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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only(as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) orRule
14a-12
SONOSITE, INC.
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(Name of Registrant as Specified In Its Charter)
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(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)(4) and 0-11
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
Per unit price
or other
Title of underlying
each class Aggregate value of
of number of transaction Proposed
securities securities to computed maximum
to which which pursuant to aggregate
transaction transaction Exchange Act value of
applies: applies: Rule 0-11: transaction: Total Fee Paid
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<S> <C> <C> <C> <C>
</TABLE>
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[_]Fee paid previously with preliminary materials.
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[_]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:______________________________________________________________
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<PAGE>
[SONOSITE LOGO]
April 6, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
(the "Annual Meeting") of SonoSite, Inc. ("SonoSite"), which will be held on
Thursday, May 6, 1999, at 9:00 a.m., local time, at the Woodmark Hotel,
located at 1200 Carillon Point, Kirkland, Washington.
At the Annual Meeting, you will be asked to consider and vote upon a
proposal to amend SonoSite's Amended and Restated 1998 Option, Stock
Appreciation Right, Restricted Stock, Stock Grant and Performance Unit Plan
(the "1998 Plan") and to elect eight directors to SonoSite's Board of
Directors.
SONOSITE'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE AMENDMENT
TO THE 1998 PLAN AND "FOR" THE ELECTION OF THE NOMINEES FOR DIRECTOR.
You should read carefully the accompanying Notice of Annual Meeting of
Shareholders and the Proxy Statement for additional related information.
Whether or not you plan to attend the Annual Meeting, please complete, sign
and date the enclosed proxy card and return it promptly in the enclosed
postage-prepaid envelope. Your stock will be voted in accordance with the
instructions you have given in your proxy. If you attend the Annual Meeting,
you may vote in person if you wish, even though you previously have returned
your proxy card. Your prompt cooperation will be greatly appreciated.
Sincerely,
/s/ Kevin M. Goodwin
Kevin M. Goodwin
President and Chief Executive
Officer
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
<PAGE>
[SONOSITE LOGO]
SONOSITE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 6, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of SonoSite,
Inc., a Washington corporation ("SonoSite"), will be held at the Woodmark
Hotel, located at 1200 Carillon Point, Kirkland, Washington, at 9:00 a.m.,
local time, on Thursday, May 6, 1999 for the following purposes:
(1) To consider and vote upon a proposal to amend SonoSite's Amended and
Restated 1998 Option, Stock Appreciation Right, Restricted Stock,
Stock Grant and Performance Unit Plan (the "1998 Plan") to (a)
increase the number of shares of SonoSite common stock, par value $.01
per share (the "Common Stock"), issuable under the 1998 Plan, (b)
limit the number of shares of Common Stock that may be granted to any
individual in the aggregate in any one fiscal year and (c) include
directors of SonoSite as eligible participants under the 1998 Plan.
(2) To elect eight directors of SonoSite.
(3) To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 10, 1999 as
the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting in
person.
To ensure representation at the Annual Meeting, shareholders are urged to
mark, sign, date and return the enclosed Proxy as promptly as possible, even
if they plan to attend the Annual Meeting. A return envelope, which requires
no postage if mailed in the United States, is enclosed for this purpose. Any
shareholder attending the Annual Meeting may vote in person, even if the
shareholder has returned a Proxy, if the Proxy is revoked in the manner set
forth in the accompanying Proxy Statement.
By order of the Board of Directors
/s/ Donald F. (Guy) Seaton III
Donald F. (Guy) Seaton III
Chief Financial Officer and
Secretary
Bothell, Washington
April 6, 1999
<PAGE>
SONOSITE, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of SonoSite, Inc. ("SonoSite" or the "Company") of proxies
for use at the Annual Meeting of Shareholders (the "Annual Meeting") to be
held at the Woodmark Hotel, located at 1200 Carillon Point, Kirkland,
Washington, at 9:00 a.m., local time, on Thursday, May 6, 1999, for the purposes
set forth in the accompanying Notice of Annual Meeting of Shareholders. The
principal executive offices of SonoSite are located at 19807 North Creek
Parkway, Suite 200, Bothell, Washington 98011-8214. It is expected that this
Proxy Statement and accompanying form of proxy will be mailed to shareholders on
or about April 6, 1999.
Record Date and Outstanding Shares
Holders of record of SonoSite's common stock (the "Common Stock") at the
close of business on March 10, 1999 are entitled to notice of and to vote at the
Annual Meeting. On that date there were 4,872,484 shares of Common Stock
outstanding. The number of shareholders of record of the Common Stock at March
10, 1999, was 5,609. This figure does not include the number of shareholders
whose shares are held of record by a broker or clearing agency, but does include
each such brokerage house or clearing agency as one holder of record.
Revocability of Proxies
Shares represented at the Annual Meeting by properly executed proxies in the
accompanying form will be voted at the Annual Meeting and, where the
shareholder giving the proxy specifies a choice, the proxy will be voted in
accordance with the specification so made. A proxy given for use at the Annual
Meeting may be revoked by the shareholder giving the proxy at any time prior
to the exercise of the powers conferred thereby. A proxy may be revoked either
by (1) filing with the Secretary of SonoSite prior to the Annual Meeting, at
SonoSite's principal executive offices, either a written revocation or a duly
executed proxy bearing a later date or (2) attending the Annual Meeting and
voting in person, regardless of whether a proxy has previously been given.
Presence at the Annual Meeting will not revoke the shareholder's proxy unless
such shareholder votes in person.
Quorum and Voting
Holders of Common Stock will be entitled to one vote per share. Holders of
Common Stock are not entitled to cumulative voting rights in the election of
directors. Action may be taken on a matter submitted to shareholders at the
Annual Meeting only if a quorum exists. One third of the outstanding shares of
Common Stock entitled to vote, present in person or represented by proxy,
constitutes a quorum at a meeting of the shareholders.
Under applicable law and SonoSite's Restated Articles of Incorporation and
Bylaws, if a quorum is present at the Annual Meeting: (1) the eight nominees
for election of directors who receive the greatest number of votes cast for
the election of directors by shares present in person or represented by proxy
and entitled to vote shall be elected director and (2) the proposed amendments
to SonoSite's 1998 Option, Restricted Stock, Stock Grant, Stock Appreciation
Right and Performance Unit Plan for employees and consultants of SonoSite (the
"1998 Plan") will be approved if the number of votes cast in favor of such
proposals exceeds the number of votes cast against them. Abstentions from
voting will have no effect on the proposals to amend the 1998 Plan and to
elect the directors since they will not represent votes cast at the Annual
Meeting for the purpose of voting on such proposals.
Brokers who hold shares for the accounts of their clients may vote such
shares either as directed by their clients or in their own discretion if
permitted by the stock exchange or other organization of which they are
<PAGE>
members. Members of the New York Stock Exchange are permitted to vote their
clients' proxies in their own discretion as to the election of directors if
their clients have not furnished voting instructions within ten days of the
meeting. Under the exchange rules, certain matters other than the election of
directors are "non-discretionary" and brokers who have received no
instructions from their clients do not have discretion to vote on those items.
When brokers vote proxies on some but not all of the proposals at a meeting,
the missing votes are referred to as "broker non-votes." Broker non-votes are
included in determining the presence of a quorum at the meeting, but they are
not considered "shares present" for voting purposes and have no impact on the
outcome of such proposals, other than to reduce the number of favorable votes
necessary to approve the proposal. Brokers do have discretion to vote on
Proposals 1 and 2 and, accordingly, there will be no broker
non-votes on these proposals.
Solicitation of Proxies
Proxies will be solicited by certain of SonoSite's directors, officers and
regular employees, without payment of any additional compensation to them.
Proxies will be solicited by personal interview, mail and telephone. Any costs
relating to such solicitation of proxies will be borne by SonoSite. In
addition, SonoSite may reimburse brokerage firms and other persons
representing beneficial owners of shares of Common Stock for their expenses in
forwarding solicitation materials to such beneficial owners.
PROPOSAL 1: AMENDMENT OF THE 1998 PLAN
Proposed Amendments
The Board recommends the approval of three amendments to the 1998 Plan (the
"Amendments") (1) to increase the number of shares of Common Stock issuable
under the 1998 Plan by 500,000 from 1,000,000 to 1,500,000 shares, (2) to
limit the number of shares of Common Stock that may be made subject to awards
under the 1998 Plan to any individual in the aggregate in any one fiscal year
to 250,000 shares, such limitation to be applied in a manner consistent with
the requirements of, and only to the extent required for compliance with, the
exclusion from the limitation on deductibility of compensation under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and (3)
to include directors of SonoSite as eligible participants under the 1998 Plan.
On February 24, 1999, the Board unanimously approved the Amendments subject to
approval of the Amendments by SonoSite's shareholders at the Annual Meeting.
The following summary of the amended 1998 Plan and its federal income tax
consequences are qualified in their entirety by reference to the complete text
of the 1998 Plan, which is attached as Appendix A.
The Board believes that the Amendments are necessary to (1) attract and
retain the services of experienced and knowledgeable employees in a
competitive medical device industry where its competitors utilize various
stock option and equity participation plans to attract such individuals, (2)
ensure that any compensation expense that results from the exercise of any
options is deductible by the Company, and (3) reduce the number of stock
option plans the Company is required to administer. The principal features of
the 1998 Plan are described below.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENTS TO THE 1998 PLAN.
Description of the 1998 Plan
The purpose of the 1998 Plan is to enhance the long-term shareholder value
of the Company by offering opportunities to selected persons to participate in
the Company's growth and success, and to encourage them to remain in the
service of the Company and its subsidiaries and to acquire and maintain stock
ownership in the Company.
The 1998 Plan combines the features of a stock option plan, a stock
appreciation rights plan, a restricted stock plan, a stock grant plan and a
performance unit plan. It is a long-term incentive compensation plan and is
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<PAGE>
designed to provide a competitive and balanced incentive and reward program
for the employees and selected consultants of SonoSite. While stock options,
stock appreciation rights and restricted stock awards reward participants for
appreciation in the market price of SonoSite Common Stock from the date of
grant to the date of exercise or maturity, the performance unit element is
designed to motivate employees and reward them for achievement of specified
significant measures of performance over extended periods of time.
The provisions of the 1998 Plan do not require that stock options, stock
appreciation rights, stock grants, restricted stock and performance units be
granted simultaneously to all eligible employees. Awards under the 1998 Plan
may be granted individually, from time to time, as the Compensation Committee
determines.
There are reserved for issuance upon the exercise of options, for the
issuance of restricted stock and stock grant awards and for issuance upon the
payment of performance units and stock appreciation rights under the 1998 Plan
1,500,000 shares of SonoSite Common Stock, of which no more than one-third may
be issued as restricted stock awards and stock grants under the 1998 Plan.
Eligibility to Receive Awards. Employees, directors, consultants and
independent contractors of SonoSite selected by SonoSite's Compensation
Committee are eligible to receive awards of options, stock grants, stock
appreciation rights, restricted stock grants and/or performance units under
the 1998 Plan.
Terms and Conditions of Stock Option Grants. The Compensation Committee is
authorized under the 1998 Plan, in its discretion, to issue options under the
1998 Plan as "Incentive Stock Options" (as defined in Section 422 of the Code)
or as "Nonqualified Stock Options" (defined in the 1998 Plan as being all other
options granted thereunder). The option price for each option granted under the
1998 Plan will be not less than 100% of the fair market value of the SonoSite
Common Stock on the date of grant, except that, with respect to any Nonqualified
Stock Option, the option price may equal the average daily fair market value of
the SonoSite Common Stock calculated over any continuous period of trading days
beginning and ending no more than 30 business days before or after the granting
date of such option. For purposes of the 1998 Plan, "fair market value" means
the average of the high and low sales prices of the SonoSite Common Stock for
the period in question as quoted on The Nasdaq Stock Market.
Upon exercise, the option price is to be paid in full in cash or, to the
extent permitted by the Compensation Committee, in SonoSite Common Stock owned
by the optionee for at least three months and having a market value on the
date of exercise equal to the aggregate option price, or in a combination of
cash and stock. The option price may also be paid by delivery of a properly
executed exercise notice, together with irrevocable instructions to a broker
designated by SonoSite to promptly deliver the exercise price to SonoSite. The
option price under each option will remain constant during the life of such
option, regardless of changes in the market value of the SonoSite Common
Stock. No cash consideration will be paid to SonoSite by optionees for the
granting of any option. The optionee must pay to SonoSite applicable
withholding taxes upon exercise of the option as a condition to receiving the
share certificates. The withholding tax may be paid in cash or by the
withholding or delivery of SonoSite Common Stock.
Each option has a term of not more than 10 years from the date of grant, and
may be exercisable in installments as prescribed by the Compensation Committee
in the option grant, but no option can be exercisable prior to the first
anniversary of the date of grant except in the case of the death of an
optionee during employment or except as the Compensation Committee otherwise
determines. It is the present intention of the Compensation Committee that
both Nonqualified Stock Options and Incentive Stock Options granted to
employees under the 1998 Plan become exercisable in annual installments of 25%
of the number of shares initially granted, commencing on the first anniversary
of the grant date, with such installments to be cumulative and not exercisable
prior thereto, except as described below.
If the employment of an optionee is terminated for cause or other than by
reason of death, normal or early retirement or disability, the optionee may
exercise the option at any time within the 30-day period immediately following
the date of such termination (but not after the expiration date of the
option), to the extent of the number of shares purchasable at the date of
termination of employment.
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<PAGE>
In the event of the termination of the employment of an optionee because of
normal retirement or disability, the optionee may exercise such option at any
time prior to expiration of the option, to the extent of the remaining shares
covered by such option, whether or not such shares had become purchasable by
the optionee at the date of termination of employment. In the event of the
termination of the employment of an optionee because of early retirement, the
optionee may exercise such option at any time prior to expiration of the
option, to the extent of the remaining shares covered by such option, at such
time or times as such option becomes purchasable by the optionee in accordance
with its terms. In the event of the death of an optionee while the optionee is
employed by SonoSite or any of its subsidiaries or while such option is
otherwise outstanding, the option may be exercised by an optionee's
beneficiary or legal representative at any time within a period of one year
after the optionee's death, but not after the expiration of the option, to the
extent of the remaining shares covered by his or her option, whether or not
such shares had become purchasable by the optionee at the date of the
optionee's death. In the event of the death of an optionee during the one-year
period following the termination of the optionee's employment or following
termination of employment by reason of normal or early retirement or
disability, such option (unless such termination is for cause) may be
exercised by the optionee's beneficiary or legal representative, but only to
the extent of the number of shares purchasable by the optionee pursuant to the
provisions of his or her option at the date of termination of the optionee's
employment during the following time periods: (1) if the optionee's death was
within one year of his termination of employment due to any reason other than
retirement or disability, then during the remainder of such one year period or
disability; or (2) if the termination was by reason of normal or early
retirement or disability, then at any time prior to the expiration date of the
option.
