<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CARDIOVASCULAR DYNAMICS, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LOGO
TO THE STOCKHOLDERS OF CARDIOVASCULAR DYNAMICS, INC.:
You are cordially invited to attend the Annual Meeting of Stockholders of
CardioVascular Dynamics, Inc. ("CVD" or the "Company") on May 16, 1997 at 10:00
a.m., California time. The Annual Meeting will be held at 13700 Alton Parkway,
Suite 160, Irvine, California 92618.
At the meeting, you will be asked to consider and vote upon the following
proposals: (i) the approval of an amendment to the 1996 Stock Option/Stock
Issuance Plan which will effect an increase in the number of shares of the
Company's Common Stock available for issuance by an additional 700,000 shares
and effect certain other changes as described in the Proxy Statement, (ii) the
election of five (5) individuals to serve as the Company's Board of Directors
and (iii) the ratification of Ernst & Young LLP as the Company's independent
auditors for the current fiscal year.
Whether or not you plan to attend the Annual Meeting, please mark, sign,
date and return the enclosed proxy card promptly in the accompanying
postage-paid reply envelope. By returning the proxy, you can help CVD avoid the
expense of duplicate proxy solicitations and possibly having to reschedule the
Annual Meeting if a quorum of the outstanding shares is not present or
represented by proxy. If you decide to attend the Annual Meeting and wish to
change your proxy vote, you may do so simply by voting in person at the Annual
Meeting.
April 16, 1997 MICHAEL R. HENSON
President and Chief Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
CARDIOVASCULAR DYNAMICS, INC.
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
CardioVascular Dynamics, Inc., a Delaware corporation ("CVD" or the "Company"),
will be held on May 16, 1997 at 10:00 a.m. at 13700 Alton Parkway, Suite 160,
Irvine, California 92618, for the following purposes:
1. To approve an amendment to CVD's 1996 Stock Option/Stock Issuance
Plan to effect an increase in the number of shares available for issuance
by an additional 700,000 shares of Common Stock and to effect certain other
changes as set forth in the Proxy Statement.
2. To elect a five (5) member Board of Directors for CVD from the
following nominees: Michael R. Henson, William G. Davis, Mitchell Dann,
Edward M. Leonard and Gerard von Hoffmann.
3. To ratify the selection of Ernst & Young LLP as CVD's independent
auditors for the current fiscal year ending December 31, 1997.
4. To transact such other business as may properly come before the
meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 9, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any continuation or adjournment thereof.
By Order of the Board of Directors
DANA P. NICKELL
Secretary
Irvine, California
April 16, 1997
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU EXPECT TO
ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE GIVEN
YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE> 4
PROXY STATEMENT
------------------------
CARDIOVASCULAR DYNAMICS, INC.
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
CardioVascular Dynamics, Inc. ("CVD" or the "Company") for use at the Annual
Meeting of Stockholders to be held on May 16, 1997 at 10:00 a.m. at 13700 Alton
Parkway, Suite 160, Irvine, California 92618, at which time stockholders of
record on April 9, 1997 will be entitled to vote. On April 9, 1997, CVD had
outstanding 9,103,459 shares of Common Stock. Stockholders of record on such
date are entitled to one vote for each share of Common Stock held on all matters
to be voted upon at the meeting.
CVD intends to mail this proxy statement and the accompanying proxy card on
or about April 16, 1997 to all stockholders entitled to vote at the Annual
Meeting. CVD's principal executive offices are located at 13700 Alton Parkway,
Suite 160, Irvine, California 92618. The telephone number at that address is
(714) 457-9546.
VOTING
Under the cumulative voting provision in the Company's Certificate of
Incorporation, each stockholder may cast for a single nominee for director, or
distribute among up to five nominees, a number of votes equal to five multiplied
by the number of shares held by such stockholder. The other matters submitted
for stockholder approval at this Annual Meeting will be decided by the
affirmative vote of a majority of shares present in person or represented by
proxy at the 1997 Annual Meeting and entitled to vote on each matter. With
regard to the election of directors, votes may be cast in favor of or withheld
from each nominee; votes that are withheld will be excluded entirely from the
vote and will have no effect. Abstentions may be specified on all proposals
except the election of directors and will be counted as present for purposes of
determining the existence of a quorum regarding the item on which the abstention
is noted. If shares are not voted by the broker who is the record holder of the
shares, or if shares are not voted in other circumstances in which proxy
authority is defective or has been withheld with respect to any matter, these
non-voted shares are not deemed to be present or represented for purposes of
determining whether stockholder approval of that matter has been obtained.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by the holder of
record by filing with the Secretary of CVD at CVD's principal executive office,
a written notice of revocation or a new duly executed proxy bearing a date later
than the date indicated on the previous proxy, or it may be revoked by the
holder of record attending the meeting and voting in person. Attendance at the
meeting will not, by itself, revoke a proxy.
SOLICITATION
CVD will bear the entire cost of proxy solicitation, including costs of
preparing, assembling, printing and mailing this proxy statement, the proxy card
and any additional material furnished to stockholders. Copies of the
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others, to forward to such beneficial owners. CVD may reimburse persons
representing beneficial owners of shares for their expenses in forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of CVD. No
additional compensation will be paid to directors, officers or other regular
employees for such services.
1
<PAGE> 5
PROPOSAL NO. 1
AMENDMENT TO THE 1996 STOCK OPTION/STOCK ISSUANCE PLAN
OF CARDIOVASCULAR DYNAMICS, INC.
The stockholders are being asked to vote on a proposal to approve an
amendment to the Company's 1996 Stock Option/Stock Issuance Plan (the "Option
Plan") which includes the following changes:
(i) increase the number of shares of Common Stock authorized for
issuance under the Option Plan by an additional 700,000 shares;
(ii) allow non-employee directors to receive discretionary grants and
stock issuances under the Discretionary Option Grant and Stock Issuance
Programs of the Option Plan;
(iii) eliminate the restriction that the individuals who serve as Plan
Administrator may not receive any discretionary option grants or direct
stock issuances from the Company while serving as Plan Administrator or
during the twelve month period preceding appointment as Plan Administrator;
(iv) require stockholder approval of future amendments to the Option
Plan only to the extent necessary to satisfy applicable laws or
regulations;
(v) eliminate both the six month holding period requirement and the
ten business day "window" period requirement for the exercise of any stock
appreciation rights granted under the Option Plan; and
(vi) allow the shares issued under the Option Plan which are
subsequently reacquired by the Company pursuant to the Company's exercise
of its repurchase rights to be added back to the share reserve available
for future issuance under the Option Plan.
The amendment to the Option Plan was adopted by the Board on April 8, 1997,
subject to stockholder approval at the 1997 Annual Meeting. The Board believes
it is in the best interests of the Company to increase the share reserve so that
the Company can continue to attract and retain the services of those persons
essential to the Company's growth and financial success. The purpose of the
remaining changes to the Option Plan is to provide the Plan Administrator with
more flexibility as is allowed under recent changes to the regulations governing
employee option plans such as the Option Plan.
The Option Plan was originally adopted by the Board of Directors on May 1,
1996 and approved by the stockholders on May 1, 1996.
The following is a summary of the principal features of the Option Plan, as
recently amended for the share increase. The summary, however, does not purport
to be a complete description of all the provisions of the Option Plan. Any
stockholder who wishes to obtain a copy of the actual plan document may do so by
written request to the Secretary of CVD at CVD's executive offices in Irvine,
California.
EQUITY INCENTIVE PROGRAMS
The Option Plan is comprised of three separate equity incentive programs:
(i) a Discretionary Option Grant Program, (ii) a Stock Issuance Program and
(iii) an Automatic Option Grant Program. The Compensation Committee of the Board
administers the Discretionary Option Grant and Stock Issuance Programs to all
persons eligible to participate in the Option Plan, the Discretionary Option
Grant and Stock Issuance Programs, subject to separate but concurrent
administration by the Board. The Plan Administrator (either the Compensation
Committee or the Board, to the extent such entity is carrying out its
administrative functions under the Option Plan with respect to one or more
classes of eligible individuals), has complete discretion (subject to the
provisions of the Option Plan) to authorize discretionary option grants or stock
issuances under the Option Plan. However, all grants under the Automatic Option
Grant Program will be made in strict compliance with the provisions of that
program, and no administrative discretion will be exercised by the Plan
Administrator with respect to the grants made thereunder.
SHARE RESERVE
The maximum number of shares of Common Stock issuable over the term of the
Option Plan may not exceed 1,900,000 shares (including the 700,000 shares for
which stockholder approval is sought under this Proposal). In no event may any
one participant in the Option Plan be granted stock options or separately
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<PAGE> 6
exercisable stock appreciation rights for more than 800,000 shares in the
aggregate over the term of the Option Plan.
In the event any change is made to the outstanding shares of Common Stock
by reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to the number and class of securities issuable (in the aggregate and to
each participant) under the Option Plan and to the number and class of
securities subject to each outstanding option and the exercise price payable per
share for those securities.
ELIGIBILITY
Employees (including officers), non-employee Board members, consultants and
other independent advisors who provide services to CVD and its parent or
subsidiaries (whether now existing or subsequently
established) will be eligible to participate in the Discretionary Option Grant
and Stock Issuance Programs. Non-employee members of the Board will also be
eligible to participate in the Automatic Grant Program.
As of March 7, 1997, approximately 146 employees (including 5 executive
officers), and 4 non-employee Board members were eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs and 4 non-employee Board
members were eligible to participate in the Automatic Option Grant Program.
VALUATION
The fair market value per share of Common Stock on any relevant date under
the Option Plan will be the closing selling price per share on that date on the
Nasdaq National Market. On March 7, 1997, the closing selling price per share
was $10.375.
DISCRETIONARY OPTION GRANT PROGRAM
Options may be granted under the Discretionary Option Grant Program at an
exercise price per share not less than eighty five percent (85%) of the fair
market value per share of Common Stock on the option grant date. No granted
option will have a term in excess of ten years.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option to the extent such option is
exercisable for vested shares. The Plan Administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
Tandem stock appreciation rights provide the holders with the right to
surrender their options for an appreciation distribution from the Company
equal in amount to the excess of (a) the fair market value of the vested
shares of Common Stock subject to the surrendered option over (b) the
aggregate exercise price payable for such shares. Such appreciation
distribution may, at the discretion of the Plan Administrator, be made in
cash or in shares of Common Stock.
