<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 / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
/X/ Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
TRIMEDYNE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / Fee not required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
<PAGE> 2
TRIMEDYNE, INC.
P.O. BOX 57001, 2801 BARRANCA RD.
IRVINE, CA 92619-7001
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN, that the Annual Meeting of the Stockholders of
Trimedyne, Inc. (the "Company") will be held on May 22, 1997 at 2:00 P.M. at
2801 Barranca Road, Irvine, CA 92606 for the election of two Class 3 directors
of the Company to hold office for a three year period and until their successors
are duly elected and qualified, to approve the Trimedyne, Inc. 1997 Incentive
and Non-Qualified Stock Option Plan and to transact such other business as may
properly come before the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on April 11, 1997,
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the annual meeting.
If you do not expect to be personally present at the meeting, but wish your
stock to be voted for the business to be transacted thereat, the Board of
Directors requests that you fill in, sign and date the enclosed proxy and
promptly return it by mail in the envelope provided.
BY ORDER OF THE BOARD OF DIRECTORS
MARVIN P. LOEB
Chairman
April 24, 1997
YOUR VOTE IS IMPORTANT
IF YOU CANNOT BE PRESENT, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
AND PROMPTLY RETURN IT IN THE ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY IF
MAILED IN THE UNITED STATES.
THANK YOU FOR ACTING PROMPTLY
<PAGE> 3
TRIMEDYNE, INC.
P.O. BOX 57001, 2801 BARRANCA RD.
IRVINE, CA 92619-7001
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 1997
INTRODUCTION
The Annual Meeting of Stockholders ("Annual Meeting") is called to elect
two directors as Class 3 directors of the Board of Directors of Trimedyne, Inc.
(the "Company") for a three year period and to approve the Trimedyne, Inc. 1997
Incentive and Non-Qualified Stock Option Plan. The meeting, however, will be
open for the transaction of such other business as may properly come before the
meeting although, as of the date of this proxy statement, management does not
know of any other business that will come before the meeting. If any other
matters do come before the meeting, the persons named in the enclosed form of
proxy are expected to vote said proxy in accordance with their judgment on such
matters.
This proxy statement and the accompanying proxy card are first being mailed
to stockholders on or about April 30, 1997. A copy of the Annual Report for the
fiscal year ended September 30, 1996, which includes audited financial
statements, is included herewith.
The solicitation of proxies in the accompanying form is made by, and on
behalf of, the Board of Directors, and no compensation will be paid therefor.
There will be no solicitation of proxies other than by mail or personal
solicitation by officers and employees of the Company. The Company will make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of proxy material to the beneficial owners of
shares held of record by such persons, and such persons will be reimbursed by
the Company for reasonable expenses incurred by them in connection therewith. A
stockholder executing the accompanying proxy has the power to revoke it at any
time prior to the exercise thereof by filing with the Secretary of the Company:
(i) a duly executed proxy bearing a later date; or (ii) a written instrument
revoking the proxy; or (iii) by attending the Annual Meeting and voting in
person.
VOTING SECURITIES
The Board of Directors has fixed the close of business on April 11, 1997,
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the annual meeting.
As of April 24, 1997, the outstanding capital stock of the Company
consisted of 10,895,747 shares of Common Stock. Each share of Common Stock is
entitled to one vote in all matters.
The shares for which the accompanying proxy is solicited will be voted FOR
the proposals described herein, if no direction to the contrary is given,
provided that the proxy is executed and returned by the stockholder prior to the
annual meeting.
<PAGE> 4
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the name of each beneficial owner of more
than five percent of the Company's Common Stock known to the Company, by each
director of the Company, by each named executive officer, and by all directors
and executive officers as a group, the number of shares beneficially owned by
such persons as of March 31, 1997 and the percent of the class so owned. Each
person named in the table has sole investment and sole voting power with respect
to the shares of Common Stock set forth opposite his name, except as otherwise
indicated. All shares are directly owned or are held for the stockholder in
street name, except as otherwise indicated.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT
NAME AND ADDRESS(A) NATURE OF OF CLASS
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
- --------------- ---------------------------------------------- -------------------- -----------
MAJOR SHAREHOLDER
--------------------
<S> <C> <C> <C>
Common Stock Marvin P. Loeb................................ 597,000(1) 5.5%
$.01 Par Value
DIRECTORS
AND EXECUTIVE OFFICERS
----------------------------------------------
Peter Hyde.................................... 7,128(2) *
Donald Baker.................................. 20,000(3) *
Bruce N. Barron............................... 40,000(3) *
Richard F. Horowitz........................... 40,000(3) *
Dean Crawford................................. 14,510(4) *
James L. Kelly................................ 19,473(5) *
Richard Demmer................................ 14,926(6) *
All Directors and Executive Officers as a
Group (8 persons)............................. 753,037(7) 6.9%
</TABLE>
- ---------------
(A) Each address above is "in care of" the Company.
(1) Includes 559,000 shares held by Mr. Loeb and his wife, 8,000 shares held by
his wife, and non-qualified currently exercisable options to purchase 30,000
shares. (See "EXECUTIVE COMPENSATION"). Mr. Loeb is also a director and CEO
of the Company.
(2) Includes currently exercisable options to purchase 5,000 shares.
(3) Consists solely of currently exercisable options to purchase Common Stock.
(4) Includes currently exercisable options to purchase 14,310 shares.
(5) Includes currently exercisable options to purchase 12,600 shares.
(6) Includes currently exercisable options to purchase 7,800 shares.
(7) Includes currently exercisable options to purchase 139,710 shares, which
includes the options referred to in notes 1 through 6 above.
* Represents less than 1%.
2
<PAGE> 5
ITEM I
ELECTION OF DIRECTORS
At the Annual Meeting two directors are to be elected to hold office for a
three year period and until their successors have been duly elected and
qualified. The Company's by-laws provide for a Board of Directors comprised of
seven directors, divided into three groups, each with terms of three years.
There are currently two vacancies on the Board of Directors.
The election of directors requires the affirmative vote of at least a
majority of shares present or represented at the Annual Meeting at which a
quorum (one-third of the outstanding shares) is present or represented. It is
the intention of the persons named in the accompanying proxy form to vote FOR
the election of the persons named in the table below as directors of the
Company, unless authority to do so is withheld. In the event that the below
listed nominee for director should become unavailable for election for any
presently unforeseen reason, the persons named in the accompanying proxy form
have the right to use their discretion to vote for a substitute.
