<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of
[X] Definitive Proxy Statement the Commission Only
[ ] Definitive Additional Materials (as permitted by
[ ] Soliciting Material Pursuant to Rule 14a-11(c) Rule 14a-6(e))
or Rule 14a-12
Radiance Medical Systems, 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:
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2) Aggregate number of securities to which transaction applies:
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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).
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement no.:
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4) Date Filed:
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Notes:
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<PAGE> 2
[RADIANCE LOGO]
13700 ALTON PARKWAY, SUITE 160
IRVINE, CALIFORNIA 92618
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 6, 2000
----------
To the Stockholders of Radiance Medical Systems, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of Radiance Medical Systems, Inc. ("Radiance" or the
"Company") on June 6, 2000 at 9:00 a.m., California time. The Annual Meeting
will be held at The Hampton Inn at 27102 Towne Centre Drive, Foothill Ranch,
California 92610.
At the Annual Meeting, you will be asked to consider and vote on the
following matters:
1. To approve an amendment to Radiance's 1996 Stock Option/Stock
Issuance Plan to effect an increase in the number of shares available
for issuance by an additional 600,000 shares of Common Stock.
2. To approve an amendment to Radiance's Employee Stock Purchase Plan to
effect an increase in the number of shares available for issuance by
an additional 200,000 shares of Common Stock.
3. To elect two individuals to serve a three year term as Class II
members of the Company's Board of Directors from the following
nominees: Franklin D. Brown and Edward M. Leonard.
4. To ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent auditors for the current fiscal year ending
December 31, 2000.
You also may be asked to consider and vote on any other business that
may properly come before the Annual Meeting.
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 Radiance 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
<PAGE> 3
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.
May 6, 2000 MICHAEL R. HENSON
Chairman of the Board and
Chief Executive Officer
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[RADIANCE LOGO]
13700 ALTON PARKWAY, SUITE 160
IRVINE, CALIFORNIA 92618
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 6, 2000
----------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Radiance Medical Systems, Inc., a Delaware corporation ("Radiance" or the
"Company"), will be held on June 6, 2000 at 9:00 a.m. at The Hampton Inn at
27102 Towne Centre Drive, Foothill Ranch, California 92610, for the following
purpose:
1. To approve an amendment to Radiance's 1996 Stock Option/Stock
Issuance Plan to effect an increase in the number of shares available
for issuance by an additional 600,000 shares of Common Stock.
2. To approve an amendment to Radiance's Employee Stock Purchase Plan to
effect an increase in the number of shares available for issuance by
an additional 200,000 shares of Common Stock.
3. To elect two individuals to serve a three year term as Class II
members of the Company's Board of Directors from the following
nominees: Franklin D. Brown and Edward M. Leonard.
4. To ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent auditors for the current fiscal year ending
December 31, 2000.
5. 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 1, 2000
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
STEPHEN R. KROLL
Secretary
Irvine, California
May 8, 2000
<PAGE> 5
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.
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[RADIANCE LOGO]
13700 ALTON PARKWAY, SUITE 160
IRVINE, CALIFORNIA 92618
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 6, 2000
----------
PROXY STATEMENT
----------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Radiance Medical Systems, Inc. ("Radiance" or the "Company") for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held on June 6, 2000
at 9:00 a.m. at The Hampton Inn at 27102 Towne Centre Drive, Foothill Ranch,
California 92610, at which time stockholders of record on April 1, 2000 will be
entitled to vote. On April 1, 2000, Radiance had 12,030,902 outstanding shares
of its Common Stock ("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 Annual Meeting.
Radiance intends to mail this proxy statement and the accompanying proxy
card on or about May 8, 2000 to all stockholders entitled to vote at the Annual
Meeting. Radiance's principal executive offices are located at 13700 Alton
Parkway, Suite 160, Irvine, California 92618. The telephone number at that
address is (949) 457-9546.
VOTING
The presence in person or by proxy of the holders of a majority of the
Common Stock issued and outstanding constitutes a quorum for the transaction of
business at the Annual Meeting. Each stockholder of record is entitled to one
vote for each share of Common Stock held as of the record date on each matter to
be voted on at the Annual Meeting. Directors are elected by the affirmative vote
of a plurality of votes cast at the Annual Meeting; therefore, broker non-votes
and abstentions or votes that are withheld will be excluded entirely from the
vote and have no effect on the outcome. Ratification of the selection of
PricewaterhouseCoopers LLP as the Company's independent public auditors, and
approval of any other matter that properly comes before the Annual Meeting, must
be accomplished by the affirmative votes of a majority of the shares present or
represented and entitled to be voted at the Annual Meeting. The vote required
for approval and the effect of proxies marked "abstain" and broker non-votes on
Proposals 1 and 2 are discussed under each respective Proposal. If shares are
not voted by a broker who is the record holder of the shares present at the
Annual
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Meeting, 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 will be counted for quorum purposes but are not deemed to be
present or represented for purposes of determining whether stockholder approval
of that matter has been obtained.
Shares of Common Stock represented by a properly executed proxy received
in time for the Annual Meeting will be voted as specified therein, unless the
proxy previously has been revoked. Unless otherwise specified in the proxy, the
persons named therein will vote FOR the election of each of the director
nominees. As to any other business properly submitted to stockholders at the
Annual Meeting, the persons named in the proxy will vote as recommended by the
Board of Directors or, if no recommendation is given, in its discretion.
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 Radiance at Radiance'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
Radiance 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. Radiance may, if deemed necessary
or advisable, retain a proxy solicitation firm to deliver solicitation materials
to beneficial owners and to assist the Company in collecting proxies from such
individuals. Radiance 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 Radiance. No additional compensation will be paid to
directors, officers or other regular employees for such services.
PROPOSAL NO. 1
AMENDMENT TO THE 1996 STOCK OPTION/STOCK ISSUANCE PLAN TO INCREASE
THE NUMBER OF SHARES
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") to increase the number of shares of Common Stock authorized for issuance
under the Option Plan by an additional 600,000 shares.
The amendment to the Option Plan was adopted by the Board on March 31,
2000, subject to stockholder approval at the Annual Meeting. The Board believes
it is in the best interests of the
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<PAGE> 8
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 Option Plan originally was adopted by the Board of Directors on May
1, 1996 and approved by the stockholders on May 1, 1996. The Option Plan was
amended by the Board of Directors on April 8, 1997 and approved by the
stockholders on May 16, 1997 and again amended by the Board of Directors on May
19, 1998 and January 14, 1999 and approved by the stockholders on May 19, 1998
and January 14, 1999, respectively.
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 Radiance at Radiance'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 is 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 3,450,000 shares (including the 600,000 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
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.
As of April 25, 2000, approximately 940,000 shares of Common Stock had
been issued under the Option Plan, approximately 1,805,000 shares of Common
Stock were subject to outstanding options, and approximately 105,000 shares of
Common Stock were available for future
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option grants, inclusive of the 600,000 share increase which stockholders are
being asked to approve under this Proposal No. 1.
NEW PLAN BENEFITS
As of April 25, 2000, no options have been granted on the basis of the
600,000 share increase for which stockholder approval is sought under this
Proposal. However, each non-employee Board member at the Annual Meeting
automatically will 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.
ELIGIBILITY
Employees (including officers), non-employee Board members, consultants
and other independent advisors who provide services to the Company 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 April 25, 2000, approximately 60 employees (including 5 executive
officers), and 5 non-employee Board members were eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs and 5 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 April 25, 2000, the closing selling price per
share was $9.07.
DISCRETIONARY OPTION GRANT PROGRAM
Options may be granted under the Discretionary Option Grant Program at
an exercise price per share not less than 85 percent 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:
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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.
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 either may be vested immediately 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
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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.
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.
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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 any event terminate on
April 29, 2006.
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 under the Option Plan in the
year ended December 31, 1999, together with the weighted average exercise price
payable per share.
<TABLE>
<CAPTION>
NUMBER OF OPTION WEIGHTED AVERAGE
NAME AND POSITION SHARES EXERCISE PRICE
- --------------------------------------------- ----------------- ----------------
<S> <C> <C>
Michael R. Henson(*) 143,717 $2.14
Chairman of the Board and Chief
Executive Officer
William G. Rigas 5,000 $4.63
Vice President, Sales and Marketing
Stephen R. Kroll 85,000 $3.65
Vice President, Finance and
</TABLE>
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<TABLE>
<S> <C> <C>
Administration, Chief Financial Officer
and Secretary
Jeffrey F. O'Donnell(*) 2,915 $0.11
President and Chief Executive Officer
Jeffrey H. Thiel 57,915 $4.69
President and Chief Operating Officer
Claire K. Walker 12,915 $2.83
Vice President, Clinical Affairs
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF OPTION WEIGHTED AVERAGE
NAME AND POSITION SHARES EXERCISE PRICE
- --------------------------------------------- ----------------- ----------------
<S> <C> <C>
All current executive officers as a group(*) 442,448 $3.34
(5 persons)
All current directors (other than executive 248,470 $2.33
officers) as a group (5 persons)
All employees, including current officers 306,227 $3.52
who are not executive officers, as a
group (43 persons)
</TABLE>
(*) Mr. O'Donnell served as Chief Executive Officer from June 1998 to March
1999, and Mr. Henson has served as Chief Executive Officer since March 1999.
- --------------------------------------------------------------------------------
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
The following is a summary of certain federal income tax consequences of
participation in the Option Plan. The summary should not be relied upon as being
a complete statement. Federal tax laws are complex and subject to change.
Moreover, participation in the Plan may also have consequences under state and
local tax laws which may vary from the federal tax consequences described below.
For such reasons, the Company recommends that each participant consult his or
her personal tax advisor to determine the specific tax consequences applicable
to him or her.
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INCENTIVE STOCK OPTIONS
No taxable income will be recognized by an optionee under the Plan upon
either the grant or the exercise of an incentive option. Instead, a taxable
event will occur upon the sale or other disposition of the shares acquired upon
exercise of an incentive option, and the tax treatment of the gain or loss
realized will depend upon how long the shares were held before their sale or
disposition. As is discussed below, the exercise of an incentive option also may
result in items of "tax preference" for purposes of the "alternative minimum
tax."
If a sale or other disposition of the shares received upon the exercise
of an incentive option occurs more than (i) one year after the date of exercise
of the option and (ii) two years after the date of grant of the option, the
holder will recognize either long-term capital gain or loss at the time of sale
equal to the full amount of the difference between the proceeds realized and
the exercise price paid. However, a sale, exchange, gift or other transfer of
legal title of such stock before the expiration of either the one-year or
two-year period described above will constitute a "disqualifying disposition." A
disqualifying disposition involving a sale or exchange will result in ordinary
income to the optionee in an amount equal to the lesser of (i) the fair market
value of the stock on the date of exercise minus the exercise price, or (ii) the
amount realized on disposition minus the exercise price. If the amount realized
in a disqualifying disposition exceeds the fair market value of the stock on the
date of exercise, the gain realized, in excess of the amount taxed as ordinary
income as indicated above, will be taxed as capital gain. A disqualifying
disposition as a result of a gift will result in ordinary income to the optionee
in an amount equal to the difference between the exercise price and the fair
market value of the stock on the date of exercise. Any loss realized upon a
disqualifying disposition will be treated as a capital loss. Capital gains and
losses resulting from disqualifying dispositions will be treated as long-term or
short-term depending upon whether the shares were held for more or less than the
applicable statutory holding period (which is currently more than one year for
long-term capital gains). The Company will be entitled to a tax deduction in an
amount equal to the ordinary income recognized by the optionee as a result of
the disqualifying disposition.
