<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Horizon Medical Products, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
(HORIZON MEDICAL LOGO)
HORIZON MEDICAL PRODUCTS, INC.
April 7, 2000
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Horizon Medical Products, Inc. to be held on May 8, 2000 at One Horizon Way,
Manchester, Georgia 31816. The meeting will begin promptly at 11:00 a.m. local
time.
The items of business are listed in the following Notice of Annual Meeting
and are more fully addressed in the Proxy Statement provided herewith.
Please date, sign and return your proxy card in the enclosed envelope at
your convenience to assure that your shares will be represented and voted at the
Annual Meeting even if you cannot attend. If you attend the Annual Meeting, you
may vote your shares in person even though you have previously signed and
returned your proxy.
On behalf of your Board of Directors, thank you for your continued support
and interest in Horizon Medical Products, Inc.
Sincerely,
/s/ Marshall B. Hunt
Marshall B. Hunt
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
(HORIZON MEDICAL LOGO)
HORIZON MEDICAL PRODUCTS, INC.
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 8, 2000
---------------------
To Our Shareholders:
The 2000 annual meeting of shareholders of Horizon Medical Products, Inc.
will be held at One Horizon Way, Manchester, Georgia, on Monday, May 8, 2000,
beginning at 11:00 a.m. local time. At the meeting, shareholders will act on the
following matters:
(1) Election of two directors, each for a term of three years;
(2) Ratification of the appointment of PricewaterhouseCoopers LLP as
the Company's independent auditors for fiscal 2000;
(3) Approval of an increase in the total number of shares of the
Company's common stock authorized and reserved for issuance under the
Company's 1998 Stock Incentive Plan from 500,000 shares to 800,000 shares;
and
(4) Any other matters that properly come before the meeting.
Shareholders of record at the close of business on March 31, 2000 are
entitled to vote at the meeting or any postponement or adjournment.
By order of the Board of Directors,
/s/ William E. Peterson, Jr.
William E. Peterson, Jr.
Secretary
April 7, 2000
Manchester, Georgia
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE AND
MAIL THE ENCLOSED PROXY PROMPTLY. IF YOU ATTEND THE ANNUAL MEETING AND VOTE IN
PERSON, THE PROXY WILL NOT BE USED. IF THE PROXY IS MAILED IN THE UNITED STATES
IN THE ENCLOSED ENVELOPE, NO POSTAGE IS REQUIRED. THE PROMPT RETURN OF YOUR
PROXY WILL SAVE US THE EXPENSE INVOLVED IN FURTHER COMMUNICATION.
<PAGE> 4
(HORIZON MEDICAL LOGO)
HORIZON MEDICAL PRODUCTS, INC.
HORIZON MEDICAL PRODUCTS, INC.
ONE HORIZON WAY
MANCHESTER, GEORGIA 31816
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement contains information related to the annual meeting of
shareholders of Horizon Medical Products, Inc. ("Horizon" or the "Company") to
be held on Monday, May 8, 2000, beginning at 11:00 a.m., at our offices located
at One Horizon Way, Manchester, Georgia, and at any postponements or
adjournments thereof. The proxy card enclosed with this Proxy Statement is being
solicited by the Board of Directors of Horizon. Voting material for the meeting,
which includes this Proxy Statement, the enclosed proxy card and our 1999 Annual
Report, will be mailed to our shareholders on or about April 7, 2000.
ABOUT THE MEETING
WHY AM I RECEIVING THIS PROXY STATEMENT AND PROXY CARD?
You are receiving a Proxy Statement and proxy card because you own shares
of common stock in Horizon Medical Products, Inc. This Proxy Statement describes
issues on which we would like you, as a shareholder, to vote. It also gives you
information on these issues so that you can make an informed decision.
When you sign the proxy card, you appoint Marshall B. Hunt and William E.
Peterson, Jr. as your representatives at the meeting. Mr. Hunt and Mr. Peterson
will vote your shares, as you have instructed them on the proxy card, at the
meeting. This way, your shares will be voted whether or not you attend the
annual meeting. Even if you plan to attend the meeting, it is a good idea to
complete, sign and return your proxy card in advance of the meeting just in case
your plans change. If an issue comes up for vote at the meeting that is not on
the proxy card, Mr. Hunt and Mr. Peterson will vote your shares, under your
proxy, in accordance with their best judgment.
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Company's annual meeting, shareholders will act upon the matters
outlined in the accompanying notice of meeting, including the election of
directors, ratification of the Company's independent auditors and approval of an
increase in the total number of shares of the Company's common stock authorized
and reserved for issuance under the Company's 1998 Stock Incentive Plan (the
"Stock Incentive Plan"). In addition, the Company's management will report on
the performance of the Company during fiscal 1999 and respond to questions from
shareholders.
WHO IS ENTITLED TO VOTE?
Only shareholders of record at the close of business on the record date,
March 31, 2000, are entitled to receive notice of the annual meeting and to vote
the shares of common stock that they held on that date at the meeting, or any
postponement or adjournment of the meeting. Each outstanding share of common
stock entitles its holder to cast one vote on each matter to be voted upon. At
the close of business on the record date 13,366,278 shares of common stock of
the Company were outstanding and entitled to vote at the meeting.
<PAGE> 5
WHO CAN ATTEND THE MEETING?
All shareholders as of the record date, or their duly appointed proxies,
may attend the meeting, and each may be accompanied by guests. Registration and
seating will begin at 10:00 a.m. Each shareholder may be asked to present valid
picture identification, such as a driver's license or passport. Cameras,
recording devices and other electronic devices will not be permitted at the
meeting. Parking is available at the Company's offices.
Please note that if you hold your shares in "street name" (that is, through
a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date and check in at
the registration desk at the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the Company to conduct its business at the
meeting. Proxies received but marked as abstentions and broker non-votes will be
included in the calculation of the number of shares considered to be present at
the meeting.
HOW DO I VOTE?
You may vote by mail. You do this by signing your proxy card and mailing
it in the enclosed, prepaid and addressed envelope. If you mark your voting
instructions on the proxy card, your shares will be voted as you instruct. If
you return a signed card but do not provide voting instructions, your shares
will be voted (i) for the two named nominees, (ii) for the ratification of the
appointment of the independent auditors and (iii) for the approval of an
increase in the total number of shares of the Company's common stock authorized
and reserved for issuance under the Company's Stock Incentive Plan.
You may vote in person at the meeting. Written ballots will be passed out
to anyone who wants to vote at the meeting. If you hold your shares in "street
name" (through a broker or other nominee), you will need to obtain a proxy from
your stockbroker in order to vote at the meeting.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxy is exercised by filing with the Secretary of
the Company either a notice of revocation or a duly executed proxy bearing a
later date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
WILL MY SHARES BE VOTED IF I DO NOT SIGN AND RETURN MY PROXY CARD?
If your shares are held in street name, your brokerage firm may vote your
shares under certain circumstances. These circumstances include certain
"routine" matters, such as the election of directors. Therefore, if you do not
vote your proxy, your brokerage firm may either vote your shares on routine
matters, or leave your shares unvoted. When a brokerage firm votes its
customers' unvoted shares on routine matters, these shares are counted for
purposes of establishing a quorum to conduct business at the meeting.
A brokerage firm cannot vote customers' shares on non-routine matters.
Therefore, if your shares are held in street name and you do not vote your
proxy, your shares will not be voted on non-routine matters and will not be
counted in determining the number of shares necessary for approval. Shares
represented by such "broker non-votes" will, however, be counted in determining
whether there is a quorum.
2
<PAGE> 6
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors. The Board's recommendation is set forth together with
the description of each item in this proxy statement. In summary, the Board
recommends a vote:
(a) for election of the nominated slate of directors (see page 5);
(b) for ratification of the appointment of PricewaterhouseCoopers LLP
as the Company's independent auditors (see page 15); and
(c) for the approval of an increase in the total number of shares of
the Company's common stock authorized and reserved for issuance under the
Company's Stock Incentive Plan from 500,000 shares to 800,000 shares (see
page 15).
With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
Election of Directors. The affirmative vote of a plurality of the votes
cast at the meeting is required for the election of directors. "Plurality" means
that the individuals who receive the largest number of votes cast are elected as
directors. Consequently, shares not voted, whether by marking "ABSTAIN" on your
proxy card, by broker non-vote (which is described above) or otherwise, have no
impact on the election of directors.
Other Items. For each other item, including the ratification of the
appointment of PricewaterhouseCoopers LLP as our independent auditors and the
approval of an increase in the total number of shares of the Company's common
stock authorized and reserved for issuance under the Company's Stock Incentive
Plan, the affirmative vote of the holders of a majority of the shares
represented in person or by proxy and entitled to vote on the item will be
required for approval. A properly executed proxy marked "ABSTAIN" with respect
to any such matter will not be voted, although it will be counted for purposes
of determining whether there is a quorum. Accordingly, an abstention will have
the effect of a negative vote. Broker non-votes will be counted for purposes of
establishing a quorum but will not be counted as votes for or against matters
presented for shareholder consideration.
STOCK OWNERSHIP
WHO ARE THE LARGEST OWNERS OF THE COMPANY'S STOCK?
Based upon a review of filings with the Securities and Exchange Commission,
the Company believes that each of Marshall B. Hunt, the Company's Chairman and
Chief Executive Officer, William E. Peterson, Jr., the Company's President and
Secretary, Roy C. Mallady, Jr., the Company's former Vice Chairman, and Tapir
Investments (Bahamas) Ltd. is the beneficial owner of more than 5% of the
Company's common stock.
HOW MUCH STOCK DO THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS OWN?
The following table shows the amount of common stock of the Company
beneficially owned (unless otherwise indicated) as of April 1, 2000 by (i) the
Company's directors and nominees for director, (ii) the named executive officers
of the Company, (iii) the directors and executive officers of the Company as a
group and (iv) each person known by the Company to own more than 5% of our
common stock.
3
<PAGE> 7
STOCK OWNERSHIP
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME(1) BENEFICIALLY OWNED(2) PERCENT OF SHARES OUTSTANDING
- ------- --------------------- -----------------------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Marshall B. Hunt(3)................................ 3,646,198 27.3%
William E. Peterson, Jr............................ 2,921,890 21.9%
Robert M. Dodge.................................... 0 --
Michael A. Crouch(4)............................... 6,500 *
Frank D. DeBartola(5).............................. 7,750 *
Robert R. Singer(4)................................ 6,500 *
Walter J. Fritschner............................... 0 --
Robert Cohen(6).................................... 8,666 *
Lynn R. Detlor(6).................................. 8,666 *
Robert J. Simmons(6) (7)........................... 64,894 *
A. Gordon Tunstall(6).............................. 33,666 *
All current directors and executive officers as a
group (11 persons)............................... 6,711,230 50.2%
OTHER PRINCIPAL SHAREHOLDERS
Tapir Investments (Bahamas) Ltd.
c/o Higgs & Johnson
Sandringham House
83 Shirby Street
P. O. Box N-3247
Nassau, Bahamas.................................. 1,494,416 11.2%
Roy C. Mallady, Jr.(8)
2985 Nancy Creek Road, N.W
Atlanta, Georgia 30327........................... 1,328,582 9.9%
</TABLE>
- ---------------
* Represents less than 1% of the Company's outstanding common stock.
(1) Except as otherwise indicated, the address of each of the executive officers
and directors is the address of the Company, which is One Horizon Way, P. O.
Drawer 627, Manchester, Georgia 31816.
(2) Under the rules of the Securities and Exchange Commission, a person is
deemed to be a "beneficial owner" of a security if that person has or shares
"voting power", which includes the power to vote or to direct the voting of
such security, or "investment power", which includes the power to dispose of
or to direct the disposition of such security. A person also is deemed to be
a beneficial owner of any securities which that person has the right to
acquire within sixty (60) days. Under these rules, more than one person may
be deemed to be a beneficial owner of the same securities and a person may
be deemed to be a beneficial owner of securities as to which he or she has
no economic or pecuniary interest. Except as set forth in the footnotes
below, the persons named below have sole voting and investment power with
respect to all shares of Common Stock shown as being beneficially owned by
them.
(3) Includes 924,210 shares of common stock owned by Hunt Family Investments,
L.L.L.P., a Georgia limited liability limited partnership of which Mr. Hunt
is the managing general partner.
(4) Includes 6,500 shares of common stock that may be acquired upon the exercise
of stock options exercisable within 60 days.
(5) Includes 7,750 shares of common stock that may be acquired upon the exercise
of stock options exercisable within 60 days.
(6) Includes 8,666 shares of common stock that may be acquired upon the exercise
of stock options exercisable within 60 days.
(7) Includes 45,328 shares owned of record by Healthcare Alliance, Inc., an
affiliate of Mr. Simmons.
(8) Includes 61,500 and 23,600 shares of common stock held, respectively (i) by
a revocable trust established by Mr. Mallady with respect to which Mr.
Mallady is neither a trustee nor a beneficiary and (ii) through an
Individual Retirement Account for the benefit of Mr. Mallady.
4
<PAGE> 8
MANAGEMENT OF THE COMPANY
DIRECTORS STANDING FOR ELECTION
The Board of Directors of the Company currently consists of six (6)
directors divided into three classes, with each director serving a three-year
term (after the initial term). The term of the Class I director, Mr. Detlor,
expires at the 2002 annual meeting. The term of the Class II directors, Messrs.
Simmons and Cohen, expires at the 2000 annual meeting. The term of the Class III
directors, Messrs. Hunt, Peterson and Tunstall, expires at the 2001 annual
meeting. Shareholders will elect the directors of each class for three-year
terms at the appropriate succeeding annual meetings of shareholders. Charles E.
Adair resigned from the Company's Board of Directors effective March 15, 2000.
