SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, For Use of the Commission Only (as permitted by rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NOVOSTE CORPORATION
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(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.
|_| 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 previous filing by registration number, or the
form or schedule and the date of its filing.
<PAGE>
NOVOSTE CORPORATION
3890 Steve Reynolds Boulevard
Norcross, Georgia 30093
(770) 717-0904
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 13, 1999
To the Shareholders of
NOVOSTE CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of Novoste Corporation (the "Company") will be held at the
Atlanta Marriott Gwinnett Place, 1775 Pleasant Hill Road in Duluth, Georgia, on
Thursday, May 13, 1999 at 9:00 a.m., local time, to consider and act upon the
following proposals:
1. To elect one (1) Class II Director to serve until the 2001
Annual Meeting of Shareholders and three (3) Class III
Directors to serve until the 2002 Annual Meeting of
Shareholders.
2. To approve amendments (the "Plan Amendments") to the Company's
Amended and Restated Stock Option Plan (the "Plan"), which
Plan Amendments (a) increase the number of shares of Common
Stock reserved for issuance thereunder by 700,000 shares to
4,100,000 shares, (b) increase the maximum number of shares
from 350,000 shares to 500,000 shares with respect to options
that may be granted to any option holder within any one
calendar year, and (c) provide that the term of all options
under the Plan survive termination of employment by or
association with the Company for a limited period of time, up
to a maximum of one year.
3. To approve amendments (the "Non-Employee Director Plan
Amendments") to the Company's Non-Employee Director Stock
Option Plan, which Non-Employee Director Plan Amendments (a)
increase the number of shares of Common Stock reserved for
issuance thereunder by 100,000 shares to 200,000 shares, and
(b) eliminate the maximum number of shares with respect to
options that may be granted to any option holder within any
one calendar year.
4. To ratify the reappointment of Ernst & Young LLP as
independent auditors of the Company for the year ending
December 31, 1999.
5. To transact such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
A Proxy Statement describing the matters to be considered at the
Annual Meeting is attached to this Notice. Only holders of record of the
Company's Common Stock at the close of business on Friday, March 26, 1999, the
Record Date for the Annual Meeting, are entitled to notice of and to vote at the
Annual Meeting.
We have also enclosed our 1998 Annual Report to Shareholders.
By Order of the Board of Directors,
Cheryl R. Johnson
Secretary
Norcross, Georgia
April 12, 1999
SHAREHOLDERS, WHETHER OR NOT THEY EXPECT TO ATTEND THE ANNUAL MEETING
IN PERSON, ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
AND RETURN IT IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
<PAGE>
Novoste Corporation
3890 Steve Reynolds Boulevard
Norcross, Georgia 30093
(770) 717-0904
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PROXY STATEMENT
----------
Annual Meeting of Shareholders
To Be Held On May 13, 1999
----------
INTRODUCTION
General
This Proxy Statement is being furnished to holders of Common Stock, par
value $.01 per share (the "Common Stock"), of Novoste Corporation, a Florida
corporation, in connection with the solicitation of proxies by the Board of
Directors of the Company for use at its Annual Meeting of Shareholders to be
held on Thursday, May 13, 1999, at the Atlanta Marriott Gwinnett Place, in
Duluth, Georgia, at 9:00 a.m., local time, and any and all adjournments or
postponements thereof (the "Annual Meeting"). The cost of the solicitation will
be borne by the Company. This Proxy Statement is being first mailed to holders
of the Common Stock on or about April 13, 1999.
All references in this Proxy Statement to "Novoste," the "Company," "we,"
"us," and "our" refer to Novoste Corporation.
Matters to be Considered at the Annual Meeting
At the Annual Meeting, the shareholders will be asked to consider and vote
upon the following proposals:
1. To elect one (1) Class II Director to serve until the 2001
Annual Meeting of Shareholders and three (3) Class III
Directors to serve until the 2002 Annual Meeting of
Shareholders.
2. To approve amendments (the "Plan Amendments") to the Company's
Amended and Restated Stock Option Plan (the "Plan"), which
Plan Amendments (a) increase the number of shares of Common
Stock reserved for issuance thereunder by 700,000 shares to
4,100,000 shares, (b) increase the maximum number of shares
from 350,000 shares to 500,000 shares with respect to options
that may be granted to any option holder within any one
calendar year and (c) provide that the term of all options
under the Plan survive termination of employment by or
association with the Company for a limited period of time, up
to a maximum of one year.
3. To approve amendments (the "Non-Employee Director Plan
Amendments") to the Company's Non-Employee Director Stock
Option Plan (the "Director Plan"), which Non-Employee Director
Plan Amendments (a) increase the number of shares of Common
Stock reserved for issuance thereunder by 100,000 shares to
200,000
<PAGE>
shares, and (b) eliminate the maximum number of shares with
respect to options that may be granted to any option holder
within any one calendar year.
4. To ratify the reappointment of Ernst & Young LLP as
independent auditors of the Company for the year ending
December 31, 1999.
5. To transact such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
Voting at the Annual Meeting
Only holders of record of Common Stock at the close of business on Friday,
March 26, 1999 (the "Record Date") are entitled to notice of and to vote at the
Annual Meeting, each such holder of record being entitled to one vote per share
of Common Stock on each matter to be considered at the Annual Meeting. On the
Record Date, there were 14,066,437 shares of Common Stock issued and
outstanding.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting (7,033,219 shares of the 14,066,437 shares outstanding) is
necessary to constitute a quorum at the Annual Meeting. In instances where
brokers are prohibited from exercising discretionary authority for beneficial
owners who have not returned proxies (so called "broker non-votes"), those
shares will be included in the calculation of whether a quorum is present at the
Annual Meeting (i.e., such shares will be deemed to be "present" at the Annual
Meeting). If a quorum is present, the plurality vote of the total votes cast by
the holders of Common Stock is required to elect the one (1) Class II Director
and the three (3) Class III Directors. The approval of the Plan Amendments and
of the Non-Employee Director Plan Amendments and the ratification of the
reappointment of Ernst & Young LLP as independent auditors of the Company for
the year ending December 31, 1999 will require the affirmative vote of the
holders of a majority of the shares of Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote.
If the enclosed proxy card is properly executed and returned to the
Company prior to voting at the Annual Meeting, the shares represented thereby
will be voted in accordance with the instructions marked thereon, subject to the
following conditions:
Election of Directors. Shares represented by a proxy that is marked
"WITHHELD" as to a vote for (i) the one (1) nominee as a Class II Director and
the three (3) nominees for Class III Directors or (ii) any individual nominee(s)
for election as directors and are not otherwise marked "FOR" the other nominees,
will not be counted in determining whether a plurality vote has been received
for the election of directors. In the absence of instructions, shares
represented by a proxy will be voted FOR all four (4) nominees. In instances of
broker non-votes, those shares will be deemed to have voted "WITHHELD" as to the
election of all four (4) nominees.
Other Proposals. Shares represented by a proxy that is marked "ABSTAIN" on
any other proposal will not be counted in determining whether the requisite vote
has been received for such proposal. In the absence of instructions, shares
represented by a proxy will be voted FOR all of the proposals set forth in the
Notice of Annual Meeting and at the discretion of the proxies on any other
matters that may properly come before the Annual Meeting. In instances of broker
non-votes, those shares will be deemed to have voted "ABSTAIN" on any other
proposal.
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<PAGE>
At any time prior to its exercise, a proxy may be revoked by the holder of
the Common Stock granting it by delivering written notice of revocation or a
duly executed proxy bearing a later date to the Secretary of the Company at the
address of the Company set forth on the first page of this Proxy Statement or by
attending the Annual Meeting and voting in person.
Proxies may be solicited on behalf of the Board by mail, telephone,
telecopy or in person, and solicitation costs will be paid by the Company.
Directors, officers and regular employees of the Company may solicit proxies by
such methods without additional compensation. Banks, brokerage houses and other
institutions, nominees and fiduciaries will be requested to forward the
soliciting material to their principals and to obtain authorizations for the
execution of proxy cards and, upon request, will be reimbursed by the Company
for their reasonable expenses.
Table of Contents
Page
----
Security Ownership of Certain Beneficial
Owners and Management ................................................... 4
Election of Directors ..................................................... 6
Executive Compensation .................................................... 11
Report of Stock Option and Compensation Committee
of Board of Directors on Executive Compensation ........................... 16
Stock Performance Graph ................................................... 19
Section 16 Proxy Statement Disclosure ..................................... 20
Approval of Amendments to Amended and Restated
Stock Option Plan ....................................................... 20
Approval of Amendments to Non-Employee Director
Stock Option Plan ....................................................... 30
Ratification of Reappointment of Independent Auditors ..................... 37
Other Business ............................................................ 37
Shareholder Proposals ..................................................... 37
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, information with
respect to the beneficial ownership of the Common Stock by (i) each person known
by the Company to own beneficially five percent or more of the outstanding
Common Stock, together with their respective addresses, (ii) each director and
nominee for election as director, (iii) each executive officer named in the
Summary Compensation Table under "Executive Compensation" on page 11 of this
Proxy Statement and (iv) all executive officers and directors as a group:
Number (1) Percentage
---------- ----------
Thomas D. Weldon(2)(3)(4) ............................ 697,252 5.0%
Charles E. Larsen(4) ................................. 576,161 4.1
Henry L. Hillman, Elsie Hilliard Hillman
and C.G Grefenstette, Trustees(5)(6) ............... 441,587 3.1
C.G. Grefenstette and Thomas G. Bigley,
Trustees(5)(7) ..................................... 582,112 4.1
President and Fellows of Harvard College(8) .......... 775,000 5.5
c/o Harvard Management Company, Inc.
600 Atlantic Avenue
Boston, MA 02210
Paul Tudor Jones, II(9) .............................. 794,200 5.6
c/o Tudor Investment Corporation
One Liberty Plaza (51st Floor)
New York, NY 10006
Norman R. Weldon, Ph.D.(3)(10) ....................... 360,571 2.6
David N. Gill ........................................ 45,000 *
Stephen I. Shapiro ................................... 23,026 *
J. Stephen Holmes .................................... 28,500 *
William E. Whitmer ................................... 25,000 *
Peter J. Schiller .................................... 18,718 *
William A. Hawkins ................................... 17,000 *
Raoul Bonan, M.D ..................................... 6,500 *
Donald C. Harrison, M.D .............................. 5,000 *
All executive officers and directors as
a group (15 persons)(11) ........................... 1,953,814 13.7
- ----------
* Less than 1%.
(1) A person is deemed to be the beneficial owner of Common Stock that can be
acquired within 60 days from the Record Date upon the exercise of options,
and that person's options are assumed to have been exercised (and the
underlying shares of Common Stock outstanding) in determining such
person's percentage ownership. Accordingly, the following shares issuable
upon exercise of options have been included in the shares beneficially
owned by the following persons: Donald C. Harrison, M.D. -- 5,000 shares;
J. Stephen Holmes -- 22,500 shares; William E. Whitmer -- 22,500 shares;
David N. Gill -- 35,000 shares; Pieter J. Schiller -- 12,500 shares;
Norman R. Weldon -- 7,500 shares; and Stephen I. Shapiro -- 12,500 shares.
(2) Includes 10,000 shares held in trust for the benefit of Mr. Weldon's
children and 5,000 shares held by Mr. Weldon as custodian for his nephew;
Mr. Weldon disclaims beneficial ownership of such
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<PAGE>
shares.
(3) Includes 102,571 shares held by The Weldon Foundation, Inc., a Florida
not-for-profit corporation in which Thomas D. Weldon and Norman R. Weldon
are directors. Mr. Weldon and Dr. Weldon disclaim beneficial ownership of
all shares held by The Weldon Foundation, Inc.
(4) Address is c/o Novoste Corporation, 3890 Steve Reynolds Blvd., Norcross,
GA 30093.
(5) Address is 2000 Grant Building, Pittsburgh, PA 15219.
(6) Consists of 436,587 shares held by a trust for the benefit of Henry L.
Hillman (the "HLH Trust") and 5,000 shares subject to options which were
granted to Richard M. Johnston, an officer of The Hillman Company.
Pursuant to an agreement with The Hillman Company, if Mr. Johnston
exercises these options, he does so on behalf of The Hillman Company or a
wholly owned subsidiary thereof. The Trustees of the HLH Trust are Henry
L. Hillman, Elsie Hilliard Hillman and C.G. Grefenstette (the "HLH
Trustees"). The HLH Trustees share voting and investment power with
respect to the shares of record held by the HLH Trust. Does not include an
aggregate of 582,112 shares held by four trusts for the benefit of members
of the Hillman family (see note 7 below).
(7) Includes 145,528 shares held by each of four irrevocable trusts for the
benefit of members of the Hillman family (the "Hillman Family Trusts").
Mr. Grefenstette and Thomas G. Bigley are trustees of these four trusts
and share voting and dispositive power over the trusts' assets.
(8) Pursuant to Amendment No. 1 to a Schedule 13G which was filed with the
Commission on February 12, 1999.
(9) Pursuant to Amendment No. 1, dated August 21, 1998 to a Schedule 13D dated
October 22, 1997, which was jointly filed with the Commission by Tudor
Investment Corporation ("TIC"), Paul Tudor Jones, II ("Jones"), The Raptor
Global Fund Ltd. ("Raptor Ltd."), The Raptor Global Fund L.P. ("Raptor
L.P."), Tudor Arbitrage Partners L.P. ("TAP"), Tudor Global Trading LLC
("TGT"), Tudor BVI Futures, Ltd. ("Tudor BVI"), The Upper Mill Capital
Appreciation Fund Ltd. ("Upper Mill"), and Tudor Proprietary Trading,
L.L.C. ("TPT"). The address of each of TIC, Jones, Raptor L.P., TAP and
TGT is c/o Tudor Investment Corporation, 600 Steamboat Road, Greenwich, CT
06830. The business address of each of Raptor Ltd., Tudor BVI and Upper
Mill is c/o Curacao International Trust Company N.V., Kaya Flamboyan 9,
Curacao, Netherlands Antilles. The business address of TPT is The Upper
Mill, Kingston Road, Ewell, Surrey KT17 2AF, England. Jones disclaims
beneficial ownership of the shares beneficially owned by Raptor Ltd.
(164,000 shares), Raptor L.P. (59,000 shares), TAP (34,900 shares), Tudor
BVI (322,368 shares), Upper Mill (132,808 shares), TPT (81,124 shares) and
TGT as sole general partner of TAP (34,900 shares).
(10) Includes 14,250 shares held by Dr. Weldon's spouse but excludes all shares
held by Dr. Weldon's adult children, none of whom reside with Dr. Weldon.
(11) See notes 1, 2, 3 and 10 above. Also includes 151,250 shares of Common
Stock and 102,407 shares of Common Stock that can be acquired within 60
days from the Record Date, upon exercise of options held by executive
officers not named in the Summary Compensation Table under "Executive
Compensation" on page 11 of this Proxy Statement.
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<PAGE>
ELECTION OF DIRECTORS
On May 28, 1996, the Company filed Restated Articles of Incorporation with
the Florida Department of State, which provide for the Board of Directors to be
divided into three classes of directors (Classes I, II and III), with the
initial term of (i) Class I Directors to expire at the 1997 Annual Meeting of
Shareholders (the "1997 Annual Meeting"), (ii) Class II Directors to expire at
the 1998 Annual Meeting and (iii) Class III Directors to expire at this Meeting.