Limited stock appreciation rights may be granted to officers of the
Company as part of their option grants. Any option with such a limited
stock appreciation right in effect will be automatically cancelled upon the
successful completion of a hostile take-over of the Company. In return for
the cancelled option, the officer will be entitled to a cash distribution
from the Company in an amount per cancelled option share equal to the
excess of (a) the take-over price per share over (b) the exercise price
payable for such share.
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<PAGE> 7
The Plan Administrator will have the authority to effect the cancellation
of outstanding options under the Discretionary Option Grant Program which have
exercise prices in excess of the then current market price of Common Stock and
to issue replacement options with an exercise price based on the market price of
Common Stock at the time of the new grant.
STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance Program at a price per share
not less than eighty-five percent (85%) of the fair market value per share of
Common Stock, payable in cash or through a promissory note payable to the
Company. Shares may also be issued solely as a bonus for past services.
The issued shares may either be immediately vested upon issuance or subject
to a vesting schedule tied to the performance of service or the attainment of
performance goals. The Plan Administrator will, however, have the discretionary
authority at any time to accelerate the vesting of any unvested shares.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, option grants have been made to
the current non-employee Board members, and option grants will be made to
individuals who join the Board as non-employee members in the future. Additional
automatic option grants will be made at annual intervals to all non-employee
Board members over their continued period of service on the Board. These special
grants may be summarized as follows:
A. Each individual who served as a non-employee Board member on June
19, 1996 was automatically granted on such date an option to purchase 5,000
shares of Common Stock.
B. Each individual who first becomes a non-employee Board member at
any time after June 19, 1996, whether through election by the stockholders
or appointment by the Board, will automatically be granted, at the time of
such initial election or appointment, an option to purchase 5,000 shares of
Common Stock.
C. On the date of each Annual Stockholders Meeting held after June
19, 1996, each individual who is to continue to serve as a non-employee
Board member after such Annual Meeting will receive an additional option
grant to purchase 5,000 shares of Common Stock, provided such individual
has been a member of the Board for at least six (6) months.
Each option will have an exercise price per share equal to 100% of the fair
market value per share of Common Stock on the option grant date and a maximum
term of ten years measured from the option grant date.
Each option will be immediately exercisable for all the option shares, but
any purchased shares will be subject to repurchase by the Company, at the
exercise price paid per share, upon the optionee's cessation of Board service.
Each initial option grant will vest (and the Company's repurchase rights will
lapse) in four equal annual installments over the optionee's period of Board
service, with the first such installment to vest upon the completion of one year
of Board service measured from the option grant date. Each annual option grant
will vest (and the Company's repurchase rights will lapse) upon the completion
of one year of Board service measured from the option grant date.
The shares subject to each automatic option grant will immediately vest
upon the optionee's death or permanent disability or an acquisition of the
Company by merger or asset sale or a hostile change in control of the Company
(whether by successful tender offer for more than 50% of the outstanding voting
stock or by proxy contest for the election of Board members). In addition, upon
the successful completion of a hostile take-over, each automatic option grant
may be surrendered to the Company for a cash distribution per surrendered option
share in an amount equal to the excess of (a) the take-over price per share over
(b) the exercise price payable for such share.
4
<PAGE> 8
GENERAL PROVISIONS
ACCELERATION
In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program which is not to
be assumed by the successor corporation or replaced with a comparable option to
purchase shares of the capital stock of the successor corporation will
automatically accelerate in full, and all unvested shares under the Stock
Issuance Program will immediately vest, except to the extent the Company's
repurchase rights with respect to those shares are to be assigned to the
successor corporation. The Plan Administrator will have the discretion to grant
options under the Discretionary Option Grant Program which automatically
accelerate if the options are assumed or replaced in connection with such
acquisition and the individual's service is subsequently terminated within a
designated period (not to exceed 18 months) following the acquisition. The Plan
Administrator will also have the discretion to grant options which automatically
accelerate in the event the individual's service is terminated within a
designated period (not to exceed 18 months) following a hostile change in
control of the Company (whether by successful tender offer for more than 50% of
the outstanding voting stock or by proxy contest for the election of Board
members). The Plan Administrator may also provide for the automatic vesting of
any outstanding shares under the Stock Issuance Program upon similar terms and
conditions.
The acceleration of vesting in the event of a change in the ownership or
control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
FINANCIAL ASSISTANCE
The Plan Administrator may permit one or more participants to pay the
exercise price of outstanding options or the purchase price of the shares under
the Option Plan by delivering a promissory note payable in installments. The
Plan Administrator will determine the terms of any such promissory note.
However, the maximum amount of financing provided any optionee may not exceed
the cash consideration payable for the purchased shares plus all applicable
taxes incurred in connection with the acquisition of the shares. Any such
promissory note may be subject to forgiveness in whole or in part, at the
discretion of the Plan Administrator, over the participant's period of service.
SPECIAL TAX ELECTION
The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have the Company withhold a portion of the
shares otherwise issuable to such individuals in satisfaction of the tax
liability incurred by such individuals in connection with the exercise of those
options or the vesting of those shares. Alternatively, the Plan Administrator
may allow such individuals to deliver previously acquired shares of Common Stock
in payment of such tax liability.
AMENDMENT AND TERMINATION
The Board may amend or modify the Option Plan in any or all respects
whatsoever subject to any required stockholder approval. The Board may terminate
the Option Plan at any time, and the Option Plan will in all events terminate on
April 29, 2006.
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<PAGE> 9
OPTION GRANTS
The table below shows, as to each of the executive officers named in the
Summary Compensation Table and the various indicated groups, the number of
shares of Common Stock subject to options granted between January 1, 1996 and
March 7, 1997 under the Option Plan and the predecessor 1995 Stock Option Plan,
together with the weighted average exercise price payable per share.
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
NAME AND POSITION OPTION SHARES(1) EXERCISE PRICE
----------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Michael R. Henson.................................... 170,000 $11.79
President and Chief Executive Officer
Dana P. Nickell...................................... 25,000 $ 9.50
Vice President, Finance and Administration
Jeffrey F. O'Donnell................................. 15,000 $ 9.50
Vice President, Sales and Marketing
All current executive officers as a group (5
persons)........................................... 268,000 $11.51
All current directors (other than executive officers)
as a group
(4 persons)........................................ 20,000 $12.00
All employees, including current officers who are not
executive officers, as a group (60 persons)........ 250,000 $10.66
</TABLE>
- - ---------------
(1) Includes shares granted on the basis of the 700,000 share increase which are
subject to stockholder approval and which are listed below in the table
under New Plan Benefits.
As of March 7, 1997, approximately 222,000 shares of Common Stock had been
issued under the Option Plan, approximately 1,191,000 shares of Common Stock
were subject to outstanding options, and approximately 487,000 shares of Common
Stock were available for future option grants, inclusive of the 700,000 share
increase which stockholders are being asked to approve under this Proposal No.
1.
NEW PLAN BENEFITS
The table below shows, as to each of the executive officers named in the
Summary Compensation Table and the various indicated groups, the number of
shares of Common Stock subject to options granted between January 1, 1996 and
March 7, 1997 under the Option Plan, which were granted on the basis of the
700,000 share increase for which stockholder approval is sought, together with
the weighted average exercise price payable per share.
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
NAME AND POSITION OPTION SHARES EXERCISE PRICE
----------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Michael R. Henson.................................... 39,000 $ 9.50
President and Chief Executive Officer
Dana P. Nickell...................................... 24,000 $ 9.50
Vice President, Finance and Administration
Jeffrey F. O'Donnell................................. 14,000 $ 9.50
Vice President, Sales and Marketing
All current executive officers as a group (5
persons)........................................... 85,000 $ 9.50
All current directors (other than executive officers)
as a group
(4 persons)........................................ 0 0
All employees, including current officers who are not
executive officers, as a group (42 persons)........ 128,000 $ 9.50
</TABLE>
As of March 7, 1997, options covering an aggregate of approximately 213,000
shares of Common Stock have been granted on the basis of the 700,000 share
increase for which stockholder approval is sought under this Proposal. Those
options have a weighted average exercise price of $9.50 per share and were
granted to a total of 46 employees, four of whom are executive officers of the
Company. None of the aforementioned options were granted to members of the Board
of Directors. However, each individual who is reelected as a non-employee Board
member at the 1997 Annual Meeting will automatically receive at that time an
option for 5,000 shares of Common Stock at an exercise price equal to the fair
market value of the shares on such grant date.
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FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the Option Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive Stock Options. No taxable income is recognized by the
optionee at the time of the option grant, and no taxable income is
generally recognized at the time the option is exercised. The optionee
will, however, recognize taxable income in the year in which the purchased
shares are sold or otherwise disposed of. For Federal tax purposes,
dispositions are divided into two categories: (i) qualifying and (ii)
disqualifying. A qualifying disposition occurs if the sale or other
disposition is made after the optionee has held the shares for more than
two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied,
then a disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased
shares, then the Company will be entitled to an income tax deduction, for
the taxable year in which such disposition occurs, equal to the excess of
(i) the fair market value of such shares on the option exercise date over
(ii) the exercise price paid for the shares. In no other instance will the
Company be allowed a deduction with respect to the optionee's disposition
of the purchased shares.
Non-Statutory Options. No taxable income is recognized by an optionee
upon the grant of a non-statutory option. The optionee will in general
recognize ordinary income, in the year in which the option is exercised,
equal to the excess of the fair market value of the purchased shares on the
exercise date over the exercise price paid for the shares, and the optionee
will be required to satisfy the tax withholding requirements applicable to
such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the
optionee's termination of service prior to vesting in those shares, then
the optionee will not recognize any taxable income at the time of exercise
but will have to report as ordinary income, as and when the Company's
repurchase right lapses, an amount equal to the excess of (i) the fair
market value of the shares on the date the repurchase right lapses over
(ii) the exercise price paid for the shares. The optionee may, however,
elect under Section 83(b) of the Internal Revenue Code to include as
ordinary income in the year of exercise of the option an amount equal to
the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the
Section 83(b) election is made, the optionee will not recognize any
additional income as and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed
for the taxable year of the Company in which such ordinary income is
recognized by the optionee.
STOCK APPRECIATION RIGHTS
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
the appreciation distribution for the taxable year in which such ordinary income
is recognized by the optionee.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION.