Notwithstanding the foregoing provisions, but subject to the provisions of
the next paragraph, the Compensation Committee may determine, in its sole
discretion, in the case of any termination of employment that (1) the optionee
may exercise such option to the extent of the remaining shares covered thereby
whether or not such shares had become purchasable by the optionee at the date
of termination of his or her employment and (2) such option may be exercised
at any time prior to the expiration of the original term of the option.
In the event that an optionee does not remain in the employ of SonoSite or
of one of its subsidiaries and the termination of the optionee's service is
for cause, the option will automatically terminate on the date of first
notification to the optionee of such termination unless the Compensation
Committee otherwise determines.
The 1998 Plan also provides that, if the option grant so states, upon
notification of an intention to exercise a Nonqualified Stock Option, either
in whole or in part, the Compensation Committee may require the optionee to
surrender the option for cancellation, in lieu of exercising it, and receive
in exchange for such surrender a payment in cash and/or shares equal to the
difference between the option price of the shares covered by the option
surrendered for cancellation and the fair market value of such shares on the
date on which the optionee's notice of exercise is received by SonoSite.
Stock Appreciation Rights. Under the 1998 Plan the Compensation Committee is
authorized to grant stock appreciation rights ("SARs") to eligible employees,
directors, consultants and independent contractors of SonoSite. A SAR is an
incentive award that permits the holder to receive (per share covered thereby)
an amount equal to the amount by which the fair market value of a share of
SonoSite Common Stock on the date of exercise exceeds the fair market value of
such share on the date the SAR was granted (the "base price").
The Compensation Committee may grant a SAR separately or in tandem with a
related option and may grant both "general" and "limited" SARS. A general SAR
granted in tandem with a related option will generally have the same terms and
provisions as the related option with respect to exercisability, and the base
price of such a SAR will generally be equal to the option price under the
related option. Upon the exercise of a tandem SAR the related option will be
deemed to be exercised for all purposes of the 1998 Plan and vice versa.
A general SAR granted separately and not in tandem with any option will have
such terms as the Compensation Committee may determine, subject to the
provisions of the 1998 Plan. Under the 1998 Plan the base price of a stand-
alone SAR may not be less than the fair market value of the SonoSite Common
Stock determined as in the case of a Nonqualified Stock Option; the term of a
stand-alone SAR may not be greater than 10 years from the date it was granted.
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<PAGE>
A limited SAR may be exercised only during the 90 days immediately following
a Change in Control (as defined below). For the purpose of determining the
amount payable upon exercise of a limited SAR, the fair market value of a
share of SonoSite Common Stock will be equal to the higher of (x) the highest
fair market value of the SonoSite Common Stock during the 90-day period ending
on the date the limited SAR is exercised, determined as in the case of an
option, or (y) whichever of the following is applicable:
(i) the highest per share price paid in any tender or exchange offer which
is in effect at any time during the 90 days preceding the exercise of
the limited right;
(ii) the fixed or formula price for the acquisition of shares of SonoSite
Common Stock in a merger or similar agreement approved by the
shareholders or Board of Directors, if such price is determinable on
the date of exercise; and
(iii) the highest price per share paid to any shareholder of SonoSite in a
transaction or group of transactions giving rise to the
exercisability of the limited right.
General SARs granted in tandem with a related option are payable in cash,
SonoSite Common Stock or any combination thereof as determined in the sole
discretion of the Compensation Committee. Limited SARs are payable only in
cash. General stand-alone SARs are also payable only in cash, unless the
Compensation Committee provides otherwise at the time of grant.
Unless otherwise provided by the Compensation Committee at the time of
grant, the provisions of the 1998 Plan relating to the termination of
employment of a holder of a stock option will apply equally, to the extent
applicable, to the holder of a SAR.
Restricted Stock Awards. The Compensation Committee is authorized under the
1998 Plan to issue shares of SonoSite Common Stock to eligible employees,
directors, consultants and independent contractors of SonoSite, such shares to
be restricted as hereinafter described. The consideration received for such
shares by SonoSite is the payment in cash of an amount equal to the par value
thereof and past services of the participant. The recipient of restricted
stock will be recorded as a shareholder of SonoSite and will have, subject to
the restrictions described below, all the rights of a shareholder with respect
to such shares and will receive all dividends or other distributions made or
paid with respect to such shares; provided that the shares themselves and any
new, additional or different shares or securities which the recipient may be
entitled to receive with respect to such shares by virtue of a stock split or
stock dividend or any other change in the corporate or capital structure of
SonoSite will be subject to the restrictions described below.
During a period of months following the date of grant, as determined by the
Compensation Committee, which will in no event be less than six months (the
"Restricted Period"), the restricted stock may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of by
the recipient, except in the event of death or the transfer of the restricted
stock to SonoSite upon termination of the holder's employment. In the event of
the normal retirement or death of the recipient during the Restricted Period,
the restrictions on the shares will immediately lapse. In the event of the
early retirement of the recipient during the Restricted Period, the
restrictions on the shares will continue until they lapse in accordance with
the terms of the grant. If the employment of the recipient by SonoSite
terminates during the Restricted Period for any reason other than the
retirement or death of the employee, the shares of restricted stock held by
the employee will be forfeited to SonoSite and the employee must immediately
transfer and return the certificates for the restricted stock, if any have
been issued to the employee, to SonoSite.
Stock Grant Awards. The 1998 Plan authorizes the Compensation Committee to
issue shares of SonoSite Common Stock to nonofficer employees of SonoSite. The
consideration received for such shares by SonoSite is the payment in cash of
an amount equal to the par value thereof and past services. Each recipient of
a stock grant may receive a cash award at the time of grant in an amount
sufficient to offset the recipient's estimated tax liabilities arising from
the grant.
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<PAGE>
Performance Unit Awards. Performance units awarded under the 1998 Plan will
have a base value, expressed in dollars, determined by the Compensation
Committee on the day on which the award is granted which generally will be the
fair market value of the SonoSite Common Stock on such day. This value is the
"unit base value." The actual amount paid to the employee, consultant or
independent contractor, as the case may be, by SonoSite when the award matures
at the end of the award cycle will depend on the achievement of cumulative
performance measures. These measures will be determined by the Compensation
Committee at the time the award is made and may include, but are not limited
to, cumulative targets with respect to earnings per share or pretax profits,
return on shareholders' equity, asset management, cash flow or return on
capital employed of SonoSite and/or one of its subsidiaries, divisions or
departments. The Compensation Committee will also determine the length of the
award cycle (which may not be less than three years), a payment schedule and
whether the payment will be made in cash, SonoSite Common Stock or a
combination of cash and SonoSite Common Stock. The payment schedule will
provide a range of percentages of the unit base value which will be payable to
the participant in the event that cumulative targets, of varying amounts, are
achieved.
In instances where performance measures are not achieved, no award will be
payable. The SonoSite Compensation Committee has discretion under the 1998
Plan to apply performance measures on an absolute basis or relative to
industry indices and conclusively determine whether the measures have been
achieved, as well as to revise the payment schedules and performance measure
formerly determined by it if, in its judgment, significant economic or other
changes have occurred which were not foreseeable by the Committee when it set
the initial measures.
A performance unit award will terminate if the participant does not remain
in the employ of SonoSite during the award cycle, except as the Compensation
Committee otherwise determines, and except in the case of death, normal or
early retirement or disability occurring after the first anniversary of the
date of grant of the award, in which event, if the performance measure is met,
a pro rata portion of the award will be paid based on the elapsed time of the
award cycle prior to death, retirement or disability.
No payment of a performance unit award will be made prior to the end of an
award cycle, except as the Compensation Committee otherwise determines and
except in the case of death, in which event the participant's beneficiary or
legal representative may elect, subject to the approval of the Compensation
Committee, to have the participant's pro rata portion of the award paid at the
end of the year in which death occurred.
Transferability. The recipient's rights to the options, SARS, restricted
stock and performance units may not be assigned or transferred except by will
or the applicable laws of descent or distribution or to a designated
beneficiary.
Capital Adjustments. In the event of any changes in the outstanding stock of
SonoSite by reason of stock dividends, stock splits, recapitalizations,
mergers, consolidations, combinations or exchanges of shares, split-ups,
split-offs, spin-offs, liquidations or other similar changes in
capitalization, or any distribution to shareholders other than cash dividends,
the Compensation Committee in its sole discretion may make any adjustments it
determines to be appropriate in the outstanding options, stock appreciation
rights, restricted shares or performance units granted under the 1998 Plan and
in the total number and class of shares as to which awards may be made under
the 1998 Plan.
Change in Control. Under the 1998 Plan, upon a Change in Control, each
outstanding option and SAR will automatically become exercisable in full for
the total remaining number of shares covered thereby. In addition, during the
90-day period following a Change in Control an optionee may choose to receive
cash equal to the difference between the exercise price of the option and the
fair market value of a share of SonoSite Common Stock determined as described
above for a limited SAR (except for optionees with related SARs and, in the
case of a Director, any Director who received an option without related SARs
and during the 6 month period prior to the Change in Control), in lieu of
exercising the option and paying the option price. Also, all restrictions on
shares of restricted stock will lapse upon a Change in Control, and
performance units will be paid (unless the optionee has previously had his or
her benefits under this 1998 Plan deferred (in which case this
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payment is also deferred)) pro rata to the date of a Change in Control and all
amounts otherwise deferred by SonoSite and any employee in connection with
performance units will be distributed. A Change in Control is defined in the
1998 Plan as (1) a change in the Board of Directors such that a majority of
the seats on the Board are occupied by individuals who were neither nominated
by a majority of the Incumbent Directors (as defined below) of SonoSite then
in office nor appointed by directors so nominated, (2) the acquisition by any
person (other than SonoSite or a SonoSite employee benefit plan) of, in the
case of transactions not approved by a majority of the directors of SonoSite
who were either nominated by a majority of the directors of SonoSite then in
office or appointed by directors so nominated ("Incumbent Directors"), 20% or
more of the combined general voting power of the SonoSite Common Stock and any
other voting securities of SonoSite and, in the case of other transactions,
33% or more of such combined voting power, or (3) the approval by the
shareholders of SonoSite of a complete liquidation or dissolution of SonoSite
or a merger, consolidation or sale of substantially all of the assets of
SonoSite (collectively, a "Business Combination"), other than a Business
Combination in which all or substantially all of the shareholders of SonoSite
receive 60% or more of the stock of the corporation resulting from the
Business Combination in substantially the same proportions as their ownership
before the Business Combination, no holder has more than 33% of the combined
voting power of the capital stock of the resulting corporation and at least a
majority of the board of directors of the resulting corporation are Incumbent
Directors.
Administration. The Compensation Committee will be authorized to administer
the 1998 Plan and will consist of at least two members of the Board who have
not been eligible to receive awards under the 1998 Plan or any other
discretionary plans of SonoSite or its affiliates for one year prior to their
service on the Compensation Committee.
Amendment and Termination. The 1998 Plan may be terminated, modified or
amended by the shareholders of SonoSite. The Board of Directors may also
terminate the 1998 Plan, or modify or amend it in certain respects as set
forth in the 1998 Plan. No options or awards may be granted under the 1998
Plan after April 6, 2008.
Federal Income Tax Consequences--Option Plans. The Federal income tax
consequences to SonoSite and to any person granted an award under the 1998
Plan under the existing applicable provisions of the Code and the regulations
thereunder, are substantially as follows.
Under present law and regulations, no income will be recognized by a
participant upon the grant of stock options, SARS, restricted stock (except as
described below) or performance units.
On the exercise of a Nonqualified Stock Option, the optionee will recognize
taxable ordinary income in an amount equal to the excess of the fair market
value of the shares acquired over the option price. Upon a later sale of those
shares, the optionee will have short-term, mid-term or long-term capital gain
or loss, as the case may be, in an amount equal to the difference between the
amount realized on such sale and the tax basis of the shares sold. If payment
of the option price is made entirely in cash, the tax basis of the shares will
be equal to their fair market value on the date of exercise (but not less than
the option price), and their holding period will begin on the day after the
exercise date.
If the optionee uses previously owned shares to exercise an option in whole
or in part the transaction will not be considered to be a taxable disposition
of the previously owned shares. The optionee's tax basis and holding period of
the previously owned shares will be carried over to the equivalent number of
shares received on exercise. The tax basis of the additional shares received
upon exercise will be the fair market value of the shares on the date of
exercise (but not less than the amount of cash, if any, used in payment), and
the holding period for such additional shares will begin on the day after the
exercise date.
The same rules apply to an Incentive Stock Option which is exercised more
than three months after the optionee's termination of employment (or more than
12 months thereafter in the case of permanent and total disability as defined
in the Code).
7
<PAGE>
On the exercise of an Incentive Stock Option during employment or within
three months after the employee's termination of employment (12 months in the
case of permanent and total disability as defined in the Code), for regular
tax purposes the optionee will recognize no income at the time of exercise
(although the employee will have income for alternative minimum income tax
purposes at that time as if the option were a Nonqualified Stock Option) and
no deduction will be allowed to SonoSite for Federal income tax purposes in
connection with the grant or exercise of the option. If the acquired shares
are sold or exchanged after the later of (1) one year from the date of
exercise of the option, or (2) two years from the date of grant of the option
(the "Holding Period"), the difference between the amount realized by the
holder on that sale or exchange and the option price will be taxed to the
holder as a capital gain or loss. If the shares are disposed of before the
Holding Period requirements are satisfied, then the holder will recognize
taxable ordinary income in the year of disposition in an amount equal to the
excess, on the date of exercise of the option, of the fair market value of the
shares received over the option price paid (or generally, if less, the excess
of the amount realized on the sale of the shares over the option price), and
the holder will have capital gain or loss, long-term or short-term as the case
may be, in an amount equal to the difference between (1) the amount realized
by the holder upon that disposition of the shares and (2) the option price
paid by the holder increased by the amount of ordinary income, if any, so
recognized by the holder. If an optionee uses shares acquired pursuant to the
exercise of an Incentive Stock Option to exercise an Incentive Stock Option
before the Holding Period requirements are satisfied, the optionee will
recognize ordinary income as discussed above, but any further gain realized
upon such exercise will not be recognized until the newly acquired stock is
disposed of.