At each Annual Meeting of Shareholders, the successors to directors of a class
whose term shall then expire shall be elected to serve from the time of election
and qualification until the third Annual Meeting following election and until a
successor has been duly elected and qualified. Directors whose terms expire are
eligible for renomination. At the 1997 Annual Meeting, the Class I Directors
were elected to serve until the 2000 Annual Meeting of Shareholders. At the 1998
Annual Meeting, the Class II Directors were elected to serve until the 2001
Annual Meeting of Shareholders.
The Restated Articles of Incorporation also provides that the number of
directors will be fixed from time to time exclusively by the Board of Directors,
but shall consist of not more than 12 nor less than 6 directors with no class of
directors consisting of more than 4 nor less than 2 directors. A vacancy on the
Board may be filled by vote of a majority of the Board of Directors then in
office.
At this Annual Meeting, one (1) Class II Director is to be elected to hold
office until the 2001 Annual Meeting of Shareholders and until his successor is
duly elected and qualified and three (3) Class III Directors are to be elected
to hold office until the 2002 Annual Meeting of Shareholders and until their
successors are duly elected and qualified. A Class II Director is being elected
at this Annual Meeting because in December 1998 the number of directors in that
Class was increased to three (3) and Donald C. Harrison, M.D., was appointed as
a Director serving in that Class. Under the Florida Business Corporation Act,
the term of a director who is appointed during the term of a class of directors
serves until the next annual meeting of shareholders, at which the shareholders
elect a director to serve the balance of the term of such class.
Unless otherwise specifically directed by shareholders executing proxies,
it is intended that all proxies in the accompanying form received in time for
the Annual Meeting will be voted at the Annual Meeting FOR the election of the
one (1) nominee as Class II Director and of the three (3) nominees as Class III
Directors named below. All such nominees are currently directors of the Company.
In the event any nominee should become unavailable for election for any
presently unforeseen reason, it is intended that the proxies will be voted for
such substitute nominee as may be designated by the present Board of Directors.
If a quorum is present, a plurality vote of the total votes cast by the holders
of Common Stock is required to elect the one (1) Class II Director and the three
(3) Class III Directors. In instances of broker non-votes, those shares will not
be included in the vote totals and therefore will have no effect on the election
of directors.
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<PAGE>
Each nominee's name, age, the year first elected as a director, office with
the Company, and certain biographical information are set forth below:
Year First
Name Age Served as a Director Position
- ---- --- -------------------- --------
Class II Nominee:
Donald C. Harrison, M.D. 64 1998 Director
Class III Nominees:
Norman R. Weldon, Ph.D. 64 1992 Director
Thomas D. Weldon 43 1992 Chairman of the Board
and Director (1)
Charles E. Larsen 47 1992 Senior Vice President,
Chief Technical
Officer and Director (2)
- ----------
(1) Mr. Weldon served as Chief Executive Officer of the Company from its
inception in May 1992 until April 1, 1999.
(2) Mr. Larsen served as Chief Operating Officer of the Company from its
inception in May 1992 until February 1997.
CLASS II
DIRECTOR NOMINATED FOR TERM EXPIRING IN 2001
Donald C. Harrison, M.D. Dr. Harrison was elected a Director of the
Company in December 1998. He has been Professor of Medicine and Cardiology,
University of Cincinnati, and Senior Vice President and Provost for Health
Affairs, University of Cincinnati Medical Center, since 1986. Dr. Harrison has
been a director of EP Technologies, Inc., InControl Inc. and SciMed Life
Systems, Inc., and is a member of the Medical Advisory Boards of Hewlett Packard
Company, Syntex Corporation and The Proctor & Gamble Company. He is a past
President of the American Heart Association and was Chief of Cardiology at
Stanford University School of Medicine. Dr. Harrison holds an M.D. from
University of Alabama School of Medicine and a B.S. in Chemistry from Birmingham
Southern College.
CLASS III
DIRECTORS NOMINATED FOR TERMS EXPIRING IN 2002
Norman R. Weldon, Ph.D. Dr. Weldon co-founded the Company and was Chairman
of the Board from our capitalization in May 1992 until May 1998. Dr. Weldon is
Treasurer and Managing Director of Partisan Management Group, a venture capital
fund he co-founded in 1993. From 1986 until May 1996, Dr. Weldon served as
President and Chief Executive Officer and as a Director of Corvita Corporation,
a medical device company Dr. Weldon co-founded in 1986. In July 1996 Pfizer Inc.
consummated its acquisition of Corvita. From 1979 to 1987, Dr. Weldon served as
President and Chief Executive Officer of Cordis Corporation. From 1964 to 1979,
Dr. Weldon served CTS Corporation in various capacities,
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<PAGE>
including as its President and Chief Executive Officer beginning in 1976. Dr.
Weldon received, from Purdue University, a Ph.D. in Economics, an M.S. in
Industrial Management and a B.S. in Biochemistry. Dr. Weldon is the father of
Mr. Thomas D. Weldon.
Thomas D. Weldon. Mr. Weldon co-founded the Company and has served as a
Director since our capitalization in May 1992. In June 1998, Mr. Weldon became
Chairman of the Company. From May 1992 through March 1999, Mr. Weldon also
served as Chief Executive Officer of the Company. Mr. Weldon co-founded and was
President, Chief Executive Officer and a Director of Novoste Puerto Rico Inc., a
manufacturer of disposable cardiovascular medical devices, from 1987 to May
1992, prior to its sale. Previous responsibilities included management positions
at Arthur Young & Company and Key Pharmaceuticals. Mr. Weldon received a B.S. in
Industrial Engineering from Purdue University and an M.B.A. in Operations and
Systems Management from Indiana University.
Charles E. Larsen. Mr. Larsen co-founded the Company and has served as a
Director since our capitalization in May 1992. Since February 28, 1997, Mr.
Larsen has been Senior Vice President and Chief Technical Officer of the
Company, having served from May 1992 through February 1997 as our Chief
Operating Officer. Mr. Larsen co-founded and was Vice President and Director of
Novoste Puerto Rico, Inc. from 1987 to May 1992. From 1983 through 1987, Mr.
Larsen was a manager of manufacturing engineering at Cordis Corporation. Mr.
Larsen received a B.S. in Mechanical Engineering from New Jersey Institute of
Technology.
CLASS I
DIRECTORS WHOSE TERMS EXPIRE IN 2000
J. Stephen Holmes. Mr. Holmes, age 55, has served as a Director of the
Company since October 1992. He became President of Weck Closure Systems, a
medical device company, in February 1998. For two years prior thereto, Mr.
Holmes was Executive Manager of Saber Endoscopy, LLC, a medical device company
he formed in February 1996. From 1992 through 1995, Mr. Holmes was a private
investor, having founded several start-ups from 1979 through 1991, including
Adler Instrument Company, Inc., SOLOS Ophthalmology, Inc. and SOLOS Endoscopy,
Inc., which he founded in 1982, 1988 and 1990, respectively, and in which he
sold his interests in 1988, 1991 and 1991, respectively. Mr. Holmes received a
B.S. in Marketing from the University of Evansville.
Stephen I. Shapiro. Mr. Shapiro, age 54, has served as a Director of the
Company since October 1996. Mr. Shapiro previously served as a Director of the
Company from August 1995 until his resignation in March 1996. Since 1982, he has
been a Managing Principal of The Wilkerson Group, a division of International
Business Machines Corporation, a management consulting group with clients in the
health care industry. From 1970 to 1982, Mr. Shapiro held a variety of technical
management and strategic planning positions with Union Carbide Clinical
Diagnostics and Becton Dickinson and Company. Mr. Shapiro received a B.S. degree
in Chemical Engineering from the Massachusetts Institute of Technology and an
M.S. degree in Chemical Engineering from the University of California at
Berkeley.
William E. Whitmer. Mr. Whitmer, age 65, has served as a Director of the
Company since October 1992. Mr. Whitmer is a Certified Public Accountant and
management consultant. From 1989 until his retirement in 1992, he was a partner
of Ernst & Young, having served as the Associate Managing Director of that
firm's southern United States management consulting group. From 1968 through
1989, Mr. Whitmer was a partner of Arthur Young & Company, having served as the
Managing Partner of its East and Southeast United States regions of the
management consulting practice from 1975 through 1989. Mr. Whitmer received a
B.A. in Economics from Denison University.
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<PAGE>
CLASS II
DIRECTORS WHOSE TERMS EXPIRE IN 2001
William A. Hawkins. Mr. Hawkins, age 44, was elected Director in May 1998,
and became President in June 1998 and Chief Executive Officer in April 1999.
From April 1997 to May 1998, Mr. Hawkins was a Corporate Vice President of
American Home Products Corporation and President of its Sherwood Davis & Geck
division. He is a past board member of the Health Industry Manufacturers
Association (HIMA). Since January 1995, he has been a director of PharmaNetics,
Inc., a Nasdaq-listed company. From October 1995 until April 1997, Mr. Hawkins
was President of Ethicon Endo-Surgery, Inc., a medical device subsidiary of
Johnson & Johnson. From January 1995 to October 1995, Mr. Hawkins served as Vice
President in charge of United States operations of Guidant Corporation and
President of Devices for Vascular Intervention, a medical device company and a
subsidiary of Guidant. Prior to joining Guidant, Mr. Hawkins held several
positions with IVAC Corporation, a medical device company, most recently serving
as President and Chief Executive Officer from 1991 until 1995. Mr. Hawkins holds
a B.S. in Engineering and Biomedical Engineering from Duke University and an
M.B.A. from the University of Virginia.
Pieter J. Schiller. Mr. Schiller, age 61, has served as a Director of the
Company since March 1996. Mr. Schiller has served as a Director of CollaGenex
Pharmaceuticals, Inc. since September 1995. Since 1987, Mr. Schiller has been a
general partner of ATV, a venture capital firm located in Boston, Massachusetts,
where he specializes in health care investing. Mr. Schiller served Allied Signal
and its predecessor companies from 1961 through 1986 in various capacities,
including Treasurer and Vice-President, Planning and Development. From 1983 to
1986, he served as Executive Vice-President of Allied Health and Scientific
Products Company, a multi-national manufacturer of biomedical and analytical
instruments and supplies. Mr. Schiller received his M.B.A. from New York
University and a B.A. in Economics from Middlebury College.
---------------
Meetings and Committees
During 1998, there were 6 meetings of the Board of Directors. No director
attended fewer than 75% of the aggregate number of meetings of the Board held
during the period in 1998 in which he was a director and the total number of
meetings held by all committees of the Board during the period in 1998 in which
he served on such committees. The Board did not take any actions in 1998 by
unanimous written consent without a meeting.
The Audit Committee (the "Audit Committee"), which was formed and became
effective on March 29, 1996, has consisted of William E. Whitmer, Chairman, and
Pieter J. Schiller since the 1998 Annual Meeting of Shareholders. On March 25,
1999, Donald C. Harrison was elected by the Board as an additional member of the
Audit Committee. The Audit Committee reviews the audit and financial procedures
of the Company and recommends any changes with respect thereto to the Board of
Directors. The Audit Committee met 2 times during 1998. The Audit Committee did
not take any actions in 1998 by unanimous written consent without a meeting.
The Stock Option and Compensation Committee (the "Committee"), which was
formed and became effective on March 29, 1996, has consisted of J. Stephen
Holmes, Chairman, and Stephen I. Shapiro since
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<PAGE>
the 1998 Annual Meeting of Shareholders. The Committee establishes compensation
policies and determines compensation for the executive officers of the Company,
as well as administers the Plan. The Committee met 6 times during 1998. The
Committee took actions in 1998 1 time by unanimous written consent without a
meeting.
The Company does not have a standing nominating committee.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid or
accrued by us during 1996, 1997 and 1998 to (1) our Chief Executive Officer and
(2) the four other most highly compensated executive officers who were serving
as executive officers at the end of 1998 and whose compensation during 1998
exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------------- ----------------------------
Common Stock
Name and Other Annual Restricted Underlying All Other
Principal Position Year Salary Bonus Compensation Stock Awards Options Compensation
- ------------------ ---- ------ ----- ------------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas D. Weldon(2) 1998 $242,923 $ 84,219 -- -- -- $ 1,974(1)
Chairman and CEO 1997 182,500 19,600 -- -- -- 1,460(1)
1996 142,500 13,600 -- -- -- --
William A. Hawkins(2)(3) 1998 160,417 49,127 $ 91,635(4) $360,500(5) 460,000(6)(7) 2,056(1)
President
Charles E. Larsen 1998 204,506 58,346 -- -- -- 3,333(1)
Senior Vice President 1997 163,750 19,600 -- -- -- 2,250(1)
and Chief Technical 1996 130,000 13,600 -- -- -- --
Officer
David N. Gill 1998 201,578 59,743 -- -- 30,000(7) 3,333(1)
Chief Operating 1997 160,000 28,200 25,000(4) -- 35,000(7) 2,250(1)
Officer and Chief 1996 67,464 13,600 -- -- 65,000(7) --
Financial Officer
Raoul Bonan, M.D.(3) 1998 125,277 207,000(8) 16,028(4) -- 125,000(7) 2,343(1)
VP -- Clinical Affairs
</TABLE>
- ----------
(1) Consists of employer contributions to the Defined Contribution 401(k)
Plan.
(2) Mr. Weldon resigned as Chief Executive Officer effective April 1, 1999,
and was replaced by Mr. Hawkins.
(3) Commenced employment on June 1, 1998.
(4) Consists of reimbursement of moving expenses.
(5) Consists of 14,000 restricted shares, with the value based upon the $25.75
per share closing sale price of the Common Stock on June 1, 1998, the date
on which Mr. Hawkins commenced employment, a condition of the award.
Restricted shares contain restrictions on transfer which lapse over time,
upon a Change of Control (as that term is defined in the Plan) or upon the
occurrence of certain events of termination of employment. The
restrictions lapse at the annual rate of 3,500 shares, commencing June 1,
1999. In the event of a termination of Mr. Hawkins' employment by us for
Unsatisfactory Performance, in addition to those shares that are then no
longer subject to the foregoing transfer restrictions, an additional 3,500
shares will no longer be subject to such restrictions unless all such
restrictions shall have previously lapsed. In the event of a Change of
Control or termination of Mr. Hawkins' employment by him for Good Reason
or termination of his employment by us without Cause, all restrictions on
transfer will lapse. See "Employment Agreements" below. At December 31,
1998, Mr. Hawkins held 14,000 restricted shares at an aggregate market
value of $397,250, based on the $28.375 closing sale price of the Common
Stock on December 31, 1998. Dividends are paid on the restricted shares at
the same time and at the same rate as dividends paid to all shareholders
of Common Stock.
(6) Includes options to purchase 120,000 shares of the Common Stock, which are
subject to shareholder approval of the Plan Amendments. With respect to
these options that are subject to shareholder
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<PAGE>
approval of the Plan Amendments, see "Issuance by Committee of Options to
William A. Hawkins, David N. Gill and Company Employees" on page 28 of
this Proxy Statement as to a discussion of potential non-cash compensation
charges to the Company.
(7) See "Stock Options" below for the exercise price and vesting terms of the
options granted.
(8) Of which $154,500 consists of the issuance of 6,000 shares of Common Stock
on June 1, 1998, based on the $25.75 per share closing sale price of our
Common Stock on that date, which was the date Dr. Bonan's employment
commenced, a condition of this sign-on bonus.
