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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-12
BIONX IMPLANTS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Consent 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)(4) 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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(3) Filing Party:
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(4) Date Filed:
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BIONX IMPLANTS, INC.
June 9, 2000
Dear Stockholder:
On behalf of the Board of Directors and management, I am pleased to
invite you to the 2000 Annual Meeting of Stockholders of Bionx Implants, Inc.
The meeting will be held on Wednesday, July 12, 2000 at 10:00 a.m. at our
corporate headquarters, 1777 Sentry Parkway West, Blue Bell, Pennsylvania. A
notice of meeting, proxy statement and proxy card are enclosed for your review.
I urge you to read the enclosed materials carefully and to complete,
sign and mail promptly the proxy card contained with this letter to assure that
your vote will be counted.
The officers, directors and staff of Bionx Implants sincerely
appreciate your continuing support.
Very truly yours,
Gerard S. Carlozzi
President and Chief Executive Officer
<PAGE> 3
BIONX IMPLANTS, INC.
Notice of Annual Meeting
The Annual Meeting of Stockholders of Bionx Implants, Inc. (the
"Company" or "Bionx") will be held at the Company's corporate headquarters, 1777
Sentry Parkway West, Blue Bell, Pennsylvania on Wednesday, July 12, 2000 at
10:00 a.m. At the meeting you will be asked to consider and act upon the
following proposals:
1. Election of two directors to serve for a term of three years.
See "Proposal One -- Election of Directors of the Company" in
the proxy statement.
2. To approve an amendment to the Company's Stock Option/Stock
Issuance Plan to increase the number of shares that may be
issued under such Plan. See "Proposal Two -- Amendment to
Increase The Authorized Shares under the Stock Option/Stock
Issuance Plan" in the proxy statement.
3. To authorize the use of payroll deductions and associated
loans to enable participants in the Company's Investment Plan
to purchase shares under such Plan. See "Proposal Three -
Authorization to Use Payroll Deductions and Associated Loans
Under the Investment Plan" in the proxy statement.
4. To conduct other business if properly raised at the meeting or
any adjournment thereof.
Only stockholders of record at the close of business on June 5,
2000 are entitled to notice of, and to vote at, the meeting.
By Order of the Board of Directors
Drew Karazin
Secretary
Blue Bell, Pennsylvania
June 9, 2000
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE,
DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY CARD IN THE RETURN ENVELOPE
PROVIDED.
<PAGE> 4
BIONX IMPLANTS, INC.
1777 Sentry Parkway West
Gwynedd Hall, Suite 400
Blue Bell, Pennsylvania 19422
PROXY STATEMENT
The Board of Directors of Bionx Implants, Inc. (the "Company") is
soliciting proxies for use at the Annual Meeting of Stockholders to be held at
the Company's corporate headquarters, 1777 Sentry Parkway West, Blue Bell,
Pennsylvania on July 12, 2000 at 10:00 a.m., and for use at any adjournments
thereof (the "Annual Meeting"). This Proxy Statement and the enclosed form of
proxy are first being sent to stockholders on or about June 14, 2000.
RECORD DATE AND QUORUM. Only stockholders of record at the close of
business on June 5, 2000 (the "Record Date") will be entitled to vote at the
Annual Meeting. On that date, there were outstanding 10,780,242 shares of the
Company's common stock, par value $.0019 per share ("Common Stock"). Each share
of Common Stock is entitled to one vote on each matter to be voted on at the
Annual Meeting. The presence at the Annual Meeting, in person or by proxy, of
holders of a majority of the issued and outstanding shares of Common Stock, as
of the Record Date, will constitute a quorum.
VOTING PROCEDURES. Directors will be elected by a plurality of the
votes cast. Approval of the proposals to amend the Company's Stock Option/Stock
Issuance Plan and to authorize the use of payroll deductions and associated
loans to enable participants in the Investment Plan to purchase shares of stock,
and approval of any other matter to be submitted to the stockholders, will
require the affirmative vote of a majority of the votes cast at the Annual
Meeting. Properly executed proxies will be voted as directed in the proxy;
however, if no direction is given, a properly executed proxy will be voted FOR
the election of the director nominees, FOR the proposed amendment to the
Company's Stock Option/Stock Issuance Plan and FOR the authorization of the use
of payroll deductions and associated loans to purchase shares of stock under the
Company's Investment Plan. Proxies marked "abstention" on a matter will not be
voted on that matter but will be considered to be represented at the Annual
Meeting. Shares registered in the names of brokers or other "street name"
nominees for which proxies are voted on some but not all matters will be
considered to be represented at the Annual Meeting, but will be considered to be
voted only as to those matters actually voted. If a quorum is present,
abstentions and broker non-votes will not have any effect on the matters to be
presented at the Annual Meeting.
PROXIES AND REVOCATION. A proxy card is enclosed. You may revoke your
proxy at any time before it is exercised. In order to revoke a proxy, you must
either give written notice of revocation to the Secretary of the Company or to
the Secretary of the Annual Meeting, or vote your shares subject to the proxy by
a later dated proxy or by written ballot at the Annual Meeting. Your presence at
the Annual Meeting will not by itself revoke your proxy.
PROPOSAL ONE - ELECTION OF DIRECTORS OF THE COMPANY
The Company's Board of Directors is divided into three classes with
each class serving staggered terms of three years, so that only one class is
elected in any one year. Presently, there are six directors on the Board. Two
directors are to be elected at the Annual Meeting to serve until the 2003 Annual
Meeting, and until their respective successors are elected and have qualified.
Each of the nominees for director is presently a director of the
Company. Each has consented to being named as a nominee in this Proxy Statement
and has agreed to serve as a director if elected at the Annual Meeting. It is
the intention of the persons named as proxies to vote the shares represented by
the proxy for the election of each of the nominees listed below. If either
nominee shall become
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unable or unwilling to serve as a director, the persons named as proxies will
cast their votes for the remaining nominee and have discretion to vote for
another person designated by the Board of Directors. The Board of Directors has
no reason to believe that either of the nominees will be unavailable for
election.
The following information contains the current and past five years'
business experience, certain other directorships and age of each nominee for
director and of each director whose term extends beyond 2000 and thus is
continuing in office. The following information is given as of May 1, 2000, and
except as otherwise noted, the directors have held the occupational positions
listed for at least the past five years:
NOMINEES FOR ELECTION FOR THREE YEAR TERMS
- Anthony J. Dimun: Executive Vice President and Chief Financial
Officer of Vital Signs, Inc. ("Vital Signs") (manufacturer of
disposable anesthesia and respiratory devices). Director of
EchoCath, Inc. and Vital Signs. Director of the Company since 1995.
Age: 56.
- David H. MacCallum: Managing Director - Global Head of Healthcare,
Salomon Smith Barney (investment banking firm) (June 1999 to the
present); Executive Vice President, Head of Healthcare, ING Baring
Furman Selz, LLC (investment banking firm) (April 1998 to June
1999); Managing Director for Life Sciences Investment Banking, UBS
Securities LLC (investment banking firm) (1994 to March 1998);
Co-Head, Investment Banking, Hambrecht & Quist LLC (1983-1994)
(investment banking firm). Director of Minimed Inc. Director of the
Company since 1995. Age: 62.
CONTINUING DIRECTOR SERVING UNTIL 2001
- Gerard S. Carlozzi: President and Chief Executive Officer of the
Company (September 1999 to the present); President and Chief
Operating Officer of the Company (May 1999 to September 1999); Vice
President of the Company (November 1998 to May 1999); Director of
Biotechnology Development and Director of Marketing and Product
Development for Maxillofacial Surgical Products of Synthes USA (a
leader in Orthopedic and Maxillofacial Trauma products) (1995 to
1998). From 1986 to 1995, Mr. Carlozzi held various positions with
Acufex Microsurgical, a pioneer and leader in Arthroscopic
orthopedic surgery, which was acquired by Smith & Nephew. At Acufex
Microsurgical, as the General Manager for the Spinal Products Group
and the Global Director of Research and Development, he held
positions responsible for Sales and Marketing, Research &
Development, Manufacturing, Quality Assurance, Clinical and
Regulatory Affairs and other various general management and
business development functions. Director of the Company since
September 1999. Age: 43.
- Terry D. Wall: Chairman of the Board of the Company (1995 to the
present); President and Chief Executive Officer of Vital Signs.
Director of Vital Signs and Exogen, Inc. Director of the Company
since 1995. Age: 58.
CONTINUING DIRECTORS SERVING UNTIL 2002
- David J. Bershad: Senior Partner, Milberg Weiss Bershad Hynes &
Lerach LLP (law firm). Director of Vital Signs. Director of the
Company since 1995. Age: 60.
- Pertti Tormala: Executive Vice President, Research and Development,
of the Company (1995 to the present); Chief Executive Officer and
co-founder of the Company's foreign subsidiaries (prior years).
Director of the Company since 1995. Age: 54.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors to file initial reports of beneficial
ownership and reports of changes of beneficial ownership of the Company's Common
Stock with the SEC. Executive officers and directors are required to furnish the
Company with copies of all Section 16(a) reports that they file. Based upon a
review of these filings and other documentation, the Company notes that Anthony
J. Dimun (a director of the Company) failed to timely report purchases of an
aggregate of 11,000 shares of Common Stock that occurred during August 1999 and
purchases of an aggregate of 4,900 shares of Common Stock that occurred during
September 1999. The Company also notes that Pertti Tormala (an executive officer
and director of the Company) failed to timely report a private sale of 2,779
shares of Common Stock that occurred during October 1998, and Pertti Viitanen
(an executive officer of the Company) failed to timely report a purchase of 926
shares of Common Stock from Mr. Tormala that occurred during October 1998. (The
shares sold by Mr. Tormala and purchased by Mr. Viitanen were owned by Bionix
B.V., a Dutch company, in which Mr. Tormala and Mr. Viitanen have an interest.
See "Security Ownership of Management and Others.") These late filings were
inadvertent, and the filings were made promptly after the failures to file were
noted.
MEETINGS OF THE BOARD OF DIRECTORS; COMMITTEES OF THE BOARD
During 1999, the Board of Directors held five meetings. During 1999, no
director attended less than 75% of the aggregate number of meetings of the Board
and committees of the Board of which he was a member. There are no relationships
by blood, marriage, or adoption, between any nominee for director, continuing
director or executive officer of the Company and any other nominee for director,
continuing director or executive officer of the Company.
Audit Committee - During 1999, the Audit Committee of the Board held
four meetings. The functions of the Audit Committee are to review, act on and
report to the Board with respect to various auditing and accounting matters.
These matters include the selection of the Company's independent auditors, the
scope of the annual audits, the fees to be paid to the auditors, the performance
of the Company's auditors and the accounting practices of the Company. The Audit
Committee is composed of two directors who are not officers or employees of the
Company or its subsidiaries. The current members of the Audit Committee are Mr.
Dimun, Chairman, Mr. MacCallum and Mr. Carlozzi.
Compensation Committee - During 1999, the Compensation Committee of the
Board held two meetings. The functions of the Compensation Committee are to
determine the salaries and incentive compensation of the employee-officers of
the Company and to provide recommendations for the salaries and incentive
compensation of the other employees and consultants of the Company. The
Compensation Committee also administers the Company's Stock Option/ Stock
Issuance Plan. The current members of the Compensation Committee are Mr. Bershad
and Mr. Wall, Chairman.
The Board has no nominating committee; the functions of a nominating
committee are performed by the entire Board. No procedures have been developed
with respect to obtaining nominations from stockholders.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth the beneficial ownership of shares of
Common Stock as of April 1, 2000 by (1) the only stockholders of the Company
known by management to beneficially own more than 5% of the Company's Common
Stock, (2) the directors of the Company, (3) the executive officers named in the
Summary Compensation Table below and (4) all directors and current executive
officers of the Company as a group:
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<TABLE>
<CAPTION>
Shares of
Common Stock
Beneficially
Beneficial Owner(1) Owned (1)(2) Percentage Beneficially Owned
<S> <C> <C>
Bionix B.V. (3) 2,684,211 24.9
Terry D. Wall (4) 3,208,309 29.8
The Kaufman Fund, Inc. (5) 862,750 8.0
Dimensional Fund Advisors Inc. (6) 718,500 6.7
Gerard S. Carlozzi(7) 6,137 *
David W. Anderson (8) 138,156 1.3
David J. Bershad (9) 502,057 4.7
Anthony J. Dimun (10) 249,518 2.3
David H. MacCallum (11) 162,677 1.5
Pertti Tormala (12) 1,122,037 10.5
James Hogan(13) 8,000 *
Gregory S. Jones (14) 6,000 *
Michael F. Matz -- *
All directors and current executive officers
as a group (9 persons)(15) 5,410,292 50.1
</TABLE>
-------------------------
* Represents less than 1% of the outstanding Common Stock.
(1) Except as otherwise indicated in the footnotes to this table and
pursuant to applicable community property laws, persons and entities
named in the table have sole voting and investment power with respect
to all shares of Common Stock and the address of the 5% stockholders is
c/o the Company, 1777 Sentry Parkway West, Gwynedd Hall, Suite 400,
Blue Bell, Pennsylvania 19422.
(2) Applicable percentage ownership is based on 10,780,242 shares of Common
Stock outstanding as of April 1, 2000 together with applicable stock
options for such stockholder. Beneficial ownership is determined in
accordance with the rules of the SEC, based on factors including voting
and investment power with respect to shares. Shares of Common Stock
subject to stock options currently exercisable, or exercisable within
60 days after April 1, 2000, are deemed outstanding for computing the
percentage ownership of the person holding such stock options but are
not deemed outstanding for computing the percentage ownership of any
other person. Each owner of an equity interest in Bionix B.V. (the
"Dutch Company") is deemed to beneficially own a percentage of the
shares of the Common Stock owned by the Dutch Company equal to such
owner's proportionate equity interest in the Dutch Company.
(3) Nearly all of the capital stock of the Dutch Company is owned by the
former stockholders of the Company's operating subsidiaries. The
current Board of Directors of the Dutch Company consists of Gerard S.
Carlozzi, David J. Bershad, Anthony J. Dimun, David H. MacCallum,
Pertti Tormala, Pertti Viitanen (all of whom are directors or executive
officers of the Company) and two other individuals. David W. Anderson,
a former director and executive officer of the Company, is a former
director of the Dutch Company. As of April 1, 2000, Messrs. Anderson,
Bershad, Dimun, MacCallum and Wall beneficially owned capital stock of
the Dutch Company representing, in the aggregate, approximately 23.6%
of the equity of the Dutch Company's capital stock. As of April 1,
2000, Messrs. Tormala and Viitanen beneficially owned capital stock of
the Dutch Company representing, in the aggregate, approximately 47.2%
of the equity of the Dutch Company's capital stock. The remaining
equity of the Dutch Company's capital stock is allocated among several
other Finnish investors.