The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options granted with exercise prices equal to the
fair market value of the shares on the grant date will qualify as
performance-based compensation
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<PAGE> 11
for purposes of Internal Revenue Code Section 162(m) and will not have to be
taken into account for purposes of the $1 million limitation per covered
individual on the deductibility of the compensation paid to certain executive
officers of the Company. Accordingly, all compensation deemed paid with respect
to those options will remain deductible by the Company without limitation under
Internal Revenue Code Section 162(m).
ACCOUNTING TREATMENT
Option grants with exercise prices less than the fair market value of the
shares on the grant date will result in a compensation expense to the Company's
earnings equal to the difference between the exercise price and the fair market
value of the shares on the grant date. Such expense will be accruable by the
Company over the period that the option shares are to vest. Option grants with
an exercise price equal to the fair market value of the option shares at the
time of grant will not result in any charge to the Company's earnings. However,
new FASB 123 will require pro-forma disclosure to the Company's financial
statements indicating the impact which those options would have upon the
Company's reported earnings were their value at the time of grant treated as
compensation expense. Whether or not granted at a discount, the number of
outstanding options may be a factor in determining the Company's earnings per
share on a fully-diluted basis.
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in compensation expense to the
Company's earnings.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the shares of the Company's
outstanding voting stock present or represented by proxy at the 1997 Annual
Meeting and entitled to vote on Proposal No. 1 is required for approval to amend
the Option Plan. If such stockholder approval is not obtained, then the share
reserve will not be increased and the members of the Compensation Committee will
not become eligible to receive option grants under the Discretionary Option
Grant Program or receive issuances under the Stock Issuance Program and any
options granted on the basis of such share increase will terminate without
becoming exercisable for any of the shares of Common Stock subject to those
options, and the Option Plan will terminate once the balance of the share
reserve as last approved by the stockholders has been issued under the Option
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE 1996 STOCK OPTION/STOCK ISSUANCE PLAN.
PROPOSAL NO. 2
ELECTION OF DIRECTORS
Five (5) directors will be elected at the Annual Meeting by the holders of
CVD Common Stock to serve until the next Annual Meeting and until their
successors are elected and qualified, or until their earlier death, resignation
or removal. The Board of Directors will vote all proxies received by them FOR
the nominees listed below unless otherwise instructed in writing on such proxy.
The five (5) candidates receiving the highest number of affirmative votes of
shares entitled to vote at the Annual Meeting will be elected directors of CVD.
In the event any nominee is unable to or declines to serve as a director at the
time of the Annual Meeting, the proxies will be voted for an additional nominee
who shall be designated by the annual current Board of Directors to fill the
vacancy. As of the date of this Proxy Statement, the Board of Directors is not
aware of any nominee who is unable or will decline to serve as director. In the
event that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner in
accordance with cumulative voting as will assure the election of as many of the
nominees listed below as possible, with any required selection among such
nominees to be determined by the proxy holders.
8
<PAGE> 12
INFORMATION WITH RESPECT TO NOMINEES
Set forth below, as of March 7, 1997, for each nominee for director of CVD
is information regarding his age, position(s) with CVD, the period he has served
as a director, any family relationship with any other director or executive
officer of CVD, and the directorships currently held by him in corporations
whose shares are publicly registered.
<TABLE>
<CAPTION>
NOMINEE, AGE AND PRINCIPAL OCCUPATION AND
FIRST YEAR AS DIRECTOR BUSINESS EXPERIENCE
- - ----------------------------------- --------------------------------------------------------
<S> <C>
Mitchell Dann, 36, 1996............ Since April 1991, Mr. Dann has been President of M. Dann
& Co., Inc., a venture capital advisory firm. From
October 1982 to April 1991, he co-founded and held the
position of Managing Partner at IAI Venture Capital
Group, the venture capital division of Investment
Advisors, Inc. Mr. Dann is Chairman of the Board of
Urologix, Inc.
William G. Davis, 65, 1995......... Mr. Davis is an independent business consultant. From
1957 to 1984, Mr. Davis was associated with Eli Lilly
and Company, a diversified health care company, where he
served as Executive Vice President, Eli Lilly
International Corporation, from 1972 to 1975, Executive
Vice President, Pharmaceutical Division, from 1975 to
1982, and President, Medical Instrument Systems Divi-
sion, from 1982 until his retirement in 1984. Mr. Davis
is also a director of ALZA Corporation, Collagen
Corporation, EndoSonics Corporation and Target
Therapeutics, Inc.
Michael R. Henson, 51, 1995........ Mr. Henson joined CVD in February 1995 as President,
Chief Executive Officer and Chairman of the Board of
Directors. Prior to joining CVD, Mr. Henson served as
the Chief Executive of EndoSonics Corporation from 1988
to February 1995, and as Chairman of the Board from
February 1993 to November 1996. Between April 1983 and
February 1988, Mr. Henson served as President and Chief
Executive Officer of Trimedyne, Inc., a manufacturer of
medical lasers and catheters. Prior to joining Trimedyne
in 1983, Mr. Henson held positions as Vice President for
G.D. Searle & Company, Director of Marketing for the
Hospital Products Division of Abbott Laboratories and
Marketing Manager for Bristol Myers and Company.
Edward M. Leonard, 55, 1996........ Mr. Leonard has been a partner in the law firm of
Brobeck, Phleger & Harrison LLP, CVD's general counsel,
since 1978.
Gerard von Hoffmann, 40, 1996...... Gerard von Hoffmann joined the Company as a director in
April 1996. He has been with the law firm of Knobbe,
Martens, Olson & Bear LLP, CVD's patent counsel, since
1986 and has been a partner since 1989.
</TABLE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met eight (8) times during the year ended December
1996. Each Director attended at least 75% of the aggregate of (1) the total
number of meetings of the Board of Directors and (2) the total number of
meetings held by all Committees of the Board on which such Director served.
CVD has a standing Audit Committee composed of Messrs. Edward M. Leonard
and Gerard von Hoffmann. The Audit Committee is primarily responsible for
approving the services performed by the Company's independent public accountants
and for reviewing and evaluating the Company's accounting principles and
reporting practices and its system of internal accounting controls. The Audit
Committee met two (2) times during the year ended December 31, 1996.
CVD has a standing Compensation Committee which met three (3) times during
the year ended December 31, 1996. For the 1996 fiscal year, this Committee
consisted of Mitchell Dann and William G.
9
<PAGE> 13
Davis. The Committee administers the 1996 Option Plan and reviews and acts on
matters relating to compensation levels and benefit plans for key executives of
CVD. The Compensation Committee has the exclusive power and authority to make
stock option grants under the 1996 Option Plan to the Company's officers.
CVD has a Pricing Committee which was formed in connection with the initial
public offering held in June 1996. The Pricing Committee met one (1) time during
the year ended December 31, 1996. This Committee consists of Messrs. Michael R.
Henson and William G. Davis.
REMUNERATION
Non-employee directors each receive a fee of $1,500 per quarter and
reimbursement for certain travel expenses and other out-of-pocket costs.
Non-employee Board members are eligible to receive periodic option grants under
the Automatic Option Grant Program in effect under the Company's 1996 Stock
Option/Stock Issuance Plan. Accordingly, each individual who was a non-employee
Board member at the time of the initial public offering received at that time an
automatic option grant to purchase 5,000 shares of Common Stock at an exercise
price of $12.00 per share (the fair market value per share of Common Stock on
the grant date). The remaining terms in effect for each option grant made under
the Automatic Option Grant Program are summarized in Proposal No. 1 above.
Mr. Leonard, a member of the Company's Board of Directors, is a partner at
Brobeck, Phleger & Harrison LLP, which serves as General Counsel to the Company.
Mr. von Hoffmann, a member of the Company's Board of Directors, is a
partner at Knobbe, Martens, Olson & Bear LLP, which serves as Patent Counsel to
the Company.
All directors hold office until the next Annual Meeting of Stockholders and
until their successors have been elected. Officers are appointed to serve, at
the discretion of the Board of Directors, until their successors are appointed.
There are no family relationships among executive officers or directors of CVD.
There are no arrangements or understandings involving any director or any
nominee regarding such person's status as a director or nominee.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The members of the Board of Directors, the executive officers of CVD and
persons who hold more than 10% of the Company's outstanding Common Stock are
subject to the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934 which require them to file reports with respect to their
ownership of the Common Stock and their transactions in such Common Stock. Based
upon (i) the copies of Section 16(a) reports which CVD received from such
persons for their 1996 fiscal year transactions in the Common Stock and their
Common Stock holdings and (ii) the written representations received from one or
more of such persons that no annual Form 5 reports were required to be filed by
them for the 1996 fiscal year, CVD believes that all reporting requirements
under Section 16(a) for such fiscal year were met in a timely manner by its
executive officers, Board members and greater than ten-percent stockholders,
except that Messrs. Dann and von Hoffmann each filed one late report with
respect to an open market purchase.
CERTAIN TRANSACTIONS
Other than the officer loans described above under Executive Compensation
and Related Information, the Company was not involved in any transaction during
the fiscal year ended December 31, 1996 in which a director, officer or greater
than 5% stockholder had a direct or indirect material interest involving an
amount in excess of $60,000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL FIVE
NOMINEES NAMED ABOVE.
10
<PAGE> 14
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as independent auditors for CVD for
the fiscal year ended December 31, 1996. The Board of Directors, on the
recommendation of CVD's management, has selected that firm to continue in this
capacity for the current fiscal year. CVD is asking the stockholders to ratify
the selection by the Board of Directors of Ernst & Young LLP, as independent
auditors to audit the consolidated financial statements of CVD for the fiscal
year ending December 31, 1997 and to perform other appropriate services. A
representative of Ernst & Young LLP is expected to be present at the Annual
Meeting to respond to stockholders' questions, and that representative will be
given an opportunity to make a brief presentation to the stockholders if he or
she so desires and will be available to respond to appropriate questions. CVD
has been advised by Ernst & Young LLP that neither that firm nor any of its
associates has any material relationship with CVD nor any affiliate of CVD.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION. In the event
that a majority of the shares voted at the Annual Meeting do not vote for
ratification of the selection of Ernst & Young LLP, the Board of Directors will
reconsider such selection. Under all circumstances, the Board retains the
corporate authority to change the auditors at a later date.