Stock Options
The following table sets forth certain information concerning options
granted in 1998 to executive officers named in the Summary Compensation Table:
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of
Securities Options Stock Price Appreciation for
Underlying Granted to Exercise Option Term(2)
Options Employees in Price Expiration -----------------------------
Name Granted(1) Fiscal Year Per Share Date 5% 10%
- ---- ---------- ----------- --------- ---------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
William A. Hawkins...... 240,000(3) 20.4% $24.00 4/10/2008 $3,622,433 $9,179,957
100,000(4) 8.5 24.00 4/10/2008 1,509,347 3,824,982
120,000(5) 10.2 11.75 10/16/2008 886,741 2,247,177
Raoul Bonan, M.D........ 100,000(6) 8.5 24.00 4/10/2008 1,509,347 3,824,982
25,000(7) 2.1 11.75 10/16/2008 184,738 468,162
David N. Gill........... 30,000(6) 2.6 28.25 2/27/2008 532,988 1,350,697
</TABLE>
- ----------
(1) All options (other than performance-based options) become fully
exercisable upon a Change of Control (as defined in the Plan) of the
Company. With respect to performance-based options, the Committee has the
discretion of determining as of the date of grant the extent, if at all,
that such options shall accelerate and become exercisable upon a Change of
Control of the Company.
(2) Amounts reported in this column represent hypothetical values that may be
realized upon exercise of the options immediately prior to the expiration
of their term, assuming the specified compounded rates of appreciation of
the Common Stock over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange
Commission. Actual gains, if any, in option exercises are dependent on the
time of such exercise and the future performance of the Common Stock.
(3) First exercisable at the annual rate of 60,000 shares commencing June 1,
1999 and become fully exercisable, upon a termination of Mr. Hawkins'
employment for Good Reason or upon a termination of his employment by us
without cause. If we terminate Mr. Hawkins' employment for Unsatisfactory
Performance, in addition to the options then currently exercisable in
accordance with the annual rate described above, options to purchase an
additional 60,000 shares also become exercisable as of the date of
termination (though in no event shall more than 240,000 options be
exercisable under such grant). See "Employment Agreements" below.
(4) Options become exercisable in full on June 1, 2003 or upon the earlier of
(i) the date (the "Trigger Date") on which the average closing sale prices
of the Common Stock for twenty (20) consecutive trading days equals or
exceeds $48.00 per share, other than by reason of the announcement of a
Change of Control on or before June 1, 1999, provided the Trigger Date
occurs prior to June 1, 2001, and (ii) the date of termination of
employment by Mr. Hawkins for Good Reason. See "Employment
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<PAGE>
Agreements" below.
(5) Consists of ten-year options granted under the Plan, exercisable
cumulatively at the annual rate of one quarter of the number of underlying
shares, commencing one year from the date of grant. These options are
subject to shareholder approval of the Plan Amendments. With respect to
these options that are subject to shareholder approval of the Plan
Amendments, see "Issuance by Committee of Options to William A. Hawkins,
David N. Gill and Company Employees" on page 28 of this Proxy Statement as
to a discussion of potential non-cash compensation charges to the Company.
(6) Consists of ten-year options granted under the Plan, exercisable
cumulatively at the annual rate of one quarter of the number of underlying
shares, generally commencing one year from the date of grant.
(7) Consists of ten-year options granted under the Plan, exercisable in full
commencing one year from the date of grant.
---------------
On February 8, 1999, we granted Mr. Gill an option to purchase 50,000
shares of our Common Stock at $23.56 per share, exercisable at the annual rate
of 12,500 shares commencing one year after the date of grant, and a 10,000 share
restricted stock award, valued at $236,900 based upon the $23.69 per share
closing sale price of the Common Stock on February 8, 1999. The transfer
restrictions on the shares subject to the restricted stock award lapse at the
annual rate of 2,500 shares per year, commencing one year from the date of
issuance, subject to his continued employment. The vesting of the option and the
restricted shares accelerate in full upon a Change of Control (as defined in the
Plan). The option has been granted subject to shareholder approval of the Plan
Amendments. With respect to this option that is subject to shareholder approval
of the Plan Amendments, see "Issuance by Committee of Options to William A.
Hawkins, David N. Gill and Company Employees" on page 28 of this Proxy Statement
as to a discussion of potential non-cash compensation charges to the Company.
Option Exercises and Holdings
The following table sets forth certain information concerning the number
and value realized of options exercised during 1998, and the number and value of
unexercised options held as at December 31, 1998, by the individuals named in
the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN 1998 AND
OPTION VALUES AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options In-the-Money Options at
Shares at December 31, 1998 December 31, 1998(1)
Acquired on -------------------- --------------------
Name Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas D. Weldon ...... -- -- 388,375 -- $10,923,047 --
William A Hawkins ..... -- -- -- 460,000(2) -- $ 3,482,500(3)
Charles E. Larsen ..... 100,000 $ 1,212,500 291,875 -- 8,208,984 --
David N. Gill ......... 16,250 244,063 25,000 88,750 405,468 917,500
Raoul Bonan, M.D ...... -- -- -- 125,000 -- 871,875
</TABLE>
- ----------
(1) Based on the closing sale price of the Common Stock as of December 31,
1998 ($28.375 per share) minus the applicable exercise price.
(2) Of which 120,000 are subject to shareholder approval of the Plan
Amendments.
(3) Of which $1,995,500 represents the value of options subject to shareholder
approval of the Plan Amendments.
-13-
<PAGE>
Employment Agreements
Agreement with William A. Hawkins. William A. Hawkins has an employment
agreement with us, under which he serves as our Chief Executive Officer and
President and reports directly to our Board.
Under his employment agreement, Mr. Hawkins currently receives a base
salary of $275,000 per year. Under his agreement, Mr. Hawkins also received
stock options and restricted shares upon commencement of his employment. We have
described these options and restricted shares in the "Summary Compensation
Table" and "Stock Options" above.
Under his employment agreement, Mr. Hawkins also is entitled to
participate in our discretionary annual incentive cash plan for executive
officers, established to reward participating individuals for their contribution
to the accomplishment of key annual corporate objectives. For calendar year
1998, Mr. Hawkins was entitled to a minimum cash bonus of 20% of his annual base
salary. The amount of any bonus in subsequent years will be determined at the
discretion of the Committee.
We may terminate Mr. Hawkins' employment for Cause without any further
liability to us. We also may terminate Mr. Hawkins' employment for
Unsatisfactory Performance, which means termination following a vote of no
confidence based upon his unsatisfactory performance of his employment duties by
a majority of our whole Board (excluding Mr. Hawkins). Upon such a termination,
Mr. Hawkins is entitled to a lump sum, cash severance payment within 60 days of
the date of termination of employment equal to 240% of his annual base salary in
effect on the date of termination of employment. Based upon his current annual
salary, this payment would aggregate $660,000. If we terminate Mr. Hawkins for
Unsatisfactory Performance, he would also be entitled to acceleration of the
vesting of his options and restricted shares to the extent described in "Stock
Options" and the "Summary Compensation Table" above. We also may terminate Mr.
Hawkins' employment for any other reason or no reason upon 30 days' prior
written notice but subject to the severance payment described below.
Mr. Hawkins' employment agreement also terminates upon his death or
permanent disability. Mr. Hawkins may terminate his employment at any time on 90
days' notice to us and may also terminate his employment at any time for Good
Reason. Good Reason means, subject to certain limitations:
* our material breach of or default under the employment agreement,
which is not cured by us within 30 days after our receipt of prior
written notice from Mr. Hawkins;
* a material reduction in Mr. Hawkins' duties or a material
interference with the exercise of Mr. Hawkins' authority by the
Board (not arising from any disabling physical or mental disability
Mr. Hawkins may sustain) that would be inconsistent with his
position as Chief Executive Officer and/or President which is not
remedied by our Board within 30 days after its receipt of prior
written notice from Mr. Hawkins; or
* a relocation of our principal executive offices to a location whose
distance is more than twenty-five (25) miles from its location at
June 1, 1998, and which relocation was not approved by Mr. Hawkins.
Upon our termination of Mr. Hawkins' employment for any reason other than
Cause or Unsatisfactory Performance or his termination of employment for Good
Reason, Mr. Hawkins is entitled to a lump sum, cash severance payment within 60
days of the date of termination of employment equal to 360% of his annual base
salary in effect on the date of termination of employment. Based upon his
current annual
-14-
<PAGE>
salary, this payment would aggregate $990,000. Mr. Hawkins would also be
entitled to the full acceleration of the vesting of his options and restricted
shares as described in the Option Grant Table and Summary Compensation Table
above.
Agreement with Dr. Raoul Bonan. Dr. Raoul Bonan has an employment
agreement with us, under which he serves as our Vice President and Medical
Officer and reports directly to our President. Under his employment agreement,
Dr. Bonan currently receives a base salary of $200,000 per year and received
options and shares of Common Stock upon commencement of his employment. We have
described these options and shares in the "Summary Compensation Table" and
"Stock Options" above.
We may terminate Dr. Bonan's employment for Cause without any further
liability to us. In the event of the termination of Dr. Bonan's employment by
reason of his death, we must pay Dr. Bonan's estate three months' base
compensation. We also may terminate Dr. Bonan's employment without Cause upon 45
days' prior notice. If we terminate Dr. Bonan's employment without Cause prior
to May 31, 1999, then no severance shall be payable to him unless we shall then
have in place a written severance policy applicable to our employees generally.
If we terminate Dr. Bonan's employment without Cause after May 31, 1999, he is
entitled to $100,000 as his sole severance compensation. Dr. Bonan may terminate
his employment at any time, although he has agreed to endeavor to provide us
with at least 90 days' notice.
Each of the other individuals named in the Summary Compensation Table is
employed at will. All individuals named in the Summary Compensation Table are
subject to agreements containing certain non-competition and confidentiality
provisions.
Compensation of Directors
Non-employee directors are reimbursed their expenses and receive a fee of
$2,000 per Board meeting attended. Such directors who are members of a committee
of the Board of Directors receive a fee of $2,000 annually per committee in
which such director is a member, regardless of the number of committee meetings
attended by such director during the course of the year. During 1998,
non-employee directors received an annual retainer of $5,000 paid quarterly.
On December 18, 1998, the Board granted to each of its non-employee
directors a five-year, non-qualified stock option to purchase 10,000 shares of
the Common Stock at an exercise price equal to $20.94 per share. With respect to
each such option, options to purchase 5,000 shares become exercisable at the
earlier of March 31, 1999 or the date of the 1999 Annual Meeting of Shareholders
and the 5,000 share balance becomes exercisable at the earlier of March 31, 2000
or the date of the 2000 Annual Meeting of Shareholders. That portion of the
options granted to Dr. Weldon that vest in 2000 are subject to shareholder
approval of the Non-Employee Director Plan Amendments. On December 18, 1998,
subject to shareholder approval of the Non-Employee Director Plan Amendments,
the Board also granted to Dr. Harrison a five-year, non-incentive stock option
to purchase 5,000 shares of the Common Stock at an exercise price equal to
$20.94 per share, all of which options become exercisable at the earlier of
March 31, 2001 or the date of the 2001 Annual Meeting of Shareholders. Vesting
of all of the foregoing options ceases on such date as the option holder ceases
to serve as a director.
With respect to the options of Dr. Weldon and Dr. Harrison that are
subject to shareholder approval of the Non-Employee Director Plan Amendments,
see "Issuance by Board of Options to Norman R. Weldon and Donald C. Harrison" on
page 35 of this Proxy Statement as to a discussion of potential non-cash
compensation charges to the Company.
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<PAGE>
REPORT OF STOCK OPTION AND COMPENSATION COMMITTEE OF
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The following is provided to shareholders by the members of the Stock
Option and Compensation Committee of the Board of Directors:
The Committee, comprised of two non-employee directors, is responsible for
the administration of the Company's compensation programs. These programs
include base salary for executive officers and both annual and long-term
incentive compensation programs. The Company's compensation programs are
designed to provide a competitive level of total compensation and include
incentive and equity ownership opportunities linked to the Company's performance
and shareholder return.
Compensation Philosophy
The primary goal of the Company is to align compensation with the
Company's business objectives and performance. The Company's aim is to attract,
retain and reward executive officers and other key employees who contribute to
the long-term shareholder value. To establish the relationship between executive
compensation and the creation of shareholder value, the Committee has adopted a
total compensation package comprised of base salary, bonus and stock option
awards. Key elements of the compensation philosophy are:
- The Company pays competitively relative to leading medical device
companies with which the Company competes for talent.
- The Company maintains annual incentive opportunities sufficient to
provide motivation to achieve specific operating goals and to
generate rewards that bring total compensation to competitive
levels.
- The Company provides significant equity-based incentives for
executives and other key employees to ensure that individuals are
motivated over the long term to respond to the Company's business
challenges and opportunities as owners and not just as employees.
Compensation Program
The Company's executive compensation program has three major components,
all of which are intended to attract, retain and motivate executive officers
consistent with the philosophy set forth above. The Committee considers these
components of compensation individually, as well as collectively, in determining
total compensation for executive officers.
1. Base salary. Each year the committee establishes base salaries for
individual executive officers based upon (i) industry and peer group surveys,
(ii) responsibilities, scope and complexity of each position, and (iii)
performance judgements as to each individual's past and expected future
contributions. The Committee reviews with the Chief Executive Officer and
approves, with appropriate modifications, an annual base salary plan for the
Company's executive officers other than the Chief Executive Officer. The
Committee reviews and fixes the base salary of the Chief Executive Officer based
on similar competitive compensation data and the Committee's assessment of his
past performance and its expectations as to his future contributions in leading
the Company.
-16-
<PAGE>
2. Annual cash (short-term) incentives. The Company has a discretionary,
annual cash incentive plan to provide a direct linkage between individual pay
and accomplishing key annual corporate objectives. Target annual bonus awards
are established for executive officers and other management employees based upon
peer group surveys and range from 13% to 35% of salary. Each officer who served
in an executive capacity during and at the end of 1998, including the Chief
Executive Officer, received a bonus for such service ranging in amount from
approximately 19% to approximately 30% of base salary. The bonus award to the
Chief Executive Officer for 1998 was approximately 30% of his base salary. In
establishing the bonus amounts for 1998, the Committee considered the attainment
of certain key overall corporate goals and objectives, focusing particularly on
the Company's product development, manufacturing ramp-up and clinical trial
progress during the year. The Committee also considered the performance of each
officer in his or her respective areas of accountability and each officer's
respective contribution to the success of the Company. Each officer establishes
operating objectives for his or her functional area of responsibility at the
beginning of the year. At the end of the year each officer is rated on the
attainment of those objectives. A major portion of each officer's annual
performance bonus is based on attainment of the overall corporate goals and
objectives, which are also determined at the beginning of the year. Each officer
may receive a portion or the full amount of their targeted annual
performance-based bonus.
3. Equity-based incentive compensation. The Company's primary long-term
incentive program consists of its employee stock option plan. This stock option
plan generally utilizes a four-year vesting period (although some stock options
granted to key executives contain performance-based criteria or accelerated
vesting features) to encourage key executives to continue in the employ of the
Company. Through stock option grants, executives receive significant equity
incentives to build long-term shareholder value. With respect to incentive stock
options, the exercise price of such options granted under this stock option plan
is 100% of the fair market value of the underlying stock on the date of grant,
and with respect to non-qualified stock options, the exercise price of such
options granted under this stock option plan is no less than 85% of the fair
market value of the underlying stock on the date of grant. Employees receive
value from these grants only if the Common Stock appreciates over the long term.