The following table sets forth the name and age of the current nominees and
of each Class 1 and Class 2 director (whose term does not expire at the Annual
Meeting) and the year he was first elected a director:
<TABLE>
<CAPTION>
NAME AND YEAR
APPOINTED TO THE BOARD POSITION HELD AGE
- ------------------------------------------ ------------------------------------------ ---
<S> <C> <C>
NOMINEES FOR CLASS 3 DIRECTORS
Marvin P. Loeb (1978)..................... Chairman of the Board, Chief Executive 70
Officer, and Director
Richard F. Horowitz (1983)................ Director 56
CLASS 1 DIRECTORS
Bruce N. Barron (1988).................... Director 42
Peter T. Hyde (1993)...................... President, Chief Operating Officer and 49
Director
CLASS 2 DIRECTOR
Donald Baker (1983)....................... Director 68
</TABLE>
Marvin P. Loeb has been a director of the Company since 1980, Chairman of
the Board of the Company since March 1981, Chief Executive Officer of the
Company since April 1991 and he served as President of the Company from April
1991 until November 1992. He has been a Director of Pharmos, Inc. (formerly
Pharmatec, Inc.), a publicly-held company developing drug delivery systems,
since December 1982 and Chairman from that date until October 1992. Since May
1986, he has been Chairman and a director of Cardiomedics, Inc., a privately
held company which is developing a circulatory assist device. Since November
1988, he has been Chairman of Ultramedics, Inc., a privately held company whose
principal interest is its investment in Cardiomedics, Inc. Mr. Loeb was a
Director of Gynex Pharmaceuticals, Inc., (now Biotechnology General
Corporation), a publicly-held pharmaceutical manufacturer, from April 1986 until
August 1993, and was its Chairman from April 1986 to August 1992. From April
1986 to June 1994, he was Chairman and a Director of Xtramedics, Inc. (now
Athena Medical Corporation), a publicly held company engaged in the development
of a feminine hygiene product. From December 1979, he was Chairman of Automedix
Sciences, Inc., (now COMC, Inc.), a publicly held company in the voice and data
telecommunications business, of which he continues to serve as a Director. Since
1980, Mr. Loeb has been a director of Contracap, Inc., (Chairman from 1988 to
1993), a publicly held company which was developing a contraceptive product and
is now inactive. Mr. Loeb was Chairman from 1983 to April 1987 and Vice Chairman
from April 1987 to April
3
<PAGE> 6
1992 of Petrogen, Inc., a privately held company which was developing
genetically engineered bacteria for oil and toxic waste cleanup and is now
inactive. Mr. Loeb has been President of Master Health Services, Inc., a family
held medical consulting firm, since 1973, and Marvin P. Loeb and Company, a
family held patent licensing firm, since 1983. Mr. Loeb is Mr. Barron's
father-in-law. Mr. Loeb holds an honorary Doctor of Science Degree from Pacific
States University and a Bachelor of Science Degree from the University of
Illinois.
Richard F. Horowitz has been a director of the Company since April 1983. He
was a director of Gynex Pharmaceuticals, Inc. (now Biotechnology General
Corporation), from August 1988 to August 1992 and has been a Director of
Automedix Sciences, Inc. (now COMC, Inc.) since November 1988 and of
Cardiomedics, Inc. since 1992. Mr. Horowitz has been a practicing attorney in
New York City for the past 32 years. He has been a member of the firm of Heller,
Horowitz & Feit, P.C. (formerly Heller, Horowitz & Feit) since January 1979.
Heller, Horowitz & Feit, P.C. has been securities counsel to the Company and to
other entities with which Mr. Loeb is associated. Mr. Horowitz is a graduate of
Columbia College and Columbia Law School. He is a member of the Association of
the Bar of the City of New York and the New York State Bar Association.
The other directors of the Company whose terms do not expire at the Annual
Meeting are:
Bruce N. Barron has been a director of the Company since August 1988 and
was also a director of the Company from May 1980 to March 1983. Since April 1995
he has been President and CEO of Molecular Geriatrics Corporation, a privately
owned company developing pharmaceuticals to treat and a diagnostic to detect,
Alzheimer's Disease, having been Chief Financial Officer since September 1993
and a director since June 1994. He was Chief Financial Officer and a director of
Gynex Pharmaceuticals, Inc. (now Biotechnology General Corporation), from May
1985 to August 1993 and Secretary from November 1985 to July 1989. He was Vice
President-Finance and a director of Contracap, Inc. from April 1988 to June
1993, a director of Petrogen, Inc. from July 1990 to April 1992; President and
Chief Executive Officer of Pharmos, Inc., a biotechnology company, from July
1990 to October 1992, a director of Pharmos, Inc., from August 1988 to October
1992, and from July 1985 to July 1986 (Vice President Finance from July 1985 to
July 1987); a director of Xtramedics, Inc. from September 1988 to June 1994,
Vice Chairman and Chief Executive Officer from September 1989 to February 1994
and Vice President-Finance from September 1988 to September 1989; a director of
Automedix Sciences (now COMC, Inc.) since 1984 and Secretary/Treasurer since
December 1987; Treasurer, Chief Financial Officer and a director of Direct
Therapeutics, Inc. (a privately owned company developing therapeutics for the
treatment of cancer) since June 1991; a director of Applied Starch Technologies
(a privately owned company developing starch based products) since January 1992;
a director of Cardiomedics, Inc. since May 1986 and a director of Toll Coating
Services, a privately owned company providing specialty coating to various
industries since January 1995. He has served without compensation from time to
time since 1978 as a director, Secretary and/or Treasurer of Master Health
Services, Inc., and other privately owned companies some of which Marvin P.
Loeb, his father-in-law, has an interest. Members of Mr. Barron's family, but
not Mr. Barron, are beneficiaries of a trust established by Mr. Loeb. Mr. Barron
holds a B.S. degree in Accounting from the University of Illinois.
Peter T. Hyde has been a director of the Company since January 1993. He has
been the President and Chief Operating Officer of the Company since November
1992. Prior to this appointment, he was a consultant for the Company from August
1992 until November, 1992. From March 1982 until August 1992, Mr. Hyde held
numerous management positions at Alcon Surgical Inc., Fort Worth, Texas, an
ophthalmic company (from November 1986 to March 1989 he served as Director of
Sales and Marketing, Instrumentation; from March 1989 to October 1989 he was
Vice President of Marketing, and from October 1989 to August 1992 he
4
<PAGE> 7
was Vice President of Sales and Marketing, Instrumentation). Mr. Hyde holds a
Bachelor of Science degree from the United States Military Academy at West
Point.
Donald Baker has been a director of the Company since May 1983. Mr. Baker
recently retired after 39 years as a partner of the law firm of Baker &
McKenzie. Mr. Baker recently retired as Secretary, General Counsel and a
Director of Air South, Inc., an airline operating in the Southeast. He holds a
J.D.S. degree from the University of Chicago Law School. Mr. Baker is a Director
of the Mid-America Committee on International Business and Government
Cooperation, Chicago, Automedix Sciences (now COMC, Inc.), Santa Ana, CA and
Cardiomedics, Inc., Santa Ana, CA. He is a member of the Illinois, Chicago and
American Bar Associations.
EXECUTIVE OFFICERS
The executive officers of the Company who are not also directors or
nominees for director are:
James L. Kelly, 49 years of age, has been Vice President-Finance,
Treasurer, and Chief Financial Officer of the Company since April, 1992. Prior
to joining the Company he served as Vice President-Finance and Chief Financial
Officer for Newport Printing Systems from July 1989 until April 1992. From
October 1986 until July 1989 Mr. Kelly served as Corporate Controller for
Printronix Inc. Mr. Kelly holds a B.S. degree in Accounting from the University
of Bridgeport (Connecticut) and is a CPA.
Richard A. Demmer, 65 years of age, is currently Vice President of
International Sales and Corporate Secretary since 1990. Mr. Demmer had been
Executive Vice President and Secretary of Trimedyne and President, Industrial
Products Division (Poly-Optical Products, Inc. and Laser Ionics, Inc.) since
September 1987. He had been Secretary-Treasurer of the Company from September
1987 through November 1988 and previously served in that capacity from September
1985 to December 1986. He had been Vice President and General Manager,
Industrial Products Division since September 1986. Prior to September 1986, Mr.
Demmer was Vice President and General Manager (since 1978) and a Director (since
April 1985) of the Company's subsidiary, Poly-Optical Products, Inc.
