<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.______)
Filed by the Registrant [X]
-
Filed by a Party Other Than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
-
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Materials Pursuant to (S)240.14a-12
STAAR SURGICAL COMPANY
- - --------------------------------------------------------------------------------
(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] $125 per Exchange Act Rules 0-11(c)(ii), 14a-6(i)(1), 14a-6(i)(2) or
- Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of securities:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of filing.
1) Amount Previously Paid:
----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
3) Filing Party:
----------------------------------------------------------------------
4) Date Filed:
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<PAGE>
PRELIMINARY COPY
May 12, 1995
To Our Stockholders:
The 1995 Annual Meeting of Stockholders of STAAR Surgical Company will be
held at 10:00 a.m. on Tuesday, June 6, 1995, at the Holiday Inn located at 924
West Huntington Drive, Monrovia, California.
Enclosed is a copy of our integrated Form 10-K/Annual Report for STAAR
Surgical Company's fiscal year ending December 30, 1994, Notice of the Annual
Meeting of Stockholders, Proxy Statement and Proxy Card. The enclosed Proxy
Statement and Proxy Card contain details concerning the business to come before
the meeting. You should note that the Board of Directors of STAAR Surgical
Company unanimously recommend a vote "FOR" each of the following matters as more
fully described in the accompanying Proxy Statement: the election of five
Director nominees to serve on STAAR Surgical Company's Board of Directors; the
adoption of certain amendments to the STAAR Surgical Company's Certificate of
Incorporation and Bylaws establishing a classified Board of Directors and
related matters; and the adoption of a Stockholders' Rights Plan and the
increase in STAAR Surgical Company's authorized shares of Common Stock in
connection therewith.
If you are a record holder of STAAR Surgical Company's common stock on
March 31, 1995, you are eligible to vote with respect to these matters, either
personally at the meeting or by proxy. It is important that your shares be
voted, whether or not you plan to attend the meeting, to ensure the presence of
a quorum. For that reason we request that you sign and return the Proxy Card
now. A postage paid envelope is enclosed for your convenience in replying. If
you attend the meeting and wish to vote your shares personally, you may revoke
your proxy.
We look forward to reviewing the activities of STAAR Surgical Company with
you at the meeting. We hope you can be with us.
Sincerely,
/s/ John R. Wolf
John R. Wolf
President and Chairman of the Board
<PAGE>
PRELIMINARY COPY
STAAR SURGICAL COMPANY
1911 WALKER AVENUE
MONROVIA, CALIFORNIA 91016
-----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 6, 1995
To the Stockholders of STAAR Surgical Company:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of STAAR Surgical Company, a Delaware corporation (the "Company"),
will be held at 10:00 a.m. local time, on Tuesday, June 6, 1995, at the Holiday
Inn located at 924 West Huntington Drive, Monrovia, California 91016, to
consider and to vote on the following matters as more fully described in the
accompanying Proxy Statement:
1. To elect five Directors to the Board of Directors of the Company to serve
until the 1996 Annual Meeting of Stockholders (or, in certain cases, to
serve until later Annual Meetings of Stockholders if the next proposal
pertaining to the adoption of a classified Board of Directors is approved
by the stockholders);
2. To vote upon the adoption of an amendment of the Certificate of
Incorporation and Bylaws of the Company to implement the following
changes recommended by the Board of Directors (the "Classified Board
Provisions"): (i) reorganize the Board of Directors of the Company into
three classes of directors, with the directors in each class serving
three year staggered terms; (ii) limit the minimum and maximum number of
authorized directors serving on the Board to 3 and 7 persons,
respectively; (iii) require that vacancies in the number of directors of
the Company be filled solely by the vote of a majority of directors then
in office; (iv) require that actions by stockholders of the Company be
taken only at an annual or special meeting and not by written consent;
and (v) require a two-thirds vote of the stockholders of the Company to
amend or repeal any of the foregoing amendments to the Certificate of
Incorporation and Bylaws of the Company;
3. To ratify the adoption of a Stockholders' Rights Plan and, in connection
therewith, to increase the Company's authorized shares of Common Stock
from 20 million shares to 30 million shares; and
4. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 31, 1995 as
the record date for the determination of stockholders entitled to notice of and
vote at the Annual Meeting and all adjourned meetings thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. Your vote is important. PLEASE FILL IN, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE RETURN ENVELOPE FURNISHED FOR THAT PURPOSE AS PROMPTLY AS
POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. Your promptness
in returning the proxy will assist in the expeditious and orderly processing of
the proxies and will assist in ensuring that a quorum is present or represented.
If you return your proxy, you may nevertheless attend the Annual Meeting and
vote your shares in person if you wish. If you later desire to revoke your
proxy for any reason, you may do so in the manner described in the attached
Proxy Statement.
By Order of the Board of Directors
/s/ John R. Wolf
John R. Wolf
Monrovia, California Chairman and President
May 12, 1995
<PAGE>
PRELIMINARY COPY
STAAR SURGICAL COMPANY
1911 Walker Avenue
Monrovia, California 91016
---------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 6, 1995
---------------------------
VOTING AND PROXY
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of STAAR Surgical Company (the "Company") for
use at the Annual Meeting of Stockholders to be held at 10:00 a.m., local time,
on Tuesday, June 6, 1995, at the Holiday Inn located at 924 West Huntington
Drive, Monrovia, California 91016 (the "Annual Meeting") and any adjournments
thereof. When such proxy is properly executed, dated and returned, the shares it
represents will be voted in accordance with any directions noted thereon. If no
specification is indicated, the shares will be voted "FOR" each of the following
matters as more fully described in the accompanying Proxy Statement: the
election of the five Director nominees to serve until the 1996 Annual Meeting of
Stockholders (or, in certain cases, to serve until later Annual Meetings of
Stockholders if the next proposal pertaining to the adoption of a classified
Board of Directors is approved by the stockholders); the adoption of certain
amendments to the Company's Certificate of Incorporation and Bylaws establishing
a classified Board of Directors and related matters; and the adoption of a
Stockholders' Rights Plan and the increase in the Company's authorized shares of
Common Stock in connection therewith. Any holder of record giving a proxy has
the power to revoke it at any time before it is voted by written notice to the
Secretary of the Company, by issuance of a later dated proxy, or by voting at
the meeting in person.