(4) Mr. Wall's shares include 4,500 shares of Common Stock issuable upon
the exercise of vested stock options and 484,421 shares of Common Stock
owned by the Dutch Company, representing
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Mr. Wall's proportionate equity interest in the shares of Common Stock
owned by the Dutch Company. Mr. Wall has the right to cause the Dutch
Company to transfer such 484,421 shares to him pursuant to an agreement
with the Dutch Company. All of Mr. Wall's shares of Common Stock and of
the Dutch Company's capital stock are held in an investment partnership
which he controls.
(5) The information set forth herein regarding The Kaufman Fund's
beneficial ownership is based on a report on Schedule 13G filed by The
Kaufman Fund with the SEC on May 18, 2000. The address of The Kaufman
Fund is 140 E. 45th Street, 43rd Floor, Suite 2624, New York, New York
10017.
(6) The information set forth herein regarding Dimensional Fund Advisors
Inc.'s beneficial ownership is based upon a report on Schedule 13G
filed by it with the SEC on February 3, 2000. The address of
Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue, 11th Floor, Santa
Monica, California 90401.
(7) Includes 4,000 shares issuable to Mr. Carlozzi upon the exercise of
vested stock options and 2,137 shares purchased by Mr. Carlozzi
pursuant to the terms of the Company's Investment Plan.
(8) Mr. Anderson's shares include 34,842 shares of Common Stock owned by
the Dutch Company, representing Mr. Anderson's proportionate equity
interest in the shares of Common Stock owned by the Dutch Company. Mr.
Anderson has the right to cause the Dutch Company to transfer such
34,842 shares to him pursuant to an agreement with the Dutch Company.
Also includes 61,947 shares held by a trust for the benefit of Mr.
Anderson's wife.
(9) Mr. Bershad's shares include 4,500 shares of Common Stock issuable upon
the exercise of vested stock options and 50,736 shares of Common Stock
owned by the Dutch Company, representing Mr. Bershad's proportionate
equity interest in the shares of Common Stock owned by the Dutch
Company. Mr. Bershad has the right to cause the Dutch Company to
transfer such 50,736 shares to him pursuant to an agreement with the
Dutch Company. A total of 331,686 of Mr. Bershad's shares of Common
Stock and all of Mr. Bershad's shares of the Dutch Company's capital
stock are held in an investment partnership which he controls.
(10) Mr. Dimun's shares include 4,500 shares of Common Stock issuable upon
the exercise of vested stock options and 34,679 shares of Common Stock
owned by the Dutch Company, representing Mr. Dimun's proportionate
equity interest in the shares of Common Stock owned by the Dutch
Company. Mr. Dimun has the right to cause the Dutch Company to transfer
such 34,679 shares to him pursuant to an agreement with the Dutch
Company. All of Mr. Dimun's shares of Common Stock and the Dutch
Company's capital stock are held in entities which he controls.
(11) Mr. MacCallum's shares include 4,500 shares of Common Stock issuable
upon the exercise of vested stock options and 26,900 shares of Common
Stock owned by the Dutch Company, representing Mr. MacCallum's
proportionate equity interest in the shares of Common Stock owned by
the Dutch Company. Mr. MacCallum has the right to cause the Dutch
Company to transfer such 26,900 shares to him pursuant to an agreement
with the Dutch Company.
(12) Represents the proportionate equity interest of Professor Tormala in
the shares of Common Stock owned by the Dutch Company. Professor
Tormala has the right to cause the Dutch Company to transfer such
1,122,037 shares to him pursuant to an agreement with the Dutch
Company. That agreement enables Professor Tormala to direct the voting
by the Dutch Company of a specified number of shares of the Company's
Common Stock held by the Dutch Company. As of April 1, 2000, that
specified number equals 2,049,854, representing Professor Tormala's
proportionate equity interest in the 2,684,211 shares of Common Stock
owned by the Dutch Company (1,122,037 shares) and the proportionate
equity interest of all other Finnish investors in such 2,684,211 shares
(927,817 shares). The table above excludes from Professor
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Tormala's beneficial ownership the 927,817 shares attributable to the
equity interests of such other Finnish investors.
(13) Represents shares issuable to Mr. Hogan upon the exercise of vested
stock options.
(14) Mr. Jones' shares include 4,000 shares of Common Stock issuable upon
the exercise of vested stock options.
(15) Includes 30,000 shares of Common Stock issuable upon the exercise of
vested stock options, 8,015 shares of Common Stock purchased pursuant
to the terms of the Company's Investment Plan and 1,864,552 shares of
Common Stock owned by the Dutch Company, representing the directors'
and current executive officers' proportionate equity interest in the
2,684,211 shares of Common Stock owned by the Dutch Company. As of
April 1, 2000, the directors and current executive officers as a group
beneficially owned approximately 69.5% of the equity associated with
the capital stock of the Dutch Company. The directors and current
executive officers of the Company as a group have a right to vote
substantially all of the 2,684,211 shares of Common Stock owned by the
Dutch Company. If all such 2,684,211 shares were deemed to be
beneficially owned by the Company's directors and current executive
officers, such persons as a group would be deemed to be the beneficial
owners of 6,221,936 shares of Common Stock, representing 57.7% of the
shares outstanding on April 1, 2000.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table and accompanying footnotes set forth certain
summary information relating to the three years ended December 31, 1999, with
respect to each of the two people who served as the Company's Chief Executive
Officer during 1999, the Company's two other most highly compensated executive
officers during 1999 who were serving as executive officers at December 31, 1999
and two additional persons who served as executive officers during 1999 but were
not serving as such on December 31, 1999 (collectively, the "Named Executive
Officers"):
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------
Annual Securities All Other
Name and Principal Compensation Other Annual Underlying Compensation
Position Year Salary Bonus(1) Compensation(2) Options/SARs(#) ($)(3)
-------- ---- ------ -------- --------------- --------------- ------
<S> <C> <C> <C> <C> <C> <C>
Gerard S. Carlozzi(4) 1999 $145,000 -- $ 6,000 100,000 $ 1,335
President and Chief 1998 21,443 -- -- -- --
Executive Officer
David W. Anderson(4) 1999 169,569(5) -- 4,000 -- 1,725
President and Chief 1998 180,000 -- 6,000 -- 20,000
Executive Officer 1997 160,000 50,000 6,000 -- 17,316
Pertti Tormala 1999 122,700 -- 8,132 40,000 --
Executive Vice 1998 119,814 -- 8,615 -- --
President, Research 1997 118,070 22,000 9,423 -- 68,650(6)
and Development
James Hogan(7) 1999 125,000 20,000 2,500 -- 21,903
President, Stenting 1998 30,640 -- -- -- --
Division
Gregory S. Jones(8) 1999 130,186 -- 6,000 40,000 19,867
</TABLE>
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<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Vice President, 1998 100,582 -- -- -- 688
Marketing
Michael F. Matz(9) 1999 132,000(10) 15,000 5,000 -- 1,584
Vice-President - Sales 1998 120,000 20,000 6,000 -- 13,580
Craniofacial Division 1997 40,000 6,666 4,000 -- --
</TABLE>
-------------------
(1) Bonus amounts for 1999 reflect amounts paid in 1999 and exclude amounts
paid in 2000 based on 1999 performance.
(2) Represents car allowances.
(3) For 1999, for Messrs. Carlozzi, Anderson, Hogan, Jones and Matz, represents
employer contributions to the Company's 401(k) plan (Mr. Carlozzi: $1,335;
Mr. Anderson: $1,725; Mr. Hogan: $1,375; Mr. Jones: $1,316; and Mr. Matz:
$1,584). Also represents reimbursement for moving expenses of $20,528 for
Mr. Hogan and $18,551 for Mr. Jones.
(4) Mr. Carlozzi joined the Company in November 1998 and became President and
Chief Executive Officer of the Company in September 1999. Mr. Anderson
stepped down as President and Chief Executive Officer in April 1999.
(5) Includes $103,569 paid as severance.
(6) Represents royalty payments to Professor Tormala under a superseded
employment agreement with respect to 1996 product sales.
(7) Mr. Hogan joined the Company in November 1998.
(8) Mr. Jones joined the Company in June 1998.
(9) Mr. Matz ceased serving as an employee of the Company in October 1999.
(10) Includes $27,500 paid as severance.
EMPLOYMENT AGREEMENTS
The Company previously entered into an employment agreement with David
W. Anderson, its former President and Chief Executive Officer until April 1999.
The original term of the agreement expired on December 31, 1998, but was
automatically renewed for one year. Pursuant to the agreement, Mr. Anderson
received minimum annual compensation of $160,000 and was entitled to receive a
performance based bonus. Mr. Anderson was also entitled to receive all health
insurance benefits generally made available to the Company's employees as well
as a monthly car allowance of $500. The agreement further provided that if Mr.
Anderson's employment were terminated without cause by the Company after the
initial term, Mr. Anderson would be entitled to base salary and health insurance
benefits continuation for a period of six months after the date of termination.
Mr. Anderson stepped down as President of the Company in April 1999.
The Company has also entered into an employment agreement with Pertti
Tormala. The agreement provides for a term expiring in 2002. Pursuant to the
agreement, Professor Tormala receives a minimum base salary of 540,000 FIM
(approximately $100,000) and is eligible to receive cash bonuses granted by the
Company's Board of Directors. Professor Tormala is also entitled to a car and
certain pension benefits. Under the agreement, all patents, patent applications
and other intellectual property rights developed by Professor Tormala relating
to the Company's research and development activities are the sole property of
the Company. The agreement permits Professor Tormala to spend up to 16 hours per
month working on a business that was spun-off from the Company prior to the
consummation of its initial public offering.
STOCK OPTION INFORMATION
The following table sets forth certain information concerning stock
options granted during the year ended December 31, 1999 to the Named Executive
Officers pursuant to the Company's Option/Stock Issuance Plan. For additional
information concerning the Stock Option/Stock Issuance Plan, see "Proposal Two".
In accordance with the rules of the SEC, the following table also sets forth the
potential realizable value over the term of the options (the period from the
grant date to the expiration date) based on assumed rates of stock price
appreciation of 5% and 10% compounded annually. These amounts do not represent
the Company's estimate of future stock price performance. Actual realizable
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<PAGE> 11
values, if any, of stock options will depend on the future stock performance of
the Common Stock. No stock appreciation rights were granted during the fiscal
year ended December 31, 1999.
Option Grants in the Fiscal Year Ended December 31, 1999
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to Exercise Price for Option Term(3)
Options Employees per Share Expiration ------------------
Name Granted(#)(1) in 1999 ($/Share)(2) Date 5% 10%
---- ------------- ------- ------------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Gerard S. Carlozzi 100,000 19.7 $4.125 9/7/2009 671,919 1,069,919
David W. Anderson -- -- -- -- -- --
Pertti Tormala 40,000 7.9 $4.125 9/7/2009 268,768 427,968
James Hogan -- -- -- -- -- --
Gregory S. Jones 40,000 7.9 $4.125 9/7/2009 268,768 427,968
Michael F. Matz -- -- -- -- -- --
</TABLE>
-------------------
(1) All of these options were granted under the Company's Stock Option/Stock
Issuance Plan, and vest in 20% installments beginning one year after the date of
grant.
(2) The exercise price per share of the options was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board.
(3) The potential realizable value is calculated based on the term of the option
at the date of grant (10 years). It is calculated assuming that the fair market
value of the Company's Common Stock on the date of grant appreciates at the
indicated annual rate compounded annually for the entire term of the options and
that the options are exercised and sold on the last day of their term for the
appreciated stock price.
The following table sets forth certain information with respect to
stock options exercised by the Named Executive Officers during 1999 and the
value of stock options held by the Named Executive Officers as of December 31,
1999. No stock appreciation rights were exercised by the Named Executive
Officers during 1999 and no stock appreciation rights were outstanding as of
December 31, 1999.
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year End Options Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired on Value Options at Options at
Exercise (#) Realized ($) December 31, 1999(#) December 31, 1999(1)($)
------------ ------------ -------------------- -----------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerard S. Carlozzi -- -- 4,000 116,000 -- --
David W. Anderson 277,009 684,905 -- -- -- --
Pertti Tormala -- -- -- 40,000 -- --
James Hogan -- -- -- -- -- --
Gregory S. Jones -- -- 4,000 56,000 -- --
Michael F. Matz -- -- -- -- -- --
</TABLE>
-------------------------
(1) Based on a value equal to the closing sale price of the Common Stock on
December 31, 1999 ($3.125), minus the per share exercise price, multiplied by
the number of shares underlying the options.
-8-
<PAGE> 12
DIRECTOR COMPENSATION
The Company has not yet commenced paying cash fees to directors in
connection with their service on the Board of Directors or on committees of the
Board. The Company does grant stock options to non-employee directors under its
Stock Option/Stock Issuance Plan. Under the Automatic Option Grant Program,
which is part of the Company's Stock Option/Stock Issuance Plan, as amended,
each non-employee director is automatically granted a non-statutory option for
10,000 shares of Common Stock on the date of his or her initial election or
appointment. In addition, at each annual stockholders' meeting, each individual
with at least six months service on the Board of Directors as a non-employee
director and who will continue to serve as a non-employee director following the
meeting is automatically granted a non-statutory option for 10,000 shares of
Common Stock. Each automatic grant has a term of ten years, subject to earlier
termination following the optionee's cessation of service on the Board of
Directors as provided in the Plan. Fifty percent of the shares subject to an
automatic grant vest on the date of grant, 25% one year after the date of grant,
and the remaining 25% two years after the date of grant. The Automatic Option
Grant Program was amended in September 2000 to increase the number of shares
subject to the options granted from 3,000 to 10,000 shares.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Terry D. Wall and
David J. Bershad. Mr. Wall and Mr. Bershad (as well as Anthony J. Dimun) serve
on the Boards of Directors of both the Company and Vital Signs (which latter
company does not have a compensation committee).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's product development efforts are dependent upon Dr.
Tormala, who is a founder, director and executive officer of the Company, and is
currently an Academy Professor at the Technical University in Tampere, Finland
and as such is permitted by the University to devote his efforts to developing
new products for the Company. This executive utilizes a group of senior
researchers, graduate students, and faculty at the Technical University to
perform research and development projects involving resorbable polymers and
other topics impacting the Company's technology and processes. This arrangement,
partially funded by the Company and permitted in Finland as a means of
encouraging the commercialization of technological development, has resulted in
substantial cost savings to the Company, while substantially expanding its
product development effort. The Company's funding obligation, which amounted to
$417,000 during the year ended December 31, 1999, consists of providing the
University with reasonable compensation for University resources (including
graduate students) utilized by the Company.