Upon the receipt of restricted stock, the employee will generally recognize
taxable ordinary income when the shares cease to be subject to restrictions
under the 1998 Plan equal to the excess of the fair market value of the shares
at that time over the amount, if any, paid for such shares. However, within 30
days after the date the shares are received, the employee may elect under
Section 83(b) of the Code to recognize taxable ordinary income at the time of
transfer in an amount equal to the excess of the fair market value of the
shares at such time over the amount, if any, paid for such shares. In that
case no additional income will be recognized by the employee upon the lapse of
restrictions on the shares, but, if the shares are subsequently forfeited, the
employee may not deduct the income recognized at the time of receipt of the
shares and the employee will have a capital loss equal to the amount, if any,
paid for such shares. The recipient's holding period for the shares will begin
at the time taxable income is recognized under these rules, and the tax basis
in the shares will be the amount of ordinary income so recognized plus the
amount, if any, paid for the shares. Any dividends received on the restricted
shares prior to the date the employee recognizes income as described above
will be taxable compensation income when received.
Upon payment to a participant in settlement of a stock option or pursuant to
the exercise of SARs or pursuant to a performance unit award the participant
will recognize taxable ordinary income in an amount equal to the cash and the
fair market value of SonoSite Common Stock received. Upon the issuance of a
stock bonus award the recipient will recognize taxable ordinary income in an
amount equal to the fair market value of the SonoSite Common Stock received
and the amount of any tax offset cash award made together with the issuance of
such stock.
Special rules apply to a Director or officer subject to liability under
Section 16(b) of the Securities and Exchange Act.
In all the foregoing cases SonoSite may be entitled to a deduction at the
same time and in the same amount as the optionee recognizes ordinary income,
provided the amount of such ordinary income, when added to the optionee's
other compensation is reasonable and is otherwise deductible under the Code.
8
<PAGE>
PROPOSAL 2: ELECTION OF DIRECTORS
At the Annual Meeting, eight directors are to be elected to hold office for
a term of one year until 2000, and in each case until his successor shall be
elected and shall qualify. The Board of Directors has no reason to believe
that any of the nominees listed below will be unable to serve as a director.
If, however, any nominee becomes unavailable, the proxies will have
discretionary authority to vote for a substitute nominee.
Unless authority to do so is withheld, the persons named as proxies in the
accompanying proxy will vote FOR the election of the nominees listed below.
The following table sets forth the name and age of each nominee for election
as a director, the positions and offices held by the nominee with SonoSite and
the period during which the nominee has served as a director of SonoSite.
Nominees
<TABLE>
<CAPTION>
Positions and Offices With Director
Name Age SonoSite Since
---- --- -------------------------- --------
<C> <C> <S> <C>
Kirby L. Cramer............ 62 Chairman of the Board of Directors 1998
President, Chief Executive Officer
Kevin M. Goodwin........... 41 and Director 1998
Edward V. Fritzky.......... 48 Director 1998
Steven R. Goldstein, M.D... 48 Director 1998
William G. Parzybok, Jr.... 56 Director 1998
Jeffrey Pfeffer, Ph.D...... 52 Director 1998
Dennis A. Sarti, M.D....... 56 Director 1998
Jacques Souquet, Ph.D...... 51 Director 1998
</TABLE>
Kirby L. Cramer has served as our Chairman of the Board of Directors since
April 1998. Since 1991, Mr. Cramer has served as Chairman Emeritus of Hazleton
Laboratories Corporation, a contract biological and chemical research
laboratory, which was acquired by Corning Incorporated in 1987. Since 1993 he
has also served as Chairman of Northwestern Trust Company. From 1987 to 1991 Mr.
Cramer served as Chairman of Hazleton Laboratories Corporation. From 1968 to
1987, Mr. Cramer served as Chief Executive Officer of Hazleton Laboratories
Corporation. In addition to the above, Mr. Cramer is a member of the boards of
directors of Immunex Corporation, Unilab Corporation, The Commerce Bank of
Washington, N.A., Landec Corporation and Ragen Mackenzie Group Incorporated. Mr.
Cramer holds a B.A. degree from Northwestern University and an M.B.A. degree
from the University of Washington and is a graduate of the Harvard Business
School's Advanced Management Program.
Kevin M. Goodwin has served as our President, Chief Executive Officer and a
director since April 1998. From February 1997 to April 1998, Mr. Goodwin served
as Vice President and General Manager of ATL Ultrasound, Inc.'s Hand Held
Systems Business Group. From August 1991 to February 1997, Mr. Goodwin served as
Vice President and General Manager of ATL Ultrasound's businesses in Asia, the
Pacific and Latin America. From 1987 to August 1991, Mr. Goodwin served in a
variety of sales positions at ATL Ultrasound. From 1980 to 1987, Mr. Goodwin
served in various management positions with American Hospital Supply, Picker
International and Baxter Healthcare Corporation. Mr. Goodwin holds a degree in
business administration from Monmouth College, with an emphasis on hospital
management, and attended the Executive Program at the Stanford Graduate School
of Business.
Edward V. Fritzky has served as a director of SonoSite since April 1998. Mr.
Fritzky has served as Chairman of the Board and Chief Executive Officer of
Immunex Corporation, a biotechnology company, since January 1994. From 1992 to
1994, he served as President of Lederle Laboratories, a division of American
Cyanamid Company. Mr. Fritzky was Vice President of Lederle Laboratories from
1989 to 1992. Prior to joining Lederle Laboratories, he was an executive at
Searle Pharmaceuticals, Inc., a subsidiary of the Monsanto Company. During his
tenure at Searle, Mr. Fritzky was Vice President, Marketing for the United
States and later
9
<PAGE>
President and General Manager of Searle Canada, Inc. and Lorex
Pharmaceuticals, a joint venture company. Mr. Fritzky also serves on the board
of directors of Geron Corporation, a biopharmaceutical company. Mr. Fritzky
holds a B.A. degree from Duquesne University and is a graduate of the Advanced
Executive Program at the J.L. Kellogg Graduate School of Management at
Northwestern University.
Steven R. Goldstein, M.D. has served as a director of SonoSite since April
1998. Since 1995, he has served as Professor of Obstetrics and Gynecology at
New York University School of Medicine. Since July 1980, Dr. Goldstein has held
various positions as a doctor of Obstetrics and Gynecology at New York
University Medical Center, serving as Director of Gynecological Ultrasound since
1994, and as Co-director of Bone Densitometry for the Department of Obstetrics
and Gynecology since 1997. Dr. Goldstein holds an M.D. degree from New York
University School of Medicine and completed his residency in Obstetrics and
Gynecology at New York University-affiliated hospitals in 1980.
William G. Parzybok, Jr. has served as a director of SonoSite since May
1998. From February 1991 to July 1998, Mr. Parzybok was Chairman of the Board
and Chief Executive Officer of Fluke Corporation, a manufacturer of electronic
test and measurement instruments. From 1988 to 1991, he served as Vice
President and General Manager of the Engineering Applications Group of
Hewlett-Packard Company, a computer hardware manufacturer. Mr. Parzybok is a
director of Penford Corporation and WRQ, Inc. Mr. Parzybok holds B.S. and M.S.
degrees from Colorado State University.
Jeffrey Pfeffer, Ph.D. has served as a director of SonoSite since April
1998. He is the Thomas D. Dee Professor of Organizational Behavior at the
Graduate School of Business at Stanford University, where he has been a
faculty member since 1979. He has also served on the faculty at the University
of Illinois and the University of California at Berkeley, and has served as
the Thomas Henry Carroll-Ford Foundation Visiting Professor of Business
Administration at Harvard Business School. Dr. Pfeffer is a member of the
boards of directors and compensation committees of Portola Packaging, Inc. and
Resumix, Inc. Dr. Pfeffer holds B.S. and M.S. degrees from Carnegie Mellon
University and a Ph.D. degree from Stanford University.
Dennis A. Sarti, M.D. has served as a director of SonoSite since July 1998.
Since October 1993, Dr. Sarti, a radiologist, has served as Chairman of the
Department of Medical Imaging at St. John's Health Center in Santa Monica,
California. Since April 1994, he has also served as director of the Technology
Steering Committee for St. John's Health Center. From July 1978 to July 1986,
Dr. Sarti served as the Director of Diagnostic Ultrasound at the U.C.L.A. School
of Medicine. Dr. Sarti holds a B.S. degree from St. Vincent's College and an
M.D. degree from the University of Pittsburgh School of Medicine.
Jacques Souquet, Ph.D. has served as a director of SonoSite since March
1998. Dr. Souquet has served as Chief Technology Officer and Senior Vice
President for Product Generation at ATL Ultrasound since June 1993. From March
1989 to June 1993, Dr. Souquet served as Director of Strategic Marketing and
Product Planning and Vice President for Product Generation of ATL Ultrasound.
He joined ATL Ultrasound in August 1981 as a principal scientist in the
cardiology division. Dr. Souquet received a High Engineering Degree from Ecole
Superieure d'Electricite of Paris, France, a Ph.D. degree from Orsay
University of France in the field of optical memory, and a second Ph.D. degree
from Stanford University in the field of new acoustic imaging techniques for
medical ultrasound applications and nondestructive testing.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES.
Compensation of Directors
Directors who are employees of SonoSite do not receive any fee for their
services as directors. Directors who are not employees of SonoSite are paid an
annual retainer of $16,000 plus $1,000 for each sequence of Board of Directors
and committee meetings attended. Any nonemployee director serving as Chairman
of the Board is paid an additional $75,000 per year. We also reimburse
directors for reasonable expenses they incur in attending meetings of the
Board.
10
<PAGE>
Our Nonemployee Director Stock Option Plan authorizes a total of 125,000
shares of our common stock for stock option grants to nonemployee directors,
subject to certain adjustments for reclassifications, reorganizations and
similar corporate transactions. The plan is administered by our board, which
may amend, terminate or suspend the plan at any time, subject to applicable
law. Under this plan, each nonemployee director automatically receives an
option to purchase 10,000 shares of our common stock on the date of his or her
first SonoSite board meeting. Each nonemployee director thereafter receives an
option to purchase 5,000 shares of our common stock on the anniversary date of
the initial grant for as long as the director serves on our board. In lieu of
these grants, a nonemployee director elected as Chairman of our board will
receive, upon his or her initial election to this position, an option to
purchase 25,000 shares of our common stock. The Chairman will thereafter
automatically receive an option to purchase 10,000 shares of our common stock
on the anniversary date of the first Chairman grant as long as the director
serves in that position. All options have an exercise price equal to the fair
market value of the common stock on the date of grant. Options vest twelve
months after the date of grant, assuming a director's continued service on our
board during this time. Options expire on the tenth anniversary of the date of
grant, subject to earlier termination if a director ceases to be a director.
Immediately prior to certain mergers, consolidations, liquidations or similar
reorganizations of SonoSite, an option granted under the plan may be exercised
in whole or in part, regardless of whether the vesting schedule for the option
has been satisfied. Once all of the shares authorized under the Nonemployee
Director Stock Option Plan have been granted, all future option grants to
directors will be made pursuant to the 1998 Plan, subject to the same terms
and conditions as the Nonemployee Director Stock Option Plan.
Information on Committees of the Board of Directors and Meetings
SonoSite has established a Compensation Committee and an Audit Committee.
Each of these Committees is responsible to the full Board of Directors and its
activities are therefore subject to approval of the Board. The functions
performed by these committees are summarized below.
Compensation Committee. The Compensation Committee currently consists of Mr.
Parzybok (chairman), Dr. Pfeffer and Dr. Sarti. There were three Compensation
Committee meetings in 1998. The Compensation Committee's responsibilities
include:
. reviewing and approving the compensation and benefits for directors and
our executive officers;
. administering our incentive compensation and benefits plans; and
. making recommendations to the Board of Directors regarding such matters.
Audit Committee. The Audit Committee consists of Mr. Fritzky (chairman), Dr.
Souquet and Dr. Goldstein. There were two Audit Committee meetings in 1998.
The Audit Committee's responsibilities include:
. facilitating the Company's relationship with independent auditors;
. reviewing and assessing the performance of accounting and finance
personnel within the Company;
. communicating to the full Board of Directors the results of work
performed by and issues raised by the Company's independent auditors and
legal counsel; and
. evaluating the Company's management of assets and reviewing policies
relating to asset management.
In 1998, there were three meetings of the Board of Directors. Each board
member attended at least 75% of the meetings of the Board and each Committee
of which he was a member.
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves as a member of the compensation
committee or board of directors of any entity that has an executive officer
serving as a member of our compensation committee or board of directors.
11
<PAGE>
EXECUTIVE OFFICERS
The executive officers of SonoSite, and their ages as of December 31, 1998,
are as follows:
<TABLE>
<CAPTION>
Officer
Name Age Position Since
---- --- -------- -------
<C> <C> <S> <C>
Kevin M. Goodwin............ 41 President, Chief Executive Officer 1998
and Director
Allen W. Guisinger.......... 56 Vice President--Global Education 1998
and Strategic Partnerships
David H. Gusdorf............ 44 Vice President--Marketing 1998
Jens U. Quistgaard, Ph.D.... 35 Vice President--Product Development 1998
and Operations
Donald F. (Guy) Seaton III.. 41 Vice President--Business 1998
Development, Chief Financial
Officer, Treasurer and Secretary
Douglas W. Tefft............ 52 Vice President--Global Distribution 1998
</TABLE>
For a biographical summary of Mr. Goodwin, see "ELECTION OF DIRECTORS --
Nominees."
Allen W. Guisinger has served as our Vice President--Global Education and
Strategic Partnerships since November 1998. From January 1993 to November
1998, he operated Marketek Professional Services, a strategic consulting
business for high-technology companies, during which time he served as a
consultant for ATL Ultrasound and SonoSite. From January 1986 to December 1992,
he served as Vice President of Sales and Marketing of ATL Ultrasound, except
during 1990, when he served as President of ATL Ultrasound. From December 1982
to January 1985, he served as Director of Marketing of Johnson & Johnson
Ultrasound, a subsidiary of Johnson & Johnson. From December 1981 to November
1982, he served as Senior Product Manager for ADR, Inc., an ultrasound equipment
manufacturer. Mr. Guisinger holds a B.S. degree from Kansas State University and
an M.B.A. degree from City University in Seattle, Washington.
David H. Gusdorf has served as our Vice President--Marketing since May 1998.
From July 1996 to April 1998, Mr. Gusdorf served as Vice President of
Worldwide Marketing of Chiron Diagnostics, Inc., a critical care diagnostics
company. From January 1990 to July 1996, Mr. Gusdorf worked for Johnson &
Johnson, during which time he served as Director of Marketing. He holds B.A.
and M.B.A. degrees from San Jose State University.
Jens U. Quistgaard, Ph.D. has served as our Vice President--Product
Development and Operations since April 1998. From February 1997 to April 1998,
Dr. Quistgaard served as Executive Director of Product Generation of ATL
Ultrasound's Hand Held Systems Business Group. From July 1995 to January 1997,
Dr. Quistgaard served as Chief of the Senior Technology Staff of ATL
Ultrasound. He joined ATL Ultrasound in 1990 as a senior engineer. Dr.