The Board of Directors will fill this vacancy in accordance with the Company's
bylaws as soon as a suitable candidate has been identified.
The Board of Directors proposes that the nominees described below, all of
whom are currently serving as Class II directors, be re-elected to Class II for
a term of three years and until their successors are duly elected and qualified.
Each of the nominees has consented to serve a three year term. If any of
them should become unavailable to serve as a director, the Board may designate a
substitute nominee. In that case, the persons named as proxies will vote for the
substitute nominee designated by the Board. In no event will proxies be voted
for the election of more than two nominees to the Board of Directors.
Class II Directors. The directors standing for election are:
Robert Cohen, 42, joined the Company's Board of Directors in January 1998.
Mr. Cohen presently is Vice President -- Business and Technology Development for
St. Jude Medical, Inc., a New York Stock Exchange listed cardiovascular device
company. Mr. Cohen is also a director of Cardio Focus, Inc. Between 1992 and
October 1998, Mr. Cohen served as Group Vice President of Sulzer Medica Ltd.
("Sulzer Medica"), a medical technology company serving the orthopedic and
cardiovascular markets. Mr. Cohen is engaged in the areas of mergers and
acquisitions, corporate accounts, business development, corporate marketing and
strategic planning. Prior to joining Sulzer Medica, Mr. Cohen served as
President and Chief Executive Officer of GCI Medical, a medical device venture
capital and management organization, during 1992 and held a variety of positions
at Pfizer Inc. and the Pfizer Hospital Products Group from 1981 to 1991.
Robert J. Simmons, 56, joined the Company's Board of Directors in January
1998. Since 1993, Mr. Simmons has served as a director and Chairman and Chief
Executive Officer of Healthcare Alliance, Inc. ("Healthcare Alliance"), which
represents a consortium of healthcare manufacturers, and since 1990 he has been
a director and President of RJS Healthcare, Inc., a healthcare consulting
company. Mr. Simmons has previously served as a director and Chairman of
Healthcare Logistics, a company focused on supply chain initiatives, founded in
1996. From 1985 to 1990, Mr. Simmons served as a director and Executive Vice
President of Baxter International, Inc. Before joining Baxter International, Mr.
Simmons held various positions at American Hospital Supply Corporation. Mr.
Simmons presently serves as a director of WRP Corporation and Footmaxx. Mr.
Simmons has served on the Boards of Directors of Ancilla Systems, Inc., CIS
Technologies, The Evanston Hospital Corporation, Pyxis, Wheaton Franciscan
Services, Inc. and Lake Forest Hospital.
DIRECTORS CONTINUING IN OFFICE
Class I Director. The following Class I director was elected at the
Company's 1999 annual meeting for a term ending in 2002:
Lynn R. Detlor, 52, joined the Company's Board of Directors in April, 1998.
Since December 1999, Mr. Detlor has served as Chief Executive Officer of
Med-eCommerce / BuyMatrix, Inc., provider of a member-benefit group purchasing
program for healthcare professionals. From 1996 to 1999, Mr. Detlor served as
the president of Premier Purchasing Partners, a group purchasing organization
owned by its members, with its primary function to provide contracting services
for its member hospitals. Mr. Detlor provided executive leadership for strategic
contracting at Premier. Previously, Mr. Detlor served as a vice president of
American
5
<PAGE> 9
Healthcare Systems and president of AmHS Purchasing Partners, L.P. Prior to
joining American Healthcare Systems, Mr. Detlor served as vice president for
material management of the Adventist Health System from 1974 to 1986. During
that time he developed a national purchasing program for the Adventist System.
Earlier he was assistant director of purchasing at Glendale Adventist Medical
Center in Los Angeles.
Class III Directors. The following Class III directors were elected at the
Company's 1998 annual meeting for terms ending in 2001:
Marshall B. Hunt, 44, is a co-founder of the Company and has served as a
director and Chief Executive Officer of the Company since its inception in 1990.
Mr. Hunt has served as the Chairman of the Board of the Company since 1997.
Prior to co-founding the Company, Mr. Hunt co-founded Cardiac Medical, Inc.
("CMI"), a distributor of cardiac pacemakers, in 1987, and served as its Chief
Executive Officer until October 1997. Mr. Hunt currently serves as Secretary of
CMI. In 1981, Mr. Hunt founded Hunt Medical Systems, Inc., a distributor of
pacemaker products, and served as its President from 1981 to 1987. From 1979
through 1981, Mr. Hunt held various sales and management positions with American
Hospital Supply Corporation.
William E. Peterson, Jr., 44, is a co-founder of the Company and has served
as President of the Company since its inception in 1990. Mr. Peterson joined the
Company's Board of Directors in January 1998. Mr. Peterson served as Vice
President of Finance of CMI from 1987 to 1997. From 1981 through 1987, he served
as a financial officer of Copolymer Rubber & Chemical Corporation, a
manufacturer of synthetic rubber. From 1978 to 1981, Mr. Peterson held various
positions with the public accounting firm of Coopers & Lybrand L.L.P., rising to
the position of Audit Senior. Mr. Peterson is a Certified Public Accountant.
A. Gordon Tunstall, 56, joined the Company's Board of Directors in January
1998. Mr. Tunstall is the founder of and has served, since 1980, as President of
Tunstall Consulting, Inc., a provider of strategic consulting and financial
planning services. Mr. Tunstall is also currently a director of kforce.com,
Inc., a professional and technical placement firm, Orthodontic Centers of
America, Inc., a manager of orthodontic practices, and Advanced Lighting
Technologies, Inc., a specialty lighting manufacturer. Mr. Tunstall has
previously served as a director of Discount Auto Parts, Inc., a retail chain of
automotive aftermarket parts stores.
HOW ARE DIRECTORS COMPENSATED?
Cash Compensation. Each non-employee director of the Company receives a
fee of $2,000 for each meeting of the Board of Directors attended and each
meeting of a committee of the Board of Directors attended (except for committee
meetings held on the same day as Board meetings). Prior to July 27, 1999, each
non-employee director of the Company received a fee of $1,000 for each meeting
of the Board of Directors attended and each meeting of a committee of the Board
of Directors attended (except for committee meetings held on the same day as
Board meetings). Directors are reimbursed for travel and other expenses incurred
in connection with attendance at meetings of the Board of Directors or
committees thereof. Directors who are also employees of the Company receive no
additional compensation for service as directors.
Options. Each non-employee director was granted, under the Company's Stock
Incentive Plan, options to acquire, subject to certain vesting requirements, up
to 6,000 shares of common stock at $3.375 per share on December 2, 1999. In
addition, each non-employee director, except for Mr. Detlor, was automatically
granted, under the Company's Stock Incentive Plan, options to acquire, subject
to certain vesting requirements, up to 10,000 shares of common stock at $14.50
per share upon the consummation of the Company's initial public offering in
April 1998. Mr. Detlor was granted, under the Company's Stock Incentive Plan,
options to acquire, subject to certain vesting requirements, up to 10,000 shares
of common stock at $15.50 per share upon joining the Board of Directors on April
22, 1998.
6
<PAGE> 10
HOW OFTEN DID THE BOARD MEET DURING 1999?
The Board of Directors met five times during fiscal 1999. Each director
attended more than 75% of the total number of meetings of the Board and
Committees on which he served, except for the Executive Committee which did not
meet during 1999.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Directors has established an Executive Committee, an Audit
Committee and a Compensation Committee. The members of each of these committees
are set forth in the following table:
BOARD COMMITTEE MEMBERSHIP
<TABLE>
<CAPTION>
EXECUTIVE COMPENSATION AUDIT
NAME COMMITTEE COMMITTEE COMMITTEE
- ---- --------- ------------ ---------
<S> <C> <C> <C>
Robert Cohen......................................... *
Lynn R. Detlor.......................................
Marshall B. Hunt..................................... *
William E. Peterson, Jr.............................. *
Robert J. Simmons.................................... *
A. Gordon Tunstall................................... * *
</TABLE>
* Member.
The Board of Directors has not established a nominating committee.
Shareholder nominations for the Board of Directors may be considered if made in
accordance with the Company's Bylaws.
Executive Committee. The Executive Committee is authorized to exercise the
power and authority of the Board of Directors in the management of the business
and affairs of the Company subject to certain limitations, including statutory
restraints under Georgia law, as well as the lack of Board authority to approve
(i) acquisitions or other business combinations, (ii) material changes in the
strategic plan of the Company and (iii) Company borrowings in excess of $7.0
million. During 1999, the Executive Committee did not meet.
Compensation Committee. The Compensation Committee is responsible for
reviewing and approving the compensation arrangements for the Company's
executive officers and for administering the Stock Incentive Plan. During 1999,
the Compensation Committee met twice.
Audit Committee. The Audit Committee is responsible for nominating the
Company's independent auditors for approval by the Board of Directors, reviewing
the scope, results and costs of the audit with the Company's independent
auditors, and reviewing the financial statements and accounting practices of the
Company. During 1999, the Audit Committee met once.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for fiscal 1999.
WHAT IS THE COMPANY'S PHILOSOPHY ON EXECUTIVE OFFICER COMPENSATION?
The Company's compensation program for executives consists of the following
key elements:
- a base salary,
- a performance-based annual or quarterly bonus, and
- periodic grants of stock options.
The Compensation Committee believes that this compensation approach best
serves the interests of the Company and its shareholders. It enables the Company
to meet the requirements of the highly competitive environment in which the
Company operates, while ensuring that executive officers are compensated in a
way
7
<PAGE> 11
that advances both the short- and long-term interests of the Company's
shareholders. The variable annual bonus permits individual performance to be
recognized on an annual or quarterly basis, and is based, in significant part,
on an evaluation of the contribution made by the officer to Company performance.
(Compensation and bonus arrangements applicable to the Company's Chief Executive
Officer and President, respectively, are described below.) Stock options relate
a significant portion of long-term remuneration directly to stock price
appreciation realized by all of the Company's shareholders.
Base Salary. Base salaries for the Company's executive officers, as well
as changes in such salaries, are determined by the Chief Executive Officer and
President. Base salaries for the Chief Executive Officer and President are
determined by and reviewed periodically by the Compensation Committee. The
Compensation Committee can revise the compensation structure for executive
officers as it determines is necessary. The factors the Compensation Committee
considers in evaluating the adequacy of compensation for executive officers of
the Company include competitive industry salaries; a subjective assessment of
the nature of the position; the contribution and experience of the officer, and
the length of the officer's service.
Stock Options. Under the stock option guidelines adopted by the
Compensation Committee, stock option grants may be made to executive officers
upon initial employment, upon promotion to a new, higher level position that
entails increased responsibility and accountability, in connection with the
execution of a new employment agreement, and/or when all previously granted
stock options have either fully vested or are within twelve months of full
vesting. Using these guidelines, the Chief Executive Officer and the President,
recommend the number of options to be granted, within a range associated with
the individual's salary level, and present their recommendations to the
Compensation Committee for review and approval. The Chief Executive Officer
and/or the President may make recommendations that deviate from the guidelines
where they deem it appropriate. While options typically vest over a minimum
four-year period, options granted to certain executive officers may have longer
or shorter vesting periods. No options have been granted to the Chief Executive
Officer or President to date.
HOW ARE THE COMPANY'S CHIEF EXECUTIVE OFFICER AND PRESIDENT COMPENSATED?
As Chief Executive Officer and President, Mr. Hunt and Mr. Peterson are
compensated pursuant to the terms of employment agreements which were entered
into in April 1998 and amended in May 1999. The agreements, which extend through
March 2003, subject to earlier termination under certain circumstances, provide
for an annual base salary of $270,000 for Mr. Hunt and $225,000 for Mr.
Peterson, with the opportunity for Messrs. Hunt and Peterson to earn an annual
bonus of 100% of base salary if the annual increase in the Company's earnings
per share is 35% or more and 50% of base salary if the annual increase in the
Company's earnings per share is at least 25% but less than 35%. See "Employment
Agreements" below.
HOW IS THE COMPANY ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid for any
fiscal year to the corporation's chief executive officer and four other most
highly compensated executive officers as of the end of any fiscal year. No
executive officer received more than $1 million in compensation in 1999 that
will be subject to the Section 162(m) limitation on deductibility.
COMPENSATION COMMITTEE
A. Gordon Tunstall
Robert Cohen
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Board's Compensation Committee is or has been an
officer or employee of the Company. However, in 1999 Mr. Tunstall's company,
Tunstall Consulting, Inc., provided certain consulting services to the Company.
In addition, in 1999 the Company was party to a consulting agreement
8
<PAGE> 12
with Mr. Cohen, although Mr. Cohen did not provide any services to the Company
under this agreement in 1999. See "Certain Relationships and Related
Transactions -- Consulting Agreements with Directors."
EMPLOYMENT AGREEMENTS
Employment Agreements with Marshall B. Hunt and William E. Peterson,
Jr. The Company has entered into employment agreements with each of Marshall B.
Hunt and William E. Peterson, Jr. (collectively, the "Employment Agreements")
which provide for Mr. Hunt's employment as Chairman of the Board and Chief
Executive Officer and Mr. Peterson's employment as President. The Employment
Agreements each have a five-year term (subject to the right of either the
Company or Messrs. Hunt and Peterson to terminate the Employment Agreement upon
90 days' notice) and provide for initial annual base salaries for Messrs. Hunt
and Peterson of $220,000 and $190,000, respectively, with the opportunity to
earn an annual bonus of 100% of base salary if the annual increase in the
Company's earnings per share is 35% or more and 50% of base salary if the annual
increase in the Company's earnings per share is at least 25% but less than 35%.
