<PAGE>
As filed with the Securities and Exchange Commission
on April 11, 1997
Registration No. 333-_______
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------------------
LUTHER MEDICAL PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
California 33-0468235
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14332 Chambers Road, Tustin, California 92780
(Address of Principal Executive Offices) (zip code)
1997 Stock Plan
(Full Title of the Plan)
David Rollo
LUTHER MEDICAL PRODUCTS, INC.
14332 Chambers Road
Tustin, California 92780
(Name and address of agent for service)
(714) 544-3002
(Telephone number, including area code, of agent for service)
Copy to:
Randolf W. Katz
ARTER & HADDEN
5 Park Plaza, Suite 1000
Irvine, California 92614
(714) 252-7500
----------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
Title of maximum maximum
securities Amount offering aggregate Amount of
to be to be price per offering registration
registered registered unit(1) price(1) fee
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 850,000 $3.750 $3,187,500 $965.91
================================================================================
</TABLE>
(1) Estimated solely for purposes of computing registration fee, based upon the
average of the closing bid and ask prices on April 7, 1997, pursuant to
Rule 457(c).
-1-
<PAGE>
LUTHER MEDICAL PRODUCTS, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-8
<TABLE>
<CAPTION>
FORM S-8 ITEM PROSPECTUS CAPTIONS
- ------------------------------ --------------------------------------------
<S> <C>
1. Plan Information 1997 Stock Plan; Administration of the Plan;
Federal Income Tax Consequences under the
Plan; Use of Proceeds; Restrictions on
Resale of Common Stock; and Annual Report
to Shareholders
2. Registrant Information Outside Front Cover Page of Prospectus
and 1997 Stock Plan
Annual Information
</TABLE>
-2-
<PAGE>
PROSPECTUS
LUTHER MEDICAL PRODUCTS, INC.
COMMON STOCK
850,000 Shares
No Par Value Per Share
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
1997 STOCK PLAN
--------------
Luther Medical Products, Inc., a California corporation (the "Company"), is
offering 850,000 shares (the "Shares") of its Common Stock, no par value per
share, (the "Common Stock") to employees, non-employee advisors, consultants,
and directors of the Company and its subsidiaries who have been or may be
granted options pursuant to the Company's 1997 Stock Plan (the "Plan"). The
offer is made at the prices and on the terms and conditions contained in the
stock options granted or to be granted pursuant to the Plan.
The Shares covered by this Prospectus are traded on the Nasdaq SmallCap
Market under the NASDAQ symbol "LUTH." Participants, defined hereinafter, (who
are not "affiliates" of the Company) who exercise options to purchase Shares
under the Plan may sell such Shares from time to time in such market.
The Company will provide without charge to each person to whom a Prospectus
is delivered, upon written or oral request, a copy of any and all of the
documents that have been incorporated by reference into the Prospectus from Item
3 of Part II of the registration statement. Such requests should be directed to
Luther Medical Products, Inc., 14332 Chambers Road, Tustin, California 92780,
Attention: Secretary; (714) 544-3002.
-------------
The date of this Prospectus is April 11, 1997.
-3-
<PAGE>
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offer contained herein and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any sale hereunder shall
under any circumstances create any implication that there has been no change in
the affairs of the Company since the date hereof.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1997 Stock Plan
General 3
Certain Provisions of the 1997 Stock Plan 4
Administration of the Plan 11
Federal Income Tax Consequences under the Plan 12
Use of Proceeds 16
Restrictions on Resale of Common Stock 16
Annual Report to Shareholders 16
</TABLE>
This Prospectus relates to shares of Common Stock issued or issuable
pursuant to the Plan of Luther Medical Products, Inc., a California corporation,
having its principal office at 14332 Chambers Road, Tustin, California 92780;
telephone (714) 544-3002.
This Prospectus is not available for resale of the securities described
herein by persons who are "affiliates" of the Company, as that term is defined
in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act").
Such resales may be made pursuant to Rule 144 under the Securities Act. In
addition, the provisions of Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), may be a consideration in resale
decisions by persons who are subject to such Section in respect of the
securities described herein.
-4-
<PAGE>
1997 STOCK PLAN
General
- -------
In October of 1996, the Board of Directors (the "Board") of the Company
adopted the 1997 Stock Plan which was approved by the shareholders in January of
1997. Awards under the Plan may be granted for an aggregate of 850,000 shares
of Common Stock to the employees, non-employee advisors, consultants, and
directors of the Company and its subsidiaries in the best interests of the
Company (individually, an "Award"; collectively, the "Awards").
Awards may be granted in the form of (a) incentive stock options to acquire
Common Stock, as provided in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), (b) non qualified stock options to acquire Common
Stock, and (c) Common Stock that is restricted and must be purchased by the
employee or director (the "Restricted Common Stock"). Incentive and non-
qualified stock options shall hereinafter be referred to individually as an
"Option" and collectively as "Options" in the Plan. Where the context requires,
nonqualified stock options may hereinafter be referred to as "Warrants."
Incentive stock options granted under the Plan must be exercised at a price
per share not less than "fair market value," as that term is defined in the
Plan. Non-qualified stock options granted under the Plan must be exercised at a
price per share not less than eighty-five percent (85%) nor more than one
hundred percent (100%) of the fair market value. Restricted Common Stock
purchased by a Participant, defined hereinafter, under the Plan shall be
purchased for not less than one cent ($.01) per share.
The Plan limits grants of Options so that no Participant shall be granted a
single Option to purchase more than 100,000 Shares. Moreover, the Plan limits
the exercise by a Participant of incentive stock options in any calendar year to
$100,000 market value. The Plan shall expire in January of 2007 and the term of
any Option shall not exceed ten years.
At March 15, 1997, no Options had been granted and no Shares had been
purchased under the Plan.
The Plan is designed to advance the interests of the Company and its
shareholders by offering to those employees, non-employee advisors, consultants,
and directors of the Company and its subsidiaries who will be responsible for
the long-term growth of the Company's earnings the opportunity to acquire or
increase their equity interests in the Company, thereby achieving a greater
commonality of interest between shareholders, employees and directors, enhancing
the Company's ability to retain and attract both highly qualified employees and
directors and providing an additional incentive to such employees to achieve the
Company's long-term business plans and objectives.
-5-
<PAGE>
In the opinion of the Company, the Plan is not subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
is not qualified under Section 401(a) of the Code.
Certain Provisions of the 1997 Stock Plan
- -----------------------------------------
The following statements include summaries of certain provisions of the
Plan. These statements do not purport to be complete and are qualified in their
entirety by reference to the provisions of the Plan, copies of which are
available for examination at the principal office of the Company and at the
office of the Securities and Exchange Commission, 450 5th Street, Washington,
D.C. 20540.
Administration. The Plan shall be administered by the Board or by a
--------------
committee (the "Committee") of the Board authorized by the Board. The Committee
shall consist of no less than three directors of the Company who shall be
appointed, from time to time, by the Board. Subject to the provisions of the
Plan, the Board, or the Committee, to the extent the Board has delegated such
authority to the Committee, shall have full and final authority to (i) interpret
the Plan; (ii) determine who will receive Awards, as well as all aspects of an
Award, including its form; (iii) adopt, amend, and rescind general and special
rules and regulations for the Plan's administration; and (iv) make all other
determinations necessary or advisable for the administration of the Plan.
No member of the Board or the Committee shall be liable for any action
taken or determination made in good faith. The members of the Board and the
Committee shall be indemnified by the Company for any acts or omissions in
connection with the Plan to the full extent permitted by California and Federal
laws.
Participation. Participation in the Plan shall be determined by the Board
-------------
and shall be limited to employees, non-employee advisors, consultants, and
directors of the Company and its subsidiaries ("Participants").
Terms and Conditions. All Awards granted under the Plan will be evidenced
--------------------
by a stock option agreement or restricted stock purchase agreement between the
Company and the Participant. Provisions under such agreements need not be
identical and may include any term or condition not inconsistent with the Plan.
All such agreements will, however, be subject to the following terms and
conditions:
(a) Exercise Price.
--------------
(1) Non-Qualified Stock Options. The price per share at which each
---------------------------
non-qualified stock option granted under the
-6-
<PAGE>
Plan may be exercised shall not, as to any particular Warrant, be less than
eighty-five percent (85%) nor more than one hundred percent (100%) of the
"fair market value," as that term is defined in the Plan, of one share of
Common Stock at the time such non-qualified stock option is granted.
(2) Incentive Stock Options. The exercise price for any share of
-----------------------
Common Stock underlying any Option that is intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code shall
be not less than one hundred percent (100%) of the fair market value of one
share of Common Stock at the time such Option is granted. In the case of a
Participant who owns shares representing more than ten percent (10%) of the
total combined voting power of all classes of capital stock of the Company
or of its parent or its subsidiaries (as determined under Section 424(d) of
the Code) at the time the incentive stock option is granted, such exercise
price shall not be less than one hundred ten percent (110%) of the fair
market value of one share of Common Stock at the time such Option is
granted.
(3) Restricted Common Stock. The price at which Restricted Common
-----------------------
Stock may be purchased by a Participant under the Plan shall be determined
by the Board and shall not be less than one cent ($.01) per share ("Initial
Price Per Share").
(b) Term.