Quistgaard holds a B.S. degree in mathematics and computational sciences from
Stanford University, and a Ph.D. degree in electrical engineering from the
University of Washington.
Donald F. (Guy) Seaton III has served as our Vice President--Business
Development, Chief Financial Officer and Treasurer since June 1998 and
Secretary since December 1998. From April 1994 to June 1998,
Mr. Seaton served as Vice President, Finance, Chief Financial Officer and
Secretary of InControl, Inc., a developer of implantable atrial
defibrillators. From January 1993 to March 1994, Mr. Seaton worked for
Interpoint Corporation, a microelectronics company, serving as Vice President
of Business Development and Administration from January to March 1994. Mr.
Seaton holds a B.A. degree from Stanford University and an M.B.A. degree from
the University of Chicago.
Douglas W. Tefft has served as our Vice President--Global Distribution since
May 1998. From December 1991 to May 1998, Mr. Tefft served as Director of
Latin American Operations of ATL Ultrasound. From October 1988 to December
1991, Mr. Tefft served as Director of Finance of ATL Ultrasound. He holds B.A.
and M.B.A. degrees from the University of Washington.
12
<PAGE>
EXECUTIVE COMPENSATION
Compensation Summary
The following table sets forth certain information regarding compensation
paid to our Chief Executive Officer and our three other most highly
compensated executive officers for the year ended December 31, 1998 (the named
executive officers).
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual ------------
Compensation Common Stock
------------------ Underlying All Other
Name and Principal Position Salary($) Bonus($) Options(#) Compensation ($)
--------------------------- --------- -------- ------------ ----------------
<S> <C> <C> <C> <C>
Kevin M. Goodwin(1)........... $160,096 -- 152,082 $4,503
President and Chief
Executive Officer
David H. Gusdorf(2)........... 104,615 $5,000 60,000 4,831
Vice President--Marketing
Jens U. Quistgaard(3)......... 106,731 -- 85,137 5,476
Vice President--Product
Development and
Operations
Donald F. (Guy) Seaton
III(4)....................... 100,385 -- 75,000 3,784
Vice President--Business
Development, Chief
Financial Officer, Treasurer
and Secretary
</TABLE>
- --------
(1) Salary represents compensation received from SonoSite from April 6, 1998.
All Other Compensation represents $3,830 in employer-matching
contributions made to the SonoSite 401(k) Retirement Savings Plan and
group term life premiums of $673 paid by SonoSite.
(2) Salary represents compensation received from SonoSite from May 11, 1998.
All Other Compensation represents $4,606 in employer-matching
contributions made to the SonoSite 401(k) Retirement Savings Plan and
group term life premiums of $225 paid by SonoSite.
(3) Salary represents compensation received from SonoSite from April 6, 1998.
All Other Compensation represents $4,803 in employer-matching
contributions made to the SonoSite 401(k) Retirement Savings Plan and
group term life premiums of $673 paid by SonoSite.
(4) Salary represents compensation received from SonoSite from June 1, 1998.
All Other Compensation represents $3,514 in employer-matching
contributions made to the SonoSite 401(k) Retirement Savings Plan and
group term life premiums of $270 paid by SonoSite.
13
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth information regarding stock options granted
to our named executive officers during the year ended December 31, 1998.
<TABLE>
<CAPTION>
Potential
Realizable Value at
Individual Grants Assumed Annual
------------------------------------------------- Rates of Stock
Number of % of Price Appreciation
Securities Total Options for Option
Underlying Granted to Exercise Term(2)(3)
Options Employees in Price Per Expiration -------------------
Name Granted 1998(1) Share($)(2) Date 5%($) 10%($)
---- ---------- ------------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kevin M. Goodwin........ 100,000 8.4% $6.9375 06/08/08 $436,296 $1,105,659
50,000 4.2% 6.9375 06/08/08 218,148 552,829
416(4) * 3.3640 05/05/04 880 2,230
416(4) * 3.3910 02/17/05 887 2,248
1,250(4) 0.1% 6.9440 05/08/06 5,459 13,834
David H. Gusdorf........ 60,000 5.1% 6.9375 06/08/08 261,777 663,395
Jens U. Quistgaard...... 85,000 7.2% 6.9375 06/08/08 370,851 939,810
37(4) * 5.0730 01/08/06 118 299
100(4) * 6.9440 05/08/06 437 1,107
Donald F. (Guy) Seaton
III.................... 75,000 6.3% 6.9375 06/08/08 327,222 829,244
</TABLE>
- --------
* Less than 0.1%.
(1) Based on a total of 1,184,430 options granted to employees during 1998.
(2) The assumed rates of appreciation are prescribed by the Securities and
Exchange Commission for illustrative purposes only and are not intended to
forecast or predict future stock prices.
(3) The increase in the market value of the holdings of all of our
shareholders, over a 10-year period based on 4,872,193 shares of common
stock outstanding as of December 31, 1998, at assumed annual rates of
appreciation of 5% and 10% from a base price of $10.38 per share (the
closing market price as of December 31, 1998), would be $31,789,996 and
$80,562,091, respectively.
(4) These grants were made pursuant to option adjustments in connection with
the spinoff from ATL Ultrasound.
Option Exercises and Year-End Values
The following table sets forth certain information as of December 31, 1998
regarding in-the-money SonoSite options held by the named executive officers
in 1998. None of our named executive officers exercised stock options in 1998.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options at Options at
December 31, 1998(#) December 31, 1998($)(1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Kevin M. Goodwin.......... 832 151,250 $4,344 $521,392
David H. Gusdorf.......... -- 60,000 -- 206,250
Jens U. Quistgaard........ 62 85,075 235 292,492
Donald F. (Guy) Seaton
III...................... -- 75,000 -- 257,813
</TABLE>
- --------
(1) Amount represents the aggregate number of the outstanding options
multiplied by the difference between the closing price of our common stock
as reported on the Nasdaq National Market on December 31, 1998 ($10.38 per
share), minus the exercise price of such options.
14
<PAGE>
Change-in-Control Arrangements
Change-in-Control Agreements. We have entered into change-in-control
agreements with Messrs. Goodwin, Gusdorf and Seaton, and Dr. Quistgaard, our
named executive officers. These agreements, which are substantially similar to
each other, provide that, in the event of a change in control of SonoSite, the
executive will receive an annual base salary that is no less than the annual
base salary in effect immediately before the change in control (as defined in
the agreements), and an annual bonus equal to at least the average of the
three annual bonuses paid to the executive in the three years prior to the
change in control. The agreements also provide that the executive will be
entitled to continue participating in our employee benefits plans and welfare
benefits plans or programs if there is a change in control. The agreements
also generally provide that we must make severance payments following and as a
result of a change in control equal to two times the sum of the executive's
annual base salary in effect at the time of a change in control. We must also
make an additional payment equal to the executive's bonus for the fiscal year
ended immediately prior to the change in control, or, if no bonus was paid in
the prior year, an additional payment of 10% of base salary. The agreements
also provide for payments to the executive if the executive suffers a
disability while employed by us, and provides for payments to the executive's
estate if the executive dies while employed by us.
1998 Plan. Under the 1998 Plan, upon a Change in Control (as defined in the
1998 Plan), each outstanding option and SAR will automatically become
exercisable in full for the total remaining number of shares covered by the
option or SAR. In addition, during the 90-day period following a Change in
Control an optionee may choose to receive cash equal to the difference between
the exercise price of the option and the fair market value of a share of
Common Stock of SonoSite determined as described above for a limited SAR
(except for optionees with related SARs and, in the case of a Director, any
Director who received an option without related SARs and during the 6 month
period prior to the Change in Control), in lieu of exercising the option and
paying the option price. Also, all restrictions on shares of restricted stock
will lapse upon a Change in Control, and performance units will be paid
(unless the optionee has previously had his or her benefits under this 1998
Plan deferred (in which case this payment is also deferred)) pro rata to the
date of a Change in Control, and all amounts otherwise deferred by SonoSite
and any employee in connection with performance units will be distributed.
15
<PAGE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
currently consists of William G. Parzybok, Jr., Jeffrey Pfeffer, Ph.D. and
Dennis A. Sarti, M.D., all of whom are nonemployee directors. The Committee is
responsible for SonoSite's executive compensation program and for administering
the 1998 Plan. On an annual basis, the Committee evaluates the performance and
compensation of SonoSite's executive officers.
SonoSite's executive compensation philosophy is based on two key elements.
The first is to attract and retain talented executive personnel by paying them
market or a premium to market base salary. Offering market or premium to
market base salary is designed to provide the executive personnel with the
benefits of a stable base compensation that is comparable to what they would
receive from most of our competitors. The second element is to provide
executive personnel with a substantial equity position in the form of stock
options. These stock options link individual compensation to individual
contribution and company performance, and align the executives' financial
interests with those of SonoSite's shareholders.
Base Salaries. The Committee plans to annually review the compensation
levels of SonoSite's executive officers in comparison to the salary levels of
executives at publicly-held medical device companies comparable to SonoSite.
This review will include third party surveys of salaries within the medical
device industry. Based on the Committee's review of SonoSite's executive
officer base salaries, and after considering the Company's performance during
the previous year, the Committee will direct adjustments consistent with the
Committee's goal of providing market or premium to market base salaries. Among
other things, the Committee intends to consider the Company's performance
during the preceding year in deciding whether to provide market or premium to
market base salaries, and the amount of any such premium.
The 1998 base salaries of Mr. Goodwin, the Company's President and Chief
Executive Officer, and Dr. Quistgaard, Vice President--Product Generation, were
determined by ATL Ultrasound, Inc. at the time of the Company's spinoff from ATL
Ultrasound. The 1998 base salary of the other executive officers was determined
by the Company at the time of each executive officer's date of hire pursuant to
the Company's executive compensation philosophy.
Stock Option Grants. Stock options are granted to provide a long-term
incentive opportunity that is directly linked to increase in shareholder
value. Generally, they are granted with an exercise price at least equal to
the market value of Common Stock on the date of the grant, have a term of ten
years, and become exercisable in 25% annual increments beginning one year
after the date of grant. To encourage stock retention, all options are granted
as incentive stock options to the maximum extent possible under the Code. The
Committee considers the Company's performance during the preceding year when
determining the amount of stock options to be granted to the executive
officers.
The Committee has not formally adopted a policy with respect to the
application of Section 162(m) of the Code, which generally imposes an annual
corporate deduction limitation of $1,000,000 on the compensation of certain
executive officers. Pursuant to Section 162(m), compensation above $1,000,000
may be deducted if it is "performance-based compensation" within the meaning
of the Code and approved by the Company's shareholders. Upon approval by the
shareholders of the Amendments to the 1998 Plan described in this Proxy
Statement, stock options granted under the 1998 Plan will qualify as
"performance-based compensation."
Compensation Committee
William G. Parzybok, Jr. (Chairman)
Jeffrey Pfeffer, Ph.D.
Dennis A. Sarti, M.D.
16
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on shares of the
Company's Common Stock with the cumulative total return of the Nasdaq National
Market, U.S. Index and the Nasdaq Medical Devices, Instruments and Supplies
Stocks Index for the period beginning on April 7, 1998, the first day of
trading, and ending on December 31, 1998, the end of the Company's last fiscal
year.
Comparison of Cumulative Total Return Among
SonoSite, Inc., Nasdaq National Market, U.S. Index and
Nasdaq Medical Devices, Instruments and Supplies, Manufacturers Stocks Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
4/07/98 12/31/98
------- --------
<S> <C> <C>
SonoSite, Inc............................................. 100.00 94.318
Nasdaq National Market, U.S. Index........................ 100.00 122.840
Nasdaq Medical Devices, Instruments and Supplies,
Manufacturers Stocks Index.............................. 100.00 104.799
</TABLE>
Assumes $100 invested in SonoSite, Inc. Common Stock, the Nasdaq National
Market, U.S. Index and the Nasdaq Medical Devices, Instruments and Supplies,
Manufacturers Stocks Index, with all dividends reinvested. Stock price shown
above for the Common Stock is historical and not necessarily indicative of
future price performance.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
SonoSite's officers and directors, and persons who beneficially own more than
10% of a registered class of SonoSite's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Officers, directors and greater than 10% shareholders are
required by Commission regulation to furnish SonoSite with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no forms were
required for those persons, SonoSite believes that during the 1998 fiscal year
all filing requirements applicable to its officers, directors and greater than
10% beneficial owners were complied with, with the exception of the filing
requirements applicable to Dr. Sarti, who failed to file a timely Form 4 to
report his acquisition of SonoSite common stock.
17
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table summarizes information regarding the beneficial
ownership of our outstanding Common Stock as of December 31, 1998 for (1) each
person or group that we know owns more than 5% of the common stock, (2) each
of our directors, (3) each of our executive officers, and (4) all of our
directors and executive officers as a group.
Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes shares over which the
indicated beneficial owner exercises voting and/or investment power. Shares of
Common Stock subject to options currently exercisable or exercisable within 60
days are deemed outstanding for computing the percentage ownership of the
person holding the options but are not deemed outstanding for computing the
percentage ownership of any other person. Except as otherwise indicated, we
believe the beneficial owners of the Common Stock listed below, based on
information furnished by them, have sole voting and investment power with
respect to the number of shares listed opposite their names. As of December
31, 1998, 4,872,193 shares of Common Stock were issued and outstanding. The
following officers and directors can be reached at our principal offices.
<TABLE>
<CAPTION>
Number of Shares Percent of Shares
Name and Address of Beneficial Owner Beneficially Owned Beneficially Owned
------------------------------------ ------------------ ------------------
<S> <C> <C>
WM Advisors, Inc.(1).................. 539,671 11.1%
1201 Third Avenue, Suite 1400
Seattle, WA 98101
Wisconsin Investment Board(2)......... 422,944 8.7%
121 East Wilson Street
Madison, WI 53702
Kirby L. Cramer(3).................... 31,832 *
Jacques Souquet, Ph.D.(4)............. 22,011 *
Dennis A. Sarti, M.D.(5).............. 20,000 *
Douglas W. Tefft(7)................... 16,469 *
Kevin M. Goodwin(7)................... 13,248 *
Jeffrey Pfeffer, Ph.D.(8)............. 5,800 *
Allen W. Guisinger(9)................. 4,500 *
Donald F. (Guy) Seaton III............ 4,000 *
William G. Parzybok, Jr............... 3,000 *
Edward V. Fritzky..................... 1,000 *
Jens U. Quistgaard, Ph.D.(10)......... 74 *
Steven R. Goldstein, M.D.............. 33 *
David H. Gusdorf...................... -- *
All directors and executive officers
as a group (13 persons)(11).......... 121,967 2.5%
</TABLE>
- --------
* Less than one percent.
(1) Based on publicly available information as of January 5, 1999.
(2) Based on publicly available information as of February 1, 1999.