At the close of business on March 31, 1995, the record date for determining
stockholders entitled to notice of and to vote at the Annual Meeting, the
Company had issued and outstanding 12,714,343 shares of common stock, par value
$.01 per share (the "Common Stock"). Each share of Common Stock entitles the
holder of record thereof to one vote on any matter coming before the Annual
Meeting. Only stockholders of record at the close of business on March 31, 1995
are entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
The Company will pay the expenses of soliciting proxies for the Annual
Meeting, including the cost of preparing, assembling, and mailing the proxy
solicitation materials. Proxies may be solicited personally, or by mail or by
telephone, by Directors, officers and regular employees of the Company who will
not be additionally compensated therefor. It is anticipated that this Proxy
Statement and accompanying Proxy Card will be mailed on or about May 12, 1995 to
all stockholders entitled to vote at the Annual Meeting.
<PAGE>
ELECTION OF DIRECTORS
ITEM 1 ON PROXY CARD
The Board of Directors recommends that the five nominees listed below be
elected to serve as Directors of the Company, to hold office until the next
annual meeting of stockholders and until their respective successors are elected
and qualified. If any such nominees should be unable or unwilling to serve, the
discretionary authority provided in the proxy will be exercised to vote for one
or more substitutes designated by management. The Board of Directors has no
reason to believe that any substitute nominees will be required.
John R. Wolf
Michael R. Deitz, M.D.
Joseph C. Gathe, M.D.
Andrew F. Pollet, Esq.
Peter J. Utrata, M.D.
The proxies cannot be voted for a greater number of persons than the number
of nominees named. Stockholders wishing to nominate Directors for election at
the Annual Meeting may do so by delivering to the Secretary of the Company, no
later than fourteen days before the Annual Meeting, a notice setting forth (i)
the name, age, business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of each
such nominee, and (iii) the number of shares of stock of the Company which are
beneficially owned by each such nominee. No person may be elected as a Director
unless he has been nominated by a stockholder in the manner just described or by
the Board of Directors. The five nominees receiving the highest number of votes
will be elected Directors.
For information regarding which class of directors each of the aforesaid
directors will initially serve within if the second proposal on your Proxy Card,
pertaining to the adoption of the Classified Board Provisions, is approved (see
"Proposed Amendments to the Certificate of Incorporation and Bylaws of the
Company - Description of Classified Board Provisions - Establishment of
Classified Board of Directors" below).
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF
MESSRS. WOLF AND POLLET AND DRS. DEITZ, GATHE AND UTRATA AS DIRECTORS FOR THE
COMPANY. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY OTHERWISE.
2
<PAGE>
BUSINESS EXPERIENCE OF DIRECTOR NOMINEES
JOHN R. WOLF was elected President and a Director in October 1989, and
was appointed Chairman of the Board in March 1994. Mr. Wolf served as Executive
Vice President of the Company from October 1986 to October 1989 and as a Vice
President of the Company from September 1983 to October 1986. Mr. Wolf also
serves as a director of certain of the Company's wholly owned subsidiaries,
namely, STAAR Surgical AG, Switzerland (where he also serves as Co-chairman of
the Board), STAAR Surgical France - SARL, STAAR Surgical Australasia Pty., Ltd.,
STAAR Surgical - Canada, STAAR Surgical - South Africa Pty., Ltd. and STAAR
Surgical - Singapore. Mr. Wolf also serves on the Board of Directors of Canon-
Staar, Japan, a joint venture in Japan of which the Company is a partner. From
November 1980 through August 1983, Mr. Wolf was employed as an Intraocular Lens
Divisional Sales Manager for Iolab Corporation, a division of Johnson & Johnson,
where he was named manager of the year in 1982. Prior thereto, he served (and
continues to serve) as President of his privately owned corporation, Iotech,
Inc. Mr. Wolf is a graduate of the University of Southern California where he
received his Bachelors of Science and Masters of Business Administration
degrees.
MICHAEL R. DEITZ, M.D. has served as a Director of the Company since June,
1990. Dr. Deitz has been a physician specializing in ophthalmology since 1962.
He attained a subspecialty in refractive eye surgery in 1979 when he was the
fourth surgeon in the United States to perform radial keratotomy. Since its
founding in 1986, Dr. Deitz has been a consultant and co-investigator at the Eye
Foundation of Kansas City. He is a Clinical Associate Professor in the
Department of Ophthalmology of the University of Missouri Kansas City School of
Medicine. Dr. Deitz received his Medical Degree from the University of
Pennsylvania, and his specialty training at the University of Michigan in Ann
Arbor. Dr. Deitz currently serves as Counselor to the American Academy of
Ophthalmology. He served on the Board of Directors of the International Society
of Refractive Keratoplasty from 1984 through 1987 and from 1989 through 1992.
JOSEPH C. GATHE, M.D. has served as a Director of the Company since June
1990. Dr. Gathe received his medical degree from the University of St. Louis in
1953, and has specialized in general surgery since 1960. At present he serves
as academic chief of surgery and program director of the surgery training
program at the St. Joseph's Hospital in Houston, Texas.
He is also an instructor in surgery at Baylor College of Medicine.
ANDREW F. POLLET has served as a Director of the Company since September
1990. Mr. Pollet has been the principal of the law firm of Pollet, Skousen &
Woodbury, a Law Corporation, and its predecessor law firms since 1980. Mr.
Pollet also serves as a director of the Mason Group, an employment agency, E.L.
Payne Heating Company, a heating and air conditioning service company, Group Air
Management, Inc., an aircraft brokerage and reseller, Sensa Pen Company, a
manufacturer of writing instruments, and Powder Keg, Inc., a western clothing
retailer under the Kemosabe name. Mr. Pollet received a Juris Doctor degree
from the University of San Diego School of Law, and received a Bachelors degree
and Masters in Business Administration degree from the University of Southern
California.
PETER J. UTRATA, M.D. has served as a Director of the Company since
December 1987. Dr. Utrata is an ophthalmic surgeon in Columbus, Ohio, and has
been the President of Eye Surgery Center of Ohio, Inc. since May 1984. He is an
active member of the Grant Eye and Ear Hospital, Columbus, Ohio. From 1974 to
May 1984, he was a physician and partner with Eye Surgery Consultants. Dr.