----
(1) Options. An Option granted under the Plan shall terminate, and
-------
the right of the Participant (or the Participant's estate, personal
representative, or beneficiary) to exercise the Option shall expire, on the
date determined by the Board at the time the Option is granted (the
"Termination Date"). No incentive stock option shall be exercisable more
than ten (10) years after the date on which it was granted, and no Warrant
shall be exercisable more than ten (10) years and one (1) day after the
date on which it was granted. In the case of a Participant who owns shares
representing more than ten percent (10%) of the total combined voting power
of all classes of the Company's capital stock, no incentive stock option
shall be exercisable more than five (5) years after the date on which it is
granted.
(2) Restricted Common Stock. At the time Restricted Common Stock is
-----------------------
first made available to the Participant for purchase (the "Restricted
Common Stock Grant"), the Board shall establish a period of time (the
"Restricted Period") applicable to the Restricted Common Stock, which shall
not be more than ten (10) years from the date of such grant. The Board may
in its sole discretion, at the time the Restricted Common Stock Grant is
made, prescribe conditions for the incremental lapse of restrictions during
the Restricted Period and for the lapse or termination of restrictions upon
the satisfaction of other conditions with respect to all or
-7-
<PAGE>
any portion of the Restricted Common Stock. The Board may also, in its
sole discretion, at any time shorten or terminate the Restricted Period or
waive any conditions for the lapse or termination of restrictions with
respect to all or any portion of the shares of Restricted Common Stock.
(c) Exercise of Options; Purchase of Restricted Common Stock.
--------------------------------------------------------
(1) Options. Each Option granted under the Plan shall be deemed
-------
exercised to the extent that the Participant shall deliver to the Company
written notice of the number of full shares of Common Stock underlying the
whole or that portion of the Option then being exercised. The Participant
shall at the same time tender to the Company payment in full for such
shares.
Subject to California law, no person, estate, or other entity shall
have any of the rights of a shareholder with reference to Shares subject to
an Option until a certificate representing the shares of Common Stock has
been delivered.
An Option granted under the Plan may be exercised for any lesser
number of whole Shares than the full amount for which it could then be
exercised; provided, however, that the Board may require, in the agreement
evidencing an Option, any partial exercise to be with respect to a
specified minimum number of shares of Common Stock. Such a partial
exercise of an Option shall not affect the right to exercise the Option
from time to time in accordance with the Plan for the remaining shares of
Common Stock underlying the Option.
(2) Restricted Common Stock. At the time the Participant purchases
-----------------------
Restricted Common Stock, the Participant must tender the purchase price for
such Restricted Common Stock and must also execute, retroactive to the date
of the Restricted Common Stock Grant, an agreement reflecting the number of
shares the Participant is purchasing and the conditions imposed upon the
purchase of such shares as determined by the Board. Such agreement must be
executed within thirty (30) days of the Restricted Common Stock Grant,
unless further extended by the Board.
(d) Payment. The Board, in its sole discretion, may accept cash,
-------
previously issued shares of Common Stock, or a combination thereof as payment
for an Option's exercise price or the purchase price of Restricted Common Stock.
The value of shares of Common Stock delivered for payment of the exercise or
purchase price shall be the fair market value of the Common Stock, as provided
for in the Plan.
The Company may make loans to any Participant or its respective lawful
successor as the Board, in its discretion, may determine in connection with the
exercise of Options granted under the Plan. The Board shall not authorize the
making of any loan where the possession of such discretion or the making of such
loan
-8-
<PAGE>
would result in a "modification" (as defined in Section 424(h)(3) of the Code)
of any incentive stock option. Such loans shall be subject to the following
terms and conditions and such other terms and conditions as the Board shall
determine at the time the loan is made as are not inconsistent with the Plan.
Such loans shall bear interest at such rates as the Board shall determine from
time to time, which rates may be below then current market rates (except in the
case of incentive stock options). In no event may any such loan exceed the fair
market value, at the date of exercise, of the shares of Common Stock underlying
the Option, or portion thereof, exercised by the Participant. No loan shall
have an initial term exceeding one (1) year, but any such loan may be renewable
at the discretion of the Board. At the time a loan is made, Common Stock having
a fair market value at least equal to the principal amount of the loan shall be
pledged by the Holder to the Company as security for payment of the unpaid
balance of the loan.
The Board may elect, in lieu of accepting payment of the exercise price of
an Option and delivering any or all shares of Common Stock as to which an Option
has been exercised, to pay the Participant an amount in cash or shares of Common
Stock, or a combination of cash and shares of Common Stock, equal to the amount
by which the fair market value on the date of exercise of the Option exceeds the
exercise price that would otherwise be payable by the Participant for such
shares of Common Stock. Subject to any then-current agreements with any third
parties, the Board may also permit a Participant simultaneously to exercise an
Option and sell the shares of Common Stock acquired upon exercise, pursuant to a
brokerage arrangement, approved in advance by the Board, and use the proceeds
from such a sale as payment of the exercise price of such Option.
(e) Vesting; Termination; and Rights.
--------------------------------
(1) Options. An Option granted under the Plan shall be considered
-------
terminated in whole or in part, to the extent that, in accordance with the
provisions of the Plan, it can no longer be exercised for the Common Stock
originally subject to the Option.
All Options granted hereunder shall be subject to a three-year vesting
schedule: on the first anniversary date of the grant, 30% of the Options
shall vest and, unless otherwise provided herein, be then exercisable; on
the second anniversary date of the grant, an additional 30% of the Options
shall vest and, unless otherwise provided herein, be then exercisable; and
on the third anniversary date of the grant, an additional 40% of the
Options shall vest and, unless otherwise provided herein, be then
exercisable. In the event of changes in the outstanding Common Stock by
reason of mergers, consolidations, combinations, exchanges of shares,
separations, reorganizations, liquidations, issuance, or exercise of
warrants or rights and the like in which the Company is not the sole
surviving successor to the assets or
-9-
<PAGE>
business of the Company immediately prior thereto, all unvested Options
shall become immediately vested and then exercisable. In the event of any
offer to shareholders of the Company generally relating to the acquisition
of their shares of Common Stock, all unvested Options shall be deemed to
have accelerated and become immediately vested and then exercisable;
provided, however, that upon the conclusion of such offer, if any such
changes in the outstanding Common Stock referenced in the immediately
preceding sentence shall not have occurred, the deemed vesting of all such
accelerated Options shall revert to the vesting schedule set forth in the
first sentence of this section. Notwithstanding the above, the Board or
the Committee, as relevant, may modify or waive any such vesting schedule.
If the Participant's employment with the Company or a subsidiary is
terminated for any reason, except cause, death, or disability, the Option
may be exercised no later than ninety (90) days after the date of such
termination. If the Participant's employment with the Company or a
subsidiary is terminated for cause, the Option may be exercised no later
than fifteen (15) days after the date of such termination, and if because
of death or disability, the Option may be exercised no later than twelve
(12) months after the date of such termination. In no event will the
Option be exercisable later than the expiration date, and in every case the
Option will only be exercisable to the extent that it would have been
exercisable on the date of such termination by the Participant or, in the
case of death or disability, the Participant's legal representative.
Nothing in the Plan shall confer on the Participant any right to
continue in the employ of, or other relationship with, the Company or any
parent, subsidiary, or affiliate of the Company, or limit in any way the
right of the Company or any parent, subsidiary or affiliate of the Company
to terminate the Participant's employment or other relationship at any
time, with cause.
(2) Restricted Common Stock. The Participant shall have the rights
-----------------------
and privileges of a shareholder as to such shares of Restricted Common
Stock, including the right to vote such shares, except that (i) the
Participant shall not be entitled to delivery of a certificate representing
such shares until the expiration or termination of the Restricted Period
and the satisfaction of any other conditions pre scribed by the Board; (ii)
none of the shares may be sold, transferred, assigned, pledged, or
otherwise encumbered or disposed of during the Restricted Period and until
the satisfaction of any other conditions prescribed by the Board; and (iii)
all of the Restricted Common Stock shall be forfeited and all rights of the
Participant to such Restricted Common Stock shall terminate without further
obligation on the part of the Company (except for the obligation of the
Company to purchase the Restricted Common
-10-
<PAGE>
Stock from the Participant at the Initial Price Per Share) in the event the
Participant has not remained in the continuous employment of the Company or
a subsidiary or in continuous service as a non-employee advisor,
consultant, or a director of the Company or a subsidiary until the
expiration or termination of the Restricted Period and the satisfaction of
any other conditions prescribed by the Board applicable to such Restricted
Common Stock. Upon the expiration or termination of the Restricted Period
and the satisfaction of any other conditions prescribed by the Board or at
such earlier time as provided for in Section 9(D) of the Plan, the
restrictions applicable to the shares of Restricted Common Stock shall
lapse and a certificate for the number of shares of Restricted Common Stock
with respect to which the restrictions have lapsed shall be delivered, free
of all such restrictions, except any that may be imposed by law, to the
Participant or the Participant's beneficiary or estate, as the case may be.
At the discretion of the Board, cash and stock dividends may be either
currently paid or withheld by the Company for the Participant's account,
and interest may be paid on the amount of cash dividends withheld at a rate
and subject to such terms as determined by the Board. All rights to the
shares of Restricted Common Stock shall be forfeited if the Participant
terminates employment with the Company and its subsidiaries or ceases to
serve on the Board for any reason except for death, permanent and total
disability, or retirement prior to the expiration of the restrictions on
such shares and such forfeited shares shall be purchased by the Company at
the Initial Price Per Share within a reasonable time period established by
the Board. If a Participant who has been in the continuous employ of the
Company or a subsidiary since the date on which the Restricted Common Stock
was granted dies, becomes permanently and totally disabled, or retires
while in such employment and prior to the lapse of the restrictions on the
Restricted Common Stock, all such restrictions shall lapse and cease to be
effective as of the end of the month in which the Participant's employment
terminates due to death, permanent and total disability, or retirement.