(3) Includes 2,832 shares subject to options exercisable within 60 days of
December 31, 1998.
(4) Includes 6,288 shares subject to options exercisable within 60 days of
December 31, 1998.
(5) Represents 20,000 shares held by Dr. Sarti indirectly through a 401(k)
Plan. Dr. Sarti and his spouse share voting and dispositive power over
these shares.
(6) Includes 1,082 shares subject to options exercisable within 60 days of
December 31, 1998.
(7) Includes 1,248 shares subject to options exercisable within 60 days of
December 31, 1998.
(8) Mr. Pfeffer and his spouse share voting and dispositive power over these
shares.
(9) Includes 500 shares subject to options exercisable within 60 days of
December 31, 1998.
(10) Represents 74 shares subject to options exercisable within 60 days of
December 31, 1998.
(11) Includes 12,024 shares subject to options exercisable within 60 days of
December 31, 1998.
18
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Relationship with ATL Ultrasound
One of our directors, Jacques Souquet, is currently an executive officer of
ATL Ultrasound. In connection with our spinoff from ATL Ultrasound, ATL
Ultrasound made a capital contribution of its cumulative advances to us of
approximately $10.6 million and agreed to contribute $30.0 million of cash to
us for working capital and other purposes. ATL Ultrasound made this
contribution in two payments. The first payment of $18.0 million was made on
April 6, 1998, and the second payment of $12.0 million was made on January 15,
1999. Also in connection with the spinoff, we entered into the following
agreements with ATL Ultrasound that govern our relationship and provide for
the allocation of certain liabilities and obligations arising from periods
prior to the spinoff:
Distribution Agreement. We entered into a distribution agreement with ATL
Ultrasound, which generally provides for the manner of effecting the spinoff
transaction, certain indemnification rights and procedures, access to books
and records, tax liabilities, noncompetition and confidentiality obligations
and insurance matters. Under this agreement, we agreed to carry out the
remaining responsibilities of ATL Ultrasound under its collaborative and
development agreement with the U.S. Office of Naval Research.
Technology Transfer and License Agreement. We have entered into a technology
transfer and license agreement with ATL Ultrasound, as amended, under which we
take ownership of certain handheld ultrasound technology developed by ATL
Ultrasound, including patent rights that have been established or are being
pursued for that technology. We also receive a nonexclusive license to use any
other ATL Ultrasound technology in existence or developed during the period
ending three years after April 6, 1998 in its handheld ultrasound products.
This license bears a royalty equivalent to a percentage of the worldwide net
revenues from the sales of specified handheld ultrasound products that use ATL
technology. A lump-sum payment in the amount of $150 million is due to ATL
Ultrasound as a license fee if we are acquired by another entity during the
five-year period beginning April 6, 1998. If, during the next ensuing three-year
period, we are acquired by an entity engaged in the medical diagnostic imaging
business (with some exceptions), a lump-sum license fee of $75 million is due to
ATL Ultrasound.
The technology transfer and license agreement includes a cross-license with
ATL Ultrasound whereby ATL Ultrasound has the right to use certain SonoSite
technology in existence or developed before April 6, 2001. We have also agreed
with ATL Ultrasound that, until April 6, 2003, we will not use specified ATL
Ultrasound technology to develop, manufacture or sell certain ultrasound
devices weighing more than 15 pounds, and ATL will not develop, manufacture or
sell certain ultrasound devices that weigh 15 pounds or less. After April 6,
2003, each party's ongoing obligation with respect to the technology of the
other will be to respect the patent and copyright rights of the other,
although we will retain a license to use the previously licensed ATL
Ultrasound technology for ultrasound devices weighing 15 pounds or less, and
ATL Ultrasound will retain a license to use our previously licensed technology
for ultrasound devices weighing over 15 pounds.
OEM Supply Agreement. We entered into an OEM Supply Agreement with ATL
Ultrasound, as amended, under which we have the option to have handheld
ultrasound products and subassemblies manufactured exclusively for us by ATL
Ultrasound in accordance with our specifications for a period of up to five
years from April 6, 1998. Upon mutual agreement on production timing and
costs, ATL Ultrasound will supply us with the specified items at ATL
Ultrasound's cost during an initial period following April 6, 1998, and at ATL
Ultrasound's cost plus a premium after the initial period through the fifth
year. We will bear any nonrecurring engineering costs and capital expenditures
associated with such manufacture. We have the right to terminate this
agreement upon 180 days' notice, in which case ATL Ultrasound will assist us
in the transfer of the manufacturing function to us or another supplier
designated by us.
Service Agreements. To ensure an orderly transition following the spinoff,
ATL Ultrasound has agreed to provide to us at our expense for limited periods
of time ranging up to five years, but only as may be requested
19
<PAGE>
by us, a number of services, including financial, human resource, engineering,
information, facilities and regulatory services. Pursuant to an engineering
service agreement, we pay ATL Ultrasound for engineering services rendered in
amounts which are intended to compensate ATL Ultrasound for its out-of-pocket
expenses (including the salaries, benefit and overhead expenses of the ATL
Ultrasound employees providing such services) and for a markup of 20%. We also
pay for capital equipment to supply the engineering services requested by us,
and take ownership of such capital equipment at the cessation of ATL
Ultrasound's provision of the engineering services. ATL Ultrasound may adjust
such prices periodically in line with its own periodic redetermination of the
cost to ATL Ultrasound of such services. We may discontinue any of the
engineering services covered by the engineering service agreement on 90 days'
prior written notice to ATL Ultrasound. Also, in the event of any dispute over
the engineering services or the manner in which they are performed by ATL
Ultrasound, we may terminate the engineering service agreement. ATL Ultrasound
has the right in certain circumstances to terminate the engineering service
agreement on 90 days' notice. ATL Ultrasound is offering these services for
five years following April 6, 1998. Engineering services after the fifth year
will be at the mutual consent of ATL Ultrasound and SonoSite. In addition, ATL
Ultrasound has agreed to provide other services, such as regulatory support
and advisory services, on substantially similar terms as the engineering
service agreement.
Employee Benefits Agreement. We entered into an employee benefits agreement
with ATL Ultrasound to provide for the adjustment of existing ATL Ultrasound
stock options, restricted stock awards and other employee benefits and to
address other employee and employee benefits matters in connection with the
spinoff from ATL Ultrasound. As of December 31, 1998, minimum services were
required under this agreement.
Change-in-Control Agreements with our Executive Officers
We have entered into change-in-control agreements with Messrs. Goodwin,
Guisinger, Gusdorf, Seaton and Tefft, and Dr. Quistgaard, our executive
officers. See "EXECUTIVE COMPENSATION--Change-in-Control Arrangements."
We believe that the transactions described above were made on terms no less
favorable to us than could have been obtained from unaffiliated third parties.
Any future transactions between us and our officers, directors, principal
shareholders and their affiliates will be subject to approval by a majority of
our Board of Directors, including a majority of our independent and
disinterested directors, and will be on terms that we believe are no less
favorable to us than would be available from independent third parties.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG LLP, certified public accountants,
to act as independent auditor of SonoSite for the fiscal year ending December
31, 1999. KPMG has been auditor of SonoSite since 1998.
A representative of KPMG is expected to be present at the Annual Meeting,
will have the opportunity to make a statement, if the representative so
desires, and is expected to be available to respond to appropriate questions
from shareholders.
OTHER BUSINESS
The Board of Directors does not intend to present any business at the Annual
Meeting other than as set forth in the accompanying Notice of Annual Meeting
of Shareholders, and has no present knowledge that any others intend to
present business at the Annual Meeting. If, however, other matters requiring
the vote of the shareholders properly come before the Annual Meeting or any
adjournment or postponement thereof, the persons named in the accompanying
proxy will have discretionary authority to vote the proxies held by them in
accordance with their judgment as to such matters.
20
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals intended for inclusion in the proxy materials for
SonoSite's 2000 Annual Meeting of Shareholders must be received by SonoSite no
later than December 8, 1999.
Such proposals should be directed to the Corporate Secretary, SonoSite,
Inc., 19807 North Creek Parkway, Suite 200, Bothell, Washington 98011-8214.
ANNUAL REPORT AND FORM 10-K
A copy of SonoSite's Annual Report to Shareholders for 1998, including
financial statements, accompanies this Proxy Statement.
A copy of SonoSite's Annual Report on Form 10-K for the year ended December
31, 1998, as filed with the Commission, will be furnished without charge to
beneficial shareholders or shareholders of record upon request to Investor
Relations at SonoSite's principal executive offices.
21
<PAGE>
Appendix A
SONOSITE, INC.
Amended and Restated 1998 Option, Stock Appreciation Right, Restricted Stock,
Stock Grant and Performance Unit Plan
1. Purpose
The purpose of the Plan is to enhance the long-term shareholder value of the
Corporation by offering opportunities to selected persons to participate in
the Corporation's growth and success, and to encourage them to remain in the
service of the Corporation and its subsidiaries and to acquire and maintain
stock ownership in the Corporation.
2. Definitions
The following terms have the corresponding meanings for purposes of the
Plan:
"Award Cycle" means a period of not less than three fiscal years over which
performance units granted during a particular year are to be earned out.
"Change in Control" means
(a) a "Board Change." For purposes of the Plan, a Board Change shall have
occurred if a majority of the seats (other than vacant seats) on the
Corporation's Board of Directors (the "Board") were to be occupied by
individuals who were neither (i) nominated by a majority of the Incumbent
Directors nor (ii) appointed by directors so nominated. An "Incumbent
Director" is a member of the Board who has been either (i) nominated by a
majority of the directors of the Corporation then in office or (ii) appointed
by directors so nominated, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person (as defined in Section 2(b))
other than the Board; or
(b) The acquisition by any individual, entity or group (within the meaning
of Section 13(d) (3) or 14(d) (2) of the Exchange Act) (a "Person") of
"Beneficial Ownership" (within the meaning of Rule 13d3 promulgated under the
Exchange Act) of (i) 20% or more of either (A) the then outstanding shares of
common stock (the "Outstanding Corporation Common Stock") or (B) the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Outstanding
Corporation Voting Securities"), in the case of either (A) or (B) of this
clause (i), which acquisition is not approved in advance by a majority of the
Incumbent Directors or (ii) 33% or more of either (A) the Outstanding
Corporation Common Stock or (B) the Outstanding Corporation Voting Securities,
in the case of either (A) or (B) of this clause (ii), which acquisition is
approved in advance by a majority of the Incumbent Directors; provided,
however, that the following acquisitions shall not constitute a Change in
Control: (x) any acquisition by the Corporation, (y) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation, or (z) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or consolidation, the
conditions described in clauses (i), (ii) and (iii) of the following
subsection (c) are satisfied; or
(c) Approval by the shareholders of the Corporation of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or
A-1
<PAGE>
consolidation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same proportions
as their ownership, immediately prior to such reorganization, merger or
consolidation, of the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities, as the case may be, (ii) no Person (excluding
the Corporation, any employee benefit plan (or related trust) of the
Corporation or such corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 33% or more
of the Outstanding Corporation Common Stock or Outstanding Corporation Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 33%
or more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation or the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors, and (iii)
at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation were
Incumbent Directors at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation or (ii) the sale or other
disposition of all or substantially all of the assets of the Corporation,
other than to a corporation, with respect to which following such sale or
other disposition, (A) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities immediately prior
to such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition, of the
Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities, as the case may be, (B) no Person (excluding the Corporation and
any employee benefit plan (or related trust) of the Corporation or such
corporation and any Person beneficially owning, immediately prior to such sale
or other disposition, directly or indirectly, 33% or more of the Outstanding
Corporation Common Stock or Outstanding Corporation Voting Securities, as the
case may be) beneficially owns, directly or indirectly, 33% or more of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of directors, and
(C) at least a majority of the members of the board of directors of such
corporation were approved by a majority of the Incumbent Directors at the time
of the execution of the initial agreement or action of the Board providing for
such sale or other disposition of assets of the Corporation.
"Committee" means the Committee provided for in Section 6, which shall
administer the Plan.
"Common Stock" means common stock, par value $0.01 per share, of the
Corporation.
"Corporation" means SonoSite, Inc., a Washington corporation.
"Designated Beneficiary" means any person designated in writing by a
Participant as a legal recipient of payments due under an award in the event
of the Participant's death, or in the absence of such designation, the
Participant's estate. Such designation must be on file with the Corporation in
order to be effective but, unless the Participant has made an irrevocable
designation, may be changed from time to time by the Participant.
"Disability," unless otherwise defined by the Plan Administrator, means a
mental or physical impairment of the Participant that is expected to result in
death or that has lasted or is expected to last for a continuous period of 12
months or more and that causes the Participant to be unable, in the opinion of
the Corporation, to perform his or her duties for the Corporation or its
subsidiaries and to be engaged in any substantial gainful activity.
A-2
<PAGE>
"Early Retirement" means early retirement as that term is defined by the
Plan Administrator from time to time for purposes of the Plan.
"Fair Market Value" of the Common Stock as of any trading day means the
average (rounded to the next highest cent in the case of fractions of a cent)
of the high and low sales prices of the Common Stock as reported on such
trading day by the Nasdaq National Market. If no sales price is reported for
the Common Stock on such trading day, then "Fair Market Value" shall mean the
highest bid price reported for the Common Stock on such trading day by the
National Quotation Bureau Incorporated or any similar nationally recognized
organization. The Committee, in its sole discretion, shall make all
determinations required by this definition.
"Participant" means an employee, director, consultant or independent
contractor who has received an award under the Plan.
"Payment Schedule" means the schedule adopted by the Committee in accordance
with Section 12 with respect to an Award Cycle to govern determination of the
Payment Value of a performance unit at the end of such Award Cycle in
accordance with Section 12.
"Payment Value" means the value, expressed in dollars, of a performance unit
at the conclusion of an Award Cycle, determined in accordance with Section 12.
"Plan" means this SonoSite, Inc. 1998 Option, Stock Appreciation Right,
Restricted Stock, Stock Grant and Performance Unit Plan.
"Restricted Stock" means the shares of Common Stock referred to in Section
10.
"Retirement" means retirement as of the Participant's normal retirement date
under the Corporation's 401(k) Plan or other similar successor plan applicable
to salaried employees, unless otherwise defined by the Plan Administrator from
time to time for purposes of the Plan.
"Withholding Tax" means any tax, including any federal, state or local
income tax, required by any governmental entity to be withheld or otherwise
deducted and paid with respect to the transfer of shares of Common Stock as a
result of the exercise of a Nonqualified Stock Option or stock appreciation
right, the payment of performance units or the award of Restricted Stock or
stock grants.