Utrata received an undergraduate and medical degrees from Ohio State University
where he is currently a Clinical Associate Professor.
3
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held four meetings during the 1994
fiscal year. No Director attended less than 75% of the total number of meetings
of the Board and the meetings of any committees on which they served.
During fiscal 1994, Mr. Wolf and Drs. Deitz and Gathe served on the Audit
Committee, and Drs. Deitz, Gathe and Utrata and Mr. Pollet served on the
Compensation Committee, which also serves as the Stock Option Committee. The
Audit Committee met one time in 1994 (as part of a Board meeting) and the
Compensation/Stock Option Committee met two times in 1994 (also as part of Board
meetings).
COMPENSATION OF DIRECTORS
Non-employee Directors are ordinarily entitled to receive $1,000 for each
Board meeting and $1,500 for each committee meeting attended. However, by
mutual agreement of the Board of Directors, no cash fees will be payable to
Directors during the period the options described below vest.
In consideration of and as an inducement for serving on the Board from
June 1994 through June 1997, the Company granted non-qualified stock options to
purchase 60,000 shares of Common Stock at the price of $4.75 per share to each
of Drs. Deitz, Gathe and Utrata and to Mr. Pollet. This grant was in lieu of
the grant of any formula options under the 1991 Stock Option Plan which had been
the prior method of compensation to the members of the Board since 1990. The
Company granted non-qualified stock options to purchase 60,000 shares of Common
Stock at the price of $4.87 1/2 per share to Mr. Wolf in August 1994 for the
same reason options were previously granted to other directors.
These stock options vested one-third upon date of grant, and will vest
one-thirds, two-thirds and fully upon the Directors' continued service through
the first and second anniversary dates of the grant of the options,
respectively. These stock options expire 5 years from date of grant, except
that vested options will expire one year after the date a Director's service is
terminated, if earlier. Unvested options shall immediately terminate in the
event of the termination of a Director's service on the Board, provided,
however, unvested options shall immediately vest upon the following events: (i)
if such termination is due to the failure or refusal of the Company, without
cause, to nominate the Director for reelection to the Board, (ii) the failure of
the Company's stockholders to re-elect the Director to the Board, (iii) the
future sale or disposition by the Company of substantially all of its business
or assets; (iv) the sale of the capital stock of the Company in connection with
the sale or transfer of a controlling interest in the Company; (v) the merger or
consolidation of the Company with another corporation as part of a sale or
transfer of a controlling interest in the Company; or (vi) the dissolution or
liquidation of the Company. Should a director exercise an option, the Company
reserves the right, in its sole discretion, to allow the director to pay for the
option shares by cash, stock, or the provision of a full recourse promissory
note, bearing interest at a rate that precludes the imposition of interest under
the Internal Revenue Code, and secured by such security as prescribed by the
Stock Option Committee. The Company has no obligation to issue registered
shares, although the Company intends (but without any obligation to do so) at
such time as it deems such action to be necessary or appropriate to register the
shares under Form S-8.
4
<PAGE>
BENEFICIAL OWNERSHIP OF DIRECTOR NOMINEES
The following table sets forth, as of March 31, 1995, certain information
with respect to each nominee for Director of the Company, including the number
of shares of Common Stock beneficially owned by each of them.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND AGE OR AGE OF DIRECTOR OWNERSHIP OF PERCENT OF
IDENTITY OF GROUP/(1)/ DIRECTOR SINCE COMMON STOCK/(2)//(3)/ COMMON STOCK/(4)/
- - ----------------------- -------- ------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
John R. Wolf 49 1989 1,039,616/(5)/ 8.1%
Michael R. Deitz, M.D. 62 1990 424,112/(6)/ 3.3%
Joseph C. Gathe, M.D. 65 1990 147,500/(7)/ 1.1%
Andrew F. Pollet, Esq. 44 1990 783,428/(8)/ 5.8%
Peter J. Utrata, M.D. 51 1987 312,000/(9)/ 2.4%
</TABLE>
- - ---------------
* Less than 1%.
/(1)/ The business address of each person listed in this column is c/o
STAAR Surgical Company, 1911 Walker Avenue, Monrovia, CA 91016.
/(2)/ Unless otherwise indicated, the persons named have sole ownership,
voting and investment power with respect to their stock, subject to
community property laws.
/(3)/ Includes number of shares which would be outstanding if all warrants
and options held by that person that are currently exercisable or
become exercisable within 60 days were exercised.
/(4)/ Based on 12,714,343 shares of Common Stock outstanding on the
transfer records as of March 31, 1995. The percentage of ownership of
each person is calculated based on the number of shares which would
be outstanding if all warrants and options held by that person (but
no other) that are currently exercisable or become exercisable within
60 days were exercised.
/(5)/ Includes 15,000 shares held by Iotech, Inc., a corporation owned and
controlled by Mr. Wolf, and 875 shares held by Mr. Wolf as Trustee of
the Iotech, Inc. Profit Sharing Plan. Also includes 115,833 shares
issuable upon exercise of (i) 62,500 formula options and 33,333
incentive options granted under the 1991 Stock Option Plan, and (ii)
20,000 non-qualified options granted as Director incentive in
connection with appointment to Board in 1994.
/(6)/ Includes 273,000 shares issuable upon exercise of (i) 50,000 formula
options granted under the 1991 Stock Option Plan, (ii) 25,000 options
granted with respect to appointment to the Board of Directors,
138,000 warrants issued in connection with a loan to the Company, and
(iii) 40,000 non-qualified options granted as Director incentive in
connection with appointment to Board in 1994.
/(7)/ Includes 147,500 shares issuable upon exercise of (i) 50,000 formula
options granted under the 1991 Stock Option Plan, (ii) 25,000 options
granted with respect to appointment to the Board of Directors, (iii)
12,500 warrants granted in connection with assistance in litigation,
and (iv) 40,000 non-qualified options granted as Director incentive
in connection with appointment to Board in 1994.
/(8)/ Includes 11,750 shares held by Mr. Pollet as Trustee of the Pollet,
Skousen & Woodbury 401(k) Pension Plan. Also includes 135,000 shares
issuable upon exercise of (i) 50,000 formula options granted under
the 1991 Stock Option Plan, (ii) 25,000 options granted with respect
to appointment to the Board of Directors, and (iii) 40,000 non-
qualified options granted as Director incentive in connection with
appointment to Board in 1994.