(f) Recapitalization. In the event that the outstanding shares are
----------------
changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend or
combination of shares, or issuance or exercise of warrants or rights, the Board
shall make an appropriate and equitable adjustment in the number and kind of
Common Stock subject to outstanding Awards, or portions thereof then
unexercised, and the number and kind of Common Stock subject to the Plan to the
end that after such event the Common Stock subject to the Plan and the
Participant's right to a proportionate interest in the Company shall be
maintained as before the occurrence of such event. Such adjustment in an
-11-
<PAGE>
outstanding Award shall be made without change in the total price applicable to
the Award or the unexercised portion of any Award (except for any change in the
total price resulting from rounding off quantities or prices of Common Stock)
and with any necessary corresponding adjustment in exercise price. Any such
adjustment made by the Board shall be final and binding upon all Participants,
the Company, and all other interested persons. Any adjustment of an incentive
stock option under this paragraph shall be made in such manner so as not to
constitute a "modification" within the meaning of Section 424(h)(3) of the Code.
The Board, in its sole discretion, may at any time make or provide for such
adjustments to the Plan or any Award granted thereunder as it shall deem
appropriate to prevent the reduction or enlargement of rights, including
adjustments in the event of changes in the outstanding Common Stock by reason of
mergers, consolidations, combinations, exchanges of shares, separations,
reorganizations, liquidations, issuance, or exercise of warrants or rights and
the like in which the Company is not the sole surviving successor to the assets
or business of the Company immediately prior thereto. In the event of any offer
to shareholders of the Company generally relating to the acquisition of their
shares of Common Stock, the Board may make such adjustments as it deems
equitable in respect of outstanding Awards. Any such determination of the Board
shall be conclusive.
(g) Transferability. No Award granted to a Participant under the Plan
---------------
shall be transferable other than by will or the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined in the Code;
provided that a transfer pursuant to a qualified domestic relations order shall
not be permitted with respect to incentive stock options or in circumstances
where such transfer would cause a lapse of restriction for purposes of Section
83 of the Code. Any attempt to transfer, assign, pledge, hypothecate, or
otherwise dispose of, or to subject to execution, attachment, or similar
process, any Award other than as permitted in the preceding sentence shall give
no right to the purported transferee.
(h) Unused Shares. If an Option granted hereunder shall expire or
-------------
terminate for any reason without having been fully exercised, if any shares of
Common Stock to be issued pursuant to an Award are not issued for any reason, of
if any shares of Restricted Common Stock granted under the Plan are forfeited to
the Company, then the shares of Common Stock underlying the unexercised portion
of such expired or terminated Option and by the unissued portion of such Award
and the shares of forfeited Restricted Common Stock shall again become available
for the purposes of the Plan. In addition, any shares of Common Stock that are
used as full or partial payment by a Participant of the exercise price of an
Option shall be available for Awards under the Plan as shall any shares of
Common Stock that are withheld in payment of tax withholding obligations of a
Participant (as provided in Section 9(E)).
-12-
<PAGE>
(i) Amendment and Termination. The Board may at any time suspend,
-------------------------
amend, or terminate the Plan, and, without limiting the foregoing, the Board
shall have the express authority to amend the Plan from time to time, with or
without approval by the shareholders, in the manner and to the extent that the
Board believes is necessary or appropriate in order to cause the Plan to conform
to provisions of Rule 16b-3 under the Exchange Act and any other rules under
Section 16 of the Exchange Act, as any of such rules may be amended,
supplemented, or superseded from time to time. Except for adjustments made in
accordance with Section 9(A) of the Plan, the Board may not, without the consent
of the grantee of the Award, alter or impair any Award previously granted under
the Plan. No Award may be granted during any suspension of the Plan or after
termination thereof.
In addition to Board approval of an amendment, if the amendment would: (i)
materially increase the benefits accruing to Participants; (ii) increase the
number of shares of Common Stock deliverable under the Plan (other than in
accordance with the provisions of Section 9(A) of the Plan); or (iii) materially
modify the requirements as to eligibility for participation in the Plan, then
such amendment shall be approved by the holders of a majority of the Company's
outstanding capital stock represented and entitled to vote at a meeting held for
the purpose of approving such amendment to the extent required by Rule 16b-3 of
the Exchange Act.
ADMINISTRATION OF THE PLAN
The following Directors presently administer the Plan.
<TABLE>
<CAPTION>
Name Address
-------- -----------
<S> <C>
David Rollo 14332 Chambers Road
Tustin, California 92780
Mark S. Isaacs 14332 Chambers Road
Tustin, California 92780
Jack W. Payne 4515 South Meadow Drive
Boulder, Colorado 80301
D. Ross Hamilton 9440 Gregory Road
Easton, Maryland 21601
William R. Dahlman 1150 S. Olive Street, Suite 2300
Los Angeles, California 90015
Barry W. Hall c/o EarthLink Network, Inc.
3100 New York Drive
Pasadena, California 91107
</TABLE>
Mr. Rollo is the Chairman of the Board, Chief Executive Officer, President,
and Chief Financial Officer and, as of March
-13-
<PAGE>
15, 1997, the beneficial owner of 153,175 shares of Common Stock representing
approximately 4.30% of the issued and outstanding capital stock of the Company.
Mr. Isaacs is a director of the Company and, as of March 15, 1997, the
beneficial owner of 100,211 shares of Common Stock representing approximately
2.81% of the issued and outstanding capital stock of the Company. Mr. Payne is
a director of the Company and, as of March 15, 1997, the beneficial owner of
61,500 shares of Common Stock representing approximately 1.72% of the issued and
outstanding capital stock of the Company. Mr. Hamilton is a director of the
Company and, as of March 15, 1997, is the beneficial owner of 99,856 shares of
Common Stock representing approximately 2.80% of the issued and outstanding
capital stock of the Company. Messrs. Dahlman and Hall are directors of the
Company and, as of March 15, 1997, each is the beneficial owner of 6,000 shares
of Common Stock representing less than 1.00% of the issued and outstanding
capital stock of the Company. By virtue of their respective positions with the
Company, Messrs. Rollo, Isaacs, Payne, Hamilton, Dahlman, and Hall may also be
deemed to be "parents" of the Company, as that term is defined under the
Securities Act. The immediately preceding statements assume the exercise of
warrants to purchase 368,000 shares of Common Stock by directors of the Company.
FEDERAL INCOME TAX CONSEQUENCES UNDER THE PLAN
Non-Qualified Stock Options
- ---------------------------
A Participant who receives a non-qualified stock option does not recognize
taxable income on the date of grant of the option, but generally recognizes
ordinary income upon the exercise of the option in an amount equal to the
difference between the exercise price and the fair market value of the Common
Stock on the date of exercise. However, if the Participant is subject to
restrictions on the resale of the Common Stock under Section 16 of the Exchange
Act, the Participant generally recognizes ordinary income on the date the six-
month restriction lapses in an amount equal to the difference between the
exercise price and the fair market value of the Common Stock on the date of
lapse. Within 30 days of the date of exercise of the option with respect to
which the recognition of ordinary income is delayed due to the foregoing
restrictions, a Participant may elect to recognize ordinary income as of the
date of exercise in an amount equal to the difference between the exercise price
and the fair market value of the Common Stock as of the date of exercise.
The Participant's basis in the shares of Common Stock received upon
exercise of the option depends on the method of payment of the exercise price.
If the Participant pays the exercise price solely in cash, the basis of such
underlying shares is equal to the fair market value of the Common Stock on the
date the Participant recognizes ordinary income. Upon a subsequent disposition
of those shares, the Participant will recognize capital gain or loss based on
the difference between the sales price and the Participant's basis in such
shares. Gain or loss
-14-
<PAGE>
will be short-term or long-term depending on how long such shares have been held
by the Participant. The holding period commences as of the date the Participant
recognizes ordinary income.
If the Participant pays the exercise price, in full or in part, with shares
of previously-acquired Common Stock, no gain or loss generally is recognized
with respect to the disposition of the previously-acquired shares. The shares
received upon exercise of the option are divided into two components for basis
and holding period purposes. First, shares of Common Stock received by the
Participant equal in number to the previously-acquired shares have the same
basis and holding period as such previously-acquired shares. Second, the
remaining shares have a basis equal to the fair market value of those shares as
of the date the Participant recognizes ordinary income. The holding period for
the second component of shares commences as of the date the Participant
recognizes ordinary income.
The Company or the subsidiary for whom the Participant performs services
generally is entitled to a deduction (for its taxable year that includes the
taxable year of the Participant in which he recognized ordinary income) in an
amount equal to the amount of ordinary income recognized by the Participant with
respect to the option.
Incentive Stock Options
- -----------------------
A Participant who receives an Incentive Stock Option ("ISO") does not
recognize taxable income either on the date of grant of the ISO or on the date
of exercise. However, the difference between the exercise price and the fair
market value of the shares on the date of exercise may adversely affect the
computation of the Participant's alternative minimum tax under the Code.
