<PAGE>
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:
[ ] 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 Section 240.14a-11(c) or Section 240.14a-12
Gynecare, Inc.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Registrant
- -------------------------------------------------------------------------------
(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: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF GYNECARE, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Gynecare,
Inc., a Delaware corporation (the "Company"), will be held on May 28, 1997 at
9:30 a.m., local time, at the offices of the Company, 235 Constitution Drive,
Menlo Park, CA 94025 (telephone (415) 614-2500), for the following purposes:
1. To elect two Class II directors to serve for three-year terms and
until their successors are elected;
2. To approve an amendment to the 1994 Stock Plan to increase the
aggregate maximum number of shares of Common Stock of the Company
issuable thereunder by 700,000 shares to a total of 1,884,210 shares;
3. To ratify the appointment of Coopers & Lybrand L.L.P. as the
independent accountants of the Company for the fiscal year ending
December 31, 1997; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only stockholders of record at the close of business on April 1, 1997 are
entitled to notice of, and to vote at, the meeting and any adjournment thereof.
All stockholders are cordially invited to attend the meeting in person.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
POSTAGE PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. You may revoke your proxy
at any time before it has been voted, and if you attend the meeting you may vote
in person even if you have previously return your proxy card.
Sincerely,
/s/ Malcolm M. Farnsworth, Jr.
Malcolm M. Farnsworth, Jr.
Vice President, Chief Financial Officer
and Secretary
Menlo Park, California
April 25, 1997
<PAGE>
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of Gynecare, Inc., a Delaware
corporation (the "Company") for use at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held on Wednesday, May 28, 1997 at 9:30 a.m.
local time, 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 the offices of the Company, 235 Constitution Drive,
Menlo Park, CA 94025. The telephone number at that address is (415) 614-2500.
These proxy solicitation materials were mailed on or about April 25, 1997 to
all stockholders entitled to vote at the meeting.
RECORD DATE AND OUTSTANDING SHARES
Stockholders of record at the close of business on April 1, 1997 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting.
At the Record Date, 8,297,701 shares of the Company's Common Stock, $0.001
par value, were issued and outstanding. The only persons known by the
Company to be the beneficial owners of more than 5% of the Company's Common
Stock as of the Record Date were Origin Medsystems, Inc., Mayfield Fund,
Delphi Ventures and New Enterprise Associates. See "ELECTION OF DIRECTORS -
Security Ownership."
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before the Annual Meeting by delivering to the
Secretary of the Company a written notice of revocation or a duly executed
proxy bearing a later date, or by attending the meeting and voting in person.
VOTING AND SOLICITATION
The cost of this solicitation will be borne by the Company. Proxies may also
be solicited by certain of the Company's directors, officers and regular
employees, without additional compensation, personally or by telephone,
electronic mail or facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" at the Annual Meeting
(the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both the presence or absence of
a quorum for the transaction of business and the total number of Votes Cast
with respect to a particular matter. In the absence of controlling precedent
to the contrary, the Company intends to treat abstentions in this manner. In
a 1988 Delaware case, BERLIN V. EMERALD PARTNERS, the Delaware Supreme Court
held that, while broker non-votes may be counted for purposes of determining
the presence or absence of a quorum for the transaction of business, broker
non-votes should not be counted for purposes of determining the number of
Votes Cast with respect to the particular proposal on which the broker has
expressly not voted. Broker non-votes with respect to proposals set forth in
this Proxy Statement will therefore not be considered "Votes Cast" and,
accordingly, will not affect the determination as to whether the requisite
majority of Votes Cast has been obtained with respect to a particular matter.
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented by
such stockholders at the Company's next Annual Meeting of Stockholders must be
received by the Company no later than December 27, 1997 in order to be
considered for possible inclusion in the Company's proxy statement and form of
proxy relating to that meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES FOR DIRECTOR
Pursuant to the Company's Certificate of Incorporation, the Company's Board
of Directors currently consists of seven persons, divided into three classes
serving staggered terms of three years. Currently there are three directors
in Class I and two directors each in Class II and Class III. Two Class II
directors are to be elected at the Annual Meeting. The Class III and Class I
directors will be elected at the Company's 1998 and 1999 Annual Meetings of
Stockholders, respectively. The two directors elected at the Annual Meeting
will serve for three-year terms and until their successors have been duly
elected and qualified.
The names of the nominees for election to the Board of Directors at the
Annual Meeting, their ages as of the Record Date and certain information
about them are set forth below.
NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ------- --- -------------------- --------------
A. Lad Burgin, Ph.D. ........ 51 President and Chief March 1997
Executive Officer
of HRMG, Inc.
A. Grant Heidrich (1)........ 44 General Partner, March 1994
Mayfield Fund
____________________
(1) Member of Audit Committee
In the event that either of such persons becomes unavailable or declines to
serve as a director at the time of the Annual Meeting, the proxy holders will
vote the proxies in their discretion for any nominee who is designated by the
current Board of Directors to fill the vacancy. It is not expected that
either of the nominees will be unavailable to serve.
Except as set forth below, either of the nominees has been engaged in his
principal occupation set forth above during the past five years. There are
no family relationships between any directors or executive officers of the
Company.
DR. BURGIN has been a Director of the Company since March 1997. Dr. Burgin
also served as President and Chief Executive Officer of the Company from July
1996 until April 1997. Dr. Burgin has twenty-seven years of experience as a
business executive and consultant. Since September 1988, Dr. Burgin served
as President and Chief Executive Officer of HRMG, Inc., a management
consulting firm specializing in assisting clients to achieve competitive
advantage by building and sustaining high performance organizations. Prior
to joining HRMG, Dr. Burgin served for ten years with Transamerica Life
Companies as President and Chief Executive Officer of its Employee Benefits
Division and Vice President of Human Resources with Transamerica Corporation.