/(9)/ Includes 135,000 shares issuable upon exercise of (i) 50,000 formula
options granted under the 1991 Stock Option Plan, (ii) 12,500
warrants issued for Director compensation, and (iii) 40,000 non-
qualified options granted as Director incentive in connection with
appointment to Board in 1994.
5
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information concerning the Executive
Officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
- - ---- --- --------
<S> <C> <C>
John R. Wolf 49 President, Chief Executive Officer and
Chairman of the Board
Vladimir Feingold 45 Executive Vice President - Research and
Development
Michael J. Lloyd 46 Senior Vice President - Manufacturing
Carl M. Manisco 45 Senior Vice President - Sales and
Marketing
William C. Huddleston 48 Vice President - Finance, Chief Financial
Officer and Secretary
Donald D. Ferguson 57 Vice President - European Affairs
Steven L. Ziemba 38 Vice President - Regulatory Affairs
</TABLE>
The executive officers of the Company are employed pursuant to employment
agreements approved by the Board of Directors. See "Employment Agreements With
Named Executive Officers", below.
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
JOHN R. WOLF was elected President and a Director in October 1989, and was
appointed Chairman of the Board in March 1994. He served as Executive Vice
President of the Company from October 1986 to October 1989 and as a Vice
President of the Company from September 1983 to October 1986. From November
1980 through August 1983, he was employed as an Intraocular Lens Divisional
Sales Manager for Iolab Corporation, a division of Johnson & Johnson, where he
was named manager of the year in 1992. Prior thereto, he served as (and
continues to serve as) President of his privately owned corporation, Iotech,
Inc. Mr. Wolf is a graduate of the University of Southern California where he
received Bachelors of Science and Masters of Business Administration degrees.
VLADIMIR FEINGOLD has been Executive Vice President - Research and
Development since September 1993. Prior to that date he was engaged by the
Company as its Vice President - Research and Development since September 1991,
and prior to that as a consultant. Mr. Feingold is also Co-chairman of the
Board of Directors and President of STAAR Surgical AG, Switzerland, and a
member of the Board of Directors of Canon-Staar, Japan. Mr. Feingold has been,
since its inception, Managing Director, Executive and Head of Research and
Development of Bionica Pty. Ltd., an Australian corporation he founded in 1984,
which is primarily involved in the development, manufacturing and distribution
of infusion systems. In 1975 through 1984, Mr. Feingold was employed as a
design engineer, chief mechanical engineer, manufacturing engineering
executive, and a research executive with Telectronics Pty., Ltd. Mr. Feingold
is a graduate of the University of Sydney (B.Sc. in Mathematics; B.E. First
Class Honors (Mechanical)). Mr. Feingold also has Certificates from the N.S.W.
Institute of Technology (Microprocessors and Data Acquisition), the Australian
Institute of Management (Influence and Negotiation, Finance, and Management),
and Sydney Hospital (Medical Technology).
6
<PAGE>
MICHAEL J. LLOYD has been Senior Vice President - Manufacturing since
November, 1993, and Vice President - Manufacturing since November 1990. He was
director of Manufacturing from April 1990 to November 1990, Manufacturing
Manager from September 1987 to April 1990 and Production Supervisor from
September 1986 to September 1987. Prior to 1986 Mr. Lloyd was materials
supervisor of sterile products and production supervisor of the assembly and
preparations departments at Cilco, Inc. Mr. Lloyd received a Bachelors of
Science degree in Business Administration from California State Polytechnic
University, Pomona.
CARL M. MANISCO has been Senior Vice President - Sales and Marketing since
1992. Prior to that time, Mr. Manisco served as Vice-President - Sales from
March 1990 and director of sales, product manager and sales manager since
August 1983. From 1980 to 1983, Mr. Manisco served as sales representative and
divisional sales trainer of Iolab Corporation, a division of Johnson & Johnson,
manufacturers of intraocular lens implants and cataract removal equipment. Mr.
Manisco received a Business Administration degree in marketing from the
University of Portland.
WILLIAM C. HUDDLESTON has been Vice President - Finance and Chief
Financial Officer of the Company since March 1990, and Secretary since February
1994. Mr. Huddleston also serves on the Board of Directors of STAAR Surgical
Australasia Pty., Ltd., STAAR Surgical - Canada, STAAR Surgical - South Africa
Pty., Ltd. and STAAR Surgical - Singapore, and is also Director of Finance and
Secretary of STAAR Surgical AG, Switzerland. From November 1988 to December
1989 Mr. Huddleston was Chief Financial Officer of MRP Acquisition Corporation,
a rubber manufacturing company located in the City of Industry, California.
From 1986 to November 1988 he was Controller of International Pharmaceutical
Products, Inc. ("IPPI"). From 1982 to 1986 Mr. Huddleston was Vice President -
Controller and a director of Paper Pak Products, Inc. He was Controller of the
Green Bay mill of American Can Company from 1979 to 1982. Prior to 1979 he was
employed in various management positions with International Paper Company.
Mr. Huddleston is a Certified Management Accountant and received a Master of
Business Administration degree from Northeast Louisiana University and a
Bachelors of Science degree in Accounting from Mississippi State University.
DONALD D. FERGUSON has been Vice President - European Affairs since
December 1993. From April 1992 until his appointment as Vice President Mr.
Ferguson served as Director of European Affairs. Mr. Ferguson also serves on
the Board of Directors of STAAR Surgical France - SARL and STAAR Surgical -
South Africa Pty., Ltd. From 1986 to February 1992 Mr. Ferguson was Vice
President - International at Ioptex Research Inc. Prior to such employment,
Mr. Ferguson was Regional Manager, North Asia and Hong Kong for Coopervision,
Inc., Regional Managing Director - Far East at CILCO, Inc., and Director of
Marketing, Director, Planning & Administration, and Market Research Manager at
INCO Ltd. Mr. Ferguson received his Bachelors of Science and Masters of
Business Administration degrees from Marshall University.