The basis and holding period of the Participant in the shares of Common
Stock received upon exercise of an ISO depend on the method of payment of the
exercise price. If the Participant pays the exercise price solely in cash, the
basis of such shares is equal to the exercise price. Upon a subsequent
disposition of those shares, long-term capital gain or loss is recognized in an
amount equal to the difference between the sales price and the Participant's
basis, provided the Participant has not disposed of the Common Stock within two
years from the date of grant of the ISO and within one year from the date of
exercise. If there is a disposition of those shares without satisfying these
holding-period requirements ("Disqualifying Disposition"), the Participant
recognizes ordinary income at the time of disposition in an amount equal to the
lesser of (i) the excess of the fair market value of the Common Stock on the
date of exercise over the Participant's basis, or (ii) the excess of the sales
price over the Participant's basis. Any remaining gain or loss is treated as
short-term or long-term capital gain or loss depending on how long the shares
have been held by the Participant. The holding period commences on the date the
ISO is exercised.
-15-
<PAGE>
If the Participant pays the exercise price of an ISO, in full or in part,
with shares of previously-acquired Common Stock, no gain or loss generally is
recognized upon the disposition of the previously-acquired shares. However, if
the previously-acquired shares were received upon the exercise of an ISO, the
exchange of those shares will be considered to be a disposition for purposes of
determining whether there has been a Disqualifying Disposition of those shares.
The shares received upon exercise of an ISO, in full or in part, with
previously-acquired shares (for which a Disqualifying Disposition does not
occur) are divided into two components for basis and holding period purposes.
First, shares of Common Stock received by the Participant equal in number to the
previously-acquired shares have the same basis and holding period as such
previously-acquired shares. Second, the remaining shares have a basis equal to
the cash, if any, paid as part of the exercise price. The holding period for
the second component of shares commences on the date the ISO is exercised.
An important restriction applicable to an ISO is that the Participant must
have been an employee for the entire period from and after the date of grant of
the ISO, and must exercise the ISO while he is an employee, within three months
of termination or retirement, or within 12 months after termination of
employment due to permanent and total disability. If the Participant exercises
an ISO after these time restrictions, the tax consequences to the Participant
generally will be the same as the tax consequences of a non-qualified option.
If the Participant dies within three months after termination of employment due
to permanent and total disability and without exercising the ISO, the
Participant's legal representative will be subject to the time restrictions
provide by the ISO within which to exercise the ISO and to obtain ISO tax
treatment.
Unlike the tax consequences with respect to a non-qualified option, neither
the Company nor any subsidiary is entitled to a deduction either upon the
exercise of an ISO or the disposition of Common Stock acquired pursuant to such
exercise, except to the extent that ordinary income is recognized by the
Participant upon a Disqualifying Disposition.
Restricted Common Stock
- -----------------------
A Participant who receives Restricted Common Stock generally recognizes
ordinary income on the date of purchase in an amount equal to the difference
between the purchase price and the fair market value of the Common Stock on the
date of purchase. Recognition of income generally is delayed under two
circumstances. First, if a Participant is subject to restrictions on the resale
of the Common Stock under Section 16 of the Exchange Act, the Participant
recognizes ordinary income on the date the six-month restriction lapses in an
amount equal to the difference between the purchase price and the fair market
value of the Common
-16-
<PAGE>
Stock on the date of lapse. Second, if restrictions imposed upon the issuance
of Restricted Common Stock cause it to be considered, for tax purposes, to be
non-transferable and to be subject to a substantial risk of forfeiture, the
Participant generally will recognize ordinary income on the date such shares
become transferable or are no longer subject to a substantial risk of
forfeiture. The amount of ordinary income will be equal to the difference
between the purchase price and the fair market value of the shares when the
restrictions lapse.
Within 30 days of the date of purchase of Restricted Common Stock with
respect to which the recognition of ordinary income is delayed under the
foregoing rules, a Participant may elect to recognize ordinary income as of the
date of purchase in an amount equal to the difference between the purchase price
and the fair market value of the Common Stock as of the date of purchase.
The Participant's basis in the shares of Restricted Common Stock received
upon purchase depends on the method of payment of the purchase price. If the
Participant pays the purchase price solely in cash, the basis of such shares
upon purchase is equal to the purchase price, and the basis is increased to an
amount equal to the fair market value of the Common Stock on the date the
Participant recognizes ordinary income. Upon a subsequent disposition of those
shares, the Participant will recognize capital gain or loss based on the
difference between the sales price and the Participant's basis. Gain or loss
will be short-term or long-term depending on how long such shares have been held
by the Participant. The holding period commences as of the date the Participant
recognizes ordinary income.
If the Participant pays the purchase price, in full or in part, with shares
of previously-acquired Common Stock, no gain or loss generally is recognized
with respect to the disposition of the previously-acquired shares. The shares
received are divided into two components for basis and holding period purposes.
First, shares of Restricted Common Stock received by the Participant equal in
number to the previously-acquired shares will have the same basis and holding
period as such previously-acquired shares. Second, the remaining shares have a
basis upon purchase equal to the cash, if any, paid as part of the purchase
price, and the basis is increased as of the date of income recognition by the
Participant by an amount equal to the ordinary income. The holding period for
the second component of shares commences as of the date the Participant
recognizes ordinary income.
The tax consequences with respect to any forfeiture of Restricted Common
Stock are subject to special rules.
The Company or the subsidiary for which the Participant performs services
generally is entitled to a deduction (for its taxable year that includes the
taxable year of the Participant in which he recognized ordinary income) in an
amount equal to the amount of ordinary income recognized by the Participant with
respect to the Restricted Common Stock.
-17-
<PAGE>
USE OF PROCEEDS
The proceeds received by the Company from the sale of Shares under the Plan will
be added to the general funds of the Company to be used for general working
capital purposes.
RESTRICTIONS ON RESALE OF COMMON STOCK
Every officer, director, and 10% shareholder of the Company is subject to the
reporting and "short swing" profits liability provisions of Section 16 of the
Exchange Act. Such provisions may restrict resale of Shares received under the
Plans. In addition, Shares received by a person deemed an "affiliate" of the
Company under the Exchange Act must be registered for resale by such person
unless such resale complies with the provisions of Rule 144 promulgated by the
Securities and Exchange Commission under the Securities Act. Rule 405 under the
Securities Act defines an "affiliate" as "a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with," the Company. The foregoing is not intended to be a
complete statement of applicable law and participants in the Plans should rely
on their own legal counsel.
ANNUAL REPORT TO SHAREHOLDERS
The Company will furnish without charge to any employee so requesting a
copy of the Company's most recent Annual Report to Shareholders.
-18-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 3. Incorporation of Certain Documents By Reference.
The following documents are hereby incorporated by reference into this
Prospectus:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1996;
2. The Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1996;
3. The Company's Quarterly Report on Form 10-QSB for the quarter ended
December 31, 1996; and
4. The Company's Proxy Statement filed on December 16, 1996.
All documents hereafter filed by the Company pursuant to Sections 13(a),
13(c), 14, and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment hereto, which either indicate that all of the Shares covered
by this Prospectus have been sold or which deregisters the Shares covered by
this Prospectus then remaining unsold, are deemed to be incorporated by
reference into this Prospectus and are a part hereof from the date of filing of
such documents.
Item 4. Description of Securities.
The Company is authorized to issue 25,000,000 shares of Common Stock, no
par value per share, of which 3,192,786 shares were issued and outstanding at
March 15, 1997, and 10,000,000 shares of preferred stock, no par value per
share, (the "Preferred Stock") of which none was issued and outstanding at March
15, 1997.
Common Stock
- ------------
The record holders of validly issued and outstanding shares of Common Stock
are entitled to one vote per share on all matters to be voted on by
shareholders. Under California law, cumulative voting in the election of
directors is mandatory upon notice given by a shareholder at a shareholder's
meeting at which directors are to be elected. In order to cumulate votes, a
shareholder must give notice at the meeting, prior to the voting, of the
shareholder's intention to vote cumulatively. If any one shareholder gives such
a notice, all shareholders may cumulate their votes. Cumulative voting permits
the holder of each share
-19-
<PAGE>
of Common Stock entitled to vote in the election of directors to cast that
number of votes which equal the number of directors to be elected. The holder
may allocate all votes represented by a share to a single candidate or may
allocate those votes among as many candidates in any manner that the holder
chooses. Thus, under cumulative voting a shareholder with a significant
minority percentage of the outstanding shares may be able to elect one or more
directors.
The holders of Common Stock are entitled to such dividends, if any, as may
be declared by the Board in its discretion out of funds legally available for
that purpose, and to participate pro rata in any distribution of the Company's
--- ----
assets upon liquidation. In the event of liquidation of the Company, all assets
available for distribution are distributable among the holders of the Common
Stock according to their respective holdings.
The holders of Common Stock do not have any preemptive or conversion
rights, nor are there any redemption rights with respect to the Common Stock.
The outstanding shares of Common Stock are, and the Shares being offered hereby,
when issued and paid for, and in the case of Restricted Common Stock, upon the
expiration or termination of the Restricted Period and the satisfaction of any
other conditions prescribed by the Board, will be, validly issued, fully paid,
and non-assessable and not subject to further call or assessment by the Company.
Preferred Stock
- ---------------
The Company's Articles of Incorporation authorize a class of Preferred
Stock. The Board has the authority to issue Preferred Stock from time to time
in series and to fix the designations, powers (including voting powers, if any),
preferences, and relative participating, options, conversion, and other special
rights, and the qualifications, limitations, and restrictions of each series.
