<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
NOVAMED EYECARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
SEC 1913 (3-99)
<PAGE>
980 North Michigan
Avenue
Suite 1620
Chicago, Illinois
60611
Telephone (312)
664-4100
Facsimile (312)
664-4250
April 10, 2000
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend the
2000 Annual Meeting of Stockholders of NovaMed Eyecare, Inc., to be held at the
R.R. Donnelley & Sons Building, 77 West Wacker Drive, 19th Floor, Chicago,
Illinois 60601, on Wednesday, May 17, 2000, at 4:00 p.m., local time.
The attached Notice of Annual Meeting and Proxy Statement describe the
matters that we expect to be acted upon at the Annual Meeting. These matters
include the election of two directors and proposals to approve our employee
stock purchase and stock incentive plans.
Whether or not you plan to attend the Annual Meeting, it is important that
your shares be represented. Regardless of the number of shares you own, please
sign and date the enclosed proxy card and promptly return it to us in the
enclosed postage paid envelope. If you sign and return your proxy card without
specifying your choices, your shares will be voted in accordance with the
recommendations of the Board of Directors contained in the Proxy Statement.
We look forward to seeing you on May 17, 2000, and encourage you to return
your proxy card as soon as possible.
Sincerely,
Stephen J. Winjum
President, Chief Executive Officer
and Chairman of the Board of
Directors
<PAGE>
[LOGO OF NOVAMED]
----------------
Notice of Annual Meeting of Stockholders
to be held on May 17, 2000
----------------
TO THE STOCKHOLDERS OF NOVAMED EYECARE, INC.:
The Annual Meeting of Stockholders of NovaMed Eyecare, Inc. (the "Company")
will be held at 4:00 p.m., Chicago time, on Wednesday, May 17, 2000, at the
R.R. Donnelley & Sons Building, 77 West Wacker Drive, 19th Floor, Chicago,
Illinois 60601, for the following purposes:
(1) To elect two Class I directors to the Company's Board of Directors;
(2) To approve the Company's Amended and Restated Stock Incentive Plan;
(3) To approve the Company's Amended and Restated 1999 Stock Purchase
Plan; and
(4) To transact such other business as may properly come before the
meeting or any adjournments thereof.
The foregoing items of business are more fully described in the accompanying
Proxy Statement.
The Board of Directors has fixed the close of business on April 3, 2000, as
the record date for determining stockholders entitled to notice of, and to vote
at, the Annual Meeting.
By order of the Board of Directors,
Ronald G. Eidell
Secretary
Chicago, Illinois
April 10, 2000
ALL STOCKHOLDERS ARE URGED TO ATTEND THE MEETING IN PERSON OR BY PROXY.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE PAID ENVELOPE FURNISHED FOR THAT PURPOSE.
<PAGE>
NovaMed Eyecare, Inc.
980 North Michigan Avenue, Suite 1620
Chicago, Illinois 60611
(312) 664-4100
-----------------------
PROXY STATEMENT
-----------------------
The accompanying proxy is solicited by the Board of Directors (the "Board of
Directors") of NovaMed Eyecare, Inc., a Delaware corporation (the "Company"),
for use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held
at 4:00 p.m., Chicago time, Wednesday, May 17, 2000, at the R.R. Donnelley &
Sons Building, 77 West Wacker Drive, 19th Floor, Chicago, Illinois 60601, and
any adjournments thereof. This Proxy Statement and accompanying form of proxy
are first being mailed to stockholders on or about April 10, 2000.
Record Date and Outstanding Shares -- The Board of Directors has fixed the
close of business on April 3, 2000, as the record date (the "Record Date") for
the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting or any adjournments thereof. As of the Record Date, the Company
had outstanding 24,398,584 shares of Common Stock, par value $.01 per share
(the "Common Stock"). Each outstanding share of Common Stock is entitled to one
vote on all matters to come before the Annual Meeting.
Voting of Proxies -- Stephen J. Winjum and Ronald G. Eidell, the persons
named as proxies on the proxy card accompanying this Proxy Statement, were
selected by the Board of Directors to serve in such capacity. Messrs. Winjum
and Eidell are executive officers of the Company and Mr. Winjum is also a
director of the Company. The shares represented by each executed and returned
proxy will be voted in accordance with the directions indicated thereon, or, if
no direction is indicated, such proxy will be voted in accordance with the
recommendations of the Board of Directors contained in this Proxy Statement.
Each stockholder giving a proxy has the power to revoke it at any time before
the shares it represents are voted. Revocation of a proxy is effective upon
receipt by the Secretary of the Company of either (1) an instrument revoking
the proxy or (2) a duly executed proxy bearing a later date. Additionally, a
stockholder may change or revoke a previously executed proxy by voting in
person at the Annual Meeting (attendance at the Annual Meeting will not, by
itself, revoke a proxy).
Required Vote -- The vote of a plurality of the shares of Common Stock voted
in person or by proxy is required to elect the nominees for the Class I
directors. Stockholders will not be allowed to cumulate their votes in the
election of directors. The affirmative vote of a majority of the shares of
Common Stock represented in person or by proxy is required to approve the
Company's Amended and Restated 1999 Stock Purchase Plan ("Stock Purchase Plan")
and Amended and Restated Stock Incentive Plan ("Stock Incentive Plan").
Quorum; Abstentions and Broker Non-Votes -- The required quorum for the
transaction of business at the Annual Meeting will be a majority of the shares
of Common Stock issued and outstanding as of the Record Date. Votes cast by
proxy or in person at the Annual Meeting will be tabulated by the election
inspectors appointed for the meeting and will determine whether or not a quorum
is present. Abstentions and broker non-votes will be included in determining
the presence of a quorum. Abstentions and broker non-votes will have no effect
on the vote for directors. Abstentions will be considered present and entitled
to vote with respect to adopting the Stock Incentive Plan and Stock Purchase
Plan and will have the same effect as votes "against" such proposal. Broker
non-votes will not be considered present and entitled to vote with respect to
adopting the Stock Incentive Plan and Stock Purchase Plan and will have no
effect on such proposal.
Annual Report to Stockholders -- The Company's Annual Report to Stockholders
for the year ended December 31, 1999, containing financial and other
information pertaining to the Company, is being furnished to stockholders
simultaneously with this Proxy Statement.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of eight directors.
Article V of the Company's Certificate of Incorporation provides that the Board
of Directors will be divided into three classes, with each class serving for a
term of three years. At the Annual Meeting, two directors of Class I will be
elected for a term of three years expiring at the Company's 2003 Annual Meeting
of Stockholders. Both of the nominees are presently serving as directors of the
Company. See "Nominees" below.
The six directors whose terms of office do not expire in 2000 will continue
to serve after the Annual Meeting until such time as their respective terms of
office expire or their successors are duly elected and qualified. See "Other
Directors" below.
If at the time of the Annual Meeting any of the nominees should be unable or
decline to serve, the persons named in the proxy will vote for such substitute
nominee or nominees as the Board of Directors recommends, or vote to allow the
vacancy created thereby to remain open until filled by the Board of Directors,
as the Board of Directors recommends. The Board of Directors has no reason to
believe that any nominee will be unable or decline to serve as a director if
elected.
NOMINEES
The names of the nominees for the office of director, together with certain
information concerning such nominees, are set forth below:
<TABLE>
<CAPTION>
Served as
Name Age Position With Company Director Since
---- --- --------------------- --------------
<S> <C> <C> <C>
Stephen J. Winjum....... 36 President, Chief Executive Officer 1995
and Chairman of the Board of Directors
Peter C. Wendell........ 49 Director 1999
</TABLE>
Mr. Winjum has served as President, Chief Executive Officer and a member of
the Board of Directors of the Company since founding the Company in March 1995.
In May 1998, the Board of Directors established the position of Chairman, and
Mr. Winjum has served in such capacity ever since.
Mr. Wendell has been a member of the Board of Directors of the Company since
March 1999. Mr. Wendell is the founder, and has been a General Partner, of
Sierra Ventures, a Menlo Park, California venture capital fund since 1982.
Sierra Ventures beneficially owns greater than 5% of the outstanding Common
Stock of the Company. Mr. Wendell is on the Board of Directors of the Princeton
University Investment Company which is responsible for the Princeton endowment.
He also serves as a director of Fatbrain.Com, Inc., an online retailer of
information resources, a position he has served in since September 1996.
The Board of Directors recommends that stockholders vote FOR both of the
nominees for election as Class I directors.
2
<PAGE>
OTHER DIRECTORS
The following persons will continue to serve as directors of the Company
after the Annual Meeting until their terms of office expire (as indicated
below) or until their successors are duly elected and qualified.
<TABLE>
<CAPTION>
Served as Term
Name Age Position with Company Director Since Expires
---- --- --------------------- -------------- -------
<S> <C> <C> <C> <C>
John D. Hunkeler, M.D... 58 Medical Director and Director 1997 2001
R. Judd Jessup (1)(2)... 52 Director 1998 2002
Scott H. Kirk, M.D...... 47 Director 1995 2002
Steven V. Napolitano.... 40 Director 1997 2002
James B. Tananbaum
(1)(2)................. 36 Director 1997 2001
Douglas P. Williams,
M.D.................... 42 Director 1995 2001
</TABLE>
- --------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Dr. Hunkeler is the Company's Medical Director and has been a director of
the Company since January 1997. He is currently a director of Premier Laser
Systems, Inc., a company that designs, manufactures and sells lasers and
diagnostic equipment for dental, surgical and ophthalmic procedures. Dr.
Hunkeler is the founder and Medical Director of the Hunkeler Eye Centers, P.C.,
a professional entity which has been a party to a long-term service agreement
with the Company since March 1997. Dr. Hunkeler has been practicing
ophthalmology in the Kansas City area since 1973.
Mr. Jessup has been a director of the Company since November 1998. He is
currently a director of CorVel Corporation, an independent nationwide provider
of medical cost containment and managed care services. Mr. Jessup is currently
a private investor. From 1994 to 1996 he served as President of the HMO
Division of FHP International Corporation, a diversified health care services
company.
Dr. Kirk has been a director of the Company since August 1995. Dr. Kirk has
practiced ophthalmology in the Chicago area since 1982, and is currently
practicing medicine in River Forest, Illinois on behalf of Sure Vision Eye
Centers, L.L.C., a professional entity whose eye care professionals have been
parties to long-term service agreements with the Company since January 1996.
Dr. Kirk is currently a member of the board of directors of the American
Association of Ambulatory Healthcare.
Mr. Napolitano has been a director of the Company since January 1997. Mr.
Napolitano is a senior partner in the law firm of Katten Muchin & Zavis where
he has practiced since 1995. He is a member of the firm's board of directors
and is also a co-chair of the firm's Private Equity and Emerging Growth Company
practice group.
Mr. Tananbaum has been a director of the Company since January 1997. Mr.
Tananbaum has been President and Chief Executive Officer of Advanced Medicine
Inc., a private pharmaceutical research company since November 1996. Mr.
Tananbaum was a co-founder of GelTex Pharmaceuticals Inc., where he was a
director until January 1997. He has also served as a director of Intensiva
HealthCare Corporation and was a founding investor in Healtheon, Inc. From 1994
to 1996, he was a partner in Sierra Ventures, a Menlo Park, California venture
capital fund.
Dr. Williams has been a director of the Company since August 1995. Dr.
Williams has practiced ophthalmology in northwest Indiana since July 1987, and
is currently practicing medicine in Hammond, Indiana, on behalf of Sure Vision
Eye Centers, L.L.C., a professional entity whose eye care professionals have
been parties to long-term service agreements with the Company since January
1996.
3
<PAGE>
Arrangements for Nomination as Director--Messrs. Winjum and Tananbaum, and
Drs. Kirk and Williams, were initially designated to the Board of Directors
pursuant to a stockholders' agreement which terminated upon consummation of the
Company's initial public offering of Common Stock in August 1999. The
stockholders' agreement also set forth the voting procedures used to elect each
of Dr. Hunkeler and Messrs. Napolitano, Jessup and Wendell, as directors.
Except for options granted to certain directors upon their initial election
to the Board of Directors, the Company's directors do not receive compensation
for serving as directors, attending or participating in meetings, or for
serving on committees or participating in committee meeting. All directors,
however, are reimbursed for their reasonable out-of-pocket expenses incurred in
attending Board of Director and committee meetings.
Meetings--During the year ended December 31, 1999, the Board of Directors
held six meetings. Each of the Company's current directors attended at least
75% of the aggregate of the number of board meetings held (during the period in
which he was a director) and the total number of committee meetings on which he
served that were held (during the period in which he was a member of such
committee) during 1999.
Committees of the Board of Directors--The Board of Directors has established
an Audit Committee and a Compensation Committee, each comprised entirely of
directors who are not officers or employees of the Company or its subsidiaries
or any other individual having a relationship which, in the opinion of the
Board of Directors, would interfere with the exercise of such director's
independent judgement in carrying out the responsibilities of a director.
Messrs. Jessup and Tananbaum serve as the two members of both the Compensation
Committee and Audit Committee. The Company does not have a standing nominating
committee.
The Audit Committee generally has responsibility for recommending
independent public accountants to the Board of Directors for selection,
reviewing the plan and scope of the accountants' annual audit, reviewing the
Company's internal controls functions and financial management policies, and
reporting to the Board of Directors regarding all of the foregoing. The Audit
Committee held one formal meeting in 1999. At a meeting of the Board of
Directors in February 2000, the Board of Directors adopted a formal written
charter governing the Audit Committee.
The Compensation Committee generally has responsibility for recommending to
the Board of Directors guidelines and standards relating to the determination
of executive and key employee compensation, reviewing the Company's executive
compensation policies, recommending to the Board of Directors compensation for
the Company's executive officers, and reporting to the Board of Directors
regarding the foregoing. The Compensation Committee also has responsibility for
administering the Stock Incentive Plan which includes determining the number of
options to be granted to the Company's executive officers and key employees
pursuant to the plan and reporting to the Board of Directors regarding the
foregoing. The Stock Purchase Plan is also administered by the Compensation
Committee. The Compensation Committee held one formal meeting in 1999. See
"Report of the Compensation Committee of the Board of Directors."
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information regarding the beneficial ownership
of our common stock as of February 29, 2000, by:
. each person or group of affiliated persons known by us to beneficially
own more than 5% of the outstanding shares of our common stock
. each of our directors
. each of our chief executive officer and the four other most highly
compensated executive officers in 1999
. all of our directors and executive officers as a group
Unless otherwise indicated below the persons in this table have sole voting
and investment power with respect to all shares shown as beneficially owned by
them. Beneficial ownership is determined in accordance with the rules of the
SEC.
<TABLE>
<CAPTION>
Percent of
Number of Voting
Name and Address (1) Shares Power
-------------------- ---------- ----------
<S> <C> <C>
Five Percent Stockholders:
Kirk Family Limited Partnership (2)................... 2,338,977 9.63%
c/o Kirk Eye Center, S.C.
7427 Lake Street
River Forest, Illinois 60305
Sierra Ventures V, L.P................................ 2,366,722 9.74%
c/o Peter C. Wendell
3000 Sand Hill Road
Building 4, Suite 210
Menlo Park, California 94025
Douglas Williams Family Partnership (3)............... 1,679,488 6.91%
c/o Brodersen-Williams Eye Institute, P.C.
6850 Hohman Avenue
Hammond, Indiana 46324
Eldi E. Deschamps, M.D. (4)........................... 1,379,488 5.68%
8510 Broadway Street
Merrillville, Indiana 46410
Directors and Officers:
Stephen J. Winjum (5)................................. 1,783,933 7.07%
Ronald G. Eidell (6).................................. 196,453 *
E. Michele Vickery (7)................................ 232,954 *
J. Gary Jordan (8).................................... 110,000 *
Robert A. Wallach (9)................................. 110,000 *
Scott H. Kirk, M.D. (10).............................. 2,493,224 10.26%
John D. Hunkeler, M.D. (11)........................... 873,112 3.58%
R. Judd Jessup (12)................................... 209,858 *
Steven V. Napolitano (13)............................. 168,000 *
James B. Tananbaum.................................... 100,000 *
Douglas P. Williams, M.D. (14)........................ 1,747,488 7.19%
Peter C. Wendell (15)................................. 2,391,722 9.85%
All Executive Officers and Directors as a Group:
(12 people) (16)...................................... 10,416,744 40.15%
</TABLE>
5
<PAGE>
- --------
* Less than 1%
(1) Unless otherwise indicated, the address of the beneficial owners is c/o
NovaMed Eyecare, Inc., 980 North Michigan Avenue, Suite 1620, Chicago,
Illinois 60611.
(2) The general partners of the Kirk Family Limited Partnership are S. Kirk,
S.C. and Kirk Eye Center, S.C. Scott H. Kirk, M.D., a member of the Board
of Directors, is the sole shareholder of S. Kirk, S.C., and his brother,
Kent A. Kirk, M.D., is the sole shareholder of Kirk Eye Center, S.C.
(3) The general partner of the Douglas Williams Family Limited Partnership is
Brodersen-Williams Eye Institute, P.C. Douglas P. Williams, M.D., a member
of the Board of Directors, is the sole shareholder of Brodersen-Williams
Eye Institute, P.C.
(4 ) Includes 518,687 shares held by Eldi E. Deschamps, M.D., as Trustee for
the Eldi E. Deschamps Grantor Annuity Trust u/a/d June 1, 1998, and
860,801 shares held by Eldi E. Deschamps, M.D., as Trustee for the Eldi
E. Deschamps Revocable Trust u/a/d June 1, 1998.
(5) Includes 935,833 options which are exercisable within 60 days of February
29, 2000.
(6) Includes 139,375 options which are exercisable within 60 days of February
29, 2000.
(7) Includes 159,000 options which are exercisable within 60 days of February
29, 2000.
(8) Includes 110,000 options which are exercisable within 60 days of February
29, 2000.
(9) Includes 110,000 options which are exercisable within 60 days of February
29, 2000. As of January 1, 2000, Mr. Wallach was no longer employed by the
Company.
(10) Includes 2,338,977 shares of common stock held by the Kirk Family Limited
Partnership.
(11) Includes 761,686 shares held by John D. Hunkeler, M.D. as Trustee for the
John D. Hunkeler Revocable Trust u/a/d October 13, 1998. Includes 100,000
options which are exercisable within 60 days of February 29, 2000.
