<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
QUEST MEDICAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
BOARD OF DIRECTORS OF QUEST MEDICAL, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)
(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- -------------------------------------------------------------------------------
(3) Filing Party:
- -------------------------------------------------------------------------------
(4) Date Filed:
- -------------------------------------------------------------------------------
- ----------------------
1 Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
(LOGO) QUEST Medical, lnc.
May 10, 1995
Dear Stockholder:
On behalf of the Board of Directors and management of Quest Medical, Inc., I
cordially invite you to the Annual Meeting of Stockholders to be held on
Thursday, June 22, 1995, in Allen, Texas. Information about the meeting is
presented on the following pages.
In addition to the formal items of business to be brought before the meeting,
members of management will report on the Company's operations and answer
stockholder questions.
It is important that your stock be represented at the meeting regardless of the
number of shares you hold. You are encouraged to specify your voting
preferences by so marking and dating the enclosed proxy card. But, if you wish
to vote in accordance with the directors' recommendations, all you need do is
sign and date the card.
Please complete and return the proxy card in the enclosed envelope whether or
not you plan to attend the meeting. If you do attend and wish to vote in
person, you may revoke your proxy at that time.
Thank you for your continued support of Quest Medical. We look forward to
seeing you on June 22nd.
Sincerely,
Thomas C. Thompson
President and Chief Executive Officer
<PAGE> 3
QUEST MEDICAL, INC.
ONE ALLENTOWN PARKWAY
ALLEN, TEXAS 75002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 1995
As a stockholder of Quest Medical, Inc. (the "Company"), you are hereby given
notice of and invited to attend in person or by proxy the Annual Meeting of
Stockholders of the Company to be held at the Company's offices located at One
Allentown Parkway, Allen, Texas 75002 on Thursday, June 22, 1995, at 10:00
a.m., Dallas, Texas time, for the following purposes:
1. To elect seven directors for a one-year term.
2. To approve the Quest Medical, Inc. 1995 Stock Option Plan.
3. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on April 24, 1995 as the
record date (the "Record Date") for the determination of stockholders entitled
to notice of and to vote at the meeting and any adjournment(s) thereof. Only
stockholders of record at the close of business on the Record Date are entitled
to notice of and to vote at the meeting. The transfer books will not be closed.
It is important that your shares be represented at the meeting. I urge you to
sign, date and promptly return the enclosed proxy card in the enclosed business
reply envelope. No postage is required if mailed in the United States.
By Order of the Board of Directors
F. Robert Merrill III
Secretary
Allen, Texas
May 10, 1995
<PAGE> 4
QUEST MEDICAL, INC.
-------------------
PROXY STATEMENT
-------------------
The accompanying proxy is solicited on behalf of the Board of Directors of
Quest Medical, Inc. (the "Company") for use at the Annual Meeting of
Stockholders to be held on Thursday, June 22, 1995, at 10:00 a.m., or at any
adjournment or adjournments thereof, at the place and for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders. Proxies in
the accompanying form, properly signed and received in time for the meeting,
will be voted as instructed. The persons named in the accompanying proxy will
vote the proxy for the Board of Directors' slate of directors and the approval
of the 1995 Stock Option Plan unless contrary instructions are given. At any
time before it is voted, each proxy granted may be revoked by the stockholder
by a later dated proxy, by written revocation addressed to the Secretary of the
Company at the address below or by voting by ballot at the Annual Meeting.
The cost of preparing and mailing the enclosed material will be borne by the
Company. The Company may use the services of officers and employees of the
Company (who will receive no additional compensation) to solicit proxies. The
Company intends to request banks and brokers holding shares of the Company's
stock to forward copies of the proxy material to those persons for whom they
hold shares and to request authority for the execution of proxies. The Company
will reimburse banks and brokers for their out-of-pocket expenses.
The principal executive office of the Company is located at One Allentown
Parkway, Allen, Texas 75002. This proxy statement and the accompanying proxy
card are being sent to stockholders on or about May 10, 1995.
STOCKHOLDER VOTE
Only stockholders of record at the close of business on April 24, 1995, are
entitled to vote at the Annual Meeting or any adjournment or adjournments
thereof. At April 24, 1995, there were 6,173,206 shares of Common Stock, par
value $.05 per share (the "Common Stock"), outstanding. Every holder of
outstanding shares of Common Stock entitled to be voted at the Annual Meeting
is entitled to one vote for each share held.
The presence at the Annual Meeting in person, or by proxy, of the holders of a
majority of outstanding Common Stock constitutes a quorum for the Annual
Meeting and for acting on the matters specified in the Notice. Votes withheld
from any director nominee will be counted in determining whether a quorum has
been reached. In the election of directors, stockholders
1
<PAGE> 5
are not entitled to cumulate their votes and are not entitled to vote for a
greater number of persons than the number of nominees named in this Proxy
Statement.
Assuming the presence of a quorum, the affirmative vote of a plurality of the
shares of Common Stock voted at the Annual Meeting and entitled to vote thereon
is required for the election of directors. Votes may be cast in favor of or
withheld from a director nominee. Votes that are withheld from a particular
nominee will be excluded entirely from the vote and will not affect the outcome
of the vote. Under applicable rules, brokers who hold shares in street name
have the authority to vote on certain items when they have not received
instructions from beneficial owners. Brokers who do not receive instructions
are entitled to vote on the election of directors.
Assuming the presence of a quorum, the affirmative vote of a majority of the
shares of Common Stock voted at the Annual Meeting and entitled to vote thereon
is required to adopt the 1995 Stock Option Plan. Brokers who hold shares in
street name have the authority to vote on the adoption of the 1995 Stock Option
Plan when they have not received instructions from beneficial owners.
Where a stockholder has appropriately specified how a proxy is to be voted, it
will be voted accordingly, and where no specific direction is given, it will be
voted for adoption of each of the proposals set forth in the Notice and at the
discretion of the proxy holders on all other business that may properly come
before the meeting. Any stockholder present at the Annual Meeting, but who
abstains from voting, shall be counted for purposes of determining whether a
quorum exists, but an abstention shall not be counted as an affirmative vote in
the election of the directors. With respect to the approval of the 1995 Stock
Option Plan and all other matters, an abstention would have the same effect as
a vote against the proposal.
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth as of April 24, 1995, the beneficial ownership
of each current director, each nominee for director, the officers and directors
as a group, and each stockholder known to management of the Company to own
beneficially more than 5% of the outstanding Common Stock.