L. Dean Crawford, 52 years of age, has been Vice
President-Operations/Research & Development since July 1995 and Vice
President-Delivery Systems since May 1992. Mr. Crawford has been with Trimedyne
since February 1989. Before joining Trimedyne, he was a manufacturing engineer
and R&D Section Manager for Baxter Edwards Critical Care Division. Mr. Crawford
has a Bachelors and Masters of Engineering Degree in Mechanical Engineering from
Brigham Young University.
BOARD OF DIRECTORS MEETING AND COMMITTEES
During the 1996 fiscal year, there were three meetings of the Board of
Directors. A number of actions, however, were taken by written unanimous consent
resolutions of the directors. In 1988, the Board of Directors created a standing
Audit Committee and a standing Compensation Committee, each of which currently
consists of Messrs. Baker, Barron and Horowitz. There was one formal committee
meeting during the fiscal 1996 year, and several informal meetings and
discussions were held at various times throughout the fiscal year and numerous
written consent resolutions were made by the Compensation Committee. The Board
does not have a standing Nominating Committee. No director was absent from more
than 33% of the Board meetings or meetings of the committee(s) of which he was a
member.
5
<PAGE> 8
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth the executive compensation paid during the
fiscal years ended September 30, 1996, 1995 and 1994 to all Executive officers
of Trimedyne who earned more than $100,000 in combined salary and bonus in
fiscal 1996:
SUMMARY COMPENSATION
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION(1) SECURITIES
NAME OF INDIVIDUAL ------------------ UNDERLYING ALL OTHER
AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(2)
- --------------------------------- ----- ------- ------ ------------ ------------------
<S> <C> <C> <C> <C> <C>
Marvin P. Loeb.................... 1996 199,518 -- 60,000 12,487
Chairman of the Board and Chief 1995 189,858 -- -- 12,770
Executive Officer 1994 184,698 -- 30,000 9,668
Peter T. Hyde..................... 1996 175,268 -- 40,000 15,444
President and Chief Operating 1995 172,200 -- -- 14.516
Officer 1994 171,509 11,881 25,000 15,653
James L. Kelly.................... 1996 108,303 -- 17,000 7,495
V.P. Finance and Chief Financial 1995 104,453 -- 55,000(3) 7,404
and Accounting Officer 1994 100,387 -- 10,000 7,298
Richard A. Demmer................. 1996 84,773 19,057 7,500 8,282
V.P. of International Sales, 1995 80,581 13,029 54,000(4) 7,633
Secretary 1994 90,504 -- -- 8,248
</TABLE>
- ---------------
(1) Amounts shown include cash and non-cash compensation earned and received by
executive officers.
(2) Amounts of All Other Compensation shown for officers include the cost of (i)
car allowances and expenses, and (ii) costs of 401(k) matching
contributions.
(3) Includes 49,500 shares of Common Stock repricing.
(4) Includes 50,000 shares of Common Stock repricing.
REPORT OF THE BOARD OF DIRECTORS CONCERNING COMPENSATION
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE IS PROVIDED SOLELY TO
THE SHAREHOLDERS OF THE COMPANY PURSUANT TO THE REQUIREMENTS OF SCHEDULE 14A
PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AND SHALL NOT BE DEEMED
TO BE "FILED" WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE PURPOSE OF
ESTABLISHING STATUTORY LIABILITY. THIS REPORT SHALL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE IN ANY DOCUMENT PREVIOUSLY OR SUBSEQUENTLY FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION THAT INCORPORATES BY REFERENCE ALL OR ANY
PORTION OF THIS PROXY STATEMENT.
The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company, approves the compensation plans
and specific compensation levels for executive officers, and administers the
1996 Incentive and Non-Qualified Stock Option Plan as well as the Company's
other Stock Option Plans as they related to executive officers. The Compensation
Committee is composed of three independent, non-employee directors who have no
interlocking relationships as defined by the SEC.
The Compensation Committee believes that the Chief Executive Officer's
(CEO) and Chief Operating Officer's (COO) compensation should be heavily
influenced by Company performance. Therefore, although there is necessarily some
subjectiveness in setting their salaries, major elements of the compensation
package
6
<PAGE> 9
are related to Company performance. The Committee establishes their salaries by
considering the salaries of executives of comparably-sized companies and their
performance according to data obtained by the Committee from independent outside
information.
The Compensation Committee has adopted similar policies with respect to
compensation of other officers of the Company. Using salary survey data received
from outside sources, the Committee establishes base salaries that are within
the range of salaries for persons holding similarly responsible positions at
other companies. In addition, the Committee considers factors such as relative
company performance, the individual's past performance and future potential in
establishing the base salaries of executive officers.
As with the CEO and COO, the number of options granted to the other
officers is determined by the subjective evaluation of the executive's ability
to influence the Company's long-term growth. All options are originally granted
at the current market price on the date of grant. Since the value of an option
bears a direct relationship to the Company's stock price, it is an effective
incentive for management to create value for stockholders. The Committee,
therefore, views stock options as an important component of its long-term,
performance-based compensation philosophy.
Donald Baker
Bruce N. Barron
Richard F. Horowitz
7
<PAGE> 10
PERFORMANCE GRAPH
The following graph shows a five year comparison of cumulative total
returns* for Trimedyne, Stock Market Index (U.S. companies) and a Peer Group**
Index.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Trimedyne NASDAQ PEER
--------------------- --------- ------ ----
<S> <C> <C> <C>
1991 100 100 100
1992 127 112 75
1993 84 147 107
1994 52 148 98
1995 52 204 195
1996 56 243 199
</TABLE>
- ---------------
* Total returns assumes reinvestment of dividends.
** The Peer Group includes Coherent Inc., Laser Industries, Ltd, Medstone
International, Inc.,Surgical Laser Technology, Inc., and Laserscope, Inc.
Each company within the Peer Group was selected based on their similar
product lines and marketing areas.
IT SHOULD BE NOTED THAT THIS GRAPH REPRESENTS HISTORICAL STOCK PRICE
PERFORMANCE AND IS NOT NECESSARILY INDICATIVE OF ANY FUTURE STOCK PRICE
PERFORMANCE.
THE FOREGOING REPORT OF THE BOARD OF DIRECTORS REGARDING COMPENSATION AND
THE PERFORMANCE GRAPH THAT APPEARS IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE
DEEMED TO BE SOLICITING MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF
1934 OR INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED UNLESS SPECIFICALLY
INCORPORATED.
8
<PAGE> 11
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information related to stock options granted
to the named executive officers during the fiscal year ended September 30, 1996:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEE OR BASE FOR OPTION TERM(3)
OPTIONS IN FISCAL PRICE(2) EXPIRATION ---------------------
NAME GRANTED #(1) YEAR ($/SHARE) DATE 5% 10%
- --------------------- ------------ ----------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Marvin P. Loeb....... 60,000 12.2 6.63 05/17/06 $250,174 $633,991
Peter T. Hyde........ 40,000 8.2 6.63 05/17/06 $166,783 $422,661
James L. Kelly....... 17,000 3.5 6.63 05/17/06 $ 70,883 $179,631
Richard A. Demmer.... 7,500 1.5 6.63 05/17/06 $ 31,272 $ 79,249
</TABLE>
- ---------------
(1) All options were granted under the Company's Incentive Stock Option Plan on
May 17, 1996. Each of the options vest over five years from the grant date
and are exercisable one year from the grant date. Each option has a maximum
term of ten years, subject to earlier termination in the event of the
optionee's cessation of employment with the Company.