Dr. Burgin is a graduate of Ohio State University from which he holds B.S.,
MBA and Ph.D. degrees.
MR. HEIDRICH has been a Director of the Company since March 1994 and has been
a general partner of The Mayfield Fund, a venture capital firm, since 1983.
Mr. Heidrich is a director of Millenium Pharmaceuticals, Inc., which produces
therapeutic products for the treatment of human disease. He received an
M.B.A. from Columbia University and a B.A. from Stanford University.
Director David L. Douglass has determined to retire from the Board of
Directors of the Company effective as of the Annual Meeting. Dr. Burgin was
appointed to the Board in March 1997 and has been nominated by the Company to
stand for re-election at the Annual Meeting.
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<PAGE>
The names of the directors whose terms of office continue after the Annual
Meeting and who are not being reelected at the Annual Meeting, their ages as
of the Record Date and certain information about them are set forth below:
<TABLE>
<CAPTION>
DIRECTOR TERM
INCUMBENT DIRECTOR AGE PRINCIPAL OCCUPATION SINCE EXPIRES
- --------------------------- --- -------------------------- ---------- -------
<S> <C> <C> <C>
Class I:
Elizabeth B. Connell, M.D. 71 Professor of Gynecology December 1999
and Obstetrics, Emory 1994
University School of
Medicine
Alan Levy, Ph.D. 59 President and Chief March 1995 1999
Executive Officer,
Heartstream, Inc.
Mary Lake Polan, M.D., Ph.D. 53 Chairperson of June 1995 1999
Department of Gynecology
and Obstetrics, Stanford
University School of
Medicine
Class III:
Roseanne Hirsch 49 President and Chief April 1997 1998
Executive Officer of the
Company
F. Thomas Watkins, III 44 Vice President, Guidant August 1998
Corporation 1995
</TABLE>
DR. CONNELL has been a Director of the Company since December 1994 and has
been a professor of Gynecology and Obstetrics at Emory University School of
Medicine since 1981. She has served as a Chairperson of the FDA Obstetrics
and Gynecology Devices Panel from 1988 to 1992; as a member of the FDA Panel
on Review of Obstetrical and Gynecological Devices Panel from 1988 to 1992;
as a member of the FDA Panel on Review of Obstetrical and Gynecological
Devices from 1976 to 1979; and as a member of the FDA Obstetrics and
Gynecology Advisory Committee from 1970 to 1978. Dr. Connell is a director
of UroMed Corp., a medical device company. Dr. Connell received her M.D. from
the University of Pennsylvania.
DR. LEVY has been a Director of the Company since March 1995. Since November
1993, Dr. Levy has been President, Chief Executive Officer and a director of
Heartstream, Inc., a company that develops, manufacturers and markets devices
for performing external cardiac defibrillation. From 1989 to 1993, he was
President of Heart Technology, Inc., a manufacturer of atherosclerosis
treatment devices. Before joining Heart Technology, Dr. Levy was Vice
President of Research and New Product Development and a member of the board
of the Ethicon division of Johnson & Johnson. Dr. Levy received his Ph.D. in
Organic Chemistry from Purdue University.
DR. POLAN has been a Director of the Company since June 1995 and was a member
of the Company's Medical Advisory Board from May 1994 to June 1995. She is a
Chairperson of the Department of Gynecology and Obstetrics at Stanford
University School of Medicine, which she joined in 1990. In 1991, Dr. Polan
served as Co-chair of the Task Force on Opportunities for Women's Health of
the National Institutes of Health. She has been a member of the National
Academy of Sciences since 1992, where she served on the Board of Health
Sciences Policy. Dr. Polan is also a director of Quidel Corporation, American
Home Products Corporation and Metra Biosystems, Inc. Dr. Polan received her
M.D. from Yale University School of Medicine, where she also received a
doctorate degree in biophysics and biochemistry.
MS. HIRSCH has been a director, President and Chief Executive Officer of the
Company since April 1997. From February 1995 to April 1997, she was President
and Chief Executive Officer of Luxar Corporation, a manufacturer of laser
surgery tools for cosmetic, medical and dental applications. From 1992 to
1995, Ms. Hirsch served as Vice-President and General Manager of the
HemoTec-Cardiac Surgery Division of Medtronic, Inc., and from 1990 to 1992
she was Director, Custom Products for the Cardiopulmonary Group of Medtronic,
Inc. Prior to that, Ms. Hirsch held various executive and management
positions with I-Flow Corporation, Applied Plastics Technology, Inc.,
Phasecom and American Hospital Supply Corporation. She received an M.S. in
Systems Management from the University of Southern California.
-3-
<PAGE>
MR. WATKINS has been a Director of the Company since August 1995. Since May
1995, he has served as a Vice President of Guidant Corporation and President
of its subsidiary, Origin. Mr. Watkins served as President of another
Guidant subsidiary, Heart Rhythm Technologies, from May 1995 through
September 1995. From July 1989 to May 1995, Mr. Watkins held various senior
management positions with Origin. Prior to that, he served in management
positions in several start-up companies, including Microgenics Corporation,
and was a consultant with the international consulting firm of McKinsey &
Company, Inc. He received an M.B.A. degree from Harvard University.
BOARD MEETINGS AND COMMITTEES
During fiscal 1996, the Board of Directors held seven meetings. The
committees of the Board of Directors include an Audit Committee and a
Compensation Committee. There is no nominating committee or committee
performing the function of a nominating committee.