STEVEN L. ZIEMBA has been Vice President of Regulatory Affairs since April
1990. From July 1986 to March 1988 he was Manager of Clinical and Regulatory
Affairs at Ioptex Research Inc. and was Sales and Marketing Consultant to
Ioptex from March 1988 to April 1990. Prior to 1986, Mr. Ziemba was Manager of
Clinical Research of Allergan Surgical Inc., Senior Clinical Monitor and
Regulatory Analyst at Allergan Medical Optics, Inc., Document Control
Supervisor at CILCO, Inc., and Standards Analyst, Associated Quality Engineer
and Physical Test Technician at American Pharmaseal Laboratories. Mr. Ziemba
received a Masters of Science degree in Systems Management from the University
of Southern California and a Bachelors of Arts degree in Biological Sciences
from California State University.
7
<PAGE>
BENEFICIAL OWNERSHIP OF CERTAIN STOCKHOLDERS
AND EXECUTIVE OFFICERS
The following table sets forth, as of March 31, 1995, certain information
with respect to the amount and nature of beneficial ownership of the Common
Stock with respect to (i) each person (other than a person who is also a
director) who is a beneficial owner of more than five percent (5%) of the
Company's outstanding stock, (ii) each person (other than a person who is also
a director) who is an executive officer named in the Summary Compensation Table
below, and (iii) all executive officers and directors as a group. Information
concerning the amount and nature of beneficial ownership of executive officers
who are also director nominees are disclosed under the Beneficial Ownership of
Director Nominees table above.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP OF PERCENT OF
NAME/(1)/ IDENTITY COMMON STOCK/(2)//(3)/ COMMON STOCK/(4)/
--------- -------- --------------------- ----------------
<S> <C> <C> <C>
Vladimir Feingold Executive Officer 190,000/(5)/ 1.5%
Michael J. Lloyd Executive Officer 92,828/(6)/ *
Carl M. Manisco Executive Officer 93,109/(7)/ *
William C. Huddleston Executive Officer 154,184/(8)/ 1.2%
Donald D. Ferguson Executive Officer 10,000/(9)/ *
Steven L. Ziemba Executive Officer 119,417/(10)/ *
All Director Nominees and Executive
Officers of the Company as a Group
(11 persons) 3,366,194/(11)/ 24.3%
</TABLE>
- - ---------------
* Less than 1%.
/(1)/ Unless otherwise indicated, the address of the persons named in this
column is c/o STAAR Surgical Company, 1911 Walker Avenue, Monrovia, CA
91016
/(2)/ Unless otherwise indicated, the persons named have sole ownership, voting
and investment power with respect to their stock, subject to community
property laws.
/(3)/ Includes number of shares which would be outstanding if all warrants and
options held by that person that are currently exercisable or become
exercisable within 60 days were exercised.
/(4)/ Based on 12,714,343 shares of Common Stock outstanding on the transfer
records as of March 31, 1995. The percentage of ownership of each person
is calculated based on the number of shares which would be outstanding if
all warrants and options held by that person (but no other) that are
currently exercisable or become exercisable within 60 days were
exercised.
/(5)/ Includes 55,000 shares issuable upon exercise of 55,000 incentive stock
options granted under the 1991 Stock Option Plan. Also includes 70,000
shares held by Bionica Pty. Ltd., of which the Executive Officer is a 52%
stockholder.
/(6)/ Includes 92,828 shares issuable upon exercise of (i) 12,500 formula
options and 28,342 incentive stock options granted under the 1991 Stock
Option Plan and (ii) 51,986 options granted in connection with a prior
employment agreement.
/(7)/ Includes 73,109 shares issuable upon exercise of (i) 12,500 formula
options and 36,666 incentive stock options granted under the 1991 Stock
Option Plan, (ii) 7,276 options granted under prior plans, and (iii)
16,667 options granted in connection with a prior employment agreement.
/(8)/ Includes 30,000 shares issuable upon exercise of 30,000 incentive stock
options granted under the 1991 Stock Option Plan.
/(9)/ Includes 10,000 shares issuable upon exercise of 10,000 incentive stock
options granted under the 1991 Stock Option Plan.
/(10)/ Includes 85,883 shares issuable upon exercise of (i) 12,500 formula
options and 30,000 incentive stock options granted under the 1991 Stock
Option Plan, and (ii) 43,383 options granted in connection with a prior
employment agreement.
/(11)/ Includes an aggregate of 1,140,653 shares issuable upon exercise of
options and warrants held by Named Executive Officers and nominees for
Directors of the Company.
8
<PAGE>
SUMMARY COMPENSATION
The following table shows the compensation paid over the past three fiscal
years with respect to the Company's Chief Executive Officer as of the end of the
last fiscal year and the four other most highly compensated executive officers
(in terms of salary and bonus) serving at the end of the last fiscal year whose
annual salary and bonus exceeded $100,000:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- ---------------------------------------------------------
AWARDS PAYOUTS
---------------------------- --------------------------
OTHER
ANNUAL RESTRICTED ALL OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION
POSITION YEAR ($) ($) ($) ($) (#)/(1)/ ($) ($)
- - --------- ---- ------- ------- -------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John R. Wolf, 1994 202,801/(2)/ - - - 60,000/(5)/ 46,875/(11)/ -
Director, CEO 1993 200,607/(2)/ - - - 12,500/(6)/ 46,875/(11)/ -
and President 1992 203,903/(2)/ - - - 62,500/(7)/ 46,875/(11)/ -
Carl Manisco, Sr. 1994 165,356/(3)/ - - - 35,000/(5)/ - -
V.P. - Sales & 1993 144,450/(3)/ - - - - - -
Marketing 1992 117,891/(3)/ - - - 37,500/(8)/ - -
Vladimir Feingold, 1994 193,667 - - - 90,000/(5)/ - -
Exec. V. P. - 1993 175,518 - - - - - -
Research & Devel. 1992 166,731 - - - 37,500/(9)/ - -
William C. Huddleston, 1994 120,165 20,000 - - 40,000/(5)/ - -
V.P. - Finance 1993 111,678 - - - - - -
and CFO 1992 113,630 - - - 25,000/(10)/ - -
Donald D. Ferguson 1994 137,228/(4)/ - - - 30,000/(5)/ - -
V. P. - European 1993 105,025/(4)/ - - - - - -
Affairs 1992 69,848 30,000 - - 15,000 - -
</TABLE>
- - ----------------
/(1)/ No SARs were granted in 1992 through 1994.