By amendment to each Employment Agreement, effective May 12, 1999, Mr. Hunt's
base salary was increased to $270,000 and Mr. Peterson's base salary was
increased to $225,000. The Employment Agreements provide that Messrs. Hunt and
Peterson are entitled to participate in all compensation, benefit and insurance
programs maintained by the Company in which executive officers are eligible to
participate and for certain other benefits, including reimbursement for
reasonable family medical and dental expenses which are not covered by
insurance, automobile leases and certain reimbursements for country club dues.
In the event the employment of either Mr. Hunt or Mr. Peterson is terminated
without cause (as defined in the respective employment agreements), he would be
entitled to receive his base salary and benefits for the remaining term of the
Employment Agreement, but in any event for no less than three years following
the date of termination, as well as bonus compensation payable with respect to
the calendar year in which he is terminated on a prorated basis. In the event of
a change in control (as defined in the respective employment agreements) of the
Company and their termination of employment, Messrs. Hunt and Peterson would be
entitled to receive, in lieu of salary, a lump-sum payment equal to the base
salary for the remaining term of employment under the Employment Agreements, but
in no event for a period less than three years.
Employment Agreement with Robert M. Dodge. The Company has entered into an
Employment Agreement with Robert M. Dodge dated December 15, 1999 (the "Dodge
Employment Agreement") which provides for Mr. Dodge's employment as Senior Vice
President and Chief Financial Officer. The Employment Agreement has a five year
term (subject to the right of either the Company to terminate the Agreement upon
30 days notice without cause or Mr. Dodge to terminate the Agreement upon 90
days prior notice) and provides for an initial annual base salary of $183,260.
Mr. Dodge has the opportunity under his Agreement to earn an annual bonus of 35%
of base salary if the Company's earnings per share equals or exceeds the
Company's budgeted earnings per share for the year or 10% of base salary if the
Company's earnings per share equals the average of all projected earnings per
share that are published at the beginning of the calendar year (as adjusted for
acquisitions) by analysts who actually establish an earnings per share
projection for the year in question, with an additional amount of bonus above
the 10% of base salary bonus if the Company's earnings per share exceeds the
average analyst earnings per share but is less than the Company's budgeted
earnings per share for the year. The Dodge Employment Agreement provides that
Mr. Dodge is entitled to participate in all benefit and insurance programs
maintained by the Company in which executive officers are eligible to
participate and for certain other benefits, including disability insurance and a
monthly amount for automobile expenses, country club dues, and tax/financial
planning. In the event the employment of Mr. Dodge is terminated without cause
(as defined in his Agreement), he would be entitled to receive his base salary
and benefits for a period of 9 to 12 months depending upon the date of
termination. In the event of an acquisition of the Company, Mr. Dodge may resign
from his employment under certain conditions (within 30 days after such
acquisition, if Mr. Dodge is not offered a position of employment that is
mutually acceptable to him and that is within a certain location) and be
entitled to receive his base salary and benefits for a period of 9 to 12 months
depending upon date of termination. If the Company is acquired and Mr. Dodge
remains an employee through the acquisition, he is entitled to a stay-put bonus
of $200,000. Pursuant to his Employment Agreement, Mr. Dodge was granted an
option to purchase 50,000 shares of the Company's common stock
9
<PAGE> 13
under the Stock Incentive Plan, which vests 25% per year on the first, second,
third and fourth anniversary dates of his employment. The options would become
fully vested and exercisable immediately prior to a change in control with
respect to the Company (as defined in the Stock Incentive Plan).
Employment Agreement with Walter J. Fritschner. The Company entered into
an Employment Agreement with Walter J. Fritschner dated May 12, 1999 (the
"Fitschner Employment Agreement") which provided for Mr. Fitschner's employment
as Senior Vice President and Chief Financial Officer. Mr. Fitschner resigned and
left the Company on December 17, 1999. The Employment Agreement had a five year
term (subject to the right of either the Company to terminate the Employment
Agreement upon thirty days' notice without cause or Mr. Fitschner to terminate
the Employment Agreement upon thirty days' prior notice) and provided for an
initial base salary of $183,260. Mr. Fitschner had the opportunity under his
agreement to earn an annual bonus for 1999 of thirty-five percent (35%) of base
salary if the Company's earnings per share was in excess of fifty cents ($.50),
twenty percent (20%) of base salary if the Company's earnings per share was in
excess of forty-five cents ($.45), but not greater than fifty cents ($.50) and
ten percent (10%) of base salary if the Company's earnings per share was
forty-three cents ($.43) or more, but not greater than forty-five cents ($.45).
For each calendar year after 1999, Mr. Fitschner would have been entitled to
earn an annual bonus, based upon thirty-five percent (35%), twenty percent
(20%), or ten percent (10%) of his base salary, if the Company achieved certain
earnings per share goals established by the Board of Directors or the
Compensation Committee of the Board of Directors. The Fitschner Employment
Agreement provided that Mr. Fitschner was entitled to participate in all benefit
and insurance programs maintained by the Company in which executive officers are
eligible to participate and provided Mr. Fitschner certain other benefits,
including monthly allowance for automobile, country club dues, tax/financial
planning, relocation expenses in connection with his relocation from Texas to
Georgia, and use of a Company furnished apartment in Manchester, Georgia.
Pursuant to his Employment Agreement, Mr. Fitschner was granted an option to
purchase 50,000 shares of the Company's common stock under the Stock Incentive
Plan, which vested twenty-five percent (25%) per year on the first, second,
third, and fourth anniversary dates of his employment. The options would become
fully vested and exercisable immediately prior to a change in control with
respect to the Company (as defined in the Stock Incentive Plan). These options
were terminated upon Mr. Fitschner's resignation on December 17, 1999.
Executive Officers Severance And Bonus Agreements. The Company has entered
into Severance and Bonus Agreements dated November 12, 1999 with certain of its
executive officers: Michael A. Crouch, Frank D. DeBartola, Robert R. Singer and
L. Bruce Maloy. Under the Agreements, each executive is entitled to a stay put
bonus of $50,000 in the event the Company is acquired and the executive remains
an employee of the Company through the acquisition. In the event of an
acquisition, the executive is also entitled to severance compensation ($121,000
for Mr. Crouch; $128,400 for Mr. DeBartola; $121,000 for Mr. Singer; and
$107,200 for Mr. Maloy) payable over a 12-month period (i) if he complies with
certain non-competition provisions and (ii) if he continues his employment
through the acquisition and is terminated after the acquisition without cause
(as defined in the Agreement) or if he is not offered within 30 days after the
acquisition a position of employment within a 50 mile radius of his home that is
acceptable to the executive and resigns.
10
<PAGE> 14
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth information concerning total compensation
earned or paid to the Chief Executive Officer and certain other executive
officers of the Company (the "named executive officers") for services rendered
to the Company during each of the last three fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ---------------
COMPENSATION SECURITIES
FISCAL ------------------- OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS/SARS(3)
- ---------------------------- ------ -------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Marshall B. Hunt (4).................. 1999 $256,667 $ -- $52,862 --
Chairman of the Board, 1998 165,445 -- 37,773 --
Chief Executive Officer and Director 1997 -- -- -- --
William E. Peterson, Jr. (4).......... 1999 214,688 -- 32,073 --
President, Secretary and Director 1998 142,910 -- 20,668 --
1997 -- -- -- --
Robert M. Dodge (5)................... 1999 7,636 -- -- 50,000
Senior Vice President and 1998 -- -- -- --
Chief Financial Officer 1997 -- -- -- --
Michael A. Crouch..................... 1999 76,667 23,515 -- 12,000
Vice President of Distribution; 1998 75,000 52,826 18,500 12,000
President of Stepic Corporation 1997 52,500 37,117 -- 12,000
Frank D. DeBartola.................... 1999 80,000 23,515 -- 12,000
Vice President of Marketing and 1998 74,583 40,000 -- 17,000
Business Development 1997 47,500 39,417 -- 7,000
Robert R. Singer...................... 1999 80,000 23,515 -- 12,000
Vice President -- Sales 1998 75,000 46,500 -- 12,000
1997 56,250 38,167 -- 6,500
Walter J. Fritschner (6).............. 1999 113,022 -- -- 50,000
Former Senior Vice President and 1998 -- -- -- --
Chief Financial Officer 1997 -- -- -- --
</TABLE>
- ---------------
(1) Amounts include paid and unpaid bonuses pertaining to each year and
commissions paid during each year.
(2) The Company provides the named executive officers with certain group life,
health, medical and other non-cash benefits generally available to all
salaried employees and certain auto allowances and other benefits. The
amounts shown include: (i) for Mr. Hunt, $13,268 for automobile allowances
and $27,532 for medical and dental expense reimbursements; and (ii) for Mr.
Peterson, $14,211 for automobile allowances and $8,543 for life and
disability insurance. No other such compensation exceeded 10% of the total
annual salary and bonus for any executive in any year for which a dollar
amount is not disclosed.
(3) The 1997 amounts represent units of stock appreciation rights ("SARs")
granted to each executive officer. All such SARs were canceled at the
Company's initial public offering in April 1998.
(4) Prior to April 1998, the Company did not pay salaries to Messrs. Hunt and
Peterson.
(5) Mr. Dodge joined the Company as Senior Vice President and Chief Financial
Officer on December 20, 1999.
(6) Mr. Fritschner served as the Company's Senior Vice President and Chief
Financial Officer from May 12, 1999 to December 17, 1999.
11
<PAGE> 15
EXECUTIVE OFFICERS AND KEY EMPLOYEES
<TABLE>
<CAPTION>
NAME AGE POSITION SINCE
- ---- --- -------- -----
<S> <C> <C> <C>
Marshall B. Hunt................................. 44 Chairman of the Board, Chief 1990
Executive Officer & Director
William E. Peterson, Jr.......................... 44 President, Secretary & Director 1990
Robert M. Dodge.................................. 49 Senior Vice President and Chief 1999
Financial Officer
Michael A. Crouch................................ 38 Vice President of Distribution; 1998
President of Stepic Corporation
Frank D. DeBartola............................... 36 Vice President of Marketing and 1998
Business Development
Robert R. Singer................................. 34 Vice President -- Sales 1999
L. Bruce Maloy................................... 36 Vice President -- Administration 1998
Augustin M. Azel................................. 60 Vice President -- Operations 2000
James R. Hager, Sr.(1)........................... 56 Vice President -- Regulatory 1999
Affairs
</TABLE>
- ---------------
(1) On March 30, 2000, Mr. Hager tendered his resignation to the Company
effective as of May 15, 2000.
Marshall B. Hunt is a co-founder of the Company and has served as a
director and Chief Executive Officer of the Company since its inception in 1990.
Mr. Hunt has served as the Chairman of the Board of the Company since 1997.
Prior to co-founding the Company, Mr. Hunt co-founded CMI, a distributor of
cardiac pacemakers, in 1987, and served as its Chief Executive Officer until
October 1997. Mr. Hunt currently serves as Secretary of CMI. In 1981, Mr. Hunt
founded Hunt Medical Systems, Inc., a distributor of pacemaker products, and
served as its President from 1981 to 1987. From 1979 through 1981, Mr. Hunt held
various sales and management positions with American Hospital Supply
Corporation.
William E. Peterson, Jr. is a co-founder of the Company and has served as
President of the Company since its inception in 1990. Mr. Peterson joined the
Company's Board of Directors in January 1998. Mr. Peterson served as Vice
President of Finance of CMI from 1987 to 1997. From 1981 through 1987, he served
as a financial officer of Copolymer Rubber & Chemical Corporation, a
manufacturer of synthetic rubber. From 1978 to 1981, Mr. Peterson held various
positions with the public accounting firm of Coopers & Lybrand L.L.P., rising to
the position of Audit Senior. Mr. Peterson is a Certified Public Accountant.
Robert M. Dodge joined the Company in 1999 as Senior Vice President and
Chief Financial Officer. Prior to joining the Company, Mr. Dodge served as
President of Management of Information Technologies, Inc., a software
development company, from 1996 to 1999. From 1986 to 1996, Mr. Dodge served as
Chief Financial Officer of Everest Healthcare Services Corporation, a provider
under the End Stage Renal Disease program and multi-state physician practice.
Prior to his position at Everest, Mr. Dodge held various financial positions
with American National Can, Inc. and American Hospital Supply Corporation.
Michael A. Crouch has served as Vice President and General Manager for
Distribution since 1998 and as President of Stepic Corporation since January 13,
2000. Mr. Crouch joined the Company in 1992 as a sales representative in Dallas,
Texas and served in that capacity until leaving the Company in 1995, and he
rejoined the Company in 1996 as a Regional Manager. Mr. Crouch served as
National Accounts Manager of the Company from 1997 to 1998. From 1995 to 1996,
Mr. Crouch served as a sales representative for renal dialysis equipment and
supplies for Cobe Renal Care, Inc., a renal device company.
Frank D. DeBartola has served as Vice President of Strategic Business
Development of the Company since 1998 and was appointed Vice
President -- Marketing in 1999. Mr. DeBartola joined the Company in 1991 as a
sales representative and thereafter held various management positions with the
Company, including Director of Marketing from 1996 to 1998, Product Manager from
1995 to 1996 and Sales Manager from 1994 to 1995.
12
<PAGE> 16
Robert R. Singer has served as Vice President -- Sales since 1999. Mr.
Singer joined the Company in 1990. Prior to assuming his current position, Mr.
Singer served as National Sales Manager from 1997 to 1999. Mr. Singer served in
the Company's sales and marketing department as a sales representative from 1990
to 1993 and Regional Sales Manager from 1993 to 1997.
L. Bruce Maloy joined the Company in 1990 in its sales and marketing
department and has served as the Vice President of Administration of the Company
since 1996. From 1990 to 1996, Mr. Maloy served in various capacities at the
Company, including Regional Manager from 1991 to 1993, National Sales Manager
from 1993 to 1995, and Director of Marketing from 1995 to 1996. Prior to joining
the Company, Mr. Maloy served as a Sales Manager of Ryder, Inc., a
transportation company, from 1989 to 1990 and a Key Account Manager of Noxell
Corporation, a subsidiary of The Proctor & Gamble Company, from 1987 to 1989.