In February 1998, the Committee granted stock options to the four
executive officers who were not founders. In addition, the Committee also
granted stock options in 1998 to three new executive officers, including the
President, in connection with their recruitment. The Committee elected not to
grant options to the Chief Executive Officer and to the Chief Technology Officer
during 1998 because of the number of stock options previously issued to such
officers, their related vesting schedules, and the value of the founders' stock
issued to these executive officers. In reaching its decisions, the Committee
relied on its experience, the information gained in the hiring process for such
officers, and the value of the officers' previously issued stock options.
The Committee also grants restricted and non-restricted stock awards to
key executives. The restricted stock awards often contain a four-year vesting
period similar in nature to the four-year vesting period for stock options.
These stock awards are intended to provide the same equity incentives as stock
options but with the added benefit of not requiring payment of an exercise price
prior to ownership of the underlying stock. In 1998, the Committee granted one
key executive a restricted stock award and another key executive a
non-restricted stock award.
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<PAGE>
Compliance with Internal Revenue Code Section 162(m)
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code, as amended (the "Code"), adopted under the Federal
Revenue Reconciliation Act of 1993. Section 162(m) disallows a deduction for any
publicly-held corporation for individual compensation exceeding $1 million in
any taxable year for any of the named executive officers, unless compensation is
performance-based. Since the targeted cash compensation of each of the named
executive officers is well below the $1 million threshold and the Committee
believes that any options granted under the Company's stock option plan will
meet the requirements of being performance-based under the transitional
provisions provided in the regulations under Section 162(m), the Committee
believes that Section 162(m) will not reduce the tax deduction available to the
Company. The Company's policy is to qualify to the extent reasonable its
executive officers' compensation for deductibility under applicable tax laws.
Dated: March 25, 1999
Respectfully submitted,
The Stock Option and Compensation Committee
J. Stephen Holmes, Chairman
Stephen I. Shapiro
The foregoing Report of the Stock Option and Compensation Committee shall
not be deemed to be "soliciting material" or to be "filed" with the Securities
and Exchange Commission, nor shall such information be incorporated by reference
into any future filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent the Company
specifically incorporates it by reference into such filing.
-18-
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
returns for the Company's Common Stock, the Nasdaq Stock Market index for U.S.
companies, and the Hambrecht & Quist Health Care-Excluding Biotechnology Index.
The graph assumes the investment of $100 on May 23, 1996, the date of the
Company's initial public offering. The performance shown is not necessarily
indicative of future performance.
[GRAPHIC OMITTED]
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<PAGE>
SECTION 16 PROXY STATEMENT DISCLOSURE
Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that officers, directors and holders of more than 10%
of the Common Stock (collectively, "Reporting Persons") file reports of their
trading in Company equity securities with the Securities and Exchange
Commission. Based on a review of Section 16 forms filed by the Reporting Persons
during the last fiscal year, the Company believes that the Reporting Persons
complied with all applicable Section 16 filing requirements.
APPROVAL OF AMENDMENTS TO AMENDED AND RESTATED
STOCK OPTION PLAN
General
In May 1998, the Company amended and restated its Plan under which an
aggregate of 3,400,000 shares of Common Stock were reserved for issuance upon
exercise of options granted thereunder. On December 18, 1998, the Committee
adopted, subject to shareholder approval, the Plan Amendments.
The purpose of the Plan is to provide incentives for selected employees,
officers, consultants and independent contractors of the Company to promote the
financial success and progress of the Company by granting such persons options
to purchase shares of Common Stock of the Company.
As of the Record Date, and without taking into account any options that
are subject to approval of the Plan Amendments, options to purchase an aggregate
of 3,396,700 shares have been granted under the Plan, of which options to
purchase an aggregate of 1,476,838 shares are currently outstanding and options
to purchase an aggregate of 1,919,862 shares have been exercised. Without giving
effect to the Plan Amendment described below to increase by 700,000 shares the
number of reserved shares, none of the shares are reserved for issuance under
the Plan for options subsequently granted thereunder.
On April 7, 1999, the most recent practical date prior to the printing of
this Proxy Statement, the closing sale price of the Common Stock was $20.50 per
share, as reported by The Nasdaq National Market.
Proposed Amendments
The Plan Amendments provide for the following:
a. the increase in the number of shares of Common Stock reserved for issuance
thereunder by 700,000 shares to 4,100,000 shares;
b. the increase in the maximum number of shares from 350,000 to 500,000 with
respect to options that may be granted to any person or entity eligible
within any one calendar year; and
c. the survival of the term of all options under the Plan upon the option
holder's termination of employment by or association with the Company for
a limited period of time, up to a maximum of one year.
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<PAGE>
Explanation of Amendments
a. Increase in the Number of Shares of Common Stock Reserved for Issuance
Thereunder by 700,000 Shares to 4,100,000 Shares.
Presently, the Plan provides for a total of 3,400,000 shares of Common
Stock to be issued upon the exercise of incentive stock options (each an "ISO")
and stock options not so qualified (each a "NQSO") that may be granted from time
to time to persons eligible to receive such options pursuant to the Plan. As
noted above, as of the Record Date, none of the shares remain reserved for
issuance under the Plan for ISOs and NQSOs subsequently granted thereunder.
To ensure that the number of shares reserved under the Plan is adequate to
attract and retain qualified personnel, the Board believes it is necessary that
further shares of Common Stock be reserved for issuance under the Plan. The
Board believes that an additional 700,000 shares of Common Stock should be
sufficient for this purpose for approximately 18 months.
As no shares remained reserved for issuance under the Plan at the time of
the following grants, these options are therefore contingent upon shareholder
approval of this Plan Amendment:
* On October 16, 1998, the Committee granted to William A. Hawkins an
option under the Plan to purchase 120,000 shares at an exercise price of $11.75
per share (the fair market value of the Common Stock on the date of grant).
* On January 27, 1999 and February 1, 1999, the Committee granted to three
Company employees options under the Plan to purchase 1,500 shares and an
aggregate of 18,500 shares, respectively, at a price per share of $27.00 and
$28.00, respectively (the fair market value of Common Stock on the date of these
grants).
* On February 8, 1999, the Committee granted to David N. Gill an option
under the Plan to purchase 50,000 shares at an exercise price of $23.56 per
share (the fair market value of Common Stock on the date of the grant).
* On March 1, 1999, the Committee granted to two Company employees options
under the Plan to purchase an aggregate of 9,000 shares at a price per share of
$25.625 (the fair market value of Common Stock on the date of these grants).
b. Increase in the Maximum Number of Shares from 350,000 to 500,000
with Respect to Options that may be Granted to any Person or Entity
Eligible within any one Calendar Year.
Presently, the Plan provides that the maximum aggregate number of shares
of Common Stock with respect to which options, whether ISOs or NQSOs, that may
be granted to any person or entity eligible under the Plan within any one
calendar year is 350,000 Shares.
Under the proposed Plan Amendment, the maximum aggregate number of shares
of Common Stock with respect to which options, whether ISOs or NQSOs, that may
be granted to any person or entity eligible under the Plan within any one
calendar year is increased to 500,000 shares.
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<PAGE>
The Board believes that such increase in the amount of options that can be
granted per calendar year will provide the Company with greater flexibility in
attracting and retaining qualified senior management.
On October 16, 1998, the Committee granted to William A. Hawkins an option
under the Plan to purchase 120,000 shares at an exercise price of $11.75 per
share (the fair market value of the Common Stock on the date of grant); as Mr.
Hawkins was already granted by the Committee options to purchase an aggregate of
340,000 shares in calendar year 1998, the option to purchase 120,000 shares is
therefore contingent upon shareholder approval of this Plan Amendment.
c. Survival of the Term of All Options under the Plan upon the Option
Holder's Termination of Employment by or Association with the
Company for a Limited Period of Time, up to a Maximum of One Year.
Presently, the Plan provides that should an option holder die, become
disabled, retire or cease to be employed by or associated with the Company for
any other reason, all options held by the option holder shall lapse immediately
following the last day that the option holder is employed by or associated with
the Company except that should an option holder die, the time during which the
option may be exercised shall be extended three months for an option holder that
held ISOs and six months for an option holder that held NQSOs. In all other
cases the Committee, in its discretion, may extend the time during which the
option may be exercised; provided, however, the maximum period of an extension
that may be allowed shall be three months for an option holder that held ISOs
and six months for an option holder that held NQSOs.
Under the proposed Plan Amendment, should an option holder become
disabled, retire or cease to be employed by or associated with the Company for
any reason (other than death), all options held by the option holder shall
terminate and lapse: (i) in the case of an ISO, on the date 45 days following
the last day that the option holder is employed by or associated with the
Company and (ii) in the case of a NQSO, on the date six months following the
last day that the option holder is employed by or associated with the Company.
Should an option holder die, regardless of whether the option holder holds ISOs
or NQSOs, all options held by the option holder shall terminate and lapse on the
date twelve months following the option holder's death.
The Board believes that the option holders should be treated uniformly
upon their termination of employment by or association with the Company, and
that all option holders should be afforded some limited period of time after
such termination to exercise any options that have vested on or prior to their
termination. In the case of death, as the estate administration process often
takes considerable time before a trustee or executor has the authority to
acquire assets for the estate, the extension of time to one year for a deceased
option holder's estate to exercise previously vested options affords the trustee
or executor additional time to exercise such options prior to their lapse.
The shareholders of the Company are being requested to consider and
approve the above-described amendments to the Plan.
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Summary of the Plan
The essential features of the Plan are outlined below.
Administration of the Plan
The Committee, which may be composed only of two or more "Non-Employee
Directors" as defined by Regulation 240.16b-3 under the Exchange Act,
administers the Plan.
Eligibility
ISOs may be granted to employees (including officers) of the Company or
any Parent or Subsidiary thereof and NQSOs may be granted to employees,
officers, consultants and independent contractors of the Company or any Parent,
Subsidiary or Affiliate thereof as the Committee determines will assist the
Company's endeavors.
Grant of Options
The Committee selects persons to be granted options (collectively, the
"Optionees" or individually, an "Optionee") and determines (i) whether the
respective option is to be an ISO or a NQSO, (ii) the number of shares of Common
Stock purchasable under the option, (iii) the time or times when the option
becomes exercisable, (iv) the exercise price, which for NQSOs cannot be less
than eighty-five percent (85%) of the fair market value of the Common Stock on
the date of grant (100% of such fair market value for ISOs), and (v) the
duration of the option, which cannot exceed ten years (five years for ISOs
granted to a person who owns or is considered as owning stock possessing more
than 10% of the total voting power of all classes of stock of the Company or any
subsidiary thereof (a "Ten Percent Shareholder").
The exercise price of an option shall be not less than the fair market
value in the case of an ISO, or 85% of the fair market value in the case of a
NQSO, of the shares at the time that the option is granted. For purposes of the
Plan, the "fair market value" of the shares shall be deemed to be, if the shares
are traded on The Nasdaq Stock Market, National Market or on a national
securities exchange, the closing sales price of the shares on The Nasdaq Stock
Market, National Market or such national securities exchange on the business day
immediately preceding the day as of which the determination is being made or on
the next preceding day on which the shares were traded if no shares were traded
on such day.
The aggregate fair market value (determined as of the time an option is
granted) of stock with respect to which ISOs are exercisable for the first time
by an Optionee during any calendar year (under the Plan or under any other
incentive stock option plan of the Company or any Parent or Subsidiary of the
Company) shall not exceed $100,000.
Each option granted under the Plan shall be evidenced by a written stock
option grant (the "Grant") in such form (which need not be the same for each
Optionee) as the Committee shall from time to time approve, which Grant shall
comply with and be subject to the terms and conditions of the Plan. The date of
grant of an option shall be the date on which the Committee makes the
determination to grant such option unless otherwise specified by the Committee.
The Grant representing the option shall be delivered to the Optionee within a
reasonable time after the granting of the option.
At the discretion of the Committee, the Company may reserve to itself or
its assignee(s) in the Grant (a) a right of first refusal to purchase any shares
that an Optionee (or a subsequent transferee) may propose to
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transfer to a third party and (b) a right to repurchase any or all shares held
by an Optionee upon the Optionee's termination of employment or service with the
Company or a Parent, Subsidiary or Affiliate of the Company for any reason
within a specified time as determined by the Committee at the time of grant at
(i) the Optionee's original purchase price, (ii) the fair market value of such
shares as determined by the Committee in good faith or (iii) a price determined
by a formula or other provision set forth in the Grant.
Exercise of Options
Options shall be exercisable within the times or upon the events
determined by the Committee as set forth in the Grant.
Payment for the shares may be made (i) in cash, (ii) by surrender of
shares of Common Stock of the Company having a fair market value equal to the
exercise price of the option, or (iii) by any combination of the foregoing where
approved by the Committee in its sole discretion; provided, however, in the
event of payment of shares of Common Stock by method (ii) above, the shares so
surrendered, if originally issued to the Optionee upon exercise of an option(s)
granted by the Company, shall have been held by the Optionee for more than six
months.
Notwithstanding the exercise periods set forth in the Grant, exercise of
an option shall always be subject to the following limitations: (i) an option
shall not be exercisable unless such exercise is in compliance with the
Securities Act of 1933, as amended (the "Securities Act"), and all applicable
state securities laws, as they are in effect on the date of exercise and (ii)
the Committee may specify a reasonable minimum number of shares that may be
purchased on any exercise of an option, provided that such minimum number will
not prevent the Optionee from exercising the option for the full number of
shares as to which the option is then exercisable.
Prior to the issuance of shares upon the exercise of an option, the
Optionee is required to pay or make adequate provision for payment of any
federal, state or local withholding tax obligations of the Company, in the
manner determined in the sole discretion of the Committee. No Optionee shall
have any of the rights of a shareholder of the Company with respect to any
shares subject to an option until the option has been validly exercised.
Ability to Exercise an Incentive Stock Options
During the lifetime of the Optionee, an ISO shall be exercisable only by
the Optionee.
Option Adjustments
The Plan contains a customary anti-dilution provision that provides that
in the event of any change in number of the Company's outstanding Common Stock
by reason of a stock dividend, stock split, reverse stock split, combination,
reclassification or similar change in the capital structure of the Company
without consideration, the number of shares of the Common Stock available under
the Plan and the number of shares subject to outstanding options and exercise
price per share of such options shall be proportionately adjusted, subject to
any required action by the Board or shareholders of the Company and compliance
with applicable securities laws. No certificate or scrip representing fractional
shares shall be issued upon the exercise of any option and any resulting
fractions of a share shall be ignored.
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Change of Control
In the event of a Change of Control (as defined below) of the Company, all
outstanding options shall accelerate and become immediately fully exercisable;
provided, however, that with respect to any Grant which includes performance
milestones relating to the exercisability of the options, the Committee shall
have discretion to determine in such Grant the extent, if at all, that such
options granted therein shall accelerate and become exercisable upon a Change of
Control.
For purposes of the Plan, a "Change of Control" shall mean (i) the sale or
other disposition to a person, entity or group (as such term is defined in Rule
13d-5 under the Exchange Act) of 50% or more of the Company's consolidated
assets, (ii) the acquisition of 50% or more of the outstanding shares by a
person or group (as such term is defined in Rule 13d-5 under the Exchange Act)
or (iii) if the majority of the Company's Board of Directors consists of persons
other than Continuing Directors (as defined below).