If legal title to any shares acquired upon exercise of an incentive
option is transferred by sale, gift or exchange, such transfer will be treated
as a disposition for purposes of determining whether a "disqualifying
disposition" has occurred. However, certain transfers will not be treated as
dispositions for such purposes, such as transfers to an estate or by inheritance
upon an optionee's death, a mere pledge or hypothecation, or a transfer into the
name of the optionee and another person as joint tenants.
Section 55 of the Code imposes an "alternative minimum tax" on an
individual's income to the extent the amount of the alternative minimum tax
exceeds the individual's regular tax for the year. For purposes of computing the
alternative minimum tax, the excess of the fair market value (on the date of
exercise) of the shares received upon the exercise of an incentive option over
the exercise price paid is included in alternative minimum taxable income in the
year the option is exercised. If the shares are sold in the same year that the
option is exercised, the regular tax treatment and the alternative tax treatment
will be the same. If the shares are sold during a year subsequent to that in
which the option was exercised, the basis of the stock acquired will equal its
fair market value on the date of exercise for purposes of computing alternative
minimum taxable income in the year of sale.
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<PAGE> 15
For example, assume that an individual pays an exercise price of $10 to purchase
stock having a fair market value of $15 on the date of exercise. The amount
included in alternative minimum taxable income is $5, and the stock has a basis
of $10 for regular tax purposes and $15 for alternative minimum tax purposes. If
the individual sells the stock in a subsequent year for $20, the gain recognized
is $10 for regular tax purposes and $5 for alternative minimum tax purposes.
An optionee who is subject to the alternative minimum tax in the year of
exercise of an incentive option may claim as a credit against the optionee's
regular tax liability in future years, the amount of alternative minimum tax
paid that is attributable to the exercise of the incentive option. This credit
is available in the first year following the year of exercise in which the
optionee has a regular tax liability.
Under the Plan, the Plan Administrator may permit an optionee to pay the
exercise price of an incentive option in certain circumstances by delivering
shares of Common Stock of the Company already owned by the optionee, valued at
their fair market value on the date of exercise. Generally, if the exercise
price of an incentive option is paid with already-owned shares or by a
combination of cash and already-owned shares, there will be no current taxable
gain or loss recognized by the optionee on the already-owned shares exchanged. A
special rule applies, however, if the shares exchanged were previously acquired
through the exercise of an incentive option and the applicable holding period
requirements for favorable tax treatment of such shares have not been met at the
time of the exchange. In such event, the exchange will be treated as a
disqualifying disposition of such shares and will result in the recognition of
income to the optionee, in accordance with the rules described above for
disqualifying dispositions. If this special rule does not apply, then the new
shares received by the optionee upon the exercise of the option equal in number
to the old shares exchanged will have the same tax basis and holding period for
capital gain purposes as the optionee's basis and holding period in the old
shares. The balance of the shares received by the optionee upon exercise of the
option will have a tax basis equal to any cash paid by the optionee, and if no
cash was paid, the tax basis of such shares will be zero. The holding period of
the additional shares for capital gain purposes will commence on the date of
exercise. The holding period for purposes of the one-year and two-year periods
described above will commence on the date of exercise as to all of the shares
received upon the exercise of an incentive option. If any of the shares subject
to the basis allocation rules described above are subsequently transferred in a
disqualifying disposition, the shares with the lowest tax basis will be treated
as being transferred first.
NONQUALIFIED OPTIONS
No taxable income is recognized by an optionee upon the grant of a
nonqualified option. Upon exercise, however, the optionee will recognize
ordinary income in the amount by which the fair market value of the shares
purchased exceeds, on the date of exercise, the exercise price paid for such
shares. The income recognized by an optionee who is an employee will be subject
to income tax withholding by the Company, which the optionee will be required to
satisfy. The Company will be entitled to a tax deduction equal to the amount of
ordinary income recognized by the optionee, provided certain reporting
requirements are satisfied.
If the exercise price of a nonqualified option is paid by the optionee
in cash, the tax basis of the shares acquired will be equal to the cash paid
plus the amount of income recognized by the optionee as a result of such
exercise. If the exercise price is paid by delivering shares of Common
12
<PAGE> 16
Stock of the Company already owned by the optionee or by a combination of cash
and already-owned shares, there will be no current taxable gain or loss
recognized by the optionee on the already-owned shares exchanged (however, the
optionee will nevertheless recognize ordinary income to the extent that the fair
market value of the shares purchased on the date of exercise exceeds the price
paid, as described above). The new shares received by the optionee equal in
number to the old shares exchanged will have the same tax basis and holding
period as the optionee's basis and holding period in the old shares. The balance
of the shares received will have a tax basis equal to any cash paid by the
optionee plus the amount of income recognized by the optionee as a result of
such exercise, and will have a holding period commencing with the date of
exercise.
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.
Upon the sale or disposition of shares acquired pursuant to the exercise
of a nonqualified option, the difference between the proceeds realized and the
optionee's basis in the shares will be a capital gain or loss and will be
treated as long-term or short-term capital gain or loss if the shares have been
held for more than the applicable statutory holding period (which is currently
more than one year for long-term capital gains).
STOCK ISSUED UNDER STOCK ISSUANCE PROGRAM
The receipt of restricted stock issued under the Stock Issuance Program
will not result in a taxable event to the participant until the expiration of
any repurchase rights retained by the Company with respect to such stock, unless
the participant makes an election under Section 83(b) of the Code to be taxed as
of the date of purchase. If no repurchase rights are retained, or if a Section
83(b) election is made, the participant will recognize ordinary income in an
amount equal to the excess of the fair market value of such shares on the date
of purchase over the purchase price paid for such shares. Even if the purchase
price and the fair market value of the shares are the same (in which case there
would be no ordinary income), a Section 83(b) election must be made to avoid
deferral of the date ordinary income is recognized. The election must be filed
with the Internal Revenue Service not later than 30 days after the date of
transfer.
If no Section 83(b) election is made or if no repurchase rights are
retained, a taxable event will occur on each date the participant's ownership
rights vest (e.g., when the Company's repurchase rights expire) as to the number
of shares that vest on that date, and the holding period for capital gain
purposes will not commence until the date the shares vest. The participant will
recognize ordinary income on each date shares vest in an amount equal to the
excess of the fair market value of such shares on that date over the amount paid
for such shares. Any income recognized by a participant
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<PAGE> 17
who is an employee will be subject to income tax withholding by the Company,
which the participant will be required to satisfy. The Company is entitled to a
tax deduction in an amount equal to the ordinary income recognized by the
participant. The participant's basis in the shares will be equal to the purchase
price, if any, increased by the amount of ordinary income recognized.
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 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 should remain deductible by the
Company without limitation under Internal Revenue Code Section 162(m).
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 Annual Meeting
and entitled to vote on Proposal No. 1 is required for approval to amend the
Option Plan. Broker non-votes with respect to this proposal will not be counted
for determining whether this proposal is approved. Proxies marked "abstain" or a
vote to abstain by a stockholder present in person at the Annual Meeting will
have the same legal effect as a vote "against" the matter because it represents
a share present or represented at the meeting and entitled to vote, thereby
increasing the number of affirmative voter required to approve this proposal. If
such stockholder approval is not obtained, then the share reserve will not be
increased.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE AMENDMENT TO THE 1996 STOCK OPTION/STOCK ISSUANCE PLAN.
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<PAGE> 18
PROPOSAL NO. 2
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE
NUMBER OF SHARES
The stockholders are being asked to vote on a proposal to approve an
amendment to the Company's Employee Stock Purchase Plan (the "Purchase Plan") to
increase the number of shares available for issuance by an additional 200,000
shares of Common Stock.
The amendment to the Purchase Plan was adopted by the Board on March 31,
2000, subject to stockholder approval at the Annual Meeting. The Board believes
it is in the best interest of the Company to adopt the amendment to the Purchase
Plan to provide eligible employees with an opportunity to acquire a proprietary
interest in the Company. The Board believes that by acquiring a proprietary
interest in the Company, the interests of employees are more closely aligned
with the interests of the stockholders due to their personal financial interest
in the growth and financial success of the Company.
The Purchase Plan originally was adopted by the Board approved by the
Company's stockholders on May 1, 1996, and subsequently was amended by the Board
on April 8, 1997 and March 12, 1998, and approved by the stockholders at the
1997 and 1998 Annual Meeting, respectively.
The following is a summary of the principal features of the Purchase
Plan, as amended. The summary, however, does not purport to be a complete
description of all of the provisions of the Purchase Plan. Any stockholder who
wishes to obtain a copy of the actual plan document may do so by written request
to the Secretary of the Company at the Company's executive offices in Irvine,
California.
PURPOSE
The purpose of the Purchase Plan is to provide eligible employees with
the opportunity to acquire a stock ownership interest in the Company through
periodic payroll deductions designed to qualify under Section 423 of the
Internal Revenue Code. These deductions will be applied at semi-annual intervals
to purchase shares of Common Stock at a discount from the then current market
price.
ADMINISTRATION
The Purchase Plan is administered by the Compensation Committee of the
Board. The Compensation Committee is comprised of two or more non-employee Board
members appointed by the Board who serve for as long as the Board deems
appropriate, and may be removed by the Board at any time. The Compensation
Committee in its capacity as administrator of the Purchase Plan is referred to
herein as the "Plan Administrator."
15
<PAGE> 19
SHARE RESERVE
A total of 400,000 shares (including the 200,000 shares for which
stockholder approval is sought under the Proposal) of Common Stock are reserved
for issuance under the Purchase Plan. There are certain limitations to the
number of shares a participant may purchase. First, the total number of shares
of Common Stock available for purchase by all participants over the ten year
term of the Purchase Plan is limited to 200,000 shares. Second, A participant is
limited by the amount of the payroll deduction authorized by such participant
during an offering period, which is a maximum of ten percent of base salary.
Third, a participant may not purchase shares at a rate in excess of $25,000
worth of Common Stock (determined on the basis of the fair market value of the
Common Stock on a participant's entry date into the offering period) for each
calendar year a participant's purchase right remains outstanding.
Finally, no purchase right will be granted to an employee who,
immediately after the grant of such right, would own (or otherwise hold options
or other rights to purchase) stock possessing five percent or more of the total
voting power or value of all classes of stock of the Company. Any payroll
deductions collected which cannot be applied to the purchase of Common Stock by
reason of one or more of these limitations will be refunded. If the total number
of shares for which purchase rights are to be exercised on any purchase date
exceeds the number of shares at the time available for issuance under the
Purchase Plan, then the Plan Administrator will make a pro-rata allocation of
the available shares on a uniform and non-discriminatory basis, and any payroll
deductions not applied to the purchase of the available shares will be refunded
to the participants.