(12) Includes 106,658 shares which are held by R. Judd Jessup and Charlene
Lynne Jessup, as Trustees for the R. Judd Jessup and Charlene Lynne Jessup
Living Trust u/a/d May 6, 1991. Includes 800 shares held by Mr. Jessup's
step-son and 800 shares held by Mr. Jessup's step-daughter. Mr. Jessup
disclaims beneficial ownership of all 1,600 of such shares.
(13) Includes 100,000 options which are exercisable within 60 days of February
29, 2000.
(14) Includes 1,679,488 shares held by the Douglas Williams Family Limited
Partnership.
(15) Includes 2,366,722 shares held by Sierra Ventures V, L.P. Mr. Wendell is a
general partner of SV Associates V, L.P., which is the general partner of
Sierra Ventures V, L.P. Mr. Wendell disclaims beneficial ownership of
these shares, except to the extent of his economic interest in the shares.
(16) Includes 1,654,208 options which are exercisable within 60 days of
February 29, 2000.
6
<PAGE>
EXECUTIVE OFFICERS
The table below identifies executive officers of the Company who are not
identified in the tables entitled "Election of Directors--Nominees" or "--Other
Directors."
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Ronald G. Eidell........ 56 Executive Vice President and Chief Financial Officer
E. Michele Vickery...... 45 Executive Vice President Operations
J. Gary Jordan.......... 52 Senior Vice President Sales
</TABLE>
Mr. Eidell has served as the Executive Vice President and Chief Financial
Officer of the Company since July 1998. From January 1996 to May 1998, Mr.
Eidell was Senior Vice President and Chief Financial Officer of Metromail
Corporation, a provider of information and technology products and services to
direct marketing firms. From June 1988 to December 1995, Mr. Eidell worked at
R.R. Donnelley & Sons Co., an international commercial printing company, where
he was that company's Senior Vice President, Finance and Treasurer from January
1991 to December 1995, and a Vice President from June 1988 through December
1990. Mr. Eidell earned his M.B.A. from the University of Chicago in 1982 and
his B.S. in Business Administration from Drexel University in 1967.
Ms. Vickery has been the Company's Executive Vice President Operations since
March 1997. From 1990 to 1996, Ms. Vickery was employed by Surgical Care
Affiliates (SCA), a company specializing in the management of outpatient
surgery centers, as a Regional Vice President from 1990 until 1992, and as one
of two Senior Vice Presidents of Operations from 1992 to 1996. Upon the
acquisition of SCA by HealthSouth in 1996, Ms. Vickery continued as a Senior
Vice President of the Surgery Division of HealthSouth until joining the
Company. Ms. Vickery received her B.S.N. from Case Western Reserve University
in 1978, and her B.A. from Wittenberg University in 1976.
Mr. Jordan joined the Company in April 1999 as its Senior Vice President
Sales, responsible for its sales organization and oversight of these activities
in certain regional markets. Prior to joining the Company, Mr. Jordan was
President of the Cardiology Division of the Cordis Corporation, a subsidiary of
Johnson & Johnson, from January 1997 to August 1998. From July 1996 to December
1996, he was Cordis Corporation's Vice President Sales and Marketing. From 1990
to 1996, Mr. Jordan was Vice President of worldwide sales and marketing for St.
Jude Medical where he directed marketing and sales for St. Jude's heart valve
division. Mr. Jordan earned his B.A. from the University of Georgia in 1970.
Subject to the terms of their employment agreements, the executive officers
serve at the discretion of the Board of Directors. Each of the executive
officers has an employment agreement with the Company. See "Executive
Compensation--Employment Agreements." Two of the Company's directors, Dr. Scott
H. Kirk and Dr. Douglas P. Williams, are brothers-in-law. None of the other
executive officers or directors are related.
Section 16(a) Beneficial Ownership Reporting Compliance--Section 16 of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), requires the
Company's officers (as defined under Section 16), directors and persons who
beneficially own greater than 10% of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Based solely on a review of the forms it
has received and on written representations from certain reporting persons that
no such forms were required for them, the Company believes that during 1999 all
Section 16 filing requirements applicable to its officers, directors and 10%
beneficial owners were complied with by such persons, except that James B.
Tananbaum failed to timely file a Form 4 for a transaction occurring in
August 1999. This transaction was reported on a Form 4 filed by Mr. Tananbaum
in October 1999.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table provides information concerning the annual and long-term
compensation for services in all capacities to the Company for the years ended
December 31, 1999, 1998 and 1997, of those persons who were (i) during 1999,
the chief executive officer of the Company and (ii) at December 31, 1999, the
four other most highly compensated (based upon combined salary and cash
incentive compensation) executive officers of the Company whose total salary
and bonus exceeded $100,000 during 1999 (collectively, the "Named Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Name and Principal Position Year Salary Bonus Comp. Awards Options Payouts Comp.
- --------------------------- ---- -------- -------- ------- ---------- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen J. Winjum.......... 1999 $237,500 $125,000 $32,597 -- 100,000 -- --
President, Chief Executive 1998 $200,000 $ 75,000 $31,203 -- 50,000 -- --
Officer and Chairman of 1997 $193,750 -- $22,062 -- 700,000 -- --
the Board
Ronald G. Eidell........... 1999 $193,750 $ 70,000 $15,808 -- 30,000 -- --
Executive Vice President 1998 $ 80,096 $ 20,000 -- -- 250,000 -- --
and Chief Financial
Officer
E. Michele Vickery......... 1999 $193,750 $ 70,000 $12,887 -- 30,000 -- --
Executive Vice President 1998 $175,000 $ 40,000 $10,097 -- 24,000 -- --
Operations 1997 $141,870 -- $ 4,038 -- -- --
J. Gary Jordan............. 1999 $127,886 $ 27,423 -- -- 110,000 -- --
Senior Vice President
Sales
Robert A. Wallach(1)....... 1999 $121,154 $ 5,000 $11,831 -- 110,000 -- --
Senior Vice President
Marketing
</TABLE>
- --------
(1) As of January 1, 2000, Mr. Wallach was no longer employed by the Company.
8
<PAGE>
Option Grants in 1999--The following table provides information on grants of
stock options to the Named Officers during 1999. The Company has never issued
stock appreciation rights.
Option Grants in 1999
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term (2)
----------------------------------------- -------------------------
Options % of Total Exercise or Expiration
Name (1) Options Base Price Date 5% ($) 10% ($)
---- ------- ---------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Winjum....... 100,000 7.69% $5.00 2/17/09 $ 314,447 $ 796,871
Ronald G. Eidell........ 30,000 2.31% $5.00 2/17/09 $ 94,334 $ 239,061
E. Michele Vickery...... 30,000 2.31% $5.00 2/17/09 $ 94,334 $ 239,061
J. Gary Jordan.......... 110,000 8.46% $6.00 4/12/09 $ 415,070 $ 1,051,870
Robert A. Wallach....... 110,000 8.46% $6.00 4/19/09 $ 415,070 $ 1,051,870
</TABLE>
- --------
(1) These options are all nonqualified stock options. In connection with the
Company's initial public offering consummated in August 1999, the Company
fully vested all options granted to employees from February 1, 1999 through
July 23, 1999, including these options granted to the Named Officers. In
connection with the acceleration of these options, each affected employee,
including the Named Officers (the "Affected Employees"), executed a lock-up
agreement with the Company's underwriters that restricts his or her ability
to sell shares received upon exercise of these options. The terms of these
lock-up agreements restrict the Affected Employees from selling these
shares until August 19, 2000. The lock-up agreements also limit the volume
of shares an Affected Employee can sell during the two-year period
commencing August 19, 2000 and ending August 19, 2002. During this two-year
period, an Affected Employee cannot, without the written consent of
Donaldson, Lufkin & Jenrette, sell in any ninety-day period more than
twelve and one-half percent (12-1/2%) of the total options originally
granted to the Affected Employee during this February 1, 1999 through July
23, 1999 period.
(2) Potential realizable value is presented net of the option exercise price
but before any federal or state income taxes associated with exercise.
These amounts represent certain assumed rates of appreciation only. Actual
gains will be dependent on the future performance of the Common Stock and
the option holder's continued employment through the vesting period. The
amounts reflected in the table may not necessarily be achieved.
Aggregated Option Exercises in 1999 and Year-End 1999 Option Values--The
following table provides information regarding each of the Named Officers'
option exercises in 1999 and unexercised options at December 31, 1999.
Aggregated Option Exercises in 1999 And
Year-End 1999 Option Values
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
At Year-End 1999 (#) at Year-End 1999 (#) (1)
------------------------- -------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Winjum....... -- -- 873,334 216,666 $4,055,211 $1,011,288
Ronald G. Eidell........ -- -- 118,542 161,458 $ 295,991 $ 444,010
E. Michele Vickery...... 34,000 $129,200 144,500 75,500 $ 559,175 $ 326,625
J. Gary Jordan.......... -- -- 110,000 -- $ 82,500 --
Robert A. Wallach....... -- -- 110,000 -- $ 82,500 --
</TABLE>
- --------
(1) The value per option is calculated by subtracting the exercise price per
option from the closing price of the Common Stock on the Nasdaq National
Market on December 31, 1999, which was $6.75.
9
<PAGE>
Employment Agreements
The Company has entered into employment agreements with its Named Officers.
The agreements generally provide for the payment of an annual base salary, plus
a bonus based upon the Company's executive compensation plan. See "Report of
the Compensation Committee of the Board of Directors." The employment
agreements also provide for the right to participate in the Stock Incentive
Plan and employee benefit programs. These programs include hospitalization,
disability, life and health insurance. The employment agreements impose on each
employee non-competition restrictions that survive termination of employment
for one year and post-termination confidentiality obligations. Each of the
Named Officers received option grants as consideration for entering into these
agreements.
The employment agreements with Ms. Vickery and Messrs. Winjum and Eidell
have initial terms of three years commencing February 17, 1999, that
automatically renew on a year-to-year basis, unless either party chooses to
terminate the agreement. The initial terms of Messrs. Jordan and Wallach are
two years commencing April 1999, with identical renewal provisions. As of
January 1, 2000, Mr. Wallach was no longer employed by the Company.
The Company may terminate these employment agreements with or without cause
or upon the Named Officer's disability. If the Company terminates a Named
Officer for disability or cause, the executive is not entitled to receive any
salary or other severance after the date of termination. The Company may
terminate a Named Officer for cause under the agreement if he or she: (i)
materially breaches any term or condition of the agreement; (ii) is grossly
negligent in the performance of his or her duties; (iii) fails to comply with
any of the Company's written guidelines that it has furnished to the executive;
(iv) has committed an act that materially, negatively affects the Company's
business or reputation, as reasonably determined by the Board of Directors; or
(v) has committed an act constituting a felony or other act involving
dishonesty, disloyalty or fraud against the Company, as reasonably determined
by the Board of Directors.
If the Company terminates a Named Officer without cause, the executive
receives severance compensation in a fixed amount equal to the executive's
then-current base salary and pro rata bonus for a period ranging from six to 18
months.
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The objectives of the Compensation Committee in determining the levels and
components of executive compensation are to (1) attract, motivate and retain
talented and dedicated executive officers, (2) provide executive officers with
both cash and equity incentives to further the interests of the Company and its
stockholders, and (3) compensate executive officers at levels comparable to
those of executive officers at other comparable companies. Generally, the
compensation of the Company's executive officers is composed of a base salary
and an annual incentive compensation award based upon the Company's executive
compensation plan. In setting base salaries, the Compensation Committee
generally reviews the individual contributions of the particular executive. The
annual incentive compensation award is based upon the Company's executive
compensation plan. In addition, stock options are granted to provide the
opportunity for long-term compensation based upon the performance of the Common
Stock over time.
Base Salaries
In determining the base salaries of the Named Officers in 1999, the
Compensation Committee considered the performance of each executive, the nature
of the executive's responsibilities, the salary levels of executives at
comparable companies and the Company's general compensation practices. The
Company entered into an amended and restated employment agreement with Stephen
J. Winjum on February 17, 1999, which provided for a base salary of $250,000.
This base salary represented a 25% increase over the base salary of $200,000
paid to Mr. Winjum in 1998. In increasing Mr. Winjum's base salary, the
Compensation Committee considered the magnitude of Mr. Winjum's contributions
to the Company.
Cash Incentive Compensation
An executive officer's cash incentive compensation is based upon the
Company's executive compensation plan which was effective as of January 1, 1999
(the "Executive Compensation Plan"), and which was approved by the Board of
Directors. As of December 31, 1999, the Executive Compensation Plan covered 17
of the Company's executives, including the Named Officers. Incentive amounts
payable under the plan for a calendar year are based upon relative achievement
of earnings targets set by the Board of Directors at the beginning of that
year. Incentive compensation amounts are determined by applying a percentage to
the executive's salary. This percentage is determined by reference to the level
of actual earnings achievement compared to the target.
The Compensation Committee administers the Executive Compensation Plan. The
Compensation Committee has the authority to approve all actions taken under the
Executive Compensation Plan except for those actions taken with respect to Mr.
Winjum. Any annual incentive compensation amount awarded to Mr. Winjum under
the Executive Compensation Plan, along with all compensation matters relating
to Mr. Winjum, is subject to final approval of the Board of Directors.
Stock Options
Annually, the Compensation Committee considers stock option grants to its
executive officers in order to provide a long-term incentive which is directly
tied to the performance of the Company's stock. These options provide an
incentive to maximize stockholder value because they reward optionholders only
if stockholders also benefit. The exercise price of these stock options is the
fair market value of the Common Stock as determined by the Compensation
Committee. In general, each option to purchase Common Stock becomes exercisable
in stages beginning six months after its grant date, when 1/8th of the
individual's options became exercisable. An additional 1/48th of each of these
options became exercisable as of the last day of each month thereafter.
Consequently, each option will generally be exercisable in full 48 months after
its grant date. In making stock option grants to executives, the Compensation
Committee considers a number of factors,
11
<PAGE>
including the performance of the particular individual, the Company's
performance during the previous calendar year, achievement of specific goals,
the responsibilities and the relative position of the individuals within the
Company, the compensation of executives in comparable companies and the number
of stock options each individual currently possesses.
COMPENSATION COMMITTEE
R. Judd Jessup
James B. Tananbaum
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Compensation Committee currently consists of Messrs. Jessup and
Tananbaum. Neither member of the Compensation Committee has been an officer or
employee of us at any time. None of our executive officers serves as a member
of the board of directors or compensation committee of any other company that
has one or more executive officers serving as a member of our Board of
Directors or Compensation Committee. Prior to the formation of the current
Compensation Committee in May 1999, the Board of Directors as a whole made
decisions relating to compensation of our executive officers. Mr. Winjum
participated in all of these discussions and decisions, except those regarding
his own compensation.
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total returns for the
Company, the Nasdaq National Market Index and the CRSP Index for Nasdaq Health
Services Stocks, during the period commencing August 18, 1999 and ending on
December 31, 1999. Because the Company did not consummate its initial public
offering until August 18, 1999, there was no public market for the Common
Stock prior to this date. The comparison assumes $100 was invested on August
18, 1999, in the Common Stock, the Nasdaq National Market Index and the CRSP
Index for Nasdaq Health Services Stocks and assumes the reinvestment of all
dividends, if any. The performance graph begins with the closing price of the
Common Stock on the date of the initial public offering, which was $8.75 (the
Common Stock was offered in the initial public offering at a price of $8.00
per share).
[PERFORMANCE CHART]
Comparison of five year cumulative total return among NovaMed Eyecare, Inc., the
Nasdaq National Market Index & the CRSP Index for Nasdaq Health Services Stocks
Measurement Period NovaMed Nasdaq National CRSP Index for Nasdaq
(Fiscal Year Covered) Eyecare, Inc. Market Index Health Services Stocks
- ------------------- ------------- ------------ ----------------------
Measurement Pt-
8/18/99 $100 $100 $100
FYE 8/31/99 $124.22 $103.07 $ 98.19
FYE 9/30/99 $127.34 $103.33 $ 93.78
FYE 10/31/99 $ 82.03 $111.62 $ 78.88
FYE 11/30/99 $ 95.31 $125.53 $ 83.46
FYE 12/31/99 $ 84.38 $153.11 $ 92.43
The stock price performance shown on the graph is not necessarily
indicative of future price performance.
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Acquisition of Midwest Uncuts, Inc.
Effective January 1, 1999, the Company acquired all of the issued and
outstanding shares of Midwest Uncuts, Inc. in exchange for $4.6 million in net
cash and 250,000 shares of Series A convertible preferred stock of the Company.
Effective upon the consummation of the Company's initial public offering on
August 18, 1999, each share of Series A convertible preferred stock converted
into shares of Common Stock on a one-for-one basis. The stockholders of Midwest
Uncuts, Inc. were Mr. and Mrs. John P. Winjum, the parents of the Company's
Chairman of the Board, President and Chief Executive Officer. The terms and
conditions of this transaction were approved by a special committee appointed
by the Board of Directors, consisting of two independent, disinterested members
of the Board of Directors.
Real Property Leases
Effective January 1, 1999, the Company entered into a lease agreement with
John P. Winjum relating to 9,500 square feet of space comprising the Indianola,
Iowa location of Midwest Uncuts. The lease has a five-year term and the Company
paid $48,000 in rent during 1999.
Effective January 1, 1996, the Company entered into a lease agreement with
First Colonial Trust Company, as trustee on behalf of Scott H. Kirk, M.D., a
member of the Board of Directors, to lease 10,098 square feet of surgery and
laser center and eye care clinic space located in River Forest, Illinois. The
lease has a five-year term and the Company paid $180,248 in rent during 1999.
Effective January 1, 1996, the Company entered into a lease agreement with
Mercantile National Bank of Indiana, as trustee on behalf of Douglas P.
Williams, M.D., a member of the Board of Directors, to lease 11,500 square feet
of surgery and laser center and eye care clinic space in Hammond, Indiana. The
lease has a five-year term and the Company paid $188,495 in rent during 1999.
Effective January 1, 1996, the Company entered into a lease agreement with
Eldi E. Deschamps, M.D., a stockholder who beneficially owns more than 5% of
the Company's Common Stock, and his wife to lease approximately 10,000 square
feet of surgery and laser center and eye care clinic space located in
Merrillville, Indiana. The lease has a five-year term and the Company paid
$129,077 in rent during 1999.
Purchase of Clinical Research Contracts
Effective July 1, 1999, the Company purchased clinical research assets
including clinical research sponsor agreements from Hunkeler Eye Centers, P.C.,
in exchange for 75,000 shares of the Company's Common Stock. Hunkeler Eye
Centers, P.C.'s stockholders include John D. Hunkeler, M.D., the Company's
Medical Director and a member of the Board of Directors.