/(2)/ Does not include commissions paid to Iotech, Inc., a corporation owned by
Mr. Wolf, pursuant to the terms of the Company's sales representative
agreement with Iotech, Inc. dating back to 1982. These amounts were
$263,000, $214,500 and $73,000 in 1994, 1993 and 1992, respectively. See
"Certain Relationships and Related Transactions - Transactions With
Management and Others" and "Report of the Compensation Committee of the
Board of Directors on Executive Compensation - CEO Compensation," herein.
/(3)/ Includes sales commission income paid to executive pursuant to the terms
of executive's employment agreement. These amounts were $55,136, $39,747
and $22,770 in 1994, 1993 and 1992, respectively.
/(4)/ Includes sales commission income paid to executive pursuant to the terms
of executive's employment agreement. These amounts were $6,889 and $3,505
in 1994 and 1993, respectively. Does not include $36,059 and $41,602 in
1993 and 1994, respectively, paid or incurred in connection with
extraordinary housing allowance and relocation expenditures relating to
Mr.Ferguson's relocation to Europe.
/(5)/ See Table below captioned "Option Grants in 1994 Fiscal Year" for a
summary of these options.
/(6)/ Includes formula options to purchase 12,500 shares of Common Stock
automatically granted pursuant to terms of 1991 Stock Option Plan in
connection with appointment to Board of Directors.
/(7)/ Includes formula options to purchase 12,500 shares of Common Stock
automatically granted pursuant to terms of 1991 Stock Option Plan in
connection with appointment to Board of Directors and incentive options
to purchase 50,000 shares of Common Stock granted pursuant to terms of
1991 Stock Option Plan.
/(8)/ Includes incentive options to purchase 37,500 shares of Common Stock
granted pursuant to terms of 1991 Stock Option Plan.
/(9)/ Includes incentive options to purchase 37,500 shares of Common Stock
granted pursuant to terms of 1991 Stock Option Plan.
/(10)/ Includes incentive options to purchase 25,000 shares of Common Stock
granted pursuant to terms of 1991 Stock Option Plan.
/(11)/ Represents automatic forgiveness of indebtedness income on January 1,
1995 of last quarterly installment of principal and interest on a
promissory note given to the Company by Mr. Wolf. See "Certain
Relationships and Related Transactions - Indebtedness of Management to
the Company in Excess of $60,000" below.
9
<PAGE>
OPTION GRANTS IN 1994 FISCAL YEAR
The following table provides certain information with respect to individual
grants of stock options in the 1994 fiscal year to each of the executive
officers named in the Summary Compensation Table set forth above (the "Named
Executive Officers"):
<TABLE>
<CAPTION> POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM/(1)/
- - ------------------------------------------------------------------------- ---------------------
% OF
TOTAL
OPTIONS/
SARS
GRANTED EXER-
OPTIONS/ TO EMPL- CISE
SARS OYEE IN PRICE EXPIR-
GRANTED FISCAL $/ ATION 0%
NAME (#)/(2)/ YEAR/(3)/ SHARE DATE ($) 5% ($) 10% ($)
- - ---- ----------- ---------- ----- ------ ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
John R. Wolf 60,000/(4)/ 17.8 4.875 8/22/99 0 73,125 146,250
Vladimir Feingold 90,000/(5)/ 26.6 4.75 3/31/99 0 106,875 213,750
Carl M. Manisco 35,000/(5)/ 10.4 4.75 3/31/99 0 41,563 83,125
William C. Huddleston 40,000/(6)/ 11.8 4.75 3/31/99 0 47,500 95,000
Donald D. Ferguson 30,000/(5)/ 8.9 4.75 3/31/99 0 35,626 71,250
</TABLE>
- - ---------------
/(1)/ The potential realizable dollar value of any given option is the
difference between (i) the fair market value of the stock underlying such
option as of the date of grant, adjusted to reflect hypothetical 0%, 5%
and 10% annual growth rates {simple interest} from the date of grant of
such option until the expiration date of such option, and (ii) the
exercise price for such option. The 0%, 5% and 10% are hypothetical
growth rates prescribed by the SEC for illustration purposes only and are
not a forecast or prediction as to future stock prices. The actual amount
that a Named Executive Officer may realize will depend on various factors
on the date the option is exercised, so there is no assurance that the
value realized by a Named Executive Officer will be at or near the value
set forth above in the chart.
/(2)/ No SARs were granted to the Named Executive Officers in the 1994 fiscal
year.
/(3)/ The numerator in calculating this percentage includes options granted to
each Named Executive Officer in his capacity both as an officer
(employee) and, if applicable, as a Director. The denominator in
calculating this percentage is 338,000, which represents options granted
to all of the employees of the Company, including the Named Executive
Officers, including, if applicable, grants of options attributable to
their capacities as Directors.
/(4)/ Non-qualified stock options granted in connection with his re-election to
Board. See "Compensation of Directors" above for a discussion of the
terms of these stock options.
/(5)/ Incentive stock options granted, pursuant to the terms of the 1991 Stock
Option Plan, to respective Named Executive Officer in connection with his
execution of employment agreement. See "Employment Agreements With Named
Executive Officers" below for a discussion of the terms of these stock
options.
/(6)/ Non-qualified stock options granted, pursuant to the terms of the 1991
Stock Option Plan, to the Named Executive Officer in connection with his
execution of employment agreement. See "Employment Agreements With Named
Executive Officers" below for a discussion of the terms of these stock
options.
10
<PAGE>
OPTION EXERCISES IN THE 1994 FISCAL YEAR
AND
OPTIONS AT 1994 FISCAL YEAR END
The following table provides certain information with respect to the
exercise of options in 1994 by the Named Executive Officers and the number and
value of their unexercised options as of the end of the 1994 fiscal year end:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS/SARS IN-THE-MONEY
SHARES AT OPTIONS/SARS AT
ACQUIRED FY-END (#)/(2)/ FY-END($)/(2)//(3)/
ON VALUE ----------------- -------------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#)/(2)/ ($)/(1)/ UNEXERCISABLE UNEXERCISABLE
- - --------------------- -------- --------- ----------------- -----------------
<S> <C> <C> <C> <C>
John R. Wolf - - 115,833 / 56,667 444,478 / 217,584
Vladimir Feingold 65,000 135,000 55,000 / 72,500 205,625 / 294,063
Carl M. Manisco - - 73,109 / 35,834 399,890 / 138,232
William Huddleston - - 30,000 / 35,000 108,750 / 139,375
Donald D. Ferguson - - 20,000 / 25,000 73,750 / 100,625
</TABLE>
- - ---------------
/(1)/ The dollar amount shown represents the difference between the fair market
value of the Common Stock underlying the options as of the date of
exercise and the option exercise price.