2
<PAGE> 6
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OF CLASS
- ------------------ ------------------------- ----------
<S> <C> <C>
William N. Borkan 809,333 13.1%
3364 N.E. 167th Street
North Miami Beach, Florida 33160
The Equitable Companies Incorporated 559,187(2) 9.1%
787 Seventh Avenue
New York, New York 10019
John A. Gula 338,098(3) 5.5%
454 River Road
Fair Haven, New Jersey 07704
Dimensional Fund Advisors, Inc. 331,118(4) 5.4%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Thomas C. Thompson 347,170(5) 5.5%
One Allentown Parkway
Allen, Texas 75002
Linton E. Barbee 15,300(3) (6)
4446 Mill Creek Road
Dallas, Texas 75244
Robert C. Eberhart, Ph.D. 11,588(7) (6)
10519 Royal Springs
Dallas, Texas 75229
F. Robert Merrill III 45,385(8) (6)
3329 Leigh
Plano, Texas 75025
Jack E. Meyer 129,982(9) 2.1%
14405 21st Avenue North
Minneapolis, Minnesota 55447
Hugh M. Morrison 25,750(3) (6)
2517 Bluebonnet Boulevard
Houston, Texas 77030
Michael J. Torma, M.D. 3,750(7) (6)
8640 Breakers Point
Dallas, Texas 75243
David O. Turner 12,875(7) (6)
2906 Country Club Road
Garland, Texas 75043
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OF CLASS
- ------------------ ------------------------- ----------
<S> <C> <C>
All officers and directors as a group 1,077,458(10) 16.5%
(16 Persons)
- -------------------------
</TABLE>
(1) Except as otherwise stated in the footnotes to this table, each of the
officers and directors and principal stockholders referred to in this
table has sole voting and investment power with respect to all shares
beneficially owned by such persons.
(2) Based on information obtained by the Company from Schedule 13G filed
by The Equitable Companies Incorporated ("The Equitable"), pursuant to
a Joint Filing Agreement among The Equitable, Alpha Assurances
I.A.R.D. Mutuelle, Alpha Assurances Vie Mutuelle, AXA Assurances
I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, and Uni Europe
Assurance Mutuelle, and AXA, dated February 10, 1995, Alliance Capital
Management L.P., a subsidiary of The Equitable, is deemed to have
beneficial ownership of 559,187 shares of the Company's Common Stock,
as of December 31, 1994.
(3) Includes 10,300 shares subject to options.
(4) Based on information obtained by the Company from Schedule 13G filed
by Dimensional Fund Advisors, Inc. ("Dimensional") dated January 31,
1995, Dimensional, a registered investment advisor, is deemed to have
beneficial ownership of 331,118 shares of the Company's Common Stock
as of December 31, 1994, all of which shares are held in portfolios of
DFA Investment Dimensions Group Inc., a registered open-end investment
company, or in series of the DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and the DFA Participating Group
Trust, investment vehicles for qualified employee benefit plans, all
of which Dimensional serves as investment manager.
(5) Includes 116,170 shares subject to options.
(6) Does not exceed 1%.
(7) Consists entirely of shares subject to options.
(8) Includes 45,320 shares subject to options.
(9) Includes 3,863 shares subject to options.
(10) Includes 337,688 shares subject to options.
ELECTION OF DIRECTORS
Seven directors are proposed to be elected at the Annual Meeting. Each director
will serve until the next Annual Meeting of Stockholders or until his successor
shall be elected and shall qualify. Proxies in the accompanying form will be
voted for the seven nominees listed in the table that follows, except where
authority is specifically withheld by the stockholder. Jack E. Meyer, a
director of the Company since 1987, will not stand for re-election at the June
1995 Annual Meeting of Stockholders. All nominees are incumbent directors with
the exception of William N. Borkan. If any of the nominees should become
unable to accept election, or for good cause will not accept the election, the
person named in the proxy may vote for such other person or persons as may be
designated by the Board of Directors. Each of the nominees named below has
indicated his willingness to accept election, and management has no reason to
believe that any of the nominees named below will be unable or unwilling to
serve.
The nominees for directors of the Company are as follows:
<TABLE>
<CAPTION>
DIRECTOR OF
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE COMPANY
NAME PAST FIVE YEARS AGE SINCE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thomas C. Thompson President of the Company since 1979; Chief 57 1979
Executive Officer of the Company since May
1984.
John A. Gula(1) Independent healthcare consultant since 55 1979
January 1986.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
DIRECTOR OF
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE COMPANY
NAME PAST FIVE YEARS AGE SINCE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Linton E. Barbee(1) Partner, Fulbright & Jaworski L.L.P. (law 56 1983
firm) since October 1990; Partner, Hughes &
Luce (law firm) from May 1986 to October 1990.
Hugh M. Morrison(2)(3) Independent business consultant and investor 48 1983
since January 1993; President and Chief
Executive Officer of American Funeral Services
Corporation (formerly Golden Era Services,
Inc.) from December 1989 to December 1992;
Director of Dow B. Hickam from March 1984 to
October 1991.
Robert C. Eberhart, Chairman, Biomedical Engineering Program, 58 1994
Ph.D.(1) University of Texas Southwestern Medical
Center at Dallas since September 1984.
Michael J. Torma, Chair, Surgical Services of Presbyterian 52 1994
M.D.(2)(3) Hospital of Dallas and Chairman of Institute
for Surgical Sciences of Presbyterian
Healthcare System since October 1992; Command
Surgeon, Strategic Air Command, USAF from June
1990 to September 1992; Chief of Professional
Affairs & Quality Assurance for USAF Medical
Services from June 1988 to June 1990.
William N. Borkan CEO and President, NICE Technology, Inc. since 39 --
October 1991; President of Neuromed, Inc. from
May 1980 to January 1993, Chairman and CEO of
Neuromed, Inc. from May 1980 to March 1995.
</TABLE>
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Stock Option Committee
COMPENSATION AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1994, there were four (4) meetings of
the Board of Directors. Each director (with the exception of Michael J. Torma,
M.D.) attended at least 75% of the aggregate of (a) the total number of
meetings of the Board of Directors held during the period for which he served
as a director and (b) the total number of meetings held by all committees of
the Board on which he served. Dr. Torma was elected to the Board of Directors
during June 1994 and attended two of three subsequent board meetings. The
Board has three committees: Audit, Compensation, and Stock Option.
5
<PAGE> 9
Prior to the Annual Meeting, the Stock Option Committee consisted of Mr. Meyer,
Mr. Morrison, and Dr. Torma, all non-management directors. This committee is
vested with full authority to select participants, grant options, determine the
number of shares subject to each option, the exercise price of each option and
in general, to make, administer and interpret such rules and regulations as it
deems necessary to administer the Company's Stock Option Plans. The Stock
Option Committee held three (3) meetings during the year ended December 31,
1994. It is expected that Mr. Gula will be elected at the board meeting
immediately following the Annual Meeting to replace Mr. Meyer on the Stock
Option Committee.