The flexibility to issue Preferred Stock in one or more series can enhance
the Board's bargaining capability on behalf of the Company's shareholders in a
takeover situation and could, under some circumstances, be used to render more
difficult or discourage a merger, tender offer, or proxy contest, the assumption
of control by a holder of a large block of the Company's securities, or the
removal of incumbent management, even if such a transaction were favored by the
holders of the requisite number of shares in that the rights, privileges, and
preferences of one or more series of Preferred Stock, which Preferred Stock
could be privately placed, could involve provisions as to voting, redemption,
conversion, or other rights which may defer such action. Accordingly,
shareholders of the Company might be deprived of an opportunity to consider a
takeover proposal which a third party might consider because the Company has a
class of Preferred Stock authorized. The Company currently does not have any
plans or commitments that would involve the issuance of shares of its Preferred
Stock.
-20-
<PAGE>
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
Article V of the Articles of Incorporation of the Registrant provides as
follows:
* * * * *
"6. Elimination of Certain Liability of Directors. The liability of
---------------------------------------------
Directors of the Corporation to the Corporation or its shareholders for
monetary damages shall be eliminated to the fullest extent permissible
under California law."
* * * * *
Insofar as indemnification for liabilities arising under federal securities
laws may be permitted to directors or officers, the Company has been informed
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such laws and is,
therefore, unenforceable. Under certain circumstances, the Company might be
required to submit to a court the question of whether such indemnification is
permissible before it could indemnify directors for such liabilities.
Item 7. Exemption from Registration Claimed.
No underwriters were involved in the issuances of the above-referenced
securities. None of the securities described above was registered under the
Securities Act in reliance upon the exemption in Section 4(2) of the Securities
Act for transactions not involving a public offering.
Item 8. Exhibits.
4.1 Registrant's 1997 Stock Plan.
4.2 Form of Common Stock Purchase Options under the Registrant's 1997
Stock Plan.
5.1 Opinion of Arter & Hadden re legality of securities.
23.1 Consent of Arter & Hadden (Included in Exhibit 5.1).
23.2 Consent of Corbin & Wertz.
-21-
<PAGE>
Item 9. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Tustin, State of California, on April 7, 1997.
LUTHER MEDICAL PRODUCTS, INC.
By: /s/ DAVID ROLLO
-----------------------
David Rollo, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ DAVID ROLLO Chairman of the Board, Chief April 7, 1997
- ----------------------- Executive Officer, President,
David Rollo and Chief Financial Officer
/s/ MARK S. ISSACS Director April 7, 1997
- -----------------------
Mark S. Issacs
/s/ JACK W. PAYNE Director April 7, 1997
- -----------------------
Jack W. Payne
/s/ D. ROSS HAMILTON Director April 7, 1997
- -----------------------
D. Ross Hamilton
/s/ WILLIAM R. DAHLMAN Director April 7, 1997
- -----------------------
William R. Dahlman
/s/ BARRY W. HALL Director April 7, 1997
- -----------------------
Barry W. Hall
</TABLE>
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<PAGE>
POWER OF ATTORNEY
TO SIGN REGISTRATION STATEMENT AND AMENDMENTS
Each person whose signature appears below hereby constitutes and appoints
David Rollo, as his or her true and lawful attorney-in-fact and agent, with full
powers of substitution and resubstitution, for him or her and in his or her
name, place, and stead, in any and all capacities indicated below, to sign this
Registration Statement and any or all amendments, including post-effective
amendments, to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and applicable state securities
administrators, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite necessary to
be done in connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Power of
Attorney for authorized signatures to this Registration Statement and amendments
thereto has been signed below by the following persons in the capacities and on
the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ MARK S. ISSACS Director April 7, 1997
- -----------------------
Mark S. Issacs
/s/ JACK W. PAYNE Director April 7, 1997
- -----------------------
Jack W. Payne
/s/ D. ROSS HAMILTON Director April 7, 1997
- -----------------------
D. Ross Hamilton
/s/ WILLIAM R. DAHLMAN Director April 7, 1997
- -----------------------
William R. Dahlman
/s/ BARRY W. HALL Director April 7, 1997
- -----------------------
Barry W. Hall
</TABLE>
-24-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
4.1 Registrant's 1997 Stock Plan.
4.2 Form of Common Stock Purchase Options under the Registrant's 1997
Stock Plan.
5.1 Opinion of Arter & Hadden re legality of securities.
23.1 Consent of Arter & Hadden (Included in Exhibit 5.1).
23.2 Consent of Corbin & Wertz.
</TABLE>
<PAGE>
EXHIBIT 4.1
LUTHER MEDICAL PRODUCTS, INC.
1997 Stock Plan
1. Purpose. The purpose of this 1997 Stock Plan (the "Plan") is to advance the
interests of Luther Medical Products, Inc., a California corporation
("Luther"), and its shareholders by offering to those employees, non-employee
advisors, consultants, and directors of Luther and its subsidiaries who will be
responsible for the long-term growth of Luther's earnings the opportunity to
acquire or increase their equity interests in Luther, thereby achieving a
greater commonality of interest between shareholders, employees and directors,
enhancing Luther's ability to retain and attract both highly qualified employees
and directors and providing an additional incentive to such employees to achieve
Luther's long-term business plans and objectives.
2. Award Opportunities. Awards (individually, an "Award"; collectively, the
"Awards") under the Plan may be granted in the form of (a) incentive stock
options to acquire shares of common stock, no par value per share of Luther (the
"Common Stock"), as provided in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), (b) nonqualified stock options to acquire Common
Stock, and (c) Common Stock that is restricted and must be purchased by the
employee or director (the "Restricted Common Stock").
Incentive and nonqualified stock options shall hereinafter be referred
to individually as an "Option" and collectively as "Options" in the Plan. Where
the context requires, nonqualified stock options may hereinafter be referred to
as "Warrants."
3. Administration.
(A) Committee. The Plan shall be administered by Luther's Board of
Directors (the "Board") or by a committee (the "Committee") of the Board
authorized by the Board. The Committee shall consist of no less than three
directors of Luther who shall be appointed, from time to time, by the
Board. At any time that Luther has a class of equity securities registered
under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (i) only directors who, at the time of service, qualify
as "disinterested persons" within the meaning of Rule 16b-3 under the
Exchange Act shall be members of the Committee and (ii) all references in
the Plan to the Board shall refer only to the Committee.
(B) Authority. The Board, or the Committee, to the extent the Board has
delegated such authority to the Committee, shall have full and final
authority with respect to the Plan (i) to interpret all provisions of the
Plan consistent with law; (ii) to determine the individuals who will
receive Awards; (iii) to determine the frequency of grant of Awards; (iv)
to determine the type of, the number of shares of Common Stock subject to,
and the exercise period and price of each Option to be granted to each
eligible individual; (v) to determine the number and the purchase price of
shares of Restricted Common Stock to be granted to each individual; (vi)
to prescribe the form and terms of instruments evidencing any Award granted
under the Plan; (vii) to determine the term of the restricted period and
other conditions applicable to Restricted Common Stock; (viii)
-1-
<PAGE>
to adopt, amend and rescind general and special rules and regulations for
the Plan's administration; and (ix) to make all other determinations
necessary or advisable for the administration of the Plan. The Board may,
with the consent of the person who has been granted an Award under the
Plan, amend the instrument regarding such Award consistent with the
provisions of the Plan.
(C) Indemnification. No member of the Board or the Committee shall be
liable for any action taken or determination made in good faith. The
members of the Board and the Committee shall be indemnified by Luther for
any acts or omissions in connection with the Plan to the full extent
permitted by California and Federal laws.
4. Eligibility. Participation in the Plan shall be determined by the Board
and shall be limited to employees or non-employee advisors, consultants,
and directors of Luther and its subsidiaries (individually, a
"Participant"; collectively, the "Participants").
5. Stock Subject to Plan. Subject to adjustments as provided in Section 9(A)
hereof, the aggregate amount of Common Stock as to which Awards may be
granted under the Plan shall not exceed 850,000 shares and may be
authorized but unissued shares or treasury shares.
The Board, or its designee, shall maintain records showing the cumulative
number of shares of Common Stock underlying outstanding Options, the number
of shares of Restricted Common Stock and the applicable restricted periods
under the Plan, and the number of shares of Common Stock delivered in
settlement of any other Award under the Plan.
If an Option granted hereunder shall expire or terminate for any reason
without having been fully exercised, if any shares of Common Stock to be
issued pursuant to an Award are not issued for any reason, of if any shares
of Restricted Common Stock granted under the Plan are forfeited to Luther,
then the shares of Common Stock underlying the unexercised portion of such
expired or terminated Option and by the unissued portion of such Award and
the shares of forfeited Restricted Common Stock shall again become
available for the purposes of the Plan. In addition, any shares of Common
Stock that are used as full or partial payment by a Participant of the
exercise price of an Option shall be available for Awards under the Plan as
shall any shares of Common Stock that are withheld in payment of tax
withholding obligations of a Participant (as provided in Section 9(E)).
6. Options.
(A) Allotment of Shares. The Board may, in its sole discretion and subject
to the provisions of the Plan, grant to Participants at such times as it
deems appropriate following adoption of the Plan by the Board, Options to
purchase Common Stock, subject to approval of the Plan by Luther
shareholders, but in no event may any Participant be granted a single
Option to purchase more than 100,000 shares of Common Stock.
-2-
<PAGE>
Options may be allotted to Participants in such amounts, subject to
the limitations specified in this Section, as the Board, in its sole
discretion, may from time to time determine. Notwithstanding the foregoing,
a non-employee advisor, consultant, or director shall not be eligible to be
granted an incentive stock option pursuant to the Plan, but shall be
eligible to be granted any other form of Award available under the Plan.