The Audit Committee held 1 meeting in fiscal 1996 and currently consists of
directors Mr. Burgin and Mr. Heidrich. The functions of the Audit Committee
include recommending appointment of the Company's independent auditors to the
Board of Directors and reviewing (i) the scope of the independent auditors'
annual audit and their compensation, (ii) the general policies and procedures
of the Company with respect to internal auditing, accounting and financial
controls and (iii) any change in accounting principles, significant audit
adjustments proposed by the auditors and any recommendations that the
auditors may have with respect to policies and procedures.
The Compensation Committee held 1 meeting in fiscal 1996 and currently
consists of directors Elizabeth B. Connell, M.D., Alan Levy, Ph.D., and F.
Thomas Watkins, III. The Compensation Committee monitors the nature and
levels of compensation paid by the Company to its executive personnel.
During fiscal 1996 (or such portion of fiscal 1996 during which a director
served as a member of the Board of Directors), no director attended fewer
than 75% of the aggregate of (i) the total number of meetings of the Board of
Directors held and (ii) the total number of meetings held by all committees
of the Board of Directors on which such director served.
RECOMMENDATION
The Board of Directors recommends that stockholders vote "FOR" each of the
Company's nominees for director.
VOTE REQUIRED
The two nominees receiving the highest number of affirmative votes of the
shares entitled to be voted for him or her shall be elected as directors.
Votes withheld from any nominee are counted for purposes of determining the
presence or absence of a quorum, but have no other legal effect under
Delaware law.
-4-
<PAGE>
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock of
the Company as of the Record Date of (i) each person known by the Company to
beneficially own more than 5% of the Company's Common Stock, (ii) each
director, (iii) each executive officer of the Company named in the Summary
Compensation Table below and (iv) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
--------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OF TOTAL
- --------------------------------------------------------- --------- ----------------
<S> <C> <C>
Entities affiliated with Guidant Corporation(2).......... 2,528,276 30.4%
F. Thomas Watkins III
135 Constitution Drive
Menlo Park, CA 94025
Entities affiliated with Mayfield Fund(3)................ 1,357,938 16.3%
A. Grant Heidrich
2800 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Entities affiliated with Delphi Ventures(4).............. 792,468 9.5%
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
New Enterprise Associates................................ 640,962 7.7%
Suite 1025, Russ Building
235 Montgomery Street
San Francisco, CA 94104
Roseanne Hirsch(5)....................................... 50,000 *
Steve Adams(6)........................................... 66,414 *
Malcolm M. Farnsworth, Jr.(7)............................ 97,916 1.2%
Augustine Y. Lien(8)..................................... 57,872 *
Milton McColl, M.D. ..................................... 50,805 *
Vahid Saadat(9).......................................... 32,203 *
A. Lad Burgin(10)........................................ 20,000 *
Elizabeth B. Connell, M.D.(11)........................... 9,573 *
Alan Levy, Ph.D.(12)..................................... 9,244 *
Mary Lake Polan, M.D., Ph.D.(12)......................... 9,244 *
William M. Hunter(13).................................... 107,373 1.3%
All directors and executive officers as a group.......... 5,830,288 69.7%
(13 persons)(14)
</TABLE>
______________________
* Less than 1%.
(1) Except pursuant to applicable community property laws or as indicated in
the footnotes to this table, to the Company's knowledge, each stockholder
identified in the table possesses sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by
such stockholder.
-5-
<PAGE>
(2) Includes (i) options to purchase 7,928 shares exercisable within sixty
days of April 1, 1997 and (ii) 2,520,348 shares held by Origin
Medsystems, Inc., a wholly owned subsidiary of Guidant Corporation for
which Mr. Watkins disclaims beneficial ownership.
(3) Includes (i) 67,476 shares held by Mayfield Associates Fund II of which
Mr. Heidrich is general partner, (ii) options to purchase 3,125 shares
held by Mr. Heidrich, (iii) options to purchase 5,263 shares held by
Mayfield Associates Fund II and (iv) 1,282,074 shares held by Mayfield
VII. Mr. Heidrich is general partner of Mayfield VII Management
Partners, which is the general partner of Mayfield VII. Mr. Heidrich
disclaims beneficial ownership of these shares except to the pecuniary
interest he will derive from these shares.
(4) Includes (i) 4,631 shares held by David Douglass, a former director of
the Company, (ii) options to purchase 3,542 shares held by Mr.
Douglass, (iii) 3,993 shares held by Delphi Investments II, L.P., and
(iv) 780,302 shares held by Delphi Ventures II, L.P. Delphi Management
Partners II is the general partner of Delphi Investments and Delphi
Ventures II and Mr. Douglass is a general partner of Delphi Management
Partners II.
(5) Ms. Hirsch was appointed President and Chief Executive Officer of
the Company effective April 21, 1997. Constitutes options exercisable
within sixty days of April 1, 1997.
(6) Includes options to purchase 625 shares exercisable within sixty days of
April 1, 1997.
(7) Includes options to purchase 417 shares exercisable within sixty days of
April 1, 1997.
(8) Includes options to purchase 768 shares exercisable within sixty days of
April 1, 1997.
(9) Includes options to purchase 625 shares exercisable within sixty days of
April 1, 1997.
(10) Constitutes options to purchase 20,000 shares exercisable within sixty
days of April 1, 1997.
(11) Constitutes options to purchase 9,573 shares exercisable within sixty
days of April 1, 1997.
(12) Constitutes options to purchase 9,244 shares exercisable within sixty
days of April 1, 1997.
(13) Constitutes shares acquired upon exercise of options on August 8, 1996.
Mr. Hunter resigned from his position as President and Chief Executive
Officer of the Company on July 11, 1996.