In the event 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, appropriate adjustments will be made to: (i) the maximum number
and class of securities issuable under the Purchase Plan; (ii) the maximum
number and class of securities purchasable per participant on each purchase
date; and (iii) the number and class of securities and the price per share in
effect under each outstanding purchase right. Such adjustments will prevent any
dilution or enlargement of the rights and benefits of Purchase Plan
participants.
OFFERING PERIOD
Shares of Common Stock are offered for purchase through a series of one
or more offering periods, each with a maximum duration of 24 months. The initial
offering period began on the effective date of the Company's initial public
offering of the Common Stock and ended on the last business day in July 1998.
Each offering period is comprised of successive purchase intervals. The
start date for the first purchase interval was the same as the start date of the
initial offering period. Subsequent purchase intervals will begin on the first
business day of February and the first business day of August of each calendar
year within the offering period. The next offering period is expected to start
on the first business day in August 2000, and any subsequent offering periods
will begin as designated by the Plan Administrator.
Should the fair market value per share of Common Stock on any purchase
date within an offering period be less than the fair market value per share of
Common Stock on the start date of that
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<PAGE> 20
offering period, then that offering period automatically will terminate
immediately after the purchase of shares on that purchase date and a new
offering period will commence on the next business day following such purchase
date.
ELIGIBILITY
An employee is eligible to participate in the Purchase Plan after he or
she is employed by the Company or any participating subsidiary for more than 20
hours per week for more than 5 months per calendar year. An eligible employee
may join the Purchase Plan on any entry date (the first business day in February
or August each year) within that offering period on which he or she remains an
eligible employee. The date on which an employee first joins a particular
offering period is such employee's "Entry Date" for that offering period. On
such Entry Date, an employee is granted a purchase right to acquire shares of
Common Stock at the end of each purchase interval within that offering period.
An employee may authorize payroll deductions in any multiple of one
percent of his or her earnings for each purchase interval completed within the
offering period, up to a maximum of ten percent. Earnings include regular base
pay plus any salary contributions made to any Section 401(k) Plan or Section 125
Cafeteria Benefit Plan now or hereafter maintained by the Company. The rate of
payroll deduction may be decreased at any time, but not more than once during
the same purchase interval. In addition, the rate of payroll deduction may be
increased prior to the start of any new purchase interval within the offering
period (but not in excess of ten percent of eligible earnings).
Payroll deductions are credited to an account established in the name of
the participating employee on the Company's books. No interest is paid on the
balance in an account. However, because the Company pays all administrative
expenses of the Purchase Plan, the full amount of payroll deductions are applied
to the purchase of Common Stock. Payroll deductions may be commingled with the
general assets of the Company and used for general corporate purposes.
TIMING
A purchase right is exercised on the last business day of each purchase
interval. These purchase dates occur on the last business day in January and
July each year during the offering period. The purchase right is exercised by
applying the amount credited in an employee's account to the purchase of shares
of Common Stock on each purchase date. However, any payroll deductions not
applied to the purchase of Common Stock by reason of the limitations on the
number of shares purchasable per participant on any purchase date (see the
limitations described above under "Share Reserve") will be refunded promptly
after such purchase date.
PURCHASE PRICE
The purchase price per share of Common Stock is 85 percent of the lower
of (i) the fair market value per share of Common Stock on an Entry Date into the
offering period or (ii) the fair market value per share on the purchase date.
Generally, the fair market value per share on any relevant date under the
Purchase Plan will be the closing selling price of the Common Stock on that
date, as reported on the Nasdaq National Market. If there is no reported selling
price for such date, then the closing selling price on the next preceding date
for which there is such a quotation will be used.
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<PAGE> 21
TERMINATION OF PURCHASE RIGHT
An employee may terminate his or her purchase right by filing a
notification form with the Plan Administrator at any time prior to the last
business day of any purchase interval, and no further payroll deductions are
collected during the remainder of the offering period. Any payroll deductions
already collected for the purchase interval in which the purchase right
terminates will, at an employee's election, be refunded or applied to the
purchase of Common Stock on the next purchase date. If no election is made,
payroll deductions automatically are refunded. Once an employee has terminated
his or her purchase right, he or she must wait until the start of a new offering
period to resume participation in the Purchase Plan.
TERMINATION OF EMPLOYMENT
Upon termination of employment for any reason (including death or
disability) or other loss of eligibility, then all payroll deductions for the
purchase interval in which employment terminates or eligibility ceases
automatically are refunded.
In the event of an approved unpaid leave of absence, an employee may
elect until the last day of the purchase interval in which leave begins, to: (i)
withdraw all payroll deductions already collected for that period; or (ii) have
such funds held for the purchase of shares of Common Stock on the next purchase
date. If no election is made by such purchase date, then all payroll deductions
automatically will be refunded, and no further payroll deductions may be made
during the period of such leave. However, upon return to active service, payroll
deductions automatically will resume at the rate in effect at the beginning of
such leave.
GENERAL
In the event of any merger, acquisition or other sale of the Company (an
"Acquisition"), then all payroll deductions for the purchase interval in which
such Acquisition occurs automatically will be applied to the purchase of Common
Stock immediately prior to the effective date of the Acquisition, subject to
existing limitations on the number of shares purchasable by a participant (see
the discussion above under "Share Reserve"). The purchase price of such shares
will be eighty-five percent of the lower of (i) the fair market value of the
Common Stock on an employee's Entry Date into the offering period or (ii) the
fair market value of the Common Stock immediately prior to the Acquisition. The
Company will use its best efforts to provide at least ten days prior notice of
any such Acquisition, and each participant will thereafter have the right to
terminate his or her outstanding purchase rights at any time prior to the
effective date of the Acquisition.
Although an employee's purchase right cannot be assigned or transferred,
individuals who purchase Common Stock under the Purchase Plan may resell such
shares without restriction, except for certain executive officers of the Company
who are restricted by applicable securities laws. However, the Federal and state
income tax treatment of the sale proceeds may differ depending on how long an
individual holds shares prior to sale. (See the discussion below, "FEDERAL
INCOME TAX CONSEQUENCES").
The Plan Administrator has the discretion to terminate all outstanding
purchase rights immediately following any purchase date. If the Plan
Administrator exercises this discretion, the Purchase Plan will terminate in its
entirety, no further purchase rights thereafter will be granted or
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<PAGE> 22
exercised and no further payroll deductions will be collected under the
terminated plan. The Board may alter or amend the Purchase Plan at any time to
become effective immediately following the close of any semi-annual purchase
date. However, certain amendments may require the approval of the Company's
stockholders. The Purchase Plan in all events will terminate upon the earliest
to occur of (i) the last business day in July 2006; (ii) the date on which all
shares available for issuance under the Purchase Plan have been sold; or (iii)
the date on which all purchase rights are exercised in connection with the
Acquisition.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of
participation in the Purchase Plan. The summary should not be relied upon as
being a complete statement. Federal tax laws are complex and subject to change.
Moreover, participation in the Purchase Plan also may have consequences under
state and local tax laws that may vary from the federal tax consequences
described below. For such reasons, the Company recommends that each participant
consult his or her personal tax advisor in order to determine the specific tax
consequences applicable to him or her.
The Purchase Plan and the right of participants to make purchases
thereunder are intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
at the time of grant or purchase of shares. However, a participant may become
liable for tax upon disposition of shares acquired under the Purchase Plan, and
the tax consequences will depend upon how long a participant has held the shares
before disposition.
If the shares are disposed of at least two years after the Entry Date
and at least one year after the purchase date, or in the event of a
participant's death (whenever occurring) while owning such shares, then the
lesser of (i) the excess of the fair market value of the shares at the time of
such disposition over the purchase price of the shares or (ii) fifteen percent
of the fair market value of the shares on the Entry Date, will be treated as
ordinary income to the participant. Any further gain upon such disposition will
be taxed as long-term capital gain. Any long-term capital gain will be taxed at
the rates then in effect. If the shares are sold and the sale price is less than
the purchase price, there is no ordinary income and the participant will have a
capital loss equal to the difference between the sale price and the purchase
price. The ability of a participant to utilize such a capital loss will depend
upon the participant's other tax attributes and the statutory limitation on
capital loss deductions not discussed herein.
If the shares are sold or disposed of (including any disposition by way
of gift) before the expiration of the two-year holding period described above or
within one year after the shares are transferred to the participant, then the
excess of the fair market value of the shares on the purchase date over the
purchase price will be treated as ordinary income to the participant. This
excess will constitute ordinary income for the year of sale or other disposition
even if no gain is realized on the sale or a gratuitous transfer of shares is
made. The balance of the gain will be taxed as capital gain at the rates then in
effect. If the shares are sold for less than their fair market value on the
purchase date, the same amount of ordinary income will be attributed to the
participant and a capital loss is recognized equal to the difference between the
sale price and the value of the shares on such purchase
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<PAGE> 23
date. As indicated above, the ability of the participant to utilize such a
capital loss will depend upon the participant's other tax attributes and the
statutory limitation on capital losses not discussed herein.
The ordinary income reported under the rules described above, added to
the actual purchase price of the shares, determines the tax basis of the shares
for the purpose of determining gain or loss on the sale or exchange of the
shares.
The Company is entitled to a deduction for amounts taxed as ordinary
income to a participant only to the extent that ordinary income must be reported
upon disposition of shares by the participant before the expiration of the
holding periods described above.
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 Annual Meeting
and entitled to vote on Proposal No. 2 is required for approval to amend the
Purchase Plan. Broker non-votes with respect to this proposal will not be
counted for determining whether this proposal is approved. Proxies marked
"abstain" or a vote to abstain by a stockholder present in person at the Annual
Meeting will have the same legal effect as a vote "against" the matter because
it represents a share present or represented at the meeting and entitled to
vote, thereby increasing the number of affirmative votes required to approve
this proposal. If such stockholder approval is not obtained, then the share
reserve will not be increased.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN.
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PROPOSAL NO. 3
ELECTION OF DIRECTORS
The Board of Directors currently consists of seven members, divided into
three classes approximately equal in size. Each class of directors is elected
for three-year terms on a staggered term basis, so that each year the term of
office of one class will expire and the terms of office of the other classes
will extend for additional periods of one and two years, respectively. The
nominees for election at this year's Annual Meeting will serve as Class II
Directors, with a term expiring at the Annual Meeting of Stockholders to be held
in 2003. Each director is elected to serve until the expiration of his term.
The nominees for election as Class II Directors at this year's Annual
Meeting are Franklin D. Brown and Edward M. Leonard. Both nominees for election
to the Board of Directors at the Annual Meeting currently are directors of the
Company and have served as a members of the Board of Directors since June 1997
and April 1996, respectively.
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
two (2) candidates receiving the highest number of affirmative votes of shares
entitled to vote at the Annual Meeting will be elected directors of Radiance. 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 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 favor of the nominees
listed below.