GENERAL
SECURITY OWNERSHIP OF OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to CVD regarding
the ownership of CVD's Common Stock as of February 14, 1997 by (i) each
stockholder known to CVD to be a beneficial owner of more than five percent (5%)
of CVD's Common Stock, (ii) each director and nominee for director, (iii) the
Named Officers (as such term is defined under the caption "Executive
Compensation and Related Information -- Summary of Cash and Certain Other
Compensation") and (iv) all current directors and officers of CVD as a group.
<TABLE>
<CAPTION>
NUMBER
OF SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OF PRINCIPAL STOCKHOLDER OWNED(1) SHARES(2)
----------------------------------------------------------- ------------ -----------
<S> <C> <C>
EndoSonics Corporation..................................... 4,040,000 44.49%
6616 Owens Drive
Pleasanton, CA 94588
Boston Scientific Corporation(3)........................... 880,000 9.56
One Boston Scientific Place
Natick, MA 01760
Wells Fargo Bank, N.A.(4).................................. 642,500 7.08
464 California Street
San Francisco, CA 94163
Scudder, Stevens & Clark, Inc.(5).......................... 584,300 6.43
345 Park Avenue
New York, New York 10154
Michael R. Henson(6)....................................... 132,291 1.45
Mitchell Dann(7)........................................... 7,500 *
William G. Davis(8)........................................ 6,875 *
Gerard von Hoffmann(9)..................................... 6,150 *
Edward M. Leonard(10)...................................... 6,807 *
Dana P. Nickell(11)........................................ 15,700 *
Jeffrey F. O'Donnell(12)................................... 31,250 *
All directors and officers as a group (13 persons)(13)..... 278,654 3.00
--------- -----
Total Principal Stockholders..................... 6,425,454 68.39%
========= =====
</TABLE>
11
<PAGE> 15
- - ---------------
* Represents beneficial ownership of less than 1%.
(1) The number of shares of Common Stock beneficially owned includes any shares
issuable pursuant to stock options that may be exercised within 60 days
after February 14, 1997. Shares issuable pursuant to such options are
deemed outstanding for computing percentage of the person holding such
options but are not deemed to be outstanding for computing the percentage
of any other person.
(2) Applicable percentages are based on 9,080,902 shares outstanding on
February 14, 1997.
(3) Pursuant to a Schedule 13G filed with the Commission on February 14, 1997,
Boston Scientific Corporation reported that as of December 31, 1996 it had
sole voting and investment power over 880,000 shares. Includes warrants to
purchase 120,000 shares of the Company's Common Stock.
(4) Pursuant to a Schedule 13G filed with the Commission on February 14, 1997,
Wells Fargo Bank, N.A. reported that as of December 31, 1996 it had shared
investment power over such 642,500 shares, sole voting power over 561,600
of such shares and shared voting power over 1,500 of such shares.
(5) Pursuant to a Schedule 13G filed with the Commission on February 10, 1997,
Scudder Stevens & Clark, Inc. reported that as of December 31, 1996 it had
sole investment power over such 584,300 shares, sole voting power over
181,900 of such shares and shared voting power over 290,300 of such shares.
(6) Includes 15,791 shares subject to options exercisable within 60 days after
February 14, 1997.
(7) Includes 5,000 shares subject to options exercisable within 60 days after
February 14, 1997.
(8) Includes 6,875 shares subject to options exercisable within 60 days after
February 14, 1997.
(9) Includes 5,000 shares subject to options exercisable within 60 days after
February 14, 1997.
(10) Includes 5,000 shares subject to options exercisable within 60 days after
February 14, 1997.
(11) Includes 15,500 shares subject to options exercisable within 60 days after
February 14, 1997.
(12) Includes 31,250 shares subject to options exercisable within 60 days after
February 14, 1997.
(13) Includes 194,497 shares subject to options exercisable within 60 days after
February 14, 1997.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
COMPENSATION COMMITTEE REPORT
Prior to the Company's initial public offering in June 1996, the Board set
the base salary and bonuses for the Company's executive officers and
administered the Company's stock option plan. The Compensation Committee was
established at the time of the initial public offering. It is the responsibility
of the Compensation Committee of the CVD Board of Directors to make
recommendations to the Board with respect to the base salary and bonuses to be
paid to the Company's executive officers each fiscal year. In addition, the
Compensation Committee has the exclusive authority to administer the CVD 1996
Stock Option/Stock Issuance Plan with respect to option grants and stock
issuances made thereunder to such officers and other key employees. The
following is a summary of the policies of the Compensation Committee which
affect the compensation paid to executive officers, as reflected in the tables
and text set forth elsewhere in this Proxy Statement.
GENERAL COMPENSATION POLICY. Under the supervision of the Compensation
Committee, CVD has developed a compensation policy which is designed to attract
and retain qualified key executives critical to the Company's success and to
provide such executives with performance-based incentives tied to the
achievement of Company milestones. One of the Committee's primary objectives is
to have a substantial portion of each officer's total compensation contingent
upon the Company's performance as well as upon the individual's contribution to
the success of CVD as measured by his personal performance. Accordingly, each
executive officer's compensation package is fundamentally comprised of three
elements: (i) base salary which reflects individual performance and expertise
and is designed to be competitive with salary levels in the industry; (ii)
variable performance awards payable in cash and tied to the Company's
achievement of certain goals; and (iii) long-term stock-based incentive awards
which strengthen the mutuality of interests between the executive officers and
the CVD stockholders.
12
<PAGE> 16
FACTORS. The principal factors which were considered in establishing the
components of each executive officer's compensation package for the 1996 fiscal
year are summarized below. However, the Committee may in its discretion apply
different factors, particularly different measures of financial performance, in
setting executive compensation for future fiscal years.
- BASE SALARY. The base salary levels for the executive officers were
established by the Board for the 1996 fiscal year on the basis of the
following factors: personal performance, the estimated salary levels in
effect for similar positions at a select group of companies with which the
Company competes for executive talent, and internal comparability
considerations. The Board, however, did not rely upon any specific
compensation surveys for comparative compensation purposes. Instead, the
Board made its decisions as to the appropriate market level of base salary
for each executive officer on the basis of its understanding of the salary
levels in effect for similar positions at those companies with which the
Company competes for executive talent. Base salaries will be reviewed by
the Compensation Committee on an annual basis, and adjustments will be made
in accordance with the factors indicated above.
- ANNUAL INCENTIVE COMPENSATION. CVD has adopted an Employee Bonus
Plan pursuant to which the Board of Directors has discretionary authority
to award cash bonuses to executive officers and employees in accordance
with recommendations made by the Compensation Committee based upon the
extent to which certain financial and performance targets established
semi-annually by the Compensation Committee are met and the contribution of
each such officer and employee to the attainment of such targets. For
fiscal year 1996, the performance targets for each of the Named Officers
included gross sales, cash flow, engineering product goals and regulatory
submission goals. The weight given to each factor varied from individual to
individual.
- LONG-TERM INCENTIVE COMPENSATION. CVD has also adopted the 1996
Stock Option/Stock Issuance Plan. Each grant under the Plan is designed to
align the interests of the executive officer with those of the stockholders
and provide each individual with a significant incentive to manage CVD from
the perspective of an owner with an equity stake in the business. The
number of shares subject to each option grant is based upon the officer's
tenure, level of responsibility and relative position in CVD. The Company
has established certain general guidelines in making option grants to the
executive officers in an attempt to target a fixed number of unvested
option shares based upon the individual's position with the Company and
their existing holdings of unvested options. However, the Company does not
adhere strictly to these guidelines and will vary the size of the option
grant made to each executive officer as it feels the circumstances warrant.
Each grant allows the officer to acquire shares of CVD Common Stock at a
fixed price per share (the market price on the grant date) over a specified
period of time (up to 10 years from the date of grant). The option normally
vests in periodic installments over a four-year period, contingent upon the
executive officer's continued employment with the Company. Accordingly, the
option will provide a return to the executive officer only if he or she
remains in the Company's employ and the market price of the Company's
Common Stock appreciates over the option term.
- CEO COMPENSATION. In setting the base salary for Mr. Michael R.
Henson, the Company's Chief Executive Officer, for the 1996 fiscal year,
the Compensation Committee sought to provide him with a level of salary
which is competitive with salaries paid to chief executive officers of
similarly-sized companies in the industry and commensurate with Mr.
Henson's experience. There was no intent on the Compensation Committee's
part to have this particular component of Mr. Henson's compensation
affected to any significant degree by Company performance.
Mr. Henson's incentive cash compensation for the 1996 fiscal year was based
on an overall assessment of his achievement in implementing certain internal
practices to strengthen the management team and further the Company's business
development.
The long-term incentive component of Mr. Henson's compensation for the 1996
fiscal year consisted of a stock option grant on November 4, 1996 to purchase
130,000 shares. As previously indicated, this grant was designed to provide a
special incentive to Mr. Henson to contribute to the Company's financial
success.
13
<PAGE> 17
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of
the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction
to publicly held corporations for compensation exceeding $1 million paid to
certain of the corporation's executive officers. The limitation applies only to
compensation which is not considered to be performance-based. The
non-performance based compensation to be paid to the Company's executive
officers for the 1996 fiscal year did not exceed the $1 million limit per
officer, nor is it expected that the non-performance based compensation to be
paid to the Company's executive officers for fiscal 1997 will exceed that limit.
The Company's 1996 Stock Option/Stock Issuance Plan is structured so that any
compensation deemed paid to an executive officer in connection with the exercise
of option grants made under that plan will qualify as performance-based
compensation which will not be subject to the $1 million limitation. Because it
is very unlikely that the cash compensation payable to any of the Company's
executive officers in the foreseeable future will approach the $1 million limit,
the Compensation Committee has decided at this time not to take any other action
to limit or restructure the elements of cash compensation payable to the
Company's executive officers. The Compensation Committee will reconsider this
decision should the individual compensation of any executive officer ever
approach the $1 million level.
COMPENSATION COMMITTEE
William G. Davis
Mitchell Dann
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors for the 1996 fiscal year were Mitchell Dann and William G. Davis. No
member of the Compensation Committee was at any time during the 1996 fiscal year
or at any other time an officer or employee of CVD.
No executive officer of CVD served on the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
14
<PAGE> 18
STOCK PERFORMANCE GRAPH
The graph depicted below shows CVD's stock price as an index assuming $100
invested on June 19, 1996 (the date of CVD's initial public offering), along
with the composite prices of companies listed on the CRSP Total Return Index for
National Association of Securities Dealers Automated Quotation ("Nasdaq") Stock
Market and the Hambrecht & Quist Incorporated Total Return Index for Healthcare
Technology Companies (Excluding Biotechnology). This information has been
provided to CVD by Hambrecht & Quist Incorporated.