The term "Continuing Director" shall mean any member of the Company's
Board of Directors on the effective date of the Plan and any other member of the
Board of Directors who shall be recommended or elected to succeed or become a
Continuing Director by a majority of the Continuing Directors who are then
members of the Board of Directors. The aggregate fair market value (determined
at the time an option is granted) of ISOs which first become exercisable in the
year of such dissolution, liquidation, merger, sale of stock or sale of assets
cannot exceed $100,000. Any remaining accelerated options shall be NQSOs.
Amendments to the Plan
The Committee may at any time terminate or amend the Plan in any respect
(including, but not limited to, any form of grant, agreement or instrument to be
executed pursuant to the Plan); provided, however, that shareholder approval
shall be required to be obtained by the Company if required to comply with the
listed company requirements of The Nasdaq National Market or of a national
securities exchange on which the shares of Common Stock are traded, or other
applicable provisions of state or federal law or self-regulatory agencies;
provided, further, that no amendment of the Plan may adversely affect any then
outstanding options or any unexercised portions thereof without the written
consent of the Optionee.
Transferability of Options
No ISO may be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order.
A NQSO may be sold, pledged, assigned, hypothecated, transferred or
disposed of as determined by the Committee and as set forth in a grant with an
Optionee.
Issuance of Shares
The shares of Common Stock, when issued and paid for pursuant to options
granted under the Plan, shall be issued as fully paid and non-assessable shares.
Termination of the Plan
No options may be granted under the Plan subsequent to May 26, 2002, but
options theretofore granted may extend beyond that date and the terms of the
Plan shall continue to apply to such options and to any
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shares acquired upon exercise thereof. The Plan may be sooner terminated at the
discretion of the Committee.
Federal Income Tax Consequences
The following is based upon federal tax laws and regulations as presently
in effect and does not purport to be a complete description of the federal
income tax aspects of the Plan. Also, the specific state tax consequences to
each participant under the Plan may vary, depending upon the laws of the various
states and the individual circumstances of each participant.
Incentive Stock Options
No taxable income is recognized by the Optionee upon the grant of an ISO
under the Plan. Further, no taxable income will be recognized by the Optionee
upon exercise of an ISO granted under the Plan and no business expense deduction
will be available to the Company. Generally, if the Optionee holds shares
acquired upon the exercise of ISOs for at least two (2) years from the date of
grant of the option and for at least one (1) year from the date of exercise, any
gain on a subsequent sale of such shares will be considered as long-term capital
gain. The gain recognized upon the sale of the shares is equal to the excess of
the selling price of the shares over the exercise price. Therefore, the net
federal income tax effect on the holders of ISOs who meet the required holding
period provisions is to defer, until the shares are sold, taxation of any
increase in the value of the shares from the date of grant and to treat such
gain, at the time of sale, as capital gain rather than ordinary income.
However, in general, if the Optionee sells the shares prior to expiration
of either the two-year or one-year period, referred to as a "disqualifying
disposition," the Optionee will recognize taxable income at ordinary tax rates
in an amount equal to the lesser of (i) the value of the shares on the date of
exercise, less the exercise price; or (ii) the amount realized on the date of
sale, less the exercise price, and the Company will receive a corresponding
business expense deduction. The balance of the gain recognized on the
disqualifying disposition will be long-term or short-term capital gain depending
upon the holding period of the optioned shares. The two-year and one-year
holding period rules do not apply to optioned shares which are disposed of by
the Optionee's estate or a person who acquired such shares by reason of the
death of the Optionee.
Under Section 162(m) of the Code, certain compensation payments in excess
of $1 million are subject to a limitation on deductibility for the Company. The
limitation on deductibility applies with respect to that portion of a
compensation payment for a taxable year in excess of $1 million to either the
Company's Chief Executive Officer or any one of the Company's other four (4)
most highly compensated executive officers. Certain performance-based
compensation is not subject to the limitation on deductibility. Options can
qualify for this performance-based exception, but only if they are granted at
fair market value, the total number of shares that can be granted to an
executive for a specified period is stated in the Plan, and shareholder and
Board approval of the Plan is obtained. The Plan has been drafted to allow
compliance with those performance-based criteria that relate to ISOs.
If shares of Common Stock are used in payment of the exercise price of an
ISO, the following rules apply:
(i) If the exercise price under an ISO is paid by delivery of shares
of Common Stock previously acquired upon exercise of an earlier granted
ISO, if such delivery constitutes a "disqualifying disposition" of the
delivered shares because such shares of Common Stock had not been held
long
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enough to satisfy the requisite two-year and one-year holding periods
applicable to ISOs, such disqualifying disposition will render the
Optionee subject to ordinary taxation as discussed above on the delivered
shares. To the extent the number of newly acquired shares equals the
number of delivered shares as to which there was a disqualifying
disposition, the basis for such newly acquired shares will be equal to the
fair market value of the delivered shares at the time they were delivered,
and the holding period for these newly acquired shares will, except for
disqualifying disposition purposes, include the period for which the
delivered shares were held; and to the extent the number of newly acquired
shares exceeds the number of delivered shares, such additional shares will
have a zero basis and a holding period measured from the date of exercise
of the option; and
(ii) If an ISO is exercised with (i) shares of Common Stock acquired
upon exercise of an ISO and held for the requisite holding period prior to
delivery, (ii) shares of Common Stock acquired under a NQSO, or (iii)
shares of Common Stock acquired through open-market purchases, then the
Optionee will not recognize any taxable income (other than relating to
alternative minimum tax) with respect to the shares of Common Stock so
delivered. To the extent the purchased shares equal in number the shares
of Common Stock delivered in payment of the exercise price, the newly
acquired shares will have the same basis and holding period as the
delivered shares. The balance of the purchased shares will have a zero
basis for tax purposes, and their holding period will commence on the date
these additional shares are acquired upon exercise by the Optionee.
At the date of this Proxy Statement, long-term capital gain is taxed to
individuals at a maximum preferential rate of 20%, and items of ordinary income
are currently taxed to individuals at a maximum rate of 39.6%.
An employee may be subject to an alternative minimum tax upon exercise of
an ISO since the excess of the fair market value of the optioned stock at the
date of exercise over the exercise price must be included in alternative minimum
taxable income, unless the acquired shares are disposed of in the same year that
the option was exercised.
Non-Qualified Stock Options
As in the case of ISOs, the grant of NQSOs will not result in any taxable
income to the Optionee. However, unlike ISOs, generally the Optionee will
recognize ordinary income in the year in which the option is exercised in the
amount by which the fair market value of the purchased shares on the date of
exercise exceeds the exercise price.
The fair market value of the shares on the date income is required to be
recognized will constitute the tax basis thereof for computing gain or loss on
any subsequent sale. Any gain or loss recognized by the Optionee upon the
subsequent disposition of the shares will be treated as capital gain or loss and
will qualify as long-term capital gain or loss if the shares are held for more
than twelve months prior to disposition.
Generally, the Company will be entitled to a business expense deduction
equal to the amount of ordinary income recognized by the Optionee at the date of
exercise. The income recognized by the Optionee will be treated as compensation
income and will be subject to income tax withholding by the Company.
Under Section 162(m) of the Code, certain compensation payments in excess
of $1 million are subject to a limitation on deductibility for the Company. The
limitation on deductibility applies with respect to that portion of a
compensation payment for a taxable year in excess of $1 million to either the
Company's Chief Executive Officer or any one of the Company's other four (4)
most highly compensated executive officers.
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Certain performance-based compensation is not subject to the limitation on
deductibility. Options can qualify for this performance-based exception, but
only if they are granted at fair market value, the total number of shares that
can be granted to an executive for a specified period is stated in the Plan, and
shareholder and Board approval of the Plan is obtained. The Plan has been
drafted to allow compliance with those performance-based criteria that relate to
NQSOs, except that NQSOs granted with an exercise price less than the fair
market value of the Common Stock on the date of the grant will not meet such
performance-based criteria and, accordingly, the compensation attributable to
such options will be subject to the deductibility limitations contained in
Section 162(m) of the Code.
At the date of this Proxy Statement, long-term capital gain is taxed to
individuals at a maximum preferential rate of 20%, and items of ordinary income
are currently taxed to individuals at a maximum rate of 39.6%.
Issuance by Committee of Options to William A. Hawkins, David N. Gill and
Company Employees
Options to purchase an aggregate of 199,000 shares (issued to William A.
Hawkins, David N. Gill and five other Company employees, as previously
described), which were outstanding as of the Record Date at a weighted average
exercise price of $16.97 per share, have been issued subject to shareholder
approval of the Plan Amendments. Given this contingency, the Company will incur
a non-cash compensation charge relating to these options to the extent that, on
the date shareholders approve these Plan Amendments, the fair market value of
the Common Stock is greater than the exercise prices of these options. Assuming
these Plan Amendments are approved and using as an example a fair market value
of $20.50 per share of Common Stock (the closing sale price on April 7, 1999,
the most recent practical date prior to the printing of this Proxy Statement, as
reported by The Nasdaq National Market), the non-cash compensation charge with
respect to the foregoing options to purchase an aggregate of 199,000 shares
would total $702,470, or an average of approximately $175,618 per year over the
four year vesting periods of these options, commencing in 1999.
Pursuant to Underwriting Agreements between Morgan Stanley & Co.
Incorporated ("Morgan Stanley") on behalf of certain underwriters, and each of
the Company and its directors, executive officers and certain other
stockholders, such directors, executive officers and certain other stockholders
have agreed that during the 90-day period from March 15, 1999 through June 13,
1999, they will not, among other things, grant, sell or purchase any stock
options, without the prior written consent of Morgan Stanley.
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The following table summarizes the value of unexercised options to be
received by William A. Hawkins, David N. Gill and the five Company employees in
the event the above-described Plan Amendments are approved by the Company's
shareholders:
NEW PLAN BENEFIT
Amended and Restated Stock Option Plan
Dollar Number
Name and Position Value (1) of Shares(2)
----------------- --------- ------------
William A. Hawkins $1,050,000 120,000
David N. Gill $ -- 50,000
Employee Group $ -- 29,000
(1) Equal to the difference between the $20.50 per share closing sale price of
the Common Stock on April 7, 1999, the most recent practical date prior to
the printing of this Proxy Statement, as reported by The Nasdaq National
Market, and the per share exercise price for the respective options. When
no dollar value is indicated, the exercise price of the option is greater
than $20.50 per share.
(2) All options are for a term of ten years from the date of grant and
exercisable cumulatively at the annual rate of one quarter of the number
of underlying shares, commencing one year from the date of grant.
Required Vote
Approval of the amendments to the Plan will require the affirmative vote
of the holders of a majority of the outstanding shares of Common Stock present
in person or represented by proxy at the Annual Meeting and entitled to vote. In
instances of broker non-votes, those shares will not be included in the vote
totals, and therefore will have no effect on the vote for the approval of the
Plan Amendments. Unless marked to the contrary, proxies received will be voted
FOR approval of the Plan Amendments.
The Board of Directors recommends that shareholders vote FOR the approval
of the Plan Amendments.
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APPROVAL OF AMENDMENTS TO NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN
General
On August 20, 1996 the Committee adopted the Director Plan, under which an
aggregate of 100,000 NQSOs are reserved for issuance as an aggregate of 100,000
shares of Common Stock. On December 18, 1998, the Board of Directors adopted,
subject to shareholder approval, the Non-Employee Director Plan Amendments.
The purpose of the Director Plan is to provide additional incentives to
Non-Employee Directors (as defined by the current Regulation 240.16b-3 under the
Exchange Act; see "Administration of Plan" above) to promote the financial
success and progress of the Company by granting such persons options to purchase
shares of the Common Stock.
As of the Record Date, and without taking into account any options that
are subject to approval of the Non-Employee Director Plan Amendments, options to
purchase an aggregate of 100,000 shares have been granted under the Director
Plan, of which options to purchase an aggregate of 92,500 shares are currently
outstanding and options to purchase an aggregate of 7,500 shares have been
exercised. Without giving effect to the Non-Employee Director Plan Amendment
described below to increase by 100,000 shares the number of reserved shares,
none of the shares are reserved for issuance under the Director Plan for options
subsequently granted thereunder.
On April 7, 1999, the most recent practical date prior to the printing of
this Proxy Statement, the closing sale price of the Common Stock was $20.50 per
share, as reported by The Nasdaq National Market.
Proposed Amendments
The Non-Employee Director Plan Amendments provide for the following:
a. the increase in the number of shares of Common Stock reserved for issuance
thereunder by 100,000 shares to 200,000 shares; and
b. the elimination of the maximum number of shares with respect to options
that may be granted to any holder within any one calendar year.
Explanation of Amendments
a. Increase in the Number of Shares of Common Stock Reserved for Issuance
Thereunder by 100,000 Shares to 200,000 Shares.
Presently, the Director Plan provides for a total of 100,000 shares of
Common Stock to be issued upon the exercise of NQSOs that may be granted from
time to time to Non-Employee Directors. As noted above, as of the Record Date,
none of the shares remain reserved for issuance under the Director Plan for
NQSOs subsequently granted thereunder.
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To ensure that the number of shares reserved under the Director Plan is
adequate to attract and retain qualified directors, the Board believes it is
necessary that further shares of Common Stock be reserved for issuance under the
Director Plan. The Board believes that an additional 100,000 shares of Common
Stock should be sufficient for this purpose for approximately 24 months.
On December 18, 1998 the Board granted to Norman R. Weldon a five-year
NQSO under the Director Plan to purchase 10,000 shares of the Common Stock at an
exercise price of $20.94 per share (the fair market value of Common Stock on the
date of grant). With respect to such NQSO, 5,000 shares become exercisable at
the earlier of March 31, 1999 or the date of the 1999 Annual Meeting of
Shareholders, and the 5,000 share balance becomes exercisable at the earlier of
March 31, 2000 or the date of the 2000 Annual Meeting of Shareholders. As only
5,000 shares remained reserved for issuance under the Director Plan at the time
of this grant to Dr. Weldon, the portion of Dr. Weldon's option that vests in
2000 (covering 5,000 shares) is subject to shareholder approval of this
Non-Employee Director Plan Amendment.
On December 18, 1998, the Board also granted to Donald C. Harrison a
five-year NQSO under the Director Plan to purchase 5,000 shares of the Common
Stock at an exercise price of $20.94 per share (the fair market value of Common
Stock on the date of grant), which becomes exercisable in its entirety at the
earlier of March 31, 2001 or the date of the 2001 Annual Meeting of
Shareholders. As only no shares remained reserved for issuance under the
Director Plan at the time of this grant to Dr. Harrison, this option is subject
to shareholder approval of this Non-Employee Director Plan Amendment.
b. Elimination of the Maximum Number of Shares with Respect to Options that
may be Granted to any Option Holder within any One Calendar Year.
Presently, the Director Plan provides that the maximum aggregate number of
shares of Common Stock with respect to which options may be granted to any
Non-Employee Director under the Director Plan within any one calendar year is
15,000 shares.
