<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ACUSON CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(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):
N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
(5) Total fee paid:
N/A
- --------------------------------------------------------------------------------
[_] 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:
N/A
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(2) Form, Schedule or Registration Statement No.:
N/A
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(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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ACUSON CORPORATION
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held May 1, 2000
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Acuson
Corporation, a Delaware corporation (the "Company"), will be held on Monday,
May 1, 2000 at 10:00 a.m., local time, at the Acuson Education Center, 1393
Shorebird Way, Mountain View, California, for the following purposes:
1. To elect a Board of Directors to serve for the ensuing year and until
their successors are elected.
2. To approve an amendment to the Company's 1995 Stock Incentive Plan to
increase the number of shares of Common Stock subject to the Plan from
3,500,000 to 6,500,000.
3. To approve an amendment to the Company's 1995 Stock Purchase Plan to
increase the number of shares of Common Stock subject to the Plan from
2,000,000 to 4,000,000.
4. To ratify the appointment of Arthur Andersen LLP as independent public
accountants of the Company.
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 15, 2000 are
entitled to notice of and to vote at the meeting and at any continuation or
adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Charles H. Dearborn
Secretary
Mountain View, California
March 30, 2000
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO VOTE,
SIGN, AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE-
PAID ENVELOPE ENCLOSED FOR THAT PURPOSE.
<PAGE>
ACUSON CORPORATION
1220 Charleston Road
P.O. Box 7393
Mountain View, CA 94039-7393
----------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To be held May 1, 2000
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Acuson Corporation, a Delaware corporation (the "Company" or "Acuson"), for
use at the Annual Meeting of Stockholders to be held on Monday, May 1, 2000,
at 10:00 a.m., local time (the "Annual Meeting"), or at any continuation or
adjournment of that meeting, for the purposes set forth in the Notice of
Annual Meeting of Stockholders dated the date hereof. The Annual Meeting will
be held at the Acuson Education Center, 1393 Shorebird Way, Mountain View,
California.
Solicitation
The Company will bear the entire cost of solicitation, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional material furnished to stockholders. The Company has engaged
the firm of Georgeson & Company Inc. to assist the Company in the distribution
and solicitation of proxies and has agreed to pay Georgeson & Company Inc. a
fee of approximately $12,000 plus expenses for its services. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
to forward to these beneficial owners. In addition, the Company may reimburse
these persons for their cost of forwarding the solicitation material to these
beneficial owners. Original solicitation of proxies by mail may be
supplemented by one or more of telephone, telegram, facsimile or personal
solicitation by directors, officers or employees of the Company. No additional
compensation will be paid for any such services. Except as described above,
the Company does not intend to solicit proxies other than by mail.
The Company intends to mail this proxy statement and accompanying proxy on
approximately March 30, 2000.
Voting
Only holders of Common Stock of record at the close of business on March 15,
2000, will be entitled to notice of and to vote at the Annual Meeting. As of
March 15, 2000, the Company had outstanding 27,512,637 shares of Common Stock.
Each share of Common Stock is entitled to one vote. The presence, in person or
by proxy duly authorized, of the holders of a majority of the outstanding
shares of Common Stock authorized to vote will constitute a quorum for the
transaction of business at the Annual Meeting and any continuation or
adjournment thereof. Abstentions and broker non-votes will be counted in
determining whether a quorum is present at the Annual Meeting. Directors are
elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors. The other proposals submitted to the stockholders in the enclosed
proxy must be approved by the vote of the holders of a majority of the shares
of the Common Stock of the Company present in person or represented by proxy
and entitled to vote at the Annual Meeting. In determining whether such
proposal has been approved, abstentions are counted as votes against the
proposal and broker non-votes are not counted as votes for or against the
proposal.
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Revocability of Proxies
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. It may be revoked by
(1) filing an instrument of revocation or a duly executed proxy bearing a
later date with the Secretary of the Company at the Company's principal
executive office, 1220 Charleston Road, P.O. Box 7393, Mountain View,
California, 94039-7393, or (2) attending the Annual Meeting and voting in
person.
Stockholder Proposals for the 2001 Annual Meeting
Stockholders may submit proposals on matters appropriate for stockholder
action at subsequent annual meetings of the Company consistent with Rule 14a-8
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Proposals of stockholders intended to be presented at the
Company's 2001 Annual Meeting of Stockholders must be received by the Company
no later than December 1, 2000 for inclusion in the Company's proxy statement
and form of proxy for that meeting. In order for a stockholder proposal not
intended to be subject to Rule 14a-8 (and thus not subject to inclusion in the
Company's proxy statement) to be considered "timely" within the meaning of
Rule 14a-4 under the Exchange Act and pursuant to the Company's Bylaws, notice
of any such stockholder proposals must be given to the Company's Secretary in
writing not less than 45 days nor more than 75 days prior to the date on which
the Company first mailed its proxy material for the 2000 Annual Meeting, which
is set forth on page 1 of this proxy statement (or the date on which the
Company mails its proxy materials for the 2000 Annual Meeting if the date of
that meeting is changed more than 30 days from the prior year). A
stockholder's notice to the Company's Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (1) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting;
(2) the name and record address of the stockholder proposing such business;
(3) the class and number of shares of the corporation that are beneficially
owned by the stockholder; and (4) any material interest of the stockholder in
such business.
PROPOSAL 1
NOMINATION AND ELECTION OF DIRECTORS
The first purpose of the Annual Meeting is the election of the Board of
Directors of the Company to hold office until the 2001 Annual Meeting or until
their successors are elected and have qualified. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the nominees named below, unless one or more of such nominees
should become unavailable for election by reason of death or other unexpected
occurrence, in which event such shares shall be voted for the election of such
substitute nominees as the Board of Directors may propose. Each person
nominated has agreed to serve if elected, and the Company knows of no reason
why any of the listed nominees would be unavailable to serve.
Nominees and Present Directors
The Bylaws of the Company provide that the number of directors of the
Company shall be fixed from time to time by the Board of Directors. At
present, the authorized size of the Board of Directors is four. The Board of
Directors has nominated four persons for election to the Board of Directors.
Proxies cannot be voted for more than four persons.
Set forth below is information regarding the nominees for election as
directors, including information furnished by them as to their principal
occupations for the last five years, certain other directorships held by them,
and their ages as of March 30, 2000.
<TABLE>
<CAPTION>
Name Age Position Director Since
---- --- -------- ---------------
<C> <C> <S> <C>
Chairman of the Board and
Samuel H. Maslak.......... 51 Chief Executive Officer September 1981
Albert L. Greene.......... 50 Director March 1995
Karl H. Johannsmeier...... 71 Director March 1995(/1/)
William J. Mercer......... 51 Director June 1999
</TABLE>
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- --------
(1) Mr. Johannsmeier also served as a director of the Company from September
1981 to May 1994.
Samuel H. Maslak co-founded the Company in September 1981 and has served as
Chief Executive Officer and a director since that date. He served as President
of the Company from September 1981 until May 1995. He was appointed Chairman
of the Board in May 1995.
Albert L. Greene is the President, Chief Executive Officer and co-founder of
HealthCentral.com, a web-based software and information services company. Mr.
Greene served from 1990 to 1998 as Chief Executive Officer of Sutter Health
East Bay, Alta Bates Health Systems and Alta Bates Medical Center in Berkeley,
California. He was Chair of the California Healthcare Association in 1998. Mr.
Greene is also a director of Quadramed Corporation, a healthcare technology
and solutions provider, and Lumisys Inc., a manufacturer of digital imaging
systems.
Karl H. Johannsmeier served as a director of the Company from September 1981
to May 1994 and has also served as a director from March 1995 to the present.
He founded Optimetrix Corporation, a semiconductor processing equipment
company, where he served as President and Chief Executive Officer from 1976 to
1981 and as Chairman of the Board of Directors from 1976 to 1984. Optimetrix
Corporation was acquired by Eaton Corporation in 1982. Mr. Johannsmeier has
been a private investor over the last twenty years.
William J. Mercer is the founder and CEO of Avocet Ventures, LLC, a private
equity investment firm specializing in strategic investments in the healthcare
and technology sectors. Prior to his current position and since 1995, Mr.
Mercer was a director, President and Chief Executive Officer of ALARIS
Medical, Inc., a publicly traded holding company, and its wholly owned
subsidiary, ALARIS Medical Systems, Inc. ALARIS is a global company
specializing in the design, manufacture and marketing of intravenous infusion
therapy products, patient monitoring equipment, and cardiac monitoring
devices.
The Board of Directors recommends a vote FOR the election of the nominees
named above.
PROPOSAL 2
AMENDMENT OF 1995 STOCK INCENTIVE PLAN
A proposal to amend the Company's 1995 Stock Incentive Plan (the "1995
Incentive Plan") will be presented to stockholders at the Annual Meeting. The
Company's Board of Directors has approved an amendment to increase the number
of shares of common stock underlying options subject to the 1995 Incentive
Plan from 3,500,000 to 6,500,000, beginning immediately following the Annual
Meeting. The purpose of the increase is to enable the Company to retain
talented employees and consultants and to attract talented new employees and
consultants by offering them participation in the Company's 1995 Incentive
Plan. Management believes that without such incentive it will be unable to
attract and retain talented individuals providing services to the Company. In
the event the stockholders do not approve the proposed increase in the number
of shares of Common Stock reserved for issuance under the 1995 Incentive Plan,
and in the event the Company is not able to grant employees any additional
stock options under the 1995 Incentive Plan because options have already been
granted with respect to all of the shares reserved under the 1995 Incentive
Plan, the Company will be able to issue non tax qualified stock options
without stockholder approval consistent with Delaware law and the Company's
listing agreement with the New York Stock Exchange.
A general description of the principal terms of the 1995 Incentive Plan is
set forth below. However, the summary does not purport to be a complete
description of all of the provisions of the 1995 Incentive Plan. Any
stockholder of the Company who wishes to obtain a copy of the actual plan
document may obtain a copy by writing to the Company's Secretary at the
Company's principal executive offices.
Approval of the proposed amendment to the 1995 Incentive Plan requires the
affirmative vote of the holders of record of a majority of the shares
represented and voting, in person or by proxy, at the Annual Meeting. The
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<PAGE>
persons designated in the enclosed proxy will vote your shares FOR approval of
the proposed amendment to the 1995 Incentive Plan unless instructions to the
contrary are indicated in the proxy.
The Board of Directors recommends a vote in favor of the proposed amendment
to the 1995 Incentive Plan.
General Description
In March 1995, the Board of Directors of the Company adopted the 1995
Incentive Plan, which was approved by the stockholders in May 1995. The 1995
Incentive Plan was subsequently amended by the Board of Directors in February
1996, by the stockholders in July 1996 and by the Board of Directors in
February 1999 and March 2000. If the proposed amendment is approved, a total
of 6,500,000 shares will be reserved for issuance under the 1995 Incentive
Plan. Options granted under the 1995 Incentive Plan may be either incentive
stock options, as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), non-statutory stock options, the sale or bonus of
restricted Common Stock or the grant of stock appreciation rights. See "U.S.
Federal Income Tax Consequences Relating to the 1995 Incentive Plan" below for
information concerning the tax treatment of both incentive stock options and
non-statutory stock options. As of March 15, 2000, options to purchase
approximately 2,887,697 shares were outstanding under the 1995 Incentive Plan,
a total of approximately 72,226 options to purchase shares had been exercised
under the 1995 Incentive Plan, and approximately 540,077 shares remained
reserved for issuance thereunder.
For purposes of establishing the option price and for all other valuation
purposes under the 1995 Incentive Plan, the fair market value per share of
Common Stock on any relevant date under the 1995 Incentive Plan will be the
closing sale price per share of the Common Stock on that date, as the price is
reported on the New York Stock Exchange. The closing selling price of the
Common Stock on March 15, 2000, was $13.06 per share.
Summary of the Provisions of the 1995 Incentive Plan
The essential features of the 1995 Incentive Plan, none of which will be
changed by the proposed amendment, are summarized below:
Purpose. The purpose of the 1995 Incentive Plan is to allow the Company to
provide incentives to Eligible Individuals (as defined below) for employment,
increased efforts and successful achievements on behalf of or in the interest
of the Company and its affiliates and to maximize the rewards due them for
those efforts and achievements.
Administration. The 1995 Incentive Plan is administered by the Board of
Directors of the Company (the "Board"), or by one or more separate committees
appointed by the Board with respect to specified groups of participants (each
such committee, a "Committee"), as set forth below. As used herein, the term
"Plan Administrator" shall refer to the Board, or any Committee, as
applicable, that is administering the provision of the 1995 Incentive Plan
being referred to:
(a) With respect to awards to Eligible Individuals who are officers or
directors of the Company subject to Section 16(b) ("Section 16(b) Persons")
of the Exchange Act, and to "covered employees" ("Covered Employees")
within the meaning of Section 162(b) of the Code, the 1995 Incentive Plan
is administered by a Committee constituted in such manner as to permit such
grants and related transactions under the 1995 Incentive Plan to be exempt
from Section 16(b) of the Exchange Act in accordance with Rule 16b-3 or its
successors under the Exchange Act ("Rule 16b-3") and a "committee comprised
solely of two or more outside directors" within the meaning of Section
162(m) of the Code.
(b) With respect to awards made to Eligible Individuals who are neither
Section 16(b) Persons nor Covered Employees, the 1995 Incentive Plan may be
administered by the Board or by any Committee consisting of one or more
persons.
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The Plan Administrator, except with respect to grants of stock options to
non-employee directors, determines the Eligible Individuals who are to receive
awards under the 1995 Incentive Plan, the timing of such awards, the type of
award and the terms thereof. The Plan Administrator has the sole authority, in
its absolute discretion, to adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable for the administration of the
1995 Incentive Plan, to construe and interpret the 1995 Incentive Plan, the
rules and regulations thereof, and the instruments evidencing awards granted
thereunder, and to make all other determinations deemed necessary or advisable
for the administration of the 1995 Incentive Plan. All decisions,
determinations, and interpretations of the Plan Administrator are binding on
all participants.
Types of Awards. Awards under the 1995 Incentive Plan may consist of (a)
options to purchase Common Stock that are designed to qualify as "incentive
stock options" under Section 422 of the Code ("Incentive Stock Options"), (b)
options to purchase Common Stock that are not described in Sections 422 or 423
of the Code ("Non-Qualified Stock Options" and, collectively with Incentive
Stock Options, "Options"), (c) the sale or bonus grant of restricted shares of
Common Stock ("Restricted Stock"), and (d) the grant of stock appreciation
rights ("SARs"), either independently of ("Independent SARs"), or in tandem
with ("Tandem SARs"), Options.
Available Shares. If this proposed amendment is adopted, then a total of
6,500,000 shares of Common Stock will be reserved for issuance under the 1995
Incentive Plan, subject to adjustment in the event of any merger,
consolidation, reorganization, reincorporation, stock split, stock dividend
(in excess of 2%) or other change in the corporate structure of the Company.
Such number of shares is subject to adjustment as described below.
(a) The following awards count against and reduce the number of shares
available under the 1995 Incentive Plan: (i) shares of Common Stock subject
to outstanding Options issued under the 1995 Incentive Plan; (ii)
outstanding shares of Restricted Stock issued under the 1995 Incentive
Plan; (iii) shares subject to Independent SARs issued under the 1995
Incentive Plan; and (iv) with respect to Tandem SARs issued under the 1995
Incentive Plan, the number of shares subject to such Tandem SAR or to the
related Option, whichever is greater.
(b) The following shares are added back to the number of shares available
under the 1995 Incentive Plan; (i) shares underlying Options issued under
the 1995 Incentive Plan that are cancelled or terminate before being
exercised; (ii) shares of Restricted Stock issued under the 1995 Incentive
Plan that are cancelled or repurchased pursuant to their vesting
restrictions; (iii) shares underlying Independent SARs issued under the
1995 Incentive Plan that are cancelled or terminate before being exercised;
(iv) shares as to which an Option related to a Tandem SAR issued under the
1995 Incentive Plan has been surrendered in connection with the exercise of
such Tandem SAR; and (v) shares underlying Independent SARs issued under
the 1995 Incentive Plan that are exercised and paid in cash, but only, in
each case, if the holder of such award did not receive dividends or other
benefits of ownership with respect to such shares.
Eligible Individuals. Employees, officers (including officers who are
directors of the Company), independent contractors, and consultants of the
Company and of any subsidiary of the Company designated by the Plan
Administrator (collectively, the "Eligible Individuals") are eligible to
participate in the 1995 Incentive Plan. Non-employee directors are not
eligible to receive any awards under the 1995 Incentive Plan other than Non-
Discretionary Options.
Limitation of Awards. No Eligible Individual may be granted Options or SARs
covering more than 1,000,000 shares during any calendar year.
Non-Discretionary Option Grants.