INFORMATION WITH RESPECT TO NOMINEES AND DIRECTORS
Set forth below, as of March 15, 2000, for each nominee and for each
director of Radiance is information regarding his age, position(s) with
Radiance, the period he has served as a director, any family relationship with
any other director or executive officer of Radiance, and the directorships
currently held by him in corporations whose shares are publicly registered.
NOMINEES FOR CLASS II DIRECTORS
<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL OCCUPATION AND
FIRST YEAR AS DIRECTOR BUSINESS EXPERIENCE
- -------------------------------------- -------------------------------------------------------
<S> <C>
</TABLE>
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<PAGE> 25
<TABLE>
<S> <C>
Franklin D. Brown, 56, 1997 Franklin D. Brown is the President and CEO of
Endologix, Inc., and currently serves as a director
of VidaMed, Inc. (Nasdaq), a developer of systems for
the treatment of urological conditions, Xillix
Technologies Corp. (Toronto Stock Exchange), a
developer of medical imaging products, and several
private companies. Prior to joining Endologix in
1988, Mr. Brown served as Chairman, President and CEO
at Imagyn Medical, Inc. from October 1994 until the
sale of the company in September 1997. Prior to
Imagyn, Mr. Brown served as President and CEO of
Pharmacia Deltec, Inc., an ambulatory drug delivery
company, from 1986 until the sale of the company in
1994. From 1982 to 1986, he was President of
Pharmacia Inc.'s health care group and General
Manager of its hospital division. Prior to his
employment with Pharmacia, Mr. Brown held various
sales and marketing positions with Choay
Laboratories, Mead Johnson, Abbott and Sterling
Drug. Mr. Brown currently is a director of Xillix
Technologies and Bridge Medical. Mr. Brown was
awarded Entrepreneur of the Year award in 1991. Mr.
Brown received an M.B.A. from the University of
Michigan and a bachelors degree from Western Michigan
University.
Edward M. Leonard, 58, 1996 Since September 1997, Mr. Leonard has been a Managing
Director of Broadview International LLC, an
investment bank specializing in mergers and
acquisitions for information technology companies.
From 1978 to September 1997, Mr. Leonard was a
partner in the law firm of Brobeck, Phleger &
Harrison.
</TABLE>
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CLASS I DIRECTORS
<TABLE>
<CAPTION>
NOMINEE, AGE AND PRINCIPAL OCCUPATION AND
FIRST YEAR AS DIRECTOR BUSINESS EXPERIENCE
- -------------------------------------- -------------------------------------------------------
<S> <C>
Maurice Buchbinder, M.D., 46, 1999 Maurice Buchbinder, M.D. was a member of the board of
directors of the (former) Radiance Medical Systems,
Inc. since its incorporation in August 1997. See,
"Certain Transactions." Since 1995, Dr. Buchbinder
has served as the Director of Interventional
Cardiology at Sharp Memorial Hospital, San Diego,
California and as the Director of Interventional
Cardiology at the Foundation for Cardiovascular
Research, Scripps Memorial Hospital, La Jolla,
California. From 1985 to 1995, Dr. Buchbinder served
at various intervals as the Professor of Medicine and
the Associate Professor of Medicine, Cardiology
Division, USCD Medical Center, San Diego,
California. Dr. Buchbinder is Board certified,
Diplomat, from the American Board of Cardiovascular
Diseases and the American Board of Internal
Medicine. Dr. Buchbinder maintains professional
affiliations with the American College of Cardiology
and the American College of Physicians.
Jeffrey F. O'Donnell, 40, 1999 Jeff O'Donnell has served as President and CEO of
PhotoMedex since November 1999. Prior to joining
PhotoMedex Mr. O'Donnell was the President and
CEO of X-SITE Medical. Mr. O'Donnell was the President
of the Company from January 1998 until March 1999,
and CEO from June 1998 until March 1999, of the
Company. Prior to being named President and CEO of
the Company, Mr. O'Donnell served as Vice President,
Sales and Marketing, since joining the Company in
November 1995. From January 1994 to May 1995, Mr.
O'Donnell was the President and CEO of Kensey Nash
Corporation, developer of the AngioSeal vascular
closure device. Prior to joining Kensey Nash
Corporation, Mr. O'Donnell worked for approximately
six years in various sales and regional management
positions with ACS, now part of Guidant. Mr. O'Donnell
also has held various senior level marketing and
sales positions with Boston Scientific and Johnson and
Johnson. Mr. O'Donnell is a member of the Board of
Directors of Escalon Medical Corporation, a
manufacturer and distributor of cardiovascular and
ophthalmology devices and PhotoMedex, a manufacturer
and distributor of medical laser products for the
treatment of skin disorders. Mr. O'Donnell graduated
from LaSalle University with a BS degree in business
administration.
</TABLE>
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<PAGE> 27
<TABLE>
<S> <C>
Gerard von Hoffmann, 43, 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, Radiance's patent
counsel, since 1986 and has been a partner since 1989.
</TABLE>
CLASS III DIRECTORS
<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL OCCUPATION AND
FIRST YEAR AS DIRECTOR BUSINESS EXPERIENCE
- -------------------------------------- -------------------------------------------------------
<S> <C>
William G. Davis, 68, 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 Division, from 1982 until his retirement in
1984.
</TABLE>
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<PAGE> 28
<TABLE>
<S> <C>
Michael R. Henson, 54, 1995 Mr. Henson joined the Company in February 1992 as
President, Chief Executive Officer and Chairman of
the Board of Directors, positions in which he
currently serves the Company. From June 1997 until
March 1999, Mr. Henson served Chairman of the Board,
Chief Executive Officer and President of the (former)
Radiance Medical Systems, Inc., and as Chairman of
the Board of the Company. Prior to joining the
Company, Mr. Henson served as the Chief Executive
Officer 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. Mr.
Henson also serves as a director of two private
companies, Endologix, Inc. and Micrus Corporation.
</TABLE>
25
<PAGE> 29
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met seven times during the year ended December
31, 1999. Each Director attended at least 75% of the aggregate of (i) the total
number of meetings of the Board of Directors and (ii) the total number of
meetings held by all Committees of the Board on which such Director served.
Audit Committee
Radiance has a standing Audit Committee composed of Messrs. Edward M.
Leonard, William Davis and Gerard von Hoffmann. The Audit Committee primarily is
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 times during the year ended December 31,
1999.
Compensation Committee
Radiance has a standing Compensation Committee which met four times
during the year ended December 31, 1999. For the 1999 fiscal year, this
Committee consisted of Franklin D. Brown, Jeffrey O'Donnell and Maurice
Buchbinder, M.D.. The Committee administers the Company's 1996 Option/Issuance
Plan (the "1996 Option Plan") and other employee plans, and reviews and acts on
matters relating to compensation levels and benefit plans for key executives of
Radiance. The Compensation Committee has the power and authority to make stock
option grants under the 1996 Option Plan to the Company's officers.
REMUNERATION
Non-employee directors each receive a fee of $1,000 per quarter, $1,000
for each Board meeting attended and reimbursement for certain travel expenses
and other out-of-pocket costs. Members of Committees of the Board each receive
an additional fee of $500 for each Committee meeting attended. 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, as summarized in Proposal No. 1 above.
Mr. von Hoffmann, a member of the Company's Board of Directors, is a
partner at Knobbe, Martens, Olson & Bear LLP, which serves as Intellectual
Property Counsel to the Company.
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 Radiance. 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
Radiance and persons who hold more than 10% of the Company's outstanding Common
Stock are subject to the reporting
26
<PAGE> 30
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 Radiance received from such persons for their 1999
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 1999 fiscal
year, Radiance 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 for the following: (i)
Mr. von Hoffmann filed one late Form 4 with respect to 11,661 shares of Common
Stock received upon exercise of a stock option, and (ii) Franklin D. Brown filed
one late Form 4 with respect to a purchase of 4,000 shares of Common Stock.
CERTAIN TRANSACTIONS
On November 3, 1998, the Company signed a merger agreement with the
(former) Radiance Medical Systems, Inc. ("RMS"), pursuant to which RMS agreed to
merge with and into a wholly-owned subsidiary of the Company. The merger was
approved by the stockholders of the Company and completed on January 14, 1999.
Pursuant to the Merger, the Company paid the former stockholders of RMS $3.00
for each share of RMS preferred stock and $2.00 for each share of RMS common
stock, for a total consideration of approximately $7.0 million, excluding the
value of RMS common stock options to be provided to RMS optionholders in
exchange for their RMS common stock options. The consideration was paid by
delivery of an aggregate of 1,900,157 shares of Company Common Stock, and $0.7
million in cash to certain RMS stockholders who elected cash. Options for
546,250 shares of RMS common stock, with an exercise price of $0.065 per share,
accelerated and vested immediately prior to the completion of the Merger. Of
these, 1,250 were exercised, and holders received the same consideration for
their shares of RMS Common Stock as other holders of RMS Common Stock. The
options not exercised prior to the completion of the Merger were assumed by the
Company and converted into options to purchase $2.00 of Company common stock at
the same exercise price, which resulted in the conversion of an aggregate of
317,775 share of the Company's Common Stock.
In addition, the former RMS stockholders and optionholders may receive
product development milestone payments of $2.00 for each share of RMS preferred
stock and $3.00 for each share of RMS common stock. The milestone payments may
be increased up to 30%, or reduced or eliminated if the milestones are reached
earlier or later, respectively, than the milestone target dates. The milestones
represent important steps in the United States Food and Drug Administration and
European approval process which the Company determined was critical to bringing
the Company's technology to the marketplace. The Company did not achieve its
initial milestone which had a target date of April 30, 1999. Therefore, possible
product development milestone payments have been reduced by $.3079 per share for
preferred stock and $.4615 for common stock.
Michael R. Henson, currently the Chairman of the Board, President and
Chief Executive Officer of the Company, served as Chairman of the Board and
Chief Executive Officer of RMS from June 1998 until March 1999. Prior to the
merger, Mr. Henson owned 300,000 shares of RMS Common Stock, acquired in June
1998 for $0.065 per share in return for agreeing not to take a salary from RMS.
Mr. Henson also owned 15,500 shares of Radiance Series A Preferred Stock, and
options to purchase 135,000 shares of Radiance Common Stock. In addition, Mr.
Henson's wife
27
<PAGE> 31
owned options to purchase an additional 40,000 shares of Radiance Common Stock.
As a result of the merger, Mr. Henson and his wife received an aggregate of
194,143 shares of the Company's common stock, and depending upon the achievement
by the Company of the product development milestones, are entitled to receive up
to an additional 551,835 shares of the Company's common stock. In addition,
pursuant to the merger, options held by Mr. Henson and his wife were converted
into an aggregate of 102,040 options to purchase shares of the Company's common
stock at an exercise price of $0.11.