Service Agreements
John D. Hunkeler, M.D., a member of the Board of Directors, is an
ophthalmologist employed by Hunkeler Eye Centers, P.C., a physician group that
has been a party to a long-term service agreement with the Company since March
1997. In 1999, the Company recognized management services revenue of
approximately $16,710,000 from Hunkeler Eye Centers, P.C.
Scott H. Kirk, M.D., a member of the Board of Directors, is an
ophthalmologist retained by Sure Vision Eye Centers, L.L.C., a professional
entity whose eye care professionals have been parties to long-term service
agreements with the Company since January 1996. In 1999, the Company recognized
management services revenue of approximately $11,496,000 from the professional
entities retaining Dr. Kirk's services.
14
<PAGE>
Douglas P. Williams, M.D., a member of the Board of Directors, is an
ophthalmologist retained by Sure Vision Eye Centers, L.L.C., a professional
entity whose eye care professionals have been parties to long-term service
agreements with the Company since January 1996. In 1999, the Company recognized
management services revenue of approximately $10,955,000 from the professional
entities retaining Dr. Williams's services.
Eldi E. Deschamps, M.D., a stockholder who beneficially owns more than 5% of
the Company's Common Stock, is an ophthalmologist retained by Sure Vision Eye
Centers, L.L.C., a professional entity whose eye care professionals have been
parties to long-term service agreements with the Company since January 1996. In
1999, the Company recognized management services revenue of approximately
$10,224,000 from the professional entities retaining Dr. Deschamps's services.
PROPOSAL 2
APPROVAL OF THE COMPANY'S
AMENDED AND RESTATED STOCK INCENTIVE PLAN
The stockholders of the Company are being asked to approve the Company's
Amended and Restated Stock Incentive Plan (the "Stock Incentive Plan"). A
complete copy of the Stock Incentive Plan is attached to this Proxy Statement
as Appendix A. The following discussion of the Stock Incentive Plan is
qualified in its entirety by reference to the full text of the Stock Incentive
Plan which is set forth in Appendix A.
General
In December 1996, the Company adopted its Stock Incentive Plan which is
designed to promote the Company's overall financial objectives by attracting,
motivating and retaining employees, outside directors and other persons who are
instrumental to the Company's long-term growth by allowing these individuals to
acquire an equity interest in the Company. The Stock Incentive Plan currently
permits the issuance of up to 6,251,800 shares of Common Stock. As of March 30,
2000, 756,712 of these options have been exercised. As of March 30, 2000, there
are outstanding stock options to acquire 5,187,116 shares of Common Stock
granted under the Stock Incentive Plan.
Prior to the Stockholders' meeting on May 17, 2000, the Board of Directors
intends to amend the Stock Incentive Plan by increasing the amount of shares
available for issuance under the plan by 1,000,000, thereby increasing the
total number of shares of Common Stock available for issuance under the Stock
Incentive Plan to 7,251,800 shares.
The Board of Directors believes that the Stock Incentive Plan will better
align the interests of the Company's officers, employees and consultants with
the interests of the Company's stockholders. In adopting the Stock Incentive
Plan, the Board of Directors noted that many other companies have adopted
equity plans to compensate their officers, employees and consultants and
believes that such a plan is appropriate to attract and retain well-qualified
persons for service as officers, employees and consultants.
Terms of the Stock Incentive Plan
The Stock Incentive Plan is administered by the Compensation Committee of
the Board of Directors. The Stock Incentive Plan provides the Compensation
Committee with broad discretion to fashion the terms of grants of options as
the committee deems appropriate. Directors, officers, employees, independent
contractors and consultants who are in a position to make contributions to the
Company's growth and success are eligible for selection by the Compensation
Committee as participants in the Stock Incentive Plan. The Compensation
Committee may grant both nonqualified options and incentive stock options. As
of December 31, 1999, all options granted under the Stock Incentive Plan have
been nonqualified options.
15
<PAGE>
Unless otherwise determined by the Compensation Committee, the exercise
price for options granted under the Stock Incentive Plan will be the closing
price of a share of Common Stock on the grant date as reported on the principal
stock exchange on which the Common Stock is traded. If an option is intended to
qualify as an incentive stock option (ISO) which is to be granted to a
participant who is a 10% stockholder of the Company, then the exercise price
cannot be less than 110% of the fair market value of the Common Stock on the
grant date. The option exercise price shall be payable by the participant (i)
in cash, (ii) by surrendering shares of Common Stock that the participant has
owned for at least six months having a total fair market value equal to the
exercise price, (iii) by "cashless exercise" where a broker-dealer delivers
cash or an extension of credit, (iv) by certifying ownership of shares of
Common Stock for later delivery to the Company, or (v) by any combination of
the foregoing.
Options are exercisable during the period specified in each option agreement
and will generally be exercisable in installments pursuant to a vesting
schedule to be designated by the Compensation Committee. No option will remain
exercisable later than ten years after the grant date (or five years from the
grant date in the case of an ISO granted to 10% stockholders of the Company).
Except as provided in any option agreement, options generally may not be
assigned or transferred except by will or the laws of inheritance following the
participant's death. After the termination of a participant's service to the
Company, the participant will generally have a limited period of time in which
to exercise options which had vested as of the date of termination. In the
event the participant voluntarily terminates his or her service, the
participant must elect to exercise any vested options prior to such
termination. In any event, the participant must exercise options before the
specified expiration of the option term. Each option will immediately terminate
upon the termination of the participant's service to the extent it is not
exercisable at that time. Upon the termination of a participant's service due
to death or disability, all of the participant's unexpired and unexercised
options will be exercisable for the shorter of their remaining term or one year
after termination of employment.
If options are forfeited or otherwise terminate for any reason before they
are exercised, then the corresponding shares of Common Stock will again become
available for options under the Stock Incentive Plan. Similarly, if any shares
of Common Stock are paid to the Company in connection with the exercise of an
option or in satisfaction of withholding taxes, those shares may again become
available for options under the Stock Incentive Plan. However, these returned
shares will not be made available for incentive stock options. In no event may
any one individual receive options under the Stock Incentive Plan for more than
1,000,000 shares of Common Stock in any three calendar year period.
In the event of a stock dividend, stock split, recapitalization, or other
change affecting the Company's capital structure, the Compensation Committee
may adjust or substitute, as the case may be, the aggregate number of shares
subject to the Stock Incentive Plan and the number and exercise price of shares
subject to outstanding options. However, fractional shares resulting from such
adjustments will be eliminated by rounding to the next lower whole number of
shares with appropriate payment for such fractional shares as determined by the
Compensation Committee.
Change in Control
Upon the occurrence of a Change in Control (as defined in the Stock
Incentive Plan), all unexercised stock options will become immediately
exercisable. In addition, after a Change in Control a participant will have the
right to surrender all or part of the outstanding options and receive cash from
the Company in the following amount for each award: (i) the excess of the
Change in Control Price (as defined in the Stock Incentive Plan) over the
exercise price of the option multiplied by (ii) the number of shares of Common
Stock subject to the option.
16
<PAGE>
New Plan Benefits
The table below sets forth certain information concerning options granted
and outstanding, as of March 30, 2000, under the Stock Incentive Plan.
Stock Incentive Plan
<TABLE>
<CAPTION>
Number of Shares
Name and Position Underlying Options
----------------- ------------------
<S> <C>
Stephen J. Winjum,......................................... 1,210,000
Chairman, President and Chief Executive Officer
Ronald G. Eidell,.......................................... 330,000
Executive Vice President and Chief Financial Officer
E. Michele Vickery,........................................ 260,000
Executive Vice President Operations
J. Gary Jordan,............................................ 130,000
Senior Vice President Sales
Robert A. Wallach,......................................... 110,000
Senior Vice President Marketing(1)
Executive Group............................................ 2,040,000
Non-Executive Director Group............................... 200,000
Non-Executive Officer Employee Group....................... 2,400,116
</TABLE>
- --------
(1) As of January 1, 2000, Mr. Wallach was no longer employed by the Company.
Federal Income Tax Consequences
The Company has been advised that under the current Federal income tax laws,
the income tax consequences associated with stock options awarded under the
Stock Incentive Plan can be summarized as follows:
Non-Qualified Stock Options
Participant. Generally, a participant receiving a non-qualified stock option
does not realize any taxable income for Federal income tax purposes at the time
of grant. Upon exercise of such option, the excess of the fair market value of
the shares of Common Stock subject to the non-qualified stock option on the
date of exercise over the exercise price will generally be taxable to the
participant as ordinary income. The participant will have a capital gain (or
loss) upon the subsequent sale of the shares of Common Stock received upon
exercise of the option in an amount equal to the sale price reduced by the fair
market value of the shares of Common Stock on the date the option was
exercised. The holding period for purposes of determining whether the capital
gain (or loss) is a long-term or short-term capital gain (or loss) will
generally commence on the date the non-qualified stock option is exercised.
Tax Withholding. The amount of income that is taxable to a participant upon
the exercise of a non-qualified stock option will be treated as compensation
income. Accordingly, such amount will be subject to applicable withholding of
Federal, state and local income taxes and Social Security taxes.
If the Participant Uses Company Stock to Pay the Option Exercise Price. If a
participant who exercises a non-qualified stock option pays the exercise price
by tendering shares of Common Stock and receives back a larger number of shares
of Common Stock, the participant will realize taxable income in an amount equal
to the fair market value of the additional shares of Common Stock received on
the date of exercise, less any cash paid in addition to the shares of Common
Stock tendered. Upon a subsequent sale of the Common Stock
17
<PAGE>
received, the number of shares of Common Stock equal to the number delivered as
payment of the exercise price will have a tax basis equal to that of the shares
of Common Stock originally tendered. The additional newly-acquired shares of
Common Stock obtained upon exercise of the non-qualified stock option will have
a tax basis equal to the fair market value of such shares on the date of
exercise.
The Company. The Company generally will be entitled to a tax deduction in
the same amount and in the same year in which the participant recognizes
ordinary income resulting from the exercise of a non-qualified stock option.
Incentive Stock Options
Participant. Generally, a participant will not realize any taxable income
for Federal income tax purposes at the time an incentive stock option is
granted. Upon exercise of the incentive stock option, the participant will
generally incur no income tax liability (other than pursuant to the alternative
minimum tax, if applicable), unless the participant has left the employ of the
Company more than three months before exercising the option. If the participant
transfers shares of Common Stock received upon the exercise of an incentive
stock option within a period of two years from the date of grant of such
incentive stock option or one year from the date of receipt of the shares of
Common Stock (the "Holding Period"), then, in general, the participant will
have taxable ordinary income in the year in which the transfer occurs in an
amount equal to the excess of the fair market value on the date of exercise
over the exercise price. However, if the sale price is less than the fair
market value of such shares on the date of exercise, the ordinary income will
not be more than the difference between the sale price and the exercise price.
The participant will have long-term or short-term capital gain (or loss) in an
amount equal to the amount by which the amount received for such Common Stock
exceeds (is less than) the participant's tax basis in the Common Stock as
increased by the amount of any ordinary income recognized as a result of the
disqualifying disposition, if any. If the participant transfers the shares of
Common Stock after the expiration of the Holding Period, he or she will
recognize capital gain (or loss) equal to the difference between the sale price
and the exercise price.
Tax Withholding. If a participant makes any disqualifying disposition prior
to the completion of the Holding Period with respect to shares of Common Stock
acquired upon the exercise of an incentive stock option granted under the Plan,
then the participant must remit to the Company an amount sufficient to satisfy
all applicable Federal (including Social Security), state, and local
withholding taxes thereby incurred.
If the Participant Uses Common Stock to Pay the Option Exercise Price. If a
participant who exercises an incentive stock option pays the option exercise
price by tendering shares of Common Stock, such participant will generally
incur no income tax liability (other than pursuant to the alternative minimum
tax, if applicable), provided any Holding Period requirement for the tendered
shares is met. If the tendered stock was subject to the Holding Period
requirement when tendered, payment of the exercise price with such stock
constitutes a disqualifying disposition. If the participant pays the exercise
price by tendering shares of Common Stock and the participant receives back a
larger number of shares, under proposed Treasury Regulations, the participant's
basis in the number of shares of newly acquired stock equal to the number of
the shares delivered as payment of the exercise price will have a tax basis
equal to that of the shares originally tendered, increased, if applicable, by
any amount included in the participant's gross income as compensation. The
additional newly acquired shares obtained upon exercise of the option will have
a tax basis of zero. All Common Stock acquired upon exercise will be subject to
the Holding Period requirement, including the number of shares equal to the
number tendered to pay the exercise price. Any disqualifying disposition will
be deemed to be a disposition of Common Stock with the lowest basis.
The Company. The Company is not entitled to a tax deduction upon grant,
exercise or subsequent transfer of shares of Common Stock acquired upon
exercise of an incentive stock option, provided that the participant holds the
shares received upon the exercise of such option for the Holding Period. If the
participant transfers the Common Stock acquired upon the exercise of an
incentive stock option prior to the end of the Holding Period, the Company
generally is entitled to a deduction at the time the participant recognizes
ordinary
18
<PAGE>
income in an amount equal to the amount of ordinary income recognized by such
participant as a result of such transfer.
Section 162(m) of the Internal Revenue Code of 1986, as amended ("Section
162(m)"), provides that any compensation, including compensation arising from
the exercise of options by a "covered employee" within the meaning of Section
162(m), which is in excess of $1,000,000 cannot be deducted by the Company for
Federal income tax purposes unless, in general, (1) such compensation
constitutes "qualified performance-based compensation" satisfying the
requirements of Section 162(m) and (2) the plan or agreement providing for such
performance-based compensation has been approved by stockholders. In an effort
to facilitate the Company's ability to deduct for tax purposes any compensation
of a "covered employee" arising from the exercise of nonqualified options
granted under the Stock Incentive Plan, the Board of Directors is submitting
the Stock Incentive Plan to the stockholders of the Company for their approval.
The Board believes the approval by stockholders of the Stock Incentive Plan is
in the best interests of the Company and its stockholders.
The Board of Directors recommends that the stockholders vote FOR the
approval of the Stock Incentive Plan.
PROPOSAL 3
APPROVAL OF THE COMPANY'S
AMENDED AND RESTATED 1999 STOCK PURCHASE PLAN
The stockholders of the Company are being asked to approve the Company's
Amended and Restated 1999 Stock Purchase Plan (the "Stock Purchase Plan"). A
complete copy of the Stock Purchase Plan is attached to this Proxy Statement as
Appendix B. The following discussion of the Stock Incentive Plan is qualified
in its entirety by reference to the full text of the Stock Purchase Plan which
is set forth in Appendix B.
General
In May 1999, the Board of Directors adopted, subject to stockholder
approval, the Stock Purchase Plan under which the Company reserved a total of
400,000 shares of Common Stock for purchase by the Company's employees. The
Board of Directors amended the Stock Purchase Plan effective as of August 1,
1999. Similar to the Stock Incentive Plan, the Stock Purchase Plan is designed
to promote the Company's overall financial objectives and the financial
objectives of the Company's stockholders by motivating participants in the
Stock Purchase Plan to achieve long-term growth in stockholder equity in the
Company.
Terms of the Stock Purchase Plan
The Compensation Committee administers the Stock Purchase Plan. Employees
are eligible to participate in the Stock Purchase Plan if they have been
employed by the Company for at least ninety days and otherwise satisfy the
terms of the plan. The Stock Purchase Plan allows eligible employees to acquire
Common Stock in the Company on favorable terms through payroll deductions.
These after-tax payroll deductions will be applied semi-annually to purchase
shares of Common Stock at a discount from the market price. The first offering
period under the Stock Purchase Plan commenced October 1, 1999, and will end on
March 31, 2000. The Company anticipates continuing a series of consecutive six-
month offering periods. At the end of each offering period, the payroll
deductions accumulated over the six-month offering period will be used to
acquire shares of Common Stock at a purchase price equal to 85% of the fair
market value of the Common Stock on the first day of the offering period or 85%
of the fair market value of the Common Stock on the last day of the offering
period, whichever is lower. Participating employees may end or modify their
participation in the Stock Purchase Plan at any time during an offering period.
Participation ends automatically upon termination of employment. An individual
may elect to invest up to 10% of the individual's salary in the Stock Purchase
Plan;
19
<PAGE>
however, the individual's payroll deductions may not exceed $20,000 in any
offering period or $25,000 in any calendar year.
Generally, a participant may not assign or transfer his or her purchase
rights under the Stock Purchase Plan, other than by will or the laws of
inheritance after the participant's death. If a participant's employment with
the Company terminates during an offering period for any reason other than
death, disability or retirement, then all of the participant's payroll
deductions for that offering period will be refunded. If a participant's
employment terminates during an offering period because of death, disability or
retirement, payroll deductions will also cease. However, the participant may
make a single payment for the purchase of Common Stock equal to the amount such
participant would have contributed for the payroll periods remaining in the
offering period. Additionally, such participant may request a distribution at
any time prior to the end of the offering period. If the participant does not
request such a distribution, the participant's payroll deductions will be used
to purchase Common Stock at the end of the offering period.
No individual will be eligible to purchase Common Stock under the Stock
Purchase Plan if that individual, or his or her family members, immediately
after the purchase, would own or control greater than 5% of the Company's
voting stock.
The fair market value of a share of Common Stock on any relevant date under
the Stock Purchase Plan will be equal to the average of the high and low
trading price quoted for that date as quoted on the Nasdaq National Market.
The number of shares subject to the Stock Purchase Plan and to offerings
granted under the Stock Purchase Plan will be proportionately adjusted in the
event that the outstanding Common Stock is changed by any stock dividend, stock
split or combination of shares. In the event of a Change in Control (as defined
in the Stock Purchase Plan), the Compensation Committee may cause the purchase
rights to become immediately exercisable, or the Compensation Committee may
cause the Company to repurchase them.
Unless the Stock Purchase Plan is terminated by the Compensation Committee,
it will automatically terminate on May 23, 2009.