During 1999, the Company paid certain administrative expenses on behalf
of Bionix B.V., which currently owns 24.9% of the Company's outstanding shares.
Bionix B.V. owed $266,539 to the Company for such expenses as of April 27, 2000.
Certain directors and executive officers of the Company control Bionix B.V. See
"Security Ownership of Certain Beneficial Owners and Management."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for implementing, overseeing
and administering the Company's overall compensation policy. The basic
objectives of that policy are to
- provide compensation levels that are fair and competitive with
peer companies,
- align pay with performance, and
- where appropriate, provide incentives which link executive and
stockholder interests and long-term corporate objectives through
the use of equity-based incentives.
-9-
<PAGE> 13
Overall, the Company's compensation program is designed to attract,
retain and motivate high quality and experienced employees at all levels of the
Company. The principal elements of executive officer compensation are base pay,
bonus and stock options, together with health benefits. The various aspects of
the compensation program, as applied to the Company's Chief Executive Officer
and the Company's other executive officers, are outlined below.
Executive officer compensation is determined by the Company's
performance and by the individual officer's ability to achieve his or her
individual performance objectives. Corporate performance is evaluated by
reviewing the extent to which strategic and business plan goals are met,
including such factors as increases in sales, gross profits, net earnings (or
the reduction of net losses) and return on equity. In 1999, corporate
performance was also measured by the extent that management was able to develop
and implement initiatives designed to preserve liquidity and improve overall
performance. Each of the Company's executive officers participates in the
development of an annual business strategy from which individual objectives are
established. Initially, the objectives are proposed by the particular officer
involved. Those objectives are then determined by the Chief Executive Officer
or, in the case of the Chief Executive Officer's objectives, by the Board of
Directors. Individual performance goals are measured quarterly.
Base Pay. The Company determines base pay for its executive officers
through an evaluation of the Company's performance, the extent to which these
individuals have achieved their performance objectives and a comparative
analysis of total compensation for similar positions within other companies.
The Chief Executive Officer's performance is analyzed by the full Board
of Directors (other than the Chief Executive Officer) against overall corporate
performance and his individual objectives. The Chief Executive Officer, in turn,
reviews the individual performance of the other executive officers. Salaries are
reviewed on an annual basis after consideration of corporate and individual
performance achievement and compensation paid by surveyed companies. The
Compensation Committee has not, as of the date of this proxy statement, approved
any increases in salary for 2000 for any of the Named Executive Officers who are
currently employed by the Company.
Bonus. Each executive officer of the Company is eligible to receive a
bonus if such officer achieves his or her individual performance objectives and
the Company achieves its performance goals.
Stock Options. The Compensation Committee believes that a stock option
plan provides capital accumulation opportunities to participants in a manner
that fosters the alignment of the participants' interests and risks with the
interests and risks of the Company's public stockholders. The Compensation
Committee further believes that stock options can function to assure the
continuing retention and loyalty of employees. The options that have been
granted to executive officers carry long-term (i.e., five year) vesting
schedules. Officers who leave the Company's employ before their options are
fully vested will lose a portion of the benefits that they might otherwise
receive if they remain in the Company's employ for the entire vesting period.
Historically, stock option grants for existing employees have been based upon a
comparative analysis of equity-based compensation among peer companies and an
analysis of the performance of the employees involved in light of the objectives
established for such employees.
The Compensation Committee believes that an appropriate compensation
program can help in fostering a continuation of profitable operations if the
program reflects a suitable balance between providing appropriate awards to key
employees while at the same time effectively controlling compensation costs,
principally by establishing cash compensation at competitive levels and
emphasizing supplemental compensation that correlates to the performance of
individuals, the Company and the Company's Common Stock.
This report has been furnished by the Compensation Committee of Bionx
Implants' Board of Directors.
Terry D. Wall, Chairman
David J. Bershad
-10-
<PAGE> 14
PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative
total stockholder return on the Company's Common Stock with the cumulative total
return of the Nasdaq Market Index and the S&P Health Care Medical
Products/Supplies Index for the period from April 25, 1997 (the date on which
the Common Stock was first publicly traded) through December 31, 1999. For
purposes of the graph, it is assumed that the value of the investment in the
Company's Common Stock and each index was 100 on April 25, 1997 and that all
dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG BIONX IMPLANTS, THE NASDAQ MARKET INDEX AND
THE S&P HEALTH CARE MEDICAL PRODUCTS/SUPPLIES INDEX
FISCAL YEAR ENDING
<TABLE>
<CAPTION>
COMPANY/INDEX/MARKET 4/25/97 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C>
Bionx Implants, Inc. 100.00 214.29 79.17 29.76
S&P Group Index 100.00 123.38 177.84 164.72
NASDAQ Market Index 100.00 129.55 182.67 339.02
</TABLE>
ASSUMES $100 INVESTED ON APRIL 25, 1997
ASSUMES DIVIDEND REINVESTED
PROPOSAL TWO
AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES
UNDER THE STOCK OPTION/STOCK ISSUANCE PLAN
GENERAL
In September 1996, the Board of Directors and stockholders of the
Company approved the Company's Stock Option/Stock Issuance Plan (the "Plan").
The purpose of the Plan is to attract and retain qualified directors, officers,
employees and consultants of the Company, to facilitate performance-based
compensation for key employees and to provide incentives for the participants in
the Plan to enhance the value of the Common Stock. Directors, officers and other
key employees of the Company and its subsidiaries are eligible to participate in
the Plan. Awards may also be granted to consultants providing valuable services
to the Company.
The principal aspects of the Plan are summarized below. A copy of the
Plan is available from the Secretary of the Company upon request.
SHARES ISSUABLE UNDER THE PLAN
Under the current terms of the Plan, the maximum number of shares of
Common Stock that may be subject to outstanding options and awards under the
Plan, determined immediately after the grant of any option or award, is 850,000
shares. In no event may any one person receive options, separately exercisable
stock appreciation rights or direct stock issuances for more than 278,947 shares
in any calendar year.
On May 4, 2000, the Board of Directors amended the Plan to increase the
number of shares that may be issued under the Plan. The amendment, which is
subject to shareholder approval, provides that the maximum number of shares of
Common Stock that may be issued over the term of the Plan shall not
-11-
<PAGE> 15
exceed 850,000 shares, plus an annual increase to be added on July 1 of each
year beginning in the year 2000, equal to the lesser of:
- 5% of the outstanding shares (on a non-diluted basis); or
- a number of shares determined by the Company's Board of Directors.
At May 4, 2000, absent such amendment to the Plan, there were 80,637
shares available for the grant of new options and awards under the Plan. The
Board approved the increase in the number of shares covered by the Plan because
the Board believes that a stock option program is an important factor in
attracting, retaining and motivating key employees and others who will dedicate
their maximum productive efforts toward the advancement of the Company. The
Board believes that the amendment increasing the number of authorized shares
under the Plan furthers these objectives by assuring continuing availability of
stock options and awards in appropriate circumstances, without the need for
subsequent shareholder approval.
TYPES OF AWARDS
The Plan is divided into four separate components: (i) the
Discretionary Option Grant Program under which employees, non-employee
directors, consultants and other independent advisors who provide services to
the Company may, at the discretion of the plan administrator, be granted options
to purchase shares of Common Stock; (ii) the Stock Issuance Program under which
such persons may, in the plan administrator's discretion, be issued shares of
Common Stock directly, either through the immediate purchase of such shares at a
price not less than the fair market value of the Common Stock on the date of
issuance or as a bonus for services rendered to the Company; (iii) the Salary
Investment Option Grant Program under which employees designated by the plan
administrator may elect to have a portion of their base salary invested each
year in options to purchase shares of Common Stock at an exercise price equal to
33-1/3% of the fair market value of the Common Stock on the grant date; and (iv)
the Automatic Option Grant Program under which eligible non-employee directors
shall automatically, at periodic intervals, receive option grants to purchase
shares of Common Stock at an exercise price equal to 100% of the fair market
value of the Common Stock on the grant date.
ADMINISTRATION
The Discretionary Option Grant, the Salary Investment Option Grant and
Stock Issuance Programs are administered by the Compensation Committee of the
Company's Board of Directors. The Compensation Committee, as plan administrator,
has full authority to determine which eligible persons are to receive option
grants or stock issuances, the time or times when such option grants or stock
issuances are to be made, the number of shares subject to each such grant or
issuance, the status of any granted option as either an incentive option or a
non-statutory option under the Federal tax laws, the vesting schedule (if any)
applicable to the option grant or stock issuance and the maximum term for which
any granted option is to remain outstanding.
The Automatic Option Grant Program is self-executing, with all grants
thereunder being made in strict compliance with the express terms of that
program, and no administrative discretion will be exercised by the Board of
Directors or any committees with respect to those grants. Under the Automatic
Option Grant Program, each non-employee director is automatically granted a
non-statutory option for 10,000 shares of Common Stock upon his or her
appointment or election to the Board. In addition, at each annual stockholders
meeting, each individual with at least six months service on the Board of
Directors as a non-employee director and who will continue to serve as a
non-employee director following the meeting is automatically granted a
non-statutory option for 10,000 shares of Common Stock.
ELIGIBILITY
Employees, non-employee directors, consultants and other independent
advisors who provide services to the Company are eligible to receive stock
options and other awards under the Plan. As
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<PAGE> 16
discretion for the grant of options is vested in the Compensation Committee, the
Company is unable, at the present time, to determine the identity or number of
officers, directors, consultants and other employees who may be granted options
under the Plan in the future.
TERMS AND CONDITIONS OF OPTIONS
Types of Stock Options
The Compensation Committee may grant incentive stock options
("Incentive Options"), designed to meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or options which do not
satisfy such requirements ("Non-Statutory Options").
Exercise Price
The exercise price of an option will be determined by the
Compensation Committee. However, the exercise price of an option cannot be less
than 100% of the fair market value of the Common Stock on the grant date. In
addition, if an Incentive Option is granted to a ten-percent stockholder, then
the exercise price per share shall not be less than 110% of the fair market
value per share of Common Stock on the grant date.
While the Company's Common Stock is quoted on Nasdaq, "fair
market value" as of a particular date will be the closing sale price per share
of the Common Stock on Nasdaq on that date. If no such closing sale price is
quoted for that date, "fair market value" shall be such closing sale price on
the last preceding date for which such quotation is available. Similarly, if the
Common Stock is traded on an exchange, "fair market value" as of a particular
date shall mean the closing sale price per share of the Common Stock on such
exchange on such date or, if no such price is quoted on such date, "fair market
value" shall be such closing sale price on the last preceding date for which
such quotation is available. If the Common Stock is not quoted on Nasdaq or
traded on an exchange, the Compensation Committee will determine "fair market
value". On June 6, 2000, the closing sale price of a share of the Company's
Common Stock on Nasdaq was $2.1875.
Exercise of Options/Payment
To exercise an option, the optionee must provide the Company
with written notice of the exercise in which the optionee indicates the number
of shares to be purchased under the option. The notice must be accompanied by
payment of the exercise price for the purchased shares, together with
appropriate proof that the person exercising the option (if other than the
optionee) has the right to effect such exercise.
The exercise price may be paid in cash or check payable to the
Company or, if permitted by the Compensation Committee, in shares of Common
Stock. Any such shares will be valued at the fair market value on the date the
optionee's option was exercised (the "exercise date") and must have been held
for the requisite period necessary to avoid a charge to the Company's earnings
for financial reporting purposes.
Cashless exercises will also be permitted as a method to
purchase shares of Common Stock. To use this procedure, the optionee must
provide irrevocable written instructions to a Company-designated brokerage firm
to effect the immediate sale of the shares of Common Stock purchased under the
option and to pay over to the Company, 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 withholding taxes. Concurrently
with such instructions, the optionee must also direct the Company to deliver the
certificates for the purchased shares to the brokerage firm in order to complete
the sale.
-13-
<PAGE> 17
Exercise Period
No option granted under the Discretionary Option Grant Program
may have a term in excess of ten years. An Incentive Option granted to a 10%
shareholder must expire no more five years after the date of grant.
Vesting
Options granted under the Discretionary Option Grant Program
shall become exercisable at such time or times, during such period and for such
number of shares as shall be determined by the Compensation Committee and set
forth in an option agreement.
Options granted under the Salary Investment Option Grant
Program shall become exercisable in a series of twelve (12) successive equal
monthly installments upon the optionee's completion of each calendar month of
Service (as defined under the Plan) in the calendar year for which the salary
reduction is in effect.
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 optionee's
period of Service or upon attainment of specified performance objectives.
Each automatic grant has a term of ten years, subject to
earlier termination following the optionee's cessation of service on the Board
of Directors as provided in the Plan. Fifty percent of the shares subject to an
automatic grant vest on the date of grant, 25% one year after the date of grant,
and the remaining 25% two years after the date of grant.
Corporate Transaction; Change in Control
Should the Company's stockholders approve a merger or
consolidation of the Company with or into another corporation, or the sale of
all or substantially all of the assets of the Company, in which the stockholders
of the Company before the transaction own less than 50% of the voting securities
of the surviving or successor corporation following the transaction (a
"Corporate Transaction"), each outstanding option under the Discretionary Option
Grant Program, other than a "Specially Designated Option," will automatically
vest in full, unless such option will be assumed or replaced with an equivalent
incentive program by the successor corporation. A Specially Designated Option is
an option which the plan administrator determines, at the time of grant or
thereafter, shall be excluded from the operation of the immediately preceding
sentence and accordingly, a Specially Designated Option will vest in full in the
event of a Corporate Transaction.
In the event of a change in control of the Company, each
outstanding Specially Designated Option will automatically vest in full and may
be exercised for any or all of those shares as fully-vested shares and shall
remain exercisable until the expiration of the option term.
Each option that is not a Specially Designated Option will
automatically vest in full if the optionee's service with the Company is
involuntarily terminated within 18 months following the effective date of a
Corporate Transaction or a change in control.
In the event of any Corporate Transaction or change in control
while the optionee remains in service to the Company, each outstanding option
under the Salary Investment Option Grant Program will automatically vest in full
and will remain exercisable until the earlier of the expiration of the option
term or the expiration of the two year period from the optionee's cessation of
service with the Company. Upon the occurrence of a hostile take-over, each
optionee under the Salary Investment Option Grant Program will have a 30 day
period in which to surrender to the Company each option granted to him or her
thereunder in exchange for a cash distribution from the Company equal to the
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<PAGE> 18
excess of the take-over price of the shares subject to the surrendered option
over the aggregate exercise price payable for such shares.