Section 162(m) of the Code disallows a deduction for any publicly-held
corporation for individual compensation exceeding $1 million in any taxable year
for any of the named executive officers, unless compensation is
performance-based. As none of the persons eligible for options under the
Director Plan qualify as such executive officers, the non-deductibility
requirements of Section 162(m) of the Code are inapplicable to compensation
under the Director Plan. Therefore, in order to provide the most flexibility for
the granting of NQSOs under the Director Plan, the Board believes that the
maximum limit on grants to any Non-Employee Director within any one calendar
year should be eliminated.
The shareholders of the Company are being requested to consider and approve the
above-described amendments to the Director Plan.
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Summary of the Director Plan
The essential features of the Director Plan are outlined below.
Administration of the Director Plan
The Director Plan is currently administered by the Board of Directors of
the Company.
Eligibility
Individuals who are Non-Employee Directors of the Company shall be
eligible to participate in the Director Plan. Each Non-Employee Director to whom
an option is granted hereunder is referred to as an "Optionee."
Grant of Options
The Board selects Non-Employee Directors to be granted options and
determines (i) the number of shares of Common Stock purchasable under the
option, (ii) the time or times when the option becomes exercisable, (iii) the
exercise price, which cannot be less than the fair market value of a share of
Common Stock on the date of grant and (iv) the duration of the option, which
cannot exceed five years.
For purposes of the Director Plan, the "fair market value" of the shares
shall be deemed to be, if the shares are traded on The Nasdaq Stock Market or on
a national securities exchange, the closing sales price of the shares on The
Nasdaq Stock Market, National Market or such national securities exchange on the
business day immediately preceding the day as of which the determination is
being made or on the next preceding day on which the shares were traded if no
shares were traded on such day.
Each option granted under the Director Plan shall be evidenced by a
written stock option agreement in such form (which need not be the same for each
Optionee) as the Board shall from time to time approve, which Grant shall comply
with and be subject to the terms and conditions of the Director Plan. The date
of Grant of an option shall be the date on which the Board makes the
determination to grant such option unless otherwise specified by the Board. The
Grant representing the option shall be delivered to the Optionee within a
reasonable time after the granting of the option.
At the discretion of the Board, the Company may reserve to itself or its
assignee(s) in the stock option agreement (a) a right of first refusal to
purchase any shares that an Optionee (or a subsequent transferee) may propose to
transfer to a third party and (b) a right to repurchase any or all shares held
by an Optionee upon the Optionee's termination of directorship with the Company
for any reason within a specified time as determined by the Board at the time of
Grant at (i) the Optionee's original purchase price, (ii) the fair market value
of such shares as determined by the Board in good faith or (iii) a price,
determined by a formula or other provision, set forth in the stock option
agreement.
Exercise of Options
Options shall be exercisable within the times or upon the events
determined by the Board as set forth in the stock option agreement.
Payment for the shares may be made (i) in cash, (ii) by surrender of
shares of Common Stock of the Company having a fair market value equal to the
exercise price of the option; or (iii) by any combination
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of the foregoing where approved by the Board in its sole discretion; provided,
however, in the event of payment of shares of Common Stock by method (ii) above,
the shares so surrendered, if originally issued to the Optionee upon exercise of
an option(s) granted by the Company, shall have been held by the Optionee for
more than six months.
Notwithstanding the exercise periods set forth in the stock option
agreement, exercise of an option shall always be subject to the following
limitations: (i) an option shall not be exercisable unless such exercise is in
compliance with the Securities Act and all applicable state securities laws, as
they are in effect on the date of exercise and (ii) the Board may specify a
reasonable minimum number of shares that may be purchased on any exercise of an
option, provided that such minimum number will not prevent the Optionee from
exercising the option for the full number of shares as to which the option is
then exercisable.
Prior to the issuance of shares upon the exercise of an option, the
Optionee is required to pay or make adequate provision for payment of any
federal, state or local withholding tax obligations of the Company, in the
manner determined in the sole discretion of the Board. No Optionee shall have
any of the rights of a shareholder of the Company with respect to any shares
subject to an option until the option has been validly exercised.
Termination or Lapse of Options
In the event of death of the Optionee or voluntary or involuntary
termination of directorship with the Company of the Optionee, such option may,
subject to the provisions of the Director Plan and any restrictions or
limitations as are determined by the Board, be exercised as to those optioned
shares in respect of which such option has not previously been exercised, but
only to the extent that such option could be exercised by the Optionee on the
date of such death or voluntary or involuntary termination of directorship with
the Company (whichever is the applicable case): (i) in the event of the death of
the Optionee, then by his or her executor or administrator, or by the person or
persons to whom the option is transferred by will or the applicable laws of
descent and distribution, within twelve months from the date of death, but in no
event subsequent to the expiration date of the option; or (ii) in the event of
the Optionee's voluntary or involuntary termination of directorship with the
Company, then by the Optionee within twelve months from the date of termination,
but in no event subsequent to the expiration date of the option.
Option Adjustments
The Director Plan contains a customary anti-dilution provision that
provides that in the event of any change in number of the Company's outstanding
Common Stock by reason of a stock dividend, stock split, reverse stock split,
combination, reclassification or similar change in the capital structure of the
Company without consideration, the number of shares of the Common Stock
available under the Director Plan and the number of shares subject to
outstanding options and exercise price per share of such options shall be
proportionately adjusted, subject to any required action by the Board of
Directors or shareholders of the Company and compliance with applicable
securities laws. No certificate or scrip representing fractional shares shall be
issued upon the exercise of any option and any resulting fractions of a share
:shall be ignored.
Change of Control of the Company
Notwithstanding any contrary terms in the grant of options under the
Director Plan, in the event of a "Change of Control", all outstanding options
all accelerate and become immediately fully exercisable. For purposes of the
Director Plan, a "Change In Control" shall mean (i) the sale or other
disposition to a person, entity or group (as such term is defined in Rule 13d-5
under the Exchange Act) of 50% or more of the
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<PAGE>
Company's consolidated assets, (ii) the acquisition of 50% or more of the
outstanding shares of Common Stock by a person or group (as such term is defined
in Rule 13d-5 under the Exchange Act) or (iii) if the majority of the Board
consists of persons other than "Continuing Directors". The term "Continuing
Director" shall mean any member of the Board on the effective date of the
Director Plan and any other member of the Board who shall be recommended or
elected to succeed or become a Continuing Director by a majority of the
Continuing Directors who are then members of the Board.
Amendments to the Director Plan
The Board may at any time terminate or amend the Director Plan in any
respect (including, but not limited to, any form of grant, agreement or
instrument to be executed pursuant to the Director Plan); provided, however,
that shareholder approval shall be required to be obtained by the Company if
required to comply with the listed company requirements of The Nasdaq National
Market or of a national securities exchange on which the shares of Common Stock
are traded, or other applicable provisions of state or federal law or
self-regulatory agencies; provided, further, that no amendment of the Director
Plan may adversely affect any then outstanding options or any unexercised
portions thereof without the written consent of the Optionee.
Transferability of Options
An option may be sold, pledged, assigned, hypothecated, transferred or
disposed of as determined by the Board and as set forth in a stock option
agreement with an Optionee.
Issuance of Shares
The shares of Common Stock, when issued and paid for pursuant to options
granted under the Director Plan, shall be issued as fully paid and
non-assessable shares.
Termination of the Director Plan
No option shall be granted pursuant to the Director Plan on or after
December 31, 2001, but options theretofore granted may extend beyond that date
and the terms of the Director Plan shall continue to apply to such options and
to any shares of Common Stock acquired upon exercise thereof.
Federal Income Tax Consequences
The following is based upon federal tax laws and regulations as presently
in effect and does not purport to be a complete description of the federal
income tax aspects of the Director Plan. Also, the specific state tax
consequences to each participant under the Director Plan may vary, depending
upon the laws of the various states and the individual circumstances of each
participant.
Non-Qualified Stock Options
The grant of NQSOs will not result in any taxable income to the Optionee.
Generally, the Optionee will recognize ordinary income in the year in which the
option is exercised in the amount by which the fair market value of the
purchased shares on the date of exercise exceeds the exercise price.
The fair market value of the shares on the date income is required to be
recognized will constitute the tax basis thereof for computing gain or loss on
any subsequent sale. Any gain or loss recognized by the
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<PAGE>
Optionee upon the subsequent disposition of the shares will be treated as
capital gain or loss and will qualify as long-term capital gain or loss if the
shares are held for more than twelve months prior to disposition.
Generally, the Company will be entitled to a business expense deduction
equal to the amount of ordinary income recognized by the Optionee at the date of
exercise. The income recognized by the Optionee will be treated as compensation
income and will be subject to income tax withholding by the Company.
Under Section 162(m) of the Code, certain compensation payments in excess
of $1 million are subject to a limitation on deductibility for the Company. The
limitation on deductibility applies with respect to that portion of a
compensation payment for a taxable year in excess of $1 million to either the
Company's Chief Executive Officer or any one of the Company's other four (4)
most highly compensated executive officers. Certain performance-based
compensation is not subject to the limitation on deductibility. Options can
qualify for this performance-based exception, but only if they are granted at
fair market value, the total number of shares that can be granted to an
executive for a specified period is stated in the Director Plan, and shareholder
and Board approval of the Director Plan is obtained. The Director Plan has been
drafted to allow compliance with those performance-based criteria that relate to
NQSOs, except that NQSOs granted with an exercise price less than the fair
market value of the Common Stock on the date of the grant will not meet such
performance-based criteria and, accordingly, the compensation attributable to
such options will be subject to the deductibility limitations contained in
Section 162(m) of the Code.
At the date of this Proxy Statement, long-term capital gain is taxed to
individuals at a maximum preferential rate of 20%, and items of ordinary income
are currently taxed to individuals at a maximum rate of 39.6%.
Issuance by Board of Options to Norman R. Weldon and Donald C. Harrison
Options to purchase an aggregate of 10,000 shares (issued to Norman R.
Weldon and Donald C. Harrison, as previously described), which were outstanding
as of the Record Date at an exercise price of $20.94 per share, have been issued
subject to shareholder approval of the Non-Employee Director Plan Amendments.
Given this contingency, the Company will incur a non-cash compensation charge
relating to these options to the extent that, on the date shareholders approve
these Non-Employee Director Plan Amendments, the fair market value of the Common
Stock is greater than the exercise prices of these options.
Pursuant to Underwriting Agreements between Morgan Stanley on behalf of
certain underwriters, and each of the Company and its directors, executive
officers and certain other stockholders, such directors, executive officers and
certain other stockholders have agreed that during the 90-day period from March
15, 1999 through June 13, 1999, they will not, among other things, grant, sell
or purchase any stock options, without the prior written consent of Morgan
Stanley.
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<PAGE>
The following table summarizes the value of unexercised options to be
received by Norman R. Weldon and Donald C. Harrison in the event the
above-described Non-Employee Director Plan Amendments are approved by the
Company's shareholders:
NEW PLAN BENEFIT
Non-Employee Director Stock Option Plan
Dollar Number
Name and Position Value (1) of Shares
----------------- --------- ---------
Norman R. Weldon $ -- 5,000
Donald C. Harrison $ -- 5,000
(1) The closing sale price of the Common Stock on April 7, 1999, the most
recent practical date prior to the printing of this Proxy Statement, as
reported by The Nasdaq National Market, was $20.50. As the exercise price
of the options described above is greater than $20.50 per share, no dollar
value is indicated.
Required Vote
Approval of the amendments to the Director Plan will require the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote. In instances of broker non-votes, those shares will not be
included in the vote totals, and therefore will have no effect on the vote for
the approval of the Non-Employee Director Plan Amendments. Unless marked to the
contrary, proxies received will be voted FOR approval of the Non-Employee
Director Plan Amendments.
The Board of Directors recommends that shareholders vote FOR the approval
of the Non-Employee Director Plan Amendments.
-36-
<PAGE>
RATIFICATION OF REAPPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the shareholders, the Board of Directors has
reappointed Ernst & Young LLP as independent auditors for the year ending
December 31, 1999.
The ratification of the reappointment of Ernst & Young LLP will require
the affirmative vote of a majority of the shares of Common Stock present in
person or represented by proxy at the Annual Meeting and entitled to vote. In
instances of broker non-votes, those shares will not be included in the vote
totals and therefore will have no effect on the ratification of the
reappointment of the independent auditors.
It is anticipated that a representative of Ernst & Young LLP will be
present at the Annual Meeting to answer appropriate questions within such firm's
field of expertise. Such representative will have the opportunity to make a
statement if he/she desires to do so.
The Board of Directors recommends that shareholders vote FOR the
reappointment of Ernst & Young LLP as independent auditors for the year ending
December 31, 1999.
OTHER BUSINESS
Management does not know of any matter to be brought before the Annual
Meeting other than as described above. In the event any other matter properly
comes before the Annual Meeting, the persons named in the accompanying form of
proxy have discretionary authority to vote on such matters.
SHAREHOLDER PROPOSALS
Any shareholder proposal to be considered for inclusion in the Company's
proxy soliciting material for the next Annual Meeting of Shareholders must be
received by the Company at its principal office by December 31, 1999.
Dated: April 12, 1999
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<PAGE>
APPENDIX
1. Copy of Company's Amended and Restated Stock Option Plan, as amended and
restated as of December 18, 1998 (subject to approval by Company's
shareholders of Plan Amendments).
2. Copy of Company's Non-Employee Director Stock Option Plan, as amended and
restated as of December 18, 1998 (subject to approval by Company's
shareholders of Non-Employee Director Plan Amendments).
<PAGE>
NOVOSTE CORPORATION
AMENDED AND RESTATED STOCK OPTION PLAN
As Amended and Restated as of December 18, 1998
1. PURPOSE. This Stock Option Plan ("Plan") is established to provide
incentives for selected persons to promote the financial success and progress of
Novoste Corporation ("Company") by granting such persons options to purchase
shares of common stock of the Company.
2. DEFINITION OF "NON-EMPLOYEE DIRECTOR". As defined by Regulation
240.16b-3 under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), a "Non-Employee Director" is a person not currently an officer of the
Company or a parent or subsidiary, who does not receive compensation either
directly or indirectly as a consultant of the Company (except for an amount not
required to be disclosed under Item 404(a) of Regulation S-K, e.g., not more
than $60,000), does not have an interest in a transaction requiring disclosure
under Item 404(a) of Regulation S-K, and is not engaged in a business
relationship which would require disclosure under Item 404(b) of Regulation S-K
(e.g., where the director has a ten percent or more equity interest in an entity
which makes or receives payments in excess of five percent of the Company's or
that entity's consolidated gross revenues).
3. ADOPTION OF PLAN; STOCK OPTION AND COMPENSATION COMMITTEE. This Plan
shall be effective on the date that it is adopted by the Stock Option and
Compensation Committee ("Committee") of the Board of Directors of the Company.
The Committee shall at all times be composed only of two or more Non-Employee
Directors. The Committee shall have and may exercise any and all of the powers
relating to the administration of this Plan and the grant of options hereunder
as are set forth herein.
4. ADMINISTRATION.
(a) This Plan shall be administered by the Committee.
(b) The Committee shall have the authority to (i) exercise all of
the powers granted to it under this Plan, (ii) construe, interpret and implement
this Plan and any Grants (as defined below) executed pursuant to Section 8
hereof, (iii) prescribe, amend and rescind rules and regulations relating to
this Plan, (iv) make all determinations necessary or advisable in administering
this Plan and (v) correct any defect, supply any omission and reconcile any
inconsistency in this Plan.