(14) Includes options to purchase 65,091 shares exercisable within sixty days
of April 1, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, officers and beneficial
owners of more than 10% of the Company's Common Stock to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership
and reports of changes in ownership of Common Stock and other equity
securities of the Company. Based solely on its review of the copies of such
reports received by it, or written representations from reporting persons,
the Company believes that during the fiscal year ended December 31, 1996, its
officers, directors and holders of more than 10% of the Company's Common
Stock complied with all Section 16(a) filing requirements.
DIRECTOR COMPENSATION; 1995 DIRECTOR OPTION PLAN
For their services as directors of the Company, all non-employee members of
the Board receive a fee of $1,000 per meeting plus travel expenses for
attending Board of Directors meetings. The Company does not pay additional
amounts for committee participation or special assignments of the Board of
Directors.
The Company's 1995 Director Option Plan (the "Director Plan") was adopted by
the Board of Directors and approved by the stockholders of the Company in
October 1995. A total of 100,000 shares of Common Stock have been authorized
for issuance under the Director Plan. Under the Director Plan, each
non-employee director was, and any additional non-employee directors who are
elected will be, granted a nonstatutory option to purchase 10,000 shares of
Common Stock on the date on which such person first becomes a director. On
the first business day of each year, each non-employee director automatically
receives an additional nonstatutory option to purchase 2,500 shares of Common
Stock. Each initial option grant under the Director Plan vests on a
cumulative monthly basis over a three-year period, and each subsequent annual
option grant vests on a cumulative monthly basis over one year. In the event
of a change in control of the Company, including a merger or sale of
substantially all of the Company's assets, outstanding options must be
assumed by any successor corporation, or they will become fully vested and
exercisable. The exercise price of each of these options is equal to the fair
-6-
<PAGE>
market value of the Common Stock on the date of grant. All such options will
expire ten years from the date of grant unless terminated sooner pursuant to
the provisions of the Director Plan. The Director Plan expires in October
2005.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company for services rendered during fiscal 1996 by the former
Chief Executive Officers of the Company, and each of the four additional
executive officers of the Company whose total compensation in fiscal 1996
equaled or exceeded $100,000 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------- ------------
SECURITIES
NAME AND UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#)
- --------------------------------------------- ---- -------- ------------ ------------
<S> <C> <C> <C> <C>
A. Lad Burgin(1)............................. 1996 $150,000 -- 15,000
1995 -- -- --
William M. Hunter(2)......................... 1996 $164,689 -- --
1995 160,000 -- --
Steve Adams.................................. 1996 $150,000 $17,296 --
Vice President of International Sales 1995 125,000 -- 60,526
Malcolm M. Farnsworth, Jr. .................. 1996 $128,400 -- --
Vice President and Chief Financial Officer 1995 120,000 -- 107,894
Augustine Y. Lien........................... 1996 $124,900 -- --
Vice President of Operations 1995 120,000 -- 57,104
Vahid Saadat................................ 1996 $114,400 $31,580 --
Vice President of Research and Development 1995 110,000 -- 63,158
</TABLE>
______________________
(1) Dr. Burgin served as President and Chief Executive Officer of the
Company from July 1996 to April 1997. Effective as of April 21, 1997,
Roseanne Hirsch was appointed as President and Chief Executive Officer
and a director of the Company.
(2) Mr. Hunter resigned from his position as President and Chief Executive
Officer of the Company on July 11, 1996.
-7-
<PAGE>
OPTION GRANTS IN FISCAL 1996
The following table sets forth information as to the options granted to the
Named Executive Officers during the fiscal year ended December 31, 1996.
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE PRICE
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR ($) DATE
---- ------------- ------------ ---------------- -----------
A. Lad Burgin 7,500 4% $5.375 07/18/06
7,500 4% $7.00 11/21/06
________________
(1) All options were granted under the Company's 1994 Stock Plan.
Such options have an exercise price equal to the fair market value of
the Common Stock on the date of grant.
AGGREGATE STOCK OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR-END VALUES
The following table sets forth information as to the option exercises and
holdings of the Named Executive Officers during the fiscal year ended
December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT DECEMBER 31, 1996 DECEMBER 31, 1996(1)
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A. Lad Burgin -- -- 10,000 5,000 $9,688 $2,500
William M. Hunter(2) 23,000 $198,260 -- -- -- --
107,373 $455,798
</TABLE>
________________
(1) Calculated by determining the difference between the closing price as
reported on the Nasdaq National Market of the Common Stock on December
31, 1996, the last day of trading for 1996, underlying the options and
the exercise price.
(2) William Hunter resigned from his position as President and Chief Executive
Officer of the Company on July 11, 1996. In accordance with the terms of a
Settlement Agreement and Mutual Release between the Company and Mr.
Hunter, the vesting on a portion of Mr. Hunter's options was accelerated
such that a total of 107,373 shares were exercisable as of the date of
his termination.
CERTAIN TRANSACTIONS
In May 1995, the Company sold 1,178,366 shares of Series C Preferred Stock at
a purchase price of $7.96 per share. Origin Medsystems, Inc., Mayfield Fund,
Delphi Ventures and New Enterprise Associates, all of which are greater than
5% stockholders of the Company, purchased 125,612, 628,060, 62,805 and
125,612 shares respectively, of Series C Preferred Stock. In July 1995, the
Company sold an additional 5,262 shares of Series C Preferred Stock to Steve
Adams, an executive officer of the Company, at a purchase price of $7.96 per
share. Each share of the Series C Preferred Stock, automatically converted
into one share of Common Stock upon the closing the Company's initial public
offering.