Upon any Corporate Transaction, all of the shares of Common
Stock subject to repurchase rights under the Stock Issuance Program will
immediately vest in full, unless those repurchase rights are assigned to the
successor corporation. Any shares under repurchase rights so assigned, and in
the event of a change in control all shares subject to repurchase rights under
the Stock Issuance Program, will immediately vest in full if the optionee's
service with the Company is involuntary terminated within 18 months following
the effective date of the Corporate Transaction or the change in control.
In the event of a Corporate Transaction or change in control,
the shares of Common Stock under the Automatic Option Grant Program will
automatically vest in full. Upon the occurrence of a hostile take-over, the
optionee will have a 30-day period in which to surrender to the Company each
automatic option held by him or her in exchange for a cash distribution from the
Company equal to the excess of the takeover price of the shares subject to the
surrendered option over the aggregate exercise price payable for such shares.
Term
The Plan will terminate on September 3, 2006, unless sooner
terminated pursuant to its terms.
OTHER AWARDS
Tandem stock appreciation rights may be issued under the Plan, which
will allow optionees to surrender their outstanding options in exchange for an
appreciation distribution from the Company equal to the excess of (i) the fair
market value of the vested shares of Common Stock subject to the surrendered
option over (ii) the aggregate exercise price payable for such shares. Such
appreciation distribution may be made in cash or in shares of Common Stock. In
addition, limited stock appreciation rights may be issued to officers and
directors of the Company under the Plan which, upon the occurrence of a hostile
take-over, permit individuals holding options with such limited stock
appreciation rights in effect for at least six months the unconditional right to
surrender such options in return for a cash distribution from the Company in an
amount equal to the excess of (i) the take-over price of the vested shares
surrendered under the option over (ii) the aggregate exercise price payable for
such shares.
The plan administrator has the authority to effect, with the consent of
the affected option holders, the cancellation of outstanding options under the
Discretionary Option Grant Program in return for new options covering the same
or a different number of shares with an exercise price based on the fair market
value of the Common Stock on the new grant date.
TERMINATION OF EMPLOYMENT
After the optionee's termination of service, the optionee will have a
limited period of time in which to exercise his or her outstanding options for
any shares of Common Stock for which those options are exercisable on the date
that service terminates. The length of this period may be set forth in the
optionee's option agreement. If the option agreement does not address this
issue, the optionee's options will be exercisable for a period of one year after
termination due to death or permanent disability, for no period of time should
employment be terminated for Misconduct (as defined under the Plan) or should
employment be terminated by the optionee in circumstances which do not
constitute Involuntary Termination (as defined under the Plan) and for 90 days
following any other type of termination, but in no event beyond the expiration
date of the applicable option. In all events, however, the optionee must
exercise his or her option before the specified expiration of the option term.
Each option will, immediately upon the optionee's termination of service,
terminate and cease to be outstanding to the extent it is not at that time
exercisable for one or more option shares.
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<PAGE> 19
Should the optionee be discharged from service for Misconduct, all of
his or her outstanding options will immediately terminate. For purposes of the
Plan, Misconduct includes (i) any act of fraud, embezzlement or dishonesty, (ii)
any unauthorized use or disclosure of confidential information or trade secrets
of the Company or (iii) any other intentional misconduct adversely affecting the
business or affairs of the Company in a material manner. However, the foregoing
list is not inclusive of all the acts or omissions which may be considered as
grounds for dismissal or discharge of any individual in the Company's service.
ASSIGNMENT
An option generally cannot be assigned or transferred. However, there
are three instances in which options may be transferred. First, an option can be
transferred by the provisions of a will or the laws of inheritance following the
optionee's death. Second, a non-statutory option may be assigned in whole or in
part pursuant to a court order issued in connection with marital dissolution or
separation proceedings. Third, an option may be transferred without
consideration to a member of the optionee's immediate family (i.e., a spouse,
child or grandchild) or to a trust established exclusively for one or more such
members. This third alternative will be available to an optionee only if the
plan administrator is notified of the terms and conditions of the transfer and
determines that the transfer complies with the requirements for transfers of
stock options under the Plan and the optionee's option agreement.
TERMINATION, AMENDMENT AND MODIFICATION
The Board has exclusive authority to amend or modify the Plan in any
and all respects. However, no amendment or modification may, without the
holder's consent, adversely affect such individual's rights and obligations
under his or her outstanding options or direct stock issuances under the Plan.
In addition, certain amendments to the Plan may require approval of the
Company's stockholders.
The Board may terminate the Plan at any time, although such termination
will have no effect on options or issuances granted prior to such action. The
Plan will terminate upon the earliest of (i) September 6, 2006, (ii) the date on
which all shares available for issuance under the Plan have been issued or (iii)
the termination of all outstanding options in connection with a Corporate
Transaction. Upon such Plan termination pursuant to clause (i) above, all
outstanding options under the Discretionary Option Grant Program will remain in
full force and effect in accordance with the provisions of the agreements
evidencing those options.
ADDITIONAL LIMITATION
The aggregate fair market value of the shares of Common Stock
(determined at the date of grant) for which an option may for the first time
become exercisable in any calendar year as an Incentive Option under the Federal
tax laws may not exceed $100,000. To the extent an optionee holds two or more
Incentive Options which become exercisable for the first time in the same
calendar year, the $100,000 limitation will be applied on the basis of the order
in which those options were granted.
FEDERAL INCOME TAX CONSEQUENCES
BECAUSE OF THE COMPLEXITY OF THE FEDERAL INCOME TAX LAWS AND THE
APPLICATION OF VARIOUS STATE INCOME TAX LAWS, THE FOLLOWING DISCUSSION OF TAX
CONSEQUENCES IS GENERAL IN NATURE AND RELATES SOLELY TO FEDERAL INCOME TAX
MATTERS. PARTICIPANTS ARE ADVISED TO CONSULT THEIR PERSONAL TAX ADVISORS BEFORE
EXERCISING AN OPTION OR DISPOSING OF ANY STOCK RECEIVED PURSUANT TO THE EXERCISE
OF ANY SUCH OPTION. IN ADDITION, THE FOLLOWING SUMMARY IS BASED UPON AN ANALYSIS
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AS CURRENTLY IN EFFECT,
EXISTING LAWS, JUDICIAL DECISIONS, ADMINISTRATIVE RULINGS, REGULATIONS AND
PROPOSED REGULATIONS, ALL OF WHICH ARE SUBJECT TO CHANGE.
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<PAGE> 20
The Internal Revenue Code of 1986, as amended (the "Code"), treats
incentive stock options and supplemental stock options, also known as
non-qualified options, differently. A participant's individual consequences will
depend upon the nature of the option received. However, as to both types of
options, no income will be recognized to the optionee at the time of the grant
of an option, nor will the Company be entitled to a tax deduction at that time.
Non-Statutory Options
Upon the exercise of a non-statutory option, the optionee will
recognize ordinary income tax on the excess of the fair market value of the
stock on the exercise date over the exercise price, if any. The Company
generally will be entitled to a tax deduction in an amount equal to the ordinary
income recognized by the optionee. If shares acquired upon such exercise are
held for more than one year before disposition, any gain on disposition of such
shares will be treated as long-term capital gain.
Incentive Stock Options
An optionee will not recognize any federal income tax in
respect of incentive stock options at the time of exercise. However, the excess
of the fair market value of the stock on the date of exercise over the exercise
price will be taken into account in determining whether the "alternative minimum
tax" will apply for the year of exercise. If the shares acquired upon the
exercise are not disposed of within two years from the date the options were
granted nor within one year after the shares are transferred, any gain or loss
upon the sale of such shares will be treated as long-term capital gain or loss
(measured by the difference between the sales price of the stock and the
exercise price). If the two-year and one-year holding period requirements are
not met (a "disqualifying disposition"), an optionee will recognize ordinary
income in the year of disposition 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. The
remainder of the gain will be treated as long-term or short-term capital gain,
depending upon whether the stock has been held for more than one year. If an
optionee makes a disqualifying disposition, the Company will be entitled to a
tax deduction equal to the amount of ordinary income recognized by the optionee.
In general, if an optionee in exercising an option tenders
shares of Common Stock in partial or full payment of the option price, no gain
or loss will be recognized on the tender. However, if the tendered shares were
previously acquired upon the exercise of an incentive stock option and the
tender is within two years from the date the option was granted or one year
after the date of exercise of the other option, the tender will be a
disqualifying disposition of the tendered shares.
Alternative Minimum Tax
As noted above, the exercise of an incentive stock option
could subject the optionee to the alternative minimum tax. The application of
the alternative minimum tax to any particular optionee depends upon the
particular facts and circumstances which exist with respect to the optionee in
the year of exercise. However, as a general rule, the amount by which the fair
market value of the Common Stock on the date of exercise of an option exceeds
the exercise price of the option will constitute an item of "adjustment" for
purposes of determining the alternative minimum tax that may be imposed. As
such, this item will enter into the tax base on which the alternative minimum
tax is computed, and may therefore cause the alternative minimum tax to become
applicable in a given year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL TWO - AMENDMENT TO
INCREASE THE NUMBER OF AUTHORIZED SHARES UNDER THE STOCK OPTION/STOCK ISSUANCE
PLAN.
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<PAGE> 21
PROPOSAL THREE
AUTHORIZATION TO USE PAYROLL DEDUCTIONS AND
ASSOCIATED LOANS UNDER THE INVESTMENT PLAN
GENERAL
The Board of Directors adopted the Bionx Investment Plan (the
"Investment Plan") on January 25, 2000. The Investment Plan is a stock
purchase/stock option plan which allows employees and directors to purchase the
Company's Common Stock (up to specific permitted amounts). For each share
purchased by an employee or director, the Investment Plan provides that the
Company will grant the participant from one to three stock options. Eligible
participants may purchase shares of Common Stock pursuant to the Investment Plan
during specified window periods. The Board of Directors is seeking shareholder
approval of the Investment Plan to authorize the use of payroll deductions and
associated loans to enable participants in the Investment Plan to purchase
shares of Common Stock under the Investment Plan. If the Company's shareholders
do not approve the Investment Plan, such authorization will be deemed not to
have been given. In such event, the Investment Plan will remain in effect, but
without the use of payroll deductions and associated loans. The following is a
summary of certain terms of the Investment Plan. A copy of the Investment Plan
is available from the Secretary of the Company upon request.
PURPOSE
The purpose of the Investment Plan is to promote the success, and
enhance the value of the Company by linking the personal interests of
participating employees and directors to those of Company stockholders, and by
providing participants with added incentives for outstanding performance. The
Investment Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of participants upon whose
judgment, interests, and special effort the successful conduct of its business
is largely dependent.
ADMINISTRATION
The Board of Directors currently administers the Investment Plan, and
has the power to establish the financial performance measures which govern the
option-to stock match, to determine how well those performance measures are
being met, to determine the terms and conditions applicable to the purchase of
Investment Plan shares and the grant of options, to interpret the Investment
Plan, to establish, amend, or waive rules and regulations for the Investment
Plan's administration and to make all other determinations which may be
necessary or advisable for the administration of the Investment Plan. The
Investment Plan provides that the Board of Directors may appoint a Plan
Administrator to administer the Investment Plan, who shall serve at the
discretion of the Board.
ELIGIBILITY
The Investment Plan permits eligible employees (including any employee
who also serves as a director of the Company) and directors of the Company to
purchase Common Stock from the Company during an approximately two week period
(known as a "window period") one or more times each year while the Investment
Plan is in effect. All persons who are employees or directors of the Company
during a window period will be eligible to participate with respect to such
window period. Approximately 125 employees and directors were eligible to
participate in the most recent window period which ended on February 28, 2000.
Since participation in the Investment Plan is at the discretion of each
employee and director, the Company is unable, at the present time, to determine
the identity or number of executive officers, other
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<PAGE> 22
key employees and directors who may elect to participate, and accordingly, who
may be granted stock options under the Investment Plan in the future.
STOCK PURCHASES
Window Periods
A "window period" is the time period designated by the Company's Board
of Directors during which eligible employees and directors may purchase shares
of Common Stock under the Investment Plan. Window periods last approximately 15
days each, and occur at times designated by the Board. It is currently intended
that the Board will continue to declare window periods at six month intervals.
Amount to be Invested
An employee or director must make an initial purchase of the Company's
Common Stock through the Investment Plan in order to receive stock options under
the Investment Plan. The Investment Plan provides that for each window period,
the maximum aggregate fair market value of shares which may be purchased by an
eligible employee or director is the greater of $50,000 or twice an employee's
annual salary in effect on the first day of the applicable window period, and,
in addition, for each two year period, is twice an employee's annual salary in
effect at any time during the two year period, unless the Board of Directors
approves a higher limit on a case-by-case basis. For any window period, no
employee may purchase shares having an aggregate fair market value equal to less
than one half of one percent of his or her base salary for that window period.
For any window period, there is no minimum number of shares which must be
purchased by a non-employee director, provided that the number of shares
purchased by any director must be a whole number.
Purchase Price
The purchase price for the shares purchased under the Investment Plan
will equal the average closing sales prices of a share of the Company's Common
Stock during the applicable window period. There are no discounts for initial
purchases under the Investment Plan.
Delivery of Shares
All shares which a participant purchases under the Investment Plan will
be delivered two years from the date of purchase (the "two-year holding
period"), provided that the full payment has been made, whether by cash or, if
approved by shareholders, through the Company's payroll deduction program.
Holding Period
The holding period is the two-year period during which a participant
must wait and retain the shares he or she purchased through the Investment Plan
to qualify for the optimum benefit of exercising the stock options granted under
the Investment Plan.
If a participant has fully paid for the shares purchased under the
Investment Plan prior to the end of the two-year holding period, the participant
is entitled to sell or transfer such stock as he or she wishes, subject to the
option forfeiture provisions contained in the Investment Plan and described
below.
Voting and Dividends
In general, a participant will be able to vote and receive any
dividends and other distributions paid with respect to the shares purchased by
him or her under the Investment Plan.
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<PAGE> 23
Payment for Shares
When an eligible participant enrolls in the Investment Plan, he or she
may indicate that the shares will be purchased by paying cash or, provided the
shareholders approve this Proposal Three, if the participant is an employee,
through payroll deductions or by a combination of cash and payroll deductions.
For employees who pay for their stock through payroll deductions, the amount the
employee will pay will equal the purchase price plus a fee that will equal the
"prime" interest rate as provided in The Wall Street Journal on the last day of
the applicable window period. Based on what the prime interest rate is at the
time, the employee will be notified of what amount his or her fixed payments
will be. Those payments will be handled as payroll deductions. The employee may
determine the length of the payroll deduction period, as long as it does not
extend beyond two years.