PERFORMANCE GRAPH FOR CARDIOVASCULAR DYNAMICS, INC.
INDEXED COMPARISON OF CUMULATIVE TOTAL RETURN
CRSP TOTAL RETURN INDEX FOR NASDAQ STOCK MARKET AND
THE HAMBRECHT AND QUIST TOTAL RETURN INDEX FOR HEALTHCARE TECHNOLOGY COMPANIES
(EXCLUDING BIOTECHNOLOGY)
<TABLE>
<CAPTION>
H&Q HEALTH-
CARDIOVASCU- CARE EXCLUDI
MEASUREMENT PERIOD LAR DYNAMICS NASDAQ STOCK NG BIOTECH-
(FISCAL YEAR COVERED) INC. MARKET-U.S. NOLOGY
<S> <C> <C> <C>
6/19/96 100 100 100
JUN-96 102.08 100.64 100.69
JULY-96 106.25 91.68 92.22
AUG-96 125.00 96.82 98.24
SEP-96 127.08 104.23 110.50
OCT-96 108.33 103.09 104.75
NOV-96 102.08 109.48 107.98
DEC-96 108.33 109.35 111.18
</TABLE>
Note: Assumes $100 invested on 6/19/96 in CVD and in the CRSP Total Return Index
for Nasdaq Stock Market and the H&Q Total Return Index for Healthcare
Technology Companies (Excluding Biotechnology). Assumes Reinvestment of
Dividends on a daily basis.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 which might incorporate future filings, including this Proxy Statement,
the preceding Compensation Committee Report on Executive Compensation and the
Company Stock Performance Graph will not be incorporated by reference into any
of those prior filings, nor will such report or graph be incorporated by
reference into any future filings made by the Company under those statutes.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned, by the Company's
Chief Executive Officer, Mr. Henson, who has served in such capacity since
February 1, 1995, and the two other executive officers
15
<PAGE> 19
whose compensation for the 1996 fiscal year was in excess of $100,000, for
services rendered in all capacities to the Company for each of the last two
fiscal years. No other executive officer who would have otherwise been
includable in such table on the basis of salary and bonus earned for the 1996
fiscal year resigned or terminated employment during that fiscal year. All the
individuals named in the table will hereinafter be referred to as the "Named
Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SHARES
----------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTIONS
- - -------------------------------------------------- ---- -------- ------- ------------
<S> <C> <C> <C> <C>
Michael R. Henson................................. 1996 $200,000 $60,000 130,000
President and Chief Executive Officer 1995 189,850 70,000 250,000
Dana P. Nickell................................... 1996 108,000 19,440 --
Vice President, Finance and Administration 1995 5,934 -- --
Jeffrey F. O'Donnell.............................. 1996 179,200 15,000 --
Vice President, Sales and Marketing 1995 8,585 4,000 --
</TABLE>
- - ---------------
(1) Includes amounts contributed by the Named Officers to the Company's 401(K)
Plan.
STOCK OPTIONS
The following table provides information with respect to the stock option
grants made during the 1996 fiscal year under the Company's 1996 Stock
Option/Stock Issuance Plan to the Named Officers. No stock appreciation rights
were granted during such fiscal year to the Named Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------- VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES IN OR BASE OPTION TERM
OPTIONS FISCAL PRICE EXPIRATION -------------------------
NAME GRANTED(1) YEAR(2) ($/SH)(3) DATE 5%($)(4) 10%($)(4)
- - ------------------------ ---------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Henson....... 130,000 40.75% $ 12.50 11/03/2006 $1,021,954 $2,589,831
Dana P. Nickell......... -- -- -- -- -- --
Jeffrey F. O'Donnell.... -- -- -- -- -- --
</TABLE>
- - ---------------
(1) The option listed in the table was granted under the Company's 1996 Stock
Option/Stock Issuance Plan. The option was granted on November 4, 1996, and
has a maximum term of ten years measured from the grant date, subject to
earlier termination upon the optionee's termination of service with the
Company. Twenty-five percent (25%) of the options are exercisable upon the
optionee's completion of one year of service measured from November 4, 1996,
and as to the balance of the option shares in a series of successive equal
monthly installments upon the optionee's completion of each additional month
of service over the next 36 months thereafter.
(2) Based upon options granted for an aggregate of 319,000 shares to employees
in 1996, including the Named Officers.
(3) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares,
together with any federal and state income tax
16
<PAGE> 20
liability incurred by the optionee in connection with such exercise. The
Compensation Committee of the Board of Directors, as the Plan Administrator
of the Company's 1996 Stock Option/Stock Issuance Plan, has the
discretionary authority to reprice the options through the cancellation of
those options and the grant of replacement options with an exercise price
based on the fair market value of the option shares on the grant date.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
option term will be at the assumed 5% and 10% levels or at any other defined
level. Unless the market price of the Common Stock appreciates over the
option term, no value will be realized from the option grants made to the
executive officers.
OPTION EXERCISES AND HOLDINGS
The table below sets forth information concerning the exercise of options
during the 1996 fiscal year and unexercised options held by the Named Officers
as of the end of such year. No stock appreciation rights were exercised by the
Named Officers during such fiscal year or were outstanding at the end of that
year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED AGGREGATE OPTIONS AT FY-END OPTIONS AT FY-END($)(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - --------------------------- -------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Henson.......... 66,000 $438,900 50,667 263,333 $ 602,000 $ 1,646,000
Dana P. Nickell............ 0 0 14,000 42,000 161,000 483,000
Jeffrey F. O'Donnell....... 0 0 25,000 75,000 288,000 863,000
</TABLE>
- - ---------------
(1) Based on the deemed fair value (as determined by the Board) for options
exercised prior to the initial public offering, less the exercise price
payable for such shares.
(2) Based on the fair market value of the Company's Common Stock at year-end,
$13.00 per share, less the exercise price payable for such shares.
MANAGEMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
None of the Named Officers have employment agreements with CVD. The
employment of each of the Named Officers may be terminated at any time at the
discretion of the Board of Directors. However, the Compensation Committee of the
Board of Directors has the authority as administrator of the Company's 1996
Stock Option/Stock Issuance Plan to provide for the accelerated vesting of the
shares of Common Stock subject to any outstanding options held by the Chief
Executive Officer and the Company's other executive officers and any unvested
shares actually held by those individuals under the 1996 Plan, in the event
their employment were to be terminated (whether involuntarily or through a
forced resignation) following a hostile take-over of the Company effected
through a successful tender for more than 50% of the Company's outstanding
Common Stock or through a change in the majority of the Board as a result of one
or more contested elections for Board membership.
OFFICER LOANS
On June 15, 1996, CVD extended a loan in the amount of $150,000, to Jeffrey
F. O'Donnell, the Company's Vice President of Sales and Marketing. The note was
secured by a second deed of trust on Mr. O'Donnell's home and has a five-year
term with interest compounding semi-annually at 6%. The principal and interest
will be due five years from the date of the note.
17
<PAGE> 21
On September 16, 1996, the Company extended an interest free loan to
Michael R. Henson, the Company's President and Chief Executive Officer, in the
amount of $175,000. The principal amount of the loan will be due in full on
September 19, 1998. The Company secured the note by a deed of trust on certain
real property owned by Mr. Henson.
On January 24, 1997, the Company extended a loan in the amount of $100,000
to Jeffrey H. Thiel, the Company's Vice President of Operations. The note was
secured by a second deed of trust on Mr. Thiel's home and has a five-year term
with interest compounding semi-annually at 6%. The principal and interest will
be due five years from the date of the note.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Under the present rules of the Commission, the deadline for stockholders to
submit proposals to be considered for inclusion in CVD's Proxy Statement for
next year's Annual Meeting of Stockholders is December 16, 1997. Such proposals
may be included in next year's Proxy Statement if they comply with certain rules
and regulations promulgated by the Commission.
OTHER BUSINESS
The Board of Directors is not aware of any other matter which may be
presented for action at the Annual Meeting. Should any other matter requiring a
vote of the stockholders arise, it is intended that the proxy holders will vote
on such matters in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Dana P. Nickell
Secretary
April 16, 1997
18
<PAGE> 22
CARDIOVASCULAR DYNAMICS, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
(AS AMENDED AND RESTATED AS OF APRIL 8, 1997)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1996 Stock Option/Stock Issuance Plan is intended to
promote the interests of CardioVascular Dynamics, Inc., a Delaware corporation,
by providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity
programs:
(i) the Discretionary Option Grant
Program under which eligible persons may, at the discretion of the
Plan Administrator, be granted options to purchase shares of Common
Stock,
(ii) the Stock Issuance Program under
which eligible persons may, at the discretion of the Plan
Administrator, be issued shares of Common Stock directly, either
through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary), and
(iii) the Automatic Option Grant Program
under which eligible non-employee Board members shall automatically
receive option grants at periodic intervals to purchase shares of
Common Stock.
B. The provisions of Articles One and Five shall apply
to all equity programs under the Plan and shall accordingly govern the
interests of all persons under the Plan.
<PAGE> 23
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive
authority to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to Section 16 Insiders.
B. Administration of the Discretionary Option Grant and
Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power
to administer those programs with respect to all such persons.
C. Members of the Primary Committee or any Secondary
Committee shall serve for such period of time as the Board may determine and
may be removed by the Board at any time. The Board may also at any time
terminate the functions of any Secondary Committee and reassume all powers and
authority previously delegated to such committee.
D. Each Plan Administrator shall, within the scope of
its administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant and Stock Issuance Programs
and to make such determinations under, and issue such interpretations of, the
provisions of such programs and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary
Committee shall constitute service as a Board member, and members of each such
committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such committee. No member
of the Primary Committee or the Secondary Committee shall be liable for any act
or omission made in good faith with respect to the Plan or any option grants or
stock issuances under the Plan.
F. Administration of the Automatic Option Grant Program
shall be self-executing in accordance with the terms of that program, and no
Plan Administrator shall exercise any discretionary functions with respect to
option grants or stock issuances made thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs are as follows:
2.