Federal Income Tax Consequences
The Company has been advised that under the current Federal income tax laws,
the income tax consequences associated with stock purchased under the Stock
Purchase Plan can be summarized as follows:
Participant. Generally, a participant will not realize any taxable income
for Federal income tax purposes at the beginning of each offering period. At
the end of the offering period, the participant will incur no income tax
liability. If the participant transfers shares of Common Stock received upon
the exercise of an option within a period of two years from the beginning of an
offering period or one year from the date of receipt of the shares of Common
Stock (the "Holding Period"), then, in general, the participant will have
taxable ordinary income in the year in which the transfer occurs in an amount
equal to the excess of the fair market value at the end of the offering period
over the exercise price. The participant will have long-term or short-term
capital gain (or loss) in an amount equal to the amount by which the amount
received for such Common Stock exceeds (is less than) the participant's tax
basis in the Common Stock as increased by the amount of any ordinary income
recognized as a result of the disqualifying disposition, if any. If the
participant transfers the shares of Common Stock after the expiration of the
Holding Period, he or she will generally have taxable ordinary income in the
year in which the transfer occurs in an amount equal to the lesser of (a) any
excess of the fair market value at the beginning of the offering period over
the exercise price on that same date, and (b) any excess of the fair market
value on the date on which the transfer occurs over the amount paid for the
shares of Common Stock.
20
<PAGE>
The participant will recognize capital gain (or loss) equal to the difference
between the fair market value on the date of the transfer and the participant's
tax basis in the Common Stock as increased by the amount of any ordinary income
recognized as a result of such transfer.
Tax Withholding. The participant must remit to the Company an amount
sufficient to satisfy all Federal (including Social Security), state, and local
withholding taxes incurred in connection with any recognition of ordinary
income under the Stock Purchase Plan.
The Company. The Company generally is entitled to a deduction at the time
the participant recognizes ordinary income in an amount equal to the amount of
ordinary income recognized by such participant as a result of a transfer of
shares of Common Stock pursuant to the Stock Purchase Plan.
The Board of Directors recommends that the stockholders vote FOR the
approval of the Stock Purchase Plan.
21
<PAGE>
MISCELLANEOUS AND OTHER MATTERS
Solicitation--The cost of this proxy solicitation will be borne by the
Company. The Company does not anticipate that costs and expenses incurred in
connection with this proxy solicitation will exceed an amount normally expended
for a proxy solicitation for an election of directors in the absence of a
contest.
Proposals of Stockholders--Proposals of stockholders (i) intended to be
considered at the Company's 2001 Annual Meeting of Stockholders (the "2001
Annual Meeting") and (ii) to be considered for inclusion in the Company's proxy
statement and proxy for the 2001 Annual Meeting, must be received by the
Secretary of the Company by no earlier than January 25, 2001, and no later than
February 24, 2001.
Other Business--The Board of Directors is not aware of any other matters to
be presented at the Annual Meeting other than those mentioned in this Proxy
Statement and the Company's Notice of Annual Meeting of Stockholders enclosed
herewith. If any other matters are properly brought before the Annual Meeting,
however, it is intended that the persons named in the proxies will vote such
proxies as the Board of Directors directs.
By order of the Board of Directors,
Ronald G. Eidell
Secretary
Chicago, Illinois
April 10, 1999
ALL STOCKHOLDERS ARE REQUESTED TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
22
<PAGE>
APPENDIX A
NOVAMED EYECARE, INC.
AMENDED AND RESTATED
STOCK INCENTIVE PLAN
(as of May 17, 2000)
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I ESTABLISHMENT.............................. A-3
ARTICLE II DEFINITIONS................................ A-3
ARTICLE III ADMINISTRATION............................. A-6
3.1 Committee Structure and Authority.......... A-6
ARTICLE IV SHARES SUBJECT TO PLAN..................... A-8
4.1 Number of Shares........................... A-8
4.2 Release of Shares.......................... A-8
4.3 Restrictions on Shares..................... A-8
4.4 Shareholder Rights......................... A-9
4.5 Anti-Dilution.............................. A-9
ARTICLE V ELIGIBILITY................................ A-9
5.1 Eligibility................................ A-9
ARTICLE VI OPTIONS.................................... A-9
6.1 General.................................... A-9
6.2 Grant...................................... A-10
6.3 Terms and Conditions....................... A-10
6.4 Termination by Reason of Death............. A-11
6.5 Termination by Reason of Disability........ A-11
6.6 Other Termination.......................... A-11
6.7 Cashing-Out of Options..................... A-11
ARTICLE VII CHANGE IN CONTROL PROVISIONS............... A-12
7.1 Impact of Event............................ A-12
7.2 Definition of Change in Control............ A-12
7.3 Change in Control Price.................... A-12
ARTICLE VIII MISCELLANEOUS.............................. A-13
8.1 Amendments and Termination................. A-13
8.2 Unfunded Status of Plan.................... A-13
8.3 Limits on Transferability.................. A-13
8.4 Status of Options Under Code Section 162(m)... A-13
8.5 General Provisions......................... A-13
8.6 Mitigation of Excise Tax................... A-15
Options in Substitution for Options Granted
8.7 by Other Entities.......................... A-15
8.8 Procedure for Adoption..................... A-15
8.9 Procedure for Withdrawal................... A-15
8.10 Delay...................................... A-15
8.11 Headings................................... A-15
8.12 Severability............................... A-15
8.13 Successors and Assigns..................... A-16
8.14 Entire Agreement........................... A-16
</TABLE>
A-2
<PAGE>
NOVAMED EYECARE, INC.
AMENDED AND RESTATED
STOCK INCENTIVE PLAN
ARTICLE I
ESTABLISHMENT
In May 1999, NovaMed Holdings Inc., an Illinois corporation merged with and
into NovaMed Eyecare, Inc., a Delaware corporation (the "Company"). The Plan
(as defined herein) was originally established by NovaMed Holdings Inc. on
December 20, 1996 (i) to replace and substitute for, and assume certain options
granted under, the NovaMed Eyecare Management, LLC Equity Incentive Plan ("LLC
Plan") and (ii) to authorize new stock options, subject to the terms and
conditions of the Plan and any Agreement. In May 1999, the Company amended the
Plan to, among other things, (i) authorize new stock options subject to the
terms and conditions of the Plan and any Agreement and (ii) provide that, upon
the consummation of an initial public offering of equity securities of the
Company, (a) options previously granted under the Plan to purchase shares of
Series A Preferred Stock and Series B Preferred Stock shall instead represent
options to purchase a like number of shares of Common Stock and (b) there shall
no longer be reserved and available for distribution pursuant to the Plan any
options to purchase shares of Series A Preferred Stock or Series B Preferred
Stock. In September 1999, the Company amended and restated the Plan to (i)
reflect the merger of NovaMed Holdings Inc. with and into NovaMed Eyecare,
Inc., (ii) reflect the consummation of the Company's initial public offering of
equity securities and (iii) incorporate all prior amendments to the Plan. This
Plan is amended and restated effective May 17, 2000, to authorize new stock
options, subject to the terms and conditions of the Plan and any Agreement. The
purpose of the Plan is to promote the overall financial objectives of the
Company, its shareholders and its Affiliates by motivating those persons
selected to participate in the Plan (which shall include those persons with
outstanding options under the LLC Plan) to achieve long-term growth in the
shareholder equity in the Company and by retaining the association of those
individuals who are instrumental in achieving this growth.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms are defined as set forth
below:
"Affiliate" means any individual, corporation, partnership, limited
liability company, association, joint-stock company, trust, unincorporated
association or other entity (other than the Company) that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, the Company, including, without limitation, any
shareholder of an affiliated group of which the Company is a common parent
corporation as provided in Section 1504 of the Code.
"Agreement" or "Option Agreement" means, individually or collectively, any
agreement entered into pursuant to the Plan pursuant to which an Option is
granted to a Participant.
"Beneficiary" means the person, persons, trust or trusts which have been
designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under
the Plan upon such Participant's death or to which Options are transferred if
and to the extent permitted hereunder. If, upon a Participant's death, there is
no designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means person, persons, trust or trust entitled by will or the laws
of descent and distribution to receive such benefits.
"Board of Directors" or "Board" means the Board of Directors of the Company.
"Cause" means, for purposes of whether and when a Participant has incurred a
Termination of Employment for Cause, any act or omission which permits the
Company or an Affiliate to terminate the
A-3
<PAGE>
Participant's employment with the Company or an Affiliate for "cause" as
defined in such agreement or arrangement, or in the event there is no such
agreement or arrangement or the agreement or arrangement does not define the
term "cause" or a substantially equivalent term, then Cause means, unless
otherwise defined in the Option Agreement with respect to the corresponding
Option:
(a) any act or failure to act deemed to constitute cause under the
Company's or an Affiliate's established practices, policies or guidelines
applicable to the Participant;
(b) breach of a covenant made by the Participant in conjunction with the
grant of an Option or the transfer of Shares hereunder;
(c) the Participant's gross negligence in the performance of his duties
or material failure or willful refusal to perform his duties;
(d) the determination by the Committee in the exercise of its reasonable
judgment that Participant has committed an act that (i) negatively affects
the Company's or Affiliate's business or reputation or (ii) indicates
alcohol or drug abuse by Participant that adversely affects his performance
hereunder; or
(e) the determination by the Committee in the exercise of its reasonable
judgment that Participant has committed an act or acts constituting a
felony or other act involving dishonesty, disloyalty or fraud against the
Company or an Affiliate.
"Change in Control" and "Change in Control Price" have the meanings set
forth in Sections 7.2 and 7.3, respectively.
"Code" or "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, any Treasury Regulations (including proposed regulations)
thereunder and any subsequent Internal Revenue Code.
"Commission" means the Securities and Exchange Commission or any successor
agency.
"Committee" means the person or persons appointed to administer the Plan,
as further described herein.
"Common Stock" means the regular voting common stock, $0.01 par value per
share, of the Company, whether presently or hereafter issued, and any other
stock or security resulting from adjustment thereof as described hereinafter
or the equity of any successor to the Company which is designated for the
purposes of this Plan.
"Company" means NovaMed Eyecare, Inc., a Delaware corporation, and includes
any successor or assignee entity or entities into which the Company may be
merged, changed or consolidated; any entity for whose securities the
securities of the Company shall be exchanged; and any assignee of or successor
to substantially all of the assets of the Company.
"Covered Employee" means a Participant who is a "covered employee" within
the meaning of Section 162(m) of the Code.
"Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan
or the Participant is not an employee of the Company or an Affiliate, a mental
or physical illness that renders a Participant totally and permanently
incapable of performing the Participant's duties for the Company or an
Affiliate. Notwithstanding the foregoing, a Disability will not qualify under
this Plan if it is the result of (i) a willfully self-inflicted injury or
willfully self-induced sickness; or (ii) an injury or disease contracted,
suffered, or incurred, while participating in a criminal offense. The
determination of Disability will be made by the Committee. The determination
of Disability for purposes of this Plan will not be construed to be an
admission of disability for any other purpose.
"Effective Date" means December 20, 1996.
A-4
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Fair Market Value" means, unless otherwise determined by the Committee, the
closing sale price per share reported on a consolidated basis for stock listed
on the principal stock exchange or market on which Common Stock is traded on
the date as of which such value is being determined or, if there is no sale on
that date, then on the last previous day on which a sale was reported.
"Grant Date" means the date as of which an Option is granted pursuant to the
Plan.
"Incentive Stock Option" means an Option to purchase shares of Common Stock
granted under this Plan which satisfies the requirements of Section 422 of the
Code.
"LLC Plan" means the NovaMed Eyecare Management, LLC Equity Incentive Plan,
which plan was terminated in connection with the establishment of this Plan.
"NASDAQ" means the Nasdaq Stock Market, including the Nasdaq National
Market.
"Nonqualified Stock Option" means an Option to purchase Shares granted under
this Plan, the taxation of which is pursuant to Section 83 of the Code.
"Option" or "Stock Option" means an option or right granted to a Participant
(under Article VI hereof) to purchase Shares at a specified price during
specified time periods.
"Option Period" means the period during which an Option shall be exercisable
in accordance with the related Agreement and Article VI.
"Option Price" means the price at which Shares may be purchased under an
Option as provided in Section 6.3.
"Participant" means a person who satisfies the eligibility conditions of
Article V and to whom an Option has been granted by the Committee under this
Plan, and in the event a Representative is appointed for a Participant or
another person becomes a Representative, then the term "Participant" shall mean
such Representative. The term shall also include a trust for the benefit of the
Participant, a partnership the interest of which is held by or for the benefit
of the Participant, the Participant's parents, spouse or descendants, or a
custodian under a uniform gifts to minors act or similar statute for the
benefit of the Participant's descendants, to the extent permitted by the
Committee and not inconsistent with the Rule 16b-3 or the status of the Option
as an Incentive Stock Option, to the extent intended. Notwithstanding the
foregoing, the term "Termination of Employment" shall mean the Termination of
Employment of the person to whom the Option was originally granted.
"Plan" means the NovaMed Eyecare, Inc. Amended and Restated Stock Incentive
Plan, as herein set forth and as may be amended from time to time.
"Representative" means (a) the person or entity acting as the executor or
administrator of a Participant's estate pursuant to the last will and testament
of a Participant or pursuant to the laws of the jurisdiction in which the
Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or
(d) any person to whom an Option has been transferred with the permission of
the Committee or by operation of law; provided that only one of the foregoing
shall be the Representative at any point in time as determined under applicable
law and recognized by the Committee. Any Representative shall be subject to all
terms and conditions applicable to the Participant.
A-5
<PAGE>
"Retirement" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or an Affiliate, if the Participant is covered by such plan, and if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.
"Rule 16b-3" means Rule 16b-3, as from time to time in effect and applicable
to the Plan and Participants, promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"Series A Preferred Stock" means the Series A Convertible Preferred Stock,
$0.01 par value, formerly authorized and designated by the Company for purposes
of the Plan.
"Series B Preferred Stock" means the Series B Convertible Preferred Stock,
$0.01 par value, of the Company, formerly authorized and designated by the
Company for purposes of the Plan.
"Shares" means shares of Common Stock.
"Termination of Employment" means the occurrence of any act or event,
whether pursuant to an employment agreement or otherwise, that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer, independent contractor, board member, consultant, director or
employee of the Company or of any Affiliate, or to be an officer, independent
contractor, board member, consultant, director or employee of any entity that
provides services to the Company or an Affiliate, including, without
limitation, death, Disability, dismissal, severance at the election of the
Participant, Retirement, or severance as a result of the discontinuance,
liquidation, sale or transfer by the Company or its Affiliates of all
businesses owned or operated by the Company or its Affiliates. With respect to
any person who is not an employee with respect to the Company or an Affiliate,
the Agreement will establish what act or event shall constitute a Termination
of Employment for purposes of the Plan. A transfer of employment from the
Company to an Affiliate, or from an Affiliate to the Company, shall not be a
Termination of Employment, unless expressly determined by the Committee. A
Termination of Employment shall occur for an employee who is employed by an
Affiliate if the Affiliate shall cease to be an Affiliate and the Participant
does not immediately thereafter become an employee of the Company or an
Affiliate.
"Voluntary Termination of Employment" means a Termination of Employment at
the election of the Participant, including, with limitation, resignation by the
Participant, but excluding Retirement.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. The Plan shall be administered by the
Committee, which shall be composed of one or more members of the Board of
Directors, each of whom is a "non-employee director" within the meaning of Rule
16b-3 of the Exchange Act and an "outside director" for purposes of the
deduction of compensation under Section 162(m) of the Code. The Committee shall
be the Compensation Committee of the Board of Directors, unless such committee
does not exist or the Board establishes a committee whose purpose is the
administration of this Plan. In the absence of an appointment of a Compensation
Committee or another specific committee, the Board shall constitute the
Committee. A majority of the Committee shall constitute a quorum at any meeting
thereof (including by telephone conference) and the acts of a majority of the
members present, or acts approved in writing by a majority of the entire
Committee without a meeting,
A-6
<PAGE>
shall be the acts of the Committee for purposes of this Plan. The Committee may
authorize any one or more of its shareholders or an officer of the Company to
execute and deliver documents on behalf of the Committee. A member of the
Committee shall not exercise any discretion respecting himself or herself under
the Plan. In the event that the Compensation Committee of the Board no longer
is the Committee, the Board shall have the authority to remove, replace or fill
any vacancy of any member of the Committee upon notice to the Committee and the
affected member. Any member of the Committee may resign upon notice to the
Board. The Committee may allocate among one or more of its members, or may
delegate to one or more of its agents, such duties and responsibilities as it
determines.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan:
(a) to select those persons to whom Options may be granted from time to
time;
(b) to determine whether and to what extent Options are to be granted
hereunder;
(c) to determine the number of Shares to be covered by each Option
granted hereunder;
(d) to determine the terms and conditions of any Option granted
hereunder (including, but not limited to, the Option Price, the Option
Period, any exercise restriction or limitation and any exercise
acceleration, forfeiture or waiver regarding any Option and the Shares
relating thereto);
(e) to adjust the terms and conditions, at any time or from time to
time, of any Option, subject to the limitations of Section 8.1;
(f) to determine under what circumstances an Option may be settled in
cash or Shares;
(g) to provide for the forms of Agreement to be utilized in connection
with the Plan;
(h) to determine whether a Participant has a Disability or a Retirement;
(i) to determine whether and with what effect an individual has incurred
a Termination of Employment;
(j) to determine what securities law requirements are applicable to the
Plan, Options, and the issuance of Shares and to require of a Participant
that appropriate action be taken with respect to such requirements;
(k) to cancel, with the consent of the Participant or as otherwise
provided in the Plan or an Agreement, outstanding Options;
(l) to interpret and make final determinations with respect to the
remaining number of Shares available under this Plan;
(m) to require as a condition of the exercise of an Option or the
issuance or transfer of a certificate for Shares, the withholding from a
Participant of the amount of any federal, state or local taxes as may be
required by law;
(n) to determine whether the Company or any other person has a right or
obligation to purchase Shares from a Participant and, if so, the terms and
conditions on which such Shares are to be purchased;
(o) to determine the restrictions or limitations on the transfer of
Shares;
(p) to determine whether an Option is to be adjusted, modified or
purchased, or is to become fully exercisable, under the Plan or the terms
of an Agreement;
(q) to determine the permissible methods of Option exercise and payment,
including cashless exercise arrangements;
(r) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan; and
A-7
<PAGE>
(s) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Option issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The Committee's policies and
procedures may differ with respect to Options granted at different times or to
different Participants.
Any determination made by the Committee pursuant to the provisions of the
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Option, may be made at the time of the grant of the Option or,
unless in contravention of any express term of the Plan or an Agreement, at any
time thereafter. All decisions made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company
and Participants. No determination shall be subject to de novo review if
challenged in court.