If an employee starts paying for shares through payroll deductions but
then directs the Plan Administrator to cease making deductions, the employee
will forfeit any shares which are not fully paid for and any options related to
shares which were originally to be paid for using payroll deductions, including
those options corresponding to shares that have at that time already been paid
for using payroll deductions.
STOCK OPTIONS
The Match
Whether a participant receives one, two or three options per share of
stock purchased will depend on how well the goals of the Investment Plan are met
as they relate to the Company's financial performance. The better the
performance to targeted goals, the higher the match. The option-to-stock match
is selected by the Board, and applies to all shares purchased under the
Investment Plan during a window period. The match was one-for-one for the one
window period that was established since the Investment Plan was adopted by the
Board, although the match could be changed in the future, based on how well the
goals of the Company have been met.
The Investment Plan provides that notwithstanding any other provision
of the Plan, no eligible participant may be granted stock options under any of
the Company's benefit plans (including the Investment Plan) in any one fiscal
year covering more than an aggregate of 250,000 shares of the Company's Common
Stock (subject to adjustment in the event of a stock dividend, stock split,
recapitalization or similar adjustment in the Company's capital structure).
Option Price
The option price will be the average of the closing sales prices of the
Company's Common Stock on Nasdaq during the window period. For the window period
ended February 28, 2000, such average price was $4.678 per share.
Exercise Period
Each option will expire 10 years and one day from the date it was
granted.
A participant must continue to be employed or serve as a director of
the Company for at least two years to exercise stock options granted under the
Investment Plan. If the participant retains the shares purchased during the
window period, the options can be exercised at any time after the initial shares
have been held for two years.
If a participant sells any of the shares purchased under the Investment
Plan before the end of the two-year holding period, then the options
corresponding to the sold shares shall be automatically forfeited, unless the
Board of Directors determines, in its sole discretion, that the employee has
suffered a hardship that caused him or her to sell the shares. In the event of
such a determination by the Board, and if no loan from the Company was used to
purchase the shares, the options will not be forfeited, but
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<PAGE> 24
the participant will have to wait five years from the date the options were
granted and still be employed by the Company or serve as a director of the
Company before the participant can exercise the related options.
If the participant holds such shares for two years and remains employed
by the Company or continue to serve as a director of the Company, he or she will
then be able to exercise the related options. If shares are assigned to a bank
as collateral or if they are held in street name, they will be treated as though
they had been sold, and, accordingly, in most cases, the five year holding
period described above will be applicable to the options.
Non-Transferability
Options are not transferable other than by will or by the laws of
descent and distribution.
Payment
Full payment for the shares purchased upon exercise of options must be
made when options are exercised. Full payment can be made to the Company either
in cash or by turning over previously acquired shares of the Company's Common
Stock that have an aggregate fair market value at the time of the exercise equal
to the total cost of exercising the options, or by a combination of both
approaches.
LAPSED AWARDS
If any share purchase or option grant under the Investment Plan is
canceled, terminates, expires or lapses for any reason, the shares purchased
and/or any shares subject to such option shall again be available for purchase
and/or grant under the Investment Plan.
NO RIGHT OF EMPLOYMENT
No provision in the Investment Plan confers upon any participant the
right to continue in the employment of the Company or any of its subsidiaries or
affects any right which the Company may have to terminate the employment of the
participant.
CHANGE IN CONTROL
If a Change in Control (as defined) occurs: (i) all options granted
under the Investment Plan which correspond to fully paid shares will become
immediately exercisable and remain exercisable throughout their entire term;
(ii) all other options granted under the Investment Plan will be forfeited; and
(iii) the Company will deliver all fully paid shares and all remaining shares
under the Investment Plan will be forfeited.
TERMINATION
Regardless of the circumstances of a participant's termination of
employment or service as a director, any shares of the Company's Common Stock
purchased under the Investment Plan that are fully paid for are and remain the
participant's shares. Any shares which have not yet been paid for at the time of
termination will be forfeited. The treatment of the related stock option depends
on the circumstances of the termination.
In the event of death, all outstanding Investment Plan stock options
corresponding to the number of shares that were fully paid for prior to a
participant's death, and which are then exercisable, will remain exercisable at
any time prior to their expiration date, or for one year after the date of
death, whichever is sooner. Options will not be exercisable unless the
participant has held them at least two years from the grant date. All other
options granted to the participant under the Investment Plan will be forfeited.
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<PAGE> 25
If employment or service as a director terminates for any reason other
than death, the participant will forfeit options that correspond to any
forfeited shares. Further, the participant will forfeit all other options if the
two-year holding period or five-year requirement, if applicable, has not been
met. If the participant leaves after satisfying either the two or five year
requirement, whichever is applicable, he or she will then have 90 days from the
effective termination date to exercise any of the then exercisable Investment
Plan options which correspond to Investment Plan shares which have been fully
paid for prior to termination (as determined by the Plan Administrator).
The Investment Plan provides that notwithstanding any provision to the
contrary, in the event that an employee continues to serve as a director or
consultant to the Company or any of its subsidiaries after the employee ceases
to be employed by the Company or any of its subsidiaries, the Board shall have
the discretion to provide that the employee shall, for purposes of the
Investment Plan, be deemed to continue in the employment of the Company until
such time as the person ceases to serve as a director of, consultant to or
employee of the Company or any of its subsidiaries.
ADJUSTMENTS
In the event of any merger, reorganization, recapitalization, stock
dividend, stock split or similar changes in the Company's capital stock, an
equitable adjustment will be made in the number and class of shares which may be
purchased under the Investment Plan, the maximum number of options that may be
granted to any one person in any fiscal year and the number and class of and/or
price of outstanding shares under the Plan and shares subject to outstanding
options granted under the Investment Plan.
TERMINATION, AMENDMENT AND MODIFICATION OF THE PLAN
The Board of Directors may at any time terminate, amend or modify the
Investment Plan except that no such termination, amendment or modification will
adversely affect in any material way any shares previously purchased under the
Investment Plan or any option previously granted under the Investment Plan. In
the absence of an amendment adopted by the Board to extend the Investment Plan,
the Investment Plan will end on January 25, 2010.
FEDERAL INCOME TAX CONSEQUENCES
BECAUSE OF THE COMPLEXITY OF THE FEDERAL INCOME TAX LAWS AND THE
APPLICATION OF VARIOUS STATE INCOME TAX LAWS, THE FOLLOWING DISCUSSION OF TAX
CONSEQUENCES IS GENERAL IN NATURE AND PARTICIPANTS ARE ADVISED TO CONSULT THEIR
PERSONAL TAX ADVISORS.
A participant does not pay taxes on the stock initially purchased
through the Investment Plan nor on the stock options at the time that the
participant receives them, nor is the Company entitled to a tax deduction at
that time.
Once options are exercised, the participant is required to pay federal
and state taxes at the same rate as the participant's ordinary income, but only
on the increased value of the stock. The Company will be entitled to a tax
deduction equal to the amount of ordinary income recognized by the optionee.
For example, if a participant exercises an option to buy 100 shares at
$20 and the fair market value of the stock on the day of purchase is $30, the
participant's taxable income is $1,000 ($3,000 - $2,000). The participant's new
tax basis for future gains or losses is $30 rather than $20.
When the participant sells any shares of stock, he or she is subject to
tax on any previously untaxed gain at capital gains rates.
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<PAGE> 26
Continuing the above example, if the participant sells 100 shares of
stock at $45, the previously untaxed gain for calculating capital gains is
$1,500 ($4,500 [sales proceeds] - $3,000 [the new tax basis as indicated
above]).
The Company has the right to deduct or withhold, or require a
participant to remit to the Company an amount sufficient to satisfy federal,
state and local taxes required by law to be withheld with respect to any taxable
event arising as a result of the Investment Plan.
The Investment Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 ('ERISA'), and is not qualified
under Section 401 of the Internal Revenue Code of 1986, as amended.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL THREE -
AUTHORIZATION TO USE PAYROLL DEDUCTIONS AND ASSOCIATED LOANS UNDER THE
INVESTMENT PLAN.
OTHER MATTERS
COSTS
The Company will pay the costs of soliciting proxies. In addition to
solicitation by mail, proxies may be solicited personally or by telephone or
telegraph by regular employees of the Company and its subsidiaries. Brokerage
houses and other custodians, nominees and fiduciaries will be requested to
forward soliciting material to their principals, and the Company will, upon
request, reimburse them for the reasonable expense of doing so.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick, certified public accountants, have been selected by
the Board of Directors to audit and report on the Company's financial statements
for the year ending December 31, 2000. A representative of that firm is expected
to be present at the Annual Meeting and will have an opportunity to make a
statement if he or she so desires. The representative is expected to be
available to respond to appropriate questions from stockholders.
OTHER MATTERS TO BE PRESENTED
The Board of Directors does not know of any matters, other than those
referred to in the accompanying Notice of the Annual Meeting, to be presented at
the Annual Meeting for action by stockholders. However, if any other matters are
properly brought before the Annual Meeting or any adjournment thereof, it is
intended that votes will be cast with respect to those matters, pursuant to the
proxies, in accordance with the best judgment of the persons acting under the
proxies.
STOCKHOLDER PROPOSALS
If you wish to have a proposal included in the Company's proxy
statement and form of proxy for next year's annual meeting, the proposal must be
received by the Company at its principal executive offices by February 9, 2001.
The Company will not be required to include in its proxy statement a stockholder
proposal which is received after that date or which otherwise fails to meet the
requirements for stockholder proposals established by the SEC. Stockholders
interested in submitting a proposal are advised to contact knowledgeable counsel
with regard to the requirements of applicable securities laws. The submission of
a stockholder proposal does not guarantee that it will be included in the
Company's proxy statement. In order for a stockholder proposal to be considered
at next year's Annual Meeting (but not included in the proxy statement for such
meeting), the proposal must be received by the Company in writing by April 25,
2001.
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<PAGE> 27
In addition, under the Company's By-Laws, if you wish to have a
proposal or nomination considered at next year's annual meeting, but not
included in the proxy statement and form of proxy for that meeting, the proposal
or nomination must be received by the Company's Secretary at the Company's
principal executive offices during the period commencing 90 days prior to the
meeting and ending on the later of the 60th day prior to the meeting or the 10th
day after the meeting date is publicly announced. In the event that the Company
does not receive timely notice with respect to such a proposal or nomination,
management of the Company would use its discretionary authority to vote the
shares it represents as the Board of Directors may recommend. Your submission
must include certain specified information concerning the proposal or nominee
and information as to your ownership of Common Stock of the Company. Proposals
or nominations not meeting these requirements will not be entertained at next
year's annual meeting.
By Order of the Board of Directors,
June 9, 2000 Drew Karazin, Secretary
A COPY OF THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1999, INCLUDING CONSOLIDATED FINANCIAL STATEMENTS,
ACCOMPANIES THIS PROXY STATEMENT. THE ANNUAL REPORT IS NOT TO BE REGARDED AS
PROXY SOLICITING MATERIAL OR AS A COMMUNICATION BY MEANS OF WHICH ANY
SOLICITATION IS TO BE MADE.
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<PAGE> 28
BIONX IMPLANTS, INC.
ANNUAL MEETING OF STOCKHOLDERS, JULY 12, 2000
The undersigned hereby appoints Gerard Carlozzi and Drew Karazin, and
each with full power to act without the other, as proxies, with full power of
substitution, for and in the name of the undersigned to vote and act with
respect to all shares of common stock of Bionx Implants, Inc. (the "Company")
standing in the name of the undersigned on June 5, 2000, or with respect to
which the undersigned is entitled to vote and act, at the Annual Meeting of
Stockholders of the Company to be held on July 12, 2000 and at any and all
adjournments thereof, with all the powers the undersigned would possess if
personally present, and particularly, but without limiting the generality of the
foregoing, the matters described on the reverse side of this proxy. All shares
represented by proxy will be voted in accordance with the instructions, if any,
given in such proxy. A stockholder may abstain from voting on any proposal or
may withhold authority to vote for any nominee(s) by so indicating on the
reverse side.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<PAGE> 29
The votes represented by this proxy will be voted as marked by you. However, if
you execute and return the proxy unmarked, such votes will be voted "FOR" all of
the proposals. Please mark each box with an "x."
The Board of Directors Recommends a Vote "FOR" all proposals.
1. Election of Directors: (Anthony J. Dimun and David H. MacCallum have
been nominated)
FOR WITHHELD Withheld Authority
to vote for the following only:
(write the nominee's name in
the space below)
[ ] [ ]
------------------------------
2. Approve the proposed amendment to the Stock Option/Stock Issuance
Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approve the proposal to authorize payroll deductions and associated
loans under the Investment Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, proxies shall be authorized to vote upon such
other matters as may properly be brought before the meeting or any adjournment
thereof.
When shares are held as 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 the full corporate name by president
or other authorized officer. If a partnership, please sign in the partnership
name by authorized person.
Dated: , 2000
-----------
--------------------------------
Signature
--------------------------------
Signature if held jointly
PLEASE SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
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<PAGE> 30
BIONX IMPLANTS, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
(AS AMENDED AND RESTATED THROUGH JUNE 1, 2000)
(LANGUAGE TO BE APPROVED BY SHAREHOLDERS AT THE
2000 ANNUAL MEETING HAS BEEN UNDERLINED)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1996 Stock Option/Stock Issuance Plan is intended to
promote the interests of Bionx Implants, Inc., a Pennsylvania 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 four 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 Salary Investment Option Grant Program under
which eligible employees may elect to have a portion of their base
salary invested each year in options to purchase shares of Common
Stock,
(iii) 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
(iv) the Automatic Option Grant Program under which
Eligible Directors shall automatically receive option grants at
periodic intervals to purchase shares of Common Stock.
<PAGE> 31
B. The provisions of Articles One and Six 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. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant,
Salary Investment 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, Salary
Investment Option Grant or Stock Issuance Program under its jurisdiction or any
option or stock issuance thereunder.
C. 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 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 of the board of
directors of any Parent or Subsidiary;
(ii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B. Only Employees shall be eligible to participate in the
Salary Investment Option Grant Program.
C. Only non-employee members of the Board shall be eligible to
participate in the Automatic Option Grant Program.
D. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan and subject to the terms and
conditions of the Plan, have full authority to determine, (i) with respect to
the option grants under the Discretionary Option Grant and Salary Investment
Option Grant Programs, which eligible persons are to receive option grants, the
time or times at which such option grants are to be made, the number of shares
to be covered by
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<PAGE> 32
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 by the Participant for such shares.
E. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with the Discretionary Option Grant and/or
Salary Investment Option Grant Program or to effect stock issuances in
accordance with the Stock Issuance Program.