(a) Option Grants. The 1995 Incentive Plan provides for the automatic
non-discretionary grant of Options ("Non-Discretionary Options") covering
7,500 shares of Common Stock to each non-employee director of the Company
on the date following each annual meeting of the Company's stockholders
during the term of the 1995 Incentive Plan.
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(b) Terms of Non-Discretionary Options. Under the 1995 Incentive Plan,
each Non-Discretionary Option shall be evidenced by a written stock option
agreement, shall have a term of ten years (subject to earlier termination
in the circumstances described below), or such shorter term as may be
required to comply with applicable law, shall have an exercise price no
less than the fair market value of the underlying shares on the grant date,
and shall vest as to 50% of the shares covered thereby on the six-month
anniversary of the grant date, and thereafter in daily increments equal to
1/365 of such shares so that the Non-Discretionary Option becomes fully
vested on the first anniversary of the grant date. The term of each Non-
Discretionary Option will terminate early in the following circumstances:
(a) if the optionee ceases to be a director for any reason other than
death, disability or cause, the Option will terminate on the last day of
the period beginning on the date after the optionee ceases to be a director
and running thereafter for a period of time equal to the duration of such
director's continuous service on the Board (but in no event more than three
years); (b) if the optionee ceases to be a director due to death or
disability, the option will terminate on the third anniversary of the date
the optionee ceases to be a director; and (c) if the optionee's service on
the Board is terminated for cause, the Option will terminate immediately.
In any of the foregoing cases, vesting of the Option will cease on the date
the optionee ceases to be a director.
Discretionary Option Grants.
(a) Option Grants. The Plan Administrator may, in its discretion, grant
Options ("Discretionary Options") to Eligible Individuals from time to time
during the term of the 1995 Incentive Plan, provided that only employees of
the Company may receive Incentive Stock Options. All grants of
Discretionary Options will be evidenced by a written option agreement.
(b) Option Term. The Plan Administrator shall determine the term of any
Discretionary Option granted by it, provided that the term of any Incentive
Stock Option may not be longer than ten years, and provided further that
the term of any Incentive Stock Option granted to an Eligible Individual
possessing more than 10% of the combined voting power of the Company or an
affiliate (a "10% Holder") may not be longer than five years.
(c) Number of Underlying Shares. The Plan Administrator shall determine
the number of shares underlying any Discretionary Option it elects to
grant, provided that the aggregate fair market value of all shares
underlying Incentive Stock Options granted to an Eligible Individual that
first become exercisable in any calendar year may not exceed $100,000.
(d) Exercise Price. The Plan Administrator shall determine the exercise
price of any Discretionary Option it elects to grant, provided that (i) the
exercise price of Incentive Stock Options may not be less than the fair
market value of the underlying shares on the grant date, and (ii) the
exercise price of any Incentive Stock Option granted to a 10% Holder may
not be less than 110% of the fair market value of the underlying shares on
the grant date.
(e) Vesting. The Plan Administrator shall determine the vesting schedule,
if any, with respect to each Discretionary Option it elects to grant.
(f) Exercise of Options. The exercise price for all Options must be paid
to the Company at the time of exercise in cash, personal or certified
check, bank draft, or postal or express money order, provided, however,
that the Plan Administrator may, in its discretion, (a) permit the exercise
price of Discretionary Options to be paid in any one, or any combination,
of the following manners: (i) with shares of Common Stock owned by the
optionee; (ii) with shares of Common Stock withheld from the shares
otherwise deliverable to the optionee upon exercise of the Option; (iii) by
delivery of an irrevocable direction to a securities broker to sell shares
of Common Stock and deliver the proceeds to the Company; and (iv) by
delivery of a promissory note with recourse, interest, security,
redemption, and other terms as the Plan Administrator shall determine; and
(b) permit the exercise price of any Non-Discretionary Option to be paid in
any one, or any combination, of the manners specified in clauses (i), (ii),
and (iii) above. Any shares of Common Stock used to exercise an Option
shall be valued at their fair market value as of the exercise date.
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The Plan Administrator also may, at its discretion, permit the holder of a
Discretionary Option to surrender all or part of such option in exchange
for a payment (in cash, shares of Common Stock valued at fair market value
on the date of surrender, or any combination thereof) in an amount equal to
the difference between the aggregate fair market value (as of the surrender
date) and the aggregate exercise price of the shares as to which such
option is surrendered.
Reload Feature. If, upon the exercise of any Discretionary Option, shares
otherwise issuable to the optionee are withheld to satisfy the exercise price
or federal, state, and local withholding tax obligations, the Plan
Administrator may, in its discretion, issue a new Option to such optionee
covering the number of shares withheld. Any such new Option will be identical
to the Discretionary Option being exercised, except that the exercise price
will be equal to the fair market value of the Common Stock as of the grant
date of such new Option.
Restricted Stock Awards. The Plan Administrator may, in its discretion,
grant awards of Restricted Stock to Eligible Individuals from time to time
during the terms of the 1995 Incentive Plan. Each such award may be either a
sale or a bonus grant, and will be evidenced by a written Restricted Stock
purchase or bonus agreement, as applicable. The Plan Administrator has the
discretion to fix the terms applicable to each Restricted Stock award,
including without limitation, payment terms, transfer restrictions, and
forfeiture, repurchase, and vesting provisions, subject only to the
restrictions contained in the 1995 Incentive Plan. The Plan Administrator may,
in its discretion, condition any Restricted Stock award on the attainment of
one or more preestablished objective performance goals meeting the
requirements of Section 162(m) of the Code and regulations thereunder.
SAR Awards. The Plan Administrator may, in its discretion, grant awards of
SARs to Eligible Individuals from time to time during the term of the 1995
Incentive Plan. Each such award will be evidenced by a written agreement,
which will specify the term of the SAR and may contain any other provisions
that the Plan Administrator deems appropriate and that are consistent with the
provisions of the 1995 Incentive Plan.
Acceleration upon Change in Ownership. On the twenty-second day after any
Share Acquisition Date (as defined below), each Option, SAR, Restricted Stock
bonus or Restricted Stock purchase agreement evidencing an Option, SAR, or
Restricted Stock automatically will become fully vested, nonforfeitable and
exercisable, and any Restricted Stock covered by any such agreement will be
released from all restrictions on transfer and all repurchase and forfeiture
restrictions, unless, before such twenty-second day, a majority of the
directors of the Company who are not affiliated with the Acquiring Person (as
defined below) have approved the transaction pursuant to which such person
became an Acquiring Person. A "Share Acquisition Date" means the first date of
public announcement that a person (other than the Company, a subsidiary of the
Company, or an employee benefit plan of the Company or any subsidiary) (an
"Acquiring Person") has become the beneficial owner of 20% or more of the
outstanding shares of Common Stock.
Certain Other Corporate Changes. The Plan Administrator has the discretion,
to the extent permitted by applicable law, to include provisions in any
agreements evidencing awards granted under the 1995 Incentive Plan providing
that, in the event of a dissolution, liquidation, merger or consolidation of
the Company, or any other event that the Plan Administrator deems to have
effected a change in control of the Company, any such awards shall accelerate
and become fully vested, and all forfeiture and/or transfer restrictions with
respect thereto shall lapse, regardless of whether such awards are otherwise
to be assumed or replaced in connection with such event.
Term and Early Termination. The 1995 Incentive Plan became effective on May
31, 1995 upon its approval by the stockholders at the 1995 Annual Meeting, and
will terminate with respect to the grant of additional awards on May 31, 2005,
unless sooner terminated by the Board of Directors. The Board of Directors may
terminate or suspend the 1995 Incentive Plan at any time and for any reason,
subject to certain restrictions on the ability to adversely affect awards
previously granted thereunder.
Amendment. The Board of Directors may amend the 1995 Incentive Plan, and any
agreements evidencing awards granted thereunder at any time and for any
reason, subject to certain restrictions on the ability to
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adversely affect awards previously granted thereunder and to any legal
requirement to obtain stockholder approval. Such amendments may include,
without limitation, accelerating vesting provisions of awards. With the
holder's written consent, the Plan Administrator also may cancel any
outstanding Option or SAR or accept any outstanding Option or SAR in exchange
for a new Option or SAR.
Repricing. The Board of Directors amended the 1995 Incentive Plan in March
2000 to provide that options may not be repriced unless such repricing is
approved by the vote of the holders of a majority of the shares of the Common
Stock of the Company present in person or represented by proxy and entitled to
vote at a meeting of stockholders.
Expenses. The Company makes no cash contributions to the 1995 Incentive
Plan, but bears the expenses of administration. In addition, the Company also
will incur cash expenses in connection with the exercise of SARs.
U.S. Federal Income Tax Consequences Relating to the 1995 Incentive Plan
The following is a brief summary of the current U.S. federal income tax
rules generally applicable to the awards under the 1995 Incentive Plan.
Non-Qualified Stock Options. An optionee is not subject to federal income
tax upon grant of a Non-Qualified Stock Option. At the time of exercise, the
optionee will realize ordinary income (subject to withholding) to the extent
that the then fair market value of the Common Stock exceeds the option price.
The amount of such income will constitute an addition to the optionee's tax
basis in the optioned stock. Sale of the shares will result in capital gain or
loss (long-term or short-term depending on the optionee's holding period). The
Company is entitled to a business expense deduction at the same time and to
the same extent that the optionee realizes compensation income.
Incentive Stock Options. Incentive Stock Options awarded under the 1995
Incentive Plan are intended to constitute "incentive stock options" under
Section 422 of the Code. An optionee is not subject to federal income tax upon
either the grant or exercise of an Incentive Stock Option. If the optionee
holds the shares acquired upon exercise for at least one year after issuance
of the optioned shares and until at least two years after grant of the option,
then the difference between the amount realized on a subsequent sale or other
disposition of shares and the option price will constitute long-term capital
gain or loss. The Company will not be entitled to any deduction with respect
to the grant or exercise of the Incentive Stock Option.
If the optionee sells the shares acquired under an Incentive Stock Option
before the requisite holding period, he/she will be deemed to have made a
"disqualifying disposition" of the shares and will realize ordinary income in
the year of disposition equal to the lesser of the fair market value of the
shares at exercise less the exercise price or the amount realized on their
disposition over the option price of the shares. Any gain recognized upon a
disqualifying disposition in excess of the ordinary income portion will
constitute either short-term or long-term capital gain. In the event of a
disqualifying disposition, the Company will be entitled to a business expense
deduction in the amount of the ordinary income realized by the optionee.
The option spread on the exercise of an Incentive Stock Option is an
adjustment in comparing alternative minimum taxable income. No adjustment is
required, however, if the optionee made a disqualifying disposition of the
shares in the same year as he/she is taxed on the exercise.
Stock Appreciation Rights. An optionee is not taxed upon the grant of SARs.
An optionee exercising SARs will realize ordinary income (subject to
withholding) in the amount of the cash or the fair market value of the shares
received. The Company will be entitled to a business expense deduction at the
same time and to the same extent that the optionee realizes compensation
income.
Restricted Stock. An awardee of Restricted Stock will generally realize
ordinary income (subject to withholding) when and to the extent that the
restrictions on the shares lapse, as measured by the value of the
8
<PAGE>
shares at the time of lapse. The awardee's holding period for the shares will
not commence until the date of lapse, and the dividends paid during the
restriction period will be treated as compensation. The income realized on
lapse of the restrictions will constitute an addition to the awardee's tax
basis in the shares.
In lieu of deferred recognition of income, the awardee may formally elect,
within 30 days of the award, to realize income at the time of award, as
measured by the fair market value of the stock on the date of the award
determined without regard to the restrictions. The income realized will
constitute an addition to the tax basis of the shares. In the case of such
election, any appreciation (or depreciation) on the shares during the
restriction period will give rise to capital gain (or capital loss). In the
event that the awardee terminates employment during
the restriction period and forfeits his/her shares, no deduction may be
claimed and the taxes paid on award of the shares shall be forfeited.
The Company will be entitled to a business expense deduction at the same
time and to the same extent that the awardee realizes compensation income.
Amended Plan Benefits
The Company will grant Non-Discretionary Options covering 7,500 shares to
each of Messrs. Greene, Johannsmeier, and Mercer, who are each non-employee
directors, immediately following the Annual Meeting, assuming such persons are
reelected as directors of the Company. However, the Company cannot now
determine the number of options to be granted in the future under the 1995
Incentive Plan, as proposed to be amended, to all current executive officers
as a group or to all employees (excluding current executive officers) as a
group. The following table sets forth information with respect to options
granted under the 1995 Incentive Plan during fiscal 1999:
<TABLE>
<CAPTION>
% of Weighted
Total Average
Options Options Exercise Price
Identity of Group Granted Granted Per Share
----------------- ------- ------- --------------
<S> <C> <C> <C>
Current executive officers as a group*...... 622,500 37.45% $14.94
Employees that are not current executive
officers, as a group....................... 917,150 55.18% $14.24
Current directors that are not executive
officers, as a group....................... 22,500 1.35% $15.25
</TABLE>
- --------
* Does not include an option for 100,000 shares granted to Daniel R. Dugan, a
former executive officer of the Company. If Mr. Dugan's option had been
included, the number of options granted to current executive officers as a
group would have been 722,500, the percentage of total options granted for
the current executive officer group would have been 43.47% and the weighted
average exercise price per share would have been $13.69.
PROPOSAL 3
AMENDMENT OF 1995 EMPLOYEE STOCK PURCHASE PLAN
A proposal to amend the Company's 1995 Employee Stock Purchase Plan (the
"1995 Purchase Plan") will be presented to stockholders at the Annual Meeting.
The 1995 Purchase Plan was adopted by the Board of Directors of the Company in
March 1995 and by the stockholders of the Company at the 1995 Annual Meeting,
and was subsequently amended by the Board in February 1999 and March 2000. The
1995 Purchase Plan is intended to qualify as an "employee stock purchase plan"
under section 423 of the Code. The 1995 Purchase Plan currently authorizes the
grant to employees of the Company and designated subsidiaries of rights to
purchase up to 2,000,000 shares of Common Stock. The proposed amendment would
increase the number of shares of Common Stock available for issuance under the
1995 Purchase Plan from 2,000,000 to 4,000,000. As of March 15, 2000,
approximately 1,954,207 shares were issued and outstanding under the 1995
Purchase Plan, and approximately 45,793 shares remained reserved for issuance
thereunder.
The goal of the Company is to recruit the best available talent in what it
believes to be one of the most competitive labor markets in the United States.
Equity incentives are a fundamental tool used by the Company to recruit and
retain employees. Currently, there are insufficient shares subject to the 1995
Purchase Plan to continue to operate the Plan. Consequently, the Board of
Directors considers the amendment of the 1995 Purchase Plan to increase the
number of shares subject to the 1995 Purchase Plan to be necessary to achieve
that goal.
9
<PAGE>
Approval of the 1995 Purchase Plan requires the affirmative vote of the
holders of record of a majority of the shares represented and voting, in
person or by proxy, at the Annual Meeting.
The Board of Directors recommends a vote in favor of the amendment of the
1995 Purchase Plan.
The persons designated in the enclosed proxy will vote your shares FOR
approval of the amendment of the 1995 Purchase Plan unless instructions to the
contrary are indicated in the proxy.
The essential features of the 1995 Purchase Plan, none of which will be
changed by the proposed amendment, are summarized below. However, the summary
does not purport to be a complete description of all of the provisions of the
1995 Purchase Plan. Any stockholder of the Company who wishes to obtain a copy
of the actual plan document may obtain a copy by writing to the Company's
Secretary at the Company's principal executive offices.
Summary of the Provisions of the 1995 Employee Stock Purchase Plan
Purpose. The purpose of the 1995 Purchase Plan is to provide employees with
an opportunity to purchase Common Stock through accumulated payroll
deductions. The Company, by means of the 1995 Purchase Plan, seeks to retain
the services of its employees, to secure and retain the services of new
employees, and to provide incentives for such persons to exert maximum efforts
for the success of the Company by providing eligible employees with an
opportunity to participate in the Company's future growth.
Administration. The 1995 Purchase Plan is administered by the Board of
Directors of the Company or by a committee appointed by the Board (the Board
or such committee being referred to as the "Plan Administrator"). The Plan
Administrator has full and exclusive discretionary authority to construe,
interpret and apply the terms of, and to determine eligibility and to
adjudicate all disputed claims filed under, the 1995 Purchase Plan. Every
decision and determination made by the Plan Administrator is, to the full
extent permitted by law, final and binding on all parties.
Available Shares. A total of 2,000,000 shares of Common Stock have currently
been reserved for issuance under the 1995 Incentive Plan, subject to
adjustment in the event of stock splits, stock dividends, and other similar
changes in the Common Stock or the capital structure of the Company. The
proposed amendment would increase the number of shares reserved for issuance
under the 1995 Purchase Plan to 4,000,000.