Augustin M. Azel was appointed Vice President -- Operations on April 1,
2000. Mr. Azel joined the Company in November 1999 as Director of Engineering.
Prior to joining the Company, Mr. Azel served as Vice President, Operations of
Sabratek, Inc., a medical instrument and disposable device manufacturer, from
March 1999 to November 1999. From 1998 to March 1999, Mr. Azel served as Sr.
Corp. Staff and Business Unit Vice President of Kenlee Precision Corporation, a
medical device, semiconductor and computer component manufacturer. Prior to his
position at Kenlee Precision Corporation, Mr. Azel held various positions with
Althin Medical, Inc., a medical instrument and disposable device manufacturer.
James R. Hager, Sr. joined the Company as Vice President of Operations in
January 1998 and was elected Chief Technical Officer of the Company in July
1998. On March 30, 2000, Mr. Hager tendered his resignation to the Company
effective as of May 15, 2000. Mr. Hager became Vice President -- Regulatory
Affairs in 1999. He served as a consultant for the Company from August 1997 to
December 1997 in connection with the Strato/Infusaid Acquisition. From 1992 to
1997, Mr. Hager held various management positions with Strato/Infusaid,
including Vice President of Quality and Regulatory Affairs in 1992, Executive
Vice President -- Operations in 1993 and General Manager from 1993 to 1997.
Prior to joining Strato/Infusaid, Mr. Hager was employed for 17 years with
Abbott Laboratories in various management positions, including Group V.P., Group
Director and Regulatory Director.
OPTION GRANTS FOR FISCAL 1999
The following table sets forth information with respect to option grants to
the named executive officers during fiscal 1999 and the potential realizable
value of such option grants:
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OPTIONS AT ASSUMED ANNUAL RATES
OF GRANTED TO EXERCISE OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES IN PRICE EXPIRATION FOR OPTION TERM (3)
NAME GRANTED FISCAL YEAR(1) ($/SHARE) DATE(2) 5% 10%
- ---- ------- -------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Marshall B. Hunt........ -0- -- -- -- -- --
William E. Peterson,
Jr.................... -0- -- -- -- -- --
Robert M. Dodge......... 50,000 20.9% $2.6875 12/20/09 $84,508 $214,159
Michael A. Crouch....... 2,000 0.8% $ 7.00 1/15/09 8,805 22,312
10,000 4.2% $ 5.75 9/30/99(4) -- --
Frank D. DeBartola...... 2,000 0.8% $ 7.00 1/15/09 8,805 22,312
10,000 4.2% $ 5.75 9/30/99(4) -- --
Robert R. Singer........ 2,000 0.8% $ 7.00 1/15/09 8,805 22,312
10,000 4.2% $ 5.75 9/30/99(4) -- --
Walter J. Fritschner.... 50,000 20.9% $ 5.75 12/17/99 -- --
</TABLE>
- ---------------
(1) Options to purchase a total of 239,275 shares of common stock were granted
to employees of the Company in 1999.
(2) The Compensation Committee, which administers the Company's stock option and
incentive plans, has general authority to accelerate, extend or otherwise
modify benefits under option grants in certain circumstances within overall
plan limits, and, with the consent of the affected optionee, to change the
13
<PAGE> 17
exercise price to a price not less than 100% of the market value of the
stock on the effective date of the amendment.
(3) Potential realizable value assumes that the stock price increases from the
date of grant until the end of the option term (10 years) at the annual rate
specified (5% and 10%). The 5% and 10% assumed annual rates of appreciation
are mandated by SEC rules and do not represent the Company's estimate or
projection of the future price of common stock. The Company does not believe
that this method accurately illustrates the potential value of a stock
option.
(4) On May 12, 1999, performance options for 10,000 shares of the Company's
common stock were granted to each of (i) Mr. DeBartola that provided for
vesting upon closing of an acquisition by the Company prior to October 1,
1999 where the acquired company had a specific level of earnings, (ii) Mr.
Singer that provided for vesting upon the satisfaction of certain sales
goals by the Company's sales representatives during the second and third
quarters of 1999 under the Premier Group Purchasing Agreement, and (iii) Mr.
Crouch that provided for vesting upon satisfaction of certain sales goals by
Stepic and CVS sales representatives during the second and third quarters of
1999 under the Premier Group Purchasing Agreement and other performance
goals for the Stepic operations. None of these performance goals were
achieved, and these options effectively expired as of September 30, 1999.
OPTION EXERCISES AND VALUES FOR FISCAL 1999
The following table sets forth certain information with respect to option
exercises during fiscal 1999 by each of the named executive officers and the
status of their options at December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF UNEXERCISED
SHARES SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
ACQUIRED UPON OPTIONS 12/31/99 MONEY OPTIONS 12/31/99(1)
EXERCISE OF VALUE REALIZED --------------------------- ----------------------------
NAME OPTION UPON EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marshall B. Hunt...... -- -- -- -- -- --
William E. Peterson,
Jr.................. -- -- -- -- -- --
Robert M. Dodge....... -- -- -- 50,000 -- --
Michael A. Crouch..... -- -- 3,000 11,000 -- --
Frank D. DeBartola.... -- -- 4,250 14,750 -- --
Robert R. Singer...... -- -- 3,000 11,000 -- --
Walter J.
Fritschner.......... -- -- -- -- -- --
</TABLE>
- ---------------
(1) In accordance with SEC rules, values are calculated by subtracting the
exercise price from the fair market value of the underlying common stock.
For purposes of this table, fair market value is deemed to be $2.44, the
average of the high and low common stock price reported for American Stock
Exchange transactions on December 31, 1999. The exercise prices of all
options held by the named executive officers range from $2.6875 to $14.50.
Accordingly, at December 31, 1999, none of the named executive officers held
in-the-money options.
14
<PAGE> 18
PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total shareholder return on the Company's common stock against the
cumulative total return of the Russell 2000 Index and the Company's peer group
index. The Company's peer group consists of Arrow International, Inc., Ballard
Medical Products, C.R. Bard, Inc., Conmed Corp., ICU Medical, Inc., and Vital
Signs. The stock performance graph assumes $100 was invested on April 15, 1998
(the date that the common stock was first publicly traded) and measures the
return thereon at various points based on the closing price of the common stock
on the dates indicated, assuming reinvestment of dividends.
PERFORMANCE GRAPH
PLOT POINTS
<TABLE>
<CAPTION>
4/15/98 4/30/98 5/29/98 6/30/98 7/31/98 8/31/98 9/30/98 10/30/98 11/30/98 12/31/98 1/29/99 2/26/99
------- ------- ------- ------- ------- ------- ------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Company $100.00 $95.58 $77.51 $60.64 $63.45 $44.98 $37.75 $25.30 $19.68 $ 28.11 $ 44.98 $ 32.13
Russell 2000 $100.00 $99.13 $93.74 $93.90 $86.17 $69.38 $74.64 $77.63 $81.65 $ 86.62 $ 87.70 $ 80.53
Peer Group $100.00 $94.39 $90.82 $87.29 $91.06 $80.55 $86.78 $94.16 $99.73 $111.49 $108.75 $109.45
<CAPTION>
3/31/99 4/30/99 5/28/99 6/30/99 7/30/99 8/31/99 9/30/99 10/29/99 11/30/99 12/31/99
------- ------- ------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Company $ 39.36 $ 44.18 $ 39.76 $ 38.55 $ 31.73 $ 20.88 $15.66 $ 29.72 $ 20.48 $ 16.06
Russell 2000 $ 81.63 $ 88.85 $ 90.06 $ 93.95 $ 91.31 $ 87.83 $87.72 $ 87.99 $ 93.22 $103.62
Peer Group $101.41 $101.80 $104.00 $103.69 $106.59 $103.10 $98.16 $104.51 $107.80 $106.63
</TABLE>
The Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has appointed PricewaterhouseCoopers LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000.
PricewaterhouseCoopers LLP has served as the Company's independent auditors
since 1993. Representatives of PricewaterhouseCoopers LLP will be present at the
annual meeting to respond to appropriate questions and to make such statements
as they may desire.
INCREASE IN NUMBER OF SHARES AUTHORIZED AND RESERVED
FOR ISSUANCE UNDER THE COMPANY'S 1998 STOCK INCENTIVE PLAN
The Board of Directors has approved and recommends to the shareholders that
they approve a proposal to amend the Company's Stock Incentive Plan to increase
the total number of shares of the Company's common
15
<PAGE> 19
stock authorized and reserved for issuance under the Stock Incentive Plan from
500,000 shares to 800,000 shares. In the event that the proposed amendment is
approved, 438,725 shares would remain available for issuance under the Stock
Incentive Plan, based on the options outstanding as of December 31, 1999. The
affirmative vote of the holders of a majority of the shares of common stock
present in person or by proxy and entitled to vote on the item at the Company's
annual meeting will be required to approve the proposed amendment to the Stock
Incentive Plan.
The Board of Directors has determined that the amendment to the Stock
Incentive Plan is in the best interests of the Company and its shareholders. The
proposed amendment would provide additional shares for grant to key employees
and non-employee directors ("Outside Directors") of the Company. The Board of
Directors believes that grants of stock options, stock appreciation rights
("SARs") and restricted stock are an effective method to attract and retain key
employees and Outside Directors and that the availability of shares for future
grants under the Stock Incentive Plan is important to the Company's business
prospects and operations.
DESCRIPTION OF THE STOCK INCENTIVE PLAN
In 1998, the Company adopted the Stock Incentive Plan and reserved 500,000
shares of common stock for issuance thereunder to key employees and Outside
Directors. The Stock Incentive Plan aims to (i) attract and retain the services
of key employees and Outside Directors, (ii) provide an additional incentive to
each key employee or Outside Director to work to increase the value of the
Company's common stock and (iii) provide each key employee or Outside Director
with a stake in the future of the Company which corresponds to the stake of each
of the Company's shareholders. As of March 31, 2000, the Company had 4 Outside
Directors and approximately 187 full-time employees. Upon amendment of the Stock
Incentive Plan, the maximum number of shares of common stock that may be issued
pursuant to the Stock Incentive Plan is 800,000. Prior to amendment, the maximum
number of shares of common stock that may be issued pursuant to the Stock
Incentive Plan is 500,000. On March 31, 2000, the last reported sales price of
the common stock on The American Stock Exchange was $2.50 per share.
The Stock Incentive Plan is administered by the Compensation Committee of
the Board of Directors. Under the Stock Incentive Plan, either incentive stock
options ("ISOs"), which are intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or non-incentive stock
options ("Non-ISOs") may be granted to key employees. Only Non-ISOs may be
granted to Outside Directors under the Stock Incentive Plan. In December 1999,
the Compensation Committee amended the Stock Incentive Plan to provide that
Outside Directors may be granted Non-ISOs based upon their service on the Board
of Directors, in addition to the initial grant of Non-ISOs which the Outside
Directors received upon their election to the Board of Directors.
Each option granted under the Stock Incentive Plan is exercisable in whole
or in part from time to time as set forth in the related option certificate, but
no option may be exercised: (i) before the end of the six-month period which
starts on the date such option is granted or (ii) on or after the earliest of
(A) the date which is the fifth anniversary of the date the option is granted,
if the option is an ISO and the key employee is a ten-percent shareholder of the
Company on the date the option is granted or (B) the date which is the tenth
anniversary of the date the option is granted, if such option is granted to a
key employee who is not a ten-percent shareholder of the Company on the date the
option is granted or if the option is a Non-ISO.
The Compensation Committee may grant SARs to key employees (but not Outside
Directors) in tandem with an option or as an independent grant. The Compensation
Committee may also grant restricted stock to key employees. No option, SAR or
restricted stock granted under the Stock Incentive Plan is transferable by a key
employee or Outside Director other than by will or by the laws of descent and
distribution, and any option or SAR is only exercisable during a key employee's
or Outside Director's lifetime only by the key employee or Outside Director.
The Stock Incentive Plan provides for adjustment of the number of shares of
common stock available for the grant of options or SARs, the option price of
such options and the SAR value of such SARs and the
16
<PAGE> 20
number, kind or class of shares of restricted stock granted by the Compensation
Committee in an equitable manner to reflect any change in the capitalization of
the Company.
If the Compensation Committee determines that there has been a "Change of
Control" of the Company (as defined) or a bona fide tender or exchange offer for
shares of common stock (other than a tender offer by the Company or an employee
benefit plan established and maintained by the Company), the Compensation
Committee has the right to take such action, if any, with respect to any or all
then outstanding options, SARs and restricted stock grants under the Stock
Incentive Plan as it deems appropriate under the circumstances to protect the
interests of the Company in maintaining the integrity of such grants under the
Stock Incentive Plan.
ESTIMATE OF BENEFITS
The Stock Incentive Plan is not subject to any of the requirements of
ERISA. The Plan is not, nor is it intended to be, "qualified" under Section
401(a) of the Code.
The number of options that will be awarded under the Stock Incentive Plan
to key employees and Outside Directors of the Company at future dates is not
currently determinable.
The following table sets for the awards granted under the Stock Incentive
Plan to the named executive officers and to the executive officers, directors
and other employees, respectively, as a group during the year ended December 31,
1999.