Such holders have rights to demand registration under the Securities Act of
1933 of shares of Common Stock issued upon conversion of shares of Preferred
Stock previously held by them (including Common Stock issuable upon
conversion of Series A Preferred Stock and Series B Preferred Stock
previously held by them and converted into Common Stock) on two occasions
beginning in November 1996. In addition, in the event the Company proposes to
register any of its securities
-8-
<PAGE>
under the Securities Act, such persons will have rights, subject to certain
exceptions and limitations, to have shares of such Common Stock included in
such registration statement.
Origin is a wholly-owned subsidiary of Guidant Corporation ("Guidant"), a
publicly traded medical device company. F. Thomas Watkins, III, a Director of
the Company, is the President of Origin and a Vice President of Guidant. On
March 25, 1994, the Company and Origin entered into a Management Services
Agreement. Under the agreement, Origin provides office space, utilities,
telephone service, maintenance and security services at hourly rates, payable
monthly. Payments to Origin under this agreement for the fiscal year ended
December 31, 1995 were approximately $1,089,000. The agreement terminated on
December 31, 1995.
On January 1, 1995, the Company and Origin entered into a Supply Agreement
under which Origin manufactures the Company's disposable balloon catheter.
For the fiscal year ended December 31, 1995, the Company paid Origin
approximately $410,000 for the product supplied under the agreement. The
Agreement was terminated in December 1995 as the Company began manufacturing
its disposable balloon catheter in its new facility.
In June 1995, the Company and Origin Canada entered into an agreement whereby
Origin Canada obtained exclusive rights to market the Company's products in
Canada. Sales to Origin Canada for the fiscal year ended December 31, 1996
totaled approximately $119,000.
In October 1995, the Company and Origin entered into an Assignment Agreement
pursuant to which Origin assigned to the Company an issued United States
patent and rights to certain foreign applications in consideration for
approximately $45,000. This royalty-bearing agreement covers potential
future modifications to the Uterine Balloon Therapy system. Additionally,
pursuant to such agreement, the Company granted to Origin a non-exclusive,
royalty-free license under such patent for use in fields other than
gynecology.
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PROPOSAL TWO
APPROVAL OF AN AMENDMENT TO
1994 STOCK PLAN
GENERAL
The Company's Board of Directors and stockholders have previously adopted and
approved the Company's 1994 Stock Plan (the "Plan") and have reserved an
aggregate of 1,184,210 shares of the Common Stock of the Company for issuance
thereunder. Subject to stockholder approval at the Annual Meeting, the Board
of Directors has approved an amendment to the Plan (the "Amendment") in order
to increase the number of shares reserved for issuance thereunder by 700,000
shares to a total of 1,884,210 shares.
BACKGROUND AND REASONS FOR THE AMENDMENT
The Company relies on the shares reserved under the Plan in order to attract
and retain key employees. In particular, the Company recently hired a new
President and Chief Executive Officer, Roseanne Hirsch. Ms. Hirsch has been
granted stock options to purchase an aggregate of 450,000 shares of Common
Stock, which become exercisable at various times in accordance with the terms
of her options and which grants are subject to stockholder approval at this
meeting. Because this grant, as well as other grants necessary to attract
and retain key employees would exceed the number of shares issuable under the
Plan, the Company is requesting that stockholders approve the increase in the
shares issuable under the Plan. In the event that the stockholders do not
approve the Amendment, the grants to Ms. Hirsch shall not be effective.
The closing price of the Company's Common Stock as quoted on the Nasdaq
National Market on April 1, 1997 was $5.75 per share.
A description of the principal features of the Plan, as amended, is set forth
below.
ADMINISTRATION
The Plan provides that it shall be administered by the Company's Board of
Directors or by a committee or committees of the Board. Administration of
the Plan with respect to officers and directors of the Company must be done
in a manner permitted by the requirements of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor rule thereto ("Rule 16b-3"), with respect to grants to such persons
under a plan intended to qualify as a discretionary plan under Rule 16b-3.
The Board or its committee is responsible for interpreting all provisions of
the Plan and of the option agreements issued thereunder. Any such
determination is final and binding on the optionee. The Plan is currently
being administered by the Compensation Committee of the Board.
ELIGIBILITY
The Plan provides that incentive stock options, as defined under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), may be granted
to employees only and that nonstatutory options and stock purchase rights may
be granted to employees and consultants. The Board of Directors or its
committee selects the participants and determines the number of shares to be
subject to each option or purchase right. As of April 1, 1997, approximately
45 employees were eligible to participate in the Plan. The Plan provides
that no employee of the Company may be granted in any fiscal year options to
purchase more than 500,000 shares of Common Stock. This provision is
intended to preserve the Company's ability to deduct from its taxable income
compensation to executive officers under the Plan.
TERMS OF OPTIONS
The terms and conditions of options granted under the Plan, including the
exercise price, exercisability and term thereof, are determined by the Board
or its committee. However, the exercise price in the case of incentive stock
options may not be less than 100% of the fair market value of the Common
Stock on the date the option is granted (110% of the fair market value on the
date of grant in the case of any incentive stock option granted to a holder
of 10% or more of the Company's outstanding
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securities) or less than 85% of such fair market value (110% of the fair
market value in the case of any nonstatutory option granted of 10% or more of
the Company's outstanding securities) in the case of nonstatutory stock
options.
If optionee's employment or consulting relationship with the Company
terminates for reasons other than death or disability, the option shall be
exercisable for 30 days after such termination, but only to the extent vested
at the time of termination. If the optionee's employment or consulting
relationship terminates due to total and permanent disability, the option may
be exercised for six months after such disability, but only to the extent
vested at the time of termination. If the optionee dies, the option may be
exercised at any time within twelve months of the date of death.
NONTRANSFERABILITY
All options and stock purchase rights granted under the Plan are
nontransferable other than by will or the laws of descent and distribution.