(c) The determination of the Committee on all matters relating to
this Plan or any Grant shall be final, binding and conclusive.
(d) No member of the Committee shall be liable for any action or
determination made in good faith with respect to this Plan or any award
thereunder.
<PAGE>
5. TYPES OF OPTIONS AND SHARES. Options granted under this Plan
("Options") may be either (a) incentive stock options ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), or (b) nonqualified stock options ("NQSOs"), as designated at the time
of grant. The shares of stock that may be purchased upon exercise of Options
granted under this Plan ("Shares") are shares of the common stock of the
Company.
6. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan is 4,100,000 Shares. Such number of
Shares shall be subject to adjustment as provided in this Plan. If any Option is
terminated in whole or in part for any reason without being exercised in whole
or in part, the Shares thereby released from such Option shall be available for
purchase under other Options subsequently granted under this Plan. At all times
during the term of this Plan, the Company shall reserve and keep available such
number of Shares as shall be required to satisfy the requirements of outstanding
Options under this Plan.
7. ELIGIBILITY. Options may be granted only to such employees, officers,
consultants and independent contractors of the Company or any Parent, Subsidiary
or Affiliate of the Company (as defined below) as the Committee shall select
from time to time in its sole discretion ("Optionees"), provided that only
employees of the Company or a Parent or Subsidiary of the Company shall be
eligible to receive ISOs. An Optionee may be granted more than one Option under
this Plan. As used in this Plan, the following terms shall have the following
meanings:
(a) "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if at the time of the
granting of the Option, each of such corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
(b) "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
granting of the Option, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
(c) "Affiliate" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
2
<PAGE>
8. TERMS AND CONDITIONS OF OPTIONS. The Committee shall determine whether
each Option is to be an ISO or a NQSO, the number of Shares for which the Option
shall be granted, the exercise price of the Option, the periods during which the
Option may be exercised, and all other terms and conditions of the Option,
subject to the following terms and conditions:
(a) Form of Option Grant. Each Option granted under this Plan shall
be evidenced by a written Stock Option Grant ("Grant") in such form (which need
not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
(b) Exercise Price. The exercise price of an Option shall be not
less than the Fair Market Value (as defined herein) in the case of an ISO, or
85% of the Fair Market Value in the case of a NQSO, of the Shares at the time
that the Option is granted. The term "Fair Market Value" means the closing sale
price for a Share on the immediately preceding trading date as reported on The
Nasdaq National Market or, if no closing sale price shall have been made on such
relevant date, on the next preceding day on which there was a closing sale
price; provided, however, that if no closing sale price shall have been made
within the ten business days preceding such relevant date, or if deemed
appropriate by the Committee for any other reason, the Fair Market Value of such
Shares shall be as determined by the Committee. In no event shall the Fair
Market Value of any Share be less than its par value.
(c) Exercise Period. Options shall be exercisable within the times
or upon the events determined by the Committee as set forth in the Grant;
provided, however, that no Option shall be exercisable after the expiration of
ten years from the date the Option is granted and is subject to earlier
termination in the event of the death or the voluntary or involuntary
termination of the Optionee as set forth herein; provided, further, that no ISO
granted to a Ten Percent Shareholder (as defined by Section 422 of the Code)
shall be exercisable after the expiration of five years from the date the ISO is
granted.
(d) Limitations on ISOs. The aggregate Fair Market Value (determined
as of the time an Option is granted) of stock with respect to which ISOs are
exercisable for the first time by an Optionee during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Parent or Subsidiary of the Company) shall not exceed $100,000.
(e) Limitations on ISOs and NQSOs. Notwithstanding anything herein,
the maximum aggregate number of Shares with respect to which Options, whether
ISOs or NQSOs, may be granted to any person or entity eligible therefor under
this Plan within any one calendar year is 500,000 Shares.
(f) Date of Grant. The date of grant of an Option shall be the date
on which the Committee makes the determination to grant such Option unless
otherwise specified by the Committee. The Grant representing the Option shall be
delivered to the Optionee within a reasonable time after the granting of the
Option.
3
<PAGE>
9. EXERCISE OF OPTIONS.
(a) Notice. Options may be exercised only by delivery to the Company
of a written notice and exercise agreement in a form approved by the Committee,
stating the number of Shares being purchased, the restrictions imposed on the
Shares and such representations and agreements regarding the Optionee's
investment intent and access to information as may be required by the Company to
comply with applicable securities laws, together with payment in full of the
exercise price for the number of Shares being purchased.
(b) Payment. Payment for the Shares may be made (i) in cash, (ii) by
surrender of Shares having a Fair Market Value equal to the exercise price of
the Option or (iii) by any combination of the foregoing where approved by the
Committee in its sole discretion; provided, however, in the event of payment for
the Shares by method (ii) above, the Shares so surrendered, if originally issued
to the Optionee upon exercise of an Option(s) granted by the Company, shall have
been held by the Optionee for more than six months.
(c) Withholding Taxes. Prior to issuance of the Shares upon exercise
of an Option, the Optionee shall pay or make adequate provision for any federal,
state or local withholding obligations of the Company, if applicable.
(d) Limitations on Exercise. Notwithstanding the exercise periods
set forth in the Grant, exercise of an Option shall always be subject to the
following limitations:
(i) An Option shall not be exercisable unless such exercise is
in compliance with the Securities Act of 1933, as amended ("Securities Act"),
and all applicable state securities laws, as they are in effect on the date of
exercise.
(ii) The Committee may specify a reasonable minimum number of
Shares that may be purchased on any exercise of an Option, provided that such
minimum number will not prevent the Optionee from exercising the Option for the
full number of Shares as to which the Option is then exercisable.
10. DEATH OR VOLUNTARY OR INVOLUNTARY TERMINATION. Should an Optionee
become disabled, retire or cease to be employed by or associated with the
Company for any reason (other than death), all Options held by the Optionee
shall terminate and lapse: (i) in the case of an ISO, on the date 45 days
following the last day that the Optionee is employed by or associated with the
Company and (ii) in the case of a NQSO, on the date six months following the
last day that the Optionee is employed by or associated with the Company. Should
an Optionee die, regardless of whether the Optionee holds ISOs or NQSOs, all
Options held by the Optionee shall terminate and lapse on the date twelve months
following the Optionee's death. Following the termination of an Optionee's
employment by or association with the Company for any reason (including death),
an Option may be exercised only for the number of Shares for which it could have
been exercised on such termination date (and in no event following the
expiration of such Option's term).
4
<PAGE>
11. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a shareholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
of exercise, except as provided in this Plan.
12. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding Shares is changed by a stock dividend, stock split, reverse stock
split, combination, reclassification or similar change in the capital structure
of the Company without consideration, the number of Shares available under this
Plan and the number of Shares subject to outstanding Options and the exercise
price per share of such Options shall be proportionately adjusted, subject to
any required action by the Committee, Board of Directors or shareholders of the
Company and compliance with applicable securities laws; provided, however, that
no certificate or scrip representing fractional shares shall be issued upon
exercise of any Option and any resulting fractions of a Share shall be ignored.
13. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan shall confer on any Optionee any right to continue in the employ
of the Company or any Parent, Subsidiary or Affiliate of the Company or limit in
any way the right of the Company or any Parent, Subsidiary or Affiliate of the
Company to terminate the Optionee's employment at any time, with or without
cause.
14. COMPLIANCE WITH LAWS. The grant of Options and the issuance of Shares
upon exercise of any Options shall be subject to and conditioned upon compliance
with all applicable requirements of law, including without limitation compliance
with the Securities Act, compliance with all applicable state securities laws
and compliance with the requirements of any stock exchange on which the Shares
may be listed. The Company shall be under no obligation to register the Shares
with the Securities and Exchange Commission or to effect compliance with the
Securities Act or with the registration or qualification requirement of any
state securities laws or stock exchange.
15. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself or its assignee(s) in the Grant (a) a right of
first refusal to purchase any Shares that an Optionee (or a subsequent
transferee) may propose to transfer to a third party and (b) a right to
repurchase any or all Shares held by an Optionee upon the Optionee's termination
of employment or service with the Company or a Parent, Subsidiary or Affiliate
of the Company for any reason within a specified time as determined by the
Committee at the time of grant at (i) the Optionee's original purchase price,
(ii) the Fair Market Value of such Shares as determined by the Committee in good
faith or (iii) a price determined by a provision set forth in the Grant.
16. CHANGE OF CONTROL. In the event of a Change of Control (as defined
herein), all outstanding Options shall accelerate and become immediately fully
exercisable; provided, however, that with respect to any Grant which includes
performance milestones relating to the exercisability of the Options included
therein, the Committee shall have discretion to determine in such Grant the
extent, if at all, that such Options granted therein shall accelerate
5
<PAGE>
and become exercisable upon a Change of Control. For purposes of this Plan, a
"Change of Control" shall mean (i) the sale or other disposition to a person,
entity or group (as such term is defined in Rule 13d-5 under the Exchange Act)
of 50% or more of the Company's consolidated assets, (ii) the acquisition of 50%
or more of the outstanding Shares by a person or group (as such term is defined
in Rule 13d-5) or (iii) if the majority of the Company's Board of Directors
consists of persons other than Continuing Directors (as defined herein). The
term "Continuing Director" shall mean any member of the Company's Board of
Directors on the effective date of this Plan and any other member of the Board
of Directors who shall be recommended or elected to succeed or become a
Continuing Director by a majority of the Continuing Directors who are then
members of the Board of Directors. The aggregate Fair Market Value (determined
at the time an Option is granted) of ISOs which first become exercisable in the
year of such dissolution, liquidation, merger, sale of stock or sale of assets
cannot exceed $100,000. Any remaining accelerated Options shall be NQSOs.
17. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan in any respect (including, but not limited to, any
form of Grant, agreement or instrument to be executed pursuant to this Plan);
provided, however, that shareholder approval shall be required to be obtained by
the Company if required to comply with the provisions of Section 162(m) of the
Code, or the listed company requirements of The Nasdaq National Market or of a
national securities exchange on which the Shares are traded, or other applicable
provisions of state or federal law or self-regulatory agencies; provided,
further, that no amendment of this Plan may adversely affect any then
outstanding Options or any unexercised portions thereof without the written
consent of the Optionee.
18. TERM OF PLAN. No Option shall be granted pursuant to this Plan on or
after May 26, 2002, but Options theretofore granted may extend beyond that date
and the terms of this Plan shall continue to apply to such Options and to any
Shares acquired upon exercise thereof.
19. APPLICABLE LAW. The validity, interpretation and enforcement of this
Plan shall be governed in all respects by the laws of the State of Florida and
the United States of America.
20. ISSUANCE OF SHARES. The Shares, when issued and paid for pursuant to
the Options granted hereunder, shall be issued as fully paid and non-assessable
Shares.
21. NON-TRANSFERABILITY OF ISOs. No ISO granted pursuant to the Plan shall
be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner otherwise than by will or by the laws of descent or distribution and an
ISO may be exercised during the lifetime of the Optionee only by such Optionee.
22. TRANSFERABILITY OF NQSOs. A NQSO may be sold, pledged, assigned,
hypothecated, transferred or disposed of as determined by the Committee and as
set forth in a Grant with an Optionee.
6
<PAGE>
[TO BE TYPED ON LETTERHEAD
OF NOVOSTE CORPORATION]
INCENTIVE STOCK OPTION AWARD
Date of Grant [DATE]
Recipient [NAME]
Number of Shares [NUMBER]
Purchase Price
per Share [PRICE-PER-SHARE]
Total Purchase
Price [NUMBER] x [PRICE-PER-SHARE]
Dear [NAME]:
We are pleased to inform you that, as a key employee of Novoste Corporation (the
"Company"), you are hereby granted an option to purchase shares of Novoste
Common Stock, par value $.01 per share, in the amount and at the price per share
stated above. This option is granted pursuant to the Company's Amended and
Restated Stock Option Plan (the "Plan"), a copy of which is attached, and is
intended to be an ISO as defined by the Plan. This option is exercisable for a
period of ten years from the date of the grant as stated above.
The right to exercise your option will vest per the following schedule:
From the date of the grant No part of the option grant shall vest
for one year
More than one but less than two 25% of the option grant shall vest
years after the date of the grant
More than two but less than three 50% of the option grant shall vest
years after the date of the grant
More than three but less than four 75% of the option grant shall vest
years after the date of the grant
More than four years after the 100% of the option grant shall vest
date of the grant
<PAGE>
This option may be exercised only by delivery to the Company of a written notice
and exercise agreement in a form approved by the Company's Stock Option and
Compensation Committee (the "Committee"), stating the number of shares being
purchased, the restrictions imposed on the shares and such representations and
agreements regarding your investment intent and access to information as may be
required by the Company to comply with applicable securities laws, together with
payment in full of the exercise price for the number of shares being purchased.
Payment for the shares may be made (i) in cash, (ii) by surrender of shares
having a Fair Market Value (as defined in the Plan) equal to the exercise price
of this option or (iii) by any combination of the foregoing where approved by
the Committee in its sole discretion; provided, however, that in the event of
payment for the shares by method (ii) above, the shares so surrendered, if
originally issued to you upon exercise of an option(s) granted by the Company,
shall have been held by you for more than six months.
You may purchase all shares that are vested at any time prior to the expiration
of the option by delivering full payment to the Corporate Secretary. You may
purchase all or part of the shares which are vested; however, you may not make
partial purchases in increments of less than 100 shares.
This option cannot be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution. Only you may exercise this option during your lifetime.
Sincerely,
Thomas D. Weldon
President and CEO
<PAGE>
[TO BE TYPED ON LETTERHEAD
OF NOVOSTE CORPORATION]
NON-QUALIFIED STOCK OPTION AWARD
Date of Grant [DATE]
Recipient [NAME]
Number of Shares [NUMBER]
Purchase Price
per Share [PRICE-PER-SHARE]
Total Purchase
Price [NUMBER] x [PRICE-PER-SHARE]
Dear [NAME]:
We are pleased to inform you that, as a key employee of Novoste Corporation (the
"Company"), you are hereby granted an option to purchase shares of Novoste
Common Stock, par value $.01 per share, in the amount and at the price per share
stated above. This option is granted pursuant to the Company's Amended and
Restated Stock Option Plan (the "Plan"), a copy of which is attached, and is
intended to be a NQSO as defined by the Plan. This option is exercisable for a
period of ten years from the date of the grant as stated above.
The right to exercise your option will vest per the following schedule:
From the date of the grant for No part of the option grant shall vest
one year
More than one but less than two 25% of the option grant shall vest
years after the date of the grant
More than two but less than three 50% of the option grant shall vest
years after the date of the grant
More than three but less than four 75% of the option grant shall vest
years after the date of the grant
More than four years after the 100% of the option grant shall vest
date of the grant
<PAGE>
This option may be exercised only by delivery to the Company of a written notice
and exercise agreement in a form approved by the Company's Stock Option and
Compensation Committee (the "Committee"), stating the number of shares being
purchased, the restrictions imposed on the shares and such representations and
agreements regarding your investment intent and access to information as may be
required by the Company to comply with applicable securities laws, together with
payment in full of the exercise price for the number of shares being purchased.
Payment for the shares may be made (i) in cash, (ii) by surrender of shares
having a Fair Market Value (as defined in the Plan) equal to the exercise price
of this option or (iii) by any combination of the foregoing where approved by
the Committee in its sole discretion; provided, however, that in the event of
payment for the shares by method (ii) above, the shares so surrendered, if
originally issued to you upon exercise of an option(s) granted by the Company,
shall have been held by you for more than six months.