F. The individuals eligible to participate in the Automatic
Option Grant Program shall be those individuals who first become non-employee
Board members after the Effective Conversion/IPO Date, whether through
appointment by the Board or election by the Corporation's stockholders, and
those individuals who continue to serve as non-employee Board members after the
Effective Conversion/IPO 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 option grant under the Automatic Option Grant Program at
the time he or she first becomes a non-employee Board member; any 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 for a period of at least one year after or she ceases
serving as an Employee, but in no event prior to the Effective Conversion/IPO
Date.
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 850,000
shares, plus an annual increase to be added on July 31 of each year beginning in
------------------------------------------------------------------------
the year 2000 equal to the lesser of (i) 5% of the outstanding Shares (on a non-
--------------------------------------------------------------------------------
diluted basis) on such date or (ii) an amount specified by the Board of
-----------------------------------------------------------------------
Directors.
----------
B. No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than 278,947 shares of Common Stock (as adjusted for the
Corporation's 1 for 1.9 reverse stock split effected in February 1997) per
calendar year.
C. Shares of Common Stock subject to outstanding options shall
be available for subsequent issuance under the Plan to the extent (i) the
options expire or terminate for any reason prior to exercise in full or (ii) the
options are canceled in accordance with the cancellation-regrant provisions of
Article Two. Unvested shares issued under the Plan and subsequently canceled or
repurchased by the Corporation at the original issue price paid per share shall
be added back to the number of shares of Common Stock available for subsequent
issuance under the Plan. However, should the exercise price of an option under
the Plan be paid with shares of
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<PAGE> 33
Common Stock in accordance with the provisions of the Plan or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option or the vesting of a stock issuance under the Plan, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised or which vest
under the stock issuance, and not by the net number of shares of Common Stock
issued to the holder of such option or stock issuance.
D. Should any change be made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the number and/or class of securities for which
any one person may be granted options, separately exercisable stock appreciation
rights and direct stock issuances per calendar year, (iii) the number and/or
class of securities for which automatic option grants are to be subsequently
made 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 in order to prevent the dilution or enlargement of
benefits thereunder. The adjustments determined by the Plan Administrator shall
be final, binding and conclusive.
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<PAGE> 34
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the
Plan Administrator but, subject to Section I, A, 3 of this Article Two and
except as provided in Section I, A, 3 of this Article Two, shall not be less
than 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 Six 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) if permitted by the Plan Administrator at the
time of grant or the time of exercise, 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) after the Effective IPO Date and 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 transaction.
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.
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3. It is acknowledged that prior to the formal adoption of the
Plan, commitments were made to grant options to certain Employees at specified
option exercise prices which, at the time such commitments were made, were
intended to represent the fair market value of the Common Stock. Notwithstanding
any provision herein to the contrary, options covering the following number of
shares (prior to adjustment for the Corporation's 1 for 1.9 reverse stock split
effected in February 1997) may be granted to the following persons at the
following exercise prices (prior to adjustment for the Corporation's 1 for 1.9
reverse stock split effected in February 1997) pursuant to the Discretionary
Option Grant Program:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES EXERCISE PRICE
<S> <C> <C>
David Anderson 526,316 $.475
Stephen Lubischer 75,000 $2.50
John Waters 25,000 $2.50
Lisa Heckman 4,000 $2.50
Liz Eckman 2,500 $2.50
Lou Baal 2,500 $2.50
Michael Martin 2,500 $2.50
</TABLE>
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. Notwithstanding the foregoing, (i) no option
shall have a term in excess of ten (10) years measured from the option grant
date and (ii) while there are any shares of Series A Preferred Stock
outstanding, unless each of the members of the Plan Administrator concurs, no
option other than the above-mentioned options granted to Messrs. Anderson and
Lubischer shall vest at a rate greater than 20% per year, subject to provisions
in the Plan relating to acceleration of options in connection with specific
events.
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 (or, in
the absence of any provision in such documents, for a period of one year
after termination resulting from death or Permanent Disability, for no
period of time should the Optionee's Service be terminated for Misconduct
or be terminated by the Optionee in circumstances which do not constitute
Involuntary Termination, and for 90 days after any other type of
termination), but no such option shall be exercisable after the expiration
of the option term.
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(ii) Any option exercisable in whole or in part by
the Optionee at the time of death may be subsequently exercised 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 it 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 I.
2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option
is to remain exercisable following the Optionee's cessation of Service from the
period otherwise in effect for that option to such greater period of time as the
Plan Administrator shall deem appropriate, but in no event beyond the expiration
of the option term, and/or
(ii) at any time after the Effective IPO Date,
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. LIMITED TRANSFERABILITY OF OPTIONS. Except as provided in
the balance of this paragraph, no Option granted under this Plan shall be
transferable otherwise than by will or
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the law of descent and distribution following the Optionee's death, and during
the lifetime of the Optionee, shall be exercisable only by him or for his
benefit by his attorney in fact or guardian. A Non-Statutory Option may, in
connection with the Optionee's estate plan and with the approval of the Plan
Administrator, be assigned in whole or in part during the Optionee's lifetime to
one or more members of the Optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned portion may only
be exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. 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 Six 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. DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the respective date or dates of grant) of the shares of Common
Stock 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 fiat 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.
C. 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, other than a "Specially
Designated 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
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<PAGE> 38
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. For purposes of this Plan, the term "Specially Designated Option"
shall mean an option which the Plan Administrator determines, at the time of
grant or at any time thereafter, shall be excluded from the operation of the
second sentence of this paragraph A (such determination to be reflected by
designating such option as a "Specially Designated Option").
B. 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).
C. 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 upon consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan on both an aggregate and per
individual basis following the consummation of such Corporate Transaction and
(ii) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same.
D. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall automatically
accelerate in the event the Optionee's Service should subsequently terminate by
reason of an Involuntary Termination within eighteen (18) months following the
effective date of such Corporate Transaction. Any options so accelerated shall
remain exercisable 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.
E. In the event of a Change in Control, each outstanding
Specially Designated Option shall automatically accelerate 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 any or all of those shares as
fully-vested shares of Common Stock; any Specially Designated Options so
accelerated shall remain exercisable until the expiration of the option term. In
the event of a Change in Control, each outstanding option which is not a
Specially Designated Option shall automatically accelerate in the event the
Optionee's Service should terminate by reason of an Involuntary Termination
within eighteen (18) months following the effective date of a Change in Control;
any options so accelerated shall remain exercisable 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.
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<PAGE> 39
F. 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 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.
G. 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 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 option
grant date.
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 either at the time of the actual
option surrender or at an earlier time. 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.
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<PAGE> 40
(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 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 shag 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 THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Plan Administration shall have the sole and exclusive
authority to determine the calendar year or years (if any) for which the Salary
Investment Option Program is to be in effect and to select the Employees
eligible to participate in the Salary Investment Option Grant Program for those
calendar year or years; provided, however, that the Salary Investment Program
shall not be in effect at any time prior to the Effective Conversion Date. Each
selected Employee who elects to participate in the Salary Investment Option
Grant Program must, prior to the start of each calendar year of participation,
file with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by a designated multiple of one percent (1%). However, the amount of such
salary reduction must be not less than Five Thousand Dollars ($5,000.00) and
must not be more than the lesser of (i) twenty percent (20%) of his or her rate
of base salary for the calendar year or (ii) Twenty Thousand Dollars
($20,000.00). Each individual who files a proper salary reduction authorization
shall automatically be granted an option under this Salary Investment Option
Grant Program on the first trading day in January of the calendar year for which
that salary reduction is to be in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option 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.
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) 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 be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common
Stock subject to the option shall be determined pursuant to the following
formula (rounded down to the nearest whole number):
X = A / (B x 66-2/3%), where
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X is the number of option shares,
A is the dollar amount of the Optionee's base salary
reduction for the calendar year; and
B is the Fair Market Value per share of Common Stock on
the option grant date.
C. EXERCISE AND TERM OF OPTIONS. The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.
D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the ten (10)-year option
term or (ii) the expiration of the two (2)-year period measured from the date of
such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by the
Optionee prior to death), 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.
Such right of exercise shall lapse, and the option shall terminate, upon the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the two
(2)-year period measured from the date of the Optionee's cessation of Service.
However, the option shall, immediately upon the Optionee's cessation of Service
for any reason, terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the
Optionee remains in Service, each outstanding option held by such Optionee under
this Salary Investment Option Grant Program 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. Each such outstanding
option shall be assumed by the successor corporation (or parent thereof) in the
Corporate Transaction and shall remain exercisable for the fully-vested shares
until the earlier of (i) the expiration of the option term or (ii) the
expiration of the two (2)-year period measured from the date of Optionee's
cessation of Service.
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B. In the event of a Change in Control while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall immediately 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 such shares as fully-vested shares of Common Stock. The option
shall remain so exercisable until the earlier of (i) the expiration of the
option term or (ii) the expiration of the two (2)-year period measured from the
date of the Optionee's cessation of Service.
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 of his or her outstanding option grants. 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 each 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. The grant of options under the Salary Investment 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. REMAINING TERMS
The remaining terms of each option granted under the Salary
Investment 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 FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program at any time after the Effective Conversion Date 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 the Fair Market Value per share
of Common Stock on the stock issuance date.
2. Subject to the provisions of Section I of Article Six,
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,
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<PAGE> 45
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to such 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-completion of the vesting
schedule applicable to such 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 nonattainment
of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the outstanding repurchase 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 repurchase
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.
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<PAGE> 46
B. Any repurchase rights that are assigned in the Corporate
Transaction shall automatically terminate, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
the Participant's Service should subsequently terminate by reason of an
Involuntary Termination within eighteen (18) months following the effective date
of such Corporate Transaction.
C. All of the outstanding repurchase 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 the Optionee's service should terminate by reason of an Involuntary
Termination within eighteen (18) months following the effective date of a Change
in Control.
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.
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ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates
specified below:
1. Each Eligible Director who is first elected or
appointed as a non-employee Board member after the Effective Conversion/IPO Date
shall automatically be granted, on the date of such initial election or
appointment, a Non-Statutory Option to purchase 10,000 shares of Common Stock.
2. On the date of each Annual Stockholders Meeting after
the Effective Conversion/IPO 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 10,000 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 10,000 share option grants any one
Eligible Director may receive over his or her period of Board service; provided,
however, that the Board may terminate the Automatic Option Grant Program at any
time (in which case no further option grants shall be made pursuant to such
Program).
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall be payable in one or more of
the alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchase 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 OF OPTIONS. Each grant shall become exercisable
for the option shares as follows: 50% on the date of grant, 25% one year after
the date of grant and 25% two years after the date of grant.
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) Should the Optionee cease to serve as a Board member
for any reason (other than death or Permanent Disability), then the Optionee
shall have a six
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(6)-month period following the date of such cessation of Board service in
which to exercise each such option.
(ii) Should the Optionee become Personally Disabled or
die while the option is outstanding, then the Optionee or 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 the Optionee's cessation of Board service in
which to exercise each such option.
(iii) During the limited 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 at the time of the
Optionee's cessation of Board service.
(iv) 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 the Optionee's death
or Permanent Disability, be exercised for all or any portion of such shares
as fully-vested shares of Common Stock.
(v) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of the limited
post-service 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,
terminate and cease to be outstanding to the extent it 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 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 such 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 such shares as
fully-vested shares of Common
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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 send 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 SIX
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 no event may the maximum credit available to the Optionee or
Participant 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 stock appreciation rights 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
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Value equal to the percentage of the Taxes (not to exceed one hundred
percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective immediately on the
Effective Date.
B. The Board may terminate the Plan at any time. The Plan shall
automatically terminate upon the earliest of (i) September 3, 2006 (ten years
from the date that the Board approved the Plan), (ii) the date on which all
shares available for issuance under the Plan shall have been issued pursuant to
the exercise of 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 a clause (i) termination or a termination by
the Board, all options and unvested stock issuances outstanding on such date
shall thereafter continue to have full force and effect in accordance with the
provisions of the documents evidencing such options or issuances.
IV. AMENDMENT OF THE PLAN
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 the 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 or regulations.
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
either (x) the delivery to the Corporation of all investment letters and other
documents required by the Corporation to qualify for an exemption from such
requirements and the filing of any documents required in connection with such
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exemption or (ii) the filing and effectiveness of a Form S-8 registration
statement for the shares of Common Stock issuable under the Plan and the
satisfaction of all applicable listing requirements of any stock exchange (or
the Nasdaq National Market, if applicable) on which the Common Stock is then
listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
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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, par value $.001
per share.
F. CORPORATE TRANSACTION shall mean either of the following stockholder
approved transactions to which the Corporation is a party, it being understood
that the reorganization described in the Reorganization Agreement dated
September 5, 1996, among the Corporation, the U.S. residents, the Finnish
residents and the other corporations which are parties thereto shall not
constitute a "Corporate Transaction" for purposes of this Plan:
(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
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(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
G. CORPORATION shall mean Bionx Implants, Inc., a Pennsylvania
corporation.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.
I. EFFECTIVE CONVERSION DATE shall mean the first date (after any shares
of the Series A Preferred Stock are issued) on which there shall be no shares of
Series A Preferred Stock outstanding.
J. EFFECTIVE CONVERSION/IPO DATE shall mean the later of the Effective
Conversion Date and the Effective IPO Date.
K. EFFECTIVE DATE shall mean the date on which the Plan is approved by the
shareholders of the Corporation.
L. EFFECTIVE IPO DATE shall mean the date on which the Securities and
Exchange Commission declares effective a registration statement of the
Corporation relating to the Corporation's initial public offering.
M. 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.
N. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary) and is 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.
O. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of an option exercise.
P. 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
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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) If the Common Stock is not traded on the Nasdaq National
Market or any Stock Exchange, Fair Market Value shall be determined by the
Plan Administrator and shall represent the fair market value of one share
of Common Stock.
Q. HOSTILE TAKE-OVER shall mean 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.
R. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
S. 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.
T. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by an Optionee or Participant, any unauthorized use or disclosure
by any such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by any 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).
U. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
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V. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
W. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant, Automatic Option Grant or Salary Investment Option
Grant Program.
X. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Y. PARTICIPANT shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.
Z. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
of an Optionee or 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.
AA. PLAN shall mean the Corporation's 1996 Stock Option/Stock
Issuance Plan, as set forth in this document.