Eligibility. All employees of the Company, and of any subsidiary of the
Company designated by the Plan Administrator, are eligible to participate in
the 1995 Purchase Plan, except that the Plan Administrator may, in its
discretion, exclude any one or more of the following classes of employees: (a)
employees whose customary employment is 20 hours or less per week; (b)
employees whose customary employment is less than five months per calendar
year; (c) employees who have been employed by the Company or by a designated
subsidiary for less than two years; and (d) highly compensated employees
(within the meaning of Section 414(q) of the Code). Non-employee directors and
persons who own, and/or own options to acquire, 5% or more of the outstanding
shares of Common Stock are not eligible to participate in the 1995 Purchase
Plan.
Purchase Period. Under the 1995 Purchase Plan, offerings are made in periods
(each a "Purchase Period") with lengths determined by the Plan Administrator,
provided that no Purchase Period may be longer than 27 months. Purchase
Periods will commence on the dates determined by the Plan Administrator. The
Plan Administrator has the discretion to implement overlapping Purchase
Periods and to permit employees to participate simultaneously in more than one
overlapping Purchase Period. Upon establishing each Purchase Period, the Plan
Administrator will also establish (a) one or more dates during such Purchase
Period (one of which must be on the last day thereof) on which amounts in the
accounts of participating employees will be applied to purchase shares of
Common Stock (each such date an "Exercise Date"), (b) a discount from the fair
market value of the Common Stock of no less than 0% and no more than 15% (in
whole percentages) (the "Applicable Discount") at which purchases will be made
during such Purchase Period, (c) the components of
10
<PAGE>
participating employees' total compensation (such components, the
"Compensation") which may be contributed to participants' 1995 Purchase Plan
accounts during such Purchase Period, and (d) a maximum number of shares that
may be purchased by any participating employee on any Exercise Date (the "Per-
Participant Limit"). Upon establishing each Purchase Period, the Plan
Administrator may, in its discretion, fix a maximum number of shares that may
be purchased by all participating employees in the aggregate during any given
Purchase Period and/or on any given Exercise Date. Once fixed, the Exercise
Date or Dates, the Applicable Discount, the Compensation, the Per-Participant
Limit, and any aggregate share purchase limits with respect to a given
Purchase Period may not be changed, except upon the occurrence of a Corporate
Transaction (as defined below).
Replacement Purchase Periods. If, on the day following any Exercise Date,
the fair market value of the Common Stock is less than it was on the first day
of the applicable Purchase Period, the Plan Administrator may, in its
discretion, terminate such Purchase Period and enroll each participant in a
newly established Purchase Period. Upon establishment of any such replacement
Purchase Period, the Plan Administrator will fix the Exercise Date or Dates,
the Applicable Discount, the Compensation, and the Per-Participant Limit, and
may fix aggregate share purchase limits, with respect to such replacement
Purchase Period, none of which may be subsequently changed except upon the
occurrence of a Corporate Transaction (as defined below).
Participation and Withdrawal. Eligible employees elect to participate by
delivering a written subscription agreement to the Company. Employees may end
their participation at any time during a Purchase Period by delivering a
written notice of withdrawal to the Company, and participation ends
automatically upon termination of their employment for any reason other than
retirement. If a participating employee retires three months or less before
the next Exercise Date of any given Purchase Period, the retiree will remain
enrolled in such Purchase Period unless he/she delivers a written notice of
withdrawal to the Company. The Plan Administrator has the discretion to change
such three-month period from time to time during the term of the 1995 Purchase
Plan, but such period shall not exceed three months.
Payroll Deductions. During each Purchase Period, the Company will deduct
from the pay of each eligible employee who elects to participate in such
Purchase Period an amount specified by such employee, and credit such amounts
to the employee's account under the 1995 Purchase Plan. Such amounts may be
from 3% to 15% (in whole percentages) of such employee's compensation. Amounts
credited to employees' accounts will not bear interest, and employees may not
make direct cash payments to their accounts. All payroll deductions received
or held by the Company under the 1995 Purchase Plan may be used by the Company
for any corporate purpose, and the Company shall not be obligated to segregate
such payroll deductions.
Grant and Exercise of Purchase Rights. On the first day of each Purchase
Period, each participating employee shall be granted the right to purchase
shares of Common Stock from his/her payroll deductions. On each Exercise Date,
the purchase rights will be exercised automatically through the application of
amounts in each participant's account to purchase shares of Common Stock at a
price per share determined by applying the Applicable Discount to the lower of
(a) the fair market value of the Common Stock on the first day of the
applicable Purchase Period or (b) the fair market value of the Common Stock on
the applicable Exercise Date (in each case as adjusted for stock splits, stock
dividends and other similar changes in the Common Stock or the capital
structure of the Company); provided, however, that the Plan Administrator may,
in its discretion, determine the per share purchase price by applying the
Applicable Discount solely to the fair market value of the Common Stock on the
first day of the applicable Purchase Period (as adjusted as provided above),
but only if the Plan Administrator elects to do so at the time it establishes
such Purchase Period. The shares purchased may be newly issued shares,
treasury shares or shares acquired by the Company on the open market or
otherwise. As of March 15, 2000, the closing sale price of the Common Stock on
the New York Stock Exchange was $13.06 per share.
Share Purchase Limit. In addition to any share purchase limits fixed by the
Plan Administrator, certain additional limitations on the amount of Common
Stock that may be purchased in any calendar year under the 1995 Purchase Plan
are imposed by the Code, including a requirement that any employee may
purchase in any calendar year under the 1995 Purchase Plan and any other
employee stock purchase plans of the Company, Common Stock with an aggregate
fair market value greater than $25,000.
11
<PAGE>
Discretion to Accelerate in Certain Circumstances. If a Corporate
Transaction (as defined below) occurs or becomes imminent, the Board of
Directors has the discretion to shorten any or all ongoing Purchase Periods by
fixing a new Exercise Date (a "New Exercise Date") with respect to such period
or periods, in which case the Board of Directors may also change the
applicable discount, the Compensation, the Per-Participant Limit, and any
aggregate share purchase limits previously established by the Plan
Administrator with respect to such period or periods. If the Board exercises
its discretion to establish a New Exercise Date, it will notify each
participant in the applicable Purchase Period or Periods of such date, of any
changes to the Applicable Discount, the Compensation, the Per-Participant
Limit, and any aggregate share purchase limits, and that the amounts held in
such employee's account will be applied to purchase Common Stock on the New
Exercise Date and, if applicable, on such changed terms, unless such employee
withdraws from the Purchase Period prior thereto. A "Corporate Transaction"
means any of the following events: (a) a Share Acquisition Date (as defined
below); (b) a dissolution or liquidation of the Company; (c) a merger or
consolidation in which the Company is not the surviving corporation; (d) a
merger in which the Company is the surviving corporation but the shares of
Common Stock outstanding immediately prior to the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; (e) any capital reorganization in which more than 50% of
the shares of the Company entitled to vote are exchanges; and (f) any other
event that the Board deems, in its discretion, to constitute a change in
control of the Company. A "Share Acquisition Date" means the first date of
public announcement that a person (other than the Company, a subsidiary of the
Company, or an employee benefit plan of the Company or any subsidiary) (an
"Acquiring Person") has become the beneficial owner of 20% or more of the
outstanding shares of Common Stock in a transaction or series of transactions
that has not been approved by a majority of the directors of the Company who
are not affiliated with such Acquiring Person.
Term and Early Termination. The 1995 Purchase Plan became effective on May
31, 1995, and shall terminate ten years after such date, unless sooner
terminated by the Board of Directors. The Board of Directors may terminate the
1995 Purchase Plan at any time and for any reason, subject to certain
restrictions on the ability to adversely affect rights previously granted
thereunder.
Amendment. The Board of Directors may amend the 1995 Purchase Plan at any
time and for any reason, subject to certain restrictions on the ability to
adversely affect rights previously granted thereunder and to any legal
requirement to obtain stockholder approval.
Expenses. The Company makes no cash contributions to the 1995 Purchase Plan,
but bears the expenses of administration.
U.S. Federal Income Tax Consequences Relating to the 1995 Purchase Plan
Under the provisions of Section 423 of the Code, an employee who elects to
participate in the 1995 Purchase Plan will not realize income upon
commencement of a Purchase Period or upon issuance to him/her of shares of
Common Stock, and, except as herein described, the Company will not be
entitled to any deduction from income. If the employee retains the shares
issued to him/her under the 1995 Purchase Plan for more than two years from
the first day of the Purchase Period and for more than one year after the date
of the issuance of such shares to her/her, or if he/she dies while owning the
shares, the employee will be required to include in income as compensation,
for the year in which he/she disposes of such shares or dies, an amount equal
to the lesser of (i) an amount determined by applying the applicable discount
to the fair market value of such shares on the first day of the Purchase
Period in which such shares were purchased, or (ii) the excess of the fair
market value of such shares at the time of disposition or death over the
purchase price. If, on the other hand, the employee disposes of such shares
within the aforesaid two-year or one-year period, the employee will be
required to include in income as compensation for the year in which such
disposition occurs an amount equal to the excess of the fair market value of
such shares on the date of purchase over the purchase price, and the Company
will be entitled to a deduction from income equal to the amount the employee
is required to include in income as compensation. Any additional gain or loss
realized upon a disposition, other than the amounts treated as compensation,
as foresaid, will be treated as capital gain or loss.
12
<PAGE>
PROPOSAL 4
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December 31, 2000,
and has further directed that management submit the selection of independent
public accountants for ratification by the stockholders at the Annual Meeting.
Arthur Andersen LLP has audited the Company's financial statements annually
since the Company's inception. Its representatives are expected to be present
at the Annual Meeting, will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
Stockholder ratification of the selection of Arthur Andersen LLP as the
Company's independent public accountants is not required by the Company's
Bylaws or otherwise. The Board of Directors is submitting the selection of
Arthur Andersen LLP to the stockholders for ratification as a matter of good
corporate practice. In the event the stockholders fail to ratify the
selection, the Board of Directors will reconsider whether or not to retain
that firm. Even if the selection is ratified, the Board of Directors in its
discretion may direct the appointment of a different independent accounting
firm at any time during the year if the Board of Directors determines that
such a change would be in the best interests of the Company and its
stockholders.
The Board of Directors recommends a vote FOR ratification of the selection
of Arthur Andersen LLP as the Company's independent public accountants for the
fiscal year ending December 31, 2000.
SHARE OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of January 21, 2000, by (i) all
those known by the Company to be beneficial owners of more than five percent
(5%) of its Common Stock; (ii) all directors and nominees for director; (iii)
the executive officers of the Company included in the Summary Compensation
Table set forth under the caption "Compensation of Directors and Executive
Officers" below; and (iv) all executive officers and directors of the Company
as of January 21, 2000 as a group. Dr. Maslak and Messrs. Johannsmeier,
Greene, and Mercer can be contacted at the offices of the Company. Except as
indicated in the footnotes to this table and pursuant to applicable community
property laws, the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
Beneficial
Ownership(1)
-----------------------
Beneficial Owner Shares Percent
- ---------------- --------- -------
<S> <C> <C>
State of Wisconsin Investment Board................... 1,656,800(/2/) 6.06%
PO Box 7842
Madison, WI 53707
Karl H. Johannsmeier.................................. 5,211,804(/3/) 19.03%
Samuel H. Maslak...................................... 2,315,739(/4/) 8.22%
Robert J. Gallagher................................... 436,477(/5/) 1.57%
Daniel R. Dugan....................................... 414,263(/6/) 1.49%
Barry Zwarenstein..................................... 26,632(/7/) *
Rick E. Smith......................................... 67,371(/8/) *
Albert L. Greene...................................... 33,881(/9/) *
Edward P. Cornell..................................... 35,000(/10/) *
William J. Mercer..................................... 5,881(/11/) *
All Executive Officers and Directors as a group (12
persons)............................................. 9,036,681(/12/) 33.03%
</TABLE>
13
<PAGE>
- --------
*Less than 1%
(1) Beneficial ownership includes all unissued shares of Common Stock subject
to options exercisable within 60 days of January 21, 2000, which are
deemed to be outstanding for the purpose of computing the percentage of
Common Stock owned by the person holding such options but are not deemed
outstanding for computing the percentage of any other person pursuant to
Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, as amended.
The number of shares of Common Stock issued and outstanding on January
21, 2000 was 27,355,833.
(2) Based solely on information contained in a statement on Schedule 13G
filed by such stockholder with the Securities and Exchange Commission on
February 10, 2000.
(3) Includes 33,381 unissued shares of Common Stock subject to options
exercisable within 60 days of January 21, 2000. Also includes 40,000
shares for which Mr. Johannsmeier disclaims beneficial ownership.
(4) Includes 817,942 unissued shares of Common Stock subject to options
exercisable within 60 days of January 21, 2000 and 60 shares held in Dr.
Maslak's 401(k) plan account. Also includes 4,030 shares for which Dr.
Maslak disclaims beneficial ownership.
(5) Includes 373,925 unissued shares of Common Stock subject to options
exercisable within 60 days of January 21, 2000 and 60 shares held in Mr.
Gallagher's 401(k) plan account.
(6) Includes 403,623 unissued shares of Common Stock subject to options
exercisable within 60 days of January 21, 2000 and 60 shares held in Mr.
Dugan's 401(k) plan account.
(7) Includes 25,000 unissued shares of Common Stock subject to options
exercisable within 60 days of January 21, 2000.
(8) Includes 67,312 unissued shares of Common Stock subject to options
exercisable within 60 days of January 21, 2000 and 60 shares held in Mr.
Smith's 401(k) plan account.
(9) Includes 33,381 unissued shares of Common Stock subject to options
exercisable within 60 days of January 21, 2000.
(10) Includes 35,000 unissued shares of Common Stock subject to options
exercisable within 60 days of January 21, 2000.
(11) Includes 5,881 unissued shares of Common Stock subject to options
exercisable within 60 days of January 21, 2000.
(12) Includes 44,030 shares as to which beneficial ownership is disclaimed by
certain executive officers of the Company and 419 shares held in certain
executive officers' 401(k) plan accounts. Also includes 2,277,503
unissued shares of Common Stock subject to options exercisable within 60
days of January 21, 2000.
14
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table discloses compensation received by (i) the Company's
Chief Executive Officer; (ii) the four other most highly paid executive
officers serving as executive officers during 1999; and (iii) one former
executive officer of the Company, for the years ended December 31, 1999, 1998
and 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
----------------------- ----------------- All Other
Name and Principal Salary Bonus Compensation
Position Year ($) ($) Awards/Options (#) ($)
- ------------------ ---- -------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Samuel H. Maslak........ 1999 $666,442 $ 0 400,000 $ 1,000(/1/)
Chairman and Chief 1998 $725,000 $ 0 100,000 $ 1,000(/1/)
Executive Officer 1997 $725,000 $145,000 0 $ 1,000(/1/)
Robert J. Gallagher..... 1999 $404,308 $ 25,000 75,000 $ 1,000(/1/)
President and Chief 1998 $450,000 $ 0 50,000 $ 1,000(/1/)
Operating Officer(/2/) 1997 $450,000 $ 90,000 0 $ 1,000(/1/)
Daniel R. Dugan......... 1999 $413,654 $ 0 100,000 $ 1,000(/1/)
Former President(/2/) 1998 $450,000 $ 0 0 $35,424(/3/)(/4/)
1997 $385,794 $ 77,600 100,000 $58,097(/3/)(/5/)
Edward P. Cornell....... 1999 $319,731 $ 73,100(/6/) 25,000 $76,026(/7/)
Senior Vice President, 1998 $340,000 $ 22,100 0 $79,332(/8/)
Engineering 1997(/9/) $ 98,750 $ 0 75,000 $55,568(/10/)
Barry Zwarenstein....... 1999 $300,000 $ 75,000 0 $ 1,000(/1/)
Vice President and 1998 $ 17,309(/11/) $ 0 125,000 $ 0
Chief Financial Officer
Rick E. Smith........... 1999 $279,035 $171,008(/12/) 50,000 $ 1,000(/1/)
Senior Vice President, 1998 $200,323 $113,482(/13/) 0 $ 1,000(/1/)
World-Wide Field
Operations 1997 $202,453 $ 95,149 0 $ 1,000(/1/)
</TABLE>
- --------
(1) Consisting of an employer contribution of $750 in cash and $250 in shares
of Acuson Common Stock to each employee's 401(k) plan account.
(2) Mr. Dugan resigned from the Company effective March 1, 2000. Mr.
Gallagher was appointed President and Chief Operating Officer of the
Company on an interim basis effective that same date.
(3) In connection with Mr. Dugan's relocation to the San Francisco Bay Area
in August 1991, the Company loaned Mr. Dugan $400,000 to assist him in
the purchase of a home. The loan was secured by Mr. Dugan's residence.
The loan was interest free and was fully forgiven on a daily basis which
commenced on August 8, 1991. The loan was forgiven in full on August 8,
1998.