(2) The exercise price per share of the option granted represented the fair
market value of the underlying shares of common stock on the date the
respective options were granted.
(3) The potential realizable value is calculated from the closing price of
Common Stock on May 17, 1996, the date of grant to officers. These amounts
represent assumed rates of appreciation only and may not necessarily be
achieved. Actual gains, if any, are dependent on the future performance of
the Common Stock, as well as the continued employment of the Named Executive
Officers through the vesting period. The potential realizable values
indicated have not taken into account amounts required to be paid as income
tax under the Internal Revenue Code of 1986, as amended (the "Code"), and
any applicable state laws.
9
<PAGE> 12
STOCK OPTIONS HELD AT END OF FISCAL YEAR
The following table provides information related to options exercised
during the 1996 fiscal year and unexercised options held by the named executive
officers as of the end of such fiscal year.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON AT FY END(#)(1) AT FY END($)(2)
EXERCISE VALUE --------------------------- ---------------------------
(#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marvin P. Loeb.............. 0 0 30,000 90,000 0 0
Peter T. Hyde............... 120,000 824,768 5,000 115,000 0 0
James L. Kelly.............. 22,000 214,271 12,600 37,400 10,344 17,074
Richard A. Demmer........... 27,000 241,154 7,800 26,700 6,418 15,952
</TABLE>
- ---------------
1) Non-Qualified Stock Options granted have a term of six years, and Incentive
Stock Options granted have a term of ten years. All Options are subject to
earlier termination, with options becoming exercisable over periods of two,
three, or four years for Non-Qualified Stock options and five years for
Incentive Stock Options from dates of grant. See footnote 1 to "Stock Option
Grants in Last Fiscal Year" above for additional information or general terms
which apply to all stock option awards made.
2) Values were calculated by multiplying the closing market price of Trimedyne
Common Stock at September 30, 1996 ($4.31 per share as reported by NASDAQ on
that date) by the respective number of shares and subtracting the option
price. For this calculation, only those options with an exercise price
greater than $4.31 per share were taken into consideration. No dollar value
represents the market price is lower than the exercise price.
TRANSACTIONS WITH MANAGEMENT
The following transactions occurred during fiscal 1996 in which the present
directors, officers and key employees of the Company had a direct or indirect
material interest. The Company believes that the terms of the transactions
described below are as favorable as could have been obtained with unaffiliated
third parties.
Mr. Horowitz, a director of the Company, is a member of the firm of Heller,
Horowitz & Feit, P.C., securities counsel to the Company. Heller, Horowitz &
Feit, P.C. also represents other companies of which Mr. Loeb is a director,
officer and/or controlling stockholder. During the fiscal year ended September
30, 1996, the company paid $39,692 to the above law firm. Mr. Barron, a
director, is also a consultant to the Company and was compensated at the rate of
$2,800 per month receiving a total of $33,600 in fiscal 1996.
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ITEM II
PROPOSAL TO APPROVE THE 1997 INCENTIVE AND
NON-QUALIFIED STOCK OPTION PLAN.
The Company's Option Plans (which are essentially identical), provide for
the issuance, pursuant to the exercise of stock options granted thereunder, of a
maximum of 1,750,000 shares of Common Stock of the Company. The Company's
Non-Qualified Plan, which was approved by the Directors in 1988 (and amended in
1989 and 1991 to increase the number of shares subject to the Plan), provides
for the issuance, pursuant to the exercise of stock options under the
Non-Qualified Plan, of a maximum of 1,242,000 shares of Common Stock of the
Company. The 1996 Incentive and Non-Qualified Stock Option Plan, under which
300,000 shares of Common Stock were reserved for issuance, was approved by the
Board and the Shareholders in 1996. Incentive Stock Options may only be granted
to officers and employees of the Company. Non-Qualified Stock Options may be
granted to officers, employees, part-time employees, directors, consultants,
advisers and contractors of the Company. The Option Plans and the Non-Qualified
Plan are sometimes referred to herein as the "1996 Plan".
As of December 31, 1996, the Company had granted options to purchase all of
the shares reserved for granting of options authorized under the Option Plans
and the Non-Qualified Plan. The Board of Directors has adopted, subject to
shareholder approval, the Company's 1997 Incentive and Non-Qualified Stock
Option Plan ("1997 Plan") which, in most material respects, is similar to a
composite of the Prior Plans. The 1997 Plan permits options to purchase up to an
additional 500,000 shares of Common Stock to be granted to employees, officers,
directors and consultants of the Company.
The Annual Meeting of the shareholders will consider whether to approve the
1997 Plan. The full text of the 1997 Plan is appended to this proxy statement as
Appendix A, and the following summary is qualified in its entirety by reference
to the 1997 Plan.
The purpose of the 1997 Plan is to encourage stock ownership by officers,
employees, directors (whether or not they are also employees) and consultants of
the Company and its subsidiaries, in order to increase their proprietary
interest in the success of the Company and to encourage them to remain in the
employ of, or maintain their relationship with, the Company. It is intended that
certain of the options granted under the 1997 Plan will qualify as incentive
stock options under Section 422 of the Internal Revenue Code.
The 1997 Plan is administered by a committee appointed by the Board of
Directors (the "Committee"). The persons eligible to receive incentive stock
options under the 1997 Plan are such officers and employees (whether or not they
are directors) of the Company and its subsidiaries as the Committee shall
select, provided that any persons who own, directly or indirectly, more than 10%
of the outstanding stock of the Company (or any parent or subsidiary thereof)
may not receive options at an exercise price less than 110% of the fair market
value of the Company's Common Stock as defined in the 1997 Plan. All directors,
officers, employees and consultants of the Company and its subsidiaries are
eligible to receive non-qualified stock options under the 1997 Plan. Members of
the Committee will only be eligible to receive "formula options" while they are
members. It is the express intent of the Board of Directors of the Company that
the 1997 Plan comply with all the conditions necessary to qualify for the
exemptions provided by Rule 16b-3 promulgated under the Securities Exchange Act
of 1934.
The maximum number of shares of Common Stock available for issuance under
the 1997 plan is 500,000, subject to adjustment in the event of stock splits,
stock dividends, mergers, consolidations and the like. Common Stock subject to
options that expire or terminate will again be available for options under the
1997
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Plan. Options may be granted under the 1997 Plan for 10 years following the date
the 1997 Plan is approved by the shareholders.
The Committee will designate the persons to receive options, the number of
shares to be optioned and the terms of the options, including the option price
and the duration of each option.
The price at which shares of Common Stock may be purchased upon exercise of
an incentive stock option must be at least 100% of the fair market value of such
stock on the date the option is granted (or 110% for a person holding more than
10% of the Company's outstanding Common Stock). The closing bid price of the
Common Stock of the Company on March 31, 1997 was $3.25 per share.
The aggregate fair market value (determined at the time the option is
granted) of the Common Stock with respect to which options granted after
December 31, 1986 are exercisable for the first time in any calendar year by an
optionee under the 1997 Plan or any of the other Option Plans of the Company, a
Parent or Subsidiaries, shall not exceed $100,000. Other than with regard to
grants of "formula options", the Committee will fix the time or times when, and
the extent to which, an option is exercisable, provided that no option will be
exercisable earlier than one year of later than ten years after the date of
grant. Unless otherwise determined by the committee, incentive stock options
will vest 20% per year during the five years following the grant of such
options. The option price is payable in cash and/or check or in shares of common
stock of the corporation based upon the fair market value of those shares on the
date of exercise. The Company may grant a loan to an employee, pursuant to the
loan provision of the 1997 Plan, for the purpose of exercising an option. If the
option price paid is in the form of shares of the Company's Common Stock, the
Committee may grant a "reload option" equal to the number of shares surrendered
on exercise, as defined in the 1997 Plan.