<PAGE> 24
(i) Employees,
(ii) non-employee members of the Board
or the board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent
advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Each Plan Administrator shall, within the scope of
its administrative jurisdiction under the Plan, have full authority (subject to
the provisions of the Plan) to determine, (i) with respect to the option grants
under the Discretionary Option Grant Program, which eligible persons are to
receive option grants, the time or times when such option grants are to be
made, the number of shares to be covered by each such grant, the status of the
granted option as either an Incentive Option or a Non-Statutory Option, the
time or times at which each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term for
which the option is to remain outstanding and (ii) with respect to stock
issuances under the Stock Issuance Program, which eligible persons are to
receive stock issuances, the time or times when such issuances are to be made,
the number of shares to be issued to each Participant, the vesting schedule (if
any) applicable to the issued shares and the consideration to be paid for such
shares.
C. The Plan Administrator shall have the absolute
discretion either to grant options in accordance with the Discretionary Option
Grant Program or to effect stock issuances in accordance with the Stock
Issuance Program.
D. The individuals eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals who
are serving as non-employee Board members on the Underwriting Date, (ii) those
individuals who first become non-employee Board members after the Underwriting
Date, whether through appointment by the Board or election by the Corporation's
stockholders, and (iii) those individuals who are to continue to serve as
non-employee Board members after one or more Annual Stockholders Meetings held
after the Underwriting Date. A non-employee Board member who has previously
been in the employ of the Corporation (or any Parent or Subsidiary) shall not
be eligible to receive an initial option grant under the Automatic Option Grant
Program on the Underwriting Date or (if later) at the time he or she first
becomes a non-employee Board member, but such individual shall be eligible to
receive periodic option grants under the Automatic Option Grant Program upon
his or her continued service as a non-employee Board member after one or more
Annual Stockholders Meetings.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock which may be issued
3.
<PAGE> 25
over the term of the Plan shall not exceed 1,900,000 shares. Such authorized
share reserve is comprised of (i) the number of shares which remained available
for issuance, as of the Plan Effective Date, under the Predecessor Plan as last
approved by the Corporation's stockholders, including the shares subject to the
outstanding options to be incorporated into the Plan and (ii) an additional
increase of 700,000 shares approved by the Board subject to stockholder
approval at the 1997 Annual Meeting.
B. No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than 800,000 shares of Common Stock in the aggregate over
the term of the Plan.
C. Shares of Common Stock subject to outstanding options
(including any options incorporated from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent (i) those
options expire or terminate for any reason prior to exercise in full or (ii)
those options are cancelled in accordance with the cancellation-regrant
provisions of Article Two. Unvested shares issued under the Plan and
subsequently cancelled or repurchased by the Corporation, at the original issue
price paid per share, pursuant to the Corporation's repurchase rights under the
Plan shall be added back to the number of shares of Common Stock reserved for
issuance under the Plan and shall accordingly be available for reissuance
through one or more subsequent option grants or direct stock issuances under
the Plan. However, should the exercise price of an option under the Plan
(including any option incorporated from the Predecessor Plan) be paid with
shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an option or the
vesting of a stock issuance under the Plan, then the number of shares of Common
Stock available for issuance under the Plan shall be reduced by the gross
number of shares for which the option is exercised or which vest under the
stock issuance, and not by the net number of shares of Common Stock issued to
the holder of such option or stock issuance.
D. Should any change be made to the Common Stock by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration,
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of securities
for which any one person may be granted options, separately exercisable stock
appreciation rights and direct stock issuances in the aggregate under the Plan,
(iii) the number and/or class of securities for which automatic option grants
are to be made subsequently per Eligible Director under the Automatic Option
Grant Program and (iv) the number and/or class of securities and the exercise
price per share in effect under each outstanding option (including any option
incorporated from the Predecessor Plan). Such adjustments to the outstanding
options are to be effected in a manner which shall preclude the dilution or
enlargement of benefits under such options. The adjustments determined by the
Plan Administrator shall be final, binding and conclusive.
4.
<PAGE> 26
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the
Plan applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed
by the Plan Administrator but shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately
due upon exercise of the option and shall, subject to the provisions of Section
I of Article Five and the documents evidencing the option, be payable in one or
more of the forms specified below:
(i) cash or check made payable to the
Corporation,
(ii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or
(iii) to the extent the option is
exercised for vested shares, through a special sale and remittance
procedure pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to (a) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares
and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate exercise
price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (b) the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
5.
<PAGE> 27
B. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in
excess of ten (10) years measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of
Service or death:
(i) Any option outstanding at the time
of the Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be determined
by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the
expiration of the option term.
(ii) Any option exercisable in whole or
in part by the Optionee at the time of death may be exercised
subsequently by the personal representative of the Optionee's estate
or by the person or persons to whom the option is transferred pursuant
to the Optionee's will or in accordance with the laws of descent and
distribution.
(iii) During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of Service. Upon
the expiration of the applicable exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding
to the extent the option is not otherwise at that time exercisable for
vested shares.
(iv) Should the Optionee's Service be
terminated for Misconduct, then all outstanding options held by the
Optionee shall terminate immediately and cease to be outstanding.
(v) In the event of an Involuntary
Termination following a Corporate Transaction, the provisions of
Section III of this Article Two shall govern the period for which the
outstanding options are to remain exercisable following the Optionee's
cessation of Service and shall supersede any provisions to the
contrary in this section.
6.
<PAGE> 28
2. The Plan Administrator shall have the
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:
(i) extend the period of time for which
the option is to remain exercisable following the Optionee's cessation
of Service from the period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) permit the option to be exercised,
during the applicable post-Service exercise period, not only with
respect to the number of vested shares of Common Stock for which such
option is exercisable at the time of the Optionee's cessation of
Service but also with respect to one or more additional installments
in which the Optionee would have vested under the option had the
Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall
have no stockholder rights with respect to the shares subject to the option
until such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have
the discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right.
F. Limited Transferability of Options. During the
lifetime of the Optionee, the option shall be exercisable only by the Optionee
and shall not be assignable or transferable other than by will or by the laws
of descent and distribution following the Optionee's death. However, a
Non-Statutory Option may be assigned in whole or in part during the Optionee's
lifetime in accordance with the terms of a Qualified Domestic Relations Order.
The assigned portion may only be exercised by the person or persons who acquire
a proprietary interest in the option pursuant to such Qualified Domestic
Relations Order. The terms applicable to the assigned portion shall be the
same as those in effect for the option immediately prior to such assignment and
shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate.
7.
<PAGE> 29
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to the terms of this Section
II.
A. Eligibility. Incentive Options may only be granted
to Employees.
B. Exercise Price. The exercise price per share shall
not be less than one hundred percent (100%) of the Fair Market Value per share
of Common Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value
of the shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee under the Plan (or
any other option plan of the Corporation or any Parent or Subsidiary) may for
the first time become exercisable as Incentive Options during any one (1)
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive Options
shall be applied on the basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an
Incentive Option is granted is a 10% Stockholder, then the exercise price per
share shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date, and the option term
shall not exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each
outstanding option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, an outstanding option shall NOT
so accelerate if and to the extent: (i) such option is, in connection with the
Corporate Transaction, either to be assumed by the successor corporation (or
parent thereof) or to be replaced with a comparable option to purchase shares
of the capital stock of the successor corporation (or parent thereof), (ii)
such option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested option shares
at the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such option or (iii)
the
8.
<PAGE> 30
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant. The determination of option
comparability under clause (i) above shall be made by the Plan Administrator,
and its determination shall be final, binding and conclusive.
B. All outstanding repurchase rights shall also
terminate automatically, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to be
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase
right is issued.
C. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options (and the automatic termination of one or more
outstanding repurchase rights with the immediate vesting of the shares of
Common Stock subject to those rights) upon the occurrence of a Corporate
Transaction, whether or not those options are to be assumed or replaced (or
those repurchase rights are to be assigned) in the Corporate Transaction. The
Plan Administrator shall also have the discretion to grant options which do not
accelerate whether or not such options are assumed (and to provide for
repurchase rights that do not terminate whether or not such rights are
assigned) in connection with a Corporate Transaction.
D. Immediately following the consummation of the
Corporate Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
E. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments to reflect such Corporate Transaction
shall also be made to (i) the number and/or class of securities available for
issuance under the Plan following the consummation of such Corporate
Transaction, (ii) the exercise price payable per share under each outstanding
option, provided the aggregate exercise price payable for such securities shall
remain the same and (iii) the maximum number of securities and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances in the
aggregate under the Plan.
F. The Plan Administrator shall have full power and
authority to grant options under the Discretionary Option Grant Program which
will automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary
9.
<PAGE> 31
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of any Corporate Transaction in which those
options are assumed or replaced and do not otherwise accelerate. Any options
so accelerated shall remain exercisable for fully-vested shares until the
earlier of (i) the expiration of the option term or (ii) the expiration of the
one (1)-year period measured from the effective date of the Involuntary
Termination. In addition, the Plan Administrator may provide that one or more
of the Corporation's outstanding repurchase rights with respect to shares held
by the Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
G. The Plan Administrator shall have full power and
authority to grant options under the Discretionary Option Grant Program which
will automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control. Each option so accelerated shall remain exercisable for
fully-vested shares until the earlier of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination. In addition, the Plan Administrator may
provide that one or more of the Corporation's outstanding repurchase rights
with respect to shares held by the Optionee at the time of such Involuntary
Termination shall immediately terminate, and the shares subject to those
terminated repurchase rights shall accordingly vest in full.
H. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One
Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent
such dollar limitation is exceeded, the accelerated portion of such option
shall be exercisable as a Non-Statutory Option under the Federal tax laws.
I. The grant of options under the Discretionary Option
Grant Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option
holders, the cancellation of any or all outstanding options under the
Discretionary Option Grant Program (including outstanding options incorporated
from the Predecessor Plan) and to grant in substitution new options covering
the same or different number of shares of Common Stock but with an exercise
price per share based on the Fair Market Value per share of Common Stock on the
new grant date.
10.
<PAGE> 32
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and
authority to grant to selected Optionees tandem stock appreciation rights
and/or limited stock appreciation rights.
B. The following terms shall govern the grant and
exercise of tandem stock appreciation rights:
(i) One or more Optionees may be granted
the right, exercisable upon such terms as the Plan Administrator may
establish, to elect between the exercise of the underlying option for
shares of Common Stock and the surrender of that option in exchange
for a distribution from the Corporation in an amount equal to the
excess of (a) the Fair Market Value (on the option surrender date) of
the number of shares in which the Optionee is at the time vested under
the surrendered option (or surrendered portion thereof) over (b) the
aggregate exercise price payable for such shares.