ARTICLE IV
SHARES SUBJECT TO PLAN
4.1 Number of Shares. Number of Shares. Subject to adjustment under Section
4.5, the total number of Shares reserved and available for distribution
pursuant to Options under the Plan shall be 7,251,800 shares of Common Stock,
as authorized for issuance on the Effective Date and thereafter from time to
time. Such Shares may consist, in whole or in part, of authorized and unissued
Shares or shares of treasury stock. Options previously granted under the Plan
to purchase shares of Series A Preferred Stock and Series B Preferred Stock
shall instead represent options to purchase a like number of shares of Common
Stock. There shall no longer be reserved and available for distribution
pursuant to the Plan any options to purchase shares of Series A Preferred Stock
or Series B Preferred Stock.
4.2 Release of Shares. If any Shares that are subject to an Option cease to
be such, if any Shares that are subject to any Option are forfeited, if any
Option otherwise terminates without issuance of Shares being made to the
Participant, or if any Shares are received by the Company in connection with
the exercise of an Option or the satisfaction of a tax withholding obligation,
such Shares, in the discretion of the Committee, may again be available for
distribution in connection with Options (other than Incentive Stock Options)
under the Plan. If any Shares could not again be available for Options to a
particular Participant under any applicable law, such Shares shall be available
exclusively for Options to Participants who are not subject to such
limitations.
4.3 Restrictions on Shares. Shares issued upon exercise of an Option shall
be subject to the terms and conditions specified herein and to such other
terms, conditions and restrictions as the Committee in its discretion may
determine or provide in an Option Agreement. The Company shall not be required
to issue or deliver any certificates for Shares, cash or other property prior
to: (i) the Participant executing any agreement that the Committee has required
the Participant to execute as a condition for the grant of Shares; (ii) the
listing of such shares on any stock exchange or NASDAQ (or other public market)
on which the Shares may then be listed (or regularly traded), (iii) the
completion of any registration or qualification of such Shares under federal or
state law, or any ruling or regulation of any government body which the
Committee determines to be necessary or advisable, and (iv) the satisfaction of
any applicable withholding obligation in order for the Company or an Affiliate
to obtain a deduction with respect to the exercise of an Option. The Company
may cause any certificate for any Shares to be delivered to be properly marked
with a legend or other notation reflecting the limitations on transfer of such
Shares as provided in this Plan or as the Committee may otherwise require. The
Committee may require any person exercising an Option to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the Shares in compliance with
applicable law or otherwise. Fractional shares shall not be delivered, but
shall be rounded to the next lower whole number of shares.
A-8
<PAGE>
4.4 Shareholder Rights. No person shall have any rights of a shareholder as
to Shares subject to an Option until, after proper exercise of the Option or
other action required, such Shares have been recorded on the Company's official
shareholder records as having been issued and transferred. Upon exercise of the
Option or any portion thereof, the Company shall have thirty (30) days in which
to issue the Shares, and the Participant will not be treated as a shareholder
for any purpose whatsoever prior to such issuance. No adjustment shall be made
for cash dividends or other rights for which the record date is prior to the
date such Shares are recorded as issued and transferred in the Company's
official shareholder records, except as provided herein or in an Agreement.
4.5 Anti-Dilution. In the event of any Company stock dividend, stock split,
reverse stock split, combination or exchange of shares, recapitalization or
other change in the capital structure of the Company, corporate separation or
division of the Company (including, but not limited to, a split-up, spin-off,
split-off or distribution to Company shareholders other than a normal cash than
dividend), sale by the Company of all or a substantial portion of its assets
(measured either on a stand-alone or consolidated basis), reorganization,
rights offering, a partial or complete liquidation, or any other corporate
transaction or event involving the Company and having an effect similar to any
of the foregoing, then the Committee may adjust or substitute, as the case may
be, the number of Shares available for Options under the Plan, the number of
Shares covered by outstanding Options, the exercise price per Share of
outstanding Options, and any other characteristics or terms of the Options as
the Committee shall deem necessary or appropriate to reflect equitably the
effects of such changes to the Participants; provided, however, that the
Committee may limit any such adjustment so as to maintain the deductibility of
the Options under Section 162(m) of the Code, and that any fractional shares
resulting from such adjustment shall be eliminated by rounding to the next
lower whole number of shares with appropriate payment for such fractional share
as shall reasonably be determined by the Committee.
ARTICLE V
ELIGIBILITY
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan and be granted Options shall be those
persons who are directors, officers, employees, independent contractors or
consultants with respect to the Company or any Affiliate, who are in a
position, in the opinion of the Committee, to make contributions to the growth,
management, protection and success of the Company and its Affiliates. Of those
persons described in the preceding sentence, the Committee may, from time to
time, select persons to be granted Options and shall determine the terms and
conditions with respect thereto. In making any such selection and in
determining the form of the Option, the Committee may give consideration to the
functions and responsibilities of the person's contributions to the Company and
its Affiliates, the value of the individual's service to the Company and its
Affiliates and such other factors deemed relevant by the Committee. The
Committee may designate as ineligible to participate in the Plan any person who
would otherwise be eligible to participate.
ARTICLE VI
OPTIONS
6.1 General. The Committee shall have authority to grant Options under the
Plan at any time or from time to time. Options may be either Incentive Stock
Options or Nonqualified Stock Options. An Option shall entitle the Participant
to receive Shares upon the exercise of such Option, subject to the
Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Agreement (the terms and
provisions of which may differ from other Agreements) including without
limitation, payment of the Option Price. During any three-calendar-year period,
Options for no more than 1,000,000 shares of Common Stock shall be granted to
any Participant.
A-9
<PAGE>
6.2 Grant. The grant of an Option shall occur as of the date the Committee
determines. Each Option granted under this Plan shall be evidenced by an
Agreement, in a form approved by the Committee, which shall embody the terms
and conditions of such Option and which shall be subject to the express terms
and conditions set forth in the Plan. Such Agreement shall become effective
upon execution by the Company and the Participant. Only a person who is a
common-law employee of the Company, any parent corporation of the Company or a
subsidiary (as such terms are defined in Section 424 of the Code) on the date
of grant shall be eligible to be granted an Option which is intended to be and
is an Incentive Stock Option. To the extent that any Option is not designated
as an Incentive Stock Option or even if so designated does not qualify as an
Incentive Stock Option, it shall constitute a Nonqualified Stock Option.
6.3 Terms and Conditions. Except to the extent determined to be appropriate
by the Committee and consented to by the Participant, an Option granted
pursuant to the Plan shall be subject to such terms and conditions as shall be
determined by the Committee, including the following:
(a) Option Period. The Option Period of each Option will be fixed by the
Committee; provided that the Option Period of a Nonqualified Stock Option
shall not exceed ten (10) years from the date the Option is granted. In the
case of an Incentive Stock Option, the Option Period shall not exceed ten
(10) years from the date of grant or five (5) years in the case of an
individual who owns more than ten percent (10%) of the combined voting
power of all classes of stock of the Company, a corporation which is a
parent corporation of the Company or any subsidiary of the Company (each as
defined in Section 424 of the Code). No Option which is intended to be an
Incentive Stock Option shall be granted more than ten (10) years from the
date this Plan is adopted by the Company or the date this Plan is approved
by the shareholders of the Company, whichever is earlier.
(b) Option Price. The Option Price per share of Common Stock purchasable
under an Option shall be determined by the Committee. If an Option is
intended to qualify as an Incentive Stock Option, the Option Price per
share of Common Stock shall be not less than the Fair Market Value per
share of Common Stock on the date the Option is granted, or where granted
to an individual who owns or who is deemed to own stock possessing more
than ten percent (10%) of the combined voting power of all classes of stock
of the Company, a corporation which is a parent corporation of the Company
or any subsidiary of the Company (each as defined in Section 424 of the
Code), not less than one hundred ten percent (110%) of such Fair Market
Value per share.
(c) Exercisability. Subject to Section 7.1, Options shall be exercisable
at such time or times and subject to such terms and conditions as shall be
determined by the Committee. If the Committee provides that any Option is
exercisable only in installments, the Committee may at any time waive such
installment exercise provisions, in whole or in part. In addition, the
Committee may at any time accelerate the exercisability of any Option. If
the Committee intends that an Option be an Incentive Stock Option, the
Committee may, in its discretion, provide that the aggregate Fair Market
Value (determined at the Grant Date) of an Incentive Stock Option which is
exercisable for the first time during the calendar year shall not exceed
$100,000.
(d) Method of Exercise. Subject to the provisions of this Article VI, a
Participant may exercise Options, in whole or in part, at any time during
the Option Period by the Participant's giving written notice of exercise on
a form provided by the Committee (if available) to the Company specifying
the number of Shares subject to the Option to be purchased. Such notice
shall be accompanied by payment in full of the purchase price by cash or
check or such other form of payment as the Company may accept. If approved
by the Committee, payment in full or in part may also be made (i) by
delivering Shares already owned by the Participant for a period of at least
six (6) months prior to payment having a total Fair Market Value on the
date of such delivery equal to the Option Price; (ii) by the execution and
delivery of a note or other full recourse evidence of indebtedness (and any
security agreement thereunder) satisfactory to the Committee; (iii) by the
delivery of cash or the extension of credit by a broker-dealer to whom the
Participant has submitted a notice of exercise or otherwise indicated an
intent to exercise an Option (in accordance with Part 220, Chapter II,
Title 12 of the Code of Federal Regulations, so-called "cashless"
A-10
<PAGE>
exercise); (iv) by certifying ownership of shares owned by the Participant
to the satisfaction of the Committee for later delivery to the Company as
expected by the Committee and (v) by any combination of the foregoing. No
Shares will be issued until full payment therefor has been made and the
Participant has executed any and all agreements that the Company may
require the Participant to execute. A Participant will have all of the
rights of a shareholder of the Company holding the Shares that are subject
to such Option (including, if applicable, the right to vote the Shares and
the right to receive dividends), when the Participant has given written
notice of exercise, has paid in full for such Shares, executed all relevant
agreements, and such Shares have been recorded on the Company's official
records as having been issued and transferred.
(e) Non-transferability of Options. Except as provided herein or in an
Agreement, no Option or interest therein shall be transferable by the
Participant other than by will or by the laws of descent and distribution
or by a designation of Beneficiary effective upon the death of the
Participant, and all Options shall be exercisable during the Participant's
lifetime only by the Participant or the Participant's Representative. If
and to the extent transferability is permitted by the Committee as provided
by an Agreement, the Option shall be transferable only if such transfer
does not result in liability under Section 16 of the Exchange Act to the
Participant or other Participants and is consistent with registration of
the Option and sale of Common Stock on Form S-8 (or a successor form) or is
consistent with the use of Form S-8 (or the Committee's waiver of such
condition) and consistent with an Option's intended status as an Incentive
Stock Option (if applicable).
6.4 Termination by Reason of Death. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, any unexpired and unexercised Option held by such
Participant shall thereafter be fully exercisable for a period of one (1) year
following the date of the appointment of a Representative (or such other period
or no period as the Committee may specify) or until the expiration of the
Option Period, whichever period is the shorter.
6.5 Termination by Reason of Disability. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to a Disability, any unexpired and unexercised Option held by
such Participant shall thereafter be fully exercisable by the Participant for
the period of one (1) year (or such other period or no period as the Committee
may specify) immediately following the date of such Termination of Employment
or until the expiration of the Option Period, whichever period is shorter, and
the Participant's death at any time following such Termination of Employment
due to Disability will not affect the foregoing. In the event of Termination of
Employment by reason of Disability, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Option will thereafter be treated as a Nonqualified Stock
Option.
6.6 Other Termination. Unless otherwise provided in an Agreement or
determined by the Committee, if a Participant incurs a Termination of
Employment due to Retirement, or the Termination of Employment is involuntary
on the part of the Participant (but is not due to death or Disability or for
Cause), any Option held by such Participant shall thereupon terminate, except
that such Option, to the extent then exercisable, may be exercised for the
lesser of the ninety (90)-day period commencing with the date of such
Termination of Employment or until the expiration of the Option Period,
whichever period is shorter. If the Participant incurs a Termination of
Employment which is either (a) for Cause or (b) a Voluntary Termination of
Employment on the part of the Participant, the Option will terminate
immediately. The death or Disability of a Participant after a Termination of
Employment otherwise provided herein will not extend the time permitted to
exercise an Option.
6.7 Cashing-Out of Options. Unless otherwise provided in the Agreement, on
receipt of written notice of exercise, the Committee may elect to cash-out all
or part of the portion of any Option to be exercised by paying the Participant
an amount, in cash or Shares, equal to the excess of (a) the Fair Market Value
of the Shares that are subject to the portion of the Option being cashed-out
over (b) the Option Price, such difference multiplied by (c) the number of
Shares subject to the portion of the Option being cashed out, all as of the
effective date of such cash-out.
A-11
<PAGE>
ARTICLE VII
CHANGE IN CONTROL PROVISIONS
7.1 Impact of Event. An Agreement may provide that in the event of a Change
in Control (as defined in Section 7.2):
(a) Any Options outstanding as of the date of such Change in Control and
not then exercisable shall become fully exercisable to the full extent of
the original grant.
(b) Notwithstanding any other provision of the Plan, unless the
Committee shall provide otherwise in an Agreement, in the event of a Change
in Control, a Participant shall have the right, whether or not the Option
is fully exercisable or may be otherwise realized by the Participant, by
giving notice to the Company during the sixty (60)-day period from and
after a Change in Control, to elect to surrender all or part of the Option
to the Company and to receive cash, within thirty (30) days of such notice,
in an amount equal to the amount by which the "Change in Control Price" (as
defined in Section 7.3) per share of the Shares on the date of such
election shall exceed the amount which the Participant must pay to exercise
the Option per share of Shares under the Option (the "Spread") multiplied
by the number of Shares granted under the Option. Notwithstanding the
foregoing, if any right under this Section would cause a transaction to be
ineligible for pooling of interest accounting that would but for the right
hereunder be eligible for such accounting treatment, the Committee may
modify or adjust the right so that pooling of interest accounting shall be
available, including the substitution of Shares having a Fair Market Value
equal to the cash otherwise payable hereunder for the right which caused
the transaction to be ineligible for pooling of interest accounting.
7.2 Definition of Change in Control. For purposes of this Plan, unless
otherwise specified in the Agreement with respect to the corresponding Option,
a "Change in Control" shall be deemed to have occurred if (a) any corporation,
person or other entity (other than the Company, a majority-owned subsidiary of
the Company or any of its subsidiaries, or an employee benefit plan (or related
trust) sponsored or maintained by the Company or an Affiliate), including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, becomes the beneficial owner of Shares representing more than fifty
percent of the combined voting power of the Company's then outstanding
securities; (b)(i) the Company approves, in any transaction or series of
related transactions, a definitive agreement to merge or consolidate the
Company with or into another entity other than a majority-owned subsidiary of
the Company, or to sell or otherwise dispose of all or substantially all of the
Company's assets, and (ii) the persons who were the members of the Board of
Directors prior to such approval do not represent a majority of the Board of
Directors of the surviving, resulting or acquiring entity or the parent
thereof; or (c) the shareholders of the Company approve a plan of liquidation
of the Company.
7.3 Change in Control Price. For purposes of the Plan, unless otherwise
specified in the Agreement with respect to the corresponding Option, "Change in
Control Price" means the higher of (a) the highest reported sales price of a
Share in any transaction reported on the principal exchange on which such
Shares are listed or on NASDAQ during the sixty (60)-day period prior to and
including the date of a Change in Control or (b) if the Change in Control is
the result of a tender or exchange offer, merger, consolidation, liquidation or
sale of all or substantially all of the assets of the Company (in each case a
"Transaction"), the highest price per Share paid in such Transaction. To the
extent that the consideration paid in any Transaction consists all or in part
of securities or other non-cash consideration, the value of such securities or
other non-cash consideration shall be determined in the sole discretion of the
Committee.
A-12
<PAGE>
ARTICLE VIII
MISCELLANEOUS
8.1 Amendments and Termination. The Board may amend, alter or discontinue
the Plan at any time, but no amendment, alteration or discontinuation shall be
made which would impair the rights of a Participant under an Option theretofore
granted without the Participant's consent, except such an amendment (a) made to
avoid an expense charge to the Company or an Affiliate, (b) made to cause the
Plan to qualify for the exemption provided by Rule 16b-3 or (c) made to permit
the Company or an Affiliate a deduction under the Code. In addition, no such
amendment shall be made without the approval of the Company's shareholders to
the extent such approval is required by law or agreement.
The Committee may amend, alter or discontinue the Plan or an Option at any
time on the same conditions and limitations (and exceptions to limitations) as
apply to the Board's authority to amend the Plan and further subject to any
approval or limitations the Board may impose.
Notwithstanding anything in the Plan to the contrary, if any right under
this Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution
of equity interests having a Fair Market Value equal to the cash otherwise
payable hereunder for the right which caused the transaction to be ineligible
for pooling of interest accounting.
8.2 Unfunded Status of Plan. It is intended that the Plan be an "unfunded"
plan for incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Shares or make payments; provided, however, that, unless
the Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
8.3 Limits on Transferability. Unless otherwise provided in this Plan or in
an Agreement, no Option shall be subject to the claims of Participant's
creditors and no Option may be sold, transferred, assigned, alienated,
encumbered, hypothecated, gifted, conveyed, pledged or disposed of in any way
other than by will or the laws of descent and distribution or to a
Representative upon the death of the Participant.
8.4 Status of Options Under Code Section 162(m). It is the intent of the
Company that Options granted to persons who are Covered Employees within the
meaning of Code Section 162(m) shall constitute "qualified performance-based
compensation" satisfying the requirements of Code Section 162(m). Accordingly,
the provisions of the Plan shall be interpreted in a manner consistent with
Code Section 162(m). If any provision of the Plan or any agreement relating to
such an Option does not comply or is inconsistent with the requirements of Code
Section 162(m), such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.
8.5 General Provisions.
(a) Representation. The Committee may require each person purchasing or
receiving shares pursuant to an Option to represent to and agree with the
Company in writing that such person is acquiring the shares without a view
to the distribution thereof. The certificates for such shares may include
any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
(b) No Additional Obligation. Nothing contained in the Plan shall
prevent the Company or an Affiliate from adopting other or additional
compensation arrangements for its employees.