1999 GRANTS UNDER THE
1998 STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
NAME AND POSITION GRANTED IN 1999 DOLLAR VALUE(1)
- ----------------- ----------------- ---------------
<S> <C> <C>
Marshall B. Hunt............................................ -0- --
Chairman of the Board, Chief Executive Officer & Director
William E. Peterson, Jr..................................... -0- --
President, Secretary & Director
Robert M. Dodge............................................. 50,000 $107,704
Senior Vice President & Chief Financial Officer
Michael A. Crouch........................................... 12,000(2) 57,979
Vice President of Distribution; President of Stepic
Corporation
Frank D. DeBartola.......................................... 12,000(2) 57,979
Vice President of Marketing and Business Development
Robert R. Singer............................................ 12,000(2) 57,979
Vice President -- Sales
Walter J. Fritschner, Jr.................................... 50,000(3) 231,788
Former Senior Vice President & Chief Financial Officer
All current executive officers as a group (7 persons)....... 88,000(2)(4) 297,920
All current outside directors as a group (4 persons)........ 24,000(5) 65,076
Other employees as a group (47 persons)..................... 101,275(6) 451,920
</TABLE>
- ---------------
(1) Based upon a Black-Scholes option pricing model. See Note 10 to the
Company's Consolidated Financial Statements.
(2) Includes performance options for 10,000 shares of the Company's common stock
which were granted on May 12, 1999 to each of (i) Mr. DeBartola that
provided for vesting upon closing of an acquisition by the Company prior to
October 1, 1999 where the acquired company had a specific level of earnings,
(ii) Mr. Singer that provided for vesting upon the satisfaction of certain
sales goals by the Company's
17
<PAGE> 21
sales representatives during the second and third quarters of 1999 under the
Premier Group Purchasing Agreement, and (iii) Mr. Crouch that provided for
vesting upon satisfaction of certain sales goals by Stepic and CVS sales
representatives during the second and third quarters of 1999 under the
Premier Group Purchasing Agreement and other performance goals for the
Stepic operations. None of these performance goals were achieved, and these
options effectively expired as of September 30, 1999.
(3) Includes options for 50,000 shares which expired on December 17, 1999 upon
Mr. Fritschner's resignation from the Company. Mr. Fritschner served as the
Company's Senior Vice President and Chief Financial Officer from May 12,
1999 to December 17, 1999.
(4) Includes options for 88,000 shares with exercise prices ranging from $2.6875
to $7.00 that were granted to five current executive officers, including all
current executive officers who are not named executive officers.
(5) Includes options for 24,000 shares with an exercise price of $3.375 that
were granted to the four current Outside Directors.
(6) Includes options for 101,275 shares with exercise prices ranging from $2.75
to $7.375 that were granted to 47 employees, including all current officers
who are not executive officers.
After giving effect to the proposed amendment to the Stock Incentive Plan,
an additional 438,725 options to purchase shares of Common Stock will be
available for grant to employees and Outside Directors of the Company, based on
the options outstanding as of December 31, 1999. As of December 31, 1999,
options to purchase a total of 361,275 shares of common stock of the Company
with exercise prices ranging from $1.875 to $15.50 per share were outstanding
under the Stock Incentive Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The rules concerning the federal income tax consequences with respect to
options granted and to be granted pursuant to the Stock Incentive Plan are
technical. Moreover, the applicable statutory provisions are subject to change,
as are their interpretations and applications, which may vary in individual
circumstances. Therefore, the following discussion is designed to provide a
general description of certain of the federal income tax consequences associated
with the options. The following discussion does not set forth (i) any federal
tax consequences other than income tax consequences or (ii) any state, local or
foreign tax consequences that may apply.
Incentive Stock Options. In general an employee will not recognize taxable
income upon either the grant or the exercise of an ISO, and the Company will not
be entitled to take an income tax deduction at either such time. For purposes of
the alternative minimum tax, however, the employee will be required to treat an
amount equal to the difference between the fair market value of the common stock
on the date of exercise over the option price as an item of adjustment in
computing the employee's alternative minimum taxable income. If the employee
does not dispose of the common stock received pursuant to the exercise of the
ISO within either (i) two years after the date of the grant of the ISO or (ii)
one year after the date on which such common stock is transferred to the
employee, a subsequent disposition of the common stock will result in long-term
capital gain or loss to the employee.
If the employee disposes of the common stock acquired upon exercise of the
ISO within either of the above-mentioned time periods, then in the year of such
disposition, the employee generally will recognize ordinary income, and the
Company will be entitled to an income tax deduction, in an amount equal to the
lesser of (i) the excess of the fair market value of the common stock on the
date of exercise over the option price, or (ii) the amount realized upon
disposition over the adjusted basis of the common stock. Any gain in excess of
such amount recognized by the employee as ordinary income would be taxed to the
employee as short-term or long-term capital gain (depending on the applicable
holding period). If the employee disposes of common stock which was acquired
through the exercise of the ISO in the same year as such exercise, no adjustment
to the employee's alternative minimum taxable income is required.
In addition, (i) in the event that the exercisability or vesting of any
option is accelerated because of a change in control under the Stock Incentive
Plan, a portion of the compensation relating to the option may constitute a
parachute payment under Section 280G of the Code, pursuant to which the Company
is
18
<PAGE> 22
disallowed any income tax deduction for "excess" parachute payments, and in
connection with which an employee receiving excess parachute payments may be
subject to an excise tax under Section 4999 of the Code, and (ii) special rules
apply to an employee who exercises an ISO by paying the option price, in whole
or in part, with shares of common stock.
Non-Incentive Stock Options. An employee will not recognize any taxable
income upon the grant of a Non-ISO, and the Company will not be entitled to take
an income tax deduction at the time of such grant. Upon the exercise of a
Non-ISO, the employee generally will recognize ordinary income, and the Company
will be entitled to take an income tax deduction, in an amount equal to the
excess of the fair market value of the common stock on the date of exercise over
the option price. Upon a subsequent sale of the common stock by the employee,
the employee will recognize short-term or long-term capital gain or loss.
In addition, (i) in the event that the exercisability or vesting of any
option is accelerated because of a change in control under the Stock Incentive
Plan, a portion of the compensation relating to the option may constitute a
parachute payment under Section 280G of the Code, pursuant to which the Company
is disallowed any income tax deduction for excess parachute payment, and in
connection with which an employee receiving excess parachute payments may be
subject to an excise tax under Section 4999 of the Code, and (ii) special rules
apply to an employee who exercises a Non-ISO by paying the option price, in
whole or in part, with shares of common stock.
Stock Appreciation Rights. An employee will not recognize any taxable
income upon the grant of an SAR. An employee will recognize ordinary income upon
the exercise of an SAR, and the Company ordinarily will be entitled to take an
income tax deduction at that time equal to the income recognized by the
employee.
Restricted Stock. An employee will recognize ordinary income when the
employee's right to any restricted stock transferred to the employee is either
transferable or no longer subject to a substantial risk of forfeiture, and the
Company ordinarily will be entitled to take an income tax deduction at that time
equal to the income recognized by the employee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loans to Founders. In connection with the purchase by Messrs. Hunt and
Peterson, the Chairman of the Board and Chief Executive Officer of the Company
and the President of the Company, respectively, and the concurrent purchase by a
former Vice Chairman of the Board of the Company, of an aggregate of 747,778
shares of common stock from Cordova Fund, a former lender to the Company, on
September 28, 1995, the Company loaned each of Messrs. Hunt and Peterson and the
former Vice Chairman $77,612 (the "September Loans"). The September Loans to
Messrs. Hunt and Peterson (and the former Vice Chairman) mature on September 20,
2000 and bear interest at a rate of 8% per annum, payable annually. In addition,
on October 12, 1995, the Company loaned $35,000 to each of Messrs. Hunt and
Peterson (and the former Vice Chairman) (the "October Loans"). The October Loans
to Messrs. Hunt and Peterson (and the former Vice Chairman) mature on October
12, 2000 and bear interest at a rate of 8% per annum, payable annually. The
October Loans were extended to Messrs. Hunt and Peterson (and the former Vice
Chairman) for payment of certain taxes. The original principal amounts of the
September Loans and the October Loans remains outstanding and, at December 31,
1999, the amount payable to the Company by each of Messrs. Hunt and Peterson
(and the former Vice Chairman) was $150,860.
Guarantee of Repayment of Revenue Bond Financing by CMI and Founders. The
development of the Company's Manchester, Georgia facility was financed in part
with approximately $705,000 in proceeds of an industrial development revenue
bond issuance in July 1996 by the Development Authority of the City of
Manchester for the benefit of the Company. In connection with and as a condition
to such bond financing, the Company entered into a lease with the Manchester
Development Authority. All payments due on the bonds have been and continue to
be guaranteed, jointly and severally, by CMI and Messrs. Hunt and Peterson and a
former Vice Chairman of the Company.
Lease Agreement with HP Aviation, Inc. In August 1998, the Company entered
into an agreement with HP Aviation, Inc., which is an affiliate of Messrs. Hunt
and Peterson (the "HP Aviation Agreement"). Under
19
<PAGE> 23
the HP Aviation Agreement, the Company may lease from HP Aviation, Inc. a King
Air 200 aircraft from time to time when needed by the Company. The aircraft
rental fees are determined based upon the Company's actual usage of the aircraft
and charged solely on a trip by trip basis. For each trip in which the Company
uses the aircraft, the rental charge is determined as follows: the normal or
regular hourly rate in the same airplane that would be charged by Epps Aviation
at Peachtree DeKalb Airport, Atlanta Georgia to a charter customer is multiplied
by the number of hours for use of the aircraft during the trip as determined by
the Hobbs meter in the aircraft, and the rental charge for the trip is ninety
percent (90%) of the result of such multiplication. When the aircraft is used by
the Company, the Company is also responsible for catering expenses and travel
expenses of pilots for the aircraft, but only to the extent travel expenses are
charged by the pilots for the particular trip. In 1999, the Company incurred
expenses totaling $104,105 under the HP Aviation Agreement.
Agreement Regarding Dog Island Property. In December 1998, the Company
entered into an agreement with Messrs. Hunt and Peterson regarding the Company's
use of the house and property (the "Property") owned by Messrs. Hunt and
Peterson on Dog Island, Florida (the "Dog Island Agreement"). The Dog Island
Agreement provides that the Company and its employees, agents and guests may
occupy and use the Property and the dock and boat located at the Property for
purposes of management meetings, sales meetings, and entertainment of guests of
the Company for a charge of $500 per day plus expenses. In 1999, the aggregate
amount payable by the Company to Messrs. Hunt and Peterson under the Dog Island
Agreement totaled $18,849.
Consulting Agreement with Healthcare Alliance. Effective January 1, 1999,
the Company amended its Consulting and Services Agreement with Healthcare
Alliance, Inc. (the "Alliance Agreement"), an affiliate of Robert J. Simmons, a
director of the Company. The Alliance Agreement provides for (i) the payment to
Healthcare Alliance of an annual consulting fee of $36,000, (ii) the payment to
Healthcare Alliance of a performance incentive fee payable quarterly equal to 5%
of any annual sales increase achieved by the Company that results from
Healthcare Alliance's efforts and (iii) the grant of options to purchase up to
1% of the Company's outstanding common stock, which will vest and become
exercisable by Healthcare Alliance only if it procures group purchasing
agreements with certain Group Purchasing Organizations ("GPOs") and the Company
achieves an amount of incremental sales revenue equal to $1 million under its
agreement with the particular GPO (at an exercise price of the closing stock
price of the Company's common stock on the effective date of the purchasing
agreement). In addition, under the amended agreement, the Company has granted an
option to Healthcare Alliance for the purchase of 45,000 shares of common stock
of the Company. Such option will become vested and exercisable by Healthcare
Alliance only if the Company achieves certain amounts of incremental sales
revenue under the Company's group purchasing agreement with Premier Purchasing
Partners, L.P. See "Agreement with Premier Purchasing" below. The exercise price
for these shares shall be the closing stock price of the Company's common stock
on the day that the options vest. The Alliance Agreement terminates on December
31, 2001. The Company incurred expense of $36,000 related to the annual
consulting fee under the Alliance Agreement during each of the years ended
December 31, 1997, 1998, and 1999. In addition, during 1998, the Company issued
45,328 shares of the Company's common stock to Healthcare Alliance in connection
with the signing of the Premier Agreement, and during 1999 the Company incurred
expense of $45,301 related to the performance incentive fee under the Alliance
Agreement. The Company recognized consulting expense of approximately $657,300
related to the issuance of the 45,328 shares in 1998 based on the fair value of
the Company's stock of $14.50 per share at the time of issuance. There were no
incentive fee amounts paid during the years ended December 31, 1997 and 1998,
nor were there any grants of Company stock during the year ended December 31,
1997.
Consulting Agreements with Directors. On May 8, 1997, the Company entered
into a letter agreement with Robert Cohen, a director of the Company, pursuant
to which Mr. Cohen has agreed to provide acquisition consulting and related
services to the Company. In the event such services result in an acquisition or
merger of the Company and a third party, Mr. Cohen will be entitled to receive a
fee (a "General Consulting Fee") equal to 2.5% of the acquisition purchase price
(x) payable by the Company with respect to a company acquired by the Company or
(y) payable to the Company or its shareholders in the event the Company or any
of the Company's assets are acquired. Such General Consulting Fee is payable, at
Mr. Cohen's option, (i) in shares of Common Stock, (ii) by the Company's
issuance to Mr. Cohen of
20
<PAGE> 24
warrants or options to purchase, at a nominal exercise price, that number of
shares of Common Stock (valued at $14.50 per share) which equals the General
Consulting Fee, (iii) in shares of the company which acquires the Company, in
the event the Company is acquired or (iv) in cash. The letter agreement also
provides for payments to Mr. Cohen for his consulting services in connection
with the acquisition of Strato/Infusaid and a second strategic venture of
$375,000 and $250,000, respectively (the "Specific Consulting Fees"). The
Specific Consulting Fee relating to the Strato/Infusaid Acquisition was paid to
Mr. Cohen in cash upon consummation of the Company's initial public offering in
April 1998. The Specific Consulting Fee for the second strategic venture is
payable only if such venture is completed and is payable in warrants or options
to purchase, at a nominal exercise price, that number of shares of Common Stock
(valued at $14.50 per share) which equals $250,000. Such Specific Consulting
Fees are to be paid in lieu of and not in addition to the General Consulting
Fees described above with respect to the strategic ventures. The letter
agreement was terminated by the Company on February 24, 2000.