/(2)/ No SARs were exercised by any Named Executive Officer in 1994, nor did
any Named Executive Officer hold any unexercised SARs at the end of the
1994 fiscal year.
/(3)/ The dollar value provided represents the cumulative difference in the
fair market value of the stock underlying all in-the-money options as of
the last day of the 1994 fiscal year and the exercise prices for such
options. Options are "in-the-money" if the fair market value of the
underlying stock as of the last day of the 1994 fiscal year exceeds the
exercise price of such options. The fair market value of the Company's
stock for purposes of this calculation is $9, based upon the closing
price for the Company's stock as quoted on the Nasdaq National Market
System on December 30, 1994, the last day of the Company's 1994 fiscal
year.
11
<PAGE>
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
The Company entered into a five year employment contract with Mr. John R.
Wolf in July 1990. The Company and Mr. Wolf agreed in December 1994 to extend
the term of this agreement for an additional 7 years commencing January 1, 1995.
Thereafter, this agreement will be renewed for additional one year terms unless
either party gives notification of termination. Mr. Wolf's agreement provided
for an initial annual base salary of $160,000, which was increased by the Board
of Directors to $200,000 effective August 1991, and will continue to be reviewed
and increased, at the discretion of the Board, on an annual basis. The
employment agreement also obligates the Company to provide certain health and
life insurance and similar benefits to Mr. Wolf. Mr. Wolf's employment
agreement also contained certain anti-dilution rights which would have allowed
him to maintain his percentage ownership of Common Stock, however, these rights
were terminated upon mutual agreement effective February 28, 1991. The Company
also pays sales commissions to Mr. Wolf's wholly owned corporation, Iotech,
Inc., pursuant to a Sales Representative Agreement with the Company. See
"Certain Relationships and Related Transactions - Transactions With Management
and Others" and "Report of the Compensation Committee of the Board of Directors
on Executive Compensation - CEO Compensation," herein.
The Company entered into a four year employment contract with Mr. Donald L.
Ferguson in March 1992 in his capacity as Director of European Sales. Mr.
Ferguson is required to devote his entire productive time to the performance of
his executive obligations. Mr. Ferguson's agreement provided for an initial
annual base salary of $90,000, which was increased by the Board of Directors to
$96,000 in April 1993, and increased again to $120,000 in December 1993 upon his
promotion to Vice President. This salary will continue to be reviewed and
increased, at the discretion of the Board, on an annual basis. In addition, the
Company pays Mr. Ferguson a housing allowance and certain other expenses
connected with his relocation to Europe. Mr. Ferguson received a $30,000 bonus
and 5,000 shares of restricted stock upon executing the employment agreement.
The employment agreement obligates the Company to pay Mr. Ferguson, following
the first year of the agreement, commissions equal to one-quarter of one percent
of gross European sales.
In March 1994 the Company entered into employment agreements with Mr.
Vladimir Feingold as Executive Vice President - Research and Development, Mr.
Carl M. Manisco, as Senior Vice President - Sales and Marketing, and Mr. William
C. Huddleston, as Vice President - Finance and Chief Financial Officer. Mr.
Feingold's employment agreement also designates him as President of the
Company's wholly owned subsidiary, STAAR Surgical AG, Switzerland. The
employment agreements provide for 3 year terms, and Mr. Feingold's agreement
provides that it shall renew upon the expiration of the 3 year initial term on a
month-to-month basis, terminable upon 30 days prior notice, pending negotiations
for a new agreement. Each of the executives are required to devote his entire
productive time to the performance of his executive obligations, except that Mr.
Feingold is required to devote so much of his productive time as is necessary,
and shall be allowed to perform services for Bionica Pty. Ltd. The employment
agreements may be terminated by the Company for cause or the disability of the
executive. The employment agreements may be terminated by the executive for
cause, upon 180 days prior notice without cause, or in the event of, among other
things, the demotion of the executive, or any of the following events (unless
the executive votes in favor of such event as a director or stockholder): (i)
the sale or disposition by the Company of substantially all of its business or
assets, (ii) the sale of the capital stock of the Company in connection with the
sale or transfer of a controlling interest in the Company; or (iii) the merger
or consolidation of the Company with another corporation as part of a sale or
transfer of a controlling interest, or (iv) the dissolution or liquidation of
the Company.
12
<PAGE>
As base compensation under their respective employment agreements, Mr.
Feingold receives $180,000 per year, Mr. Manisco receives $105,000 per year, and
Mr. Huddleston receives $118,800 per year. Base compensation for each executive
may be increased on an annual basis at the discretion of the Board of Directors.
In addition, Mr. Manisco is entitled under his employment agreement to
commissions equal to one-quarter of one percent of domestic sales, and Mr.
Feingold is entitled to an automobile allowance of $750 per month. Each of the
executives are also provided with medical and dental insurance, disability
insurance equal to 60% of their base salary, and life insurance in the amount of
$200,000.
Messrs. Manisco's and Huddleston's respective employment agreements provide
that the Company shall pay such executive severance pay in an amount equal to
one year's base salary in the event any of the following events occur and the
Company or the executive terminate their employment as a result of such event:
(i) the future sale or disposition by the Company of substantially all of its
business or assets, (ii) the sale of the capital stock of the Company in
connection with the sale or transfer of a controlling interest in the Company;
or (iii) the merger or consolidation of the Company with another corporation as
part of a sale or transfer of a controlling interest in the Company.
As part of their respective employment agreements, the Company agreed to
grant incentive stock options under the 1991 Stock Option Plan to Messrs.
Feingold and Manisco to purchase 90,000 and 35,000 shares of the Common Stock,
respectively, at $4.75 per share. The Company further agreed, pursuant to Mr.
Huddleston's employment agreement, to grant non-qualified options to Mr.