(B) Exercise Price. The price per share at which each non-qualified option
granted under the Plan may be exercised shall not, as to any particular
Warrant, be less than eighty-five percent (85%) nor more than one hundred
percent (100%) of the fair market value of one share of Common Stock at the
time such non-qualified option is granted; provided, however, that the
exercise price for any share of Common Stock underlying any Option that is
intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code shall be not less than one hundred percent (100%)
of the fair market value of one share of Common Stock at the time such
Option is granted. In the case of a Participant who owns Common Stock
representing more than ten percent (10%) of the total combined voting power
of all classes of capital stock of Luther or of its parent or its
subsidiaries (as determined under Section 424(d) of the Code) at the time
the incentive stock option is granted, such exercise price shall not be
less than one hundred ten percent (110%) of the fair market value of one
share of Common Stock at the time such Option is granted.
If the Common Stock listed on a national securities exchange or the
high and low selling prices thereof are reported on NASDAQ at the time an
Option is granted, then the fair market value of one share of Common Stock
shall be the average of the highest and lowest selling prices of the Common
stock as reported by such exchange or as reported on NASDAQ on the date
such Option is granted or, if there were no sales of Common Stock on said
date, then on the next prior business day on which there were sales of
Common Stock. If the Common Stock is traded other than on a national
securities exchange or the high and low selling prices thereof are not
reported on NASDAQ at the time an Option is granted, then the fair market
value of one share of Common Stock shall be the average between the bid and
asked price of a share of Common Stock on the date the Option is granted as
reported on NASDAQ or, if there is no bid and asked price on said date,
then on the next prior business day on which there was a bid and asked
price. If no such bid and asked price is available, then the Board shall
make a good faith determination of the fair market value of one share of
Common Stock using any reasonable method of valuation. Unless an other date
is specified by the Board, the date on which the Board approves the
granting of an Option shall be deemed the date on which the Option is
granted.
(C) Option Period. An Option granted under the Plan shall terminate, and
the right of the Participant (or the Participant's estate, personal
representative, or beneficiary) to exercise the Option shall expire, on the
date determined by the Board at the time the Option is granted (the
"Termination Date"). No incentive stock option shall be exercisable more
than ten (10) years after the date on which it was granted, and no Warrant
shall be exercisable more than ten (10) years and one (1) day after the
date on which it was granted. In the case of a Participant who owns Common
Stock represent-
-3-
<PAGE>
ing more than ten percent (10%) of the total combined voting power of all
classes of Luther's capital stock, no incentive stock option shall be
exercisable more than five (5) years after the date on which it is granted.
(D) Vesting Schedule; Termination. An Option granted under the Plan shall
be considered terminated in whole or in part, to the extent that, in
accordance with the provisions of the Plan, it can no longer be exercised
for the Common Stock originally subject to the Option.
(1) Vesting Schedule. All Options granted hereunder shall be subject
to a three-year vesting schedule: on the first anniversary date of
grant, 30% of the Options shall vest and, unless otherwise provided
herein, be then exercisable; on the second anniversary date of grant,
an additional 30% of the Options shall vest and, unless otherwise
provided herein, be then exercisable; and on the third anniversary
date of grant, an additional 40% of the Options shall vest and, unless
otherwise provided herein, be then exercisable. In the event of
changes in the outstanding Common Stock by reason of mergers,
consolidations, combinations, ex changes of shares, separations,
reorganizations, liquidations, issuance, or exercise of warrants or
rights and the like in which Luther is not the sole surviving
successor to the assets or business of Luther immediately prior
thereto, all unvested Options shall become immediately vested and then
exercisable. In the event of any offer to shareholders of Luther
generally relating to the acquisition of their shares of Common Stock,
all unvested Options shall be deemed to have accelerated and become
immediately vested and then exercisable; provided, however, that upon
the conclusion of such offer, if any such changes in the outstanding
Common Stock referenced in the immediately preceding sentence shall
not have occurred, the deemed vesting of all such accelerated Options
shall revert to the vesting schedule set forth in the first sentence
of this section. Notwithstanding the above, the Board or the
Committee, as relevant, may modify or waive any such vesting schedule.
(2) Termination for Any Reason Except Cause, Death, or Disability. If
the Participant is Terminated for any reason, except cause (as the
same is provided in the California Corporations Code Section 304 as to
directors, or for malfeasance, theft, harassment, or breach of
employment agreement or a term of the Company's employment manual as
to employees or consultants), death, or disability, the Option, to the
extent (and only to the extent) that it would have been exercisable by
the Participant on the date of Termination, may be exercised by the
Participant no later than ninety (90) days after the date of
Termination, but in any event no later than the Expiration Date.
(3) Termination For Cause. If the Participant is Terminated for
cause, the Option, to the extent (and only to the extent) that it
would have been exercisable by the Participant on the date of
Termination, may be exercised by the Participant no later than fifteen
(15) days after the date of Termination, but in any event no later
than the Expiration Date.
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<PAGE>
(4) Termination Because of Death or Disability. If the Participant is
Terminated because of death or Disability of the Participant, the
Option, to the extent that it is exercisable by the Participant on the
date of Termination, may be exercised by the Participant (or the
Participant's legal representative) no later than twelve (12) months
after the date of Termination, but in any event no later than the
Expiration Date.
(5) No Obligation to Employ. Nothing in the Plan or this Agreement
shall confer on the Participant any right to continue in the employ
of, or other relationship with, the Company or any Parent, Subsidiary,
or Affiliate of the Company, or limit in any way the right of the
Company or any Parent, Subsidiary or Affiliate of the Company to
terminate the Participant's employment or other relationship at any
time, with cause.
(E) Manner of Exercise and Payment.
(1) Exercise.
Each option granted under the Plan shall be deemed exercised to
the extent that the Participant shall deliver to Luther written notice
of the number of full shares of Common Stock underlying the whole or
that portion of the Option then being exercised. The Participant shall
at the same time tender to Luther payment in full for such shares,
which payment may be in cash or, subject to Section 6(E)(2), in
previously is sued shares of Common Stock or partly in cash and partly
in previously issued shares of Common Stock, and shall comply with
such other reasonable requirements as the Board may establish,
pursuant to Section 9(C). These provisions shall not preclude exercise
of an Option, or payment of the exercise price thereunder, by any
other proper legal method specifically approved by the Board.
Subject to California law, no person, estate, or other entity
shall have any of the rights of a shareholder with reference to Shares
subject to an Option until a certificate representing the shares of
Common Stock has been delivered.
An Option granted under the Plan may be exercised for any lesser
number of whole Shares than the full amount for which it could then be
exercised; provided, however, that the Board may require, in the
agreement evidencing an Option, any partial exercise to be with
respect to a specified minimum number of shares of Common Stock. Such
a partial exercise of an Option shall not affect the right to exercise
the Option from time to time in accordance with the Plan for the
remaining shares of Common Stock underlying the Option.
(2) Payment in Shares of Common Stock.
The value of shares of Common Stock delivered for payment of the
exercise price of an Option shall be the fair market value of the
Common Stock determined as provided in Section 6(B) on the date the
Option is exercised. If
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<PAGE>
certificates representing shares of Common Stock are used to pay all
or part of the exercise price of an Option, separate certificates
shall be delivered to Luther representing the number of shares of
Common Stock so used, and an additional certificate or certificates
shall be delivered to the Participant representing the additional
shares of Common Stock to which the Participant is entitled as a
result of exercise of the Option. Notwithstanding the foregoing and
the pro visions of Section 6(E)(1), the Board, in its sole discretion,
may refuse to accept shares of Common Stock delivered for payment of
the exercise price, in which event any certificates representing such
shares of Common Stock that were actually received by Luther with the
written notice of exercise shall be returned to the exercising
Participant, together with notice by Luther of the refusal of Luther
to accept such shares of Common Stock as partial or full payment of
the exercise price.
In the event Shares are delivered for payment of the exercise
price of such Option as herein provided, then, at the discretion of
the Board, the Participant may be granted an Option to purchase that
quantity of Common Stock equal to the quantity of Common Stock
delivered in partial or full payment of the exercise price, with an
exercise price equal to the current fair market value of such Common
Stock, and with a term of such Option extending to the expiration date
of the Option for which partial or full payment of the exercise price
thereof was accomplished by delivery of previously issued shares of
Common Stock.
(3) Loans.
Luther may make loans to Participants or their respective lawful
successors as the Board, in its discretion, may determine (including a
grantee who is a director or officer of Luther) in connection with the
exercise of Options granted under the Plan; provided, however, that
the Board shall not authorize the making of any loan where the
possession of such discretion or the making of such loan would result
in a "modification" (as defined in Section 424 of the Code) of any
incentive stock option. Such loans shall be subject to the following
terms and conditions and such other terms and conditions as the Board
shall determine at the time the loan is made as are not inconsistent
with the Plan. Such loans shall bear interest at such rates as the
Board shall determine from time to time, which rates may be below then
current market rates (except in the case of incentive stock options).
In no event may any such loan exceed the fair market value, at the
date of exercise, of the shares of Common Stock underlying the Option,
or portion thereof, exercised by the Participant. No loan shall have
an initial term exceeding one (1) year, but any such loan may be
renewable at the discretion of the Board. At the time a loan is made,
Common stock having a fair market value at least equal to the
principal amount of the loan shall be pledged by the Holder to Luther
as security for payment of the unpaid balance of the loan. Every loan
shall comply with all applicable laws, regulations, and rules of the
Board of Governors of the Federal Reserve System and any other
governmental agency having jurisdiction.
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<PAGE>
(4) Award of Cash or Shares of Common Stock in Lieu of Exercise.