3. Stock Subject to the Plan
There are reserved for issuance upon the exercise of options, for issuance
of Restricted Stock and stock grant awards and for issuance upon the payment
of performance units and stock appreciation rights under the Plan 1,500,000
shares of Common Stock, of which no more than an aggregate of 333,333 shares
may be issued as Restricted Stock awards and stock grants under the Plan. Such
shares may be authorized and unissued shares of Common Stock or shares now
held or subsequently acquired by the Corporation. If any option or stock
appreciation right granted under the Plan shall expire or terminate for any
reason (including, without limitation, by reason of its surrender, pursuant to
the third paragraph of Section 8(b) or otherwise, or cancellation, in whole or
in part, pursuant to the provisions of Section 8(c) or otherwise or pursuant
to Section 9(f), or the substitution in place thereof of a new option or stock
appreciation right) without having been exercised in full, the shares subject
thereto shall again be available for the purposes of issuance under the Plan.
If shares of Restricted Stock shall be forfeited and returned to the
Corporation pursuant to the provisions of Section 10, such shares shall again
be available for the purposes of issuance under the Plan. In no event shall
shares of Common Stock which, under the Plan, are authorized to be used in
payment of performance unit awards be deemed to be unavailable for purposes of
the Plan until such shares have been issued in payment thereof in accordance
with the provisions of Section 12(g). Stock appreciation rights and
performance unit awards providing for payments only in cash are not subject to
the overall limitations referred to above.
A-3
<PAGE>
4. Limitations
Subject to adjustment from time to time as provided in Section 16, not more
than 250,000 shares of Common Stock may be made subject to awards under the
Plan to any individual in the aggregate in any one fiscal year of the
Corporation, such limitation to be applied in a manner consistent with the
requirements of, and only to the extent required for compliance with, the
exclusion from the limitation on deductibility of compensation under Section
162(m) of the Code.
5. Administration
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have plenary authority, in its
discretion, to determine the individuals to whom, and the time or times at
which, performance units or Restricted Stock shall be awarded and stock
appreciation rights or options shall be granted (including, without
limitation, whether such options shall be Incentive Stock Options or
Nonqualified Stock Options or a combination thereof, as such terms are defined
in Section 8(a)) and the number of units and/or shares to be covered by each
such award or grant. Provided, however, that the Chief Executive Officer shall
have the limited authority to grant Incentive Stock Options or Nonqualified
Stock Options or a combination thereof, in an amount not to exceed 25,000
shares per individual per calendar year, to attract and retain nonofficer
employees. In making such determinations, the Committee may take into account
the nature of the services rendered by the respective Participants, their
present and potential contributions to the Corporation's success and such
other factors as the Committee in its discretion may deem relevant. Subject to
the express provisions of the Plan, the Committee shall have plenary authority
to interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine the terms and provisions of Restricted Stock,
performance unit, stock appreciation right and option agreements (which need
not be identical) and to make all other determinations necessary or advisable
for the administration of the Plan. The Committee's determinations of the
matters referred to in this Section 5 shall be conclusive. The Corporation
intends that administration of the Plan comply in all respects with Section
16(b) of the Exchange Act, and the rules and regulations promulgated
thereunder. Notwithstanding anything in the Plan to the contrary, the Board,
in its absolute discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to persons who are subject to
Section 16 of the Exchange Act without so limiting or conditioning the Plan
with respect to other persons.
6. The Committee
The Board shall designate a Committee of members of the Board which shall
meet the requirements of Section 16(b) of the Exchange Act. Currently, the
Committee shall consist solely of two or more members of the Board who are
non-employee directors. If at any time an insufficient number of non-employee
directors is available to serve on such Committee, other directors may serve
on the Committee; however, during such time, no options, stock appreciation
rights or Restricted Stock shall be granted under the Plan to any person if
the granting of such options, stock appreciation rights or Restricted Stock
would not meet the requirements of Section 16(b) of the Exchange Act.
For purposes of this Section 6, a "non-employee" is a person who meets the
definition of "non-employee director" as set forth in the rules and
regulations promulgated under Section 16(b) of the Exchange Act or any
successor rule or regulatory requirement. The Committee shall be appointed by
the Board, which may from time to time appoint members of the Committee in
substitution for members previously appointed and may fill vacancies, however
caused, in the Committee. The Committee shall select one of its members as its
Chairman and shall hold its meetings at such times and places as it may
determine. A majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by not less than a majority of
its members. Any decision or determination reduced to writing and signed by
all the members shall be fully as effective as if it had been made by a
majority vote at a meeting duly called and held. The Committee may appoint a
secretary, shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
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7. Eligibility
The Committee may award performance units and Restricted Stock and grant
options and stock appreciation rights only to employees, directors,
consultants or independent contractors (which term as used herein includes
officers) of the Corporation and of its present and future subsidiary
corporations ("subsidiaries"). Any person eligible under the Plan may receive
one or more awards of performance units or Restricted Stock or one or more
grants of options or stock appreciation rights, or any combination thereof, as
the Committee shall from time to time determine, and such determinations may
be different as to different Participants and may vary as to different awards
and grants.
8. Option Grants
(a) The Committee is authorized under the Plan, in its discretion, to issue
options as "Incentive Stock Options" (as defined in Section 422 of the United
States Internal Revenue Code of 1986, as amended (the "Code")) or as
"Nonqualified Stock Options" (all other options granted hereunder) and the
options shall be designated as Incentive Stock Options or Nonqualified Stock
Options in the applicable option agreement. The purchase price of the Common
Stock under each option granted under the Plan shall be determined by the
Committee but shall be not less than 100% of the Fair Market Value of the
Common Stock at the time such option is granted. Notwithstanding the previous
sentence, any Nonqualified Stock Option may provide that the purchase price be
equal to the average Fair Market Value of the Common Stock over any continuous
period of trading days beginning and ending no more than 30 business days
before or after the date such option is granted.
(b) The Committee shall be authorized in its discretion to prescribe in the
option grant the installments, if any, in which an option granted under the
Plan shall become exercisable, provided that no option shall be exercisable
prior to the six months prior to the date of grant thereof except as provided
in Sections 8(c), (d), (g), (h) and (i) or except as the Committee otherwise
determines. In no case may an option be exercised as to less than 50 shares at
any one time (or the remaining shares covered by the option if less than 50)
during the term of the option. The Committee shall also be authorized to
establish the manner of the exercise of an option. The term of each option
shall be not more than 10 years from the date of grant thereof.
In general, upon exercise, the option price is to be paid in full in cash;
however, the Committee can determine at the time the option is granted for
Incentive Stock Options or at any time prior to exercise for Nonqualified
Stock Options, that additional forms of payment will be permitted. To the
extent permitted by the Committee and applicable laws and regulations
(including, but not limited to, federal tax and securities laws and
regulations and state corporate law), an option may be exercised (i) in Common
Stock owned by the option holder having a Fair Market Value on the date of
exercise equal to the aggregate option price, or in a combination of cash and
stock; provided, however, that payment in stock shall not be made unless such
stock shall have been owned by the option holder for a period of at least six
months prior thereto (or any shorter period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes); or (ii) by delivery
of a properly executed exercise notice, together with irrevocable instructions
to a broker designated by the Corporation, all in accordance with the
regulations of the Federal Reserve Board, to deliver promptly to the
Corporation the amount of sale or loan proceeds to pay the exercise price and
any federal, state or local withholding tax obligations that may arise in
connection with the exercise.
In lieu of requiring an option holder to pay cash or stock and to receive in
turn certificates for shares of Common Stock upon the exercise of a
Nonqualified Stock Option, if the option so provides, the Committee may elect
to require the option holder to surrender the option to the Corporation for
cancellation as to all or any portion of the number of shares covered by the
intended exercise and receive in exchange for such surrender a payment, at the
election of the Committee, in cash, in shares of Common Stock or in a
combination of cash and shares of Common Stock, equivalent to the appreciated
value of the shares covered by the option surrendered for cancellation. Such
appreciated value shall be the difference between the option price of such
shares (as adjusted pursuant to Section 16) and the Fair Market Value of such
shares, which shall for this purpose be determined by the Committee taking
into consideration all relevant factors, but which shall not be less than the
Fair Market
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Value of such shares on the date on which the option holder's notice of
exercise is received by the Corporation. Upon delivery to the Corporation of a
notice of exercise of option, the Committee may avail itself of its right to
require the option holder to surrender the option to the Corporation for
cancellation as to shares covered by such intended exercise. The Committee's
right of election shall expire, if not exercised, at the close of business on
the fifth business day following the delivery to the Corporation of such
notice. Should the Committee not exercise such right of election, the delivery
of the aforesaid notice of exercise shall constitute an exercise by the option
holder of the option to the extent therein set forth, and payment for the
shares covered by such exercise shall become due immediately.
(c) In the event that a Participant's services for the Corporation or one of
its subsidiaries shall cease and the termination of such individual's service
is for cause, the option shall automatically terminate upon first notification
to the option holder of such termination of services, unless the Committee
determines otherwise, and such option shall automatically terminate upon the
date of such termination of services for all shares which were not purchasable
upon such date. For purposes of this Section 8(c), "cause" is defined as a
determination by the Committee that the option holder (i) has committed a
felony, (ii) has engaged in an act or acts of deliberate and intentional
dishonesty resulting or intended to result directly or indirectly in improper
material gain to or personal enrichment of the individual at the Corporation's
expense, or (iii) has willfully disobeyed the Corporation's appropriate rules,
instructions or orders, and such willful disobeyance has continued for a
period of 10 days following notice thereof from the Corporation.
In the event of the termination of the services of the holder of an option
because of Retirement, Early Retirement at the Corporation's request or
Disability, he may (unless such option shall have been previously terminated
pursuant to the provisions of the preceding paragraph or unless otherwise
provided in his option grant) exercise such option at any time prior to the
expiration of the option, (i) in the event of Disability or Retirement, to the
extent of the number of shares covered by such option, whether or not such
shares had become purchasable by him at the date of the termination of his
services and (ii) in the event of Early Retirement at the Corporation's
request, to the extent of the number of shares covered by such option at such
time or times as such option becomes purchasable by him in accordance with its
terms. (Although the option may be exercised after Retirement, Early
Retirement at the Corporation's request or Disability, under Section 422 of
the Code, if the option has been designated as an Incentive Stock Option, it
must be exercised within three months after the date of Retirement or Early
Retirement or one year after the termination of employment due to Disability
in order to qualify for incentive stock option tax treatment. For purposes of
the preceding sentence, Disability shall mean "disability" as that term is
defined for purposes of Section 422 of the Code.)
In the event of the death of an individual to whom an option has been
granted under the Plan, while he is performing services for the Corporation or
a subsidiary, the option theretofore granted to him (unless his option shall
have been previously terminated pursuant to the provisions of this Section
8(c) or unless otherwise provided in his option grant) may, subject to the
limitations described in Section 8(f), be exercised by his Designated
Beneficiary, by his legatee or legatees of the option under his last will, or
by his personal representatives or distributees, at any time within a period
of one year after his death, but not after the expiration of the option, to
the extent of the remaining shares covered by his option whether or not such
shares had become purchasable by such an individual at the date of his death.
In the event of the death of an individual (i) during the one-year period
following termination of his services or (ii) following termination of his
services by reason of Retirement, Early Retirement at the Corporation's
request or Disability, then the option (if not previously terminated pursuant
to the provisions of this Section 8(c)) may be exercised during the remainder
of such one-year period, but not after the expiration of the option,
respectively, by his Designated Beneficiary, by his legatee under his last
will, or by his personal representative or distributee, but only to the extent
of the number of shares purchasable by such Participant pursuant to the
provisions of Section 8(d) at the date of termination of his services.
In the event of the termination of the services of the holder of an option,
other than by reason of Retirement, Early Retirement at the Corporation's
request, Disability or death, he may (unless his option shall have been
previously terminated pursuant to the provisions of this Section 8(c) or
unless otherwise provided in his option grant) exercise his option at any time
within 30 days after such termination or such longer period as determined
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by the Committee, but not after the expiration of the option, to the extent of
the number of shares covered by his option which were purchasable by him at
the date of the termination of his services, and such option shall
automatically terminate upon the date of such termination of services for all
shares which were not purchasable upon such date.
(d) Notwithstanding the foregoing provisions, the Committee may determine,
in its sole discretion, in the case of any termination of services, that the
holder of an option may exercise such option to the extent of some or all of
the remaining shares covered thereby whether or not such shares had become
purchasable by such an individual at the date of the termination of his
services and may exercise such option at any time prior to the expiration of
the original term of the option, except that such extension shall not cause
any Incentive Stock Option to fail to continue to qualify as an Incentive
Stock Option without the consent of the option holder. Options granted under
the Plan shall not be affected by any change of relationship with the
Corporation so long as the holder continues to be an employee, consultant or
independent contractor of the Corporation or of a subsidiary; however, a
change in a participant's status from an employee to a nonemployee (e.g.,
consultant or independent contractor) shall result in the termination of an
outstanding Incentive Stock Option held by such participant in accordance with
Section 8(c). The Committee, in its absolute discretion, may determine all
questions of whether particular leaves of absence constitute a termination of
services; provided, however, that with respect to Incentive Stock Options,
such determination shall be subject to any requirements contained in the Code.
Nothing in the Plan or in any option granted pursuant to the Plan shall confer
on any individual any right to continue in the employ or other service of the
Corporation or any other person or interfere in any way with the right of the
Corporation or any other person to terminate his employment or other services
at any time.
(e) The date of grant of an option pursuant to the Plan shall be the date
specified by the Committee at the time it grants such option, provided that
such date shall not be prior to the date of such action by the Committee and
that the price shall be determined in accordance with Section 8(a) on such
date. The Committee shall promptly notify a grantee of an award and a written
option grant shall promptly be duly executed and delivered by or on behalf of
the Corporation.
(f) In the event an optionee is granted Incentive Stock Options that in the
aggregate entitle the optionee to purchase, in the first year such options
become exercisable (whether under their original terms or as a result of the
occurrence of an Acceleration Event, as defined below), Common Stock of the
Corporation, any parent corporation or any subsidiary of the Corporation
having a Fair Market Value (determined as of the time such options are
granted) in excess of $100,000, such portion in excess of $100,000 shall be
treated as a Nonqualified Stock Option. Such limitation shall not apply if the
Internal Revenue Service publicly rules, issues a private ruling to the
Corporation, any optionee of the Corporation or any legatee, personal
representative or distributee of an optionee or states in proposed, temporary
or final regulations that provisions which allow the full exercise of an
optionee's Incentive Stock Options upon the occurrence of the relevant
Acceleration Event do not violate Section 422(d) of the Code. An "Acceleration
Event" means (i) a determination of the Committee to allow an optionee to
exercise his options in full upon termination of his employment or other
service as provided in Section 8(c) or (d), (ii) the death of an optionee
while he is employed by the Corporation or a subsidiary, (iii) any Change in
Control, or (iv) the optionee's termination of employment or other service
under circumstances that will allow him to exercise options not otherwise
exercisable pursuant to Section 8(i).