Upon termination of an optionee's employment, all options will terminate,
except that any option that was exercisable on the date employment terminated
may, to the extent then exercisable, be exercised within three months
thereafter. If an optionee dies while employed by the Company or during such
three-month period, the option may be exercised within one year after death by
the decedent's estate of his legatees or distributees, but only to the extent
exercisable at the time of death, and in any event, no later than such option
could have been exercised had such event not occurred.
The Board of Directors may amend, suspend or discontinue the 1997 Plan, but
it must obtain stockholder approval to (i) increase the number of shares subject
to the 1997 Plan by a material amount, (ii) change the designation of the class
of employees eligible to receive options, (iii) decrease the price at which
options may be granted, except that the Board may, without stock holder
approval, accept the surrender of outstanding options and authorize the granting
of new options in substitution therefor specifying a lower exercise price that
is not less than the fair market value of the Common Stock on the date the new
option is granted, (iv) remove the administration of the 1997 Plan from the
Committee, (v) render any member of the Committee eligible to receive an option
under the 1997 Plan, other than a "formula option", while serving thereon, or
(vi) amend the 1997 Plan in such manner that options issued under it fail to
meet the requirements of Incentive Stock Options as defined in Section 422 of
the Internal Revenue Code.
Under current federal income tax law, the grant of incentive stock options
under the 1997 Plan or the prior Plans will not result in any taxable income to
the optionee or any deduction for the Company at the time the options are
granted. The optionee recognizes no gain upon the exercise of an option.
However, the amount by which the fair market value of the Common Stock at the
time the option is exercised exceeds the option price is an "item of tax
preference" of the optionee, which may cause the optionee to be subject to the
alternative minimum tax. If the optionee holds the shares of Common Stock
received on exercise of the option at least one year from the date of exercise
and two years from the date of grant, he will be taxes at the time of
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<PAGE> 15
sale at long-term capital gains rates, if any, on the amount by which the
proceeds of the sale exceed the option price. If the optionee disposes of the
Common Stock before the required holding period is satisfied, ordinary income
will generally be recognized in an amount equal to the excess of the fair market
value of the shares of Common Stock at the date of exercise over the option
price, or, if the disposition is a taxable sale or exchange, the amount of gain
realized on such sale or exchange if that is less. If, as permitted by the 1997
Plan or the prior Plan, the Board of Directors permits an optionee to exercise
an option by delivering already owned shares of Common Stock (valued at fair
market value), the optionee will not recognize gain as a result of the payment
of the option price with such already owned shares. However, if such shares were
acquired pursuant to the previous exercise of an option, and were held less than
one year after acquisition or less than two years from the date of grant, the
exchange will constitute a disqualifying disposition resulting in immediate
taxation of the gain on the already owned shares as ordinary income. If is not
clear how the gain will be computed on the disposition of shares acquired by
payment with already owned shares.
The affirmative vote of the holders of a majority of the shares present and
entitled to vote at the meeting is required for approval of the 1997 Plan. The
Board of Directors believes that, in the competitive market for highly qualified
personnel, it is critical for companies to offer a variety of benefits in order
to attract, retain and motivate key employees of outstanding ability. Since
there are no shares available for future grants under the Prior Plans, the Board
believes that authorizing the issuance of additional options is necessary to
accomplish this objective. Accordingly, the Board of Directors recommends a vote
FOR adoption of the 1997 Plan. Unless they are otherwise directed by the
stockholders, the proxies intend to vote FOR this proposal.
INDEPENDENT PUBLIC ACCOUNTANT
The Company has appointed Price Waterhouse, LLP as independent public
accountants to examine the consolidated financial statements of the Company for
the current fiscal year. The selection of Price Waterhouse was approved by the
Board of Directors prior to their appointment. Price Waterhouse, LLP has advised
the Company that they do not have any material financial interests in, or any
connection (other than as independent accountants) with the Company.
A representative of Price Waterhouse is expected to be present at the
Annual Meeting and will have the opportunity to make a statement if the
representative desires to do so and is expected to be available to respond to
appropriate questions from stockholders.
STOCKHOLDERS PROPOSALS FOR 1997 ANNUAL MEETING OF STOCKHOLDERS
Proposals which stockholders intend to present at the 1998 Annual Meeting
of Stockholders must be received by the Company by December 31, 1997 to be
eligible for inclusion in the proxy material for the 1998 Annual Meeting.
ANNUAL REPORT ON FORM 10-K
Upon sending a written request to Trimedyne, Inc., P.O. Box 57001, 2801
Barranca Road, Irvine, California 92619-7001, Attention: Vice President-Finance,
stockholders may obtain, free of charge, a copy of the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1996, and any amendments
thereto, as filed with the Securities and Exchange Commission.
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OTHER MATTERS
As of the date of this Proxy Statement, the only business which management
expects to be considered at the Annual Meeting is the election of directors and
approval of the Trimedyne, Inc. 1997 Incentive and Non-Qualified Stock Option
Plan. However, if any other matters come before the Annual Meeting, the persons
named in the enclosed form of proxy are expected to vote the proxy in accordance
with their best judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS,
Marvin P. Loeb
Chairman of the Board
Dated: April 24, 1997
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APPENDIX A
1997 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
1. PURPOSE
This Incentive and Non-Qualified Stock Option Plan (the "Plan") is intended
to encourage stock ownership of Trimedyne, Inc., a Nevada Corporation (the
"Corporation") by officers, directors, consultants and employees of the
Corporation and any subsidiary corporations (the "Subsidiaries"), as defined in
Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"), so
that they may acquire or increase their proprietary interest in the success of
the Corporation and Subsidiaries, and to encourage them to remain in the employ
of, or maintain their relationship with, the Corporation and/or the
Subsidiaries. It is further intended that options issued pursuant to this Plan
shall constitute either "incentive stock options" within the meaning of Section
422 of the Code ("Incentive Stock Options") or "non-qualified stock options",
the tax consequences of which are governed by Section 83 of the Code
("Non-Qualified Stock Options"), of the type designated at the time of grant.
Any option granted pursuant to this Plan which for any reason fails to qualify
as an Incentive Stock Option shall be deemed to have been granted as an option
not qualified under Section 422 of the Code. The Corporation intends this Plan
to enable it to issue Non-Qualified Stock Options, with terms similar in most
respects to Incentive Stock Options. Non-Qualified Stock Options may be granted
independently of Incentive Stock Options.
2. ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board of
Directors of the Corporation (the "Committee"). Each member on the Committee
shall by a "disinterested person" within the meaning of Rule 16b-3 as
promulgated under the Securities Exchange Act of 1934, as amended (the "1934
Act"). Such Committee shall consist of not less than two members of the
Corporation's Board of Directors. The Board of Directors may from time to time
remove members from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board of Directors. The
Committee shall select one of its members as Chairman, and shall hold meetings
at such times and places as it may determine. A majority of the Committee at
which a quorum is present, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall by the valid acts of the
Committee. The Committee shall from time to time at its discretion determine (i)
those officers, directors, consultants and employees (including key and non-key)
who shall be granted options; (ii) the number of shares of stock to be optioned
to each; and (iii) regardless of the express provisions of the Plan, the terms
of all options so granted. Other than "formula awards" granted pursuant to
Article 5(k), no director while a member of the Committee shall be eligible to
receive an option under the Plan.