During 1999, Tunstall Consulting, Inc., an affiliate of Gordon Tunstall, a
director of the Company, provided consulting services to the Company with
respect to financial and certain related matters. In consideration for such
services, the Company paid to Tunstall Consulting fees of $77,291.
Agreement with Premier Purchasing. On March 20, 1998, the Company issued
to Premier Purchasing Partners, L.P. ("Premier"), of which Mr. Detlor was
President until December 1999, a warrant to purchase up to 500,000 shares of
Common Stock, subject to certain vesting requirements. The Company granted the
warrant to Premier in partial consideration for Premier executing a group
purchasing agreement (the "Premier Agreement") with the Company. The right to
purchase shares of common stock under the warrant vests annually in increments
of 100,000 shares only upon the achievement of certain specified minimum annual
sales and/or minimum cumulative sales of the Company's products to participating
Premier shareholders. During the first year under the warrant term (ending June
30, 1999), there was no vesting under the warrant. In February 1999, the Company
extended the term of the Premier Agreement to February 28, 2004 and added the
following products to the agreement: vascular access ports, port introducers and
Huber needles. During 1999, the Company's direct sales and sales through Stepic
Corporation and CVS of such products to Premier member institutions under the
Premier Agreement totaled $3,760,351. In 1999, the Company's distributors (other
than Stepic Corporation and CVS) also sold such products to Premier member
institutions under the Premier Agreement, however the Company has no access to
verifiable information to quantify these sales.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than 10% of a
registered class of the Company's equity securities to file with the SEC initial
reports of ownership and statements of changes in ownership of common stock and
other equity securities of the Company. Based solely upon a review of such
reports furnished to the Company and certain representations of such persons,
all such persons complied with the Section 16(a) reporting requirements during
1999 except for Mr. Mallady who inadvertently failed to file a Form 4 to report
the sale of 5,000 shares of Common Stock on August 11, 1999 which was reportable
on a Form 4 due September 10, 1999. This transaction was reported on a Form 5
filed February 14, 2000.
OTHER MATTERS
As of the date of this Proxy Statement, the Company knows of no business
that will be presented for consideration at the annual meeting other than the
items referred to above. If any other matter is properly brought before the
meeting for action by shareholders, proxies in the enclosed form returned to the
Company will be voted in accordance with the recommendation of the Board of
Directors or, in the absence of such a recommendation, in accordance with the
judgment of the proxy holders.
21
<PAGE> 25
SHAREHOLDER PROPOSALS
Shareholders interested in presenting a proposal for inclusion in the proxy
statement relating to the Company's annual meeting of shareholders in 2001 may
do so by following the procedures prescribed in Rule 14a-8 under the Securities
Exchange Act of 1934 and the Company's bylaws. To be eligible for inclusion,
shareholder proposals must be received by the Company's Secretary no later than
December 12, 2000. Any shareholder proposal to be considered at next year's
annual meeting but not included in the proxy statement must be received at the
principal executive offices of the Company no later than February 23, 2001 or
the persons appointed as proxies may exercise their discretionary voting
authority with respect to the matter if it is otherwise properly considered at
the meeting.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K, including the financial
statements and financial statement schedules, as filed with the Securities and
Exchange Commission, except exhibits thereto, accompanies this Proxy Statement.
The Company will provide copies of the exhibits, should they be requested by
eligible shareholders, and the Company may impose a reasonable fee for providing
such exhibits. Request for copies of the Company's Annual Report on Form 10-K
should be mailed to:
Horizon Medical Products, Inc.
One Horizon Way
Manchester, Georgia 31816
Attn: Controller
PROXY SOLICITATION
The proxies being solicited hereby are being solicited by the Company. The
cost of soliciting proxies in the enclosed form will be borne by the Company.
Officers and regular employees of the Company may, but without compensation
other than their regular compensation, solicit proxies by further mailing or
personal conversations, or by telephone, telex, facsimile or electronic means.
The Company will, upon request, reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation material to the beneficial owners
of stock. The Company expects the costs incurred relating to proxy solicitation
to be nominal.
By order of the Board of Directors,
/s/ William E. Peterson, Jr.
William E. Peterson, Jr.
Secretary
April 7, 2000
22
<PAGE> 26
Annex A
HORIZON MEDICAL PRODUCTS, INC.
1998 STOCK INCENTIVE PLAN
<PAGE> 27
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ss.1 PURPOSE...................................................................................................1
ss.2 DEFINITIONS...............................................................................................1
2.1 Board..................................................................................1
2.2 Change in Control......................................................................1
2.3 Code...................................................................................2
2.4 Committee..............................................................................2
2.5 Fair Market Value......................................................................2
2.6 Horizon Medical........................................................................2
2.7 IPO....................................................................................3
2.8 ISO....................................................................................3
2.9 Key Employee...........................................................................3
2.10 1933 Act...............................................................................3
2.11 Non-ISO................................................................................3
2.12 Option.................................................................................3
2.13 Option Certificate.....................................................................3
2.14 Option Price...........................................................................3
2.15 Outside Director.......................................................................3
2.16 Parent Corporation.....................................................................3
2.17 Plan...................................................................................4
2.18 Restricted Stock.......................................................................4
2.19 Restricted Stock Certificate...........................................................4
2.20 Rule 16b-3.............................................................................4
2.21 Stock..................................................................................4
2.22 SAR Value..............................................................................4
2.23 Stock Appreciation Right...............................................................4
2.24 Stock Appreciation Right Certificate...................................................4
2.25 Subsidiary.............................................................................4
2.26 Ten Percent Shareholder................................................................5
ss.3 SHARES SUBJECT TO OPTIONS, RESTRICTED STOCK
GRANTS OR STOCK APPRECIATION RIGHTS.......................................................................5
ss.4 EFFECTIVE DATE............................................................................................6
ss.5 COMMITTEE.................................................................................................6
</TABLE>
<PAGE> 28
<TABLE>
<S> <C>
ss.6 ELIGIBILITY...............................................................................................6
ss.7 GRANT OF OPTIONS TO KEY EMPLOYEES.........................................................................7
7.1 Committee Action.......................................................................7
7.2 $100,000 Limit.........................................................................7
7.3 Option Price...........................................................................8
7.4 Exercise Period........................................................................8
ss.8 GRANT OF OPTIONS TO OUTSIDE DIRECTORS.....................................................................9
8.1 Grants of Non-ISOs to Outside Directors................................................9
8.2 Exercise Period for Non-ISOs Granted to Outside Directors
During 1998...........................................................................10
8.3 Exercise Period for Non-ISO Granted to Outside Directors
After 1998............................................................................11
ss.9 RESTRICTED STOCK.........................................................................................11
9.1 Committee Action......................................................................11
9.2 Conditions............................................................................12
(a) Stock Issuance Conditions.....................................................12
(b) Grants Subject to Forfeiture..................................................12
9.3 Dividends and Voting Rights...........................................................13
9.4 Satisfaction of All Conditions........................................................13
ss.10 STOCK APPRECIATION RIGHTS................................................................................13
10.1 Committee Action......................................................................13
10.2 Terms and Conditions..................................................................14
(a) Stock Appreciation Right Certificate..........................................14
(b) Option Certificate............................................................14
10.3 Exercise..............................................................................15
ss.11 NONTRANSFERABILITY.......................................................................................15
ss.12 SECURITIES REGISTRATION AND RESTRICTIONS.................................................................16
ss.13 LIFE OF PLAN.............................................................................................17
ss.14 ADJUSTMENT...............................................................................................18
14.1 Capital Structure.....................................................................18
</TABLE>
ii
<PAGE> 29
<TABLE>
<S> <C>
14.2 Mergers...............................................................................18
14.3 Fractional Shares.....................................................................19
ss.15 CHANGE OF CONTROL........................................................................................19
ss.16 AMENDMENT OR TERMINATION.................................................................................20
ss.17 MISCELLANEOUS............................................................................................20
17.1 No Shareholder Rights.................................................................20
17.2 No Contract of Employment.............................................................21
17.3 Withholding...........................................................................21
17.4 Loans.................................................................................21
17.5 Rule 16b-3............................................................................22
17.6 Construction..........................................................................22
</TABLE>
iii
<PAGE> 30
SS. 1
PURPOSE
The purpose of this Plan is to promote the interests of
Horizon Medical by authorizing the Committee to grant Options to Key Employees
and Outside Directors and to grant Restricted Stock and Stock Appreciation
Rights to Key Employees in order (1) to attract and retain Key Employees and
Outside Directors, (2) to provide an additional incentive to each Key Employee
or Outside Director to work to increase the value of Stock and (3) to provide
each Key Employee or Outside Director with a stake in the future of Horizon
Medical which corresponds to the stake of each of Horizon Medical's
shareholders.
SS. 2
DEFINITIONS
2.1 Board -- means the Board of Directors of Horizon
Medical Products, Inc.
2.2 Change in Control -- means (a) the acquisition of
the power to direct, or cause the direction, of the management and policies of
Horizon Medical by a person (not previously possessing such power), acting
alone or in conjunction with others, whether through the ownership of Stock, by
contract or otherwise, or (b) the direct or indirect acquisition (other than
through a bona fide public offering) of the power to vote 20% or more of the
outstanding Stock by a person or persons (other than a person possessing such
power on the date this Plan becomes effective or Horizon Medical or an employee
benefit plan established and maintained by Horizon Medical), where, for
purposes of this definition, (i) the term "person" means a natural person,
<PAGE> 31
corporation, partnership, joint venture, trust, government or instrumentality
of a government and (ii) customary agreements with or between underwriters and
selling group members with respect to a bona fide public offering of Stock
shall be disregarded.
2.3 Code -- means the Internal Revenue Code of 1986, as
amended.
2.4 Committee -- means a committee of the Board which
shall have at least 2 members, each of whom shall be appointed by and shall
serve at the pleasure of the Board.
2.5 Fair Market Value -- means (1) the closing price on
any date for a share of Stock as reported by The Wall Street Journal (a) under
the New York Stock Exchange Composite Transactions if Stock is traded on the
New York Stock Exchange or, if Stock is otherwise publicly traded, (b) under
the quotation system under which such closing price is reported or, if The Wall
Street Journal no longer reports such closing price, such closing price as
reported by a newspaper or trade journal selected by the Committee or, if no
such closing price is available on such date, (2) such closing price as so
reported in accordance with ss. 2.5(1) for the immediately preceding business
day, or, if no newspaper Or trade journal reports such closing price or if no
such price quotation is available or if Stock is not publicly traded, (3) the
price which the Committee acting in good faith determines through any
reasonable valuation method that a share of Stock might change hands between a
willing buyer and a willing seller, neither being under any compulsion to buy
or to sell and both having reasonable knowledge of the relevant facts.
2.6 Horizon Medical -- means Horizon Medical Products,
Inc. and any successor to such organization.
-2-
<PAGE> 32
2.7 IPO -- means the initial public offering of Horizon
Medical.
2.8 ISO -- means an option granted under this Plan to
purchase Stock which is intended to satisfy the requirements of ss. 422 of the
Code.
2.9 Key Employee -- means an employee of Horizon Medical
or any Subsidiary or Parent who, in the judgment of the Committee acting in its
absolute discretion, is a key to the success of Horizon Medical.
2.10 1933 Act - means the Securities Act of 1933, as
amended.
2.11 Non-ISO -- means an option granted under this Plan
to purchase Stock which is intended to fail to satisfy the requirements of ss.
422 of the Code.
2.12 Option -- means an ISO or a Non-ISO which is granted
under ss. 7 or ss. 8 of this Plan.
2.13 Option Certificate -- means the written agreement or
instrument which sets forth the terms and conditions of an Option granted to a
Key Employee or Outside Director under this Plan.
2.14 Option Price - means the price which shall be paid
to purchase one share of Stock upon the exercise of an Option granted under
this Plan.
2.15 Outside Director -- means a director who is neither
an officer, an employee, nor a 10% shareholder of Horizon Medical or a Parent
or Subsidiary of Horizon Medical.
2.16 Parent Corporation -- means any corporation which is
a parent of Horizon Medical within the meaning of ss. 424(e) of the Code.
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2.17 Plan -- means this Horizon Medical 1998 Stock
Incentive Plan as effective as of the date adopted by the Committee in 1998 and
as amended from time to time thereafter.
2.18 Restricted Stock -- means Stock granted to a Key
Employee under ss. 9 of this Plan.
2.19 Restricted Stock Certificate -- means the written
agreement or instrument which sets forth the terms and conditions of a
Restricted Stock grant to a Key Employee.
2.20 Rule 16b-3 -- means the exemption under Rule 16b-3
to Section 16b of the Securities Exchange Act of 1934, as amended, or any
successor to such rule.
2.21 Stock -- means the Common Stock of Horizon Medical,
without any adjustment for the stock split effected prior to the IPO.
2.22 SAR Value -- means the value assigned by the
Committee to a share of Stock in connection with the grant of a Stock
Appreciation Right under ss. 10.
2.23 Stock Appreciation Right -- means a right to receive
the appreciation in a share of stock which is granted under ss. 10 of this Plan
either as part of an Option or independent of any Option.
2.24 Stock Appreciation Right Certificate -- means the
written agreement or instrument which sets forth the terms and conditions of a
Stock Appreciation Right which is granted to a Key Employee independent of an
Option.