(g) Notwithstanding any contrary waiting period, installment period or other
limitation or restriction in any option agreement or in the Plan, in the event
of a Change in Control, each option outstanding under the Plan shall thereupon
become exercisable at any time during the remaining term of the option, but
not after the term of the option, to the extent of the number of shares
covered by the option, whether or not such shares had become purchasable by
the Participant thereunder immediately prior to such Change in Control.
(h) Anything in the Plan to the contrary notwithstanding, during the 90-day
period from and after a Change in Control (x) an optionee (other than an
optionee who initiated a Change in Control in a capacity other than as an
officer or a director of the Corporation) who is an officer or a director of
the Corporation (within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder) with respect to an
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option that was granted at least six months prior to the date of exercise
pursuant to this sentence and is unaccompanied by a stock appreciation right
and (y) any other optionee who is not an officer or a director with respect to
an option that is unaccompanied by a stock appreciation right shall, unless
the Committee shall determine otherwise at the time of grant, have the right,
in lieu of the payment of the full purchase price of the shares of Common
Stock being purchased under the option and by giving written notice to the
Corporation, to elect (within such 90-day period) to surrender all or part of
the option to the Corporation and to receive in cash an amount equal to the
amount by which the amount determined pursuant to Section 9(d) hereof on the
date of exercise (determined as if the optionee had exercised a limited stock
appreciation right on such date) shall exceed the purchase price per share
under the option multiplied by the number of shares of Common Stock granted
under the stock option as to which the right granted by this sentence shall
have been exercised. Such written notice shall specify the optionee's election
to purchase shares granted under the option or to receive the cash payment
referred to in the immediately preceding sentence.
(i) Notwithstanding the foregoing provisions, the optionee's employment or
other contract with the Corporation may provide that upon termination of his
employment or other services for other than cause or for "good reason" (as
defined in his contract), all stock options shall become immediately
exercisable.
9. Stock Appreciation Rights
(a) Stock appreciation rights may be paid upon exercise in cash, Common
Stock or any combination thereof, as the Committee in its sole discretion may
determine. A stock appreciation right is an incentive award that permits the
holder to receive (per share covered thereby) an amount equal to the amount by
which the Fair Market Value of a share of Common Stock on the date of exercise
exceeds the Fair Market Value of such share on the date the stock appreciation
right was granted.
(b) The Committee may grant a stock appreciation right separately or in
tandem with a related option and may grant both "general" and "limited" stock
appreciation rights. A general stock appreciation right granted in tandem with
a related option will generally have the same terms and provisions as the
related option with respect to exercisability, and the base price of such a
stock appreciation right will generally be equal to the option price under the
related option. Upon the exercise of a tandem stock appreciation right, the
related option will be deemed to be exercised for all purposes of the Plan and
vice versa.
(c) A general stock appreciation right granted separately and not in tandem
with any option will have such terms as the Committee may determine. The base
price of a stand-alone stock appreciation right may not be less than the Fair
Market Value of the Common Stock, determined as in Section 8(a) in the case of
a Nonqualified Stock Option; the term of a stand-alone stock appreciation
right may not be greater than 10 years from the date it was granted.
(d) A limited stock appreciation right may be exercised only during the 90
calendar days immediately following the date of a Change in Control. For the
purpose of determining the amount payable upon exercise of a limited stock
appreciation right, the fair market value of the Common Stock will be equal to
the higher of (x) the highest Fair Market Value of the Common Stock during the
90-day period ending on the date the limited stock appreciation right is
exercised and (y) whichever of the following is applicable:
(i) the highest per share price paid in any tender or exchange offer
which is in effect at any time during the 90 calendar days preceding the
exercise of the limited right;
(ii) the fixed or formula price for the acquisition of shares of Common
Stock in a merger or similar agreement approved by the Corporation's
shareholders or Board, if such price is determinable on the date of
exercise; and
(iii) the highest price per share paid to any shareholder of the
Corporation in a transaction or group of transactions giving rise to the
exercisability of the limited right. In no event, however, may the holder
of a limited stock appreciation right granted in tandem with a related
Incentive Stock Option receive an amount in excess of the maximum amount
which will enable the option to continue to qualify as an Incentive Stock
Option without the consent of the Participant.
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(e) Limited stock appreciation rights are payable only in cash. General
stand-alone stock appreciation rights are payable only in cash, unless the
Committee provides otherwise at the time of grant. General stock appreciation
rights granted in tandem with a related option are payable in cash, Common
Stock or any combination thereof, as determined in the sole discretion of the
Committee. Notwithstanding the foregoing, and to the extent required by Rule
16b-3 promulgated under Section 16(b) of the Exchange Act, a payment, in whole
or in part, of cash upon exercise of a stock appreciation right may be made to
an optionee who is an officer or director of the Corporation (within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder) only if (i) the right was granted at least six months
prior to the date of exercise (except that in the event of the death or
Disability of the optionee prior to the expiration of the six-month period,
this limitation shall not apply) and (ii) the optionee's election to receive
cash in settlement of the right and the exercise of the right are made (a)
during the period beginning on the third business day following the date of
release for publication of the quarterly or annual summary statements of sales
and earnings of the Corporation and ending on the twelfth business day
following such date, (b) six months prior to the date the stock appreciation
right becomes taxable or (c) during the 90-day period from and after a Change
in Control.
(f) Unless otherwise provided by the Committee at the time of grant, the
provisions of Section 8 relating to the termination of the service of a holder
of an option shall apply equally, to the extent applicable, to the holder of a
stock appreciation right.
10. Restricted Stock Awards
(a) The consideration to be received for shares of Restricted Stock issued
hereunder out of authorized but unissued shares or shares subsequently
acquired by the Corporation shall be equal to cash in an amount equal to the
par value thereof and past services for the Corporation. The recipient of
Restricted Stock shall be recorded as a shareholder of the Corporation, at
which time the Corporation, at its discretion, may either issue a Restricted
Stock Certificate or make a book entry credit in the Corporation's stock
ledger to evidence the award of such Restricted Stock, and the Participant
shall have, subject to the provisions hereof, all the rights of a shareholder
with respect to such shares and receive all dividends or other distributions
made or paid with respect to such shares; provided, that the shares
themselves, and any new, additional or different shares or securities which
the recipient may be entitled to receive with respect to such shares by virtue
of a stock split or stock dividend or any other change in the corporate or
capital structure of the Corporation, shall be subject to the restrictions
hereinafter described.
(b) During a period of years following the date of grant, as determined by
the Committee, which shall in no event be less than six months (the
"Restricted Period"), the Restricted Stock or any rights thereto may not be
sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or
disposed of by the recipient, except in the event of death or the transfer
thereof to the Corporation under the provisions of the next succeeding
paragraph. In the event of the death or Retirement of the recipient during the
Restricted Period, such restrictions shall immediately lapse, and the
recipient or, in the case of the recipient's death, his Designated
Beneficiary, the legatee under his last will or his personal representative or
distributee shall be free to transfer, encumber or otherwise dispose of the
Restricted Stock. In the event of the Early Retirement at the Corporation's
request of the recipient during the Restricted Period, such restrictions shall
continue until they lapse in accordance with the terms of the grant.
Except as provided in Section 10(c), in the event that, during the
Restricted Period, the service of the recipient by the Corporation or one of
its subsidiaries is terminated for any reason (including termination with or
without cause by the Corporation or such subsidiary or resignation by the
recipient), other than termination of service due to the Retirement, Early
Retirement at the Corporation's request or death of the recipient, then the
shares of Restricted Stock held by him shall be forfeited to the Corporation
and the recipient shall immediately transfer and return to the Corporation the
certificates, if any have been issued to him, representing all the Restricted
Stock and the recipient's rights as a shareholder with respect to the
Restricted Stock shall cease, effective with such termination of service.
Notwithstanding the foregoing, the recipient's service contract with the
Corporation may provide that upon termination of his service for other than
cause or for good reason, all Restricted Stock shall cease to be subject to
such restrictions.
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A recipient's rights to Restricted Stock may not be assigned or transferred
except upon death by will, descent or distribution. In the event of any
attempt by the recipient to sell, exchange, transfer, pledge or otherwise
dispose of shares of Restricted Stock in violation of the provisions hereof,
such shares shall be forfeited to the Corporation.
(c) Notwithstanding the Restricted Period contained in the grant of
Restricted Stock, in the event of a Change in Control (as defined in Section
2), all restrictions on shares of Restricted Stock shall immediately lapse and
such Restricted Shares shall become immediately transferable and
nonforfeitable.
(d) Notwithstanding anything contained in the Plan to the contrary, the
Committee may determine, in its sole discretion, in the case of any
termination of a recipient's service, that the restrictions on some or all of
the shares of Restricted Stock awarded to a recipient shall immediately lapse
and such Restricted Shares shall become immediately transferable and
nonforfeitable.
11. Stock Grant Awards
(a) Each nonofficer employee of the Corporation is eligible to receive a
grant of Common Stock as a stock bonus (i) at the end of each fiscal year or
(ii) if the employee terminates prior to year-end, at the time of termination.
The number of shares to be granted shall be determined by setting a percentage
of the employee's salary at the fiscal year-end or time of termination and
dividing that amount by the price per share of the Common Stock or by any
other method determined by the Committee. For this purpose, the price for the
Common Stock shall be the Fair Market Value on the date of grant and each
grant shall be for full shares only; any fractional shares resulting from this
calculation shall be disregarded. The consideration to be received for shares
of Common Stock issued under this Section 11(a) shall be cash in an amount
equal to the par value thereof and past services for the Corporation.
(b) In addition, each recipient of a stock grant under Section 11(a) may be
granted a cash award at the time the shares are issued in an amount sufficient
to offset the recipient's estimated tax liabilities arising from the issuance
of the Common Stock under Section 11(a).
(c) Determinations regarding eligibility for grants under Section 11(a), the
amount of individual grants of Common Stock, the amount of the cash offset
award, the interpretation of Section 11 and all other matters relating to the
administration of Section 11 are within the sole discretion of the Committee.
12. Performance Unit Awards
(a) Performance units which are awarded to a Participant shall have a "unit
base value," expressed in dollars, determined by the Committee on the day on
which the award is granted and generally determined to be the Fair Market
Value of the Common Stock on such day. The performance units will also have a
Payment Value at the end of the applicable Award Cycle contingent upon the
performance of the Corporation and/or of such Participant's subsidiary,
division or department during the Award Cycle. The performance measures may
include, but shall not be limited to, cumulative growth in earnings per share
or pretax profits, return on shareholders' equity, asset management, cash flow
or return on capital employed. Such measures may be applied on an absolute
basis or relative to industry indices and shall be defined in a manner which
the Committee shall deem appropriate. For each performance unit awarded, the
Committee shall determine the length of the Award Cycle, which shall be a
period of not less than three fiscal years, and shall establish a Payment
Schedule based upon the performance measures determined for such performance
unit and the length of the Award Cycle, setting forth a range of Payment
Values corresponding to performance levels targeted for the Corporation or
such subsidiary, division or department. If during the course of an Award
Cycle there should occur, in the opinion of the Committee, significant changes
in economic conditions or in the nature of the operations of the Corporation
or a subsidiary, division or department which the Committee did not foresee in
establishing the performance measures for such Award Cycle and which, in the
Committee's sole judgment have, or are expected to have, a substantial effect
on the performance of the Corporation or of a Participant's subsidiary,
division or department
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during such Award Cycle, the Committee may revise the Payment Schedule and
performance measures formerly determined by it in such manner as the
Committee, in its sole judgment, may deem appropriate except as otherwise
provided in Section 12(l).
(b) In determining the number of performance units to be awarded, the
Committee shall take into account a person's responsibility level,
performance, potential, cash compensation level and such other considerations
as it deems appropriate.
(c) Except as otherwise provided in Section 12(l), an award of performance
units to a Participant shall terminate for all purposes if the services of the
Participant for the Corporation or one of its subsidiaries ceases during the
Award Cycle, except in the case of death, Disability or Early Retirement at
the request of the Corporation, in which case (and provided that the
Participant at the time of death, Disability or Early Retirement as aforesaid
shall have maintained his employment or other qualifying relationship with the
Corporation or one of its subsidiaries continuously during the period
commencing on the date the award was granted and ending on the first
anniversary thereof) the Participant will be entitled to payment (such payment
to be made in accordance with the provisions of Section 12(d)) of the same
portion of the Payment Value of the award the Participant would otherwise have
been paid (such Payment Value, if any, to be determined at the conclusion of
the applicable Award Cycle in accordance with the provisions of Sections 12(a)
and 12(e) unless otherwise provided in Section 12(l)) as the portion of the
Award Cycle during which the Participant maintained such relationship with the
Corporation bears to the full Award Cycle. Under particular circumstances, the
Committee may make other determinations with respect to Participants whose
services do not meet the foregoing requirements, including the waiver of any
of the requirements of this subsection (c) relating to periods of continuous
service.
(d) Except as otherwise provided in Section 12(l), unless the Committee
otherwise determines, no payment with respect to performance units will be
made to a Participant prior to the end of such Participant's Award Cycle;
provided, however, that if a Participant should die during an Award Cycle and
his award shall not have been terminated hereunder prior to his death, such
Participant's Designated Beneficiary, the legatee under the Participant's last
will, his personal representative or his distributee may elect instead,
subject to the approval of the Committee, to have the pro rata portion of the
Participant's Payment Value determined by the Committee as of the end of the
year during which such Participant's death occurred, based upon application of
the Payment Schedule to the part of the Award Cycle which shall have elapsed
(for such purpose, the cumulative growth rate or improvement achieved in the
applicable performance measures to the end of the fiscal year in which death
occurs will be assumed to continue for the Award Cycle), in which event such
pro rata portion shall be paid in cash or Common Stock, as provided in Section
12(g), as soon as practicable following such year (or in such number of
installments as shall have been requested by the Participant and approved by
the Committee) to such Participant's Designated Beneficiary or legal
representative.
(e) Except as otherwise provided in Section 12(d) in the case of death, or
in Section 12(l) in the case of a Change in Control, a Participant's interest
in any performance units awarded to him shall mature on the last day of the
Award Cycle for such award. The Payment Value of a performance unit shall be
the dollar amount calculated on the basis of the Payment Schedule applicable
to such Award Cycle.