Prior to the Annual Meeting, the Compensation Committee consisted of Mr. Meyer,
Mr. Morrison, and Dr. Torma, all non-management directors. This committee
establishes executive compensation policies and makes recommendations to the
Board of Directors. The Compensation Committee held three (3) meetings during
the year ended December 31, 1994. It is expected that Mr. Gula will be elected
at the board meeting immediately following the Annual Meeting to replace Mr.
Meyer on the Compensation Committee.
Prior to the Annual Meeting, the Audit Committee consisted of Mr. Barbee, Mr.
Gula, and Dr. Eberhart, all non-management directors. This committee acts as a
liaison between the Board of Directors and the independent auditors. The
committee reviews with the independent auditors the planning and scope of
financial statement audits, the results of those audits and the adequacy of
internal accounting controls. It also monitors other corporate and financial
policies. The Audit Committee held two (2) meetings during the year ended
December 31, 1994. It is expected that Mr. Borkan will be elected at the board
meeting immediately following the Annual Meeting to replace Mr. Gula on the
Audit Committee.
Non-management directors received $1,000 for each Board of Director meeting
attended and reimbursement for expenses incurred in attending such meetings.
Non-management directors who serve on committees did not receive additional
compensation for serving on such committees.
In April 1980, the Company adopted the Quest Medical, Inc. Directors' Stock
Option Plan, (the "Directors' Plan"), which has been amended on several
different occasions, most recently in July 1992 to increase the number of
shares to be held by an advisory director at any time from 12,000 to 15,000.
Under the Directors' Plan, nontransferable stock options may be granted to
directors and advisory directors of the Company. Under the Directors' Plan,
the option price per share cannot be less than the fair market value per share
on the date the option is granted. The Directors' Plan further provides that
the exercise period for options cannot exceed six years. Under the Directors'
Plan, each option vests ratably over a four-year period.
6
<PAGE> 10
During the year ended December 31, 1994, two directors were granted options
under the Directors' Plan. Robert C. Eberhart, Ph.D. was granted 15,000
options at an exercise price of $4.375 and Michael J. Torma, M.D. was granted
15,000 options at an exercise price of $6.375. During the year ended December
31, 1994, no options were exercised under the Directors' Plan; however, during
April 1995, two directors exercised options which were scheduled to expire
during May and August of 1995. Linton E. Barbee purchased 15,450 shares of
Common Stock at an exercise price of $2.18. The net value of such securities
to Mr. Barbee (market value less exercise price) was approximately $78,331.
Hugh M. Morrison purchased 6,180 shares of Common Stock at an exercise price of
$1.45. The net value of such securities to Mr. Morrison was approximately
$38,161.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AGE POSITION SINCE
---- --- -------- ---------------------
<S> <C> <C> <C>
Thomas C. Thompson 57 President, Chief Executive 1979
Officer and Director
David O. Turner 48 Executive Vice President, Chief 1994
Operating Officer
F. Robert Merrill III 45 Vice President - Finance, Chief 1981
Financial Officer, Treasurer
and Secretary
James P. Calhoun 45 Vice President - Human 1995
Resources
George L. Carlson 54 Vice President 1995
Eric D. Dufford 36 Vice President - Sales and 1994
Marketing
Kenneth A. Jones 38 Vice President - Research and 1993
Development
Robert E. Paysour 37 Vice President - Corporate 1989
Development
O. Mark Samples 45 Vice President - Manufacturing 1990
</TABLE>
7
<PAGE> 11
<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AGE POSITION SINCE
---- --- -------- ---------------------
<S> <C> <C> <C>
W. Lynn Switzer 46 Vice President - Quality 1991
</TABLE>
Executive officers are elected annually at the first meeting of the Board of
Directors following the Annual Meeting of Stockholders and serve at the
discretion of the Board of Directors.
Thomas C. Thompson has been President and Director of the Company since May
1979 and Chief Executive Officer of the Company since May 1984.
David O. Turner has been Executive Vice President and Chief Operating Officer
of the Company since April 1994. From July 1990 to December 1993, Mr. Turner
was employed by Texas Instruments as Worldwide Operations Manager of the
Consumer Products Division. From October 1989 to June 1990, Mr. Turner was
employed by Texas Instruments as Material Management Center Site and Operations
Manager for the Defense Group. From August 1982 to September 1989, Mr. Turner
was employed by Texas Instruments as Quality Manager for the Electro-Optics
division of the Defense Group.
F. Robert Merrill III has been Vice President - Finance and Treasurer of the
Company since February 1981, Secretary since February 1989 and Chief Financial
Officer since April 1994.
James P. Calhoun has been Vice President - Human Resources of the Company since
April 1995. From April 1992 to April 1995, Mr. Calhoun was employed by Hogan
Quality Institute as Executive Director. From February 1988 to April 1992, Mr.
Calhoun was employed by Harris Adacom Corporation as Vice President of Human
Resources and Corporate Quality Programs.
George L. Carlson has been Vice President of the Company since April 1995.
From January 1993 to April 1995, Mr. Carlson was employed by Neuromed, Inc. as
President. From January 1989 to December 1992, Mr. Carlson was employed by
Neuromed, Inc. as Vice President of Sales and Marketing.
Eric D. Dufford has been Vice President - Sales and Marketing of the Company
since June 1994. From January 1991 to May 1994, Mr. Dufford was employed by
St. Jude Medical, Inc. where he held various positions within the Sales and
Marketing area, including Director of International Sales. From June 1983 to
December 1990, Mr. Dufford was employed by Shiley, Inc. where he held various
positions within the Cardiopulmonary Division, including Regional Manager.
8
<PAGE> 12
Kenneth A. Jones has been Vice President - Research and Development of the
Company since March 1993. From August 1991 to February 1993, Mr. Jones was
Director of Research and Development of the Company. From March 1978 to July
1991, Mr. Jones was employed by the Shiley Division of Pfizer, Inc. where he
held various positions in Research and Development including Manager of New
Product Development for cardiopulmonary products.
Robert E. Paysour has been Vice President - Corporate Development of the
Company since May 1989. From May 1988 to April 1989, Mr. Paysour was Director
of Corporate Development of the Company. From July 1984 through April 1988,
Mr. Paysour was employed by Marakon Associates, a management consulting firm,
as an associate and manager.
O. Mark Samples has been Vice President - Manufacturing of the Company since
March 1990. From November 1983 to February 1990, Mr. Samples was Director of
Manufacturing of the Company.
W. Lynn Switzer has been Vice President - Quality of the Company since April
1991. From October 1990 to March 1991, Mr. Switzer was Director of Quality of
the Company. From June 1971 to September 1990, Mr. Switzer was employed by
Baxter International where he held various positions within the quality area,
including Director of Regulatory Affairs and Quality Assurance.