2.25 Subsidiary -- means any corporation which is a
subsidiary corporation (within the meaning of ss. 424(f) of the Code) of
Horizon Medical and any
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other organization which would be treated as under common control with Horizon
Medical under ss. 414(c) of the Code if "50 percent" was substituted for "80
percent" in the income tax regulations under ss. 414(c) of the Code.
2.26 Ten Percent Shareholder -- means a person who owns
(after taking into account the attribution rules of ss. 424(d) of the Code)
more than ten percent (10%) of the total combined voting power of all classes
of stock of either Horizon Medical, a Subsidiary or a Parent Corporation.
SS. 3
SHARES SUBJECT TO OPTIONS, RESTRICTED STOCK GRANTS
OR STOCK APPRECIATION RIGHTS
There shall be 800,000 shares of Stock reserved for use under this
Plan. Such shares of Stock shall be reserved to the extent that Horizon Medical
deems appropriate from authorized but unissued shares of Stock and from shares
of Stock which have been reacquired by Horizon Medical. Any shares of Stock
subject to an Option which remain unissued after the cancellation or expiration
of such Option, any shares of Restricted Stock which are forfeited or canceled
and any shares of Stock subject to a Stock Appreciation Right with respect to
which no exercise has been made under ss. 10 before the cancellation or
expiration of such Stock Appreciation Right thereafter shall again become
available for use under this Plan, but any shares of Stock used to exercise an
Option or to satisfy a withholding obligation shall not again be available for
use under this Plan.
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SS. 4
EFFECTIVE DATE
The effective date of this Plan shall be the date this Plan is adopted
by the Committee in 1998, provided Horizon Medical's shareholders (acting at a
duly called meeting of such shareholders) approve this Plan within twelve (12)
months after the date the Committee adopts this Plan. Any Option or Restricted
Stock or Stock Appreciation Right granted before such shareholder approval
automatically shall be granted subject to such approval.
SS. 5
COMMITTEE
This Plan shall be administered by the Committee. The Committee acting
in its absolute discretion shall exercise such powers and take such action as
expressly called for under this Plan and, further, the Committee shall have the
power to interpret this Plan and to take such other action in the
administration and operation of this Plan as the Committee deems equitable
under the circumstances, which action shall be binding on Horizon Medical, on
each affected Key Employee and on each other person directly or indirectly
affected by such action.
SS. 6
ELIGIBILITY
Only Key Employees and Outside Directors shall be eligible for the
grant of Options under this Plan, and only Key Employees shall be eligible for
the grant of Restricted Stock or Stock Appreciation Rights under this Plan.
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SS. 7
GRANT OF OPTIONS TO KEY EMPLOYEES
7.1 Committee Action. The Committee acting in its
absolute discretion shall have the right to grant an Option to a Key Employee
under this Plan from time to time to purchase shares of Stock and, further,
shall have the right to grant a new Option to a Key Employee in exchange for
the cancellation of an outstanding Option granted to such Key Employee which
has a higher or lower Option Price. Each grant of an Option shall be evidenced
by an Option Certificate, and each Option Certificate shall
(a) specify whether the Option is an ISO or Non-ISO, and
(b) incorporate such other terms and conditions as the
Committee acting in its absolute discretion deems
consistent with the terms of this Plan, including
(without limitation) a limitation on the number of
shares subject to the Option which first become
exercisable on any date or a Stock Appreciation
Right which is a part of such Option.
If the Committee grants an ISO and a Non-ISO to a Key Employee on the same
date, the right of the Key Employee to exercise the ISO shall not be
conditioned on his or her failure to exercise the Non-ISO.
7.2 $100,000 Limit. The aggregate Fair Market Value of
the shares of Stock subject to ISOs and other incentive stock options (which
satisfy the requirements under ss. 422 of the Code) granted to a Key Employee
under this Plan and under any other stock option plan adopted by Horizon
Medical, a Subsidiary or a Parent Corporation which first become exercisable in
any calendar year shall not exceed $100,000. Such Fair Market Value figure
shall be determined by the Committee on the
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date the ISO or other incentive stock option is granted. The Committee shall
interpret and administer the limitation set forth in this ss. 7.2 in accordance
with ss. 422(d) of the Code, and the Committee shall treat this ss. 7.2 as in
effect only for those periods for which ss. 422(d) of the Code is in effect.
7.3 Option Price. The Option Price for each share of
Stock subject to an ISO or Non-ISO granted to a Key Employee shall be no less
than the Fair Market Value of a share of Stock on the date the ISO or Non-ISO
is granted unless the Option is an ISO and the Option is granted to a Key
Employee who is a Ten Percent Shareholder, in which event the Option Price for
each share of Stock subject to such ISO shall be no less than 110% of the Fair
Market Value of a share of Stock on the date the ISO is granted. The Option
Price shall be payable in full upon the exercise of any Option, and an Option
Certificate at the discretion of the Committee may provide for the payment of
the Option Price either in cash (which may be provided through a loan or other
extension of credit) or in Stock which has been held by the Key Employee for at
least 6 months or in any combination of cash and such Stock. If an Option
Certificate allows the payment of the Option Price in whole or in part in
Stock, such payment shall be made in Stock acceptable to the Committee. Any
payment made in Stock shall be treated as equal to the Fair Market Value of
such Stock on the date the properly endorsed certificate for such Stock is
delivered to the Committee.
7.4 Exercise Period. Each Option granted to a Key
Employee under this Plan shall be exercisable in whole or in part at such time
or times as set forth in the related Option Certificate, but no Option
Certificate shall
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(a) make an Option exercisable before the end of the six
month period which starts on the date such Option is
granted, or
(b) make an Option exercisable on or after the earliest
of the
(1) the date which is the fifth anniversary of
the date the Option is granted, if the
Option is an ISO and the Key Employee is a
Ten Percent Shareholder on the date the
Option is granted,
or
(2) the date which is the tenth anniversary of
the date such Option is granted, if such
Option is granted to a Key Employee who is
not a Ten Percent Shareholder on the date
the Option is granted or if such Option is
a Non-ISO.
An Option Certificate may provide for the exercise of an Option after the
employment of a Key Employee has terminated for any reason whatsoever,
including death or disability.
SS. 8
GRANT OF OPTIONS TO OUTSIDE DIRECTORS
8.1 Grants of Non-ISOs to Outside Directors. Each person
who is an Outside Director at the time of the IPO automatically will be granted
a Non-ISO under this Plan to purchase 10,000 shares of Stock at an Option Price
equal to the IPO price of a share of Stock. Thereafter, the Committee acting in
its absolute discretion shall have the right to grant to an Outside Director at
the time he or she becomes an Outside Director and at any time thereafter a
Non-ISO to purchase shares of Stock under this
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Plan at an Option Price equal to the Fair Market Value of a share of Stock on
the date of such grant.
8.2 Exercise Period for Non-ISOs Granted to Outside
Directors During 1998. Subject to any special exercise rules set forth in an
Option Certificate evidencing the grant of a Non-ISO to an Outside Director
during 1998 under this Plan, an Outside Director's right to exercise a Non-ISO
granted to him or her during 1998 under this Plan shall be conditioned on the
Outside Director continuing as an Outside Director of Horizon Medical as
follows:
(a) If the Outside Director continues as an Outside
Director of Horizon Medical or a Subsidiary until
the first anniversary of the date he or she is
granted a Non-ISO under this Plan, the Outside
Director may exercise the Non-ISO as to 33 1/3% of
the shares of Stock covered by the Non-ISO on such
grant date.
(b) If the Outside Director continues as an Outside
Director of Horizon Medical or a Subsidiary until
the second anniversary of the date he or she is
granted a Non-ISO under this Plan, the Outside
Director may exercise the Non-ISO as to an
additional 33 1/3% of the shares of Stock covered by
the Non-ISO on such grant date.
(c) If the Outside Director continues as an Outside
Director of Horizon Medical or a Subsidiary until
the third anniversary of the date he or she is
granted a Non-ISO under this Plan, the Outside
Director may exercise the Non-ISO as to the
remaining shares of Stock covered by the Option.
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The aggregate number of shares of Stock which the Outside Director can purchase
through the exercise of the Non-ISO on any date shall equal the excess number
of shares of Stock as to which the Outside Director has the right on such date
to purchase over the number of shares of Stock which Outside Director
previously has purchased through the exercise of the Non-ISO. An Option
Certificate may provide for the exercise of a Non-ISO after the Outside
Director ceases to serve as an Outside Director for any reason whatsoever,
including death or disability.
8.3 Exercise Period for Non-ISO Granted to Outside
Directors After 1998. An Outside Director's right to exercise a Non-ISO granted
to him or her after 1998 under this Plan shall be conditioned on the Outside
Director continuing as an Outside Director of Horizon Medical with such vesting
requirements as the Committee shall establish from time to time. The aggregate
number of shares of Stock which the Outside Director can purchase through the
exercise of the Non-ISO on any date shall equal the excess number of shares of
Stock as to which the Outside Director has the right on such date to purchase
over the number of shares of Stock which the Outside Director previously has
purchased through the exercise of the Non-ISO. An Option Certificate may
provide for the exercise of a Non-ISO after the Outside Director ceases to
serve as an Outside Director for any reason whatsoever, including death or
disability.
SS. 9
RESTRICTED STOCK
9.1 Committee Action. The Committee acting in its
absolute discretion shall have the right to grant Restricted Stock to a Key
Employee under this Plan from time to time and, further, shall have the right
to make a new Restricted Stock grant to a
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Key Employee in exchange for the cancellation of an outstanding Restricted
Stock grant to such Key Employee. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Certificate, and each Restricted Stock
Certificate shall set forth the conditions, if any, under which Stock will be
issued in the name of the Key Employee and the conditions, if any, under which
the Key Employee's interest in such Stock will become nonforfeitable.
9.2 Conditions.
(a) Stock Issuance Conditions. The Committee acting in
its absolute discretion may make the issuance of Restricted Stock in the name
of a Key Employee subject to the satisfaction of one, or more than one,
condition which the Committee deems appropriate under the circumstances, and
the related Restricted Stock Certificate shall set forth each such condition,
if any, and the deadline, if any, for satisfying each such condition or the
expiration date, if any, for each such condition. Stock shall be issued in the
name of a Key Employee only after each such condition, if any, has been
satisfied or has expired in accordance with the terms of the related Restricted
Stock Certificate, and upon issuance such Stock shall be held by Horizon
Medical (or Horizon Medical's delegate) pending the satisfaction or expiration
of the forfeiture conditions, if any, set forth in the related Restricted Stock
Certificate.
(b) Grants Subject to Forfeiture. The Committee acting
in its absolute discretion may make Restricted Stock issued in the name of a
Key Employee subject to forfeiture upon a failure to satisfy one, or more than
one, condition which the Committee acting in its absolute discretion deems
appropriate under the circumstances, and the related Restricted Stock
Certificate shall set forth each such forfeiture condition, if any,
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and the related deadline, if any, for satisfying each such forfeiture condition
or the expiration date, if any, for each such condition. Stock issued in the
name of a Key Employee shall be forfeited unless each such forfeiture
condition, if any, has been satisfied or has expired in accordance with the
terms of the related Restricted Stock Certificate.
9.3 Dividends and Voting Rights. Each Restricted Stock
Certificate shall specify what rights, if any, a Key Employee shall have with
respect to the Stock issued in the name of a Key Employee, including rights to
receive dividends and to vote, pending the forfeiture of such Stock or the
satisfaction or expiration of each forfeiture condition, if any, with respect
to such Stock. Furthermore, the Committee may grant dividend equivalent rights
on Restricted Stock while such Stock remains subject to an issuance condition
under ss. 9.2(a) under which cash equivalent to a dividend shall be paid to the
Key Employee by Horizon Medical when a dividend is paid, and any such dividend
equivalent right shall be set forth in the related Restricted Stock
Certificate.
9.4 Satisfaction of All Conditions. A share of Stock
issued in the name of a Key Employee shall cease to be Restricted Stock at such
time as a Key Employee's interest in such Stock becomes nonforfeitable, and the
certificate representing such share shall be released by Horizon Medical (or
Horizon Medical's delegate) and transferred to the Key Employee as soon as
practicable thereafter.
SS. 10
STOCK APPRECIATION RIGHTS
10.1 Committee Action. The Committee acting in its
absolute discretion shall have the right to grant a Stock Appreciation Right to
a Key Employee under this
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Plan from time to time, and each Stock Appreciation Right grant Shall be
evidenced by a Stock Appreciation Right Certificate or, if such Stock
Appreciation Right is granted as part of an Option, shall be evidenced by the
Option Certificate for the related Option.
10.2 Terms and Conditions.
(a) Stock Appreciation Right Certificate. If a Stock
Appreciation Right is evidenced by a Stock Appreciation Right Certificate, such
certificate shall set forth the number of shares of Stock to which the Key
Employee has the right to appreciation and the SAR Value of each share of
Stock. Such SAR Value shall be no less than the Fair Market Value of a share of
Stock on the date that the Stock Appreciation Right is granted. The Stock
Appreciation Right Certificate shall set forth such other terms and conditions
for the exercise of the Stock Appreciation Right as the Committee deems
appropriate under the circumstances, but no Stock Appreciation Right
Certificate shall make a Stock Appreciation Right exercisable on or after the
date which is the tenth anniversary of the date such Stock Appreciation Right
is granted.