Maurice Buchbinder, M.D., who was appointed to the Board of Directors of
the Company after completion of the merger, was the largest stockholder in RMS
(other than the Company) and owned 769,230 shares of Series A Preferred Stock of
RMS and options to purchase 160,000 shares of Common Stock of RMS. In addition,
Dr. Buchbinder was a director of RMS. As a result of the merger, Dr. Buchbinder
received an aggregate of 693,000 shares of the Company's common stock, and
depending upon the achievement by the Company of the product development
milestones, is entitled to receive up to an additional 765,013 shares of the
Company's common stock. In addition, pursuant to the merger, Dr. Buchbinder's
options were converted into 93,294 options to purchase shares of the Company's
common stock at an exercise price of $0.11. In addition to receiving the merger
consideration in exchange for his capital stock of RMS, the Company agreed to
appoint Dr. Buchbinder the Medical Director of the Company for a period of four
years on a consulting basis, pursuant to which he received a grant of an option
to purchase 50,000 shares of the Company's common stock at an exercise price of
$3.63.
Prior to the merger, Gerard von Hoffmann, a director of the Company,
owned 16,000 shares of Radiance Series A Preferred Stock and options to purchase
20,000 shares of Radiance Common Stock. As a result of the merger, Mr. von
Hoffmann received an aggregate of 14,414 shares of the Company's common stock,
and depending upon the achievement by the Company of the product development
milestones, is entitled to receive up to an additional 34,868 shares of the
Company's common stock. In addition, pursuant to the merger, Mr. von Hoffmann's
options were converted into 11,661 options to purchase shares of the Company's
common stock at an exercise price of $0.11.
Jeffrey O'Donnell, currently a director who also served as Chief
Executive Officer and President of Radiance from June 1998 until March 1999, and
Jeffery Thiel, currently President and Chief Operating Officer, each had options
to purchase 5,000 shares of RMS Common Stock that were granted by the Board of
Directors of RMS in exchange for providing certain management services relating
to research and development, regulatory, manufacturing and marketing.
Other than the officer loan described below under Executive Compensation
and Related Information and the RMS transaction described above, the Company was
not involved in any transaction during the fiscal year ended December 31, 1998
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.
ENDOLOGIX SHARE TRANSFER
During 1999 the Company transferred 150,000 shares of Endologix, Inc. to
Mr. Henson as compensation for his return of options for 130,000 shares of
Radiance common stock to the Company in 1997, for giving the
28
<PAGE> 32
Company the opportunity to acquire 625,000 shares of Endologix, Inc. in 1997 and
for his agreement to return the role of Chief Executive Officer upon the
departure of Mr. O'Donnell. The estimated value of the shares at the date of
transfer was $37,500.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE TWO
NOMINEES NAMED ABOVE.
29
<PAGE> 33
PROPOSAL NO. 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
On August 10, 1999, Ernst & Young LLP was dismissed as the Company's
independent auditors. There was no disagreements with Ernst & Young LLP on any
matter of accounting principles or practices, financial statement disclosure,
auditing scope or procedure or any reportable event. Ernst & Young LLP's reports
on the Company's financial statements for the fiscal years ended December 31,
1998 and December 31, 1997, (i) did not contain any adverse opinion or
disclaimer of opinion, and (ii) were not qualified as to uncertainty, audit
scope or accounting principles.
On August 10, 1999, PricewaterhouseCoopers LLP was engaged as the
Company's independent auditors for the fiscal year ended December 31, 1999. The
foregoing change in auditors was approved by the Audit Committee of the Board of
Directors of the Company.
The Board of Directors, on recommendation of Radiance's management, has
selected that firm to continue in this capacity for the current fiscal year.
Radiance is asking the stockholders to ratify the selection by the Board of
Directors of PricewaterhouseCoopers LLP, as independent auditors to audit the
consolidated financial statements of Radiance for the fiscal year ending
December 31, 2000 and to perform other appropriate services. A representative of
PricewaterhouseCoopers 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. Radiance has
been advised by PricewaterhouseCoopers LLP that neither that firm nor any of its
associates has any material relationship with Radiance nor any affiliate of
Radiance.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION.
30
<PAGE> 34
GENERAL
SECURITY OWNERSHIP OF OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to Radiance
regarding the ownership of Radiance's Common Stock as of March 15, 2000 by (i)
each stockholder known to Radiance to be a beneficial owner of more than five
percent (5%) of Radiance's Common Stock, (ii) each director and nominee for
director, (iii) the Named Executive Officers (as such term is defined under the
caption "Executive Compensation and Related Information") and (iv) all current
directors and officers of Radiance as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OWNED(1) SHARES(2)
- ----------------------------------------- ------------ ----------
<S> <C> <C>
EndoSonics Corporation 1,350,566 11.9
2870 Kilgore Rd.
Rancho Cordova, CA 95670
Interactive Research Advisors, Inc.(3) 569,800 5.0
101 Park Center Plaza, Suite 1300
San Jose, CA 95113
William Harris Investors(4) 599,571 5.3
Two North La Salle Street, Suite 400
Chicago, IL 60602
Dimensional Fund Advisor(5) 637,773 5.6
1299 Ocean Avenue 11th Floor
Santa Monica, CA 90401
</TABLE>
31
<PAGE> 35
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OWNED(1) SHARES(2)
- ----------------------------------------- ------------ ----------
<S> <C> <C>
Michael R. Henson(6) 552,842 4.9
13700 Alton Parkway, Ste. 160
Irvine, CA 92618
Franklin D. Brown(7) 37,500 *
Maurice Buchbinder, M.D.(8) 824,732 7.2
13700 Alton Parkway, Ste. 160
Irvine, CA 92618
William G. Davis(9) 45,430 *
Gerard von Hoffmann(10) 70,429 *
Stephen R. Kroll(11) 67,429 *
Edward M. Leonard(12) 66,192 *
William G. Rigas 26,337 *
Jeffrey F. O'Donnell(13) 200,539 1.7
Jeffrey H. Thiel(14) 84,153 *
Claire K. Walker(15) 45,793 *
All directors and officers as a group
(12 persons)(16) 2,008,563 16.8
Total Principal Stockholders 5,229,527 43.7
</TABLE>
*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 March 15, 2000. 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 11,335,245 shares plus the number of
shares such individual can acquire within 60 days of March 15, 2000, which
represents 12,021,245 shares outstanding on March 15, 2000, less 686,000
treasury shares held by the Company.
32
<PAGE> 36
(3) Pursuant to a Schedule 13G filed with the Commission on February 12, 1999,
Interactive Research Advisors, Inc. reported that it had sole voting and
investment power over 569,800 shares.
(4) Pursuant to a Schedule 13G filed with the Commission on February 14, 2000,
William Harris Investors reported that it had shared voting and sole
dispositive power over 599,571 shares.
(5) Pursuant to a schedule 13G filed with the Commission on February 3, 2000,
Dimensional Fund Advisors reported that it has sole voting and dispositive
power over 637,773 shares. Dimensional reported that all shares are owned
by investment funds it serves as investment adviser or manager, and
disclaims beneficial ownership of such shares.
(6) Include 43,854 shares subject to options exercisable within 60 days after
March 15, 2000.
(7) Includes 32,500 shares subject to options exercisable within 60 days after
March 15, 2000.
(8) Includes 121,732 shares subject to options exercisable within 60 days
after March 15, 2000.
(9) Includes 38,500 shares subject to options exercisable within 60 days
after March 15, 2000. Mr. Davis shares voting and investment power with
his spouse as co-trustee with respect to 6,930 shares held in a revocable
trust.
(10) Includes 32,500 shares subject to options exercisable within 60 days after
March 15, 2000.
(11) Includes 45,417 shares subject to options exercisable within 60 days after
March 15, 2000. Mr. Kroll shares voting and investment power with his
spouse as co-trustee with respect to these shares, which are held in a
revocable trust.
(12) Includes 32,500 shares subject to options exercisable within 60 days after
March 15, 2000. Mr. Leonard shares voting and investment power as a
beneficiary with respect to 22,807 shares held in a retirement trust. Mr.
Leonard disclaims beneficial ownership with respect to 200 shares held by
his spouse and 3,000 shares held as custodian for his minor children under
the Uniform Gift to Minors Act.
(13) Includes 195,728 shares subject to options exercisable within 60 days
after March 15, 2000.
(14) Includes 62,501 shares subject to options exercisable within 60 days after
March 15, 2000. Mr. Thiel shares voting and investment power with his
spouse with respect to 7,335 shares.
(15) Includes 1,520 shares subject to options exercisable within 60 days after
March 15, 2000.
(16) Includes 640,710 shares subject to options exercisable within 60 days
after March 15, 2000.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following table sets forth the salary and bonus earned for the three
fiscal years ended December 31, 1999, by the Company's Chief Executive Officer,
Mr. Henson and executive officers
33
<PAGE> 37
whose salary and bonus for the 1999 fiscal year exceeded of $100,000. All the
individuals named in the table are referred to in this Proxy Statement as the
"Named Executive Officers."
34
<PAGE> 38
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------------
SHARES
NAME AND UNDERLYING
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) OPTIONS
- -------------------------------- ---- --------- -------- ----------
<S> <C> <C> <C> <C>
Michael R. Henson 1999 264,000 84,480 123,125
Chairman of the Board, 1998 220,000 77,000 55,000
Chief Executive Officer(*) 1997 219,051 22,000 55,000(3)
Jeffrey F. O'Donnell(****) 1999 52,130 -- 297,915
President and Chief Executive 1998 222,965 72,570 225,000
Officer 1997 181,034 15,550 145,000(5)
Jeffrey H. Thiel(*****) 1999 173,092 41,542 173,000
President, Chief Operations 1998 132,692 26,640 98,000
Officer 1997 120,000 12,000 58,000(6)
Stephen R. Kroll(**) 1999 173,846 41,723 145,000
Vice President, Finance and 1998 108,462 21,697 60,000
Administration, Chief Financial
Officer and Secretary
William G. Rigas(***) 1999 158,257 8,123 65,000
Vice President, Sales and 1998 -- -- --
Marketing
Claire K. Walker 1999 134,427 10,000 117,915
Vice President, Clinical Affairs 1998 125,302 25,124 78,000
1997 113,275 11,214 38,000(3)
</TABLE>
(*) Mr. Henson served as the Chief Executive Officer of the Company from
January - June 1998. The Board of Directors elected Mr. Henson to serve
as Chief Executive Officer of the Company upon the Mr. O'Donnell's
resignation in March 1999.
(**) Mr. Kroll was hired by the Company as Vice President, Finance and
Administration, Chief Financial Officer and Secretary in April 1998.
(***) Mr. Rigas resigned as Vice President, Sales and Marketing in January
2000.
(****) Mr. O'Donnell served as the President and Chief Operating Officer, and
as Chief Executive Officer from June 1998 until March 1999.
(*****) Mr. Thiel was elected President and Chief Operating Officer in October
1999. Previously he held the position of Executive Vice President -
Operations.
(1) Includes amounts contributed by the Named Executive Officers to the
Company's 401(K) Plan.
(2) Represents amounts paid in subsequent fiscal year for work performed in
prior fiscal year.
(3) Represents options granted in 1998 fiscal year for work performed in
1997 fiscal year.
35
<PAGE> 39
(4) Mr. Henson voluntarily returned to the Company in 1997 options to
acquire 130,000 shares.