(f) The total amount of Payment Value due a Participant at the conclusion of
an Award Cycle shall be paid on such date following the conclusion of such
Award Cycle as the Committee shall designate, except as specifically otherwise
provided in the Plan; provided, however, that the Committee shall have
authority, if it deems appropriate, to defer payment (in cash or in stock or
both in specified percentages) of the Payment Value due a Participant if the
Participant shall request the Committee to do so at any time prior to the last
year of the Award Cycle for such award. In respect of awards made or to be
made in one or more deferred installments in cash, interest shall be credited
semiannually on each such award at a rate to be determined semiannually by the
Committee, but in no event shall such rate be less than the average rate on
10-year AAA new industrial corporate bonds during each such semiannual period
as calculated on the basis of the average of such rates for each calendar week
ending during the period January 1 through June 30 and July 1 through December
31; provided that awards made during any such six-month period shall be
credited on the basis of the average rate for that
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period; and provided further that installments paid during any six-month
period shall be credited with interest on the basis of the average rate for
the next preceding six-month period, in each case adjusted for the number of
days such award was to be credited. Unless paid to the recipient of such award
at the time credited, interest at the foregoing rate shall be credited on the
interest so credited until so paid. The foregoing minimum interest rate for
any award that is payable in one or more deferred installments under the Plan
may not be modified without the prior written consent of the Participant.
Whenever an award is made in one or more deferred installments in Common
Stock, the Committee may determine that there shall be credited on such award
an amount equivalent to the dividends which would have been paid with respect
to such shares of Common Stock if they had been issued and outstanding. Such
dividend equivalents shall be credited on the dividend record dates until
certificates for such shares shall have been delivered to the recipient of
such award or until such earlier date as the Committee may determine.
Such interest and dividend equivalents shall be paid to the recipient of any
such award in cash (or in property if the related dividend shall have been in
property) at such time or times during the deferred period of such award or at
the same time as the cash or shares of Common Stock to which such interest and
dividend equivalents apply, all as the Committee shall determine. The
Committee may also determine that any such dividend equivalents may be used to
purchase additional shares of outstanding Common Stock (such shares to be
valued for such purpose at Fair Market Value on the dividend record date) to
be added to the shares of Common Stock covered by such award and held subject
to the same terms and conditions, including provisions relating to the payment
of amounts equivalent to dividends thereon.
(g) Except as otherwise provided in Section 12(l), the Committee in its
discretion may determine at the time of grant or at the end of the Award Cycle
as to each Participant whether the payment of the Payment Value due a
Participant shall be made (i) in cash, (ii) in shares of Common Stock (valued
at the average Fair Market Value of the Common Stock for the five trading days
immediately preceding the date of payment), or (iii) in a combination of cash
and shares of Common Stock so valued.
(h) If the payment of any award shall be deferred until after the
termination of the services of the recipient by the Corporation or one of its
subsidiaries, the cash or Common Stock covered by such award, together with
any deferred interest or dividend equivalents thereon, shall be delivered in
not more than 20 annual installments, commencing not later than the January 31
after such termination of services (or such other date as the Committee from
time to time shall determine), all as the Committee may determine. If the
payment of an award under the Plan is deferred, such payment thereafter may be
accelerated so that such payment shall be made immediately or at such earlier
time or in such less number of installments, in each case as the Committee may
from time to time determine, but only with the prior written consent of the
Participant.
(i) A Participant to whom any award has been made shall not have any
interest beyond that of a general creditor of the Corporation in the cash or
Common Stock awarded, or in any interest or dividend equivalents credited to
him until the cash has been paid to him or the certificates for the Common
Stock have been delivered to him, as the case may be, in accordance with the
provisions of the Plan.
(j) In the case of the death of the recipient of an award, before or after
the termination of his services, any unpaid installments of such deferred
award shall pass to the Designated Beneficiary, the legatee under the
Participant's last will, his personal representative or his distributee.
Unpaid installments of a deferred award shall be paid either in the same
installments as originally provided or otherwise as the Committee may
determine in individual cases.
(k) Subject to the provisions of Section 12(l), in any case in which payment
of an award is to be made in Common Stock, the Corporation shall have the
right, in lieu of delivering the certificate or certificates for any or all of
the stock which would otherwise be deliverable to the Participant pursuant to
the Plan, to pay to such Participant on the date on which such certificate or
certificates would otherwise be deliverable an amount in cash equal to the
Fair Market Value of such Common Stock on such date or dates as may be
determined by the Committee, but not more than five trading days prior to such
date, all as the Committee may determine in individual cases.
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(l) Anything herein to the contrary notwithstanding, in the event of a
Change in Control, with respect to any unmatured performance unit awards which
a Participant held immediately prior to such Change in Control, the
Participant will be entitled to immediate payment in cash (unless payment of
such performance unit awards shall be deferred in accordance with Section
12(f), in which event the amount provided to be payable by this Section 12(l)
shall also be so deferred) in an amount equal to the value of such units
determined in accordance with the Payment Schedule applicable to such awards,
based on the cumulative, growth rate in the Corporation's reported earnings
per share for all previously elapsed fiscal years, if any, included in the
Award Cycles for such awards and the actual or presumed cumulative growth rate
in the earnings per share for the balance of each Award Cycle, determined as
follows: (i) if such Change in Control occurs prior to the completion of the
first fiscal year of an Award Cycle, the cumulative growth rate to be utilized
for the balance of the Award Cycle shall be the cumulative growth rate in the
Corporation's earnings per share in the four fiscal years preceding the first
year and (ii) if such Change in Control occurs during any subsequent fiscal
year of an Award Cycle, the cumulative growth rate to be utilized for the
balance of the Award Cycle shall be the cumulative growth rate of the
preceding fiscal year(s) in that Award Cycle prior to the fiscal year in which
occurs the Change in Control. In the event that a performance measure other
than earnings per share is employed, similar adjustments shall be made for
such holders of unmatured performance units. The Committee may in its
discretion determine that such historical financial data are not appropriate
or not available and may use the latest budgets, projections, forecasts or
plans for the Corporation or its business units or subsidiaries. Except as
expressly set forth in this Section 12(l), upon the occurrence of a Change in
Control, no change(s) shall be made in the terms of any performance unit
(including, without limitation, its unit base value, Payment Value or
performance criteria) or in the underlying accounting assumptions or practices
for purposes of determining the amount due thereunder, which change(s) would
lessen the value of any performance unit to the holder thereof.
13. Withholding Taxes
In connection with the transfer of shares of Common Stock as a result of the
exercise of a Nonqualified Stock Option or stock appreciation right, the
payment of performance units or the award of Restricted Stock or stock grants,
the Corporation (a) shall not issue a certificate for such shares until it has
received payment from the Participant of any Withholding Tax in cash or by the
retention or acceptance upon delivery thereof by the Participant of shares of
Common Stock sufficient in Fair Market Value to cover the amount of such
Withholding Tax and (b) shall have the right to retain or sell without notice,
or to demand surrender of, shares of Common Stock in value sufficient to cover
any Withholding Tax. The Corporation shall have the right to withhold from any
cash amounts due from the Corporation to the award recipient pursuant to the
Plan an amount equal to the Withholding Tax. In either case, the Corporation
shall make payment (or reimburse itself for payment made) to the appropriate
taxing authority of an amount in cash equal to the amount of such Withholding
Tax, remitting any balance to the Participant. For purposes of this Section
13, the value of shares of Common Stock so retained or surrendered shall be
equal to the Fair Market Value of such shares on the date that the amount of
the Withholding Tax is to be determined (the "Tax Date"), and the value of
shares of Common Stock so sold shall be the actual net sale price per share
(after deduction of commissions) received by the Corporation.
Notwithstanding the foregoing, the Participant may elect, subject to
approval by the Committee, to satisfy the obligation to pay any Withholding
Tax, in whole or in part, by providing the Corporation with funds sufficient
to enable the Corporation to pay such Withholding Tax or by having the
Corporation retain or accept upon delivery thereof by the Participant shares
of Common Stock sufficient in Fair Market Value to cover the amount of such
Withholding Tax. Each election by a Participant to have shares retained or to
deliver shares for this purpose shall be in writing and made on or prior to
the Tax Date.
14. Transferability and Ownership Rights of Options, Stock Appreciation Rights
and Performance Units
No option or stock appreciation right granted or performance unit awarded
under the Plan shall be transferable otherwise than pursuant to the
designation of a Designated Beneficiary or by will, descent or distribution,
and an option or stock appreciation right may be exercised, during the
lifetime of the holder thereof,
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<PAGE>
only by him. The holder of an option, stock appreciation right or performance
unit award shall have none of the rights of a shareholder until the shares
subject thereto or awarded thereby shall have been registered in the name of
such holder on the transfer books of the Corporation.
15. Holding Periods
In order to obtain certain tax benefits afforded to incentive stock options
under Section 422 of the Code, an optionee must hold the shares issued upon
the exercise of an incentive stock option for two years after the date of
grant of the option and one year from the date of exercise. An optionee may be
subject to the alternative minimum tax at the time of exercise of an incentive
stock option. The Committee may require an optionee to give the Corporation
prompt notice of any disposition in advance of the required holding period of
shares of Common Stock acquired by exercise of an incentive stock option. Tax
advice should be obtained when exercising any option and prior to the
disposition of the shares issued upon the exercise of any option.
16. Adjustments Upon Changes in Capitalization
Except as otherwise provided in Section 8(g) and Section 12(l), in the event
of any changes in the outstanding stock of the Corporation by reason of stock
dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, split-ups, split-offs, spin-offs,
liquidations or other similar changes in capitalization, or any distribution
to shareholders other than cash dividends, the Committee shall make such
adjustments, if any, in light of the change or distribution as the Committee
in its sole discretion shall determine to be appropriate, (i) in the number
and class of shares or rights subject to options and stock appreciation rights
and the exercise prices of the options and stock appreciation rights covered
thereby, (ii) in the number of shares of Common Stock covered by a performance
unit award for which certificates have not been delivered, any dividend
equivalents to which deferred awards of Common Stock are entitled, and the
performance measures established by the Committee under Section 12(a), and
(iii) the maximum number and class of shares or rights that may be subject to
awards to any individual as set forth in Section 4. In the event of any such
change in the outstanding Common Stock of the Corporation, the aggregate
number and class of shares available under the Plan and the maximum number of
shares as to which options may be granted and stock appreciation rights or
performance units awarded and the maximum number of shares of Restricted Stock
which may be awarded shall be appropriately adjusted by the Committee.
17. Amendment and Termination
Unless the Plan shall theretofore have been terminated as hereinafter
provided, the Plan shall terminate on, and no awards of performance units,
stock appreciation rights, or Restricted Stock or options shall be made after,
April 5, 2008; provided, however, that such termination shall have no effect
on awards of performance units, stock appreciation rights, Restricted Stock or
options made prior thereto. The Plan may be terminated, modified or amended by
the shareholders of the Corporation. The Board of Directors of the Corporation
may also terminate the Plan, or modify or amend the Plan in such respects as
it shall deem advisable in order to conform to any change in any law or
regulation applicable thereto, or in other respects; however, to the extent
required by applicable law or regulation, shareholder approval will be
required for any amendment which will (a) materially increase the total number
of shares as to which options may be granted or which may be used in payment
of performance unit awards or stock appreciation right awards under the Plan
or which may be issued as Restricted Stock, (b) materially change the class of
persons eligible to receive awards of performance units or Restricted Stock
and grants of stock appreciation rights or options, or (c) otherwise require
shareholder approval under any applicable law or regulation. The amendment or
termination of the Plan shall not, without the consent of the recipient of any
award under the Plan, alter or impair any rights or obligations under any
award theretofore granted under the Plan.
18. Effectiveness of the Plan
The Plan shall become effective on April 6, 1998. The Committee may in its
discretion authorize the awarding of performance units and Restricted Stock
and the granting of options and stock appreciation rights,
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<PAGE>
the payments, issuance or exercise of which, respectively, shall be expressly
subject to the conditions that (a) the shares of Common Stock reserved for
issuance under the Plan shall have been duly listed, upon official notice of
issuance, upon each stock exchange in the United States upon which the Common
Stock is traded and (b) a registration statement under the Securities Act of
1933, as amended, with respect to such shares shall have become effective.
Adopted by the Board on April 3, 1998, and approved by the Company's
shareholders on April 3, 1998. The Board amended Section 3 (currently Section
5) of the Plan on June 8, 1998 to permit the Chief Executive Officer to grant
options. Plan Amended and Restated on February 24, 1999. Shareholder approval
of Sections 3 and 4 obtained on , 199 .
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<PAGE>
SONOSITE, INC.
This Proxy is solicited by the Board of Directors for the
Annual Meeting of Shareholders -- May 6, 1999
The undersigned hereby appoint(s) Kevin M. Goodwin and Donald F. (Guy)
Seaton III and each of them as proxies, with full power of substitution, to
represent and vote as designated all shares of Common Stock of SonoSite, Inc.
held of record by the undersigned on March 10, 1999 at the Annual Meeting of
Shareholders of the Company to be held at the Woodmark Hotel, located at 1200
Carillon Point, Kirkland, Washington 98033, at 9:00 a.m. on Thursday, May 6,
1999, with authority to vote upon the matters listed below and with
discretionary authority as to any other matters that may properly come before
the meeting or any adjournment or postponement thereof.
(1) APPROVAL OF AMENDMENT OF THE FOR AGAINST ABSTAIN
AMENDED AND RESTATED 1998 [ ] [ ] [ ]
OPTION, STOCK APPRECIATION RIGHT,
RESTRICTED STOCK, STOCK GRANT
AND PERFORMANCE UNIT PLAN
WITHHOLD
AUTHORITY
(2) ELECTION OF EIGHT DIRECTORS FOR the to vote for the
Nominees: Kirby L. Cramer, Nominees Nominees
Kevin M. Goodwin, Edward V. [ ] [ ]
Fritzky, Steven R. Goldstein,
M.D., William G. Parzybok, Jr.,
Jeffrey Pfeffer, Ph.D., Dennis
A. Sarti, M.D., and Jacques
Souquet, Ph.D.
WITHHOLD for the following only: (write the name of the nominee in the
space below)
______________________________________________________________________________
unless otherwise directed, all notes will be apportioned equally among those
persons for whom authority is given to vote
IMPORTANT--PLEASE DATE AND SIGN ON THE OTHER SIDE
<PAGE>
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER IN THE SPACE PROVIDED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR" ITEM 1 AND "FOR THE NOMINEES" IN ITEM 2.
The Board of Directors recommends a vote "FOR" Item 1 and "FOR the
Nominees" in Item 2.
Date ___________________________________
Signature(s) ___________________________
Date ___________________________________
Signature(s) ___________________________
Please sign exactly as your name appears
hereon. Attorneys, trustees, executors
and other fiduciaries acting in a
representative capacity should sign their
names and give their titles. An
authorized person should sign on behalf
of corporations, partnerships,
associations, etc. and give his or her
title. If your shares are held by two or
more persons, each person must sign.
Receipt of the notice of meeting and
proxy statement is hereby acknowledged.
[ ] I plan to attend the Annual Meeting
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