PAYMENT UPON EXERCISE OF OPTIONS
The Plan allows for payment by an optionee upon exercise of an option by
cash, check, promissory note, other shares of Common Stock of the Company
with aggregate fair market value equal to the aggregate exercise price,
delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of
sale or loan proceeds required to pay the exercise price (a "cashless
exercise") or any combination thereof, all as determined by the Board or its
committee. While the Plan authorizes all of these forms of consideration,
the option agreement may limit the acceptable forms of payment, as determined
by the Board or its committee in its discretion.
CAPITALIZATION CHANGES; DISSOLUTION; MERGER, CHANGE IN CONTROL
In the event any change, such as a stock split or dividend, is made in the
Company's capitalization that results in an increase or decrease in the
number of shares of the Company's Common Stock outstanding without receipt of
consideration, appropriate adjustment will be made in the exercise price of,
and the number of shares subject to, all outstanding options, and appropriate
adjustment will be made in the total number of shares reserved for issuance
under the Plan.
The Plan provides that, in the event of the proposed dissolution or
liquidation of the Company, all outstanding options will terminate
immediately prior to the consummation of such proposed action.
In the event of a merger of the Company with or into another corporation, all
outstanding options shall be assumed or equivalent options shall be
substituted by such successor corporation or a parent or subsidiary thereof.
In the event that the option is not assumed or substituted, the options will
terminate as of the date of the closing of the merger.
AMENDMENT AND TERMINATION
The Board of Directors or its committee may amend or terminate the Plan at
any time without stockholder approval; provided, however, that stockholder
approval of amendments shall be obtained to the extent necessary and
desirable to comply with any applicable law, including Section 422 of the
Code and Rule 16b-3. No amendment to the Plan may unilaterally alter or
impair any option or stock purchase plan previously granted without the
consent of the holder. The Plan will terminate by its terms in March 2004.
FEDERAL TAX INFORMATION
An optionee who is granted an incentive stock option as defined in Section
422 of the Code will not recognize taxable income either at the time the
option is granted or upon its exercise, although the exercise may subject the
optionee to the alternative minimum tax. Upon sale or exchange of the shares
at least two years after the grant of the option and one year after
exercising the option, any gain or loss will be treated as long-term capital
gain or loss. If these holding periods are not satisfied, the optionee will
recognize ordinary income at the time of the sale or exchange equal to the
difference between the exercise price and the lower of (i) the fair market
value of the shares at the date of the option exercise or (ii) the sale price
of the shares.
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Unless the Board or its committee determines otherwise, the restricted stock
purchase agreement shall grant the Company a repurchase option at the
original price paid by the purchaser, exercisable upon the termination of the
purchaser's employment or consulting relationship for any reason. The
purchase price for shares repurchased by the Company pursuant to the
restricted stock purchase agreement may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall
lapse at such rate as the Board or its committee may determine.
A different rule for measuring ordinary income upon such premature
disposition may apply if the optionee is also an officer, director or 10%
shareholder of the Company. The Company will be entitled to a deduction in
the same amount as the ordinary income recognized by the optionee. Any gain
or loss recognized on such a premature disposition of share in excess of the
amount treated as ordinary income will be characterized as long-term or
short-term capital gain or loss, depending on the holding period.
All options that do not qualify as incentive stock options are referred to as
nonstatutory options. An optionee will not recognize any taxable income at
the time he or she is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize taxable income generally measured as
the excess of the then fair market value of the shares purchased over the
purchase price. Any taxable income recognized in connection with an option
exercise by an optionee who is also an employee of the Company will be
subject to tax withholding by the Company. Upon resale of such shares by the
optionee, any difference between the sales price and the optionee's purchase
price, to the extent not recognized as taxable income as described above,
will be treated as long-term or short-term capital gain or loss, depending on
the holding period. The Company will be entitled to a tax deduction in the
same amount as the ordinary income recognized by the optionee with respect to
shares acquired upon exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income taxation upon
the optionee and the Company with respect to the grant and exercise of
options under the Plan, does not purport to be complete, and does not discuss
the tax consequences of the optionee's death or the income tax laws of any
municipality, state or foreign country in which an optionee may reside.
STOCK PURCHASE RIGHTS
The Plan permits the Company to grant stock purchase rights, which allow the
offeree the opportunity to purchase, during a specified period of time not
exceeding 30 days, Common Stock of the Company on the terms specified by the
Board or its committee. The Board or its committee notifies the offeree in
writing of the terms, conditions and restrictions related to the offer,
including the number of shares of Common Stock that the offeree shall be
entitled to purchase, the price to be paid and the time within which the
offeree must accept such offer (which shall in no event exceed 30 days from
the date upon which the Board or its committee made the determination to
grant the Purchase Right). Offers may be accepted by execution of a
restricted stock purchase agreement between the Company and the offeree and
payment of the purchase price.
Stock Purchase Rights will generally be taxed in the same manner as
nonstatutory stock options. The Company has never granted any Stock Purchase
Rights under the Plan.
PARTICIPATION IN THE PLAN
The grant of options and stock purchase rights, under the Plan to employees,
including the Named Executive Officers, is subject to the discretion of the
Board or its committee. As of the date of this proxy statement, there has
been no determination by the Board or its committee with respect to future
awards under the Plan. Accordingly, future awards are not determinable.