STOCK OPTIONS
The following table provides information with respect to the stock
option grants made during the 1999 fiscal year under the Company's 1996 Stock
Option/Stock Issuance Plan to the Named Executive Officers. No stock
appreciation rights were granted during such fiscal year to the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
TERM
INDIVIDUAL GRANTS
-----------------------------------------------------
% OF TOTAL
OPTIONS
NUMBER OF GRANTED TO
SECURITIES EMPLOYEES
UNDERLYING IN FISCAL EXERCISE OR
OPTION YEAR(2) BASE PRICE EXPIRATION
NAME GRANTED(1) ($/SH)(3) DATE 5%($)(4) 10%($)(4)
- --------------------- ---------- ---------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Henson 78,717 10 0.11 1/13/09 496,278 795,369
50,000 6 4.47 2/23/09 140,529 356,122
15,000 2 5.00 12/08/09 47,167 119,531
Stephen R. Kroll 50,000 6 3.63 1/14/09 113,987 288,865
20,000 3 2.69 6/08/09 33,809 85,680
William G. Rigas 15,000 2 5.00 12/08/09 47,167 119,531
5,000 * 4.63 9/07/09 14,543 36,855
Jeffrey F. O'Donnell 0 --- --- --- ---
Jeffrey H. Thiel 20,000 3 3.625 1/14/09 45,595 115,546
2,915 * 0.11 1/13/09 18,378 29,454
20,000 3 6.19 9/18/09 77,832 197,242
15,000 2 5.00 12/08/09 47,167 119,531
Claire K. Walker 10,000 1 3.625 1/14/09 22,797 57,773
2,915 * 0.11 1/13/09 18,378 29,454
</TABLE>
* Less than 1%
(1) The option listed in the table was granted under the Company's 1998 Stock
Option/Stock Issuance Plan. The options have a maximum term of ten years
measured from the date of grant. Twenty-five percent (25%) of the options
are exercisable upon the optionee's completion of one year of service
measured from the date of grant, and as to the balance of the option
shares in a
36
<PAGE> 40
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 776,590 shares to employees
in 1999, including the Named Executive 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 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 1999 fiscal year and unexercised options held by the Named
Executive Officers as of the end of such year. No stock appreciation rights were
exercised by the Named Executive 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
UNDER-LYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS OPTIONS AT
SHARES AGGREGATE AT FY-END FY-END($)(2)
ACQUIRED VALUE ----------------------- --------------------
ON REALIZED EXERCIS- UNEXER- EXERCIS- UNEXER-
NAME EXERCISE ($)(1) ABLE CISABLE ABLE CISABLE
- ---------------- -------- --------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Henson 89,133 532,798 23,542 99,583 15,613 37,731
Stephen R. Kroll 0 0 23,541 121,759 3,872 120,518
William G. Rigas 0 0 19,375 45,625 14,156 32,519
Jeffrey F. O'Donnell 0 0 175,832 122,083 376,625 58,725
Jeffrey H. Thiel 2,915 14,618 44,374 128,626 13,660 65,890
Claire K. Walker 0 0 55,373 59,542 140,215 59,890
</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
37
<PAGE> 41
(2) Based on the fair market value of the Company's Common Stock at year-end,
$4.94 per share, less the exercise price payable for such shares.
MANAGEMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
Michael Henson. The Company entered into an employment agreement with
Michael Henson dated January 14, 1999 and subsequently amended as of February 1,
1999 and December 10, 1999. Pursuant to the employment agreement, Mr. Henson,
Chairman of the Board of Directors of the Company, agreed to serve as the
President and Chief Executive Officer of the Company effective as of March 1999.
The term of the agreement is two years, and commencing on the first anniversary,
automatically is extended on each day for one day so that the remaining term is
always one year unless either party elects to terminate upon written notice of
intent not to renew no later than 60 days prior to the end of the second
anniversary or any successive anniversary of the agreement. Mr. Henson will
receive a base salary of $264,000 per year, which may be increased subject to
review annually by the Compensation Committee of the Board of Directors. Mr.
Henson also is eligible to participate in incentive compensation plans of the
Company and will be entitled to earn a bonus of up to 35% of his base salary.
Pursuant to the agreement, the Company may terminate Mr. Henson at any time upon
at least thirty (30) days prior written notice.
Jeffrey O'Donnell. In November 1998, Radiance entered into a two-year
employment agreement with Jeffrey O'Donnell, the Company's President and Chief
Executive Officer from June 1998 until March 1999. Mr. O'Donnell was employed as
President and Chief Executive Officer of the Company at a base salary of
$220,000 per year, and was entitled to earn a bonus of up to 35% of his base
salary. The agreement provided that if Mr. O'Donnell voluntarily resigns, and
provides at least six months notice of such resignation, all of his options
shall continue to vest for one year following the date of termination. In
December 1998, Mr. O'Donnell resigned as Chief Executive Officer, for family
reasons, effective March 1999. In connection with such resignation, Mr.
O'Donnell was not entitled to any severance benefits under his employment
agreement. Pursuant to their terms and an agreement with the Company, Mr.
O'Donnell's options shall continue to vest in accordance with their terms during
his continuing service as a director. In the event of a change in control or
acquisition, all of his options shall accelerate and vest whether or not the
options or the Company's stock option plan is assumed by any successor, but only
in the event that: (i) his service as a director ceases; and (ii) such
acceleration does not impair the accounting for such transaction as a "pooling
of interests."
Stephen R. Kroll. The Company entered into an employment agreement with
Mr. Kroll dated February 1, 1999 which was amended on December 10, 1999 pursuant
to which Mr. Kroll is employed as the Vice President and Chief Financial Officer
of the Company. The term of the agreement is two years, and commencing on the
first anniversary, automatically is extended on each day for one day so that the
remaining term is always one year unless either party elects to terminate upon
written notice of intent not to renew no later than 60 days prior to the end of
the second anniversary or any successive anniversary of the agreement. Mr. Kroll
receives a base salary of $180,000 per year, which may be increased subject to
review annually by the Compensation Committee of the Board of Directors. Mr.
Kroll also is eligible to participate in incentive compensation plans of the
Company and is entitled to earn a bonus of up to 30% of his base salary.
38
<PAGE> 42
Edward F. Smith, III Ph.D. The Company entered into an employment
agreement with Dr. Smith dated October 7, 1999 pursuant to which Dr. Smith is
employed as Vice President of Research and Development of the Company. Dr. Smith
receives a base salary of $150,000 per year which may be increased subject to
review annually by the Compensation Committee of the Board of Directors. The
term of the agreement is two years, and commencing on the first anniversary,
automatically is extended on each day for one day so that the remaining term is
always one year unless either party elects to terminate upon written notice of
intent not to renew no later than 60 days prior to the end of the second
anniversary or any successive anniversary of the agreement. Dr. Smith also is
eligible to participate in the incentive compensation plans of the Company and
is entitled to earn a bonus up to 20% of his base salary.
Jeffrey Thiel. The Company entered into an employment agreement with Mr.
Thiel dated February 1, 1999 which was amended on December 10, 1999 pursuant to
which Mr. Thiel is employed as the President and Chief Operating Officer of the
Company. The term of the agreement is two years, and commencing on the first
anniversary, automatically is extended on each day for one day so that the
remaining term is always one year unless either party elects to terminate upon
written notice of intent not to renew no later than 60 days prior to the end of
the second anniversary or any successive anniversary of the agreement. Mr. Thiel
receives a base salary of $180,000 per year, which may be increased subject to
review annually by the Compensation Committee of the Board of Directors. Mr.
Thiel also is eligible to participate in incentive compensation plans of the
Company and is entitled to earn a bonus up to 30% of his base salary.
Brett Trauthen. The Company entered into an employment agreement with
Mr. Trauthen dated January 14, 1999 which was amended on December 10, 1999
pursuant to which Mr. Trauthen is employed as the Vice President of Clinical
Development of the Company. The term of the agreement is two years, and
commencing on the first anniversary, automatically is extended on each day for
one day so that the remaining term is always one year unless either party elects
to terminate upon written notice of intent not to renew no later than 60 days
prior to the end of the second anniversary or any successive anniversary of the
agreement. Mr. Trauthen receives a base salary of $130,000 per year which may be
increased subject to review annually by the Compensation Committee of the Board
of Directors. Mr. Trauthen also is eligible to participate in the incentive
compensation plans of the Company and is entitled to earn a bonus up to 20% of
his base salary.
Claire Walker. The Company entered into an employment agreement with Ms.
Walker dated February 1, 1999 pursuant to which Ms. Walker was employed as the
Vice President, Clinical Affairs of the Company. Ms. Walker received a base
salary of $138,180 per year, which could be increased subject to review annually
by the Compensation Committee of the Board of Directors. Ms. Walker also was
eligible to participate in incentive compensation plans of the Company and was
be entitled to earn a bonus of up to 20% of her base salary. This agreement was
terminated upon the death of Ms. Walker in March 2000.
Pursuant to the employment agreements with each of Mr. Kroll, Dr. Smith,
Mr. Thiel and Mr. Trauthen, the Company may terminate each such Named Officer at
any time upon at least thirty (30) days written notice. If such termination is
without cause, each such Named Officer is entitled to received a severance
amount equal to his then current base salary payable for the remainder of the
term and all of his stock options shall accelerate and automatically vest by one
additional year, and such options shall otherwise be exercisable in accordance
with their terms. In addition, the agreements provide that in the event of a
change of control or acquisition of the Company during the term of his
employment, all options shall vest in full and all rights of the Company to
repurchase restricted stock shall terminate. In addition each officers
compensation and benefits will be continued for 1 year following termination. A
change of control is triggered by: (i) the acquisition by any person of
beneficial ownership of 50% or more of the voting power of the Company's
outstanding securities pursuant to a transaction which the Board of Directors
does not recommend to the stockholders; (ii) a change in the majority of the
incumbent members of the Board of Directors (unless such change is approved by a
majority of the incumbent members); (iii) a merger of the Company pursuant to
which more than 50% of the voting power is transferred to a third party, in a
transaction approved by the stockholders; and (iv) the sale, transfer or other
disposition of
39
<PAGE> 43
substantially all of the Company's assets in complete liquidation or dissolution
of the Company, in a transaction approved by the stockholders.
OFFICER LOANS
On January 24, 1997, the Company loaned $100,000 to Jeffrey H. Thiel,
the Company's President. 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 January 24, 2002.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors makes
recommendations to the full 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 authority to administer the Radiance 1996 Stock
Option/Stock Issuance Plan with respect to option grants and stock issuances
made thereunder to 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. The Company's compensation policy 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
Compensation 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 Radiance as
measured by his personal performance. Accordingly, each executive officer's
compensation package is comprised primarily 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 Radiance stockholders.
Factors. The principal factors which the Compensation Committee
considered in establishing the components of each executive officer's
compensation package for the 1999 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 1999 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. Although the
Compensation Committee reviewed various compensation surveys, the Board, did not
rely upon any specific survey 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
40
<PAGE> 44
Committee on an annual basis, and adjustments will be made in accordance with
the factors indicated above.