AB. PLAN ADMINISTRATOR shall mean the Board; provided, however, that (i)
at any time that any shares of Series A Preferred Stock are outstanding, the
term "Plan Administrator" shall mean a committee of three or more non-employee
members of the Board, one of which members shall be the Series A Preferred Stock
Director if there is a Series A Preferred Director on the Board, and (ii) at any
time on or after the Effective Conversion Date, the term "Plan Administrator"
shall mean any other committee of the Board to the extent that the Board
delegates to such committee any of the responsibilities of the Plan
Administrator hereunder.
AC. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary
investment option grant program in effect under the Plan.
AD. 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.
AE. SERIES A PREFERRED STOCK shall mean the first series of the
Corporation's preferred stock (par value $.001 per share) established by the
Board.
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AF. SERIES A PREFERRED STOCK DIRECTOR shall mean the member of the Board,
if any, elected solely by the holders of the Series A Preferred Stock; provided,
however, that prior to the first election of such director, the "Series A
Preferred Stock Director" shall be Terral Jordan or such other person as shall
be designated by the holders of the Series A Preferred Stock.
AG. SERVICE shall mean the provision 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 such holder's options
or the vesting of his or her 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).
AR. TRANSFEREE shall mean the person or entity to whom an Optionee
transfers all or a portion of his or her options in accordance with the
provisions of Article II, Section I, Subsection E of the Plan.
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BIONX INVESTMENT PLAN
ARTICLE 1. ESTABLISHMENT. PURPOSE. AND DURATION
1.1 Establishment of the Plan. Bionx, Inc., a Pennsylvania
corporation (hereinafter referred to as the "Company"), pursuant to
authorization by its Board of Directors, hereby establishes a stock purchase and
stock option plan to be known as the "Bionx Investment Plan" (hereinafter
referred to as the "Plan"), as set forth in this document. The Plan permits the
grant of options to eligible Employees and Directors upon the purchase of Plan
Shares.
Subject to approval of appropriate regulatory authorities, the Plan
shall become effective as of January 25, 2000 (the "Effective Date"), and shall
remain in effect as provided in Section 1.3 hereof.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the
success, and enhance the value, of the Company by linking the personal interests
of Participants to those of Company shareholders, and by providing Participants
with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to the Company
in its ability to motivate, attract, and retain the services of Participants
upon whose judgment, interest, and special effort the successful conduct of its
business largely is dependent.
1.3 Duration of the Plan. The Plan shall commence on the Effective
Date, as described in Section 1.1 hereof, and shall remain in effect, subject to
the right of the Board of Directors to terminate the Plan at any time pursuant
to Article 12 hereof, until all Shares subject to it shall have been purchased
or acquired according to the Plan's provisions. In the absence of an amendment
adopted by the Board to extend the Plan, the Plan shall end ten years and one
day after the Effective Date.
ARTICLE 2. DEFINITIONS
Wherever used in the Plan, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized:
(a) "Award Agreement" means an agreement to be entered into by and
between the Company and each Participant, setting forth the terms
and
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conditions applicable to each purchase of Plan Shares under the
Plan, and of the corresponding grant of Options.
(b) "Board" or "Board of Directors" means the Board of
Directors of the Company.
(c) "Base Salary" with respect to a particular Window Period means
(i) in the case of an Employee who has been employed by the Company
or its subsidiaries for at least one year prior to the first day of
such Window Period, the aggregate amount of income set forth on the
Form W-2 provided to a Participant by the Company or its
subsidiaries for the calendar year prior to the calendar year in
which the Window Period occurs, and (ii) in the case of an Employee
who has not been employed by the Company or its subsidiaries for at
least one year prior to the first day of such Window Period, the
annual salary of such Employee at the commencement of such Window
Period. Determinations of Base Salary shall be made by the Board of
Directors in its sole discretion or, upon delegation by the Board of
Directors, by the Plan Administrator.
(d) "Change in Control" shall mean:
the approval by the stockholders of the Company of (i) any
consolidation or merger of the Company in which the holders of
voting stock of the Company immediately before the
consolidation or merger will not own 50% or more of the voting
shares of the continuing or surviving corporation immediately
after such consolidation or merger, or (ii) any sale, lease,
exchange or other transfer (in one transaction or series of
related transactions) of all or substantially all of the
assets of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Company" means Bionx, Inc., a Pennsylvania corporation, or any
successor thereto as provided in Article 15 hereof.
(g) "Director" means any individual who is a member of the Board of
Directors of the Company.
(h) "Employee" means any employee of the Company or any of its
subsidiaries. The term "Employee" shall include any employee who is
also a Director.
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(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
(j) "Fair Market Value" means the closing sales price for Shares as
quoted on the National Market System of the National Association of
Securities Dealers Automated Quotation System on the relevant
date(s), or if there were no sales on such date(s), the closing
sales price for Shares as quoted on the National Market System of
the National Association of Securities Dealers Automated Quotation
System on the first immediately preceding date on which such price
is quoted.
(k) "Fully Paid" means that a Participant has satisfied the full
purchase price for Plan Shares by either (i) paying cash in one lump
sum to the Plan Administrator or (ii) by paying in full, as
determined by the Plan Administrator in accordance with any payroll
deduction program as shall be implemented by the Plan Administrator
with the approval of the Board of Directors or (iii) by paying in
full by some combination of payroll deduction and cash payments
which may be made at any time. All such determinations shall be
subject to the provisions of Section 6.4 hereof.
(l) "Option" means an option to purchase Shares granted under
Article 7 hereof. It is intended that Options under this Plan shall
not be incentive stock options for federal income tax purposes.
(m) "Option Price" means the price at which a Share may be purchased
by a Participant pursuant to an Option, as determined by the Board
of Directors.
(n) "Participant" means an Employee or Director of the Company who
has purchased Plan Shares and who has outstanding an Option granted
under the Plan.
(o) "Plan Administrator" means the individual or designated by the
Board of Directors to administer this Plan; or the Board of
Directors if no such designation has been made.
(p) "Plan Shares" means Shares purchased by Participants pursuant to
the terms of Article 6 hereof.
(q) "Retirement" shall have the same meaning herein as under the
Company's 401(k) plan.
(r) "Shares" means the shares of common stock of the Company.
(s) "Window Period" means the time period designated by the Board,
during which eligible Employees and Directors may purchase Plan
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Shares, pursuant to the terms of Article 6 hereof. Window Periods
shall last approximately fifteen days each, and shall occur at times
designated by the Board; it is currently intended that Window
Periods will occur at six months intervals.
ARTICLE 3. ADMINISTRATION
3.1 The Board of Directors. The Plan shall be administered by the
Board of Directors, or by a Plan Administrator appointed by the Board of
Directors. The Plan Administrator shall be appointed from time to time by, and
shall serve at the discretion of, the Board of Directors. The Board of Directors
and the Plan Administrator shall, in turn, retain independent agents to purchase
Shares in the market for purposes of the Plan unless the Board of Directors
determines from time to time that such Shares shall be issued directly by the
Company.
3.2 Authority of the Board of Directors. The Board of Directors
shall have the power to establish performance measures which will govern the
number of Options available in connection with purchases of Plan Shares, to
determine the degree to which the pre-designated performance measures are
attained by the Company, and to determine the terms and conditions applicable to
purchases of Plan Shares and grants of Options in a manner consistent with the
Plan; to construe and interpret the Plan and any agreement or instrument entered
into under the Plan; to establish, amend, or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 12 hereof) to
amend the terms and conditions of any outstanding Plan Share or Option to the
extent such terms and conditions are within the discretion of the Board of
Directors as provided in the Plan. Further, the Board of Directors shall make
all other determinations which may be necessary or advisable for the
administration of the Plan. The Board of Directors may delegate its authority as
identified hereunder to a Plan Administrator or such other persons as it may
deem appropriate.
3.3 Decisions Binding. All interpretations of the Plan,
determinations and decisions made by the Board of Directors pursuant to the
provisions of the Plan and all related orders or resolutions of the Board of
Directors shall be final, conclusive, and binding on all Participants.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section
4.3 and 6.2 hereof, the total number of Shares available for purchase as Plan
Shares and for grant under Options pursuant to the Plan may not exceed 500,000.
These 500,000 Shares may be either authorized but un-issued, or reacquired
shares. The following rules will
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apply for purposes of the determination of the number of Shares available for
grant under the Plan:
(a) the sale of Plan Shares shall reduce the Shares available for
purchase and/or grant under the Plan by the number of Shares sold;
and
(b) unless and until an Option is canceled, lapses, expires, or
terminates, it shall be counted against the authorized pool of
Shares.
No one person participating in the Plan may receive options under
the Plan or under any other benefit plan of the Company for more than an
aggregate of 250,000 shares of Common Stock in any fiscal year, subject to
adjustment as provided in Section 4.3 and 6.2 hereof.
4.2 Lapsed Awards. If any Plan Share purchase or Option grant under
this Plan is canceled, terminates, expires, or lapses for any reason, any Plan
Shares and/or any Shares subject to such Option shall again be available for
purchase and/or grant under the Plan.
4.3 Adjustments in Authorized Shares. In the event of any merger,
reorganization, consolidation, re-capitalization, separation, liquidation, stock
dividend, split-up, share combination, or other change in the corporate
structure of the Company affecting the Shares, such adjustment shall be made in
the number and class of Shares which may be purchased or delivered under the
Plan. and in the number and class of and/or price of outstanding Plan Shares and
Shares subject to outstanding Options granted under the Plan, as may be
determined to be appropriate and equitable by the Board of Directors, in its
sole discretion, to prevent dilution or enlargement of rights; and provided that
the number of Plan Shares and the Shares subject to any Option shall always be a
whole number. In such event, an appropriate adjustment shall also be made in the
maximum number of shares subject to options which may be granted under the Plan
and under any other benefit plan of the Company to any one person in any fiscal
year.
ARTICLE 5. PARTICIPATION
All persons who are Employees or Directors during a Window Period
shall be given the opportunity to purchase Plan Shares during such Window
Period, provided that such purchases are within the limits set forth in Section
6.2 hereof and provided that in the event that the Board terminates the Plan, no
Employee or Director shall have the right to purchase Plan Shares pursuant to
Article 6 hereof in any Window Period commencing subsequent to such termination.
Each Participant's eligibility for grants of Options pursuant to Article 7
hereof shall be contingent upon the Participant's purchasing Plan Shares, as set
forth in Article 6 hereof.
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ARTICLE 6. PURCHASES OF PLAN SHARES
6.1 Plan Share Purchases. An Employee or Director shall only be
entitled to purchase Plan Shares during a Window Period if such Employee or
Director is an Employee or Director, as the case may be, during such Window
Period. Each Plan Share purchased by a Participant under this Plan shall entitle
the Participant to be granted an Option to purchase a specified number of
Shares, as set forth in Article 7 herein. Purchases of Shares by Participants
other than pursuant to this Plan shall not entitle Participants to receive
option grants under Article 7 herein.
6.2 Maximum and Minimum Plan Share Purchases. All Plan Share
purchases shall occur during a Window Period. The Fair Market Value of the Plan
Shares purchased shall be determined pursuant to the provisions of Section 6.3
hereof. For each Window Period, the maximum aggregate Fair Market Value of Plan
Shares which may be purchased by an Employee or Director is the greater of
$50,000 or twice an Employee's annual salary in effect on the first day of the
applicable Window Period, and, in addition, for each two year period, the
Maximum Aggregate Fair Market Value of Plan Shares which may be purchased by an
Employee is twice an Employee's annual salary in effect at any time during such
two year period, unless the Board of Directors approves a higher limit on a
case-by case basis with respect to specific Employees or Directors. For any
Window Period, no Employee shall be permitted to purchase Plan Shares having an
aggregate Fair Market Value equal to less than one half of one percent of Base
Salary for that Window Period. For any Window Period, there shall be no minimum
number of Plan Shares which must be purchased by Directors, provided that the
number of shares purchased by any Director must be a whole number.
6.3 Purchase Price. The price of each Plan Share purchased under
this Plan shall equal the average Fair Market Value of a Share during the
applicable Window Period.
6.4 Procedure for Purchasing Plan Shares. A Participant who desires
to purchase Plan Shares shall notify the Plan Administrator, in writing, of the
number of Plan Shares to be purchased, and of the desired manner of paying for
the Plan Shares. Subject to Section 6.2 hereof, all applicable rules and
regulations of the United States Securities and Exchange Commission, and the
Plan Administrator's ability to reduce the number of Plan Shares to be purchased
to a whole number, the Plan Administrator shall cause to be issued from the
Company or shall purchase, on behalf of the Participant, the number of Plan
Shares indicated by the Participant, within thirty (30) days after the end of
the applicable Window Period. The Plan Administrator shall establish an account
in the name of each Participant, for the purpose of administering the Plan
Shares purchased by each Participant. The Plan Administrator shall have the
discretion to establish rules and procedures for purchasing Plan Shares on
behalf of Participants, and for administering the Plan Share accounts of
Participants.
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In addition, the Plan Administrator shall provide each Participant
who purchases Plan Shares with an Award Agreement, setting forth the terms and
provisions applicable to the Plan Shares purchased, and the Options granted to
the Participant in connection with the purchase of Plan Shares. Purchases
requested by Employees or Directors who fail to execute the Award Agreement
tendered by the Plan Administrator may be voided by the Plan Administrator.
Subject to the terms of the Plan and any terms approved by the Board of
Directors, and to the conditions placed on each Plan Share purchase opportunity,
each Participant shall satisfy the purchase price for Plan Shares by paying cash
in one lump sum to the Plan Administrator. If permitted by the Plan
Administrator, an Employee may satisfy the purchase price for Plan Shares by a
combination of paying cash and payroll deductions.
Except as otherwise provided in Section 6.2 and Section 9.1, in the
event that any Participant whom the Plan Administrator permits to pay for Plan
Shares through payroll deductions subsequently directs the Plan Administrator to
cease making payroll deductions before all Plan Shares which the Participant
previously indicated he desired to purchase are Fully Paid, then, unless the
Participant makes a cash payment to satisfy the full purchase price for Plan
Shares (i.e. the shares become Fully Paid), (i) the Participant will forfeit all
Plan Shares which are not then Fully Paid, (ii) the Participant will forfeit all
Options corresponding to the shares that were originally to be paid for using
payroll deduction, including those options corresponding to shares that have at
that time already been paid for using payroll deduction.. The Participant's
Award Agreement will be revised to indicate the forfeited Plan Shares and
Options and the Option forfeiture requirements described in Article 8 applicable
to any other Options.
Payment for plan shares via loan or payroll deduction will not be
allowed until approval by the shareholders of the Company.