(4) Consisting of an employer contribution of $750 in cash and $250 in shares
of Acuson Common Stock to Mr. Dugan's 401(k) plan account and partial
forgiveness of a loan from the Company in the amount of $34,424. See note
3 above.
(5) Consisting of an employer contribution of $750 in cash and $250 in shares
of Acuson Common Stock to Mr. Dugan's 401(k) plan account and partial
forgiveness of a loan from the Company in the amount of $57,097. See note
3 above.
(6) Consisting of management incentive bonuses of $42,500 paid in April 1999
for the period April 1998 through March 1999, and $30,600 paid in
November 1999 for the period April 1999 through October 1999.
(7) Consisting of partial forgiveness of a loan from the Company. See
"Certain Relationships and Owner Transactions" for a description of such
loan.
15
<PAGE>
(8) Consisting of a housing allowance of $8,000 and partial forgiveness of a
loan from the Company in the amount of $76,026. See "Certain
Relationships and Other Transactions" for a description of such loan.
(9) Mr. Cornell joined the Company in September 1997.
(10) Consisting of a $2,000 housing allowance, a relocation bonus of $35,000
and relocation expenses of $18,568.
(11) Mr. Zwarenstein joined the Company in October 1998.
(12) Consisting of a management incentive bonus of $9,000 paid in April 1999
for the period October 1998 through March 1999, a management incentive
bonus of $13,500 paid in November 1999 for the period April 1999 through
October 1999, and $148,508 in sales commissions.
(13) Consisting of a management incentive bonus of $15,000 paid in October and
November 1998 for the period April 1998 through September 1998, and
$98,482 in commissions and other bonuses.
During 1999, each non-employee director received an annual fee of $26,000 in
connection with his service as a member of the Board of Directors of the
Company and was reimbursed for all travel expenses incurred in attending
meetings of the Board. Pursuant to the Company's 1995 Stock Incentive Plan,
each non-employee director who was elected at the 1999 Annual Meeting was
granted an option on June 8, 1999, to purchase 7,500 shares of the Company's
Common Stock at an exercise price equal to the then fair market value of
$15.25 per share.
16
<PAGE>
OPTIONS GRANTED TO EXECUTIVE OFFICERS
The following two tables set forth certain information regarding stock
options granted to, exercised by and owned by the executive officers named in
the foregoing Summary Compensation Table during 1999.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
% of Total Market Potential Realizable Value at
Options Price Assumed Rates of Stock Price
Granted to on Appreciation for Option
Options Employees Exercise Date Term(1)
Granted in Fiscal Price/ of Expiration ------------------------------
Name (#) Year Share Grant Date 0% 5% 10%
- ---- ------- ---------- -------- ------ ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Samuel H. Maslak........ 100,000(/2/) 5.51% $14.94 $14.94 2/19/09 0 $ 939,411 $2,380,653
300,000(/3/) 16.53% $14.94 $14.94 2/19/09 0 $2,818,234 $7,141,958
Robert J. Gallagher..... 75,000(/3/) 4.13% $14.94 $14.94 2/19/09 0 $ 704,559 $1,785,490
Daniel R. Dugan......... 33,334(/4/) 1.84% $ 5.94 $14.94 3/1/00 $300,006 $ 325,672 $ 351,374
66,666(/5/) 3.67% $ 5.94 $14.94 3/1/00 $599,994 $ 651,324 $ 702,727
Edward P. Cornell....... 25,000(/2/) 1.38% $14.94 $14.94 2/19/09 0 $ 234,853 $ 595,163
Rick E. Smith........... 50,000(/2/) 2.75% $14.94 $14.94 2/19/09 0 $ 469,706 $1,190,326
Barry Zwarenstein....... 0 -- -- -- -- -- -- --
</TABLE>
- --------
(1) The dollar amounts under these columns are the result of calculations at
the 0%, 5% and 10% annual rates of stock appreciation prescribed by the
Securities and Exchange Commission and are not intended to forecast
possible future appreciation, if any, of the Company's stock price.
Assuming 5% and 10% compounded annual appreciation of the stock price over
the term of the option, the price of a share of Common Stock underlying
the options issued February 19, 1999 (a) with an exercise price of $14.94
would be $24.33 and $38.74, respectively, on February 19, 2009 and (b)
with an exercise price of $5.94 would be, on March 1, 2000 (the date these
options expired), $15.71 and $16.49, respectively. The closing sale price
of Acuson Common Stock on the New York Stock Exchange on December 31, 1999
was $12.56.
(2) Granted at fair market value on the date of grant under the Company's 1995
Stock Incentive Plan; vesting over four years with 20% of the shares
vesting on each of the first and second anniversaries of the grant date
and 30% of the shares vesting on each of the third and fourth
anniversaries of the grant date. Vesting may be accelerated at the
discretion of the Board of Directors. Subject to certain exceptions and
conditions, in the event that a person or entity acquires more than 20% of
the Company's then outstanding Common Stock without the approval of the
Board of Directors, vesting of outstanding options is automatically
accelerated.
(3) Granted at fair market value on the date of grant under the Company's 1995
Stock Incentive Plan; full vesting on the first anniversary of the grant
date. Vesting may be accelerated at the discretion of the Board of
Directors. Subject to certain exceptions and conditions, in the event that
a person or entity acquires more than 20% of the Company's then
outstanding Common Stock without the approval of the Board of Directors,
vesting of outstanding options is automatically accelerated.
(4) Granted at $9.00 less than fair market value on the date of grant; the
option was immediately exercisable subject to a repurchase right on the
part of the Company which would have lapsed upon the earlier of the fifth
anniversary of the grant date or any year that the Company met certain
earnings per share targets. The repurchase price would have been the lower
of $10.45 and the fair market value of the shares on the date immediately
prior to the day of repurchase.
(5) Granted at $9.00 less than fair market value on the date of grant; the
option was immediately exercisable subject to a repurchase right on the
part of the Company which would have lapsed upon the earlier of the fifth
anniversary of the grant date or any year that the Company met certain
earnings per share targets, but no earlier than one year after the
repurchase right for the option for 33,334 shares granted to Mr. Dugan
described above expired. The repurchase price would have been $5.94, the
exercise price of the option.
17
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired on Underlying Unexercised In-the-Money Options at FY-
Exercise Value Options at FY-End (#) End ($)
Name (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---- ----------- ------------ ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Samuel H. Maslak........ -- -- 473,508/503,267 $392,905
Robert J. Gallagher..... -- -- 282,273/134,956 $226,131
Daniel R. Dugan......... -- -- 399,735/ 83,305 $731,447
Edward P. Cornell....... -- -- 30,000/ 70,000 $ 0
Rick E. Smith........... -- -- 55,647/ 84,353 $ 13,505
Barry Zwarenstein....... -- -- 25,000/100,000 $ 0
</TABLE>
- --------
(1) Value per share is defined as the market price of Acuson Common Stock at
year end minus the per share exercise price of the option. The closing
sale price of Acuson Common Stock on the New York Stock Exchange on
December 31, 1999 was $12.56.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
On October 12, 1998, the Company entered into Change in Control Agreements
with five of the Company's executive officers, including Messrs. Maslak,
Dugan, Gallagher and Cornell. The Company also entered into a Change in
Control Agreement with Mr. Zwarenstein when he joined the Company on October
30, 1998 and with Mr. Smith on November 2, 1999. The agreements provide that
if within 13 months of a Change in Control of the Company (as defined in the
agreement), such officer's employment is terminated other than for Cause (as
defined in the agreement), disability, such officer's retirement, or such
officer's resignation without Good Reason (as defined in the agreement), such
officer shall be paid two years' salary, bonuses and regular benefits plus any
accrued but unpaid salary, bonuses and benefits, and all stock options issued
to such officer shall immediately become 100% vested. Each agreement remains
in effect for a period of three years but is automatically renewed for
subsequent one-year terms unless either party gives 90 days notice of intent
not to renew.
In connection with Mr. Zwarenstein joining the Company, the Company agreed
to enter into a severance agreement with him under which the Company would pay
him a severance payment equal to twelve months' base salary plus certain
health benefits for twelve months following termination if he is terminated
without cause within twenty-four months of his employment by the Company. If
Mr. Zwarenstein is provided benefits under the Change in Control Agreement
described above, he will not receive any benefits under this severance
agreement.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Company believes that compensation of the Company's key executives
should be sufficient to attract and retain highly qualified personnel in the
competitive Silicon Valley area, and should also provide meaningful incentives
for measurably superior performance. The Company seeks to reward achievement
of long- and short-term performance goals measured by successful development
of new products, sales volume, meeting or exceeding financial targets and
other factors. In addition, the Company's performance is considered on an
absolute basis and in comparison to other ultrasound companies in the United
States and other high technology companies in the San Francisco Bay Area in
determining executive remuneration.
The Company's executive compensation generally consists of a base salary, a
cash bonus and long-term incentive compensation in the form of stock options.
Salaries for the Company's executive officers, other than
18
<PAGE>
for the Chief Executive Officer, are recommended by Dr. Maslak, the Chief
Executive Officer, and reviewed and approved by the Compensation Committee of
the Board of Directors. In determining his recommendations for salaries of
executive officers, Dr. Maslak generally does not employ a formulaic approach
or assign a predetermined weight to any specific objective or subjective
criteria. Rather, he relies on a number of factors he deems important in
making his recommendations. These factors include the performance of the
executive over the past year, his view of the value of the executive's
position at the Company and the importance of the output of the functional
area managed by the executive, both on an absolute basis and on a relative
basis in comparison to the challenges facing that functional area and the
results achieved, as well as his view of the Company's performance and the
ultrasound market in general. He also reviews publicly available executive
compensation surveys chosen for their reputability and relevance to the
Company in terms of geographic area and size of companies surveyed and on a
study of executive compensation in publicly-held high technology companies,
including competitors and neighboring companies in the San Francisco Bay Area.
The overall officer cash compensation structure is designed so that, in
general, a combination of base salary and the appropriate target bonus is
aimed to pay officers at approximately the 75th percentile, based on the
survey data. However, the compensation for any individual officer may be above
or below this target, based on the factors described above. The Compensation
Committee believes that the Company's most direct competitors for executive
talent are not necessarily all of the companies that would be included in a
peer group established to compare stockholder returns. Therefore, neither the
surveys nor the study specifically use data for the companies included in the
groups listed in the performance graph in this proxy statement.
The salary for the Chief Executive Officer is determined in much the same
manner by the Compensation Committee, with the Committee considering the
survey data, an assessment of the Company's performance and Dr. Maslak's
performance and contributions to the Company. In general, there has been no
formulaic tie between the Company's stated goals and performance and Dr.
Maslak's salary; instead the Compensation Committee's judgment and discretion
has been used after considering these factors.
For the past few years, the Compensation Committee has utilized an incentive
compensation plan for all officers that is designed to focus and motivate them
to improve the Company's operating results by making a higher percentage of
the officers' compensation variable. The Committee recognized that the trend
in executive compensation is to have a greater percentage of an executive's
pay "at risk." As a result, under this plan, all officers other than Dr.
Maslak and Messrs. Gallagher and Dugan could earn up to 20% of their annual
salary as a target bonus. The target bonuses for Messrs. Dugan and Gallagher
were up to 25% of their salaries, and the target bonus for Dr. Maslak, the
Chief Executive Officer, was up to 30% of his salary. In addition to the
target bonus, there was a further bonus, referred to as a "Company match,"
equal to either 50% or 100% of the bonus actually paid to the officer if the
Company, as a whole, met predetermined objectives, which consisted of certain
earnings per share targets.
However, for 1999, Dr. Maslak recommended, and the Compensation Committee
agreed, to institute a special program to focus on meeting overall expense
targets and corporate goals. This program consisted of a reduction of base
salary, an increase in target bonuses and in some cases an adjustment to the
"Company match" component of the bonus program.
For Dr. Maslak and Messrs. Dugan and Gallagher and one other executive
officer (the "Designated Officers"), base salaries were reduced by 10% for all
of 1999, but if (i) the Company as a whole met its first half year expense
targets and (ii) the Company's cumulative earnings per share for the first
half of 1999 met or exceeded a certain target, the target bonuses would be
increased by 10%, so that Dr. Maslak's target bonus would become 40% of his
reduced 1999 salary, the target bonus for Messrs. Dugan and Gallagher would
become 35% of their respective reduced 1999 salaries and the target bonus for
the other officer would become 30% of his reduced salary. If the Company
failed to meet either of these goals, the target bonus for each Designated
Officer would remain at the 1998 levels. The "Company match" component of the
bonus program for the Designated Officers remained unchanged from 1998. Thus,
the Designated Officers would receive either 50% or 100% of the target bonus
actually paid if the Company met the predetermined objectives. As in past
years, the Committee determined that the "Company match" would be based on
publicly reported earnings per share for the year.
19
<PAGE>
With respect to Mr. Zwarenstein, because he only recently joined the
Company, the Compensation Committee determined that his salary would not be
reduced. Further, as part of his offer to join the Company, Mr. Zwarenstein
was guaranteed a bonus equal to 20% of his salary. In connection with the
revised 1999 compensation program, the Committee agreed that if the Company
met both the expense and earnings per share targets for the first half of
1999, Mr. Zwarenstein would be paid the higher of his guaranteed 20% bonus or
the bonus determined as if he participated in the salary reduction and revised
bonus program at the 30% level.
Because the Company as a whole met both the expense and earnings per share
targets for the first half of 1999, the target bonuses for the Designated
Officers and Mr. Zwarenstein were increased by 10% as described above.
While Mr. Gallagher initially participated in the same program on the same
terms as Mr. Dugan, in June 1999, he retired as an executive officer of the
Company and the Company agreed to consider paying Mr. Gallagher a
discretionary bonus of up to 10% of his reduced compensation.
For the Designated Officers, the target bonuses were to be determined after
the results for calendar 1999 were available. Initially the Committee
determined that the amount of these bonuses would be solely a function of the
Company meeting certain predetermined earnings per share targets. However,
because of the impact of the acquisition of Ecton, Inc. in December 1999 and
other factors, the Committee modified the bonus program for the Designated
Officers so that the Committee could determine the percentage of target bonus
to be paid based on its subjective evaluation of both personal objectives as
well as overall department and corporate objectives, such as financial
results, orders, shipments, profit margins, relative market share, completing
planned corporate acquisitions, meeting earnings per share targets, meeting
product development milestones and expense controls in a timely manner,
achievement versus difficulty of corporate objectives and positioning the
Company for the future.
The Compensation Committee met in March 2000 to determine bonuses for 1999.
Dr. Maslak reported to the Committee that the Company had not met the
objective for the "Company match" portion of the bonus to be paid to the
executive officers, but that based on an evaluation of the qualitative and
measurable factors described above, Dr. Maslak recommended target bonuses for
Mr. Zwarenstein and the current Designated Officers, other than himself. Dr.
Maslak also recommended that because of the current financial pressures on the
Company, he should receive no bonus. The Compensation Committee accepted all
of Dr. Maslak's recommendations and agreed that Dr. Maslak should receive no
bonus.
For all other executive officers under the 1999 compensation program, the
salaries as in effect for 1998 were reduced by 10% starting March 1, 1999 and
were designed to return to the pre-reduction levels on October 4, 1999, if the
functional area over which the officer had responsibility met certain pre-
established expense targets. The 20% target bonus, and the 50% first level
"Company match," remained unchanged, but the second level "Company match" was
increased from 100% to 200% of the target bonus actually paid to compensate
for the salary reduction. As stated above, because the Company did not meet
the earnings per share target for the "Company match", the "Company match"
portion of their bonus was not paid. However, during 1999, all of these
officers met their expense targets; thus their salaries returned to the pre-
reduction levels in October 1999.
As in past years, the amount of the target bonus actually earned by these
officers was a function of meeting certain specific personal objectives. These
personal objectives were set by the officer's immediate supervisor and
reviewed by Dr. Maslak, and were a combination of measurable goals, such as
meeting order targets and profit margin targets; and qualitative goals, such
as improving overall performance of individual departments. The Company
reserved the right to modify objectives to meet changing business requirements
by notifying participants within 30 days of the change. At full achievement of
personal objectives, the 1999 compensation plan would pay the target bonus
percentage multiplied by the base salary paid during the measurement period. A
percentage of the full pay out amount could be linked to each objective. In
order for any amount to be paid for achievement of personal objectives, a
satisfactory level of overall personal performance must have been maintained.
In addition, the target bonuses were to be paid based upon six-month
objectives covering the six-month periods ending September 30, 1999 and March
31, 2000.
20
<PAGE>
In addition to the bonus programs described above, the Company has a merit
bonus program that applies to employees, including officers, to recognize
special accomplishments or significant efforts. The Chief Executive Officer
has the discretion to grant a bonus to any officer consistent with the
principles of this program. No bonuses were awarded to executive officers
under this program in 1999.