(c) Withholding. No later than the date as of which an amount first
becomes includable in the gross income of the Participant for income tax
purposes with respect to any Option, the Participant shall pay to the
Company (or other entity identified by the Committee), or make arrangements
satisfactory to the Company or other entity identified by the Committee
regarding the payment of, any Federal, state, local or
A-13
<PAGE>
foreign taxes of any kind required by law to be withheld with respect to
such amount required in order for the Company or an Affiliate to obtain a
current deduction. Unless otherwise determined by the Committee,
withholding obligations may be settled with Shares, including Shares that
are part of the Option that gives rise to the withholding requirement,
provided that any applicable requirements under Section 16 of the Exchange
Act are satisfied. The obligations of the Company under the Plan will be
conditional on such payment or arrangements, and the Company and its
Affiliates will, to the extent permitted by law, have the right to deduct
any such taxes from any payment otherwise due to the Participant. If the
Participant disposes of shares of Common Stock acquired pursuant to an
Incentive Stock Option in any transaction considered to be a disqualifying
transaction under the Code, the Participant must give written notice of
such transfer and the Company shall have the right to deduct any taxes
required by law to be withheld from any amounts otherwise payable to the
Participant. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements, and the Company and its
Affiliates shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment otherwise due to the Participant.
(d) Representative. The Committee shall establish such procedures as it
deems appropriate for a Participant to designate a Representative to whom
any amounts payable in the event of the Participant's death are to be paid.
(e) Controlling Law. The Plan and all Options made and actions taken
thereunder will be governed by and construed in accordance with the laws of
the State of Delaware (other than its law respecting choice of law). The
Plan shall be construed to comply with all applicable law and to avoid
liability to the Company, an Affiliate or a Participant or loss of a
deduction, including, without limitation, liability under Section 16(b) of
the Exchange Act.
(f) Offset. Any amounts owed to the Company or an Affiliate by the
Participant of whatever nature may be offset by the Company from the value
of any Shares, cash or other thing of value under this Plan or an Agreement
to be transferred to the Participant, and no Shares, cash or other thing of
value under this Plan or an Agreement shall be transferred unless and until
all disputes between the Company and the Participant have been fully and
finally resolved and the Participant has waived all claims to such against
the Company or an Affiliate.
(g) No Rights with Respect to Continuance of Employment. Nothing
contained herein shall be deemed to alter the relationship between the
Company or an Affiliate and a Participant, or the contractual relationship
between a Participant and the Company or an Affiliate if there is a written
contract regarding such relationship. Nothing contained herein shall be
construed to constitute a contract of employment between the Company or an
Affiliate and a Participant. The Company or an Affiliate and each of the
Participants continue to have the right to terminate the employment or
service relationship at any time for any reason, except as provided in a
written contract. The Company or an Affiliate shall have no obligation to
retain the Participant in its employ or service as a result of this Plan.
There shall be no inference as to the length of employment or service
hereby, and the Company or an Affiliate reserves the same rights to
terminate the Participant's employment or service as existed prior to the
individual's becoming a Participant in this Plan.
(h) Fail-Safe. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3, as applicable. To the extent any
provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee. Moreover, in the event the Plan does not
include a provision required by Rule 16b-3 to be stated herein, such
provision (other than one relating to eligibility requirements or the price
and amount of Options) shall be deemed to be incorporated by reference into
the Plan with respect to Participants subject to Section 16.
(i) Right to Capitalize. The grant of an Option shall in no way affect
the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidation,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
A-14
<PAGE>
8.6 Mitigation of Excise Tax. Subject to any agreement with a Participant,
if any payment or right accruing to a Participant under this Plan (without the
application of this Section 8.6), either alone or together with other payments
or rights accruing to the Participant from the Company or an Affiliate ("Total
Payments"), would constitute a "parachute payment" (as defined in Section 280G
of the Code and regulations thereunder), such payment or right shall be reduced
to the largest amount or greatest right that will result in no portion of the
amount payable or right accruing under the Plan being subject to an excise tax
under Section 4999 of the Code or being disallowed as a deduction under Section
280G of the Code. The determination of whether any reduction in the rights or
payments under this Plan is to apply shall be made by the Committee in good
faith after consultation with the Participant, and such determination will be
conclusive and binding on the Participant. The Participant shall cooperate in
good faith with the Committee in making such determination and providing the
necessary information for this purpose. The provisions of this Section 8.6
shall apply with respect to any Participant only if, after reduction for any
applicable federal excise tax imposed by Section 4999 of the Code and other
federal income tax imposed by the Code, the Total Payments accruing to such
Participant would be less than the amount of the Total Payments as reduced (i)
if applicable, pursuant to the provisions of this Section 8.6 and any similar
provisions under any other plan of the Company or any Affiliate to mitigate the
applicable federal excise tax, and (ii) by federal income taxes (other than
such excise tax).
8.7 Options in Substitution for Options Granted by Other Entities. Options
may be granted under the Plan from time to time in substitution for options
held by employees, directors or service providers of other entities who are
about to become officers, directors, shareholders or employees of the Company
or an Affiliate. The terms and conditions of the Options so granted may vary
from the terms and conditions set forth in this Plan at the time of such grant
as the majority of the shareholders of the Committee may deem appropriate to
conform, in whole or in part, to the provisions of the Options in substitution
for which they are granted.
8.8 Procedure for Adoption. Any Affiliate of the Company may by resolution
of such Affiliate's board of directors with the consent of the Board of
Directors and subject to such conditions as may be imposed by the Board of
Directors, adopt the Plan for the benefit of its employees as of the date
specified in the resolution.
8.9 Procedure for Withdrawal. Any Affiliate which has adopted the Plan may,
by resolution of the board of directors of such Affiliate, with the consent of
the Board of Directors and subject to such conditions as may be imposed by the
Board of Directors, terminate its adoption of the Plan.
8.10 Delay. If at the time a Participant incurs a Termination of Employment
(other than due to Cause) or if at the time of a Change in Control, the
Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under the Plan or an Agreement to
the extent necessary to avoid the imposition of liability will be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six months and one day and not to exceed the Option Period.
The Company shall have the right to suspend or delay any time period described
in the Plan or an Agreement if the Committee shall determine that the action
may constitute a violation of any law or result in liability under any law to
the Company, an Affiliate or a shareholder in the Company until such time as
the action required or permitted will not constitute a violation of law or
result in liability to the Company, an Affiliate or a shareholder of the
Company. The Committee shall have the discretion to suspend the application of
the provisions of the Plan required solely to comply with Rule 16b-3 if the
Committee determines that Rule 16b-3 does not apply to the Plan.
8.11 Headings. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.
8.12 Severability. If any provision of this Plan is for any reason held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Plan, and this Plan will be construed as if
such invalid or unenforceable provision were omitted.
A-15
<PAGE>
8.13 Successors and Assigns. This Plan shall inure to the benefit of and be
binding upon each successor and assign of the Company. All obligations imposed
upon a Participant, and all rights granted to the Company hereunder, shall be
binding upon the Participant's heirs, legal representatives and successors.
8.14 Entire Agreement. This Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan shall control.
A-16
<PAGE>
APPENDIX B
NOVAMED EYECARE, INC.
AMENDED AND RESTATED
1999 STOCK PURCHASE PLAN
(Original Plan adopted effective May 24, 1999)
(Amended and Restated Plan adopted effective August 1, 1999)
B-1
<PAGE>
NOVAMED EYECARE, INC.
AMENDED AND RESTATED
1999 STOCK PURCHASE PLAN
(Original Plan adopted effective May 24, 1999)
(Amended and Restated Plan adopted effective August 1, 1999)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I ESTABLISHMENT AND PURPOSE.................................... B-4
1.1 Purpose...................................................... B-4
ARTICLE II DEFINITIONS.................................................. B-4
2.1 "Account..................................................... B-4
2.2 "Agreement" or "Option Agreement............................. B-4
2.3 "Board of Directors" or "Board............................... B-4
2.4 "Code" or "Internal Revenue Code............................. B-4
2.5 "Committee................................................... B-4
2.6 "Common Stock................................................ B-4
2.7 "Company..................................................... B-4
2.8 "Continuous Service.......................................... B-5
2.9 "Contribution Rate........................................... B-5
2.10 "Disability.................................................. B-5
2.11 "Eligible Employee........................................... B-5
2.12 AERISA....................................................... B-5
2.13 "Exercise Date............................................... B-5
2.14 "Exchange Act................................................ B-5
2.15 "Fair Market Value........................................... B-5
2.16 "Grant Date.................................................. B-5
2.17 "Option...................................................... B-5
2.18 "Option Period............................................... B-6
2.19 "Option Price................................................ B-6
2.20 "Participant................................................. B-6
2.21 "Plan........................................................ B-6
2.22 "Plan Year................................................... B-6
2.23 "Representative.............................................. B-6
2.24 "Retirement.................................................. B-6
2.25 "Securities Act.............................................. B-6
2.26 "Subsidiary.................................................. B-6
2.27 "Termination of Employment................................... B-6
ARTICLE III ADMINISTRATION............................................... B-7
3.1 Committee Structure and Authority............................ B-7
ARTICLE IV STOCK PROVISIONS............................................. B-8
4.1 Number of Shares Subject to the Plan......................... B-8
4.2 Release of Shares............................................ B-8
4.3 Restrictions on Shares....................................... B-8
4.4 Stockholder Rights........................................... B-9
4.5 Stock Valuation.............................................. B-9
4.6 Custodian.................................................... B-9
ARTICLE V ELIGIBILITY; OPTION PROVISIONS............................... B-9
5.1 Eligibility.................................................. B-9
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
5.2 Grant of Options........................................... B-9
5.3 Option Period.............................................. B-10
5.4 Option Price............................................... B-10
5.5 Contribution Rate.......................................... B-10
5.6 Purchase of Shares......................................... B-11
5.7 Cancellation of Options.................................... B-11
5.8 Terminated Employees....................................... B-11
5.9 Deceased Employees......................................... B-11
5.10 Disabled or Retired Employees.............................. B-11
5.11 Limitations................................................ B-12
5.12 Nonassignability........................................... B-12
ARTICLE VI GENERAL PROVISIONS APPLICABLE TO THE PLAN.................. B-12
6.1 Termination of Plan........................................ B-12
6.2 Investment Representation.................................. B-12
6.3 Effect of Certain Changes.................................. B-13
6.4 Withholding................................................ B-14
6.5 No Company Obligation...................................... B-15
6.6 Committee Discretion....................................... B-15
ARTICLE VII MISCELLANEOUS.............................................. B-15
7.1 Indemnification of the Board and Committee................. B-15
7.2 Mitigation of Excise Tax................................... B-15
7.3 Interpretation............................................. B-16
7.4 Governing Law.............................................. B-16
7.5 Limitations on Liability................................... B-16
7.6 Validity................................................... B-16
7.7 Assignment................................................. B-16
7.8 Captions................................................... B-16
7.9 Amendments................................................. B-16
7.10 Entire Agreement........................................... B-16
7.11 Rights with Respect to Continuance of Employment........... B-16
Options for Shares in Substitution for Stock Options
7.12 Granted by Other Corporations.............................. B-17
7.13 Procedure for Adoption..................................... B-17
7.14 Procedure for Withdrawal................................... B-17
7.15 Expenses................................................... B-17
</TABLE>
B-3
<PAGE>
NOVAMED EYECARE, INC.
AMENDED AND RESTATED
1999 STOCK PURCHASE PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
1.1 Purpose. The NovaMed Eyecare, Inc. Amended and Restated 1999 Stock
Purchase Plan (the "Plan") is hereby established effective August 1, 1999 by
NovaMed Eyecare, Inc. The adoption of the Plan is expressly conditioned upon
the Plan's approval by the stockholders of NovaMed Eyecare, Inc. within twelve
(12) months after the date the Plan was originally adopted. The purpose of the
Plan is to promote the overall financial objectives of the Company and its
stockholders by motivating participants in the Plan to achieve long-term growth
in stockholder equity in the Company. The Plan is intended as an "employee
stock purchase plan" within the meaning of Section 423 of the Code, and Options
granted hereunder are intended to constitute options granted under such a plan,
and the Plan document and all actions taken in connection with the Plan shall
be constructed consistently with such intent.
ARTICLE II
DEFINITIONS
The following sections of this Article II provide basic definitions of terms
used throughout the Plan, and whenever used therein in the capitalized form,
except as otherwise expressly provided, the terms shall be deemed to have the
following meanings:
2.1 "Account" shall mean the bookkeeping account established on behalf of a
Participant to which shall be credited all contributions paid for the purpose
of purchasing Common Stock under the Plan, and to which shall be charged all
purchases of Common Stock pursuant to the Plan. The Company shall have custody
of such Account.
2.2 "Agreement" or "Option Agreement" means, individually or collectively,
any enrollment and withholding agreement entered into pursuant to the Plan. An
Agreement shall be the right of the Company to withhold from payroll amounts to
be applied to purchase Common Stock.
2.3 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.4 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, and any subsequent Internal Revenue Code. If there is a
subsequent Internal Revenue Code, any references herein to Internal Revenue
Code sections shall be deemed to refer to comparable sections of any subsequent
Internal Revenue Code.
2.5 "Committee" means the person or persons appointed by the Board of
Directors to administer the Plan, as further described in the Plan.
2.6 "Common Stock" means the shares of the Common Stock of the Company,
$1.00 par value per share, whether presently or hereafter issued, and any other
stock or security resulting from adjustment thereof as described in Section
6.3.
2.7 "Company" means NovaMed Eyecare, Inc. and includes any successor or
assignee corporation or corporations into which the Company may be merged,
changed or consolidated; any corporation for whose securities the securities of
the Company shall be exchanged; and any assignee of or successor to
substantially all of the assets of the Company.
B-4
<PAGE>
2.8 "Continuous Service" shall mean, subject to modification by the
Committee, an Eligible Employee's number of full years and completed months of
continuous employment with the Company or a Subsidiary from his last hiring
date to his date of Termination of Employment for any reason. The Committee
may provide rules from time to time regarding the calculation of Continuous
Service and the method for crediting such service.
2.9 "Contribution Rate" means the rate determined under Section 5.5
2.10 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long-term disability plan of the
Company or a Subsidiary, or if the Participant is not covered by such plan, a
mental or physical illness that renders a Participant permanently and totally
incapable of performing his duties as an employee of the Company or a
Subsidiary. Notwithstanding the foregoing, a Disability shall not qualify
under this Plan if it is the result of (a) a willfully self-inflicted injury
or willfully self-induced sickness; or (b) an injury or disease contracted,
suffered, or incurred, while participating in a criminal offense. The
determination of Disability shall be made by the Committee. The determination
of Disability for purposes of this Plan shall not be construed to be an
admission of disability for any other purpose.
2.11 "Eligible Employee" means each employee of the Company or a Subsidiary
(if the Subsidiary has adopted the Plan) on a Grant Date except that the
Committee in its sole discretion may exclude:
(a) any employee who has accrued less than a minimum period of
Continuous Service established by the Committee (but not to exceed 2
years).
(b) any employee whose customary employment is 20 hours or less per
week;
(c) any employee whose customary employment is for not more than 5
months in any calendar year;
(d) any employee who would directly or indirectly own or hold (applying
the rules of Section 424(d) of the Code to determine stock ownership)
immediately following the grant of an Option hereunder an aggregate of five
percent (5%) or more of the total combined voting power or value of all
outstanding shares of all classes of stock of the Company or any
Subsidiary; and
(e) any employee who is a highly compensated employee of the Company or
Subsidiary within the meaning of Section 414(q) of the Code.
Any period of service described in the preceding sentence may be decreased in
the discretion of the Committee.
2.12 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
2.13 "Exercise Date" means such one or more dates determined by the
Committee on which the accumulated value of the Account shall be applied to
purchase Common Stock. The Committee may accelerate an Exercise Date in order
to satisfy the employment period requirement of Section 423(a)(2).
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2.15 "Fair Market Value" means the value determined on the basis of the
good faith determination of the Committee pursuant to the applicable method
described in Section 4.5 and as adjusted, averaged or otherwise modified by
the Committee.
2.16 "Grant Date" means the date or dates established by the Committee on
which one or more Options are granted pursuant to the Plan. The Committee may
determine for any Plan Year that there shall be no Grant Date, in which case
no Options shall be granted for that Plan Year. The terms and conditions of
any Option granted on a particular Grant Date shall be independent of and have
no effect on the terms and conditions of any Option granted on another Grant
Date.
2.17 "Option" means the right to purchase Common Stock pursuant to the Plan
and any Agreement.
B-5
<PAGE>
2.18 "Option Period" means the period beginning on the Grant Date and
expiring on the Exercise Date as determined by the Committee, subject to the
limitations of Section 5.3.
2.19 "Option Price" means the price at which the Company's Common Stock
granted as of a specific Grant Date may be purchased under an Option. The price
shall be subject to the limitation set forth in Section 5.4.
2.20 "Participant" means an Eligible Employee who satisfies the eligibility
conditions of the Plan and to whom an Option has been granted by the Committee
under the Plan, and in the event a Representative is appointed for a
Participant, then the term "Participant" shall mean such appointed
Representative, or successor Representative(s) appointed, as the case may be,
provided that "Termination of Employment" shall mean the Termination of
Employment of the Participant.
2.21 "Plan" means the NovaMed Eyecare, Inc. 1999 Stock Purchase Plan, as
herein set forth and as may be amended from time to time.
2.22 "Plan Year" means, for the first Plan Year, the period starting on the
effective Date of the Plan, and ending on December 31, 1999; and for all
subsequent Plan Years, the twelve (12) consecutive month period starting on
January 1 and ending on the following December 31. The Committee may at any
time in its discretion designate another period as the Plan Year.
2.23 "Representative" means (a) the person or entity acting as the executor
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in which
the Participant had his primary residence at the date of the Participant's
death; (b) the person or entity acting as the guardian or temporary guardian of
a Participant's estate; or (c) the person or entity which is the beneficiary of
the Participant upon or following the Participant's death. A Participant may
file a written designation of his Representative with the Committee. Such
designation of his Representative may be changed by the Participant at any time
by written notice given in accordance with rules and procedures established by
the Committee.
2.24 "Retirement" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or a Subsidiary, if the Participant is covered by such plan, and if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.
2.25 "Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated pursuant thereto.
2.26 "Subsidiary" means any corporation, as currently defined in Section
424(f) of the Code. Unless otherwise indicated the term "Company" shall
hereinafter be deemed to include all Subsidiaries of the Company which have
adopted the Plan.
2.27 "Termination of Employment" means the latest date on which a person
ceases, for whatever reason, to be an employee of the Company or a Subsidiary.
For determining whether and when a Participant has incurred a Termination of
Employment for cause, "cause" shall mean any act or omission which permits the
Company or a Subsidiary to terminate the employment agreement or arrangement
between the Participant and the Company or a Subsidiary for cause as defined in
such agreement or arrangement, or in the event there is no such employment
agreement or arrangement or the agreement or arrangement does not define the
term "cause," then "cause" shall mean (a) any act or omission which the Company
or a Subsidiary believes is of a criminal nature, and the result of which the
Company or a Subsidiary believes is detrimental to the interests of the Company
or a Subsidiary; (b) the material breach of a fiduciary duty owing to the
Company or a Subsidiary, including without limitation, fraud and embezzlement;
or (c) conduct or the omission of conduct on the part of the Participant which
constitutes a material breach of any statutory or common-law duty of loyalty to
the Company or a Subsidiary.