Non-employee directors are not eligible to participate in the Plan. The
following table sets forth information with respect to the grant of options
to the Named Executive Officers, to all current executive officers as a group
and to all other employees as a group during the last fiscal year:
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AMENDED PLAN BENEFITS
1994 STOCK PLAN
NUMBER OF
NAME OF INDIVIDUAL SHARES UNDERLYING
OR IDENTITY OF GROUP AND POSITION OPTIONS GRANTED (#) EXERCISE PRICE ($/SH)
- --------------------------------- ------------------- ---------------------
A. Lad Burgin 7,500 $5.375
7,500 $7.00
All current executive 15,000 $5.375 - $7.00
officers as a group (6 persons)
All other employees as a group 134,200 $5.375 - $10.125
RECOMMENDATION
The Board of Directors recommends that the shareholders vote "FOR" the
Amendment to the Plan.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand LLP, independent
accountants, to audit the financial statements of the Company for the fiscal
year ending December 31, 1997. If the stockholders do not ratify the
appointment of Coopers & Lybrand LLP, the selection of independent auditors
will be reconsidered by the Board of Directors. Representatives of Coopers
& Lybrand LLP are expected to be present at the meeting, will have the
opportunity to make a statement if they desire to do so, and are expected to
be available to respond to appropriate questions.
RECOMMENDATION
The Board of Directors has unanimously approved the appointment of Coopers &
Lybrand LLP as the Company's independent auditors for fiscal 1997 and
recommends that the stockholders vote "FOR" this proposal.
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OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual Meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
Dated: April 25, 1997
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GYNECARE, INC.
1994 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.
(e) "COMMON STOCK" means the Common Stock of the Company.
(f) "COMPANY" means Gynecare, Inc., a California corporation.
(g) "CONSULTANT" means any person who is engaged by the Company or
any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company registers
any class of any equity security pursuant to the Exchange Act, the term
Consultant shall thereafter not include directors who are not compensated for
their services or are paid only a director's fee by the Company.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means that the
employment or consulting relationship is not interrupted or terminated by the
Company, any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Company, including sick leave, military leave, or any
other personal leave; provided, however, that for purposes of Incentive Stock
Options, no such leave may exceed ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract (including certain Company
policies) or statute; provided, further, that on the ninety-first (91st) day of
any such leave (where reemployment is not guaranteed by contract or statute) the
Optionee's Incentive Stock Option shall automatically convert to a Nonstatutory
Stock Option, or (ii) transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successor.
<PAGE>
(i) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(j) "EMPLOYEE" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported, as quoted
on such exchange or system for the last market trading day prior to the time of
determination) as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but
not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for
the Common Stock or;
(iii) In the absence of an established market for the Common
Stock, or if the Board determines that the trading volume on such established
market is so low that the trading prices do not fairly represent the value of
the stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(n) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(o) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(p) "OPTION" means a stock option granted pursuant to the Plan.
(q) "OPTIONED STOCK" means the Common Stock subject to an Option or
a Stock Purchase Right.
(r) "OPTIONEE" means an Employee or Consultant who receives an
Option or Stock Purchase Right.
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(s) "PARENT" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(t) "PLAN" means this 1994 Stock Plan.
(u) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(v) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(w) "STOCK PURCHASE RIGHT" means the right to purchase Common Stock
pursuant to Section 11 below.
(x) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 1,884,210 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right should expire or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares which were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) INITIAL PLAN PROCEDURE. Prior to the date, if any, upon which
the Company becomes subject to the Exchange Act, the Plan shall be
administered by the Board or a committee appointed by the Board.
(b) PLAN PROCEDURE AFTER THE DATE, IF ANY, UPON WHICH THE COMPANY
BECOMES SUBJECT TO THE EXCHANGE ACT.
(i) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS.
With respect to grants of Options or Stock Purchase Rights to Employees who
are also officers or directors of the Company, the Plan shall be administered
by (A) the Board if the Board may administer the Plan in compliance with Rule
16b-3 promulgated under the Exchange Act or any successor thereto ("Rule
16b-3") with respect to a plan intended to qualify thereunder as a
discretionary plan, or (B) a committee designated by the Board to administer
the Plan, which committee shall be constituted in such a manner as to permit
the Plan to comply with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all
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members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan.
(ii) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER
EMPLOYEES. With respect to grants of Options or Stock Purchase Rights to
Employees or Consultants who are neither directors nor officers of the
Company, the Plan shall be administered by (A) the Board or (B) a committee
designated by the Board, which committee shall be constituted in such a
manner as to satisfy the legal requirements relating to the administration of
incentive stock option plans, if any, of California corporate and securities
laws, of the Code, and of any applicable stock exchange (the "Applicable
Laws"). Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by the Applicable Laws.
(c) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, including the approval, if required, of any stock exchange upon
which the Common Stock is listed, the Administrator shall have the authority,
in its discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;
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(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(ix) to determine the terms and restrictions applicable to
Stock Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights; and
(x) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options or Stock
Purchase Rights.
5. ELIGIBILITY.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if otherwise eligible, be granted additional Options
or Stock Purchase Rights.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment relationship with the Company, nor shall
it interfere in any way with his or her right or the Company's right to
terminate his or her employment relationship at any time, with or without cause.
(e) The following limitations shall apply to grants of Options to
Officers:
(i) No Officer shall be granted, in any fiscal year of
the Company, Options to purchase more than 500,000 Shares, provided that a
newly-hired Officer may in addition receive a one-time grant of up to 500,000
Shares upon acceptance of employment with the Company; and
(ii) Over the remaining term of the Plan, no Officer shall
be granted Options to purchase more than 2,000,000 Shares.
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The foregoing limitations shall be adjusted proportionately in connection
with any change in the Company's capitalization as described in Section 12(a).
The limitations set forth in this Section 5(e) are intended to satisfy the
requirements applicable to Options intended to qualify as "performance-based
compensation" (within the meaning of Section 162(m) of the Code). In the event
the Administrator determines that such limitations are not required to qualify
Options as performance-based compensation, the Administrator may modify or
eliminate such limitations.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof. However, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Option shall be five (5) years from the date of grant thereof or such
shorter term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant
of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of the grant.