The Company awards stock options to encourage a long-term commitment to the
Company and to direct officers' focus on long-term appreciation of stockholder
value, as opposed to short-term results or functional area goals. In general,
stock options align rewards with long-term increased value for stockholders.
Stock options also serve as a reward and recognition for past work and as an
incentive to perform well in the future. The Chief Executive Officer
recommends a pool of shares available for stock option grants to officers as a
whole and he compares the recommended pool with survey data drawn from high
technology companies in the San Francisco Bay Area and other ultrasound
companies. According to this data, the Company's overall pool of shares
allocated for officer stock option grants in 1999 was comparable to officer
stock option grants among the companies in the survey data. Dr. Maslak's
recommendation of which individual officers should receive grants of stock
options and the size of those grants was based primarily on his view of
individual performance, the potential of the individual to influence
positively the long-term growth of the Company, his evaluation of the relative
importance of that individual in meeting the Company's objectives, and on
advice from the Company's Human Resources Department on compensation necessary
to hire and retain senior executives in the Silicon Valley area. The
Compensation Committee accepted all of the Chief Executive Officer's
recommendations.
With respect to a grant to Dr. Maslak, the Committee decided in February
1999 to grant Dr. Maslak an option for 300,000 shares with a vesting period of
one year. The Committee noted that Dr. Maslak had previously had an option for
300,000 shares that had expired in October 1998, unexercised, and concluded
that Dr. Maslak should have a substantial stock option position to tie his
total compensation to increased stockholder value. The Committee also granted
Dr. Maslak in February 1999 an additional 100,000 option share grant, with the
standard Company vesting period of four years, on the basis that he had
received a reduction in salary for 1999 and no salary increase for the prior
two years.
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation
exceeding $1 million paid to certain of the corporation's executive officers.
The limitation applies only to compensation that is not considered to be
performance-based. The non-performance-based compensation to be paid to the
Company's executive officers in 1999 did not exceed the $1 million limit per
officer. The Compensation Committee is aware of the limitations imposed by
Section 162(m), and the exemptions available therefrom, and has therefore
adopted a Section 162(m) qualified bonus plan. The Company did not use this
plan in 1999.
The Compensation Committee
Karl H. Johannsmeier
Albert L. Greene
William J. Mercer
21
<PAGE>
PERFORMANCE GRAPH
Comparison of Five Year Cumulative Total Return(1)
Among S&P 500 Index, S&P(R) Health Care
(Medical Products & Supplies)
Index(2) and Acuson Corporation
[ACUSON PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Measurement Period S&P S&P
(Fiscal Year Covered) Acuson Corp. 500 INDEX Health Care
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
December 94 $100 $100 $100
December 95 $76.15 $137.58 $169.01
December 96 $150.00 $169.16 $193.98
December 97 $101.92 $225.60 $241.84
December 98 $91.15 $290.08 $348.58
December 99 $77.31 $351.11 $322.87
</TABLE>
Assumes $100 invested on December 31, 1994 in S&P 500 Index, S&P Health Care
(Medical Products & Supplies) Index and Acuson Corporation.
- --------
(1) Total Return assumes reinvestment of dividends.
(2) S&P(R) Health Care (Medical Products & Supplies) Index includes C.R. Bard
Inc., Bausch & Lomb, Baxter International Inc., Becton Dickinson, Biomet,
Inc., Boston Scientific, Guidant Corp., Medtronic Inc. and St. Jude Medical
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, which might incorporate future
filings made by the Company under those statutes, the preceding Compensation
Committee Report on Executive Compensation and the Performance Graph will not
be incorporated by reference into any of those prior filings; nor will such
report or graph be incorporated into any future filings made by the Company
under those statutes.
22
<PAGE>
RELATIONSHIPS AMONG DIRECTORS OR EXECUTIVE OFFICERS
There are no family relationships between any director or executive officer
of the Company.
BOARD OF DIRECTORS COMMITTEES AND MEETINGS
The Board of Directors has three standing committees: the Compensation
Committee, the Audit Committee and the Non-Officer Stock Option Administration
Committee. The Board does not have a nominating committee.
The Compensation Committee was established in February 1993 to determine
compensation to be paid to the Company's executive officers and to administer
the Company's stock plans generally. The current members of the Compensation
Committee are Messrs. Greene, Johannsmeier and Mercer.
The Audit Committee was established in October 1986 to recommend engagement
of the Company's independent public accountants, to approve services performed
by such accountants and to review, in consultation with the independent public
accountants, the Company's accounting system and system of internal controls.
The current members of the Audit Committee are Messrs. Greene and Mercer.
The Non-Officer Stock Option Administration Committee was established in
July 1987 to administer the Company's stock option plans only for non-officer
employees of the Company. Its member is Dr. Maslak.
During the fiscal year ended December 31, 1999, the Board of Directors held
eight meetings, the Compensation Committee held three meetings and the Audit
Committee held five meetings. The Non-Officer Stock Option Administration
Committee acted solely by unanimous written consent in accordance with the
Company's Bylaws and Delaware law. Each director attended at least 75% of the
aggregate of all meetings of the Board of Directors and of the committees, if
any, upon which such director served.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in beneficial ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than ten percent (10%)
stockholders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1999, all
Section 16(a) filing requirements applicable to its officers, directors, and
greater than ten percent stockholders for fiscal 1999 were complied with on a
timely basis with the exception of the following late filings: Messrs. Greene
and Johannsmeier each inadvertently failed to file a Form 5 in a timely manner
to report an option grant of 7,500 shares, which was automatically granted to
each non-employee director on the date of the 1998 Annual Meeting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Johannsmeier, Mercer and
Greene, none of whom has ever been an officer or employee of the Company.
23
<PAGE>
CERTAIN RELATIONSHIPS AND OTHER TRANSACTIONS
In connection with the relocation of Edward P. Cornell, the Senior Vice
President of Engineering, to the San Francisco Bay Area in September 1997, the
Company loaned Mr. Cornell $400,000 pursuant to a promissory note to assist
him in the purchase of a home in the San Francisco Bay Area. The loan is
secured by Mr. Cornell's residence. The loan to Mr. Cornell is interest-free
and will be fully forgiven on a daily basis over a seven-year period which
commenced on September 2, 1997. The loan will be automatically forgiven upon
termination of Mr. Cornell's employment without "cause" as defined in the
promissory note, Mr. Cornell's death, reduction of Mr. Cornell's target
compensation (with a base salary of not less than $176,000 per year) from the
Company to an amount less than $200,000 per year, or a "change in control", as
defined in the promissory note. If Mr. Cornell voluntarily terminates his
employment with the Company or if he is terminated by the Company for "cause"
he must repay the outstanding balance of the loan plus any tax savings to him
resulting from any repayment of the loan, no later than the second anniversary
of the date of his termination.
As of December 31, 1999, approximately $247,948 of the loan to Mr. Cornell
was outstanding and the largest amount outstanding during the year was
$323,818.
Effective February 19, 1999, the Company granted Mr. Dugan, the Company's
then President, an option to purchase 100,000 shares of the Company. The
exercise price for the options was $9.00 per share less than the fair market
value on the date of grant. The options were immediately exercisable subject
to a repurchase right on the part of the Company that would lapse upon the
earlier of the fifth anniversary of the grant date, or with respect to 33,334
shares, in any year that the Company met certain earnings per share targets.
The repurchase price would be, with respect to 33,334 shares, the lower of
$10.45 and the then fair market value of the shares, and with respect the
other remaining 66,666 shares, the exercise price of the option. The Company
agreed to loan Mr. Dugan up to $350,000 for the purposes of funding the
exercise of the option with respect to 33,334 shares and paying all or a
portion of the income tax due upon such exercise. The loan was fully due and
payable two years from the date of loan, with interest payable annually at the
lowest rate required under federal income tax regulations to avoid the
imputation of interest. At the time of Mr. Dugan's resignation from the
Company effective March 1, 2000, Mr. Dugan had not exercised any of these
options and therefore, the loan had not been put into effect. The option
expired by its terms on March 1, 2000.
ANNUAL REPORT AND FORM 10-K
The Company's 1999 Annual Report, including the Company's Report on Form 10-
K with financial statements and financial statement schedules, is being mailed
with this proxy statement to stockholders entitled to notice of the Annual
Meeting.
24
<PAGE>
OTHER BUSINESS
The Board of Directors knows of no other business that will be presented for
consideration at the Annual Meeting. If other matters are properly brought
before the meeting, it is the intention of the persons named in the
accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
Charles H. Dearborn
Secretary
Mountain View, California
March 30, 2000
25
<PAGE>
0426-PS-00
<PAGE>
ACUSON CORPORATION
1995 STOCK INCENTIVE PLAN
Adopted by the Board of Directors on March 1, 1995
Approved by stockholders on May 31, 1995
Amended by the Board of Directors on February 29, 1996
Amendment approved by stockholders on July 23, 1996
Amended by the Board of Directors on February 19, 1999
Amended by the Board of Directors on March 9, 2000
1. Establishment, Purpose, and Definitions.
---------------------------------------
(a) Acuson Corporation (the "Company") hereby adopts the Acuson
Corporation 1995 Stock Incentive Plan (the "Plan").
(b) The purpose of the Plan is to allow the Company to provide
incentives to Eligible Individuals (as defined in Section 4, below) for
employment, increased efforts and successful achievements on behalf of or in
the interests of the Company and its Affiliates and to maximize the rewards
due them for those efforts and achievements. In the case of Employees
(including officers and directors who are Employees) of the Company and of
its Affiliates such incentives include (i) an opportunity to purchase shares
of common stock, par value $.0001 per share, of the Company ("Stock")
pursuant to options which may qualify as incentive stock options (referred
to as "incentive stock options") under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), (ii) an opportunity to purchase
shares of Stock pursuant to options which are not described in Sections 422
or 423 of the Code (referred to as "nonqualified stock options"), (iii) the
sale or bonus of restricted Stock ("Restricted Stock"), and (iv) the grant
of stock appreciation rights ("SARs"), either separately or in relation
("tandem") with stock options, entitling holders to compensation measured by
appreciation in the value of Stock. The Plan also provides for the grant of
similar incentives (other than incentive stock options) to independent
contractors and consultants to the Company and its Affiliates. Finally, the
Plan provides for the automatic, nondiscretionary grant of nonqualified
stock options to directors of the Company who are not Employees of the
Company or any Affiliate ("Non-Employee Directors").
(c) Except for purposes of Section 12, the term "Affiliate" means parent
or subsidiary corporations of the Company, as defined in Sections 424(e) and
(f) of the Code (but substituting "the Company" for "employer corporation"),
including parents or subsidiaries of the Company that become such after
adoption of the Plan.
1
<PAGE>
(d) The term "Employee" means any person, including officers and
directors, who is an employee of the Company or an Affiliate for purposes
of income tax withholding under the Code. Neither service as a director nor
payment of a director's fee by the Company shall be sufficient to
constitute a person an Employee.
2. Administration of the Plan.
--------------------------
(a) The Plan may be administered by different committees with respect
to: (i) Non-Employee Directors; (ii) Eligible Individuals who are (A)
officers or directors subject to Section 16(b) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or (B) "covered employees"
within the meaning of Section 162(m)(3) of the Code ("Covered Employees");
and (iii) Eligible Individuals who are neither officers or directors
subject to Section 16(b) of the Exchange Act nor Covered Employees. Each
committee, in addition to satisfying any specific requirements imposed by
this Section 2, shall also satisfy any legal requirements relating to the
administration of stock-based compensation plans under applicable state
corporate and securities laws and the Code ("Applicable Laws"). References
herein to the "Plan Administrator" shall refer to the applicable
committee(s) or, if the Board of Directors of the Company (the "Board")
does not delegate administration of some aspects of the Plan to a
committee, shall be construed to refer to the Board.
(b) With respect to awards made to Eligible Individuals who are officers
or directors subject to Section 16(b) of the Exchange Act or Covered
Employees, the Plan shall be administered by a committee of the Board,
which committee shall be constituted (i) in such manner as to permit such
grants and related transactions under the Plan to be exempt from Section
16(b) of the Exchange Act in accordance with Rule 16b-3 (or any successor
thereto) promulgated under the Exchange Act ("Rule 16b-3") and as a (ii)
"committee comprised solely of two or more outside directors" for purposes
of Section 162(m) of the Code. Once appointed, such committee shall
continue to serve in its designated capacity until otherwise directed by
the Board. From time to time, the Board may increase the size of the
committee and appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however caused), all to
the extent permitted by Rule 16b-3, Section 162(m) of the Code, the rules
and regulations with respect to each, and Applicable Laws. The committee
shall select one of its members as chair of the committee and shall hold
meetings at such times and places as it may determine. To the extent
permitted by Rule 16b-3, Section 162(m) of the Code, the rules and
regulations with respect to each, and Applicable Laws, a majority of the
committee shall constitute a quorum, and acts of the committee at which a
quorum is present, or acts
2
<PAGE>
reduced to or approved in writing by all the members of the committee,
shall be the valid acts of the committee .
(c) With respect to awards made to Eligible Individuals who are neither
officers nor directors subject to Section 16(b) of the Exchange Act nor
Covered Employees, the Plan shall be administered by (i) the Board; or (ii)
a committee of one or more persons (which may be the committee established
pursuant to Section 2(b), above) designated by the Board. Once appointed,
such committee shall continue to serve in its designated capacity until
otherwise directed by the Board. From time to time, the Board may increase
the size of the committee and appoint additional members, remove members
(with or without cause) and substitute new members, fill vacancies (however
caused), and remove all members of the committee and thereafter directly
administer the Plan, all to the extent permitted by Applicable Laws. The
committee shall select one of its members as chair of the committee and
shall hold meetings at such times and places as it may determine. To the
extent permitted by Applicable Laws, a majority of the committee shall
constitute a quorum, and acts of the committee at which a quorum is
present, or acts reduced to or approved in writing by all the members of
the committee, shall be the valid acts of the committee.
(d) The Plan Administrator shall determine which Eligible Individuals
shall be granted options under the Plan, the timing of such grants, the
terms thereof (including any restrictions on the Stock), and the number of
shares subject to such options .
(e) The Plan Administrator shall also determine which Eligible
Individuals shall be granted or issued SARs or Restricted Stock (other than
pursuant to the exercise of options) under the Plan, the timing of such
grants or issuances, the terms thereof (including any restrictions and the
consideration, if any, to be paid therefor) and the number of shares or
SARs to be granted .
(f) Subject to Section 2(h) of this Plan, the Plan Administrator may
amend the terms of any outstanding option or SAR granted under this Plan,
but any amendment that would adversely affect the holder's rights under an
outstanding option or SAR shall not be made without the holder's written
consent. The Plan Administrator may, with the holder's written consent,
cancel any outstanding option or SAR or accept any outstanding option or
SAR in exchange for a new option or SAR. The Plan Administrator also may
amend any Restricted Stock purchase agreement or Restricted Stock bonus
agreement relating to sales or bonuses of Restricted Stock under the Plan,
but any amendment that would adversely affect the individual's rights to
the Restricted Stock shall not be made without his or her written consent.
3
<PAGE>
(g) The Plan Administrator shall have the sole authority, in its
absolute discretion, to adopt, amend, and rescind such rules and
regulations as, in its opinion, may be advisable for the administration of
the Plan, to construe and interpret the Plan, the rules and the
regulations, and the instruments evidencing options, SARs or Restricted
Stock granted or issued under the Plan and to make all other determinations
deemed necessary or advisable for the administration of the Plan. All
decisions, determinations, and interpretations of the Plan Administrator
shall be binding on all participants.
(h) Notwithstanding any other provision of this Plan, options granted
under this Plan may not be repriced unless such repricing is approved by
the vote of the holders of a majority of the shares of the Common Stock of
the Company present in person or represented by proxy and entitled to vote
at a meeting of stockholders.
3. Stock Subject to the Plan.
-------------------------
(a) The maximum aggregate number of shares of Stock available for
issuance under the Plan and during the life of the Plan shall equal
6,500,000 shares, subject to adjustment from time to time in accordance
with this Section 3. The Stock subject to the Plan may be unissued shares,
treasury shares or shares purchased by the Company on the open market or
otherwise .