You may purchase all shares that are vested at any time prior to the expiration
of the option by delivering full payment to the Corporate Secretary. You may
purchase all or part of the shares which are vested; however, you may not make
partial purchases in increments of less than 100 shares.
This option cannot be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution. Only you may exercise this option during your lifetime. [MAY BE
MODIFIED IF FORM S-8 REQUIREMENTS CHANGE]
Sincerely,
Thomas D. Weldon
President and CEO
<PAGE>
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
OF
NOVOSTE CORPORATION
As Amended and Restated as of December 18, 1998
1. Purpose of Plan.
The purpose of this Non-Employee Director Stock Option Plan ("Plan")
is to provide additional incentives to Non-Employee Directors (as defined below)
of Novoste Corporation ("Company") to promote the financial success and progress
of the Company by granting such persons options to purchase shares of the
Company's Common Stock ("Common Stock"). The options to purchase shares of
Common Stock under this Plan shall not qualify under Section 422 of the Internal
Revenue Code of 1986, as amended.
2. Definition of "Non-Employee Director".
As defined by Regulation 240.16b-3 under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), a "Non-Employee Director" is a person not
currently an officer of the Company or a parent or subsidiary, who does not
receive compensation either directly or indirectly as a consultant of the
Company (except for an amount not required to be disclosed under Item 404(a) of
Regulation S-K, e.g., not more than $60,000), does not have an interest in a
transaction requiring disclosure under Item 404(a) of Regulation S-K, and is not
engaged in a business relationship which would require disclosure under Item
404(b) of Regulation S-K (e.g., where the director has a ten percent or more
equity interest in an entity which makes or receives payments in excess of five
percent of the Company's or that entity's consolidated gross revenues).
3. Adoption of Plan.
This Plan shall be effective on the date that it is adopted by the
Board of Directors of the Company ("Board"). The Board shall have and may
exercise any and all of the powers relating to the administration of this Plan
and the grant of options hereunder as are set forth herein.
4. Administration.
(a) This Plan shall be administered by the Board.
(b) The Board shall have the authority to (i) exercise all of the
powers granted to it under this Plan, (ii) construe, interpret
and implement this Plan and any Stock Option Agreements
executed pursuant to Section 8 hereof, (iii) prescribe, amend
and rescind rules and regulations relating to this Plan, (iv)
make all determinations necessary or advisable in
administering this Plan and (v) correct any defect, supply any
omission and reconcile any
<PAGE>
inconsistency in this Plan.
(c) The determination of the Board on all matters relating to this
Plan or any Stock Option Agreement shall be final, binding and
conclusive.
(d) No member of the Board shall be liable for any action or
determination made in good faith with respect to this Plan or
any award thereunder.
5. Eligibility.
Individuals who are Non-Employee Directors of the Company shall be
eligible to participate in this Plan. Each Non-Employee Director to whom an
option is granted hereunder is referred to as an "Optionee."
6. Shares Subject to this Plan.
The maximum number of shares of Common Stock that may be issued
pursuant to options granted under this Plan to all Optionees is 200,000 shares,
which shares may, at the discretion of the Board, be either authorized but
unissued shares or shares previously issued and reacquired by the Company. Such
number of shares shall be subject to adjustment as provided in this Plan. If any
option is terminated or unpurchased in whole or in part for any reason without
being exercised in whole or in part, the shares thereby released from such
option shall be available for purchase under other options subsequently granted
under this Plan. At all times during the term of this Plan, the Company shall
reserve and keep available such number of shares of Common Stock as shall be
required to satisfy the requirements of outstanding options under this Plan.
7. Granting of Options; Effective Date.
Until the expiration or sooner termination of this Plan, the Board,
at any time and from time to time, may grant options to Non-Employee Directors
for such number of shares, at such option price, and subject to the terms and
provisions of this Plan. The date on which the grant of an option is authorized
by the Board shall be the effective date of grant for all purposes,
notwithstanding the fact that written acceptance by the Optionee of such grant
may take place thereafter.
8. Terms and Conditions of Options.
All options granted under this Plan shall be evidenced by a written
Stock Option Agreement (which may incorporate the provisions of this Plan by
reference and which shall be in such form as the Board shall approve) signed by
the President of the Company and the Optionee. All options shall be granted
subject to the following terms and conditions:
(a) Exercise Price. The exercise price per share with respect to
each option shall not be less than the Fair Market Value of a
share of Common Stock on the date of grant.
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<PAGE>
(b) Fair Market Value. The term "Fair Market Value" as used herein
as of any date and in respect of any share of Common Stock
means the closing sale price for a share of Common Stock on
the immediately preceding trading date as reported on The
Nasdaq National Market or, if no closing sale price shall have
been made on such relevant date, on the next preceding day on
which there was a closing sale price; provided, however, that
if no closing sale price shall have been made within the ten
business days preceding such relevant date, or if deemed
appropriate by the Board for any other reason, the Fair Market
Value of such shares of Common Stock shall be as determined by
the Board. In no event shall the Fair Market Value of any
share of Common Stock be less than its par value.
(c) Option Term. Each option shall be granted for a term
determined from time to time by the Board, but in no event
shall an option be granted for a term of more than five years
and each option is subject to earlier termination in the event
of the death or the voluntary or involuntary termination of
the Optionee as set forth herein.
(d) [intentionally omitted]
(e) Exercise of Options. Options shall be exercisable within the
times or upon the events determined by the Board as set forth
in the grant of options; provided, however, that no option
shall be exercisable after the expiration of five years from
the date the option is granted. Upon exercise no fractional
shares of Common Stock shall be issued or transferred and no
payments shall be made in lieu of fractional shares. No shares
of Common Stock shall be issued or delivered until full
payment therefor has been made. No option may be exercised for
fewer than the lesser of (i) 500 shares of Common Stock or
(ii) all remaining shares of Common Stock subject to the
option.
(f) Notice of Exercise. Options may be exercised only by delivery
to the Company of a written notice and exercise agreement in a
form approved by the Board, stating the number of shares of
Common Stock being purchased, the restrictions imposed on the
shares of Common Stock and such representations and agreements
regarding the Optionee's investment intent and access to
information as may be required by the Company to comply with
applicable securities laws, together with payment in full of
the exercise price for the number of shares of Common Stock
being purchased.
(g) Payment. Payment for the shares of Common Stock may be made
(i) in cash, (ii) by surrender of shares of Common Stock
having a Fair Market Value equal to the exercise price of the
option or (iii) by any combination of the foregoing where
approved by the Board in its sole discretion; provided,
however, in the event of payment for the shares of Common
Stock by method (ii) above, the shares of Common Stock so
surrendered,
3
<PAGE>
if originally issued to the Optionee upon exercise of an
option(s) granted by the Company, shall have been held by the
Optionee for more than six months.
(h) Purchase for Investment. If the shares of Common Stock subject
to an option have not been registered under the Securities Act
of 1933, as amended ("Securities Act"), the Board shall have
the right to require, as a condition to any exercise of the
option, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such
Act, including but not limited to the representation that any
and all shares of Common Stock purchased upon exercise of the
option will be purchased for investment and not with a view to
the distribution or resale thereof and to agree that such
shares will not be sold except in accordance with such
restrictions or limitations as may be set forth in the Stock
Option Agreement or as may be imposed by law.
(i) Death or Voluntary or Involuntary Termination. In the event of
death of the Optionee or voluntary or involuntary termination
of directorship with the Company of the Optionee, such option
may, subject to the provisions of this Plan and any
restrictions or limitations as are determined by the Board, be
exercised as to those optioned shares in respect of which such
option has not previously been exercised, but only to the
extent that such option could be exercised by the Optionee on
the date of such death or voluntary or involuntary termination
of directorship with the Company (whichever is the applicable
case):
i) in the event of the death of the Optionee, then by
his or her executor or administrator, or by the
person or persons to whom the option is
transferred by will or the applicable laws of
descent and distribution, within twelve months
from the date of death, but in no event subsequent
to the expiration date of the option; or
ii) in the event of the Optionee's voluntary or
involuntary termination of directorship with the
Company, then by the Optionee within twelve months
from the date of termination, but in no event
subsequent to the expiration date of the option.
9. Privileges of Stock Ownership.
No Optionee shall have any of the rights of a shareholder with
respect to any shares of Common Stock subject to an option until the option has
been validly exercised. No adjustment shall be made for dividends or
distributions or other rights for which the record date is prior to the date of
exercise, except as provided in this Plan.
4
<PAGE>
10. Adjustment of Option Shares.
In the event that the number of outstanding shares of Common Stock
is changed by a stock dividend, stock split, reverse stock split, combination,
reclassification or similar change in the capital structure of the Company
without consideration, the number of shares of Common Stock available under this
Plan and the number of shares of Common Stock subject to outstanding options and
the exercise price per share of such options shall be proportionately adjusted,
subject to any required action by the Board or shareholders of the Company and
compliance with applicable securities laws; provided, however, that no
certificate or scrip representing fractional shares shall be issued upon
exercise of any option and any resulting fractions of a share of Common Stock
shall be ignored.
11. Compliance with Laws.
The grant of options and the issuance of shares upon exercise of any
options shall be subject to and conditioned upon compliance with all applicable
requirements of law, including without limitation compliance with the Securities
Act, compliance with all applicable state securities laws and compliance with
the requirements of any stock exchange on which the shares may be listed. The
Company shall be under no obligation to register the shares with the Securities
and Exchange Commission or to effect compliance with the Securities Act or with
the registration or qualification requirement of any state securities laws or
stock exchange.
12. Restrictions on Shares.
At the discretion of the Board, the Company may reserve to itself or
its assignee(s) in the Stock Option Agreement (a) a right of first refusal to
purchase any shares of Common Stock that an Optionee (or a subsequent
transferee) may propose to transfer to a third party and (b) a right to
repurchase any or all shares of Common Stock held by an Optionee upon the
Optionee's termination of directorship with the Company for any reason within a
specified time as determined by the Board at the time of grant at (i) the
Optionee's original purchase price, (ii) the Fair Market Value of such shares of
Common Stock as determined by the Board in good faith or (iii) a price
deter-mined by a provision set forth in the Stock Option Agreement.
13. Change of Control.
Notwithstanding any contrary terms in the grant of options
hereunder, in the event of a Change of Control (as defined herein), all
outstanding options shall accelerate and become immediately fully exercisable.
For purposes of this Plan, a "Change In Control" shall mean (i) the sale or
other disposition to a person, entity or group (as such term is defined in Rule
13d-5 under the Exchange Act) of 50% or more of the Company's consolidated
assets, (ii) the acquisition of 50% or more of the outstanding shares of Common
Stock by a person or group (as such term is defined in Rule 13d-5) or (iii) if
the majority of the Board consists of persons other than Continuing Directors
(as defined herein). The term "Continuing Director" shall mean any member of the
Board on the effective date of this Plan and any other member of the Board who
shall be recommended or elected to succeed or become a Continuing Director by a
majority of the Continuing Directors who are then members of the Board.
5
<PAGE>
14. Amendment or Termination of Plan.
The Board may at any time terminate or amend this Plan in any
respect (including, but not limited to, any form of grant, agreement or
instrument to be executed pursuant to this Plan); provided, however, that
shareholder approval shall be required to be obtained by the Company if required
to comply with the listed company requirements of The Nasdaq National Market or
of a national securities exchange on which the shares of Common Stock are
traded, or other applicable provisions of state or federal law or
self-regulatory agencies; provided, further, that no amendment of this Plan may
adversely affect any then outstanding options or any unexercised portions
thereof without the written consent of the Optionee.
15. Term of Plan.
No option shall be granted pursuant to this Plan on or after
December 31, 2001, but options theretofore granted may extend beyond that date
and the terms of this Plan shall continue to apply to such options and to any
shares of Common Stock acquired upon exercise thereof.
16. Applicable Law.
The validity, interpretation and enforcement of this Plan shall be
governed in all respects by the laws of the State of Florida and the United
States of America.
17. Issuance of Shares.
The shares of Common Stock, when issued and paid for pursuant to the
options granted hereunder, shall be issued as fully paid and non-assessable
shares.
18. Withholding Taxes.
Whenever under this Plan shares are to be issued in satisfaction of
the exercise of options granted thereunder, the Company shall have the right to
require the recipient to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such shares.
19. Transferability of Options.
An option may be sold, pledged, assigned, hypothecated, transferred
or disposed of as determined by the Board and as set forth in a Stock Option
Agreement with an Optionee.
6
<PAGE>
PROXY
NOVOSTE CORPORATION
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas D. Weldon, William A. Hawkins and
David N. Gill, and each of them, proxies, each with the power of substitution,
to vote the shares of the undersigned at the Annual Meeting of Shareholders of
Novoste Corporation on May 13, 1999, and any adjournments and postponements
thereof, upon all matters as may properly come before the Annual Meeting.
Without otherwise limiting the foregoing general authorization, the proxies are
instructed to vote as indicated herein.
Please complete, date and sign on the reverse side and mail in
the enclosed envelope.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR MATTERS (1), (2), (3) and (4)
LISTED BELOW, TO COME BEFORE THE ANNUAL MEETING:
(1) Election of one (1) Class II Director to Nominee: Donald C. Harrison
serve until the 2001 Annual Meeting
of Shareholders:
|_| FOR |_| WITHHELD
For, except withheld from the following nominee:
________________________________________________
Election of three (3) Class III Directors Nominees: Norman R. Weldon
to serve until the 2002 Annual Meeting of Thomas D. Weldon
Shareholders: Charles E. Larsen
|_| FOR |_| WITHHELD
For, except withheld from the following nominee(s):
________________________________________________
(2) To approve amendments (the "Plan Amendments") to the Company's Amended and
Restated Stock Option Plan (the "Plan"), which Plan Amendments (a)
increase the number of shares of Common Stock reserved for issuance
thereunder by 700,000 shares to 4,100,000 shares, (b) increase the maximum
number of shares from 350,000 shares to 500,000 shares with respect to
options that may be granted to any option holder within any one calendar
year, and (c) provide that the term of all options under the Plan survive
termination of employment by or association with the Company for a limited
period of time, up to a maximum of one year.
|_| FOR |_| AGAINST |_| ABSTAIN
<PAGE>
(3) To approve amendments (the "Non-Employee Director Plan Amendments") to the
Company's Non-Employee Director Stock Option Plan, which Non-Employee
Director Plan Amendments (a) increase the number of shares of Common Stock
reserved for issuance thereunder by 100,000 shares to 200,000 shares, and
(b) eliminate the maximum number of shares with respect to options that
may be granted to any option holder within any one calendar year.
|_| FOR |_| AGAINST |_| ABSTAIN
(4) To ratify the reappointment of Ernst & Young LLP as independent auditors
of the Company for the year ending December 31, 1999.
|_| FOR |_| AGAINST |_| ABSTAIN
(5) Upon any and all such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
This Proxy, which is solicited on behalf of the Board of Directors, will be
voted FOR the matters described in paragraphs (1), (2), (3) and (4) above unless
the shareholder specifies otherwise, in which case it will be voted as
specified.
SIGNATURE(S):___________________________________ DATE: _________________________
Note: Executors, Administrators, Trustees, etc. should give full title.