The Board may elect, in lieu of accepting payment of the exercise
price of an Option and delivering any or all shares of Common Stock as
to which an Option has been exercised, to pay the Participant an
amount in cash or shares of Common Stock, or a combination of cash and
shares of Common Stock, equal to the amount by which the fair market
value (determined as provided in Section 6(B)) on the date of exercise
of the Option exceeds the exercise price that would otherwise be
payable by the Participant for such shares of Common Stock. Subject to
any then-current agreements with any third parties, the Board may also
permit a Participant simultaneously to exercise an Option and sell the
shares of Common Stock acquired upon exercise, pursuant to a brokerage
arrangement, approved in advance by the Board, and use the proceeds
from such a sale as payment of the exercise price of such Option.
(5) Persons Subject to Section 16 of the Exchange Act.
Participants who are subject to Section 16 of the Exchange Act
are hereby advised that reliance on Rule 16b-3 may require that any
equity security of Luther acquired upon exercise of an Option by such
person be held at least until the date six months after the date of
grant of the Option.
(F) Limitations on Exercise. In the case of Options intend ed to be
incentive stock options, the aggregate fair market value, determined as of
the date of grant, of the shares of Common Stock underlying such Options
that are exercisable for the first time by a Participant shall be limited
to $100,000 per calendar year.
Warrants may be exercised by a Participant without regard to the
foregoing limitation, but subject to the requirement of Section 6(D).
7. Restricted Common Stock.
(A) Granting of Restricted Common Stock. The Board may, in its sole
discretion and subject to the provisions of the Plan, grant to eligible
employees or non-employee advisors, consultants, or directors at such times
as it deems appropriate following adoption of the Plan by the Board, the
right to purchase shares of Restricted Common Stock, subject to approval of
the Plan by Luther shareholders.
(B) Price of Restricted Common Stock. The price at which Restricted Common
Stock may be purchased by a Participant under the Plan shall be determined
by the Board and shall not be less than one cent ($.01) per share. If the
Board deter mines that the price per Share shall be the fair market value
of a Share, fair market value shall be determined as provided in Section
6(B) hereof. The purchase price per share of Restricted Common Stock as to
any particular Restricted Common Stock grant shall also be known as the
"Initial Price Per Share."
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<PAGE>
(C) Terms of Restricted Common Stock. At the time of a Restricted Common
Stock grant, the Board shall establish a period of time (the "Restricted
Period") applicable to the Restricted Common Stock, which shall not be more
than ten (10) years from the date of grant. Each grant of Restricted Common
Stock may have a different Restricted Period. The Board may in its sole
discretion, at the time of the grant of Restricted Common Stock is made,
prescribe conditions for the incremental lapse of restrictions during the
Restricted Period and for the lapse of termination of restrictions upon the
satisfaction of other conditions with respect to all or any portion of the
Restricted Common Stock. The Board may also, in its sole discretion, at any
time shorten or terminate the Restricted Period or waive any conditions for
the lapse or termination of restrictions with respect to all or any portion
of the shares of Restricted Common Stock.
Unless another date is specified, the date on which the Board approves
the grant of Restricted Common Stock shall be deemed the date on which the
Restricted Common Stock is granted.
In order for Participant to exercise his right to purchase shares of
Restricted Common Stock under a grant (unless that payment date is further
extended by the Board), within thirty (30) days after the date of grant,
such Participant shall execute, retroactive to the date of such grant, an
agreement reflecting the number of shares the Participant is purchasing and
the conditions imposed upon the purchase of such shares as determined by
the Board.
As payment for the purchase price of the Restricted Common Stock, the
Participant may tender to Luther payment in cash, in previously issued
shares of Common Stock (taken at their fair market value on the date the
Restricted Common Stock is granted determined as provided in Section 6(B))
or partly in cash and partly in previously issued shares of Common Stock
and shall comply with such other reasonable requirements as the Board may
establish, pursuant to this Section 8(C). Notwithstanding the foregoing,
the Board, in its sole discretion, may refuse to accept shares of Common
Stock in payment of the purchase price, in which event any certificates
representing such shares of Common Stock that were actually received by
Luther as attempted payment for the Restricted Common Stock shall be
returned to the Participant, together with notice by Luther of the refusal
of Luther to accept such shares of Common Stock as partial or full payment
for the Restricted Common Stock.
A stock certificate representing the number of shares of Restricted
Common Stock granted to and purchased by a Participant shall be registered
in the Participant's name but shall be held in custody by Luther for the
Participant's account. The Participant shall have the rights and
privileges of a shareholder as to such shares of Restricted Common Stock,
including the right to vote such shares, except that (i) the Participant
shall not be entitled to delivery of such certificate until the expiration
or termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Board, (ii) none of the Shares may be sold,
transferred, assigned, pledged, or otherwise encumbered or disposed of
during the Restricted Period and until the satisfaction of any other
conditions prescribed by the Board, and (iii) all of the Restricted Common
Stock shall be forfeited and all rights of the Participant to such
Restricted Common Stock shall
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<PAGE>
terminate without further obligation on the part of Luther (except for the
obligation of Luther to purchase the Restricted Common Stock from the
Participant at the Initial Price Per Share) in the event the Participant
has not remained in the continuous employment of Luther or a subsidiary or
in continuous service as a non-employee advisor, consultant, or a director
until the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Board applicable to
such Restricted Common Stock. The Board shall decide in each case to what
extent leaves of absence for government or military service, illness,
temporary disability or other reasons shall not, for this purpose, be
deemed interruption of continuous employment or service as a non-employee
advisor, consultant, or director. If the Participant's continuous
employment or service as a non-employee advisor, consultant, or director
should be terminated or cease because of death, permanent, and total
disability or retirement, the provisions contained in Section 8(D) shall
apply.
At the discretion of the Board, cash and stock dividends may be either
currently paid or withheld by Luther for the Participant's account, and
interest may be paid on the amount of cash dividends withheld at a rate and
subject to such terms as determined by the Board.
Each certificate evidencing shares of Restricted Common Stock shall be
inscribed with a legend substantially as follows:
"The shares of common stock of Luther Medical Products, Inc.,
evidenced by this certificate are subject to the terms and
restrictions of the Luther Medical Products, Inc., 1997 Stock Plan.
Such shares are subject to forfeiture or cancellation under the terms
of said Plan and shall not be sold, transferred, assigned, pledged,
encumbered, or otherwise alienated or hypothecated except pursuant to
the provisions of said Plan, a copy of which is available from Luther
Medical Products, Inc., upon request."
Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Board or at such
earlier time as provided for in Section 9(D), the restrictions applicable
to the shares of Restricted Common Stock shall lapse and a stock
certificate for the number of shares of Restricted Common Stock with
respect to which the restrictions have lapsed shall be delivered, free of
all such restrictions, except any that may be imposed by law, to the
Participant or the Participant's beneficiary or estate, as the case may be.
Luther shall not be required to deliver any fractional shares but will pay,
in lieu thereof, the fair market value (determined in accordance with
Section 6(B) as of the date the restrictions lapse) of such fractional
shares to the Participant.
(D) Termination of Employment. All rights to the shares of Restricted
Common Stock shall be forfeited if the Participant terminates employment
with Luther and its subsidiaries or ceases to serve on the Board for any
reason except for death, permanent and total disability or retirement prior
to the expiration of the restrictions on such Shares and such forfeited
shares shall be purchased by Luther at the Initial Price Per Share within a
reasonable time period established by the Board. Any attempt to dispose of
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<PAGE>
any such shares in contravention of the foregoing restrictions shall be
null and void and without effect.
If a Participant who has been in the continuous employ of Luther or a
subsidiary since the date on which the Restricted Common Stock was granted
dies, becomes permanently and totally disabled, or retires while in such
employment and prior to the lapse of the restrictions on the Restricted
Common Stock, all such restrictions shall lapse and cease to be effective
as of the end of the month in which the Participant's employment
terminates due to death, permanent and total disability, or retirement.
(E) Persons Subject to Section 16 of the Exchange Act. Participants who
are subject to Section 16 of the Exchange Act are hereby advised that
reliance on Rule 16b-3 may require that any equity security of Luther
acquired upon exercise of Restricted Common Stock by such person be held at
least until the date six months after the date of grant of the Restricted
Common Stock.
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<PAGE>
8. Other Provisions.
(A) Adjustment of Shares. In the event that the outstanding Shares are
changed into or exchanged for a different number or kind of shares of
Luther or other securities of Luther by reason of merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend or
combination of Shares, or issuance or exercise of warrants or rights, the
Board shall make an appropriate and equitable adjustment in the number and
kind of Common Stock subject to outstanding Awards, or portions thereof
then unexercised, and the number and kind of Common Stock subject to the
Plan to the end that after such event the Common Stock subject to the Plan
and the Participant's right to a proportionate interest in Luther shall be
maintained as before the occurrence of such event. Such adjustment in an
outstanding Award shall be made without change in the total price
applicable to the Award or the unexercised portion of any Award (except for
any change in the total price resulting from rounding off quantities or
prices of Common Stock) and with any necessary corre sponding adjustment in
exercise price. Any such adjustment made by the Board shall be final and
binding upon all Participants, Luther and all other interested persons.