The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted under it shall be final unless otherwise
determined by the Board of Directors. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.
If at any time no Committee shall be in office, the Board shall perform the
functions of the Committee provided that each member of the Board is a
"disinterested person."
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3. ELIGIBILITY
The person who shall be eligible to receive Incentive Stock Options shall
be such officers and employees (whether or not they are directors) of the
Corporation or its Subsidiaries as the Committee shall select from time to time.
Non-employee directors, consultants and others, who have a relationship with the
Corporation or its Subsidiaries which the Committee considers beneficial to the
Corporation may only receive Non-Qualified Stock Options. Officers and employees
may also receive Non-Qualified Stock Options. An optionee may hold more than one
option, but only on the terms and subject to the restrictions hereafter set
forth. Members of the Committee, and members of the Board of Directors if there
is no Committee, shall only be eligible to receive grants under the Plan
pursuant to Article 5(k).
4. STOCK
The stock subject to the options to be granted hereunder shall be an
aggregate of 500,000 shares of the Corporation's authorized by unissued or
reacquired $.01 par value common stock, hereafter called "Common Stock." The
aggregate fair market value (determined at the time the option is granted) of
the Common Stock with respect to which Incentive Stock Options are exercisable
for the first time in any calendar year by an optionee under this Plan or any
other plan of the Corporation, a parent of the Corporation (if any) or
Subsidiaries, shall not exceed $100,000 (or such other amount as may then be
permissible under Section 422 of the Code). Any option granted and exercisable
in excess of such amount shall be treated as a Non-Qualified Stock Option with
respect to such excess. For the purpose of the immediately preceding sentence,
options that are not qualified as Incentive Stock Options by reason of such
excess shall be deemed to relate first to the most recently granted options. The
limitations established by each of the preceding sentences shall be subject to
adjustment as provided in Article 5(g) of the Plan.
In the event any outstanding option under the Plan for any reason expires,
lapses or is otherwise terminated, the shares of Common Stock allocable to the
unexercised portion of such option may again become the subject of an option
granted under the Plan.
5. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by the Committee
and shall by evidenced by agreements in such form as the Committee shall from
time to time approve, which agreements shall comply with and be subject to the
following terms and conditions.
(a) Number of Shares.
Each option shall state the total number of shares to which it pertains.
(b) Option Price.
Each option shall state the option price, which, in the case of an
Incentive Stock Option, shall be not less than 100% of the fair market value of
the shares of Common Stock of the Corporation on the date of the granting of the
option. Notwithstanding the preceding sentence, in the case of an individual,
who immediately before the grant of an option, owns (including constructive
ownership pursuant to Section 424(d) of the Code) more than ten percent (10%) of
the total combined voting power of all classes of stock of the Corporation or
its parent (if any) or any of the Subsidiaries ("10% Stockholder"), the purchase
price per share of Common Stock under each such option shall not be less than
110% of the fair market value per share of stock at the time of the grant of the
option. At or prior to the time an option is granted, the Committee shall
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fix the term of such option which, notwithstanding Section 5(d) of the Plan,
shall not be more than ten years from the date of the grant of the option in the
case of persons other than 10% Stockholders, and five years from the date of
grant of the option for 10% Stockholders. The foregoing restrictions shall not
apply to grantors of Non-Qualified Stock Options. In the event that the
Committee takes no action to fix the term of an option granted to such an
individual, such option shall contain a provision that it shall expire ten years
from the date of grant. For purposes of this paragraph, the parent of the
Corporation shall be any corporation, which with respect to the Corporation, is
a parent corporation pursuant to Section 424(e) of the Code; and the
Subsidiaries of the Corporation shall be all corporations which, with respect to
the Corporation, are subsidiary corporations pursuant to Section 424(f) of the
Code. During such time as the Common Stock is not listed upon an established
stock exchange the fair market value per share shall be the mean between the
closing "bid" and "ask" prices of the Common Stock in the New York
over-the-counter market on the day the option is granted, as reported by the
National Association of Securities Dealers, Inc. If the stock is listed upon an
established stock exchange or exchanges, such fair market value shall be deemed
to be the highest closing price of the Common Stock on such stock exchange or
exchanges on the day the option is granted or if no sale of the Corporation's
Common Stock shall have been made on any stock exchange that day, on the next
preceding day on which there was a sale of such stock. If there is no
established market for the stock, the fair market value shall be determined by
the most recent prior private sale price of the Common Stock. Subject to the
foregoing the Committee in fixing the option price shall have full authority and
discretion so long as they shall act in good faith.
(c) Medium and Time of Payment.
The option price shall be payable in United States dollars upon the
exercise of the option and may be paid in cash, check or in shares of Common
Stock of the Corporation, based upon the fair market value of those shares as
determined under Article 5(b) of the Plan.
(d) Term and Exercise of Options.
No Incentive Stock Option shall be exercisable either in whole or in part
prior to twelve months from the date it is granted. Subject to the right of
cumulation provided for in this subdivision, each option, other than Formula
Options, shall be exercisable as to not more than one-fifth of the total number
of shares granted thereby during each twelve-month period during which the
optionee remains continuously an employee or consultant of the Corporation,
commencing twelve months from the date of the granting of the option.
Notwithstanding the limitations of the first two sentences of this subparagraph,
the Committee, in its discretion, may waive such vesting requirements, and each
option shall also be otherwise exercisable pursuant to the terms of each option
agreement as determined by the Committee. To the extent that the option is not
exercised in any period, the number of shares as to which the option is
exercisable shall accumulate and be exercisable, in whole or in part, in any
subsequent period but not later than ten (10) years from the date of grant in
the case of an Incentive Stock Option, five (5) years from the date of grant in
the case of an Incentive Stock Option granted to a 10% Stockholder or six (6)
years from the date of grant in the case of a Non-Qualified Stock Option. No
option shall be exercisable after three (3) months after termination or
cessation of employment, except as provided for herein in the event of death or
permanent and total disability (as defined below) of the optionee. Upon
exercise, the option must be exercised for a minimum number of one hundred (100)
shares, unless the number of shares for which the option is exercisable at such
time shall be less than one hundred (100) shares, in which case the minimum
number of shares exercisable shall be the total amount for which the option is
exercisable.
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(e) Termination of Employment Except Death.
In the event that an optionee shall cease to be employed by the Corporation
or Subsidiaries for any reason other than his death and shall be no longer in
the employ of any of them, subject to the condition that no option shall be
exercisable after the expiration of ten (10) years (or five (5) years in the
case of a 10% Stockholder) from the date it is granted, such optionee shall have
the right to exercise the option at any time within three (3) months (twelve
(12) months in the case of the "permanent and total disability" of the optionee
as defined in Section 22(e)(3) of the Code) after such termination of employment
to the extent his right to exercise such option had accrued pursuant to Article
5(d) of the Plan and had not previously been exercised at the date of such
termination. Subject to Treasury Regulation 1.421-7, whether authorized leave of
absence for military or governmental services shall constitute termination of
employment, for the purpose of the Plan, shall be determined by the Committee,
which determination, unless overruled by the Board of Directors, shall be final
and conclusive. (As used in this Plan, the terms "employ" and "employment" shall
be deemed to refer to employment of the optionee by the Corporation and any of
its Subsidiaries and the continuation of such service and/or employment in none
of such capacities.)
(f) Death of Optionee and Transfer of Option.