B-6
<PAGE>
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. The Plan shall be administered by the
Committee. The Committee shall be comprised of two or more disinterested
members of the Board of Directors selected by the Board. A majority of the
Committee shall constitute a quorum at any meeting thereof (including telephone
conference) and the acts of a majority of the members present, or acts
unanimously approved in writing by the entire Committee without a meeting,
shall be the acts of the Committee. A person shall be considered disinterested
for this purpose only if, at the time he exercises discretion in administering
the Plan, he is a "disinterested person" within the meaning of Rule 16b-3 under
the Exchange Act. The Board shall have the authority to remove, replace or fill
any vacancy of any member of the Committee upon notice to the Committee and the
affected member. Any member of the Committee may resign upon notice to the
President of the Company or to the Board. The Committee may allocate among one
or more of its members, or may delegate to one or more of its agents, such
duties and responsibilities as it determines. Subject to the provisions of this
Plan, the Committee shall have full and final authority in its discretion to:
(a) determine from time to time whether a person is an Eligible Employee
as of any Grant Date;
(b) determine the Option Price;
(c) determine the number of shares of Common Stock available as of any
Grant Date or subject to each Option;
(d) determine any Grant Date, Exercise Date and Option Period, and
provide for all aspects of payroll deduction, suspension or withdrawal;
(e) determine, subject to the Plan, the time or times and the manner
when each Option shall be exercisable and the duration of the Option
Period;
(f) provide for the acceleration of the right to exercise an Option (or
portion thereof);
(g) prescribe additional terms, conditions and restrictions in the
Agreement and to provide for the forms of Agreement to be utilized in
connection with this Plan;
(h) determine whether a Participant has incurred a Disability;
(i) determine what securities laws requirements are applicable to the
Plan, Options, and the issuance of shares of Common Stock hereunder and
request of a Participant that appropriate action be taken;
(j) cancel, with the consent of the holder or as otherwise provided in
the Plan or an Agreement, outstanding Options;
(k) require as a condition of the exercise of an Option or the issuance
or transfer of a certificate of Common Stock, the withholding from a
Participant of the amount of any federal, state or local taxes as may be
necessary in order for the Company or Subsidiary to obtain a deduction and
as may be otherwise required by law;
(l) determine whether and for what reason an individual has incurred a
Termination of Employment or an authorized leave of absence;
(m) treat all or any portion of any period during which a Participant is
on an approved leave of absence as a period of employment for purposes of
accrual of his rights under an Option;
(n) determine whether the Company or any other person has a right or
obligation to purchase Common Stock from a Participant and, if so, the
terms and conditions on which such Common Stock is to be purchased;
(o) determine the restrictions or limitations on the transfer of Common
Stock issued upon exercise of an Option;
B-7
<PAGE>
(p) determine whether an Option is to be adjusted, modified or
purchased, or become fully exercisable, under Section 6.3 of the Plan or
the terms of an Agreement;
(q) adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of this Plan;
(r) appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties;
(s) correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Agreement relating to an Option, in
such manner and to the extent the Committee shall determine in order to
carry out the purposes of the Plan; and
(t) construe and interpret this Plan, any Agreement, and take all other
actions, and make all other determinations and take all other actions
deemed necessary or advisable for the administration of this Plan.
In the absence of the appointment of a Committee, the two or more members of
the Board who have served the longest period of time as members of the Board
and who are disinterested persons within the meaning of Rule 16b-3 of the
Exchange Act shall be the Committee. No member of the Committee, while serving
as such, shall be eligible to receive any Option hereunder, although membership
on the Committee shall not affect or impair any such member's rights under any
Option granted to him at a time when he was not a member of the Committee. A
member of the Committee shall not exercise any discretion respecting himself
under the Plan.
ARTICLE IV
STOCK PROVISIONS
4.1 Number of Shares Subject to the Plan. The stock subject to the Options
granted under this Plan shall be the Company's Common Stock. Unless otherwise
amended by the Board and approved by the stockholders of the Company to the
extent required by law, a maximum number of 400,000 shares of Common Stock of
the Company (or such number as may result following any adjustment pursuant to
Section 6.3) shall be reserved and available for Options granted under the
Plan. The shares issued with respect to Options under the Plan may be
authorized and unissued shares, or shares issued and reacquired by the Company.
4.2 Release of Shares. If any shares of Common Stock available for
subscription are unsubscribed, or if any Option granted hereunder shall be
canceled, forfeited, expire or terminate for any reason without having been
exercised or realized in full, any shares of Common Stock subject to
subscription or subject to such Option shall again be available and may
thereafter be granted or otherwise applied under this Plan.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise of
an Option shall be subject to the terms and conditions specified herein and to
such other terms, conditions and restrictions as the Committee in its
discretion may determine or provide in the Agreement. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock prior
to (1) the listing of such shares on any stock exchange (or other public
market) on which the Common Stock may then be listed (or regularly traded), (2)
the completion of any registration or qualification of such shares under
federal or state law, or any ruling or regulation of any governmental body
which the Committee, in its sole discretion, determines to be necessary or
advisable, and (3) the tendering to the Company of such documents and/or
payments as the Committee may deem necessary, including documents the Committee
deems necessary to satisfy any applicable withholding obligation in order for
the Company or another entity to obtain a deduction on its federal, state or
local tax return with respect to the exercise of an Option. The Company may
cause any certificate for any share of Common Stock to be delivered to be
properly marked with a legend or other notation reflecting the limitations on
transfer of such Common Stock as provided in this Plan or as the Committee may
otherwise require. The
B-8
<PAGE>
Company has no obligation to register shares of Common Stock issued pursuant to
the Plan. Fractional shares shall not be delivered, but shall be rounded to the
next lower whole number of shares.
4.4 Stockholder Rights. No person shall have any rights of a stockholder as
to shares of Common Stock subject to an Option until, after proper exercise of
the Option or other action required, such shares shall have been recorded on
the Company's official stockholder records as having been issued or
transferred. No adjustment shall be made for cash dividends or other rights for
which the record date is prior to the date such shares are recorded as issued
or transferred in the Company's official stockholder records, except as
provided in Section 6.3.
4.5 Stock Valuation. If and when the value of Common Stock shall be required
to be determined, it shall be determined in accordance with the following
provisions by the Committee, as applicable:
(a) if the Common Stock is listed on a national securities exchange or
on the Nasdaq National Market ("NNM") the closing price of the Common Stock
on the relevant date, as reported on the composite tape or by NNM, as the
case may be;
(b) if the Common Stock is not listed on a national securities exchange
or quoted on NNM, but is traded in the over-the-counter market, the average
of the closing bid and asked prices for the Common Stock on the relevant
date, or the most recent preceding day for which such quotations are
available; and
(c) if, on the relevant date, the Common Stock is not publicly traded or
reported as described in (i) or (ii), on the basis of the good faith
determination of the Committee.
4.6 Custodian. Shares of Common Stock purchased pursuant to the Plan may be
delivered to and held in the custody of such investment or financial firm as
shall be appointed by the Committee. The custodian may hold in nominee or
street name certificates for shares purchased pursuant to the Plan, and may
commingle shares in its custody pursuant to the Plan in a single account
without identification as to individual Participants. By appropriate
instructions to the custodian on forms to be provided for the purpose, a
Participant may from time to time obtain (a) transfer into the Participant's
own name or into the name of the Participant and another individual as joint
tenants with the right of survivorship of all or part of the whole shares held
by the custodian for the Participant's account and delivery of such shares to
the Participant; (b) transfer of all or part of the whole shares held for the
Participant's account by the custodian to a regular individual brokerage
account in the Participant's own name or in the name of the Participant and
another individual as joint tenants with the right of survivorship, either with
the firm then acting as custodian or with another firm, or (c) sale of all or
part of the whole shares held by the custodian for the Participant's account at
the market price at the time the order is executed and remittance of the net
proceeds of the sale to the Participant. Upon termination of participation in
the Plan, and upon receipt of instructions from the Participant, the shares
held by the custodian for the account of the Participant will be transferred
and delivered to the Participant in accordance with (a) above, transferred to a
brokerage account in accordance with (b), or sold in accordance with (c),
above.
ARTICLE V
ELIGIBILITY; OPTION PROVISIONS
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan as of any Grant Date shall be those persons
(and only those persons) who are Eligible Employees of the Company (including a
Subsidiary that has adopted the Plan) on a Grant Date. Employees of any entity
related to the Company other than a corporation shall not be eligible to
participate in the Plan.
5.2 Grant of Options. The Committee shall have authority to grant Options
under the Plan at any time or from time to time to all Eligible Employees as of
a Grant Date. (To the extent an Option is granted to any Eligible Employee of
an entity on a relevant date, all Eligible Employees of the entity shall be
granted an Option to the extent required by law.) An Option shall entitle the
Participant to receive shares of Common
B-9
<PAGE>
Stock at the conclusion of the Option Period, subject to the Participant's
satisfaction in full of any conditions, restrictions or limitations imposed in
accordance with the Plan or an Agreement, including without limitation, payment
of the Option Price. Each Option granted under this Plan shall be evidenced by
an Agreement, in a form approved by the Committee, which shall embody the terms
and conditions of such Option and which shall be subject to the express terms
and conditions set forth in this Plan and to such other terms and conditions as
the Committee may deem appropriate. The grant and exercise of Options hereunder
shall be subject to all applicable federal, state and local laws, rules and
regulations and to such approvals by any governmental or regulatory agency as
may be required. As of any Grant Date, each Eligible Employee shall be granted
Options with the same rights and privileges as any other Eligible Employee on
that Grant Date, except the amount of the Common Stock which may be purchased
by any Participant under any Option may bear a uniform relationship to the
total compensation, or the basic or regular rate of compensation, (as
determined by the Committee) of all Eligible Employees on that Grant Date, and
the Option may establish a maximum amount of Common Stock which may be
purchased.
5.3 Option Period. Each Agreement shall specify the period for which the
Option thereunder is granted, which shall be determined by the Committee. In no
event shall the Option Period extend beyond the period permitted under Section
423(b)(7) of the Code.
5.4 Option Price. Subject to the limits stated herein, the Option Price per
share at which shares of Common Stock may be acquired upon exercise of an
Option shall be determined by the Committee. Unless otherwise specified by the
Committee, with respect to any Exercise Date, the Option Price shall not be
less than the lesser of eighty-five percent (85%) of the Fair Market Value of a
share of Common Stock (averaged over such period as the Committee may determine
and as permitted by law) on the applicable Grant Date and eighty-five percent
(85%) of the Fair Market Value of a share of Common Stock (averaged over such
period as the Committee may determine and as permitted by law) on the
applicable Exercise Date. The Committee reserves the right to increase the
Option Price by the value of any accretion to the amounts credited to an
Account if the Participant is credited with such accretion regardless of the
method of accounting for such accretion.
5.5 Contribution Rate. If an Eligible Employee elects to participate, the
Participant shall file an Agreement with the Committee within the time period
designated by the Committee. The Committee may provide that the Agreement shall
specify a dollar amount determined by the Participant to be deducted each pay
period, or the Committee may permit only a specified amount. Such amount when
deducted shall be credited to the Account and shall be the Participant's
Contribution Rate. Such deductions shall begin as of the first regularly
scheduled payroll date on or after the later of the Grant Date and the date
specified by the Committee. The Committee may establish minimum and maximum
amounts to be contributed and a date by when such Agreement must be filed with
the Committee. Notwithstanding the foregoing, in no event may more than $20,000
(or such other amount as may be determined from time to time by the Committee)
be deducted from the Participant's compensation (as defined by the Committee)
for each Option Period and the maximum number of shares which can be purchased
by a Participant during the Option Period shall not exceed such amount divided
by eighty-five percent of the Fair Market Value of a share of Common Stock on
the applicable Grant Date (as determined under Section 5.4). Such contributions
will be held in the general funds of the Company, and no interest shall accrue
on any amounts held under this Plan, unless expressly determined by the
Committee. If payroll deductions are made by a Subsidiary, that corporation
will promptly remit the amount of the deduction to the Company. A Participant's
Contribution Rate, once established, shall remain in effect during the Option
Period unless the Committee decides, in its sole discretion, to allow
Participants to modify their Contribution Rate; provided, however, that
contributions shall be suspended or fully discontinued in order to comply with
Section 401(k) of the Code or for such other reasons as the Committee in its
sole discretion may determine, or if the Participant shall request suspension
or discontinuance. If a Participant requests to suspend payroll deductions, the
Participant may do so at such times and in such manner as the Committee may
permit, and previously deducted amounts shall be retained until the earlier of
the Exercise Date and the date the Participant totally discontinues payroll
deductions and requests a distribution of the Account. A Participant who
B-10
<PAGE>
has suspended contributions may recommence payroll deductions at such time, if
at all, as determined by the Committee. If a Participant requests to totally
discontinue payroll deductions, the Participant may do so by providing written
notice to the Committee. There shall be paid to the Participant the value of
the Participant's Account as soon as administratively possible and the
Participant shall not receive any shares as of the Exercise Date.
5.6 Purchase of Shares. Subject to Sections 5.7, 5.8, 5.9, 5.10 and 5.11 on
each Exercise Date, a Participant who has previously executed an Agreement with
respect to a specific Grant Date and made one or more payments described in
Section 5.5 shall be deemed to have exercised the Option to the extent of the
value of the Account, subject to the limit set forth in Section 5.5 with
respect to the Option being exercised, and shall be deemed to have purchased
such number of full shares of Common Stock as set forth below, subject to the
limits of Sections 423(b)(3) and 423(b)(8) of the Code. The number of shares of
Common Stock to be purchased as of any Exercise Date shall be determined by
dividing the Account value by the Option Price per share of the Common Stock
and the value of the shares so purchased shall be charged to the Account. If
the total number of shares to be purchased as of any Exercise Date by all
Participants exceeds the number of shares authorized under this Plan or made
available by the Committee as to any Exercise Date, a pro rata allocation of
the available shares will be made among all Participants authorizing such
payroll deductions based on their Account Value on the Exercise Date. The
Company shall not be required to issue any fractional share hereunder. Any
value remaining in an Account of the Participant shall be returned to the
Participant and not applied to purchase Common Stock. Certificates of Common
Stock purchased hereunder may be held by the custodian as provided in Section
4.6. Any Common Stock issued to the Participant who is subject to reporting
under Section 16 of the Exchange Act must be held for six (6) months to the
extent required by law to avoid liability under the Exchange Act. The Committee
may amend the Plan or any Agreement or provide in operation for Participants to
dispose of shares of Common Stock received upon the Exercise Date on or
immediately thereafter (which time may include any period during which the
Option is held) to the extent such change would not result in liability under
Section 16 of the Exchange Act.
5.7 Cancellation of Options. Except as otherwise provided in an Agreement,
an Option shall cease to be exercisable and shall be canceled on or after the
expiration of the Option Period.
5.8 Terminated Employees. Except as otherwise provided by the Committee or
in an Agreement, any Participant who incurs a Termination of Employment for any
reason, except death, Disability or Retirement, during the Option Period shall
cease to be a Participant, the Option shall be null and void on the date of the
Termination of Employment without notice to the Participant and the balance of
the Account of the Participant shall be distributed to him as soon as
administratively possible.
5.9 Deceased Employees. If a Participant shall die during an Option Period
while an Eligible Employee, no further contributions by deduction from
regularly scheduled payments on behalf of the deceased Participant shall be
made, except that the Representative may make a single sum payment with respect
to the Option at any time on or before the Exercise Date equal to the amount
the Participant would have contributed as determined by the Committee for the
payroll periods remaining to the Exercise Date. The Representative may at any
time prior to the Exercise Date request a distribution of the Account. If the
Representative does not request a distribution, the balance accumulated in the
deceased Participant's Account shall be used to purchase shares of the Common
Stock on the previously mentioned Exercise Date.
5.10 Disabled or Retired Employees. If a Participant incurs a Termination of
Employment due to Disability, or if a Participant incurs a Termination of
Employment due to Retirement, during an Option Period, no further contributions
by deduction from regularly scheduled payments on behalf of the disabled or
retired Participant shall be made, except that the Participant may make a
single sum payment with respect to the Option at any time on or before the
Exercise Date equal to the amount the Participant would have contributed as
determined by the Committee for the payroll periods remaining to the Exercise
Date. The Participant may at any time prior to the Exercise Date request a
distribution of the Account. If the Participant does not request a
B-11
<PAGE>
distribution of the Account, the balance accumulated in the disabled or retired
Participant's Account shall be used to purchase shares of the Common Stock on
the previously mentioned Exercise Date.
5.11 Limitations. Notwithstanding any other provision of this Plan, in no
event may a Participant (i) purchase under the Plan during a calendar year
Common Stock having a fair market value (determined at Grant Date) of more than
$25,000 or (ii) receive any rights to purchase stock hereunder if he or she
beneficially owns, immediately after such receipt, five percent (5%) or more of
the total voting power or value of all classes of stock of the Company.
5.12 Nonassignability. Neither the Option nor the Account shall be assigned,
transferred (except as herein provided), pledged, or hypothecated in any way
(whether by operation of law or otherwise), other than by will or the laws of
descent and distribution or pursuant to a domestic relations order which would
be a qualified domestic relations order as defined in the Code or ERISA (if the
Plan were described in the relevant Sections) but only to the extent consistent
with Section 423 of the Code. Except as provided herein, the Option is
exercisable during a Participant's lifetime only by the Participant or the
appointed guardian or legal representative of the Participant, and neither the
Option nor the Account shall be subject to execution, attachment, or similar
process. Any attempted assignment, transfer, pledge, hypothecation, or other
disposition contrary to the provisions hereof, and the levy of any attachment
or similar process upon the Option or the Account shall be null and void and
without effect. The Company shall have the right to terminate the Option or the
Account in the event of any such assignment, transfer, pledge, hypothecation,
other disposition of the Option or the Account, or levy of attachment or
similar process, by notice to that effect to the person then entitled to
exercise the Option; provided, however, that termination of the Option
hereunder shall not prejudice any rights or remedies which the Company may have
under an Agreement or otherwise.