(b) For purposes of the limitation specified in Section 3(a), the
following principles shall apply:
(1) the following transactions, if granted pursuant to this
Plan, shall count against and decrease the number of shares of Stock
that may be issued for purposes of Section 3(a): (i) shares of Stock
subject to outstanding options, outstanding shares of Restricted Stock,
and shares subject to SARs granted independently of options (based upon
a good faith estimate by the Company or the Plan Administrator of the
maximum number of shares for which the SAR may be settled (assuming
payment in full in shares of Stock), and (ii) in the case of options
granted in tandem with SARs, the greater of the number of shares of
Stock that would be counted if one or the other alone was outstanding
(determined as described in clause (i) above);
(2) the following shall be added back to the number of shares of
Stock that may be issued for purposes of Section 3(a): (i) shares of
Stock with respect to which options, SARs granted independent of
options, or Restricted Stock awards expire, are cancelled, or otherwise
terminate without being exercised, converted, or
vested, as applicable, and (ii) in the case of options granted in tandem
with SARs, shares of Stock as to which an option has been surrendered in
connection with the exercise of a tandem SAR, to the extent the number
surrendered exceeds the number issued upon exercise of the SAR;
provided that, in any case, the holder of such awards did not receive
-------------
any dividends or other benefits of ownership with respect to the
underlying shares being added back, other than voting rights and the
accumulation (but not payment) of dividends of Stock ;
(3) shares of Stock subject to SARs granted independently of
options (calculated as provided in clause (1) above) that are exercised
and paid in cash shall be added back to the number of shares of Stock
that may be issued for purposes of Section 3(a), provided that the
holder of such SAR did not receive any dividends or other benefits of
ownership, other than voting rights and the accumulation (but not
payment) of dividends, relative to the shares of Stock subject to the
SARs;
(4) shares of Stock that are transferred by a holder of an award
(or withheld by the Company) as full or partial payment to the Company
of the purchase price of shares of Stock subject to an option or the
Company's or any Affiliate's tax withholding obligations shall not be
added back to the number of shares of Stock that may be issued for
purposes of Section 3(a) and shall not again be subject to awards; and
(5) if the number of shares of Stock counted against the number
of shares that may be issued for purposes of Section 3(a) is based upon
an estimate made by the Company or the Plan Administrator as provided in
clause (1) above and the actual number of shares of Stock issued
pursuant to the applicable award is greater or less than the estimated
number, then upon such issuance, the number of shares of Stock that may
be issued pursuant to Section 3(a) shall be further reduced by the
excess issuance or increased by the shortfall, as applicable.
(c) If there is any change in the Stock through merger, consolidation,
reorganization, recapitalization, reincorporation, stock split, stock
dividend (in excess of 2%), or other change in the capital structure of the
Company, appropriate adjustments shall be made by the Plan Administrator,
in order to preserve but not to increase the benefits to the outstanding
options, SARs and Restricted Stock purchase or Restricted Stock bonus
awards under the Plan, including adjustments to the aggregate number and
kind of shares subject to the Plan, or to outstanding Restricted Stock
purchase or Restricted Stock bonus agreements, or SAR agreements, and the
number and kind of shares and the price per share subject to outstanding
options.
4
<PAGE>
(d) The Plan Administrator shall have the discretion, to the extent
permitted by Applicable Law, to include provisions in any agreements
evidencing awards granted under the Plan providing that, in the event of a
dissolution, liquidation, merger or consolidation of the Company, or any
other event that the Plan Administrator deems to have effected a change in
control of the Company, any such awards shall accelerate and become fully
vested, and all forfeiture and/or transfer restrictions with respect
thereto shall lapse, regardless of whether such awards are otherwise to be
assumed or replaced in connection with such event .
4. Eligible Individuals. Individuals who shall be eligible to have the Plan
--------------------
Administrator grant to them options, SARs or Restricted Stock under the Plan
("Eligible Individuals") shall be such employees, officers (including officers
who are directors of the Company), independent contractors, and consultants of
the Company or an Affiliate as the Plan Administrator, in its discretion, shall
designate from time to time. Notwithstanding the foregoing, only Employees
shall be eligible to receive incentive stock options. Eligible Individuals
shall not include Non-Employee Directors. Non-Employee Directors shall receive
automatic and nondiscretionary option grants pursuant to Section 5 and will not
be otherwise eligible to receive any other option grants or awards of SARs or
Restricted Stock under the Plan or any other stock plan of the Company or any
Affiliate.
5. Automatic Option Grants to Non-Employee Directors.
-------------------------------------------------
(a) All grants of options pursuant to this Section 5 shall be automatic
and nondiscretionary and shall be made strictly in accordance with the
provisions of this Section 5. No person shall have any discretion to
determine which Non-Employee Directors shall be granted options, the number
of shares of Stock to be covered by options granted to Non-Employee
Directors, the timing of such option grants or the exercise price thereof.
(b) An option to purchase 7,500 shares of Stock shall be granted to each
Non-Employee Director continuing in office immediately following each
annual meeting of the Company's stockholders which occurs on or after the
date of approval of the Plan by the stockholders of the Company and prior
to the termination of the Plan.
(c) The term of each option granted pursuant to this Section 5 shall be
ten years from the date of grant, unless a shorter period is required to
comply with any Applicable Law, and except for the early termination
provisions contained in the written stock option agreement in the form of
Exhibit A hereto, in either of which cases such shorter period shall apply.
5
<PAGE>
(d) Each option granted pursuant to this Section 5 shall vest and become
fully exercisable as to fifty percent (50%) of the shares subject to the
option on the date which is six (6) months from the date the option is
granted, then daily thereafter as to 1/365th of the total shares subject to
the option so that the option is fully exercisable no later than one year
following the date the option is granted .
(e) Each option grant to an Non-Employee Director pursuant to this
Section 5 shall be evidenced by a written stock option agreement, in the
form of Exhibit A hereto, executed by the Company and the Non-Employee
Director to whom such option is automatically granted.
6. Terms and Conditions of Options.
-------------------------------
(a) Each option granted pursuant to the Plan will be evidenced by a
written stock option agreement executed by the Company and the person to
whom such option is granted.
(b) Except for options granted under Section 5 above, the Plan
Administrator shall determine the term of each option granted under the
Plan; provided, however, that the term of an incentive stock option shall
not be for more than ten years and that, in the case of an incentive stock
option granted to a person possessing more than 10% of the combined voting
power of the Company or an Affiliate on the date the option is granted, the
term of each incentive stock option shall be no more than five years .
(c) In the case of incentive stock options, the aggregate fair market
value (determined as of the time such option is granted) of the Stock with
respect to which incentive stock options are exercisable for the first time
by an Eligible Individual in any calendar year (under this Plan and any
other plans of the Company or its Affiliates) shall not exceed $100,000. If
the aggregate fair market value of the Stock with respect to which
incentive stock options are exercisable by an optionee for the first time
in any calendar year exceeds $100,000, such options shall be treated, to
the minimum extent required to preserve incentive stock option treatment
for as many options as possible, as nonqualified stock options. The rule
set forth in the preceding sentence shall be applied by taking options into
account in the order in which they were granted.
(d) The exercise price of each incentive stock option shall be not less
than the per share fair market value of the Stock subject to such option on
the date the option is granted. The exercise price of each nonqualified
stock option shall be as determined by the Plan Administrator.
Notwithstanding the foregoing, (i) in the case of an incentive stock option
granted to a person possessing more than 10% of the combined voting power
of the Company or an Affiliate on the date the
6
<PAGE>
option is granted, the exercise price shall be not less than 110% of the
fair market value of the Stock on the date the option is granted, and (ii)
in the case of an option granted pursuant to Section 5 above, the exercise
price shall be not less than the per share fair market value of the Stock
subject to such option on the date the option is granted. The exercise
price of an option shall be subject to adjustment to the extent provided in
Section 3(c), above.
(e) The stock option agreement may contain such other terms, provisions,
and conditions consistent with this Plan as may be determined by the Plan
Administrator. If an option, or any part thereof, is intended to qualify as
an incentive stock option, the stock option agreement shall contain those
terms and conditions which are necessary to so qualify it.
(f) The maximum number of shares of Stock with respect to which SARs or
options to acquire Stock may be granted to any individual during any
calendar year shall not exceed 1,000,000 shares (which number may be
increased without stockholder approval to reflect adjustments under Section
3(c), above, to the extent such increase does not cause the grant to fail
to qualify as remuneration payable solely on account of one or more
performance goals within the meaning of Section 162(m) of the Code). To the
extent required by Section 162(m) of the Code or the regulations
thereunder, in applying the foregoing limitation with respect to any
employee, if any option is cancelled, the cancelled option shall continue
to count against the maximum number of shares for which options may be
granted to the employee under this Section 6(f). For this purpose, the
repricing of an option shall be treated as a cancellation of the existing
option and the grant of a new option to the extent required by Section
162(m) of the Code or the regulations thereunder.
7. Payment Upon Exercise of Options.
--------------------------------
(a) Payment of the purchase price upon exercise of any option granted
under this Plan shall be made in cash, by optionee's personal check, a
certified check, bank draft, or postal or express money order payable to
the order of the Company in lawful money of the United States
(collectively, "Cash Consideration"); provided, however, that, except for
options granted under Section 5 above, the Plan Administrator, in its sole
discretion, may permit an optionee to pay the option price in whole or in
part (i) with shares of Stock owned by the optionee or with shares of Stock
withheld from the shares otherwise deliverable to the optionee upon
exercise of an option; (ii) by delivery on a form prescribed by the Company
of an irrevocable direction to a securities broker approved by the Company
to sell shares of Stock and deliver all or a portion of the proceeds to the
Company in payment for the Stock; (iii) by delivery of the optionee's
promissory note with such recourse, interest, security, and
7
<PAGE>
redemption provisions as the Plan Administrator in its discretion
determines appropriate; or (iv) in any combination of the foregoing. The
exercise price of any options granted under Section 5 above, shall be paid
in Cash Consideration, the consideration specified in clauses (i) or (ii)
of the preceding sentence or in any combination thereof. Any Stock used to
exercise options shall be valued at its fair market value on the date of
the exercise of the option. In addition, the Plan Administrator, in its
sole discretion, may authorize the surrender by an optionee of all or part
of an unexercised option (excluding options granted under Section 5 above)
and authorize a payment in consideration thereof of an amount equal to the
difference between the aggregate fair market value of the Stock subject to
such option and the aggregate option price of such Stock. In the Plan
Administrator's discretion, such payment may be made in cash, shares of
Stock with a fair market value on the date of surrender equal to the
payment amount, or some combination thereof .
(b) In the event that the exercise price is satisfied by shares withheld
from the shares of Stock otherwise deliverable to the optionee, the Plan
Administrator may issue the optionee an additional option, with terms
identical to the option agreement under which the option was exercised,
entitling the optionee to purchase additional shares of Stock equal to the
number of shares so withheld but at an exercise price equal to the fair
market value of the Stock on the grant date of the new option; provided,
however, that no Such additional options may be granted with respect to
options granted pursuant to Section 5, above.
8. Terms and Conditions of Restricted Stock Purchases and Bonuses.
--------------------------------------------------------------
(a) Each sale (other than upon exercise of options) or bonus grant of
Restricted Stock pursuant to the Plan will be evidenced by a written
Restricted Stock purchase or Restricted Stock bonus agreement, as
applicable, executed by the Company and the person to whom such Restricted
Stock is sold or granted.
(b) The Restricted Stock purchase agreement or Restricted Stock bonus
agreement may contain such terms, provisions, and conditions consistent
with this Plan as may be determined by the Plan Administrator, including
not by way of limitation, payment terms, restrictions on transfer,
forfeiture provisions, repurchase provisions, and vesting provisions.
(c) The Plan Administrator may condition the award or the exercise of
any right under an award under this Section 8 upon the attainment of one or
more preestablished objective performance goals meeting the requirements of
Section 162(m) of the Code and the regulations thereunder.
8
<PAGE>
9. Terms and Conditions of SARs. The Plan Administrator may, under such terms
----------------------------
and conditions as it deems appropriate, authorize the issuance of SARs evidenced
by a written SAR agreement (which, in the case of tandem options, may be part of
the option agreement to which the SAR relates) executed by the Company and the
person to whom the SARs are granted. The SAR agreement shall specify the term
for the SARs covered thereby and contain such other terms, provisions and
conditions consistent with this Plan as may be determined by the Plan
Administrator.
10. Withholding Taxes.
-----------------
(a) No Stock shall be granted or sold under the Plan to any Eligible
Individual, and no SAR may be exercised, until the individual has made
arrangements acceptable to the Plan Administrator for the satisfaction of
federal, state, and local income and employment tax withholding
obligations, including without limitation obligations incident to the
receipt of Stock under the Plan, the lapsing of restrictions applicable to
such Stock, the failure to satisfy the conditions for treatment as
incentive stock options under applicable tax law, or the receipt of cash
payments. Upon the exercise of an option or the lapsing of a restriction
on Stock issued under the Plan, the Company (or the optionee's or
stockholder's employer) may withhold from the shares otherwise deliverable
to the optionee upon such exercise, or require the stockholder to surrender
shares of Stock as to which the restriction has lapsed, such number of
shares having a fair market value sufficient to satisfy federal, state and
local income and employment tax withholding obligations.
(b) In the event that such tax withholding is satisfied by the Company
or the optionee's employer withholding shares of Stock otherwise
deliverable to the optionee, the Plan Administrator may issue the optionee
an additional option, with terms identical to the option agreement under
which the option was exercised, entitling the optionee to purchase
additional shares of Stock equal to the number of shares so withheld but at
an exercise price equal to the fair market value of the Stock on the grant
date of the new option; provided, however, that no such additional options
may be granted with respect to options granted pursuant to Section 5,
above.
9
<PAGE>
11. Assignability. Incentive stock options may not be sold, pledged, assigned,
-------------
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised, during the lifetime of
the optionee, only by the optionee. Nonqualified stock options and SARs shall
be transferable to the extent provided in the stock option or SAR agreement or
as determined by the Plan Administrator. Stock subject to a Restricted Stock
purchase agreement or a Restricted Stock bonus agreement shall be transferable
only as provided in such agreement.
12. Change in Control.
-----------------
(a) Notwithstanding anything to the contrary contained in the Plan, each
stock option, SAR, Restricted Stock bonus or Restricted Stock purchase
agreement (or an amendment thereto) evidencing an option, SAR, Restricted
Stock bonus or Restricted Stock purchase hereunder shall automatically and
without further action be fully vested, nonforfeitable and become
exercisable, and any Restricted Stock covered by such an agreement shall be
released from restrictions on transfer and repurchase or forfeiture rights,
on the twenty-second day after any Share Acquisition Date, unless prior to
such twenty-second day a majority of the Continuing Directors then in
office has determined that the transaction pursuant to which a Person has
become an Acquiring Person is an Approved Transaction.
(b) Certain Definitions. For purposes of this Section 12, the
-------------------
following definitions shall apply:
"Acquiring Person" means any Person who or which, together with all
----------------
Affiliates and Associates of such Person, shall be the Beneficial Owner of 20%
or more of the Common Shares then outstanding, but shall not include the
Company, any Subsidiary of the Company or any employee benefit plan of the
Company or any Subsidiary of the Company, or any entity holding Common Shares
for or pursuant to the terms of any such plan. Notwithstanding the foregoing,
no Person shall become an "Acquiring Person" as the result of an acquisition of
Common Shares by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by
such Person to 20% or more of the Common Shares of the Company then outstanding;
provided, however, that if a Person becomes the Beneficial Owner of 20% or more
- -------- -------
of the Common Shares of the Company then outstanding by reason of share
purchases by the Company and shall, after such share purchases by the Company,
becomes the Beneficial Owner of any additional Common Shares of the Company,
then such Person shall be deemed to be an "Acquiring Person".
"Affiliate" and "Associate" have the respective meanings ascribed to such
--------- ---------
terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
10
<PAGE>
"Approved Transaction" means any transaction that occurs at a time when
--------------------
Continuing Directors are in office and a majority of the Continuing Directors
then in office has determined that the transaction is in the best interest of
the Company and its stockholders.
A Person shall be deemed the "Beneficial Owner" of and shall be deemed to
----------------
"beneficially own" any securities: (i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly; (ii) which
such Person or any of such Person's Affiliates or Associates has (A) the right
to acquire (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding, or
upon the exercise of conversion rights, exchange rights, rights (other than the
Rights), warrants or options, or otherwise; provided, however, that a Person
-------- -------
shall not be deemed the Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange; or (B) the right to vote
pursuant to any agreement, arrangement or understanding; provided, however, that
-------- -------
a Person shall not be deemed the Beneficial Owner of, or to beneficially own,
any security if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to such
person in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations of the Exchange Act
and (2) is not also then reportable on Schedule 13D under the Exchange Act (or
any comparable or successor report); or (iii) which are beneficially owned,
directly or indirectly, by any other Person with which such Person or any of
such Person's Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting (except to the
extent contemplated by the proviso to clause (ii)(B) of this definition) or
disposing of any securities of the Company; provided further, however, that
nothing in this Section 12 shall cause a Person to be the Beneficial Owner of,
or to beneficially own, any securities (x) acquired through such Person's
participation in the business of underwriting securities in good faith in a firm
commitment underwriting until the expiration of forty days after the date of
such acquisition or (y) which such Person has reported on Schedule 13G under the
Exchange Act and has not ceased to be eligible to report on Schedule 13G
pursuant to Rule 13d-1 under the Exchange Act.
"Common Shares" means the shares of common stock, par value $.0001 per
-------------
share, of the Company.