(ii) No such option surrender shall be
effective unless it is approved by the Plan Administrator. If the
surrender is so approved, then the distribution to which the Optionee
shall be entitled may be made in shares of Common Stock valued at
Fair Market Value on the option surrender date, in cash, or partly in
shares and partly in cash, as the Plan Administrator shall in its sole
discretion deem appropriate.
(iii) If the surrender of an option is
rejected by the Plan Administrator, then the Optionee shall retain
whatever rights the Optionee had under the surrendered option (or
surrendered portion thereof) on the option surrender date and may
exercise such rights at any time prior to the later of (a) five (5)
business days after the receipt of the rejection notice or (b) the
last day on which the option is otherwise exercisable in accordance
with the terms of the documents evidencing such option, but in no
event may such rights be exercised more than ten (10) years after the
option grant date.
C. The following terms shall govern the grant and
exercise of limited stock appreciation rights:
(i) One or more Section 16 Insiders may
be granted limited stock appreciation rights with respect to their
outstanding options.
(ii) Upon the occurrence of a Hostile
Take-Over, each such individual holding one or more options with such
a limited stock appreciation right in effect shall have the
unconditional right (exercisable for
11.
<PAGE> 33
a thirty (30)-day period following such Hostile Take-Over) to
surrender each such option to the Corporation, to the extent the
option is at the time exercisable for vested shares of Common Stock.
In return for the surrendered option, the Optionee shall receive a
cash distribution from the Corporation in an amount equal to the
excess of (a) the Take-Over Price of the shares of Common Stock which
are at the time vested under each surrendered option (or surrendered
portion thereof) over (b) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within five (5)
days following the option surrender date.
(iii) Neither the approval of the Plan
Administrator nor the consent of the Board shall be required in
connection with such option surrender and cash distribution.
(iv) The balance of the option (if any)
shall continue in full force and effect in accordance with the
documents evidencing such option.
12.
<PAGE> 34
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. Purchase Price.
1. The purchase price per share shall be fixed
by the Plan Administrator, but shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of
Article Five, shares of Common Stock may be issued under the Stock Issuance
Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. Vesting Provisions.
1. Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the
Participant or the performance objectives to be attained,
(ii) the number of installments in which the shares
are to vest,
13.
<PAGE> 35
(iii) the interval or intervals (if any) which are to
lapse between installments, and
(iv) the effect which death, Permanent Disability or
other event designated by the Plan Administrator is to have upon the
vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities
or other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to the
Participant's unvested shares of Common Stock by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested shares of Common
Stock and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The Participant shall have full stockholder
rights with respect to any shares of Common Stock issued to the Participant
under the Stock Issuance Program, whether or not the Participant's interest in
those shares is vested. Accordingly, the Participant shall have the right to
vote such shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in
Service while holding one or more unvested shares of Common Stock issued under
the Stock Issuance Program or should the performance objectives not be attained
with respect to one or more such unvested shares of Common Stock, then those
shares shall be immediately surrendered to the Corporation for cancellation,
and the Participant shall have no further stockholder rights with respect to
those shares. To the extent the surrendered shares were previously issued to
the Participant for consideration paid in cash or cash equivalent (including
the Participant's purchase-money indebtedness), the Corporation shall repay to
the Participant the cash consideration paid for the surrendered shares and
shall cancel the unpaid principal balance of any outstanding purchase- money
note of the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common
Stock (or other assets attributable thereto) which would otherwise occur upon
the cessation of the Participant's Service or the non-attainment of the
performance objectives applicable to those shares. Such waiver shall result in
the immediate vesting of the Participant's interest in the shares of Common
Stock as to which the waiver applies. Such waiver may be effected at any time,
14.
<PAGE> 36
whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All outstanding cancellation rights under the Stock
Issuance Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the
event of any Corporate Transaction, except to the extent (i) those cancellation
rights are assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed in the Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary
authority, exercisable either at the time the unvested shares are issued or any
time while the Corporation's cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's
Service should subsequently terminate by reason of an Involuntary Termination
within a designated period (not to exceed eighteen (18) months) following the
effective date of any Corporate Transaction in which those cancellation rights
are assigned to the successor corporation (or parent thereof).
C. The Plan Administrator shall have the discretionary
authority, exercisable either at the time the unvested shares are issued or any
time while the Corporation's cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's
Service should subsequently terminate by reason of an Involuntary Termination
within a designated period (not to exceed eighteen (18) months) following the
effective date of any Change in Control.
D. The Plan Administrator shall have the discretion to
provide for cancellation rights with terms different from those in effect under
Section II.A. in connection with a Corporate Transaction.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
15.
<PAGE> 37
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the
dates specified below:
1. Each individual who is serving as a
non-employee Board member on the Underwriting Date shall automatically be
granted, on the Underwriting Date, a Non-Statutory Option to purchase 5,000
shares of Common Stock, provided such individual has not previously been in the
employ of the Corporation (or any Parent or Subsidiary).
2. Each individual who is first elected or
appointed as a non-employee Board member on or after the Underwriting Date
shall automatically be granted, on the date of such initial election or
appointment, a Non-Statutory Option to purchase 5,000 shares of Common Stock,
provided such individual has not previously been in the employ of the
Corporation (or any Parent or Subsidiary).
3. On the date of each Annual Stockholders
Meeting held after the Underwriting Date, each individual who is to continue to
serve as an Eligible Director, shall automatically be granted a Non-Statutory
Option to purchase an additional 5,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months. There shall be no limit on the number of such 5,000-share option
grants any one Eligible Director may receive over his or her period of Board
service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal
to one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall be payable in one or
more of the alternative forms authorized under the Discretionary Option Grant
Program. Except to the extent the sale and remittance procedure specified
thereunder is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten
(10) years measured from the option grant date.
16.
<PAGE> 38
D. EXERCISE AND VESTING OF OPTIONS. Each option shall
be immediately exercisable for any or all of the option shares. However, any
shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares. Each initial
grant shall vest, and the Corporation's repurchase right shall lapse, in a
series of four (4) successive equal annual installments over the Optionee's
period of continued service as a Board member, with the first such installment
to vest upon the Optionee's completion of one (1) year of Board service
measured from the option grant date. Each annual grant shall vest, and the
Corporation's repurchase right shall lapse, upon the Optionee's completion of
one (1) year of Board service measured from the option grant date.
E. EFFECT OF TERMINATION OF BOARD SERVICE. The
following provisions shall govern the exercise of any options held by the
Optionee at the time the Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's
death, the personal representative of the Optionee's estate or the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution) shall have a twelve (12)-month period following the date
of such cessation of Board service in which to exercise each such
option.
(ii) During the twelve (12)-month exercise period,
the option may not be exercised in the aggregate for more than the
number of vested shares of Common Stock for which the option is
exercisable at the time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at
the time subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period following
such cessation of Board service, be exercised for all or any portion
of those shares as fully-vested shares of Common Stock.
(iv) In no event shall the option remain
exercisable after the expiration of the option term. Upon the
expiration of the twelve (12)-month exercise period or (if earlier)
upon the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Board service for any reason other than death
or Permanent Disability, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested
shares.
17.
<PAGE> 39
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares
of Common Stock at the time subject to each outstanding option but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for all or any portion of those
shares as fully-vested shares of Common Stock. Immediately following the
consummation of the Corporate Transaction, each automatic option grant shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).
B. In connection with any Change in Control, the shares
of Common Stock at the time subject to each outstanding option but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Change in Control, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Each such option shall remain exercisable
for such fully-vested option shares until the expiration or sooner termination
of the option term or the surrender of the option in connection with a Hostile
Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the
Optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each automatic option held by him or her. The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the shares of Common Stock at
the time subject to the surrendered option (whether or not the Optionee is
otherwise at the time vested in those shares) over (ii) the aggregate exercise
price payable for such shares. Such cash distribution shall be paid within
five (5) days following the surrender of the option to the Corporation. No
approval or consent of the Board or any Plan Administrator shall be required in
connection with such option surrender and cash distribution.
D. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the exercise price
payable per share under each outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same.
E. The grant of options under the Automatic Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
18.
<PAGE> 40
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
19.
<PAGE> 41
ARTICLE FIVE
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price under the Discretionary Option
Grant Program or the purchase price for shares issued under the Stock Issuance
Program by delivering a promissory note payable in one or more installments.
The terms of any such promissory note (including the interest rate and the
terms of repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price
or purchase price payable for the purchased shares plus (ii) any Federal, state
and local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.
B. The Plan Administrator may, in its discretion,
determine that one or more such promissory notes shall be subject to
forgiveness by the Corporation in whole or in part upon such terms as the Plan
Administrator may deem appropriate.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of options or upon the issuance or vesting of
such shares under the Plan shall be subject to the satisfaction of all
applicable Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion,
provide any or all holders of Non-Statutory Options or unvested shares of
Common Stock under the Plan (other than the options granted or the shares
issued under the Automatic Option Grant Program) with the right to use shares
of Common Stock in satisfaction of all or part of the Taxes incurred by such
holders in connection with the exercise of their options or the vesting of
their shares. Such right may be provided to any such holder in either or both
of the following formats:
(i) Stock Withholding: The election to
have the Corporation withhold, from the shares of Common Stock
otherwise issuable upon the exercise of such Non-Statutory Option or
the vesting of such shares, a portion of those shares with an
aggregate Fair Market Value equal to the
20.
<PAGE> 42
percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.
(ii) Stock Delivery: The election to
deliver to the Corporation, at the time the Non-Statutory Option is
exercised or the shares vest, one or more shares of Common Stock
previously acquired by such holder (other than in connection with the
option exercise or share vesting triggering the Taxes) with an
aggregate Fair Market Value equal to the percentage of the Taxes (not
to exceed one hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan became effective with respect to the
Discretionary Option Grant and Stock Issuance Program on the Plan Effective
Date. The Automatic Option Grant Program became effective on the Underwriting
Date. On April 8, 1997, the Board amended the Plan to (i) increase the number
of shares available for issuance by 700,000 shares, (ii) provide that
non-employee Board members shall be eligible to participate in the
Discretionary Option Grant and the Stock Issuance Programs, (iii) eliminate the
restriction that the individuals who serve as Plan Administrator may not
receive any discretionary option grants or direct stock issuances from the
Company while serving as Plan Administrator or during the twelve month period
preceding appointment as Plan Administrator, (iv) require stockholder approval
of future amendments to the Plan only to the extent necessary to satisfy
applicable laws or regulations, (v) eliminate both the six month holding period
requirement and the ten business day "window" period requirement for the
exercise of any stock appreciation rights granted under the Plan and (vi) allow
the shares issued under the Plan which are subsequently reacquired by the
Company pursuant to the Company's exercise of its repurchase rights to be added
back to the share reserve available for future issuance under the Plan.