COMPENSATION OF EXECUTIVE OFFICERS
The following tables set forth certain information regarding compensation,
aggregate stock option grants and exercises during 1994 and year-end stock
option values for the Chief Executive Officer and all other executive officers
whose total annual salary and bonus exceeded $100,000 for the last fiscal year.
9
<PAGE> 13
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
------------------------ -------
Other Restricted Securities All other
Name and Annual Stock Underlying LTIP Compen-
Principal Salary Bonus Comp. Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs (#) ($) ($)
- ---------- ---- ---------- -------- -------- --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas C. 1994 $168,480 $39,206 -- -- -- -- $ 8,600(1)
Thompson 1993 $164,077 $23,918 -- -- -- -- $ 8,797(2)
(C.E.O) 1992 $162,000 $21,393 -- -- -- -- $ 8,264(3)
- ---------------------------------------------------------------------------------------------------------
David O. 1994 $ 84,675 $18,911 -- -- -- -- $ 2,809(4)
Turner 1993 $ -- $ -- -- -- -- -- $ --
(C.O.O.) 1992 $ -- $ -- -- -- -- -- $ --
- ---------------------------------------------------------------------------------------------------------
F. Robert 1994 $ 92,150 $12,185 -- -- -- -- $ 4,557(5)
Merrill, 1993 $ 89,449 $ 7,972 -- -- -- -- $ 4,437(6)
III 1992 $ 88,320 $ 6,702 -- -- -- -- $ 3,996(7)
(C.F.O.)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes $4,500 matching employer contribution under the Employee's Saving
Plan (401K) and $4,100 for use of Company vehicle.
(2) Includes $4,497 matching employer contribution under the Employee's Savings
Plan (401K) and $4,300 for use of Company vehicle.
(3) Includes $4,364 matching employer contribution under the Employee's Savings
Plan (401K) and $3,900 for use of Company vehicle.
(4) Represents use of Company vehicle.
(5) Includes $3,057 matching employer contribution under the Employee's Savings
Plan (401K) and $1,500 for car allowance.
(6) Includes $2,937 matching employer contribution under the Employee's Savings
Plan (401K) and $1,500 for car allowance.
(7) Includes $2,496 matching employer contribution under the Employee's Savings
Plan (401K) and $1,500 for car allowance.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE
NAME GRANTED (#) FISCAL YEAR PRICE ($/SH) EXPIRATION DATE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas C. Thompson -- -- -- --
(C.E.O.)
- ------------------------------------------------------------------------------------------------
David O. Turner 51,500(1) 28.9% $4.61 4/13/04
(C.O.O.)
- ------------------------------------------------------------------------------------------------
F. Robert Merrill, III -- -- -- --
(C.F.O.)
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Adjusted to reflect 3% stock dividend.
10
<PAGE> 14
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES ACQUIRED VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
ON EXERCISE REALIZED OPTIONS/SARS AT FY-END (#) AT FY-END ($)
-------------------------- -------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas C. 2,000 $10,850 116,170 -- $417,863 --
Thompson
(C.E.O)
- ------------------------------------------------------------------------------------------------------
David O. -- -- -- 51,500 -- $32,960
Turner
(C.O.O.)
- ------------------------------------------------------------------------------------------------------
F. Robert -- -- 41,457 3,863 $146,020 $9,039
Merrill, III
(C.F.O.)
- ------------------------------------------------------------------------------------------------------
</TABLE>
The Company does not have any deferred compensation, profit sharing, pension or
retirement plans, except for the Employees Savings Plan and Trust (the "Savings
Plan"), which was adopted by the Board of Directors effective as of January 1,
1988. The Savings Plan is available generally to any employee who has
completed at least six months of service and is at least 21 years of age. The
Savings Plan permits employees to elect salary deferral contributions of up to
15% of compensation (subject to limits imposed by the Internal Revenue Code)
and requires the Company to make matching contributions equal to 50% of a
participant's salary deferral contributions, to a maximum of salary deferral
contributions equal to 6% of the participant's total cash compensation, up to
$150,000. The amount of the matching employer contribution may be increased or
decreased at the discretion of the Board of Directors. During the year ended
December 31, 1994, the Company committed to contribute approximately $102,961
to the Savings Plan, of which $18,399 is to be contributed on behalf of the
following executive officers: Thomas C. Thompson--$4,500, Kenneth A.
Jones--$2,865, F. Robert Merrill, III--$3,057, Robert E. Paysour--$2,775, O.
Mark Samples--$2,713, and W. Lynn Switzer--$2,489.
1995 STOCK OPTION PLAN
Effective March 30, 1995, the Board of Directors adopted the Quest Medical,
Inc. 1995 Stock Option Plan (the "Plan"). Certain options granted under the
Plan are intended to qualify as "incentive stock options" pursuant to Section
422 of the Internal Revenue Code of 1986 while certain other options granted
under the Plan will constitute nonqualified options. The Plan is being
submitted for approval by the stockholders of the Company to qualify for the
benefits of Rule 16b-3 under the Securities and Exchange Act and to permit the
granting of qualified options under the Internal Revenue Code.
11
<PAGE> 15
As background, in 1979, the Board of Directors adopted an employee stock
option plan to attract and retain key employees. In 1992, the Board and the
stockholders amended the plan to increase the number of shares issuable upon
stock option exercises to 1,019,867(1). As of April 24, 1995, options to
purchase 615,710 shares of Common Stock were outstanding but unexercised, and
only 3,534 shares of Common Stock remained available under the plan for the
grant of additional stock options. (A total of 400,623 shares had previously
been issued upon the exercise of stock options granted under such plan.)
Because the Company has used stock options to successfully attract and retain
key employees in the past, the Board of Directors determined that it would be
in the Company's best interest to adopt a new stock option plan.
The purpose of the Plan is to attract and retain the best available personnel
for positions of substantial responsibility and to provide incentives to such
personnel to promote the success of the business of the Company and its
subsidiaries. On March 31, 1995, the Company consummated the acquisition of
Neuromed, Inc. The Board of Directors believes it is essential to provide key
employees of Neuromed, Inc. with an opportunity to acquire an equity interest
in the Company and thereby share in its growth and prosperity, and to encourage
such employees' continued involvement with the Company. In addition, as the
Company continues to grow through acquisitions or the development of new
products, the Board of Directors believes it is necessary to provide such
equity-based incentives to other key employees. Consequently, the Board of
Directors recommends that the Company's stockholders vote FOR the adoption of
the Plan.
The 1995 Stock Option Plan is set forth as Appendix A to this Proxy Statement,
and the following description is qualified in its entirety by this reference
thereto.