During the lifetime of the optionee, the option shall be exercisable only
by him and shall not be assignable or transferable by him, and no other person
shall acquire any rights therein. Options granted hereunder shall not be
transferable except by will or by the laws of descent and distribution. In the
event of the death of an optionee, no option shall be exercised unless such
optionee had been an employee of the Corporation or any Subsidiary for a period
of one (1) year following the date of grant thereof. If the optionee shall die
while in the employ of the Corporation or a Subsidiary or within a period of
three months after the termination of his employment with the Corporation or any
Subsidiary and shall not have fully exercised the option, an option may be
exercised, subject to the condition that no option shall be exercisable after
the expiration of ten years from the date it is granted, to the extent that the
optionee's right to exercise such option had accrued pursuant to Article 5(d) of
the Plan at the time of his death and had not previously been exercised, at any
time within six (6) months after the optionee's death, by the executors or
administrators of the optionee or by any person or persons who shall have
acquired the option directly from the optionee by bequest or inheritance.
(g) Changes in Capitalization.
Subject to any required action by the stockholders, the number of shares of
Common Stock covered by each outstanding option, and the price per share thereof
set forth in each such option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock of the
Corporation by reason of any Common Stock dividend or Common Stock split or
reverse stock split, recapitalization (including, without limitation, the
payment of an extraordinary cash dividend), merger, consolidation, combination,
exchange of shares, or other similar corporate change. In its discretion, the
Committee may also adjust the number of shares of Common Stock covered by each
outstanding option in the event of the sale or other disposition or distribution
by the corporation of all or a portion of its assets.
Subject to any required actions by the stockholders, if the Corporation
shall be the surviving corporation in any merger or consolidation, each
outstanding option shall pertain to and apply to the securities to which a
holder of the number of shares of Common Stock subject to the option would have
been entitled. A dissolution or liquidation of the Corporation or a merger or
consolidation in which the Corporation is not the surviving corporation, shall
cause each outstanding option to terminate, provided that each optionee who has
been continuously in the employ of the Company at least two (2) years shall, in
such event, have the right
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immediately prior to such dissolution or liquidation, or merger or consolidation
in which the Corporation is not the surviving corporation, to exercise his
option in whole or in part without regard to the installment provisions of
Article 5(d) of the Plan, unless a comparable stock option is then granted to
the optionee by the surviving corporation.
In the event of a change in the Common Stock of the Corporation as
currently constituted, which is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par value
or without par value, the shares resulting from any such change shall be deemed
to be the Common Stock within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or securities
of the Corporation, such adjustments shall by made by the Committee, whose
determination in that respect shall be final, binding and conclusive, provided
that each Incentive Stock Option granted pursuant to this Plan shall not be
adjusted in a manner that causes such option to fail to continue to qualify as
an Incentive Stock Option within the meaning of Section 422 of the Code.
Except as hereinbefore expressly provided in this Article 5(g), the
optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any dissolution, liquidation, merger or consolidation or spin-off of assets
or stock of any class, or securities convertible into shares of stock of any
class, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to the option.
The grant of an option pursuant to the Plan shall not affect in any way the
right or power of the Corporation to make adjustments, reclassification,
reorganizations or changes of its capital of business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
(h) Rights as Stockholder or Employee.
An optionee or a transferee of an option shall have no rights as a
stockholder with respect to any shares covered by his option until the date of
the issuance of a stock certificate to him for such shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distribution or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Article 5(g) hereof. The Plan is not a contract of employment, and the terms of
employment of any optionee or the relationship of any non-employee consultant
with the Corporation shall not be affected in any way by the Plan, shall not be
construed as conferring any legal rights upon any optionee for a continuation of
employment, nor shall it interfere with the right of the Corporation or any
Subsidiary to discharge any optionee and to treat him without regard to the
effect which such treatment might have upon him as an optionee.
(i) Modification, Extension and Renewal of Options.
Subject to the terms and conditions and within the limitations of the Plan,
including but limited to Article 5(d), the Committee may modify, extend or renew
outstanding options granted under the Plan or accept the surrender of
outstanding options (to the extent not theretofore exercised) and authorize the
granting to the new options in substitution therefor (to the extent not
theretofore exercised). The Committee shall not, however, modify any outstanding
options so as to specify a lower price. Notwithstanding the foregoing,
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however, no modification of an option shall, without the consent of the
optionee, alter or impair any rights or obligations under any option theretofore
granted under the Plan.
(j) Investment Purpose and Qualification of Shares.
Each option under the Plan shall be granted on the condition that the
purchases of stock thereunder shall be for investment purposes, and not with a
view to resale or distribution, except in the event the stock subject to such
option is registered under the Securities Act of 1933, as amended, or in the
event a resale of such stock without such registration would otherwise be
permissible. Such condition shall be inoperative if, in the opinion of counsel
for the Corporation, such condition is not permitted under the Securities Act of
1933 or any other applicable law, regulation, or rule of any governmental
agency.
The Corporation shall seek such authority as may lawfully be required to
offer and sell the shares covered by an option in each jurisdiction in which an
optionee resides. However, nothing herein shall require the Corporation to
register under the Securities Act of 1933 either the Plan, options granted
thereunder or any securities issued or issuable pursuant to any option granted
under the Plan. If such authority is not obtained for any reason, the
Corporation shall not be obligated (and shall be relieved of any liability for
failure) to issue and sell any securities which may be exercisable pursuant to
any option granted hereunder until and unless such authority is obtained.
(k) Formula Awards to Committee Members.
Each director appointed to the Committee shall be granted Non-Qualified
Stock Options for 30,000 shares of Common Stock on the day such Committee member
is so appointed and thereafter further grants of Non-Qualified Stock Options for
30,000 shares of Common Stock on the third anniversary of the grant of such
Committee member's most recent prior grant under this Article 5(k); provided,
however, that the grant to newly appointed Committee members shall be reduced on
an option-for-option basis by the amount of any option grants accepted by such
appointee from the Company within the prior 24 month period (the "Formula
Options".) The Formula Options granted to such Committee member shall have an
exercise price per share equal to the fair market value of a share of Common
Stock on the date of grant. Each Formula Option granted under this Article 5(k)
shall become exercisable in three equal installments on each of the first three
anniversaries of the date of grant. Each portion of each Formula Option granted
under this Article 5(k) shall be exercisable for ten years after the date of
grant. Upon termination of a director's membership on the Board, other than due
to such director's death or "permanent and total disability," any Formula
Options which are then exercisable may be exercised by such director at any time
prior to the expiration of such option's term or within three (3) months (six
(6) months in the case of death or twelve (12) months in the case of "permanent
and total disability") following such cessation of membership, whichever period
is shorter. The exercise price for each Formula Option granted pursuant to this
Article 5(k) is payable in the forms prescribed in Article 5(c). The terms and
provisions of the Plan, including specifically but without limitation the first
sentence of Article 5(g), shall also apply to the grant and exercise of Formula
Options, to the extent such other provisions do not contradict the express
provisions of this Article 5(k) and further provided that no provision of this
Plan shall be construed as applying to this Article 5(k) if the application of
such provision would have the effect of a recipient of Formula Options to not be
a "disinterested person."
(i) Other Provisions.
The option agreements authorized under the Plan shall from time to time and
from option to option contain such other provisions, including, without
limitation, restrictions upon the exercise of the option, as the
A-6
<PAGE> 23
Committee shall deem advisable in each case. Any such option agreement shall
contain such limitations and restrictions upon the exercise of the option as
shall by necessary, in the case of Incentive Stock Options, in order that such
option will be an Incentive Stock Option or to conform to any change in law.