Any adjustment of an incentive stock option under this paragraph shall be
made in such manner so as not to constitute a "modification" within the
meaning of Section 424(h)(3) of the Code. The Board, in its sole
discretion may at any time make or provide for such adjustments to the Plan
or any Award granted thereunder as it shall deem appropriate to prevent
the reduction or enlargement of rights, including adjustments in the event
of changes in the outstanding Common Stock by reason of mergers,
consolidations, combinations, exchanges of shares, separations,
reorganizations, liquidations, issuance, or exercise of warrants or rights
and the like in which Luther is not the sole surviving successor to the
assets or business of Luther immediately prior thereto. In the event of
any offer to shareholders of Luther generally relating to the acquisition
of their shares of Common Stock, the Board may make such adjustments as it
deems equitable in respect of outstanding Awards. Any such determination
of the Board shall be conclusive.
(B) Non-Transferability. No Award granted to a Participant under the Plan
shall be transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined in the Code; provided that transfer pursuant to a qualified
domestic relations order shall not be permitted with respect to incentive
stock options or in circumstances where such transfer would cause a lapse
of restriction for purposes of Section 83 of the Code. Any attempt to
transfer, assign, pledge, hypothecate, or otherwise dispose of, or to
subject to execution, attachment, or similar process, any Award other than
as permitted in the preceding sentence shall give no right to the purported
transferee.
(C) Compliance with Law and Approval of Regulatory Bodies. No Option shall
be exercisable and no Shares shall be delivered in settlement of any Award
and no unrestricted Common Stock shall be issued for Restricted Common
Stock under the Plan except in compliance with all applicable Federal and
state laws and regulations including, without limitation, compliance with
the rules of all domestic stock exchanges on which Luther's shares may be
listed. Any certificate issued to evidence shares of Common Stock for which
an Award is exercised or with respect to which Restricted Com-
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<PAGE>
mon Stock restrictions lapse, shall bear such leg ends and statements as
the Board deems advisable in order to assure compliance with Federal and
state laws and regulations. No Award shall be exercisable and no Common
Stock shall be delivered and no Restricted Common Stock shall be issued
under the Plan until Luther has obtained consent or approval from such
regulatory bodies, Federal or state, having jurisdiction over such matters
as the Board may deem advisable.
In the case of the exercise of an Award by a person or estate
acquiring the right to exercise such Award by bequest or inheritance or in
the case of a person or estate acquiring by bequest or inheritance the
right to receive Restricted Common Stock because of the lapse of the
restrictions, the Board may require reasonable evidence as to the ownership
of the Award, may require such consents and releases of taxing authorities
as it may deem advisable.
(D) No Right to Employment. Neither the adoption of the Plan nor its
operation, nor any document describing or refer ring to the Plan, or any
part thereof, shall confer upon any Participant under the Plan any right to
continue in the employ of Luther or a subsidiary or shall in any way affect
the right and power of Luther or a subsidiary to terminate the employment
of any Participant under the Plan at any time with or without assigning a
reason therefor.
(E) Tax Withholding. The Board shall have the right to deduct from any
settlement of an Award, including without limitation the delivery or
vesting of Common Stock, made under the Plan any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such
payments or to take any such other action as may be necessary in the
opinion of the Board to satisfy all obligations for payment of such taxes.
If Common Stock that would otherwise be delivered in settlement of the
Award are used to satisfy tax withholding, such Common Stock shall be
valued based on their Fair Market Value determined in accordance with
section 6(B) when the tax withholding is required to be made.
(F) Amendment and Termination. The Board may at any time suspend, amend,
or terminate the Plan, and, without limiting the foregoing, the Board shall
have the express authority to amend the Plan from time to time, with or
without approval by the shareholders, in the manner and to the extent that
the Board believes is necessary or appropriate in order to cause the Plan
to conform to provisions of Rule 16b-3 under the Exchange Act and any other
rules under Section 16 of the Exchange Act, as any of such rules may be
amended, supplemented, or superseded from time to time. Except for ad-
justments made in accordance with Section 9(A), the Board may not, without
the consent of the grantee of the Award, alter or impair any Award
previously granted under the Plan. No Award may be granted during any
suspension of the Plan or after termination thereof.
In addition to Board approval of an amendment, if the amendment would:
(i) materially increase the benefits accruing to Participants; (ii)
increase the number of shares of Common Stock deliverable under the Plan
(other than in accordance with the provisions of Section 9(A); or (iii)
materially modify the requirements as to eligibility
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for participation in the Plan, then such amendment shall be approved by
the holders of a majority of Luther's outstanding capital stock represented
and entitled to vote at a meeting held for the purpose of approving such
amendment to the extent required by Rule 16b-3 of the Exchange Act.
(G) Effective Date of the Plan. The Plan was adopted by the Board and the
shareholders holding a majority of Luther's outstanding shares entitled to
vote thereon on January 24, 1997.
(H) Duration of the Plan. Unless previously terminated by the Board, the
Plan shall terminate at the close of business on January 23, 2007, and no
Award shall be granted under it thereafter, but such termination shall not
affect any Award theretofore granted.
(I) Use of Certain Terms. The terms "parent" and "subsidiary" shall have
the meanings ascribed to them in Section 424 of the Code and unless the
context otherwise requires, the other terms defined in Section 421, 422,
and 424, inclusive, of the Code and regulations and revenue rulings
applicable thereto, shall have the meanings attributed to them therein.
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EXHIBIT 4.2
LUTHER MEDICAL PRODUCTS, INC.
1997 Stock Plan
STOCK OPTION AGREEMENT
The Board of Directors of Luther Medical Products, Inc., (the
"Company") desires to grant to Optionee the ability to participate in the 1997
Stock Plan (the "Plan"), a copy of which is attached hereto, by granting an
option to purchase shares in the Company as set forth below.
Optionee:
Address:
Date of Grant:
Option Shares:
(as may be adjusted as provided for in the Plan).
Incentive Stock Option/Exercise Price per Share:
(being the Fair Market Value on the date as provided for in the Plan).
or
Non-Qualified Stock Option/Exercise Price Per Share:
(being not less than 85% of the Fair Market Value on the date as provided
for in the Plan).
Option Period:
Vesting Schedule of Option:
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
Manner of Exercise: The Optionee shall give written notice to the Company
specifying the number of full shares to be purchased accompanied by payment in
cash, by certified check, upon approval by the Board, his promissory note
(secured by collateral other than the shares acquired), or other shares of the
Company's Common Stock, for the full purchase price. No share shall be issued
until full payment therefor has been made.
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<PAGE>
Employment: Nothing contained in this Stock Option Agreement (the "Option")
shall confer upon the Optionee any right to be continued in the employment of
the Company or shall prevent the Company from terminating his employment at any
time, with or without cause.
Termination/Death/Disability: If the Optionee's employment with the Company is
terminated for any reason (voluntarily or involuntarily), except cause, death,
or disability, the Option may be exercised no later than ninety (90) days after
the date of such termination. If the Optionee's employment with the Company is
terminated for cause, the Option may be exercised no later than fifteen (15)
days after the date of such termination, and if because of death or disability,
the Option may be exercised no later than twelve (12) months after the date of
such termination. In no event will the Option be exercisable later than the
expiration date, and in every case the Option will only be exercisable to the
extent that it would have been exercisable on the date of such termination by
the Optionee or, in the case of death or disability, the Optionee's legal
representative.
Non-Transferability of Option: The Option shall not be transferrable other than
by will or by the laws of descent and distribution, and may be exercised during
the Optionee's lifetime only by him.
Incorporation of Plan: The Option granted hereby is subject to, and governed
by, the terms and conditions of the Plan, which are hereby incorporated by
reference. The Option, including the Plan incorporated by reference herein, is
the entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings.
Securities Laws Requirements: No shares shall be issued upon the exercise of
any option unless and until the Company and the Optionee are determined to be in
compliance with applicable State and Federal securities laws with respect to an
individual exercise. The shares issued under the Plan may be restricted
securities subject to limitations on resale.
General: Notice regarding this agreement shall be in writing and shall be
delivered in person or by registered mail to the Company's address or by the
laws of the State of California.
The parties have accepted the terms herein and entered into this agreement this
day of , 199 .
- ----- ------------ --
Company:
----------------------
Optionee:
----------------------
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[LETTERHEAD OF ARTER & HADDEN]
EXHIBIT 5.1
April 8, 1997
Luther Medical Products, Inc.
14332 Chambers Road
Tustin, California 92780
Re: Registration Statement on Form S-8
----------------------------------
Gentlemen:
At your request, we have examined the Registration Statement on Form S-8
(the "Registration Statement") as proposed to be filed by you with the
Securities and Exchange Commission in connection with the registration under the
Securities Act of 1933, as amended, of the offer and sale of up to 850,000
shares (the "Shares") of Common Stock, no par value per share, of Luther Medical
Products, Inc., a California corporation (the "Company") upon exercise of
options and warrants granted or to be granted pursuant to the Company's 1997
Stock Plan. We have further examined the proceedings that you have previously
taken and are familiar with the additional proceedings proposed to be taken in
connection with the authorization, issuance, and sale of the Shares.
Subject to compliance with applicable state securities and "Blue Sky" laws,
we are of the opinion that the Shares, upon their issuance and sale in the
manner described in the Registration Statement, will be legally issued, fully
paid, and non-assessable securities of the Company.
We consent to the use of this opinion as Exhibit 5.1 to the Registration
Statement and to the use of our name in the Prospectus constituting a part
thereof.
Very truly yours,
/s/ ARTER & HADDEN
ARTER & HADDEN
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Luther Medical Products, Inc.
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated August 8, 1996 appearing in the Annual
Report on Form 10-KSB of Luther Medical Products, Inc. for the years ended June
30, 1996 and 1995.
/s/ CORBIN & WERTZ
CORBIN & WERTZ
Irvine, California
April 10, 1997