The total number of shares of Common Stock issuable under the Plan shall be
250,000 shares, provided, however, that on January 1 of each year (commencing
on January 1, 1996), the aggregate number of shares of Common Stock then
issuable upon the exercise of options shall be increased by the same percentage
that the total number of issued and outstanding shares of Common Stock
increased from the preceding January 1 to the following December 31 (if such
percentage is positive).
Officers or other key employees of the Company or one of its subsidiaries
(including Neuromed, Inc.) are eligible to receive stock option grants under
the Plan. The Stock Option Committee has determined that employees of the
Company or its subsidiaries whose salaries exceed a certain level are eligible
to receive stock options under the Plan. Approximately 59 people were eligible
to participate in the Plan as of April 24, 1995.
- ------------------------------------------
(1) Adjusted to reflect 3% stock dividend.
12
<PAGE> 16
Under the terms of the Plan, the Stock Option Committee of the Board of
Directors (the "Committee"), consisting of two or more Disinterested Directors,
will administer the Plan. The Committee is generally empowered to interpret the
Plan, to prescribe, amend and rescind rules and regulations relating to it, and
to determine the terms and provisions of the respective option agreements. The
Committee may suspend or terminate the Plan at any time, although all Qualified
Options must be granted within ten years from the effective date of the Plan.
Each option granted under the Plan will be evidenced by option agreements
containing such terms and provisions as are approved by the Committee and
executed on behalf of the Company by an appropriate officer. The per share
exercise price of each option is determined by the Committee, but will in no
event be less than the Fair Market Value of the Common Stock at the time the
option is granted. Generally, each option will be for a term of not less than
five years nor more than ten years from the date of grant. Vesting of the
options will be determined by the Committee, although for the most part,
options will become exercisable with respect to 25% of the total number of
shares subject to the option twelve months after the date of grant and with
respect to an additional 25% at the end of each twelve-month period thereafter
on a cumulative basis during the succeeding three years.
Upon exercise of an option under the Plan, the exercise price for the purchased
shares will be immediately payable in cash, by check, or at the Committee's
option, previously owned shares of Common Stock having a Fair Market Value on
the date immediately preceding the exercise date equal to the exercise price.
The Committee may, but is not required to, make financing available to the
Participant for the purchase of shares of Common Stock pursuant to such option
on such terms as it shall specify.
Options granted under the Plan are not assignable or transferable other than by
will or the laws of descent and distribution, and during the optionee's
lifetime, the option may be exercised only by such optionee.
Options granted under the Plan shall cease to be exercisable with respect to
any vested shares of Common Stock subject to the option (a) 90 days following
the date the optionee ceases to be an employee of the Company or any of its
subsidiaries if such cessation of service is not due to the death or permanent
and total disability of the optionee or (b) twelve months following the date
such optionee ceases to be an employee of the Company or any of its
subsidiaries if such cessation of service is due to the death or permanent and
total disability of the optionee.
13
<PAGE> 17
If any option granted under the Plan expires or is terminated or canceled
unexercised as to any shares of Common Stock, such released shares may again be
optioned.
The following table sets forth information with respect to stock options
granted under the Plan as of April 24, 1995:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING OPTIONS
NAME OR GROUP OF OPTIONEE(S) EXERCISE PRICE GRANTED
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
George L. Carlson $7.125 40,000
President - Neuromed, Inc.
Vice President
James P. Calhoun $7.125 25,000
Vice President - Human Resources
All Current Executive Officers as a Group, $7.125 65,000
Including Persons Named Above
(2 Persons)
All Other Employees as a Group $7.125 102,000
(13 Persons)(1)
</TABLE>
(1) Consists entirely of employees of Neuromed, Inc.
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
The Company has engaged the services of the law firm of Fulbright & Jaworski
L.L.P. located in Dallas, Texas. Mr. Barbee, a director of the Company, is a
partner of such firm.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP has been selected by the Board of Directors as the Company's
independent auditors for the current year. Representatives of Ernst & Young
LLP are expected to be present at the Annual Meeting and will have an
opportunity to make a statement if they desire to do so, and are expected to be
available to respond to appropriate questions.
PROPOSALS OF STOCKHOLDERS
A proper proposal submitted by a stockholder in accordance with applicable
rules and regulations for presentation at the Company's Annual Meeting of
Stockholders in 1996 and
14
<PAGE> 18
received at the Company's principal executive office by January 11, 1996, will
be included in the Company's Proxy Statement and form of proxy relating to such
Annual Meeting.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for action at
the meeting other than the matters set forth herein. Should any other matter
requiring a vote of stockholders arise, the proxies in the enclosed form confer
upon the person or persons entitled to vote the shares represented by such
proxies discretionary authority to vote the same in accordance with their best
judgment in the interest of the Company.
FINANCIAL STATEMENTS AVAILABLE
A copy of the Company's 1994 Annual Report accompanies this Proxy Statement.
The Annual Report does not constitute a part of the proxy solicitation
material.
UPON WRITTEN REQUEST TO F. ROBERT MERRILL III, CORPORATE SECRETARY, QUEST
MEDICAL, INC., ONE ALLENTOWN PARKWAY, ALLEN, TEXAS 75002, THE COMPANY WILL
PROVIDE WITHOUT CHARGE COPIES OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES
AND EXCHANGE COMMISSION ON FORM 10- KSB.
By Order of the Board of Directors
F. Robert Merrill III
Secretary
Allen, Texas
May 10, 1995
15
<PAGE> 19
APPENDIX A
QUEST MEDICAL, INC.
1995 STOCK OPTION PLAN
1. Purpose of the Plan. This Plan shall be known as the Quest
Medical, Inc. 1995 Stock Option Plan. The purpose of the Plan is to attract
and retain the best available personnel for positions of substantial
responsibility and to provide incentives to such personnel to promote the
success of the business of Quest Medical, Inc. and its subsidiaries.
Certain options granted under this Plan are intended to qualify as
"incentive stock options" pursuant to Section 422 of the Internal Revenue Code
of 1986, as amended from time to time, while certain other options granted
under the Plan will constitute nonqualified options.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" shall mean the Board of Directors of the
Corporation.
(b) "Common Stock" shall mean the Common Stock, $.05 par
value per share, of the Corporation. Except as otherwise provided herein, all
Common Stock issued pursuant to the Plan shall have the same rights as all
other issued and outstanding shares of Common Stock, including but not limited
to voting rights, the right to dividends, if declared and paid, and the right
to pro rata distributions of the Corporation's assets in the event of
liquidation.
(c) "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
(d) "Committee" shall mean the committee described in
Section 18 that administers the Plan.