6. CORPORATION LOANS
The Corporation may make nonrecourse, collateralized loans to employees for
the purpose of exercising options, with such loans to be made to employees of
the Corporation or the Subsidiaries who are then and who remain in good
standing, said loans bearing interest at a rate to be determined by the
Committee, but in no event at a rate of interest less than the Federal interest
rate applicable under Section 7872 of the Code. Such loans shall be in such
amounts as may from time to time be required to enable said employees to
exercise options granted under the Plan, to the extent that such loans are
permitted by law and to the extend that such options are then exercisable, and
shall be secured by the shares being purchased. Such loans shall, however,
terminate and be due and payable (including interest) thirty days after the last
day of the employment of any employee or, if earlier, upon the disposition by
the employee of the shares purchased with the proceeds of such loans.
7. RELOAD OPTIONS
Without in any way limiting the authority of the Committee to make grants
hereunder, and in order to induce officers and other key employees to retain
ownership of shares of stock in the Company, the Committee shall have the
authority (but not an obligation) to include within any option agreement a
provision entitling the optionee to a further option (a "Reload Option") in the
event the optionee exercises the option evidenced by the option agreement, in
whole or in part, by surrendering other shares of stock of the Company in
accordance with this Plan and terms and conditions of the option agreement. Any
such Reload Option shall be for a number of shares of stock equal to the number
of surrendered shares of stock, shall become exercisable in the event the
purchased shares of stock are held for a minimum period of time established by
the Committee, and shall be subject to such other terms and conditions as the
Committee may determine. Reload options shall only be available to Committee
members exercising Formula Options received pursuant to Article 5(k), if the
Corporation shall receive an opinion of counsel that the grant of Reload Options
to such Committee member will not cause such Committee member to lose his status
as a "disinterested director" within the meaning of Rule 16b-3 promulgated under
the 1934 Act, in which event the Reload Options shall be held for six months
before they may be exercised.
8. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time within a
period of ten years from the date the Plan is adopted, or the date the Plan is
approved by the stockholders, whichever is earlier.
9. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Corporation against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party be reason of any action
taken or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Corporation) or paid by them in satisfaction of a judgement in
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<PAGE> 24
any such action, suit or proceeding; provided that within 60 days after
institution of any such action, suit or proceeding a Committee member shall in
writing offer the Corporation the opportunity, at its own expense, to handle and
defend the same. The foregoing right of indemnification shall be exclusive and
shall be independent of any other rights of indemnification to which such
persons may be entitled under the Corporation's Articles of Incorporation or
By-Laws, by contract, as a matter of law, or otherwise.
10. AMENDMENT OF THE PLAN
The Board of Directors of the Corporation may, insofar as permitted by law,
from time to time, with respect to any shares at the time not subject to
options, suspend or discontinue the Plan or revise or amend it in any respect
whatsoever except that, without approval of the stockholders, no such revision
or amendment shall change the number of shares subject to the Plan in a material
amount, change the designation of the class of employees eligible to receive
options, decrease the price at which options may be granted, remove the
administration of the Plan from the Committee, or render any member of the
Committee eligible to receive an option under the Plan, other than Formula
Options, while serving thereon. Furthermore, the Plan, as to Incentive Stock
Options, may not, without approval of the stockholders, be amended in any manner
that will cause such options issued under it to fail to meet the requirements of
Incentive Stock Options as defined in Section 422 of the Code, and further
provided that neither the Board of Directors nor the Committee may amend,
suspend, modify, or terminate the Plan so as to alter or impair any grantee's
right under any option theretofore granted under the Plan. The above
notwithstanding, the provisions of Article 5(k) shall not be amended more than
once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, or the rules thereunder.
Further, any and/or all provisions of this Plan may be revised and/or deleted,
if the Board of Directors, acting upon the advice of Counsel, determines that
the securities laws and/or tax laws then in effect no longer require the
inclusion of such provisions.
11. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of Common Stock
pursuant to options will be used for general corporate purposes.
12. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the optionee to
exercise such option.
13. APPROVAL OF STOCKHOLDERS
This Plan is subject to approval by the holders of a majority of the
outstanding shares of Common Stock of the Corporation, which approval must occur
within the period beginning twelve months before or ending twelve months after
the date the Plan is adopted by the Board of Directors. In the period following
the adoption of this Plan by the Board of Directors but prior to obtaining
approval by the stockholders, the Committee may grant options hereunder, subject
to obtaining stockholder approval of the Plan.
A-8
<PAGE> 25
(PROXY CARD)
(FRONT OF CARD)
TRIMEDYNE, INC.
P.O. Box 57001, 2801 Barranca Rd.
Irvine, CA 92619-7001
PROXY SOLICITED BY THE BOARD OF DIRECTORS
-----------------------------------------
Annual Meeting of Stockholders - May 22, 1997
The undersigned, as a Stockholder of TRIMEDYNE, INC. (the "Company"),
hereby appoints MARVIN P. LOEB, PETER T. HYDE and BRUCE N. BARRON, or any of
them, the true and lawful proxies and attorneys in fact of the undersigned to
attend the Annual Meeting of the Stockholders of the Company to be held on May
22, 1997, at 2:00 p.m. at 2801 Barranca Road, Irvine, CA 92606, and any
adjournments thereof, and hereby authorizes them to vote, as designated below,
the number of shares which the undersigned would be entitled to vote, as fully
and with the same effect as the undersigned might do if personally present on
the following matters as set forth in the Proxy Statement and Notice dated
April 24, 1997:
(Please Sign and Date the Proxy on the Reverse Side)
<PAGE> 26
(PROXY CARD)
(BACK OF CARD)
1. ELECTION OF CLASS 3 DIRECTORS (THREE YEARS)
FOR the nominees WITHHOLD AUTHORITY NOMINEES:
listed at right except as to vote for both nominees Richard F. Horowitz
marked to the contrary: listed at right: Marvin P. Loeb
[INSTRUCTIONS: To withhold authority to vote for either of the individual
nominees cross out the nominee's name above].
2. APPROVAL OF THE TRIMEDYNE, INC. 1997 FOR
INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN. AGAINST
ABSTAIN
3. IN THE DISCRETION OF SUCH PROXIES UPON ALL
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE
THE MEETING.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES IDENTIFIED ABOVE TO THE BOARD OF
DIRECTORS AND FOR THE MOTION TO APPROVE THE TRIMEDYNE, INC. 1997 INCENTIVE AND
NON-QUALIFIED STOCK OPTION PLAN IN THE DISCRETION OF THE PROXIES NAMED, ON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
This Proxy is revocable at any time, and the undersigned reserves the right
to attend the meeting and vote in person. The undersigned hereby revokes any
proxy heretofore given in respect of the shares of the Company.
THE BOARD OF DIRECTORS URGES THAT YOU FILL IN, SIGN AND DATE THE PROXY AND
RETURN IT PROMPTLY BY MAIL IN THE ENCLOSED ENVELOPE. NO POSTAGE IS NECESSARY
IF MAILED IN THE UNITED STATES.
CORRECT ADDRESS IF NECESSARY
- -----------------------------
SIGNATURE*
- ----------------------------- DATE , 1997
SIGNATURE IF HELD JOINTLY* --------------------
* NOTE: Please sign exactly as name(s) appear on your Stock Certificate. When
signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If more than one name is shown, as in
the case of joint tenancy, each party must sign.