"Continuing Director" means (i) any member of the Board of Directors of the
-------------------
Company, while such Person is a member of the Board, who is not an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person, or a representative
of an Acquiring Person or of any such Affiliate or Associate, and who was, if
applicable, a member of the Board prior to the time that any Person becomes an
Acquiring Person, or (ii) any Person who subsequently becomes a member of the
Board, while such Person is a member of the Board, who is not
11
<PAGE>
an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, if
such Person's nomination for election or election to the Board is recommended or
approved by a majority of Continuing Directors.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated thereunder.
"Person" means any individual, firm, partnership, corporation or other
------
entity, and shall include any successor (by merger or otherwise) of such entity.
"Rights" means the rights granted to the Company's shareholders to purchase
------
additional Common Shares under certain circumstances, as described in that
certain Rights Agreement, dated as of May 5, 1988, by and between the Company
and The First National Bank of Boston, as rights agent.
"Share Acquisition Date" means the first date of public announcement by the
----------------------
Company or an Acquiring Person that a Person has become an Acquiring Person.
"Subsidiary" of any Person means any corporation or other entity of which a
----------
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by such Person, or which is otherwise
controlled by such Person.
13. Amendment, Suspension, or Termination of the Plan.
-------------------------------------------------
(a) The Board may at any time amend, suspend or terminate the Plan as it
deems advisable; provided that such amendment, suspension or termination
complies with all applicable requirements of state and federal law,
including any applicable requirement that the Plan or an amendment to the
Plan be approved by the stockholders, and provided further that, except as
provided in Section 3(c) above, the Board shall in no event amend the Plan
in the following respects without the consent of stockholders then
sufficient to approve the Plan in the first instance:
(1) To materially increase the benefits accruing to participants
under the Plan;
(2) To materially increase the number of shares of Stock
available under the Plan or to increase the number of shares of Stock
available for grant of incentive stock options under the Plan; or
(3) To materially modify the eligibility requirements for
participation in the Plan or the class of employees eligible to receive
options under the Plan or to change the designation or class of persons
eligible to receive incentive stock options under the Plan.
12
<PAGE>
(b) No option or SAR may be granted nor may any Stock be issued (other
than upon exercise of outstanding options) under the Plan during any
suspension or after the termination of the Plan, and no amendment,
suspension, or termination of the Plan shall, without the affected
individual's consent, alter or impair any rights or obligations under any
option or SAR previously granted under the Plan.
14. Term of Plan. The Plan shall terminate with respect to the grant of
------------
additional awards on the tenth anniversary of the date the Plan is approved by
the stockholders, unless previously terminated by the Board pursuant to Section
13.
15. Use of Proceeds. Cash proceeds realized from the exercise of options
---------------
granted under the Plan or from other sales of Stock under the Plan shall
constitute general funds of the Company.
16. Stockholder Approval. The Plan was adopted by the Board on March 1, 1995
--------------------
and became effective when approved by the Company's stockholders on May 31,
1995. On February 29, 1996, the Board adopted and approved an amendment to
increase the automatic option grants to Non-Employee Directors from 5,000 to
7,500 shares of Stock which became effective when approved by the Company's
stockholders on July 23, 1996. On February 19, 1999, the Board adopted and
approved an amendment and restatement of the Plan to reflect amendments
promulgated by the Securities and Exchange Commission to Rule 16b-3 applicable
to the Plan, which amendment and restatement was not subject to stockholder
approval. On March 9, 2000, the Board adopted and approved an amendment to the
Plan to eliminate the ability of the Plan Administrator to reprice outstanding
options, which amendment was not subject to stockholder approval, and also
adopted and approved an amendment to the Plan to increase the maximum aggregate
number of shares of stock available for issuance under the Plan from 3,500,000
to 6,500,000, which will become effective if approved by the Company's
stockholders.
17. No Employment Right. Nothing in this Plan or any instrument executed or
-------------------
any award granted pursuant thereto shall confer upon any employee, independent
contractor, consultant or director any right to continue in the employ of the
Company or any Affiliate (or to continue acting as an independent contractor,
consultant or director) or shall affect the right of the Company or any
Affiliate to terminate the employment, contractual or consulting relationship or
directorship of any person, with or without cause.
13
<PAGE>
ACUSON CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
Adopted by the Board of Directors on March 1, 1995
Approved by stockholders on May 31, 1995
Amended by the Board of Directors on February 19, 1999
Amended by the Board of Directors on March 9, 2000
The following constitute the provisions of the 1995 Employee Stock Purchase
Plan of Acuson Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. The Company, by
means of the Plan, seeks to retain the services of its employees, to secure and
retain the services of new employees, and to provide incentives for such persons
to exert maximum efforts for the success of the Company by providing eligible
employees with an opportunity to participate as shareholders in the Company's
future growth. It is the intention of the Company to have the Plan qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Code. Accordingly, the
provisions of the Plan, and the discretion granted to the Plan Administrator
hereunder shall be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.
2. Definitions.
-----------
(a) "Applicable Discount" shall mean, with respect to any given
-------------------
Purchase Period, the discount fixed by the Plan Administrator pursuant to
paragraph 4(b) with respect to such Purchase Period, which discount shall be no
less than 0% and no more than 15% (in whole percentages).
(b) "Board" shall mean the Board of Directors of the Company.
-----
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(d) "Common Stock" shall mean the common stock, par value $.0001 per
------------
share, of the
(e) "Company" shall mean Acuson Corporation, a Delaware corporation.
-------
(f) "Compensation" shall mean, with respect to any given Purchase
------------
Period, the components of each Participant's total compensation that will be
treated as compensation for purposes of the Plan during such Purchase Period as
determined by the Plan Administrator pursuant to paragraph 4(b).
1
<PAGE>
(g) "Designated Subsidiaries" shall mean the Subsidiaries which have
-----------------------
been designated by the Plan Administrator from time to time in its sole
discretion as eligible to participate in the Plan.
(h) "Employee" shall mean any individual who is regularly engaged in
--------
the rendition of personal services to the Company or a Designated Subsidiary for
earnings considered wages under Section 3121(a) of the Code. For purposes of the
Plan, the employment relationship shall be treated as continuing intact while
the individual is on sick leave or other leave of absence approved by the
Company. Where the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the 91st day of such leave.
(i) "Enrollment Date" shall mean the first day of each Purchase Period.
---------------
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(k) "Exercise Date" shall mean, with respect to any given Purchase
-------------
Period, the date or dates fixed by the Plan Administrator with respect to such
Purchase Period pursuant to paragraph 4(b).
(l) "Fair Market Value" shall mean, as of any date, the value of Common
-----------------
Stock determined as follows:
(1) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such exchange (or the exchange with the greatest volume of trading in the
Common Stock) or system on the day of such determination, if such day is a
Trading Day, or the previous Trading Day, if such day is not a Trading Day, as
reported in The Wall Street Journal or such other source as the Board deems
-----------------------
reliable; or
(2) If the Common Stock is quoted on the NASDAQ system (but not on
the National Market system thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high and low asked prices for the Common Stock on
the day of such determination, if such day is a Trading Day, or the previous
Trading Day, if such day is not a Trading Day, as reported in The Wall Street
---------------
Journal or such other source as the Board deems reliable; or
- -------
2
<PAGE>
(3) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board.
(m) "Participant" means an eligible Employee of the Company or
-----------
Designated Subsidiary who is actively participating in the Plan.
(n) "Plan" shall mean this Employee Stock Purchase Plan.
----
(o) "Plan Administrator" shall mean either the Board or a committee of
------------------
the Board that is responsible for the administration of the Plan.
(p) "Purchase Period" shall mean a purchase period established by the
---------------
Plan Administrator pursuant to paragraph 4 hereof.
(q) "Purchase Price" shall mean, with respect to any given Exercise
--------------
Date, the amount determined by applying the Applicable Discount to the lower of
(i) the Fair Market Value of the Common Stock as of such Exercise Date and (ii)
the Fair Market Value of the Common Stock as of the first date of the Purchase
Period in which such Exercise Date falls; provided, however, that the Plan
Administrator may, in its discretion, determine that the Purchase Price for all
Exercise Dates within a given Purchase Period shall be the amount determined by
applying the Applicable Discount to the Fair Market Value of the Common Stock as
of the first date of such Purchase Period, but only if the Plan Administrator
does so upon establishing such Purchase Period.
(r) "Replacement Purchase Period" shall mean a replacement purchase
---------------------------
period established pursuant to paragraph 4(e) hereof.
(s) "Reserves" shall mean the number of shares of Common Stock covered
--------
by all purchase rights granted under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but as to which purchase rights have not yet been granted (or as
to which purchase rights have previously been granted but have expired
unexercised).
(t) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary, except that as used in paragraph
18(b), "Subsidiary" shall have the meaning set forth in paragraph 18(c).
(u) "Trading Day" shall mean a day on which The New York Stock Exchange
-----------
is open for trading.
3
<PAGE>
3. Eligibility.
-----------
(a) Any Employee who has been continuously employed by the Company prior
to the applicable Enrollment Date for such minimum period of time (not to exceed
two years), if any, as the Plan Administrator may require and who is employed by
the Company on such Enrollment Date shall be eligible to participate in the Plan
for the Purchase Period commencing with such Enrollment Date. Members of the
Board who are eligible Employees are permitted to participate in the Plan except
to the extent limited by paragraph 13(b).
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted purchase rights under the Plan (i) if, immediately
after the grant, such Employee (taking into account stock owned by any other
person whose stock would be attributed to such Employee pursuant to Section
424(d) of the Code) would own stock and/or hold outstanding options or rights to
purchase stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or of any Subsidiary, or
(ii) which permits his/her rights to purchase stock under all employee stock
purchase plans of the Company and its Subsidiaries to accrue at a rate which
exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the
Fair Market Value of the shares at the time such purchase right is granted) for
each calendar year in which such purchase right is outstanding at any time. The
determination of the accrual of the right to purchase stock shall be made in
accordance with Section 423(b)(8) of the Code and the regulations thereunder.
(c) Notwithstanding paragraph (a) above, the Plan Administrator shall
have the discretion to exclude any one or more of the following categories of
Employees from participation in the Plan: (i) Employees whose customary
employment is 20 hours or less per week; (ii) Employees whose customary
employment is five months or less in any calendar year; (iii) Employees who have
been employed by the Company or any Designated Subsidiary for less than two
years; and (iv) highly compensated Employees (within the meaning of Section
414(q) of the Code).
4. Purchase Periods.
----------------
(a) The Plan shall be implemented by Purchase Periods until such time as
(i) the maximum number of shares of Common Stock available for issuance under
the Plan shall have been purchased or (ii) the Plan shall have terminated in
accordance with paragraph 19 or paragraph 23 hereof. Each Purchase Period shall
be of such duration (not to exceed twenty-seven months per Purchase Period) as
determined by the Plan Administrator upon establishment of such Purchase Period.
Purchase Periods will commence on such dates as may be determined by the Plan
Administrator during the period in which the Plan remains in existence. The Plan
Administrator shall have the discretion to establish overlapping Purchase
Periods.
4
<PAGE>
(b) Upon establishing each Purchase Period, the Plan Administrator shall
fix (i) one or more Exercise Dates with respect to such Purchase Period, one of
which shall be on the last day of such Purchase Period, (ii) the Applicable
Discount with respect to such Purchase Period, (iii) the Compensation with
respect to such Purchase Period and (iv) the maximum number of shares that may
be purchased by any Participant on any Exercise Date during such Purchase Period
(the "Per-Participant Limit"). In addition, the Plan Administrator may, in its
discretion, fix a maximum number of shares of Common Stock that may be purchased
by all Participants in the aggregate during such Purchase Period and/or on any
given Exercise Date therein. Once fixed, the Exercise Date or Dates, the
Applicable Discount, the Compensation, the Per-Participant Limit and any
aggregate share purchase limits with respect to a given Purchase Period may not
be changed, except upon the occurrence of a Corporate Transaction as provided in
paragraph 18(b).
(c) A Participant shall be granted a separate purchase right for each
Purchase Period in which he/she participates. The purchase right shall be
granted on the first day of the Purchase Period and shall be automatically
exercised in successive installments on each Exercise Date during the Purchase
Period.
(d) If the Plan Administrator establishes overlapping Purchase Periods,
the Plan Administrator may, in its discretion, permit Participants to
participate in more than one Purchase Period at a time.
(e) If on the Trading Day following any Exercise Date in a Purchase
Period the Fair Market Value of the Common Stock is less than the Fair Market
Value of the Common Stock on the first day of such Purchase Period (after taking
into account any adjustment during the Purchase Period pursuant to paragraph
18(a)), the Plan Administrator may, in its discretion, provide that the Purchase
Period shall be terminated and that all Participants therein shall be enrolled
in a new Purchase Period, other than any such Participants who are not eligible
to participate in the Plan on that date or who have elected to terminate
participation in the Plan. Any such new Purchase Period (a "Replacement Purchase
Period") shall be established by the Plan Administrator pursuant to paragraph
4(a) and shall commence on the date that such previous Purchase Period is
terminated. The Plan Administrator shall fix one or more Exercise Dates, the
Applicable Discount, the Compensation and the Per-Participant Limit, and may fix
aggregate share purchase limits, pursuant to paragraph 4(b) with respect to such
Replacement Purchase Period .
(f) Except as specifically provided herein, the acquisition of Common
Stock through participation in the Plan for any Purchase Period shall neither
limit nor require the acquisition of Common Stock by a Participant in any
subsequent Purchase Period.
5
<PAGE>
5. Participation.
-------------
(a) An eligible Employee may become a Participant in the Plan by
completing a subscription agreement authorizing payroll deductions in a form
designated by the Company and filing it with the Company's payroll office prior
to the Enrollment Date for the Purchase Period in which such participation will
commence in accordance with the filing deadline established by the Company. Such
agreement will remain effective under subsequent Purchase Periods unless and
until such Employee files a new agreement or terminates his/her participation in
the Plan in accordance with paragraph 6(c), provided that such Employee must
file a new subscription agreement to enroll in any Purchase Period that overlaps
with a Purchase Period in which such Employee has previously enrolled.
(b) Payroll deductions for a Participant shall commence with the first
payroll following the Enrollment Date and shall end on the last complete payroll
period during the Purchase Period, unless sooner terminated by the Participant
as provided in paragraph 10.
6. Payroll Deductions.
------------------
(a) At the time a Participant files his/her subscription agreement,
he/she shall elect to have payroll deductions made on each pay day during the
Purchase Period in an amount from three to fifteen percent (in whole percentages
only) of the Compensation which he/she receives on each such pay day.
(b) All payroll deductions made for a Participant shall be credited to
his/her account under the Plan. A Participant may not make any additional
payments into such account.
(c) A Participant may discontinue his/her participation in the Plan as
provided in paragraph 10. A Participant's subscription agreement shall remain in
effect for successive Purchase Periods unless and until such Participant files a
new agreement or terminates his/her participation in the Plan as provided in
paragraph 10. The Plan Administrator may, in its discretion, permit Participants
to amend their subscription agreements to increase and/or decrease the rate of
their payroll deductions during any given Purchase Period.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and paragraph 3(b) herein, a Participant's
payroll deductions may be decreased to 0% at such time during any Purchase
Period which is scheduled to end during the current calendar year (the "Current
Purchase Period") that the aggregate of all payroll deductions which were
previously used to purchase stock under the Plan in any other Purchase Period
that ended or that will end during that calendar year plus all payroll
deductions accumulated with respect to the Current Purchase Period equal the
6
<PAGE>
maximum amount permitted under Section 423 of the Code. Payroll deductions shall
recommence at the rate provided in such Participant's subscription agreement at
the beginning of the first Purchase Period which is scheduled to end in the
following calendar year, unless terminated by the Participant as provided in
paragraph 10.
7. Grant of Purchase Right. On the first day of each Purchase Period, each
-----------------------
Participant in such Purchase Period shall be granted the right to purchase on
each Exercise Date of such Purchase Period (at the applicable Purchase Price) up
to a number of shares of Common Stock determined by dividing such Participant's
payroll deductions accumulated prior to such Exercise Date and retained in the
Participant's account as of the Exercise Date by the applicable Purchase Price;
provided that such purchase shall be subject to the limitations set forth in
paragraphs 3(b), 4(b), 6(d), 8(b) and 12(a) hereof. Exercise of the purchase
right shall occur as provided in paragraph 8, unless the Participant has
withdrawn from the Plan pursuant to paragraph 10, and the purchase right, to the
extent not exercised, shall expire on the last day of the Purchase Period.