Annual Incentive Compensation. The Radiance Employee Bonus Plan provides
the Board of Directors with discretionary authority to award cash bonuses to
executive officers and employees in accordance with recommendations made by the
Compensation Committee. The Compensation Committee's recommendations are 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 1999, the performance targets for each of the Named Executive 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. The 1996 Stock Option/Stock Issuance
Plan also provides the Board with the ability to align the interests of the
executive officer with those of the stockholders and provide each individual
with a significant incentive to manage Radiance 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 Radiance. The Company has established general guidelines
for 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 Radiance 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. The Compensation Committee set the base salary for
Michael R. Henson, the Company's Chief Executive Officer from January 1999 until
December 1999, and Jeffrey F. O'Donnell, the Company's Chief Executive Officer
from June 1998 until March 1999, at a level which is designed to provide a
salary competitive with salaries paid to chief executive officers of
similarly-sized companies in the industry and commensurate with each such
individual's experience. Mr. Henson's experience in the industry as a chief
executive officer of various companies during a period of over fifteen years,
and Mr. O'Donnell's experience at the Company and his work on several corporate
transactions during the fiscal year, including the Radiance/RMS merger, were
important factors in setting the total compensation for each individual. The
Compensation Committee did not intend to have the base salary component of
compensation affected to any significant degree by Company performance. In
January 1999 the Company issued Mr. Henson an option for 78,717 shares in
exchange for an option he held for shares of the former Radiance Medical
System's. In addition, the Company granted Mr. Henson a total of 65,000 options,
both as recognition of his service to the Company during the fiscal year and as
an incentive to participate in the success and increased value of the Company,
and to align his interest with the long-term interest of the Company's
stockholders.
41
<PAGE> 45
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 1998 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 1999 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
Franklin D. Brown
Maurice Buchbinder, MD
Jeffery F. O'Donnell
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors were Franklin D. Brown and William G. Davis from January 1, 1999
through June, 1999. From June, 1999 through December 31, 1999 the members of the
Compensation Committee were Maurice Buchbinder, M.D; Franklin D. Brown and
Jeffrey F. O'Donnell. Jeffrey F. O'Donnell served as the Company's President and
Chief Executive Officer until March 1999. No other member of the Compensation
Committee was at any time during the 1999 fiscal year or at any other time an
officer or employee of Radiance.
No executive officer of Radiance 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.
STOCK PERFORMANCE GRAPH
The graph depicted below shows Radiance's stock price as an index
assuming $100 invested on June 19, 1996 (the date of Radiance'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 Radiance by Hambrecht & Quist Incorporated.
42
<PAGE> 46
CHASE H&Q INDEX PRODUCTS AND SERVICES:
2000 PROXY PERFORMANCE GRAPH DATA
MONTHLY DATA SERIES
SCALED PRICES: Stock and index prices scaled to 100 at 6/19/96
<TABLE>
<CAPTION>
Radiance Medical Chase H&Q Nasdaq Stock Market
DATES Systems Technology -U.S.
----- ---------------- ---------- -------------------
<S> <C> <C> <C>
6/19/96 100.00 100.00 100.00
Aug-96 125.00 88.22 96.88
Nov-96 102.08 108.45 109.53
Feb-97 89.58 107.30 110.73
May-97 64.58 120.02 118.82
Aug-97 64.58 140.96 135.18
Nov-97 45.83 129.70 136.45
Feb-98 40.10 147.33 151.35
May-98 55.21 144.29 150.73
Aug-98 28.13 119.11 127.87
Nov-98 34.38 165.42 167.27
Feb-99 35.42 194.54 197.04
May-99 22.92 220.50 212.31
Aug-99 43.75 256.77 236.93
Nov-99 45.83 339.21 280.81
</TABLE>
Note: Assumes $100 invested on 6/19/96 in Radiance 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.
43
<PAGE> 47
DEADLINE FOR RECEIPT OF
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any Stockholder desiring to submit a proposal for action at the 2001
Annual Meeting of Stockholders should arrange for such proposal to be delivered
to Radiance at its principal place of business no later than January 9, 2001,
in order to be considered for inclusion in Radiance's proxy statement relating
to that meeting. Matters pertaining to such proposals, including the number and
length thereof, the eligibility of persons entitled to have such proposals
included and other aspects are regulated by the Securities Exchange Act of 1934,
Rules and Regulations of the SEC and other laws and regulations.
Rule 14a-4(c)(1) governs Radiance's use of its discretionary proxy
voting authority with respect to a stockholder proposal which is not addressed
in Radiance's proxy statement. The rule provides that if a proponent of a
proposal fails to notify Radiance at least 45 days prior to the month and day of
mailing of the prior year's proxy statement, then Radiance will be allowed to
use its discretionary voting authority when the proposal is raised at the
meeting, without any discussion of the matter in the proxy statement.
With respect to Radiance's 2000 Annual Meeting of Stockholders, if
Radiance is not provided notice of a stockholder proposal, which the stockholder
has not previously sought to include in Radiance's proxy statement, by March 22,
2000, Radiance will be allowed to use its voting authority as outlined.
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
Stephen R. Kroll
Secretary
May 8, 2000
44
<PAGE> 48
PROXY
RADIANCE MEDICAL SYSTEMS, INC.
ANNUAL MEETING OF STOCKHOLDERS, JUNE 6, 2000
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 June 6, 2000 and the
proxy statement and appoints Michael R. Henson and Stephen R. Kroll, or either
of them, the proxy of the undersigned, with full power of substitution, to vote
all shares of Common Stock of Radiance Medical Systems, Inc. ("Radiance") 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
Radiance to be held at The Hampton Inn at 27102 Towne Centre Drive, Foothill
Ranch, California 92610 on Wednesday, June 6, 2000 at 9:00 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.)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
Please mark your votes as indicated in /X/ this example
1. AMENDMENT TO RADIANCE'S 1996 STOCK OPTION/STOCK ISSUANCE PLAN TO EFFECT AN
INCREASE IN THE POOL OF SHARES AVAILABLE FOR ISSUANCE BY AN ADDITIONAL
600,000 SHARES OF COMMON STOCK.
FOR AGAINST ABSTAIN
/ / / / / /
2. AMENDMENT TO RADIANCE'S EMPLOYEE STOCK PURCHASE PLAN TO EFFECT AN INCREASE
IN THE POOL OF SHARES AVAILABLE FOR ISSUANCE BY AN ADDITIONAL 200,000 SHARES
OF COMMON STOCK.
FOR AGAINST ABSTAIN
/ / / / / /
3. ELECTION OF DIRECTORS INSTRUCTION: To withhold authority to vote for any
individual nominee mark the "EXCEPTIONS" box, and strike a line through the
nominee's name in the list below:
<PAGE> 49
FRANKLIN D. BROWN
EDWARD M. LEONARD
WITHHOLD
FOR AUTHORITY
all nominees to vote for
listed below all nominees EXCEPTIONS
/ / / / / /
4. RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS FOR
FISCAL YEAR 2000
FOR AGAINST ABSTAIN
/ / / / / /
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 1, 2 and 4 and FOR each of the nominees listed under Proposal No. 3 if
no specification is made. THIS PROXY WILL ALSO BE VOTED AT THE DISCRETION OF THE
PROXY HOLDER ON SUCH MATTERS OTHER THAN THE THREE SPECIFIC ITEMS AS MAY COME
BEFORE THE MEETING.
PLEASE RETURN YOUR EXECUTED PROXY TO RADIANCE'S TRANSFER AGENT IN THE ENCLOSED
ENVELOPE, OR, IF NECESSARY, DELIVER IT TO RADIANCE, ATTENTION: SECRETARY.
Please print the name(s) appearing on each share certificate(s) over which you
have voting authority:
--------------------------------------------------
(Print name(s) as it (they) appear on certificate)
Dated:_____________________ 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.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
2
<PAGE> 50
ANNEX I
RADIANCE MEDICAL SYSTEMS, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
(AS AMENDED AND RESTATED AS OF APRIL 8, 1997, MARCH 12, 1998, NOVEMBER 3, 1998
AND MARCH 31, 2000)
ARTICLE I
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1996 Stock Option/Stock Issuance Plan is intended to
promote the interests of Radiance Medical Systems, 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.
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.
<PAGE> 51
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:
(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.
2
<PAGE> 52
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 ore 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 over the term of the Plan shall not exceed 3,450,000
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 600,000 shares approved by the Board subject
to stockholder approval at the 2000 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.
3
<PAGE> 53
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.
ARTICLE II
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.
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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.
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.
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
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(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.
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.
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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 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
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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 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.
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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 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.
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ARTICLE III
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,
(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
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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, 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).
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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.
ARTICLE IV
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
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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.
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.
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
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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.
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.
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ARTICLE V
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
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.
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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. The April 8, 1997 amendments to the Plan were
subsequently approved by the stockholders at the 1997 Annual Meeting. On March
12, 1998, the Board amended the Plan to increase the number of shares available
for issuance by an additional 200,000 shares, and the stockholders approved the
amendment at the 1998 Annual Meeting on May 19, 1998. On November 3, 1998, the
Board amended the Plan to increase the number of shares available for issuance
by an additional 750,000 shares, and the stockholders approved the amendment at
the 1999 Special Meeting on January 14, 1999. On March 31, 2000, the Board
amended the Plan to increase the number of shares available for issuance by an
additional 600,000 shares. 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 2000 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.
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
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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.
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.
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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.
ARTICLE VI
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
(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.
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G. CORPORATION shall mean Radiance Medical Systems, Inc., a
Delaware corporation, and any corporate successor to all or substantially all of
the assets or voting stock of Radiance Medical Systems, 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
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.
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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.
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
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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 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.
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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.
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.
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<PAGE> 72
ANNEX II
RADIANCE MEDICAL SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests
of Radiance Medical Systems, Inc. by providing eligible employees with the
opportunity to acquire a proprietary interest in the Corporation through
participation in a payroll-deduction based employee stock purchase plan designed
to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such terms
in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares of Common Stock
purchased on the open market. The maximum number of shares of Common Stock which
may be issued over the term of the Plan shall not exceed Four Hundred Thousand
(400,000) shares.
B. 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 class of securities issuable under the Plan,
and (ii) the number and class of securities and the price per share in effect
under each outstanding purchase right in order to prevent the dilution or
enlargement of benefits thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the Plan
through a series of successive offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
B. Each offering period shall be of such duration (not to exceed
twenty-four (24) months) as determined by the Plan Administrator prior to the
start date. The initial offering period shall commence at the Effective Time and
terminate on the last business day in July 1998. The next offering period shall
commence on the first business day in August 2000, and subsequent offering
periods shall commence as designated by the Plan Administrator.
C. Each offering period shall be comprised of a series of one or more
successive Purchase Intervals. Purchase Intervals shall run from the first
business day in February each year to the last business day in July of the same
year and from the first business day in August each year to
<PAGE> 73
the last business day in January of the following year. However, the first
Purchase Interval in effect under the initial offering period shall commence at
the Effective Time and terminate on the last business day in January 1997.