However, no options granted under the Plan on the basis of such share increase
may be exercised, and no shares shall be issued thereunder, until the amendment
to the Plan increasing the share reserve is approved by the Corporation's
stockholders at the 1997 Annual Meeting. If such stockholder approval is not
obtained, then all options previously granted under this Plan on the basis of
such share increase shall terminate and cease to be outstanding.
B. The Plan shall serve as the successor to the
Predecessor Plan, and no further option grants shall be made under the
Predecessor Plan after the Section 12(g) Registration Date. All options
outstanding under the Predecessor Plan as of such date shall be incorporated
into the Plan at that time and shall be treated as outstanding options under
the Plan. However, each outstanding option so incorporated shall continue to
be governed solely by the terms of the documents evidencing such option, and no
provision of the Plan shall be deemed to affect or otherwise modify the rights
or obligations of the holders of such incorporated options with respect to
their acquisition of shares of Common Stock.
21.
<PAGE> 43
C. One or more provisions of the Plan, including
(without limitation) the option/vesting acceleration provisions of Article Two
relating to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated
from the Predecessor Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest of (i)
April 29, 2006, (ii) the date on which all shares available for issuance under
the Plan shall have been issued pursuant to the exercise of the options or the
issuance of shares (whether vested or unvested) under the Plan or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. Upon such Plan termination, all outstanding options and unvested
stock issuances shall continue to have force and effect in accordance with the
provisions of the documents evidencing such options or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect any rights and obligations
with respect to options, stock appreciation rights or unvested stock issuances
at the time outstanding under the Plan unless the Optionee or the Participant
consents to such amendment or modification. In addition, certain amendments
may require stockholder approval pursuant to applicable laws and regulations.
B. Options to purchase shares of Common Stock may be
granted under the Discretionary Option Grant Program and shares of Common Stock
may be issued under the Stock Issuance Program that are in each instance in
excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under those programs are held in
escrow until there is obtained stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess grants or issuances are
made, then (i) any unexercised options granted on the basis of such excess
shares shall terminate and cease to be outstanding and (ii) the Corporation
shall promptly refund to the Optionees and the Participants the exercise or
purchase price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
22.
<PAGE> 44
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
option or stock appreciation right under the Plan and the issuance of any
shares of Common Stock (i) upon the exercise of any option or stock
appreciation right or (ii) under the Stock Issuance Program shall be subject to
the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the options and stock
appreciation rights granted under it and the shares of Common Stock issued
pursuant to it.
B. No shares of Common Stock or other assets shall be
issued or delivered under the Plan unless and until there shall have been
compliance with all applicable requirements of Federal and state securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining such person) or
of the Optionee or the Participant, which rights are hereby expressly reserved
by each, to terminate such person's Service at any time for any reason, with or
without cause.
23.
<PAGE> 45
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option
grant program in effect under the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control
of the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by
any person or related group of persons (other than the Corporation or
a person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over
a period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time the Board approved such election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction; or
A-1.
<PAGE> 46
(ii) the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
G. CORPORATION shall mean CardioVascular Dynamics, Inc., a
Delaware corporation, and any corporate successor to all or substantially all
of the assets or voting stock of CardioVascular Dynamics, Inc. which shall by
appropriate action adopt the Plan.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under the Plan.
I. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or
order (including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
J. ELIGIBLE DIRECTOR shall mean a non-employee Board member
eligible to participate in the Automatic Option Grant Program in accordance
with the eligibility provisions of Article One.
K. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
L. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.
M. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of
A-2.
<PAGE> 47
transactions on such exchange. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(iii) For purposes of any option grants made on the
Underwriting Date, the Fair Market Value shall be deemed to be equal
to the price per share at which the Common Stock is sold in the
initial public offering pursuant to the Underwriting Agreement.
N. HOSTILE TAKE-OVER shall mean a change in ownership of the
Corporation effected through the following transaction:
(i) the acquisition, directly or indirectly, by
any person or related group of persons (other than the Corporation or
a person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept, and
(ii) more than fifty percent (50%) of the
securities so acquired are accepted from persons other than Section 16
Insiders.
O. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
P. INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the Corporation
which materially reduces his or her level of responsibility, (B) a
reduction in his or her level of compensation (including base salary,
fringe benefits and participation in corporate-performance based bonus
or incentive programs) by more than fifteen percent (15%) or (C) a
relocation of such individual's place of employment by more than fifty
(50) miles, provided and only if such change, reduction or relocation
is effected by the Corporation without the individual's consent.
A-3.
<PAGE> 48
Q. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of
the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by such person adversely affecting the business or affairs of the
Corporation (or any Parent or Subsidiary) in a material manner. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Corporation (or any Parent or Subsidiary) may consider as grounds for
the dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
R. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
S. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
T. OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant or Automatic Option Grant Program.
U. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
V. PARTICIPANT shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program.
W. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of
twelve (12) months or more. However, solely for the purposes of the Automatic
Option Grant Program, Permanent Disability or Permanently Disabled shall mean
the inability of the non-employee Board member to perform his or her usual
duties as a Board member by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous duration
of twelve (12) months or more.
X. PLAN shall mean the Corporation's 1996 Stock Option/Stock
Issuance Plan, as set forth in this document.
Y. PLAN ADMINISTRATOR shall mean the particular entity, whether
the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to one or more
A-4.
<PAGE> 49
classes of eligible persons, to the extent such entity is carrying out its
administrative functions under those programs with respect to the persons under
its jurisdiction.
Z. PLAN EFFECTIVE DATE shall mean April 30, 1996, the date on
which the Plan was adopted by the Board.
AA. PREDECESSOR PLAN shall mean the Corporation's 1995 Stock
Option Plan.
AB. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.
AC. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic
Relations Order which substantially complies with the requirements of Code
Section 414(p). The Plan Administrator shall have the sole discretion to
determine whether a Domestic Relations Order is a Qualified Domestic Relations
Order.
AD. SECONDARY COMMITTEE shall mean a committee of two (2) or more
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
AE. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
AF. SECTION 12(G) REGISTRATION DATE shall mean the first date on
which the Common Stock is first registered under Section 12(g) of the 1934 Act.
AG. SERVICE shall mean the performance of services to the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in
the documents evidencing the option grant or stock issuance.
AH. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
AI. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into
by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.
AJ. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.
A-5.
<PAGE> 50
AK. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
AL. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
AM. TAXES shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of those
options or the vesting of those shares.
AN. 10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
AO. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
AP. UNDERWRITING DATE shall mean the date on which the
Underwriting Agreement is executed and priced in connection with the initial
public offering of the Common Stock.
A-6.
<PAGE> 51
PROXY
CARDIOVASCULAR DYNAMICS, INC.
ANNUAL MEETING OF STOCKHOLDERS, MAY 16, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned revokes all previous proxies, acknowledges receipt of the
notice of annual meeting of stockholders to be held on May 16, 1997 and the
proxy statement and appoints Michael R. Henson and Dana P. Nickell, or either of
them, the proxy of the undersigned, with full power of substitution, to vote
all shares of Common Stock of CardioVascular Dynamics, Inc. ("CVD") which the
undersigned is entitled to vote, either on his or her own behalf or on behalf
of an entity or entities, at the Annual Meeting of Stockholders of CVD to be
held at 13700 Alton Parkway, Suite 160, Irvine, California 92618 on Monday, May
16, 1997 at 10:00 a.m., and at any adjournment or postponement thereof, and to
vote in their discretion on such other business as may properly come before the
Annual Meeting and any postponement or adjournment thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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<PAGE> 52
Please mark
your votes as
indicated in /X/
this example
1. AMENDMENT TO CVD'S 1996 STOCK OPTION/STOCK FOR AGAINST ABSTAIN
ISSUANCE PLAN TO EFFECT AN INCREASE IN THE
POOL OF SHARES AVAILABLE FOR ISSUANCE BY AN / / / / / /
ADDITIONAL 700,000 SHARES OF COMMON STOCK AND
MAKE SUCH OTHER CHANGES AS DESCRIBED IN THE
PROXY STATEMENT.
2. ELECTION OF DIRECTORS WITHHOLD
INSTRUCTION: To withhold authority to FOR AUTHORITY
vote for any individual nominee mark all nominees to vote for
the "EXCEPTIONS" box, and strike a listed below all nominees EXCEPTIONS
line through the nominee's name in
the list below: / / / / / /
MITCHELL DANN EDWARD M. LEONARD
WILLIAM G. DAVIS GERARD VON HOFFMANN
MICHAEL R. HENSON
3. RATIFICATION OF ERNST & YOUNG LLP AS FOR AGAINST ABSTAIN
INDEPENDENT AUDITORS FOR FISCAL YEAR 1997.
/ / / / / /
The Board of Directors recommends a vote FOR each of the director nominees
listed above and for the other proposals set forth above. This Proxy, when
properly executed will be voted as specified above. This Proxy will be voted
FOR Proposals Nos. 1 and 3 and FOR each of the nominees listed under Proposal
No. 2 if no specification is made. This proxy will also be voted at the
discretion of the proxy holders on such matters other than the three specific
items as may come before the meeting.
PLEASE RETURN YOUR EXECUTED PROXY TO CVD'S TRANSFER AGENT IN THE ENCLOSED
ENVELOPE, OR, IF NECESSARY, DELIVER IT TO CVD, ATTENTION: SECRETARY.
Please print the name(s) appearing on each share certificate(s) over which you
have voting authority:
______________________________________ Dated:______________________________
(Print name(s) as it (they) appear on certificate)
Signature(s)____________________________________________________________________
Please sign exactly as your name(s) is (are) shown on the share certificate to
which the Proxy applies. When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title, as such. If a corporation, please sign in full
corporate name by the President or another authorized officer. If a
partnership, please sign in the partnership name by an authorized person.
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