(B) granted to any person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.
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(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the Board
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company (but not in the event of an Optionee's change of
status from Employee to Consultant (in which case an Employee's Incentive
Stock Option shall automatically convert to a Nonstatutory Stock Option on
the ninety-first (91st) day following such change of status) or from
Consultant to Employee), such Optionee may, but only within such period of
time as is determined by the Administrator, of at least thirty (30) days,
with such determination in the case of an Incentive Stock Option not
exceeding three (3) months after the date of such termination (but in no
event later than the expiration date of the term of such
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<PAGE>
Option as set forth in the Option Agreement), exercise his or her Option to
the extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of such termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 6 above, in the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee as a result of his or her
disability, Optionee may, but only within six (6) months from the date of such
termination (and in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise the Option to the extent
otherwise entitled to exercise it at the date of such termination; provided,
however, that if such disability is not a "disability" as such term is defined
in Section 22(e) (3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically convert to a Nonstatutory Stock
Option on the day three months and one day following such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) RULE 16b-3. Options granted to persons subject to Section 16(b)
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Options and
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
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<PAGE>
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Administrator made the determination to grant the Stock Purchase
Right. The price to be paid shall be at least (1) 85% of the fair market value
at the time the person is granted the right to purchase shares under the Plan or
the purchase is consummated or (2) 100% of the fair market value at either of
such times if the person who is granted the stock purchase right owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or its Parent or subsidiary corporations. The offer shall
be accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator. Shares purchased pursuant to the grant of a
Stock Purchase Right shall be referred to herein as "Restricted Stock."
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine, but at a minimum rate of 20% per year.
(c) OTHER PROVISIONS. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 12
of the Plan.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclas-
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<PAGE>
sification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made
by the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock
subject to an Option or Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER. In the event of a merger of the Company with or into
another corporation, the Option or Stock Purchase Right shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation. If, in such event, the
Option or Stock Purchase Right is not assumed or substituted, the Option or
Stock Purchase Right shall terminate as of the date of the closing of the
merger. For the purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger, the option or right
confers the right to purchase, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right immediately prior to the merger, the
consideration (whether stock, cash, or other securities or property) received in
the merger by holders of Common Stock for each Share held on the effective date
of the transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger
was not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger.
13. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of
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<PAGE>
the NASDAQ or an established stock exchange), the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a
degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted, and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase Right,
the Company may require the person exercising such Option or Stock Purchase
Right to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
16. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's 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.
17. AGREEMENTS. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Board shall approve from time to time.
18. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
19. INFORMATION TO OPTIONEES AND PURCHASERS. The Company shall provide to
each Optionee and to each individual who acquired Shares pursuant to the Plan,
during the period such Optionee or purchaser has one or more Options or Stock
Purchase Rights outstanding, and, in the case of an individual who acquired
Shares pursuant to the Plan, during the period such individual owns such Shares,
copies of annual financial statements. The Company shall not be required to
provide such statements to key employees whose duties in connection with the
Company assure their access to equivalent information.
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<PAGE>
PROXY GYNECARE, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Roseanne Hirsch and Malcolm M.
Farnsworth, Jr., and each of them, with full power of substitution, to
represent the undersigned and to vote all of the shares of stock to Gynecare,
Inc. (the "Company") which the undersigned is entitled to vote at the Annual
Meeting of the Stockholders of the Company to be held at the offices of the
Company located at 235 Constitution Drive, Menlo Park, California 94025
(telephone (415) 614-2500) on Wednesday, May 28, 1997 at 9:30 a.m. Pacific
Time, and at any adjournment thereof (1) as hereinafter specified upon the
proposals listed on the reverse side and as more particularly described in
the Proxy Statement of the Company dated April 25, 1997 (the "Proxy
Statement"), receipt of which is hereby acknowledged, and (2) in their
discretion, upon such other matters as may properly come before the meeting.
The undersigned hereby acknowledges receipt of the Company's Annual Report
for the year ended December 31, 1996 and the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED FOR EACH OF THE ABOVE
PERSONS AND PROPOSALS, AND FOR SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE ANNUAL MEETING AS THE PROXYHOLDERS DEEM ADVISABLE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE.
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE
<PAGE>
1. ELECTION OF TWO CLASS II DIRECTORS
Nominees:
FOR WITHHELD
A. Lad Burgin / / / /
A. Grant Heidrich / / / /
MARK HERE IF
YOU PLAN TO / /
ATTEND THE MEETING
MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE BELOW
2. PROPOSAL TO APPROVE AN AMENDMENT TO FOR AGAINST ABSTAIN
THE COMPANY'S 1994 STOCK PLAN TO INCREASE / / / / / /
THE AGGREGATE MAXIMUM NUMBER OF SHARES
OF COMMON STOCK BY 700,000 ISSUABLE
THEREUNDER TO 1,884,210 SHARES.
3. PROPOSAL TO RATIFY THE APPOINTMENT OF FOR AGAINST ABSTAIN
COOPERS & LYBRAND LLP AS THE COMPANY'S / / / / / /
INDEPENDENT ACCOUNTANTS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1997.
AND, IN THEIR DISCRETION, UPON SUCH OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY ADJOURNMENT(S) THEREOF.
Sign exactly as your name(s) appears on your stock certificate. A
corporation is requested to sign its name by its President or other
authorized officer, with the office held designated. Executors,
administrators, trustees, etc., are requested to so indicate when signing.
If stock is registered in two names, both should sign.
Signature: _______________________________________ Date:____________________
Signature: _______________________________________ Date:____________________
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK
MAY BE REPRESENTED AT THE MEETING.