ARTICLE VI
GENERAL PROVISIONS APPLICABLE TO THE PLAN
6.1 Termination of Plan. To the extent required by law, this Plan shall
terminate on the last day of the ten (10) year period commencing with the
effective date or at such earlier time as the Board may determine, and no
Options shall be granted under the Plan after that date. Any Options
outstanding under the Plan at the time of its termination shall remain in
effect until they shall have been exercised, expired or otherwise canceled,
settled or terminated as provided herein or in an Agreement, and such
outstanding Options shall not be affected by such termination of the Plan. The
provisions of the Plan in respect to the full and final authority of the
Committee under the Plan, other than the authority to grant Options, and in
respect of a Participant's obligations respecting shares of Common Stock
received pursuant to the exercise of an Option shall continue notwithstanding
the termination of the Plan.
6.2 Investment Representation. In the event the disposition of Common Stock
acquired upon the exercise of any Option is not covered by a then current
registration statement under the Securities Act and is not otherwise exempt
from such registration, the Common Stock so acquired shall be restricted
against transfer to the extent required by the Securities Act or regulations
thereunder, and each Agreement shall contain a requirement that, upon demand by
the Company for such representation, the individual exercising an Option shall
state in writing, as a condition precedent to each exercise of the Option, in
whole or in part, that the Common Stock acquired by such exercise is acquired
for investment purposes only and not for resale or with a view to distribution.
The Committee may set forth in an Agreement such other terms and conditions
relating to the registration or qualification of the Common Stock under federal
or state securities laws as it desires, including, in its discretion, the
imposition of an obligation on the Company to cause the Common Stock issued to
a Participant to be registered under the Securities Act.
B-12
<PAGE>
6.3 Effect of Certain Changes.
(a) Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, recapitalization or other change
in the capital structure of the Company, corporate separation or division
of the Company (including, but not limited to, a split-up, spin-off, split-
off or distribution to Company stockholders other than a normal cash
dividend), sale by the Company of all or a substantial portion of its
assets (as measured on either a stand-alone or consolidated basis),
reorganization, rights offering, partial or complete liquidation, or any
other corporate transaction or event involving the Company and having an
effect similar to any of the foregoing, then the Committee may adjust or
substitute, as the case may be, the number of shares of Common Stock
available for Options under the Plan, the number of shares of Common Stock
covered by outstanding Options, the exercise price per share of outstanding
Options, and any other characteristics or terms of the Options as the
Committee shall deem necessary or appropriate to reflect equitably the
effects of such changes to the Participants; provided, however, that any
fractional shares resulting from such adjustment shall be eliminated by
rounding to the next lower whole number of shares with appropriate payment
for such fractional share as shall reasonably be determined by the
Committee.
(b) Change in Control. If there is a Change in Control of the Company
(as defined herein) or the Committee reasonably anticipates that a Change
in Control is likely to occur, then (1) the Committee may cause each Option
to be immediately exercised; (2) the Committee may provide that any Option
exercisable on the date of any such Change in Control may be purchased by
the Company in an amount equal to the excess, if any, of the aggregate fair
market value per share of Common Stock subject to the Option (or portion
thereof) over the aggregate Option Price of the shares subject to the
Option (or portion thereof) which the Committee determines to purchase; or
(3) the Company may provide for any combination of (1) and (2) above. For
purposes of this Section 6.3(b), the aggregate fair market value per share
of Common Stock subject to the Option that the Committee determines to
purchase shall be determined by the Committee by reference to the cash or
fair market value, determined by the Committee, of the securities, property
or other consideration receivable pursuant to the Change in Control
described in this Section 6.3(b). The aggregate Option Price of the Common
Stock shall be determined by multiplying the number of such shares by the
Option Price. If the event of a Change in Control described in Section
6(c)(iii), and if the Option is unexercised and the Committee does not
exercise its discretion hereunder to purchase the Option, then the Option
shall be regarded as the right to receive the securities, property, cash or
other consideration receivable by stockholders of the Company immediately
prior to the Change in Control described in Section 6(c)(iii). The
provisions of this Section 6.3(b) shall be construed consistently with the
terms or conditions of any regulation or ruling respecting the status of
Options under Section 423 of the Code and the receipt of cash or other
consideration coincident with the cancellation of such Options, and in
order to provide the Participant the economic benefit of the Option without
incurring liability under Section 16(b) of the Exchange Act.
(c) "Change in Control" shall be deemed to have occurred on the first to
occur of any of the following events:
(i) 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 13d-3
promulgated under the Exchange Act) of fifty percent (50%) or more of
either (A) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) the combined voting
power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change in Control of the Company:
(1) any acquisition directly from the Company (excluding an acquisition
by virtue of the exercise of a conversion privilege unless such
convertible securities were acquired directly from the Company), (2)
any acquisition by the Company, (3) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (4) any acquisition by
any corporation pursuant to a reorganization, merger or
B-13
<PAGE>
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (A) and (B) of
subsection (iii) of this Section are satisfied; or
(ii) Individuals who, as of the effective date of this Plan,
constitute the Board of Directors of the Company (the "Incumbent Board
of the Company") cease for any reason to constitute at least a majority
of the Board of Directors of the Company; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders, was
recommended or approved by a vote of at least a majority of the
directors then comprising the Incumbent Board of the Company shall be
considered as though such individual were a member of the Incumbent
Board of the Company, 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 contemplated by
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors of the Company; or
(iii) The consummation by the Company of a reorganization, merger or
consolidation, in each case, unless, following such reorganization,
merger or consolidation, (A) more than fifty percent (50%) of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or 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 Company Common
Stock and Outstanding Company 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 Company
Common Stock and Outstanding Company Voting Securities, as the case may
be, and (B) at least a majority of the members of the board of
directors of the corporation resulting from such reorganization, merger
or consolidation were members of the Board of Directors of the Company
at the time of the execution of the initial agreement providing for
such reorganization, merger or consolidation; or
(iv) The consummation by the Company of the sale or other
disposition of all or substantially all of the assets of the Company,
other than to a corporation with respect to which, following such sale
or other disposition, (A) more than fifty percent (50%) 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
Company Common Stock and Outstanding Company 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 Company Common Stock and
Outstanding Company Voting Securities, as the case may be, and (B) at
least a majority of the members of the board of directors of such
corporation were members of the Board of Directors of the Company 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
Company.
(d) The Committee may, in its discretion, grant to the Participant, in
exchange for the surrender and cancellation of the Option, a new Option on
such terms and conditions as may be determined by the Committee in
accordance with the Plan.
6.4 Withholding. Notwithstanding any other provision hereof, as a condition
of delivery or transfer of shares of Common Stock, the Committee in its sole
discretion may require the Participant to pay to the Company, or the Committee
may at its election withhold from any wages, salary, or stock to be issued to a
Participant pursuant to the exercise of an Option, or other payment due to the
Participant, an amount sufficient to satisfy all present or estimated future
federal, state and local withholding tax requirements related thereto.
B-14
<PAGE>
The Participant may satisfy any requirement under the Plan or an Agreement with
respect to the Company's federal, state or local tax withholding obligation by
requesting that the Committee withhold and not transfer or issue shares of
Common Stock with a Fair Market Value equal to such withholding obligation,
otherwise issuable or transferable to him pursuant to the exercise of that
portion of the Option. An Agreement may provide for shares of Common Stock to
be delivered or withheld having a Fair Market Value in excess of the minimum
amount required to be withheld, but not in excess of the amount determined by
applying the Participant's maximum marginal tax rate. Any right or election of
the Participant under this Section 6.4 shall be subject to the approval of the
Committee and shall be in compliance with Section 16 of the Exchange Act. The
amount of required withholding shall, at the election of the Participant, be at
a specified rate not less than the statutory minimum federal and state
withholding rate and not greater than the maximum federal, state and local
marginal tax rate applicable to the Participant and to the particular option
exercise transaction.
6.5 No Company Obligation. The Company shall have no duty or obligation to
affirmatively disclose to a record or beneficial holder of an Option, and such
holder shall have no right to be advised of, any material information regarding
the Company at any time prior to, upon or in connection with the exercise of an
Option.
6.6 Committee Discretion. The Committee may in its sole discretion include
in any Agreement an obligation that the Company purchase a Participant's shares
of Common Stock received upon the exercise of an Option (including the
repurchase of any unexercised Options which have not expired), or may obligate
a Participant to sell shares of Common Stock to the Company upon such terms and
conditions as the Committee may determine and set forth in an Agreement. The
provisions of this Article VI shall be construed by the Committee in its sole
discretion, and shall be subject to such other terms and conditions as the
Committee may from time to time determine.
ARTICLE VII
MISCELLANEOUS
7.1 Indemnification of the Board and Committee. In addition to such other
rights of indemnification as they may have and to the extent permitted by law,
the Company shall indemnify, defend and hold harmless the Board, the Committee,
the members of the Committee, the officers of the Company, and any agent or
representative selected by the Board or Committee (collectively "indemnified
party") against the reasonable expenses, including, without limitation,
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or any threat thereof, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any act or omission in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by legal counsel selected by the Company)
or paid by them in satisfaction of a judgment in any action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such indemnified party is liable for gross
negligence or gross misconduct in the performance of his duties; provided that
within sixty (60) days after institution of any such action, suit or proceeding
the indemnified party may in writing elect to defend the same at its sole
expense, and if such election is made, the Company shall have no further
liability or obligations to the indemnified party under this Section. The
provisions of this Section 7.1 shall in no way limit any other obligation or
arrangements the Company may have with regard to indemnifying an indemnified
party.
7.2 Mitigation of Excise Tax. Subject to any agreement with a Participant,
if any payment or right accruing to a Participant under this Plan (without the
application of this Section 7.2), either alone or together with other payments
or rights accruing to the Participant from the Company or an Affiliate ("Total
Payments") would constitute a "parachute payment" (as defined in Section 280G
of the Code and regulations thereunder), such payment or right shall be reduced
to the largest amount or greatest right that will result in no portion of the
amount payable or right accruing under the Plan being subject to an excise tax
under Section 4999 of the Code or being disallowed as a deduction under Section
280G of the Code. The
B-15
<PAGE>
determination of whether any reduction in the rights or payments under this
Plan is to apply shall be made by the Committee in good faith after
consultation with the Participant, and such determination will be conclusive
and binding on the Participant. The Participant shall cooperate in good faith
with the Committee in making such determination and providing the necessary
information for this purpose. The provisions of this Section 7.2 shall apply
with respect to any Participant only if, after reduction for any applicable
federal excise tax imposed by Section 4999 of the Code and other federal income
tax imposed by the Code, the Total Payments accruing to such Participant would
be less than the amount of the Total Payments as reduced (i) if applicable,
pursuant to the provisions of this Section 7.2 and any similar provisions under
any other plans of the Company or any Affiliate to mitigate the applicable
federal excise tax, and (ii) by federal income taxes (other than such excise
tax).
7.3 Interpretation. Whenever necessary or appropriate in this Plan and where
the context so requires, the singular term and the related pronouns shall
include the plural and the masculine and feminine gender.
7.4 Governing Law. The Plan and any Agreement shall be governed by the laws
of the State of Delaware (other than its laws respecting choice of law).
7.5 Limitations on Liability. No liability whatever shall attach to or be
incurred by any past, present or future stockholders, officers or directors,
merely as such, of the Company under or by reason of any of the terms,
conditions or agreements contained in this Plan, in an Agreement or implied
from either thereof, and any and all liabilities of, and any and all rights and
claims against the Company, or any shareholder, officer or director, merely as
such, whether arising at common law or in equity or created by statute or
constitution or otherwise, pertaining to this Plan or to an Agreement, are
hereby expressly waived and released by every Participant as a part of the
consideration for any benefits provided by the Company under this Plan. A
person who shall claim a right or benefit under this Plan shall be entitled
only to claim against the Company for such benefit.
7.6 Validity. If any provision of this Plan shall for any reason be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, and this Plan shall be construed as if such
invalid or unenforceable provision were omitted.
7.7 Assignment. This Plan shall inure to the benefit of and be binding upon
the parties hereof and their respective successors and permitted assigns.
7.8 Captions. The captions and headings to this Plan are for convenience of
reference only and in no way define, limit or describe the scope or the intent
of this Plan or any part hereof, nor in any way affect this Plan or any part
hereof.
7.9 Amendments. The Board of Directors may at any time amend, waive,
discharge or terminate the Plan even with prejudice to a Participant. The Board
or the Committee may amend, waive, discharge, terminate, modify, extend,
replace or renew an outstanding Option Agreement even with prejudice to a
Participant; provided such a change does not cause the Plan to fail to be a
plan as described in Section 423 of the Code.
7.10 Entire Agreement. This Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan shall control.
7.11 Rights with Respect to Continuance of Employment. Nothing contained
herein or in an Agreement shall be deemed to alter the at-will employment
relationship between the Company or a Subsidiary and a Participant. Nothing
contained herein or in an Agreement shall be construed to constitute a contract
of employment between the Company or a Subsidiary and a Participant. The
Company or, as applicable, the Subsidiary and the Participant each continue to
have the right to terminate the employment relationship at any time for any
reason. The company or Subsidiary shall have no obligation to retain the
Participant in its employ
B-16
<PAGE>
as a result of this Plan. There shall be no inference as to the length of
employment hereby, and the Company or Subsidiary reserves the same rights to
terminate the Participant's employment as existed prior to the individual
becoming a Participant in this Plan.
7.12 Options for Shares in Substitution for Stock Options Granted by Other
Corporations. Options may be granted under the Plan from time to time in
substitution for stock options or stock appreciation rights held by employees,
directors or service providers of other corporations who are about to become
employees of the Company or a Subsidiary as the result of a merger or
consolidation of the employing corporation with the Company or a Subsidiary, or
the acquisition by the Company or a Subsidiary of the assets of the employing
corporation, or the acquisition by the Company or a Subsidiary of the stock of
the employing corporation, as the result of which it becomes a designated
employer under the Plan. The terms and conditions of the Options so granted may
vary from the terms and conditions set forth in this Plan at the time of such
grant as the majority of the members of the Committee may deem appropriate to
conform, in whole or in part, to the provisions of the Options in substitution
for which they are granted.
7.13 Procedure for Adoption. Any Subsidiary of the Company may by resolution
of such Subsidiary's board of directors, with the consent of the Board of
Directors and subject to such conditions as may be imposed by the Board of
Directors, adopt the Plan for the benefit of its employees as of the date
specified in the board resolution. The Board shall have the power to make such
designation before or after the Plan is approved by stockholders.
7.14 Procedure for Withdrawal. Any Subsidiary which has adopted the Plan
may, by resolution of the board of directors of such Subsidiary, with the
consent of the Board of Directors and subject to such conditions as may be
imposed by the Board of Directors, terminate its adoption of the Plan; provided
such termination of adoption does not cause the Plan to fail to be a plan
described in Section 423 of the Code.
7.15 Expenses. Expenses of the Plan, including the fees or expenses incurred
by the transfer agent in connection with the transfer of Common Stock and
brokerage fees or expenses incurred in connection with the acquisition of
Common Stock in connection with the Plan or transfer to the Participant, shall
be paid by the Company. Any expense or fee associated with the Common Stock,
including, for example, fees or commissions in connection with the disposition
of shares or the withdrawal of such shares from the custodian, shall be borne
by the Participant.
Executed and effective as of the date first written above.
NOVAMED EYECARE, INC.
/s/ Stephen J. Winjum
By: _________________________________
President and Chief Executive
Officer
Title: ______________________________
B-17
<PAGE>
NOVAMED EYECARE, INC.
980 North Michigan Avenue
Suite 1620
Chicago, Illinois 60611
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) hereby appoints Stephen J. Winjum and Ronald
G. Eidell and each of them, with full power substitution, as attorneys and
proxies for, and in the name and place of, the undersigned, and hereby
authorizes each of them to represent and to vote all of the shares which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of NovaMed
Eyecare, Inc. to be held at the R.R. Donnelley & Sons Building, 77 West Wacker
Drive, 19th Floor, Chicago, Illinois 60601, on Wednesday, May 17, 2000, at 4:00
p.m., local time, and at any adjournments thereof, upon the matters as set forth
in the Notice of Annual Meeting of Stockholders and Proxy Statement, receipt of
which is hereby acknowledged.
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED IN A TIMELY MANNER, WILL BE
VOTED AT THE ANNUAL MEETING AND AT ANY ADJOURNMENTS THEREOF IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO SPECIFICATION IS MADE,
THE PROXY WILL BE VOTED FOR ELECTION OF ALL NOMINEES LISTED IN PROPOSAL 1, FOR
APPROVAL OF PROPOSALS 2 AND 3 AS DESCRIBED IN THE PROXY, AND IN ACCORDANCE WITH
THE JUDGMENT OF THE PERSONS NAMED AS PROXIES HEREIN ON ANY OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(continued, and to be signed and dated, on reverse side)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
NOVAMED EYECARE, INC.
May 17, 2000
---- Please Detach and Mail in the Envelope Provided ----
<TABLE>
<S> <C>
[X] Please mark your
votes as in this
example.
FOR all nominees WITHHELD The Board of Directors unanimously recommends that you vote FOR all
listed at right (except AUTHORITY nominees listed in Proposal 1 and FOR Proposals 2 and 3.
as marked to the to vote for
contrary below) all nominees Nominees: Stephen J. Winjum
1. Election of [_] [_] Peter C. Wendell
Class
Directors
FOR AGAINST ABSTAIN
(Instruction: to withhold authority to vote for any individual 2. Proposal to approve the Amended [_] [_] [_]
nominee, write that nominee's name on the line below) and Restated Stock Incentive
Plan.
- -------------------------------------------------------------- 3. Proposal to approve the Amended [_] [_] [_]
and Restated 1999 Stock
Purchase Plan.
4. Each of the persons named as proxies herein are authorized,
in such person's discretion, to vote upon such other
matters as may properly come before the Annual Meeting,
or any adjournments thereof.
PLEASE VOTE, SIGN EXACTLY AS NAME APPEARS HEREON, DATE AND
RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Signature: _____________________________ Signature, if held jointly: _____________________________ Dated: ________________, 2000
NOTE: Please date this Proxy and sign it exactly as your name(s) appears hereon. When shares are held by joint tenants, both
should sign. When signing as an attorney, executor, administrator, trustee, guardian or other fiduciary, please indicate
your capacity. If you sign for a corporation, please print full corporate name and indicate capacity of duly authorized
officer executing on behalf of the corporation. If you sign for a partnership, please print full partnership name and
indicate capacity of duly authorized person executing on behalf of the partnership.
</TABLE>