(e) "Corporation" shall mean Quest Medical, Inc., a Texas
corporation.
(f) "Date of Grant" shall mean the date on which an
Option is granted pursuant to this Plan or, if the Committee so determines, the
date specified by the Committee as the date the award is to be effective.
A-1
<PAGE> 20
(g) "Disinterested Director" shall mean a director who is
not, during the one year prior to service as an administrator of the Plan, or
during such service, granted or awarded an Option pursuant to the Plan or any
other plan of the Corporation or any of its affiliates (except as may be
permitted by Rule 16b-3 promulgated under the Exchange Act).
(h) "Employee" shall mean any officer or other key
employee of the Corporation or one of its Subsidiaries (including any director
who is also an officer or key employee of the Corporation or one of its
Subsidiaries).
(i) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(j) "Fair Market Value" shall mean the closing sale price
(or average of the quoted closing bid and asked prices if there is no closing
sale price reported) of the Common Stock on the date specified as reported by
NASDAQ or by the principal national stock exchange on which the Common Stock is
then listed. If there is no reported price information for the Common Stock,
the Fair Market Value will be determined by the Committee, in its sole
discretion. In making such determination, the Committee may, but shall not be
obligated to, commission and rely upon an independent appraisal of the Common
Stock.
(k) "Nonqualified Option" shall mean any Option that is
not a Qualified Option.
(l) "Option" shall mean a stock option granted pursuant
to Section 6 of this Plan.
(m) "Optionee" and "Participant" shall each mean an
individual who receives an Option pursuant to this Plan.
(n) "Plan" shall mean the Quest Medical, Inc. 1995 Stock
Option Plan, as amended from time to time.
(o) "Qualified Option" shall mean any Option that is
intended to qualify as an "incentive stock option" within the meaning of
Section 422 of the Code.
(p) "Rule 16b-3" shall mean Rule 16b-3 of the rules and
regulations under the Exchange Act as Rule 16b-3 may be amended from time to
time and any successor provisions to Rule 16b-3 under the Exchange Act.
A-2
<PAGE> 21
(q) "Subsidiary" shall mean any now existing or
hereinafter organized or acquired company of which more than fifty percent
(50%) of the issued and outstanding voting stock is owned or controlled
directly or indirectly by the Corporation or through one or more Subsidiaries
of the Corporation.
3. Term of Plan. The Plan was adopted by the Board effective as
of March 30, 1995 and, to qualify for the benefits of Rule 16b-3 and to permit
the granting of Qualified Options under the Code, will be submitted for
approval by the shareholders of the Corporation by the affirmative votes of the
holders of a majority of the shares of Common Stock then issued and
outstanding. The Plan shall continue in effect until terminated pursuant to
Section 18(a).
4. Shares Subject to the Plan. Subject to adjustment as provided
in Section 17 hereof, the aggregate number of shares of Common Stock issuable
upon the exercise of Options pursuant to this Plan shall be 250,000 shares;
provided, however, that on January 1 of each year (commencing on January 1,
1996), the aggregate number of shares of Common Stock then issuable upon the
exercise of Options shall be increased by the same percentage that the total
number of issued and outstanding shares of Common Stock increased from the
preceding January 1 to the following December 31 (if such percentage is
positive). For example, if the total number of issued and outstanding shares
of Common Stock on January 1, 1996 were 5,000,000, the total number of issued
and outstanding shares of the Corporation on December 31, 1996 were 5,500,000,
and the aggregate number of shares of Common Stock then issuable upon the
exercise of Options pursuant to this Plan were 250,000, the aggregate number of
shares of Common Stock issuable under the Plan effective January 1, 1997 would
be 275,000 (a 10% increase). Shares issuable upon the exercise of Options may
either be authorized but unissued shares or treasury shares. The Corporation
shall, during the term of this Plan, reserve and keep available a number of
shares of Common Stock sufficient to satisfy the requirements of the Plan. If
an Option should expire or become unexercisable for any reason without having
been exercised in full, then the shares that were subject thereto shall, unless
the Plan shall have terminated, become immediately available for the grant of
additional Options under this Plan, subject to the limitations set forth above.
In addition, for purposes of calculating the aggregate number of shares that
may be issued under this Plan, only the net shares issued (including the
shares, if any, withheld for tax withholding requirements) shall be counted
when shares of Common Stock are used as full or partial payment for shares
issued upon exercise of a Qualified Option or a Nonqualified Stock Option.
Shares tendered by a Participant as payment for shares issued upon such
exercise shall be available for reissuance under the Plan.
A-3
<PAGE> 22
5. Eligibility. Qualified Options may be granted under Section 6
of the Plan to such Employees of the Corporation or its Subsidiaries as shall
be determined by the Committee. Nonqualified Options may be granted under
Section 6 of the Plan to such Employees of the Corporation or its Subsidiaries
as shall be determined by the Committee. In connection with the granting of
Qualified Options, the aggregate Fair Market Value (determined at the Date of
Grant of a Qualified Option) of the shares with respect to which Qualified
Options are exercisable for the first time by an Optionee during any calendar
year (under all such plans of the Optionee's employer corporation and its
parent and subsidiary corporations as defined in Section 424(e) and (f) of the
Code, or a corporation or a parent or subsidiary corporation of such
corporation issuing or assuming an Option in a transaction to which Section
424(a) of the Code applies (collectively, such corporations described in this
sentence are hereinafter referred to as "Related Corporations")) shall not
exceed $100,000 or such other amount as from time to time provided in Section
422(d) of the Code or any successor provision. In connection with the granting
of any Options under the Plan, the aggregate number of shares of Common Stock
issuable to any single Employee shall not exceed the number of shares subject
to the Plan referred to in Section 4.
6. Grant of Options. The Committee shall determine the number of
shares of Common Stock to be offered from time to time pursuant to Options
granted hereunder and shall grant Options under the Plan. The grant of Options
shall be evidenced by Option agreements containing such terms and provisions as
are approved by the Committee and executed on behalf of the Corporation by an
appropriate officer.
7. Time of Grant of Options. The date of grant of an Option
under the Plan shall be the date on which the Committee awards the Option or,
if the Committee so determines, the date specified by the Committee as the date
the award is to be effective. Notice of the grant shall be given to each
Participant to whom an Option is granted promptly after the date of such grant.
8. Price. The Option price for each share of Common Stock
subject to an Option (the "Exercise Price") granted pursuant to Section 6 of
the Plan shall be determined by the Committee at the Date of Grant; provided,
however, that (a) the Exercise Price for any Option shall not be less than 100%
of the Fair Market Value of the Common Stock at the Date of Grant, and (b) if
the Optionee owns on the Date of Grant more than 10 percent of the total
combined voting power of all classes of stock of the Corporation or its parent
or any of its subsidiaries, as more fully described in Section 422(b)(6) of the
Code or any successor provision (such shareholder is referred to herein as a
"10-Percent Stockholder"), the Exercise Price for any Qualified Option granted
to such Optionee shall not be less than 110% of the Fair Market Value of the
Common Stock at the Date of Grant.