(b) Option Certificate. If a Stock Appreciation Right is
evidenced by an Option Certificate, the SAR Value for each share of Stock
subject to the Stock Appreciation Right shall be the Option Price for the
related Option. Each such Option Certificate shall provide that the exercise of
the Stock Appreciation Right with respect to any share of Stock shall cancel
the Key Employee's right to exercise his or her Option with respect to such
share and, conversely, that the exercise of the Option with respect to any
share of Stock shall cancel the Key Employee's right to exercise his or her
Stock Appreciation Right with respect to such share. A Stock Appreciation Right
which is granted as part of an Option shall be exercisable only while the
related Option is
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exercisable. The Option Certificate shall set forth such other terms and
conditions for the exercise of the Stock Appreciation Right as the Committee
deems appropriate under the circumstances.
10.3 Exercise. A Stock Appreciation Right shall be
exercisable only when the Fair Market Value of a share of Stock subject to such
Stock Appreciation Right exceeds the SAR Value for such share, and the payment
due on exercise shall be based on such excess with respect to the number of
shares of Stock to which the exercise relates. A Key Employee upon the exercise
of his or her Stock Appreciation Right shall receive a payment from Horizon
Medical in cash or in Stock, or in a combination of cash and Stock, and any
payment in Stock shall be based on the Fair Market Value of a share of Stock on
the date the Stock Appreciation Right is exercised. The Committee acting in its
absolute discretion shall have the right to determine the form and time of any
payment under this ss. 10.3.
SS. 11
NONTRANSFERABILITY
No Option, Restricted Stock or Stock Appreciation Right shall be
transferable by a Key Employee or an Outside Director other than by will or by
the laws of descent and distribution, and any Option or Stock Appreciation
Right shall be exercisable during a Key Employee's or Outside Director's
lifetime only by the Key Employee or Outside Director. The person or persons to
whom an Option or Restricted Stock or Stock Appreciation Right is transferred
by will or by the laws of descent and distribution thereafter shall be treated
as the Key Employee or Outside Director.
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SS. 12
SECURITIES REGISTRATION AND RESTRICTIONS
Each Option Certificate, Restricted Stock Certificate and Stock
Appreciation Right Certificate shall provide that, upon the receipt of shares
of Stock as a result of the exercise of an Option or a Stock Appreciation Right
or the satisfaction or expiration of the forfeiture conditions, if any, on any
Restricted Stock, the Key Employee or Outside Director shall, if so requested
by Horizon Medical, agree to hold such shares of Stock for investment and not
with a view of resale or distribution to the public and, if so requested by
Horizon Medical, shall deliver to Horizon Medical a written statement
satisfactory to Horizon Medical to that effect. Each Option Certificate,
Restricted Stock Certificate and Stock Appreciation Right Certificate also
shall provide that, if so requested by Horizon Medical, the Key Employee or
Outside Director shall make a written representation to Horizon Medical that he
or she will not sell or offer for sale any of such Stock unless a registration
statement shall be in effect with respect to such Stock under the 1933 Act and
any applicable state securities law or he or she shall have furnished to
Horizon Medical an opinion in form and substance satisfactory to Horizon
Medical of legal counsel satisfactory to Horizon Medical that such registration
is not required. Certificates representing the Stock transferred upon the
exercise of an Option or Stock Appreciation Right or upon the lapse of the
forfeiture conditions, if any, on any Restricted Stock may at the discretion of
Horizon Medical bear a legend to the effect that such Stock has not been
registered under the 1933 Act or any applicable state securities law and that
such Stock cannot be sold or offered for sale in the absence of an effective
registration statement as to such Stock under the 1933 Act and any applicable
state securities law or an opinion in form and substance satisfactory to
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Horizon Medical of legal counsel satisfactory to Horizon Medical that such
registration is not required.
SS. 13
LIFE OF PLAN
No Option, Restricted Stock or Stock Appreciation Right shall be
granted under this Plan on or after the earlier of
(a) the tenth anniversary of the effective date of this
Plan, at which Point this Plan shall continue in
effect only until all then outstanding Options and
Stock Appreciation Rights have been exercised in
full or no longer are exercisable and all then
outstanding Restricted Stock grants have been
forfeited or the forfeiture conditions, if any, with
respect to such grants have been satisfied or
expired, or
(b) the date on which all of the Stock reserved under
ss. 3 of this Plan has (as a result of the exercise
of Options or Stock Appreciation Rights or the
satisfaction or expiration of the forfeiture
conditions, if any, on all Restricted Stock) been
issued or no longer is available for use under this
Plan, in which event this Plan also shall terminate
on such date.
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SS. 14
ADJUSTMENT
14.1 Capital Structure. The number, kind or class of
shares of Stock reserved under ss. 3 of this Plan and the number, kind or class
of shares of Stock subject to Options or Stock Appreciation Rights granted
under this Plan and the Option Price of such Options and the SAR Value of such
Stock Appreciation Rights as well as the number, kind or class of shares of
Restricted Stock granted under this Plan shall be adjusted by the Committee in
an equitable manner to reflect any change in the capitalization of Horizon
Medical, including, but not limited to, such changes as stock dividends or
stock splits.
14.2 Mergers. The Committee as part of any corporate
transaction described in ss. 424(a) of the Code shall have the right to adjust
(in any manner which the Committee in its discretion deems consistent with ss.
424(a) of the Code) the number, kind or class (or any combination thereof) of
shares of Stock reserved under ss. 3 of this Plan. Furthermore, the Committee
as part of any corporate transaction described in ss. 424(a) of the Code shall
have the right to adjust (in any manner which the Committee in its discretion
deems consistent with ss. 424(a) of the Code) the number, kind or class (or any
combination thereof) of shares of Stock underlying any Restricted Stock grants
previously made under this Plan and any related grant conditions and forfeiture
conditions, and the number, kind or class (or any combination thereof) of
shares subject to Option and Stock Appreciation Right grants previously made
under this Plan and the related Option Price and SAR Value for each such Option
and Stock Appreciation Right, and, further, shall have the right (in any manner
which the Committee in its discretion deems consistent with ss. 424(a) of the
Code) to make Restricted Stock, Option and
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stock Appreciation Right grants to effect the assumption of, or the
substitution for, restricted stock, option and stock appreciation right grants
previously made by any other corporation, to the extent that such corporate
transaction Calls for such substitution or assumption of such restricted stock,
option or appreciation right grants.
14.3 Fractional Shares. If any adjustment under this ss. 14 would create
a fractional share of Stock or a right to acquire a fractional share of Stock,
such fractional share shall be disregarded and the number of shares of Stock
reserved under this Plan and the number subject to any Option or Stock
Appreciation Right grants and Restricted Stock grants shall be the next lower
number of shares of Stock, rounding all fractions downward. An adjustment made
under this ss. 14 by the Committee shall be conclusive and binding on all
affected persons.
SS. 15
CHANGE OF CONTROL
If the Committee determines that there has been a Change in Control of
Horizon Medical or a bona fide tender or exchange offer for Stock (other than a
tender offer by Horizon Medical or an employee benefit plan established and
maintained by Horizon Medical), the Committee thereafter shall have the right
to take such action, if any, with respect to any or all then outstanding
Options, Stock Appreciation Rights and Restricted Stock grants under this Plan
as the Committee deems appropriate under the circumstances to protect the
interest of Horizon Medical in maintaining the integrity of such grants under
this Plan, including waiving any conditions to the exercise of such Options and
Stock Appreciation Rights and any issuance and forfeiture conditions on any
Restricted Stock and thereafter canceling such Options, Stock Appreciation
Rights
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and Restricted Stock grants. The Committee shall have the right to take
different action under this ss. 15 with respect to different Key Employees or
Outside Directors or different groups of Key Employees or Outside Directors, as
the Committee deems appropriate under the circumstances.
SS. 16
AMENDMENT OR TERMINATION
This Plan may be amended by the Committee from time to time to the
extent that the Committee deems necessary or appropriate. The Committee also
may suspend the granting of Options or Stock Appreciation Rights or Restricted
Stock under this Plan at any time and may terminate this Plan at any time;
provided, however, Horizon Medical shall not have the right unilaterally to
modify, amend or cancel any Option, Stock Appreciation Right or Restricted
Stock granted before such suspension or termination unless (1) the Key Employee
or Outside Director consents in writing to such modification, amendment or
cancellation or (2) there is a dissolution or liquidation of Horizon Medical or
a transaction described in ss. 14 or ss. 15 of this Plan.
SS. 17
MISCELLANEOUS
17.1 No Shareholder Rights. No Key Employee or Outside
Director shall have any rights as a shareholder of Horizon Medical as a result
of the grant of an Option or a Stock Appreciation Right to him or to her under
this Plan or his or her exercise of such Option or a Stock Appreciation Right
pending the actual delivery of Stock subject to such Option or Stock
Appreciation Right to such Key Employee or
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Outside Director, and no Key Employee shall have any rights as a shareholder
with respect to any Restricted Stock except those rights, if any, set forth in
the related Restricted Stock Certificate.
17.2 No Contract of Employment. The grant of an Option or
a Stock Appreciation Right or Restricted Stock to a Key Employee or Outside
Director under this Plan shall not constitute a contract of employment and
shall not confer on a Key Employee or Outside Director any rights upon his or
her termination of employment in addition to those rights, if any, expressly
set forth in the related Option Certificate, Stock Appreciation Right
Certificate or Restricted Stock Certificate.
17.3 Withholding. Each Option, Stock Appreciation Right
and Restricted Stock grant shall be made subject to the condition that the Key
Employee or Outside Director consents to whatever action the Committee directs
to satisfy the federal and state tax withholding requirements, if any, which
the Committee in its discretion deems applicable to the exercise of such Option
or Stock Appreciation Right or the satisfaction or expiration of any forfeiture
conditions with respect to Restricted Stock issued in the name of the Key
Employee. The Committee also shall have the right to provide in an Option
Certificate, Stock Appreciation Right Certificate or a Restricted Stock
Certificate that a Key Employee or Outside Director may elect to satisfy
federal and state tax withholding requirements through a reduction in the cash
or the number of shares of Stock actually transferred to him or to her under
this Plan.
17.4 Loans. If approved by the Committee, Horizon Medical
may lend money to, or guarantee loans by a third party to, any Key Employee or
Outside Director to finance the exercise of any Option granted under this Plan,
and the exercise of an
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<PAGE> 51
Option with the proceeds of any such loan shall be treated as an exercise for
cash under this Plan. If approved by the Committee, Horizon Medical also may,
in accordance with a Key Employee's or Outside Director's instructions,
transfer Stock upon the exercise of an Option directly to a third party in
connection with any arrangement made by the Key Employee or Outside Director
for financing the exercise of such Option.
17.5 Rule 16b-3. The Committee shall have the right to
amend any Option, Restricted Stock or Stock Appreciation Right grant or to
withhold or otherwise restrict the transfer of any Stock or cash under this
Plan to a Key Employee or Outside Director as the Committee deems appropriate
in order to satisfy any condition or requirement under Rule 16b-3 to the extent
Rule 16 of the Securities Exchange Act of 1934, as amended, might be applicable
to such grant or transfer.
17.6 Construction. All of the defined terms under this
Plan are set forth in ss. 2 of this Plan. All references to sections (ss.) are
to sections (ss.) of this Plan unless otherwise indicated. All references to
the singular shall include the plural, and all references to the plural shall
include the singular. This Plan shall be construed under the laws of the State
of Georgia.
IN WITNESS WHEREOF, Horizon Medical has caused its duly authorized
officer to execute this Plan this ___ day of _______,1998 to evidence its
adoption of this Plan.
HORIZON MEDICAL PRODUCTS, INC.
By:
-------------------------------
Title:
----------------------------
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PROXY CARD PROXY CARD
HORIZON MEDICAL PRODUCTS, INC.
Annual Meeting of Shareholders -- To Be Held May 8, 2000
THE BOARD OF DIRECTORS SOLICITS THIS PROXY
The undersigned hereby appoint(s) Marshall B. Hunt and William E. Peterson,
Jr., and each of them, attorney, agent and proxy of the undersigned, with full
power of substitution, to vote all shares of common stock of Horizon Medical
Products, Inc. that the undersigned would be entitled to cast if personally
present at the 2000 Annual Meeting of Shareholders of the Company to be held on
May 8, 2000, at 11:00 a.m., local time, at One Horizon Way, Manchester, Georgia
31816, and at any postponement or adjournment thereof. This proxy will be voted
as specified by the undersigned. If no choice is specified, the proxy will be
voted for the election of all nominees for director listed on the reverse side,
for proposal number 2, for proposal number 3 and according to the discretion of
the proxy holders on any other matters that may properly come before the meeting
or any postponement or adjournment thereof. Please date, sign exactly as your
name appears on the form and mail the proxy promptly. When signing as an
attorney, executor, administrator, trustee or guardian, please give your full
title as such. If shares are held jointly, both owners must sign.
Vote by Mail
Mark, sign and date your proxy card and return it in the postage-paid
envelope that we have provided or return it to Horizon Medical Products, Inc.,
One Horizon Way, Manchester, Georgia 31816.
Thank you for voting.
Control Number:
---------------
The Board recommends a vote for items 1, 2 and 3.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. IF YOU ATTEND
THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY.
(continued on other side)
Please mark all choices like this [X]
Election of directors:
<TABLE>
<S> <C> <C> <C>
(1) (a) Robert Cohen [ ] FOR ALL [ ] WITHHOLD ALL [ ] FOR ALL EXCEPT
(b) Robert J. Simmons
</TABLE>
To withhold authority to vote, mark "For All Except" and write the nominee's
letter on the line:
- --------------------------------------------------------------------------------
Appointment of Independent Auditors:
(2) To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors for 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Increase shares authorized under the Company's 1998 Stock Incentive Plan:
(3) To increase the total number of shares of the Company's common stock
authorized and reserved for issuance under the Company's 1998 Stock
Incentive Plan from 500,000 shares to 800,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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Signature
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Date
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Signature (Joint Owners)
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Date
(Please Sign Within Box)