D. Should the Fair Market Value per share of Common Stock on any
Purchase Date within an offering period be less than the Fair Market Value per
share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new offering
period shall have a duration of twenty four (24) months, unless a shorter
duration is established by the Plan Administrator within five (5) business days
following the start date of that offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of any
offering period under the Plan may enter that offering period on such start date
or on any subsequent Semi-Annual Entry Date within that offering period,
provided he or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee after the
start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.
C. The date an individual enters an offering period shall be designated
his or her Entry Date for purposes of that offering period.
D. To participate in the Plan for a particular offering period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes of
acquiring shares of Common Stock during an offering period may be any multiple
of one percent (1%) of the Base Salary paid to the Participant during each
Purchase Interval within that offering period, up to a maximum of ten percent
(10%). The deduction rate so authorized shall continue in effect throughout the
offering period, except to the extent such rate is changed in accordance with
the following guidelines:
1. The Participant may, at any time during the offering
period, reduce his or her rate of payroll deduction to become effective as soon
as possible after filing the appropriate form with the Plan Administrator. The
Participant may not, however, effect more than one (1) such reduction per
Purchase Interval.
2. The Participant may, prior to the commencement of any new
Purchase Interval within the offering period, increase the rate of his or her
payroll deduction by filing the appropriate form with the Plan Administrator.
The new rate (which may not exceed the ten percent (10%) maximum) shall become
effective on the start date of the first Purchase Interval following the filing
of such form.
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B. Payroll deductions shall begin on the first pay day following the
Participant's Entry Date into the offering period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that offering period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance from time to time outstanding in
such account. The amounts collected from the Participant shall not be held in
any segregated account or trust fund and may be commingled with the general
assets of the Corporation and used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the termination of
the Participant's purchase right in accordance with the provisions of the Plan.
D. The Participant's acquisition of Common Stock under the Plan on any
Purchase Date shall neither limit nor require the Participant's acquisition of
Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a separate
purchase right for each offering period in which he or she participates. The
purchase right shall be granted on the Participant's Entry Date into the
offering period and shall provide the Participant with the right to purchase
shares of Common Stock, in a series of successive installments over the
remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (within the meaning of Code Section 424(d)) or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Corporation
or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant (other than Participants whose payroll deductions
have previously been refunded pursuant to the Termination of Purchase Right
provisions below) on each such Purchase Date. The purchase shall be effected by
applying the Participant's payroll deductions for the Purchase Interval ending
on such Purchase Date to the purchase of whole shares of Common Stock at the
purchase price in effect for the Participant for that Purchase Date.
C. PURCHASE PRICE. The purchase price per share at which Common Stock
will be purchased on the Participant's behalf on each Purchase Date within the
offering period shall not be less than eighty-five percent (85%) of the lower of
(i) the Fair Market Value per share of Common Stock on the Participant's Entry
Date into that offering period or (ii) the Fair Market Value per share of Common
Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common Stock
purchasable by a Participant on each Purchase Date during the offering period
shall be the number of whole shares obtained by dividing the amount collected
from the Participant through payroll
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deductions during the Purchase Interval ending with that Purchase Date by the
purchase price in effect for the Participant for that Purchase Date.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied to the
purchase of shares of Common Stock on any Purchase Date because they are not
sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable by the Participant on the
Purchase Date shall be promptly refunded.
F. TERMINATION OF PURCHASE RIGHT. The following provisions shall govern
the termination of outstanding purchase rights:
1. A Participant may, at any time prior to the next scheduled
Purchase Date in the offering period, terminate his or her outstanding purchase
right by filing the appropriate form with the Plan Administrator (or its
designate), and no further payroll deductions shall be collected from the
Participant with respect to the terminated purchase right. Any payroll
deductions collected during the Purchase Interval in which such termination
occurs shall, at the Participant's election, be immediately refunded or held for
the purchase of shares on the next Purchase Date. If no such election is made at
the time such purchase right is terminated, then the payroll deductions
collected with respect to the terminated right shall be refunded as soon as
possible.
2. The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the offering period
for which the terminated purchase right was granted. In order to resume
participation in any subsequent offering period, such individual must re-enroll
in the Plan (by making a timely filing of the prescribed enrollment forms) on or
before his or her scheduled Entry Date into that offering period.
3. Should the Participant cease to remain an Eligible Employee
for any reason (including death, disability or change in status) while his or
her purchase right remains outstanding, then that purchase right shall
immediately terminate, and all of the Participant's payroll deductions for the
Purchase Interval in which the purchase right so terminates shall be immediately
refunded. However, should the Participant cease to remain in active service by
reason of an approved unpaid leave of absence, then the Participant shall have
the right, exercisable up until the last business day of the Purchase Interval
in which such leave commences, to (a) withdraw all the payroll deductions
collected to date on his or her behalf for that Purchase Interval or (b) have
such funds held for the purchase of shares on his or her behalf on the next
scheduled Purchase Date. In no event, however, shall any further payroll
deductions be collected on the Participant's behalf during such leave. Upon the
Participant's return to active service, his or her payroll deductions under the
Plan shall automatically resume at the rate in effect at the time the leave
began, unless the Participant withdraws from the Plan prior to his or her
return.
G. CORPORATE TRANSACTION. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the Purchase Interval in which such Corporate Transaction occurs to the
purchase of whole shares of Common Stock at a purchase price per share not less
than eighty-five percent (85%) of the lower of (i) the Fair Market Value per
share of Common Stock on the Participant's Entry Date into the offering period
in which such Corporate Transaction occurs or
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(ii) the Fair Market Value per share of Common Stock immediately prior to the
effective date of such Corporate Transaction.
The Corporation shall use its best efforts to provide at least ten (10)
days prior written notice of the occurrence of any Corporate Transaction, and
Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Corporate Transaction.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of shares of
Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable only by the
Participant and shall not be assignable or transferable by the Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder rights
with respect to the shares subject to his or her outstanding purchase right
until the shares are purchased on the Participant's behalf in accordance with
the provisions of the Plan and the Participant has become a holder of record of
the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire Common
Stock pursuant to any purchase right outstanding under this Plan if and to the
extent such accrual, when aggregated with (i) rights to purchase Common Stock
accrued under any other purchase right granted under this Plan and (ii) similar
rights accrued under other employee stock purchase plans (within the meaning of
Code Section 423) of the Corporation or any Corporate Affiliate, would otherwise
permit such Participant to purchase more than Twenty-Five Thousand Dollars
($25,000) worth of stock of the Corporation or any Corporate Affiliate
(determined on the basis of the Fair Market Value per share on the date or dates
such rights are granted) for each calendar year such rights are at any time
outstanding.
B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:
1. The right to acquire Common Stock under each outstanding
purchase right shall accrue in a series of installments on each successive
Purchase Date during the offering period on which such right remains
outstanding.
2. No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already accrued in
the same calendar year the right to acquire Common Stock under one (1) or more
other purchase rights at a rate equal to Twenty-Five Thousand Dollars ($25,000)
worth of Common Stock (determined on the basis of the Fair Market Value per
share on the date or dates of grant) for each calendar year such rights were at
any time outstanding.
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C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Interval, then the payroll
deductions which the Participant made during that Purchase Interval with respect
to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on April 30, 1996 and shall become
effective at the Effective Time, provided no purchase rights granted under the
Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the stockholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements
established by law or regulation. In the event such stockholder approval is not
obtained, or such compliance is not effected, within twelve (12) months after
the date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect, and all sums collected from Participants during
the initial offering period hereunder shall be refunded.
B. Unless sooner terminated by the Board, the Plan shall terminate upon
the earliest of (i) the last business day in July 2006, (ii) the date on which
all shares available for issuance under the Plan shall have been sold pursuant
to purchase rights exercised under the Plan or (iii) the date on which all
purchase rights are exercised in connection with a Corporate Transaction. No
further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following such termination.
X. AMENDMENT OF THE PLAN
The Board may alter, amend, suspend or discontinue the Plan at any time
to become effective immediately following the close of any Purchase Interval.
However, the Board may not, without the approval of the Corporation's
stockholders, (i) materially increase the number of shares of Common Stock
issuable under the Plan or the maximum number of shares purchasable per
Participant on any one Purchase Date, except for permissible adjustments in the
event of certain changes in the Corporation's capitalization, (ii) alter the
purchase price formula so as to reduce the purchase price payable for the shares
of Common Stock purchasable under the Plan or (iii) materially increase the
benefits accruing to Participants under the Plan or materially modify the
requirements for eligibility to participate in the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation.
B. Nothing in the Plan shall confer upon the Participant any right to
continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere
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with or otherwise restrict in any way the rights of the Corporation (or any
Corporate Affiliate employing such person) or of the Participant, which rights
are hereby expressly reserved by each, to terminate such person's employment at
any time for any reason, with or without cause.
C. The provisions of the Plan shall be governed by the laws of the
State of California without resort to that State's conflict-of-laws rules.
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SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
Radiance Medical Systems, Inc.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. BASE SALARY shall mean the (i) regular base salary paid to a
Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
any pre-tax contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. The
following items of compensation shall not be included in Base Salary: (i) all
overtime payments, bonuses, commissions (other than those functioning as base
salary equivalents), profit-sharing distributions and other incentive-type
payments and (ii) any and all contributions (other than Code Section 401(k) or
Code Section 125 contributions) made on the Participant's behalf by the
Corporation or any Corporate Affiliate under any employee benefit or welfare
plan now or hereafter established.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE AFFILIATE shall mean any parent or subsidiary corporation
of the Corporation (as determined in accordance with Code Section 424), whether
now existing or subsequently established.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
1. 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
2. the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation or
dissolution of the Corporation.
G. CORPORATION shall mean Radiance Medical Systems, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Radiance Medical Systems, Inc. which shall by
appropriate action adopt the Plan.
H. EFFECTIVE TIME shall mean the time at which the Underwriting
Agreement is executed and finally priced. Any Corporate Affiliate which becomes
a Participating Corporation after such Effective Time shall designate a
subsequent Effective Time with respect to its employee Participants.
I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
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J. ENTRY DATE shall mean the date an Eligible Employee first commences
participation in the offering period in effect under the Plan. The earliest
Entry Date under the Plan shall be the Effective Time.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
1. 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.
2. 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 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.
3. For purposes of the initial offering period which begins at
the Effective Time, 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.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
M. PARTICIPANT shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.
N. PARTICIPATING CORPORATION shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan as of the Effective Time are listed in
attached Schedule A.
O. PLAN shall mean the Corporation's Employee Stock Purchase Plan, as
set forth in this document.
P. PLAN ADMINISTRATOR shall mean the committee of two (2) or more Board
members appointed by the Board to administer the Plan.
Q. PURCHASE DATE shall mean the last business day of each Purchase
Interval. The initial Purchase Date shall be January 30, 1997.
R. PURCHASE INTERVAL shall mean each successive six (6) month period
within the offering period at the end of which there shall be purchased shares
of Common Stock on behalf of each Participant.
S. SEMI-ANNUAL ENTRY DATE shall mean the first business day in February
and August each year on which an Eligible Employee may first enter an offering
period.
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T. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
U. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
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