6.5 Holding Period for Plan Shares. Subject to the terms of this
Plan, all Plan Shares which have been purchased shall be delivered at the end of
the 2 year period from the date of purchase provided that such Shares are Fully
Paid. To the extent that a Plan Share is Fully Paid prior to the end of these
holding periods, and subject to the option forfeiture provisions set forth in
Article 8 hereof, a Participant who is an Employee or Director at the time of
the requested transfer, shall be entitled to sell or otherwise transfer or
convey the Plan Shares (it being understood that the Plan Administrator shall
have sole discretion to determine the extent to which a Plan Share is Fully Paid
during the holding periods subject to Section 6.4 hereof).
Participants desiring to sell, transfer, or otherwise convey a Fully
Paid Plan Share prior to the end of the holding periods shall submit a request
in writing to the Plan Administrator for delivery of a Share certificate
representing such Plan Share. Such request shall be accompanied by the
Participant's Award Agreement, representing the grant of Options in connection
with the purchase of the Plan Share. If the Plan Administrator determines that
the Plan Share is Fully Paid, then the Plan Administrator
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shall deliver to the Participant a fully executed Share certificate,
representing such Plan Share, and shall document in the Award Agreement of the
Participant the corresponding change in Option forfeiture requirements of the
Plan (as set forth in Article 8 hereof).
In the event that prior to the end of the holding periods, a
Participant's employment with the Company or service as a Director of the
Company terminates, as the case may be, the terms of Article 9 hereof shall
govern the treatment of outstanding Plan Shares.
6.6 Voting Rights. During the holding periods described in Section
6.5 hereof and until such Shares are transferred and/or sold Participants who
have purchased Plan Shares shall be entitled to exercise full voting rights with
respect to such Plan Shares.
6.7 Dividends and Other Distributions. During the holding periods
described in Section 6.5 hereof. Participants who have purchased Plan Shares
shall be entitled to receive all dividends and other distributions (if any) paid
with respect to such Plan Shares while they are so held, provided that any such
distributions or dividends may be subject to the terms of any outstanding
purchase loan programs. If any such dividends or distributions are paid in
Shares, the Shares shall be converted into additional Plan Shares, and shall be
subject to the same restrictions on transferability and forfeitability as the
Plan Shares with respect to which they were paid. To the extent that dividends
are on shares the are not yet Fully Paid, the dividends will be held by the
Company and paid to the Participant at the time all shares are Fully Paid and
only to the pro rata extent the shares become Fully Paid.
6.8 Award Agreement. Each purchase of Plan Shares shall be evidenced
by an Award Agreement, setting forth relevant terms and provisions applicable to
the Plan Shares and to the corresponding grant of Options.
ARTICLE 7. STOCK OPTIONS
7.1 Option Grants. Subject to the terms and provisions of the Plan,
Options shall be granted to Participants upon the purchase of Plan Shares as of
the last day of the Window Period during which such Plan Shares have been
purchased.
The minimum number of Shares to be granted under option in
connection with the purchase of each Plan Share shall be one (1), and the
maximum number shall be three (3).
The multiple is selected by the Board and shall apply to all Plan
Share purchases during the applicable Window Period. Prior to or at the
beginning of the relevant Window Period, the multiple shall be communicated to
all Employees and Directors.
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7.2 Option Price. The Option Price for each option granted under
this Plan shall equal the average Fair Market Value of a Share during the Window
Period during which the Option shall have been granted.
7.3 Duration of Options. Each Option shall expire ten years and one
day from the date on which the Option was granted.
7.4 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and shall be subject to such restrictions and
conditions as the Board of Directors shall in each instance approve, which need
not be the same for each grant or for each Participant; provided, in the absence
of specific individual restrictions set at the time of option grant, that
options are exercisable as follows: 100% of the options granted during a window
period are exercisable two years after the grant date.
7.5 Payment. Options shall be exercised by the delivery of a written
notice of exercise to the Plan Administrator, setting forth the number of Shares
with respect to which the Option is to be exercised, accompanied by full payment
for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent or (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price, or (c) by a combination of both such
approaches.
The Board of Directors also may allow cashless exercises as
permitted under the Federal Reserve Board's Regulation T, subject to applicable
legal restrictions, or by any other means which the Board of Directors
determines to be consistent with the Plan's purposes and applicable law.
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the Participant, in the
Participant's name, share certificates in an appropriate amount, based upon the
number of Shares purchased under the Option(s).
7.6 Restrictions on Share Transferability. The Board of Directors
shall impose such restrictions on any Shares acquired pursuant to the exercise
of an Option under the Plan as it may deem advisable to comply with Federal and
State laws and exchange rules, including, without limitation, restrictions under
applicable Federal securities laws, under the requirements of NASDAQ or any
stock exchange or market upon which such Shares are then listed and/or traded,
and under any blue sky or state securities laws applicable to such Shares.
7.7 Nontransferability of Options. No Option granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
During a Participant's
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lifetime, all Options granted to a Participant under the Plan shall be
exercisable only by such Participant, except as set forth in Section 7.9 hereof.
7.8 No Rights as a Shareholder. Prior to the purchase of Shares
pursuant to an Option, a Participant shall not have the rights of a shareholder
with respect to such Shares.
7.9 Exercise of Options With Respect to Incapacitated Participants.
If a Participant, who has met the holding period described in Section 6.5 hereof
or has completed five (5) years of continuous employment or service as a
Director subsequent to the purchase of Plan Shares, is under a legal disability
or in the Board of Directors's opinion incapacitated in any way so as to be
unable to manage his or her financial affairs, the Board of Directors may allow
such Participant's legal representative to exercise the Participant's Options on
behalf of the Participant. Actions taken pursuant to this Section by the Board
of Directors shall discharge all liabilities under the Plan.
ARTICLE 8. PREMATURE DISPOSITION OF PLAN SHARES
Except as otherwise provided in Section 6.2 and Section 9.1, in the
event a Plan Participant sells, transfers or otherwise conveys a Fully Paid Plan
Share prior to the end of the holding periods described in Section 6.5 hereof
the options corresponding to the sold shares shall automatically be forfeited.
The foregoing forfeitures in this Article 8 are to be completed
unless the Board of Directors shall determine, in its sole and absolute
discretion, that the Employee has suffered hardship and such hardship has caused
such Employee to effect any of the actions discussed in (i) or (ii) of the first
sentence of this Article 8. In the event of such determination by the Board of
Directors, and if no loan from the Company was used to purchase such Plan
Shares, such Plan options shall not be forfeited, provided, however, the right
to exercise the Options granted in connection with the purchase of a Fully Paid
Plan Share shall be contingent upon the Participant's completion of five (5)
years continuous (a) employment with the Company or any of its subsidiaries or
(b) service as a Director of the Company subsequent to the last day of the
Window Period in which the Participant agreed to purchase such Plan Share.
ARTICLE 9. TERMINATION OF EMPLOYMENT
OR SERVICE AS A DIRECTOR
9.1 Termination by Reason of Death In the event the employment or
service as a Director of a Participant is terminated by reason of death, the
following provisions shall apply:
(a) Treatment of Plan Shares. The Participant will be credited with
all Plan Shares which are Fully Paid as of the date of employment
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termination or termination of service as a Director. If, at the time
of employment termination or termination of service as a Director,
the Participant has not Fully Paid all outstanding Plan Shares
purchased, the number of Plan Shares which shall be deemed Fully
Paid shall be determined at the sole discretion of the Plan
Administrator, subject to Section 6.4 hereof.
All outstanding Plan Shares which are not Fully Paid as of the
date of employment termination or termination of service as a
Director (as determined by the Plan Administrator, subject to
Section 6.4) shall be forfeited to the Company, and shall once again
become available for purchase under the Plan.
(b) Treatment of Stock Options. All outstanding Options granted to
the Participant corresponding to Plan Shares Fully Paid for prior to
the Participant's termination of employment or termination of
service as a Director which are then exercisable (and, accordingly,
which have been held at least for the periods specified in section
7.4) (collectively, the "Covered Options"), shall not be forfeitable
pursuant to Article 8 (if applicable) in the event of death and, if
not so forfeitable, shall remain exercisable at any time prior to
their expiration date, or for one (1) year after the date of death,
whichever period is shorter, by the Participant or by such person or
persons that have acquired the Participant's rights under the Option
by will or by the laws of descent and distribution. The Plan
Administrator shall, in all cases, determine the date of employment
termination or termination of service as a Director. All Options
granted to the Participant pursuant to the Plan other than the
Covered Options shall be forfeited and shall once again be available
for grant under the Plan. For the purpose of determining which
options represent Covered Options for this section only, the time
periods specified in section 7.4 are accelerated one year.
(c) Amounts Subject to Dispute. If at the time of a Participant's
death, the Plan Administrator is unable to determine what person,
persons or entity is entitled to exercise Options on behalf of the
Participant, the Plan Administrator shall not be required to
implement any directions to exercise such Options or deliver Plan
Shares to any such person, persons or entity during the pendency of
such dispute. Neither the Plan Administrator, the Board of Directors
or the Company shall be responsible for a failure to implement such
exercise instructions or to deliver such Plan Shares during the
pendency of such dispute,
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notwithstanding the fact that such Plan Shares or Options may
diminish in value or expire during the pendency of such dispute.
9.2 Other Termination In the event a Participant's employment or
service as a Director is terminated for reasons other than Death, the
following provisions shall apply:
(a) Treatment of Plan Shares. The Participant will be credited with
all Plan Shares which are Fully Paid as of the date of employment
termination or termination of service as a Director. The number of
Plan Shares which are Fully Paid for as of such date shall be
determined according to the guidelines set forth in Section 9,1 (a)
hereof. All outstanding Plan Shares which are not Fully Paid as of
the date of employment termination or termination of service as a
Director shall be forfeited to the Company and shall once again
become available for purchase under the Plan.
Plan Shares which have been delivered to a Participant prior
to employment termination or termination of service as a Director
shall not be affected by this provision.
(b) Treatment of Stock Options. Upon such a termination, a
Participant shall forfeit (i) all Options for which the requirements
of Article 8 (if applicable) have not been met, and (ii) all other
Options granted to the Participant under the Plan which do not
constitute Covered Options.
Covered Options for which the requirements of Article 8 (if
applicable) have been met may be exercised by the Participant within
the period beginning on the effective date of employment termination
or termination of service as a Director, and ending 90 days after
such date.
Notwithstanding any provision in this Plan to the contrary, in the
event that an employee continues to serve as a director or consultant to the
Company or any of its subsidiaries after such employee ceases to be employed by
the Company or any of its subsidiaries, the Board shall have the discretion to
provide that the employee shall, for purposes of this Plan, be deemed to
continue in the employment of the Company until such time that such person
ceases to serve as a director of, consultant to or employee of the Company or
any of its subsidiaries.
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ARTICLE 10. RIGHTS OF PARTICIPANTS
Nothing in the Plan shall interfere with or limit in any way the
right of the Company to terminate any participating Employee's employment at any
time or to dismiss any participating Director at any time, nor confer upon any
Participant any right to continue in the employ of the Company or as a Director
of the Company.
ARTICLE 11. CHANGE IN CONTROL
The following provisions shall apply if a Change in Control occurs:
(a) Any and all Options granted hereunder corresponding to Fully
Paid Shares (as determined by the Plan Administrator) shall become
immediately exercisable (and shall remain exercisable throughout
their entire term); all other Options granted hereunder shall be
forfeited to the Company;
(b) The Company shall deliver all Plan Shares which are Fully Paid
as of the effective date of the Change in Control (the Plan
Administrator shall have the authority to determine the number of
Plan Shares which are Fully Paid as of such date subject to Section
6.4 hereof, and to establish procedures for the delivery of such
Shares to Participants), and all remaining Plan Shares shall be
forfeited to the Company; and
(c) Subject to the other provisions of this Plan, the Board of
Directors shall have the authority to make any modifications to the
Plan Shares and Options as are determined by the Board of Directors
to be appropriate to accomplish the sections 11 (a) and (b) before
the effective date of the Change in Control.
ARTICLE 12. AMENDMENT, MODIFICATION AND TERMINATION
12.1 Amendment. Modification and Termination. With the approval of
the Board, at any time and from time to time, the Board of Directors may
terminate, amend or modify the Plan. Any such termination shall be effective
with respect to all subsequent Window Periods.
12.2 Awards Previously Granted. No termination, amendment or
modification of the Plan shall adversely affect in any material way any Plan
Share previously purchased or Option previously granted under the Plan, without
the written consent of the Participant holding such Plan Share or Option.
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ARTICLE 13. WITHHOLDING
13.1 Tax Withholding. The Company shall have the power and the right
to deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of this Plan.
13.2 Share Withholding. With respect to withholding required upon
the exercise of Options, upon the purchase of Plan Shares, or upon any other
taxable event hereunder, Participants may elect, subject to the approval of the
Board of Directors, to satisfy the withholding requirement, in whole or in part,
by having the Company withhold Shares having a Fair Market Value on the date the
tax is to be determined equal to the minimum statutory total tax which could be
imposed on the transaction. All elections shall be irrevocable, made in writing,
signed by the Participant, and comply with all procedures established by the
Board of Directors for Share withholding.
In addition, subject to the approval of the Board of Directors,
Participants may satisfy the tax withholding obligation arising as a result of
any taxable event occurring hereunder, by remitting to the Plan Administrator
previously held Shares having an aggregate Fair Market Value on the date the tax
is to be determined equal to the minimum statutory total tax which could be
imposed on the transaction; provided, however, that any Shares which are so
tendered must have been beneficially owned by the Participant for at least six
(6) months prior to the date of their tender.
ARTICLE 14. INDEMNIFICATION
Each person who is or shall have been a member of the Board of
Directors, or the Plan Administrator, and each agent retained by the Plan
Administrator, shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action taken in good faith or any
good faith failure to act under the Plan and against and from any and all
amounts paid by him or her in settlement thereof, with the Company's approval,
or paid by him or her in satisfaction of any judgment in any such action, suit,
or proceeding against him or her, provided he or she shall give the Company an
opportunity, at its own expense, to handle and defend the same before he or she
undertakes to handle and defend it on his or her own behalf. The foregoing right
of indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Company's Certificate of
Incorporation or By-Laws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.
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ARTICLE 15. SUCCESSORS
All obligations of the Company under the Plan, with respect to Plan
Shares purchased and Options granted hereunder, shall be binding on any
successor to the Company, whether the existence of such successor is the result
of a direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.
ARTICLE 16. LEGAL CONSTRUCTION
16.1 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine, the
plural shall include the singular and the singular shall include the plural.
16.2 Severability. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
16.3 Requirements of Law. The purchase of Plan Shares, the granting
of Options, and the issuance of Shares under the Plan, shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
16.4 Governing Law. To the extent not pre-empted by Federal law,
the Plan, and all agreements hereunder, shall be construed in accordance with
and governed by the laws of the State of Pennsylvania.
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