A-4
<PAGE> 23
9. Vesting. Subject to Section 11 of this Plan, each Option
award under the Plan shall vest in accordance with the vesting provisions set
forth in the applicable Option agreement. The Committee may, but shall not be
required to, permit acceleration of vesting upon any sale of the Corporation or
similar transaction. A Participant's Option agreement may contain such
additional provisions with respect to vesting as the Committee shall specify.
10. Exercise. A Participant may pay the Exercise Price of the
shares of Common Stock as to which an Option is being exercised by the delivery
of (a) cash, (b) check, (c) at the Committee's option, previously owned shares
of Common Stock having a Fair Market Value on the date immediately preceding
the exercise date equal to the Exercise Price or (d) at the Committee's option,
any other consideration that the Committee determines is consistent with the
Plan's purpose and applicable law. If the shares to be purchased are covered
by an effective registration statement under the Securities Act of 1933, as
amended, any Option granted under the Plan may be exercised by a broker-dealer
acting on behalf of an Optionee if (a) the broker-dealer has received from the
Optionee or the Corporation a fully- and duly-endorsed agreement evidencing
such Option, together with instructions signed by the Optionee requesting the
Corporation to deliver the shares of Common Stock subject to such Option to the
broker-dealer on behalf of the Optionee and specifying the account into which
such shares should be deposited, (b) adequate provision has been made with
respect to the payment of any withholding taxes due upon such exercise, and (c)
the broker-dealer and the Optionee have otherwise complied with Section
220.3(e)(4) of Regulation T, 12 CFR Part 220, or any successor provision.
11. When Qualified Options May be Exercised. No Qualified Option
shall be exercisable at any time after the expiration of ten (10) years from
the Date of Grant; provided, however, that if the Optionee with respect to a
Qualified Option is a 10-Percent Stockholder on the Date of Grant of such
Qualified Option, then such Option shall not be exercisable after the
expiration of five (5) years from its Date of Grant. In addition, if an
Optionee of a Qualified Option ceases to be an employee of the Corporation or
any Related Corporation for any reason, such Optionee's vested Qualified
Options shall not be exercisable after (a) 90 days following the date such
Optionee ceases to be an employee of the Corporation or any Related
Corporation, if such cessation of service is not due to the death or permanent
and total disability (within the meaning of Section 22(e)(3) of the Code) of
the Optionee, or (b) twelve months following the date such Optionee ceases to
be an employee of the Corporation or any Related Corporation, if such cessation
of service is due to the death or permanent and total disability (as defined
above) of the Optionee. Upon the death of an Optionee, any vested Qualified
Option exercisable on the date of death may be exercised by the Optionee's
estate or by a person who acquires the right to exercise such
A-5
<PAGE> 24
Qualified Option by bequest or inheritance or by reason of the death of the
Optionee, provided that such exercise occurs within both the remaining option
term of the Qualified Option and twelve months after the date of the Optionee's
death. This Section 11 only provides the outer limits of allowable exercise
dates with respect to Qualified Options; the Committee may determine that the
exercise period for a Qualified Option shall have a shorter duration than as
specified above.
12. Option Financing. Upon the exercise of any Option granted
under the Plan, the Corporation may, but shall not be required to, make
financing available to the Participant for the purchase of shares of Common
Stock pursuant to such Option on such terms as the Committee shall specify.
13. Withholding of Taxes. The Committee shall make such
provisions and take such steps as it may deem necessary or appropriate for the
withholding of any taxes that the Corporation is required by any law or
regulation of any governmental authority to withhold in connection with any
Option including, but not limited to, withholding the issuance of all or any
portion of the shares of Common Stock subject to such Option until the
Participant reimburses the Corporation for the amount it is required to
withhold with respect to such taxes, canceling any portion of such issuance in
an amount sufficient to reimburse the Corporation for the amount it is required
to withhold or taking any other action reasonably required to satisfy the
Corporation's withholding obligation.
14. Conditions Upon Issuance of Shares. The Corporation shall not
be obligated to sell or issue any shares upon the exercise of any Option
granted under the Plan unless the issuance and delivery of shares shall comply
with all provisions of applicable federal and state securities laws and the
requirements of NASDAQ or any stock exchange upon which shares of the Common
Stock may then be listed.
As a condition to the exercise of an Option, the Corporation
may require the person exercising the Option to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of applicable federal and state securities laws.
The Corporation shall not be liable for refusing to sell or
issue any shares covered by any Option if the Corporation cannot obtain
authority from the appropriate regulatory bodies deemed by the Corporation to
be necessary to lawfully sell or issue such shares. In addition, the
Corporation shall have no obligation to any Participant, express or implied, to
list, register or otherwise qualify the shares of Common Stock covered by any
Option.
A-6
<PAGE> 25
No Participant will be, or will be deemed to be, a holder of
any Common Stock subject to an Option unless and until such Participant has
exercised his or her Option and paid the purchase price for the subject shares
of Common Stock. Each Option under this Plan shall be transferable only by
will or the laws of descent and distribution and shall be exercisable during
the Participant's lifetime only by such Participant.
Any Common Stock issued pursuant to the exercise of an Option
to a person who would be deemed an officer or director of the Corporation under
Rule 16b-3 shall not be transferred until at least six months have elapsed from
the Date of Grant to the date of disposition of the Common Stock.
15. Restrictions on Shares. Shares of Common Stock issued
pursuant to the Plan shall be subject to restrictions on transfer under
applicable federal and state securities laws. The Board may impose such
additional restrictions on the ownership and transfer of shares of Common Stock
issued pursuant to the Plan as it deems desirable; any such restrictions shall
be set forth in any Option agreement entered into hereunder.
16. Modification of Options. At any time and from time to time,
the Committee may execute an instrument providing for modification, extension
or renewal of any outstanding Option, provided that no such modification,
extension or renewal shall impair the Option without the consent of the holder
of the Option or conflict with the provisions of Rule 16b-3. Notwithstanding
the foregoing, (a) in the event of such a modification, substitution, extension
or renewal of a Qualified Option, the Committee may increase the exercise price
of such Option if necessary to retain the qualified status of such Option, and
(b) the Committee may, in its discretion and without the holder's consent,
convert any Qualified Option into a Nonqualified Option.