8. Exercise of Purchase Right.
---------------------------
(a) Unless a Participant withdraws from the Plan as provided in
paragraph 10 below, his/her right to purchase shares will be exercised
automatically on each Exercise Date, and the maximum number of full shares
subject to such right shall be purchased for such Participant at the applicable
Purchase Price with the accumulated payroll deductions in his/her account. No
fractional shares will be purchased; any payroll deductions accumulated in a
Participant's account which are not sufficient to purchase a full share shall be
carried over to the next Exercise Date under the Plan or returned to the
Participant, provided that, if the next Exercise Date falls within a new
Purchase Period, such payroll deductions shall be carried over to such Exercise
Date only if the Participant participates in such new Purchase Period. Any
amount remaining in a Participant's account at the close of any Exercise Date
caused by anything other than a surplus due to fractional shares (including the
accumulated payroll deductions in any Participant's account as of any Exercise
Date that are in excess of the amount needed to purchase the maximum number of
full shares which may be purchased by such Participant based on the limitations
in paragraphs 3(b), 4(b), 6(d), 8(b) and 12(a) hereof) shall be refunded to the
Participant in cash as soon as practicable and shall not be carried over to the
next Exercise Date. During a Participant's lifetime, a Participant's right to
purchase shares hereunder is exercisable only by him/her.
(b) If, on a given Exercise Date, the aggregate purchase of shares upon
the exercise in full of all purchase rights would exceed the aggregate share
purchase limit, if any, fixed by the Plan Administrator pursuant to paragraph
4(b) with respect to the applicable Purchase Period, the Company shall make a
pro-rata allocation of the available shares in as nearly uniform a manner as
shall be practicable and as it shall determine to be equitable.
7
<PAGE>
9. Delivery. The Company shall arrange the delivery to each Participant
--------
of a certificate representing the shares of Common Stock purchased upon exercise
of his/her purchase right based upon instructions provided to the Company by the
Participant from time to time, but subject to paragraph 12(c).
10. Withdrawal; Termination of Employment.
-------------------------------------
(a) A Participant may withdraw all but not less than all the payroll
deductions credited to his/her account and not yet used to exercise his/her
purchase right under the Plan at any time by giving written notice to the
Company in a form designated by the Company. All of the Participant's payroll
deductions credited to his/her account will be paid to such Participant as soon
as practicable after receipt of such notice of withdrawal. Upon receipt of such
notice of withdrawal, the Participant's purchase right for the Purchase Period
will be automatically terminated, and no further payroll deductions for the
purchase of shares will be made during the Purchase Period. If a Participant
withdraws from a Purchase Period, payroll deductions will not resume at the
beginning of the succeeding Purchase Period unless the Participant delivers to
the Company a new subscription agreement.
(b) Upon a Participant's ceasing to be an eligible Employee for any
reason other than retirement, the payroll deductions credited to such
Participant's account during the Purchase Period but not yet used to exercise
his/her purchase right will be returned to such Participant or, in the case of
his/her death, to the person or persons entitled thereto under paragraph 14, and
such Participant's purchase right will be automatically terminated.
(c) Upon a Participant's ceasing to be an eligible Employee by reason of
his/her retirement, the provisions of this paragraph 10(c) shall apply. If such
retirement occurs three months or less prior to the next Exercise Date, the
retired Participant shall have the option of withdrawing from the Plan as
provided in paragraph 10(a), or taking no action and thereby continuing
participation in the Purchase Period in which he/she was participating at the
time of retirement. If retirement occurs more than three months prior to the
next Exercise Date, the payroll deductions credited to such retired
Participant's account during the Purchase Period but not yet used to exercise
his/her purchase right will be returned to such Participant and such
Participant's purchase right will be automatically terminated. The Plan
Administrator shall have the discretion to shorten or lengthen such period from
time to time during the term of the Plan, but such period shall in no event
exceed three months.
11. Interest. No interest shall accrue on the payroll deductions of a
--------
Participant in the Plan.
8
<PAGE>
12. Stock.
-----
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 4,000,000 shares,
subject to adjustment upon changes in capitalization of the Company as provided
in paragraph 18. If on a given Exercise Date the aggregate number of shares with
respect to which purchase rights are to be exercised exceeds the number of
shares then available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a manner
as shall be practicable and as it shall determine to be equitable. If any
purchase right granted under the Plan shall terminate for any reason without
having been exercised, the Common Stock not purchased under such right shall
again become available under the Plan.
(b) A Participant will have no interest or voting right in shares
covered by his/her purchase right until such shares are actually purchased on
the Participant's behalf in accordance with the applicable provisions of the
Plan. No adjustment shall be made for dividends, distributions or other rights
for which the record date is prior to the date of such purchase.
(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant, in the name of the Participant and
his/her spouse, in the name of the stockbroker at which the Participant
maintains an account in accordance with instructions provided to the Company by
the Participant pursuant to paragraph 9 or in the name of any permitted
transferee of the Participant pursuant to paragraph 15.
(d) The Common Stock subject to the Plan may be unissued shares,
treasury shares or shares purchased by the Company on the open market or
otherwise.
13. Administration. The Plan shall be administered by the Plan
--------------
Administrator, which shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Plan Administrator shall, to the full
extent permitted by law, be final and binding upon all parties.
14. Designation of Beneficiary.
--------------------------
(a) Participants may file a written designation of a beneficiary, on a
form designated by the Company, who is to receive any shares and cash, if any,
from the Participant's account under the Plan in the event of such Participant's
death. If a Participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
9
<PAGE>
(b) Such designation of beneficiary may be changed by the Participant
(and his/her spouse, if any) at any time by written notice. In the event of the
death of a Participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such Participant's death, the
Company shall deliver such shares and/or cash to the executor or administrator
of the estate of the Participant, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to any one or
more dependents or relatives of the Participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.
15. Transferability. Neither payroll deductions credited to a
---------------
Participant's account nor any rights with regard to the exercise of a purchase
right or to receive shares under the Plan may be assigned, transferred, pledged
or otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 14 hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from a Purchase Period in accordance with paragraph 10.
16. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each Participant
-------
in the Plan. Such accounts will be unfunded. Statements of account will be given
to Participants as soon as practicable following each Exercise Date, which
statements will set forth the amounts of payroll deductions, the Purchase Price,
the number of shares purchased and the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization or Ownership.
-------------------------------------------------------
(a) Subject to any required action by the shareholders of the Company,
the Reserves, as well as the Purchase Price with respect to each purchase right
under the Plan that has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Plan
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of
10
<PAGE>
stock of any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock subject to
purchase rights granted under the Plan. The Plan Administrator may, if it so
determines in the exercise of its sole discretion, make provision for adjusting
the Reserves, as well as the price per share of Common Stock covered by each
outstanding purchase right, in the event the Company effects one or more
reorganizations, recapitalizations, rights offerings or other increases or
reductions of shares of its outstanding Common Stock.
(b) In the event that any Corporate Transaction occurs or becomes
imminent, the Board may determine, in the exercise of its sole discretion, to
shorten any Purchase Period or Purchase Periods then in progress by setting a
new Exercise Date (the "New Exercise Date"). If it elects to fix a New Exercise
Date, the Board also may, in its discretion, change the Applicable Discount, the
Compensation, the Per-Participant Limit and any aggregate share purchase limits
previously established with respect to the shortened Purchase Period or Periods.
If the Board shortens any such Purchase Period, the Board shall notify each
Participant in writing that the Exercise Date for his/her purchase right has
been changed to the New Exercise Date and that his/her purchase right will be
exercised automatically on the New Exercise Date, unless prior to such date
he/she has withdrawn from such Purchase Period as provided in paragraph 10. Such
written notice shall also include a description of any changes made to the
Applicable Discount, the Compensation, the Per-Participant Limit and any
aggregate share purchase limits made pursuant to this paragraph 18(b).
(c) For purposes of paragraph 18(b), the following definitions shall
apply:
"Acquiring Person" means any Person who or which, together with all
----------------
Affiliates and Associates of such Person, shall be the Beneficial
Owner of 20% or more of the Common Stock then outstanding, but shall
not include the Company, any Subsidiary of the Company or any employee
benefit plan of the Company or any Subsidiary of the Company, or any
entity holding Common Stock for or pursuant to the terms of any such
plan. Notwithstanding the foregoing, no Person shall become an
Acquiring Person as the result of an acquisition of Common Stock by
the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by
such Person to 20% or more of the Common Stock of the Company then
outstanding; provided, however, that if a Person becomes the
-------- -------
Beneficial Owner of 20% or more of the Common Stock of the Company
then outstanding by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Stock of the Company, then
such Person shall be deemed to be an Acquiring Person.
11
<PAGE>
"Affiliate" and "Associate" have the respective meanings ascribed to
--------- ---------
such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
"Approved Transaction" means any transaction that occurs at a time
--------------------
when Continuing Directors are in office and a majority of the Continuing
Directors then in office has determined that the transaction is in the
best interest of the Company and its stockholders.
A Person shall be deemed the "Beneficial Owner" of and shall be deemed
----------------
to "beneficially own" any securities: (i) which such Person or any of
such Person's Affiliates or Associates beneficially owns, directly or
indirectly; (ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person
-------- -------
shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or exchange; or
(B) the right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall
-------- -------
not be deemed the Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to
such person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and
regulations of the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or (iii) which are beneficially owned, directly or indirectly,
by any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to clause (ii)(B) of this definition) or
disposing of any securities of the Company; provided further, however,
that nothing in this paragraph 18 shall cause a Person to be the
Beneficial Owner of, or to beneficially own, any securities (x) acquired
through such Person's participation in the business of underwriting
securities in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition or (y) which
such Person has reported on Schedule 13G under the Exchange Act and has
not
12
<PAGE>
ceased to be eligible to report on Schedule 13G pursuant to Rule 13d-
1 under the Exchange Act.
"Common Stock" has the meaning set forth in paragraph 2(d).
------------
"Corporate Transaction" means any of the following events: (a) a Share
---------------------
Acquisition Date; (b) a dissolution or liquidation of the Company; (c)
a merger or consolidation in which the Company is not the surviving
corporation; (d) a merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately
prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise; (e)
any capital reorganization in which more than 50% of the shares of the
Company entitled to vote are exchanged; and (f) any other event that
the Board deems, in its discretion, to constitute a change in control
of the Company.
"Continuing Director" means (i) any member of the Board, while such
-------------------
Person is a member of the Board, who is not an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, or a representative of
an Acquiring Person or of any such Affiliate or Associate, and who
was, if applicable, a member of the Board prior to the time that any
Person becomes an Acquiring Person, or (ii) any Person who
subsequently becomes a member of the Board, while such Person is a
member of the Board, who is not an Acquiring Person, or an Affiliate
or Associate of an Acquiring Person, or a representative of an
Acquiring Person or of any such Affiliate or Associate, if such
Person's nomination for election or election to the Board is
recommended or approved by a majority of Continuing Directors.
"Exchange Act" has the meaning set forth in paragraph 2(j).
------------
"Person" means any individual, firm, partnership, corporation or other
------
entity, and shall include any successor (by merger or otherwise) of
such entity.
"Rights" means the rights granted to the Company's shareholders to
------
purchase additional Common Stock under certain circumstances, as
described in that certain Rights Agreement, dated as of May 5, 1988,
by and between the Company and The First National Bank of Boston, as
rights agent.
"Share Acquisition Date" means the first date of public announcement
----------------------
by the Company or an Acquiring Person that a Person has become an
Acquiring Person; provided, however, that no "Share Acquisition Date"
-------- -------
shall occur as a result of any Person
13
<PAGE>
becoming an Acquiring Person pursuant to an Approved Transaction.
"Subsidiary" of any Person means any corporation or other entity of
----------
which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person,
or which is otherwise controlled by such Person.
19. Amendment or Termination.
------------------------
(a) The Board may at any time and for any reason terminate or amend the
Plan. Except as provided in paragraph 18 and paragraph 19(b), no such
termination can affect purchase rights previously granted, provided that a
Purchase Period may be terminated by the Board on any Exercise Date if the Board
determines that the termination of the Plan is in the best interests of the
Company and its shareholders. Except as provided in paragraph 18, no amendment
may make any change in any purchase rights theretofore granted which adversely
affects the rights of any Participant. To the extent necessary to comply with
Rule 16b-3 under the Exchange Act or Section 423 of the Code (or any successor
rule or provision or any other applicable law or regulation), the Company shall
obtain shareholder approval of any amendment to the Plan in such a manner and to
such a degree as required.
(b) Without shareholder consent and without regard to whether any
Participant rights may be considered to have been "adversely affected," the Plan
Administrator shall be entitled to change Purchase Periods, limit the frequency
and/or number of changes in the amount withheld during Purchase Periods,
establish the exchange ratio applicable to amounts withheld in a currency other
than U.S. dollars, permit payroll withholding in excess of the amount designated
by a Participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
Participant properly correspond with amounts withheld from the Participant's
Compensation, and establish such other limitations or procedures as the Plan
Administrator determines in its sole discretion are advisable and that are
consistent with the Plan.
20. Notices. All notices or other communications by a Participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares of Common Stock shall not be
----------------------------------
issued with respect to a purchase right unless the exercise of such purchase
right and the issuance and delivery of such shares pursuant thereto shall comply
with all applicable provisions of law, domestic or foreign, including,
14
<PAGE>
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange or any automated inter-dealer quotation system maintained by the
National Association of Securities Dealers, Inc. upon which the Common Stock may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. As a condition to the exercise of a
purchase right, the Company may require the person exercising such purchase
right to represent and warrant at the time of any such exercise that the shares
are being purchased only for investment and without any present intention to
sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned applicable
provisions of law.
22. Effective Date. The Plan shall become effective on the date it is
--------------
approved by the stockholders (the "Effective Date").
23. Term of Plan. The Plan shall continue in effect for a term of
------------
ten (10) years after the Effective Date unless sooner terminated under paragraph
19. No rights may be granted under the Plan following its termination.
24. Stockholder Approval. The Plan became effective when adopted by the
--------------------
Board on March 1, 1995 and was approved by the Company's stockholders on May 31,
1995. On February 19, 1999 the Board adopted and approved an amendment and
restatement of the Plan to reflect amendments promulgated by the Securities and
Exchange Commission to Rule 16b-3 applicable to the Plan which amendment and
restatement is not subject to stockholder approval. On March 9, 2000 the Board
adopted and approved an amendment to the Plan to increase the number of shares
of the Company's Common Stock available for sale under the Plan from 2,000,000
to 4,000,000, which amendment will become effective if approved by the Company's
stockholders.
25. No Employment Rights. The Plan does not, directly or indirectly, create
--------------------
any right for the benefit of any employee or class of employees to purchase any
shares under the Plan, or create in any employee or class of employees any right
with respect to continuation of employment by the Company, and it shall not be
deemed to interfere in any way with the Company's right to terminate, or
otherwise modify, an employee's employment at any time.
26. Effect of Plan. The provisions of the Plan shall, in accordance with
--------------
its terms, be binding upon, and inure to the benefit of, all successors of each
Participant, including, without limitation, such Participant's estate and the
executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such
Participant.
15
<PAGE>
27. Governing Law. The law of the State of California will govern all
-------------
matters relating to this Plan except to the extent it is superseded by the laws
of the United States.
16
<PAGE>
ACU878 DETACH HERE
PROXY
ACUSON CORPORATION
Proxy Solicited by Board of Directors
For Annual Meeting of Stockholders to be held May 1, 2000
The undersigned hereby appoints Samuel H. Maslak and Robert J. Gallagher,
and each of them, with full power of substitution, as proxies and
attorneys-in-fact to vote the shares of Common Stock of Acuson Corporation
(the "Company") which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of the Company to be held May 1, 2000 and at any
adjournment(s) thereof, on the following matters as set forth in the Notice of
said meeting and Proxy Statement related thereto, and, in their discretion,
upon such other matters which may properly come before the meeting or any
adjournment(s) thereof.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE>
ACU87A DETACH HERE
Please mark
X votes as in
this example.
This proxy will be voted as specified, or if no choice is specified, FOR items
1, 2, 3 and 4.
1. ELECTION OF DIRECTORS:
Nominees: (01) Albert L. Greene, (02) Karl. H. Johannsmeier,
(03) Samuel H. Maslak, (04) William J. Mercer
FOR WITHHELD
| | | |
| | ______________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To approve an amendment to the Company's 1995
Stock Incentive Plan to increase the number of | | | | | |
shares of Common Stock subject to the Plan
from 3,500,000 to 6,500,000.
FOR AGAINST ABSTAIN
3. To approve an amendment to the Company's 1995
Stock Purchase Plan to increase the number of | | | | | |
shares of Common Stock subject to the Plan
from 2,000,000 to 4,000,000.
FOR AGAINST ABSTAIN
4. To ratify the appointment of Arthur Andersen
LLP as independent public accountants of the | | | | | |
Company.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT | |
Please sign below exactly as your name or names appear hereon. If more than one
name appears, all persons so designated should sign. When signing in a
representative capacity, please give your full title.
Signature:_________________________Date:______________
Signature:_________________________Date:______________