17. Effect of Change in Stock Subject to the Plan. In the event
that each of the outstanding shares of Common Stock (other than shares held by
dissenting stockholders) shall be changed into or exchanged for a different
number or kind of shares of stock of the Corporation or of another corporation
(whether by reason of merger, consolidation, recapitalization,
reclassification, split-up, combination of shares or otherwise), or in the
event a stock split or stock dividend shall have occurred, then the Corporation
may either (a) substitute for each share of Common Stock then subject to
Options or available for Options the number and kind of shares of stock into
which each outstanding share of Common Stock (other than shares held by
dissenting stockholders) shall be so changed or exchanged, or the number of
shares of Common Stock as is equitably required in the event of a stock split
or stock dividend, together with an appropriate adjustment of the Exercise
Price, or (b) cancel all such Options as of the effective date of any merger,
consolidation,
A-7
<PAGE> 26
recapitalization, reclassification, split-up or combination of shares by giving
written notice to each holder thereof or his personal representatives of its
intention to do so and by permitting the exercise of all such Options, without
regard to determinations of periods or installments of exercisability during
the thirty (30) day period immediately preceding such effective date. The
Committee may, but shall not be required to, provide additional anti-dilution
protection to a Participant under the terms of the Participant's Option
agreement or otherwise.
18. Administration.
(a) Notwithstanding anything to the contrary herein, to
the extent necessary to comply with the requirements of Rule 16b-3, the Plan
shall be administered by the Board, if each member is a Disinterested Director,
or by a committee of two or more Disinterested Directors appointed by the Board
(the group responsible for administering the Plan is referred to herein as the
"Committee"). Options may be granted under Sections 6 and 7, respectively,
only by majority agreement of the members of the Committee. Subject to the
limitations and qualifications set forth in this Plan, the Committee shall also
determine the number of Options to be granted, the number of shares subject to
each Option grant, the exercise price or prices of each Option, the vesting and
exercise period of each Option, whether an Option may be exercised as to less
than all of the Common Stock subject thereto, and such other terms and
conditions of each Option, if any, as are consistent with the provisions of
this Plan. Except with respect to Section 18(b) of this Plan, the Committee
shall have complete authority to construe, interpret and administer the
provisions of this Plan and the provisions of the Option agreements entered
into hereunder; to prescribe, amend and rescind rules and regulations
pertaining to this Plan; to suspend or discontinue this Plan (subject to
Section 18(d)); and to make all other determinations necessary or deemed
advisable in the administration of the Plan. The determinations,
interpretations and constructions made by the Committee shall be final and
conclusive. No member of the Committee shall be liable for any action taken,
or failed to be taken, made in good faith relating to the Plan or any award
thereunder, and the members of the Committee shall be entitled to
indemnification and reimbursement by the Corporation in respect of any claim,
loss, damage or expense (including attorneys' fees) arising therefrom to the
fullest extent permitted by law.
(b) Members of the Committee shall be specified by the
Board, and shall consist solely of Disinterested Directors. Disinterested
Directors shall not be eligible to receive Options to purchase Common Stock
pursuant to Section 6 of this Plan.
A-8
<PAGE> 27
(c) Notwithstanding Section 18(a), to comply with Rule
16b-3, no amendment may be made without the approval of the shareholders of the
Corporation by the affirmative votes of the holders of a majority of the shares
of Common Stock then issued and outstanding, which amendment would materially
(i) increase the benefits accruing to Participants, (ii) increase the number of
securities which may be issued under the Plan, other than in accordance with
Section 17 hereof, or (iii) modify the requirements as to eligibility for
participation in the Plan.
(d) Although the Committee may suspend or discontinue the
Plan at any time, all Qualified Options must be granted within ten (10) years
from the effective date of the Plan or the date the Plan is approved by the
shareholders of the Corporation, whichever is earlier.
19. Continued Employment Not Presumed. Nothing in this Plan or
any document describing it nor the grant of any Option shall give any
Participant the right to continue in the employment of the Corporation or
affect the right of the Corporation to terminate the employment of any such
person with or without cause.
20. Liability of the Corporation. Neither the Corporation, its
directors, officers or employees or the Committee, nor any Subsidiary which is
in existence or hereafter comes into existence, shall be liable to any
Participant or other person if it is determined for any reason by the Internal
Revenue Service or any court having jurisdiction that any Qualified Option
granted hereunder does not qualify for tax treatment as an incentive stock
option under Section 422 of the Code.
21. GOVERNING LAW. THE PLAN SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF STATE OF TEXAS AND THE UNITED STATES, AS
APPLICABLE, WITHOUT REFERENCE TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
22. Severability of Provisions. If any provision of this Plan is
determined to be invalid, illegal or unenforceable, such invalidity, illegality
or unenforceability shall not affect the remaining provisions of the Plan, but
such invalid, illegal or unenforceable provision shall be fully severable, and
the Plan shall be construed and enforced as if such provision had never been
inserted herein.
A-9
<PAGE> 28
<TABLE>
<CAPTION>
APPENDIX B
<S> <C> <C> <C> <C> <C> <C>
/X/ Please mark your
votes as in this
example
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. Proposal to approve the Quest / / / / / /
Directors Medical, Inc. 1995 Stock Option
(see reverse) Plan.
For, except vote withheld from the following nominee(s): 3. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come
- --------------------------------------------------------- before the meeting or any adjournment(s) thereof.
This proxy will be voted in accordance with the specifications
made above.
SIGNATURE(S) DATE
---------------------------------------- ------------
SIGNATURE(S) DATE
---------------------------------------- ------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title as such.
QUEST MEDICAL, INC.
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 22, 1995
O
X The undersigned hereby (a) acknowledges receipt of the Notice of Annual Meeting of Stockholders of Quest Medical, Inc. to be
Y held on June 22, 1995, and the Proxy Statement (herein so called) in connection therewith, each dated May 10, 1995, (b) appoints
F. Robert Merrill, III and John A. Gula as Proxies, or either of them, each with the power to appoint a substitute, (c)
authorizes the Proxies to represent and vote, as designated below, all the shares of Common Stock of Quest Medical, Inc., held
of record by the undersigned on April 24, 1995, at such annual meeting and at any adjournment(s) thereof and (d) revokes any
proxies heretofore given.
1. Election of Directors, Nominees:
Linton E. Barbee John A. Gula Thomas C. Thompson
William N. Borkan Hugh M. Morrison Michael J. Torma, M.D.
Robert C. Eberhart, Ph.D.
2. Proposal to approve the Quest Medical, Inc. 1995 Stock Option Plan.
You are encouraged to specify your choices by marking the appropriate boxes (SEE REVERSE SIDE) but you need not mark any boxes if
you wish to vote in accordance with the Board of Directors' recommendations. The Proxy Committee cannot vote your shares unless you
sign and return this card.
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