Huddleston to purchase 40,000 shares of Common Stock at $4.75 per share. The
Company also granted incentive stock options to Mr. Donald Ferguson to purchase
30,000 shares of Common Stock at $4.75 per share in connection with his
appointment as Vice President - European Affairs.
The stock options will vest one-third, two-thirds, and fully upon the
executive's continued employment by the Company and/or its affiliates as of
January 1, 1995, 1996 and 1997, respectively, and will expire five years
following the grant date, except that vested options will expire earlier in the
following circumstances: (i) immediately upon the date of termination in the
event of the termination of an optionee's employment by the Company for cause,
(ii) 3 months following the date of termination if such termination is without
cause by the Company, and (iii) one year after date of death in the event the
termination is attributable to such death. Unvested options shall immediately
terminate in the event of the termination of an optionee's employment, with the
exception of the following events, in which case the options shall immediately
vest: (i) the termination of the optionee's employment if such termination is
made by the Company and is without cause; (ii) the termination of the optionee's
employment if such termination is made by the optionee and is for cause; (iii)
the future sale or disposition by the Company of substantially all of its
business or assets; (iv) the sale of the capital stock of the Company in
connection with the sale or transfer of a controlling interest in the Company;
(v) the merger or consolidation of the Company with another corporation as part
of a sale or transfer of a controlling interest in the Company; or (vi) the
dissolution or liquidation of the Company. Should an executive exercise an
option, the Company reserves the right, in its sole discretion, to allow the
executive to pay for the option shares by cash, stock, or the provision of a
full recourse promissory note, bearing interest at a rate that precludes the
imposition of interest under the Internal Revenue Code, and secured by such
security as prescribed by the Stock Option Committee.
The Company has no obligation under these plans to issue registered shares,
although the Company intends (but without any obligation to do so) at such time
as it deems such action to be necessary or appropriate to register the shares
under Form S-8.
13
<PAGE>
Mr. Feingold's employment agreement also addresses certain loans in the
respective amounts of $120,000 and $192,000 which the Company made to Mr.
Feingold in March 1994. The terms of these loans are more particularly
described in "Certain Relationships and Related Transactions - Indebtedness of
Management to the Company in Excess of $60,000" below. Among other things, the
employment agreement provides that Mr. Feingold will be obligated to maintain
collateral equal to at least 110% of the outstanding balance of these loans.
The employment agreement also provides that the Company shall forgive the
outstanding balance of these loans in the event of: (i) the future sale or
disposition by the Company of substantially all of its business or assets, (ii)
the sale of the capital stock of the Company in connection with the sale or
transfer of a controlling interest in the Company; or (iii) the merger or
consolidation of the Company with another corporation as part of a sale or
transfer of a controlling interest in the Company. Similar forgiveness will be
granted with respect to the outstanding balance of any loans given by the
Company in connection with Mr. Feingold's exercise of incentive stock options
granted under the Employment Agreement provided that such options were exercised
at least ninety days prior to entering into negotiations for such transaction.
Messrs. Feingold, Manisco and Huddleston have covenanted, pursuant to the
terms of their employment agreements, that they shall not, for a period of one
year following the termination of their employment or services, compete with the
Company within certain specified geographic areas, or solicit the Company's
employees or customers. In addition, these executives have covenanted to return
all proprietary information to the Company following the termination of their
respective employment agreements, and not disclose any confidential information
of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1994, Drs. Deitz, Gathe and Utrata and Mr. Pollet served on
the Company's Compensation Committee (which is responsible for determining
executive compensation) and its Stock Option Committee (which is responsible for
determining grants of stock under the Company's 1990 and 1991 Stock Option Plans
to the Company's employees). None of these Directors is an executive officer or
director of any other company of which any of the other aforementioned Directors
is an executive officer or director.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The following is the report from the Compensation Committee of the Board of
Directors, comprised of the Company's four outside Directors. The Compensation
Committee also serves as the Stock Option Committee under the Company's 1990 and
1991 Stock Option Plans. This report discusses the compensation policies for
executive officers in general and the Committee's rationale for compensation
paid to the Chief Executive Officer in particular.
GENERAL
The Company's executive compensation program is designed to align
stockholder's interests with business strategy, company values and
management initiatives. It is based upon the following four objectives: (i)
to link the interests of management with those of stockholders by
encouraging stock ownership in the Company, (ii) to attract and retain
superior executives by providing them with the opportunity to earn total
compensation packages that are competitive with the industry, (iii) to
reward individual results by recognizing performance through salary, annual
cash incentives and
14
<PAGE>
long-term stock based incentives, and (iv) to manage compensation based on
the level of skill, knowledge, effort and responsibility needed to perform
the job successfully.
Executive officers' compensation includes base salary and long-term stock
ownership plans. In addition, it also includes, in common with all
employees of the Company, annual cash bonuses to be paid based upon annual
performance.
In general, the Company's practice in determining compensation is for
management to make a recommendation to the Compensation Committee, which in
turn will evaluate such recommendation and make its own recommendation to
the Board for its determination. The Compensation Committee, however, makes
the final determination with respect to grants under the Company's 1990 and
1991 Stock Option Plan.
BASE COMPENSATION
The present base compensation of the Company's executive officers is based
upon the amounts set forth in their respective employment agreements which
range, in term, from 3 to 7 years. The initial amount of base salary paid
to executive officers under their employment agreements was the amount, as
determined by the Committee at such time, to be necessary to attract and
retain executives with the requisite superior abilities to perform their
executive functions. The Committee believes that the amount of base salary
paid to its executive officers is consistent with that paid in the industry.
Pursuant to the terms of their employment agreements, base salary for the
Company's executives is reviewed on an annual basis by the Compensation
Committee. The Compensation Committee's philosophy toward increasing base
salary is to offer moderate increases from present levels, thereby
maintaining base salaries on a basis consistent with what the Compensation
Committee believes is paid in the industry.
In addition to base salary, certain executive officers are entitled to
bonuses based upon certain performance related financial goals where the
efforts of such officers are essential to the successful achievement of such
goals.
Inducement for superior performance by executive officers will be tied
into the Company's performance and stock price by way of the annual cash
bonuses and grants of stock and options to purchase stock discussed below.
ANNUAL CASH BONUSES
The Compensation Committee, in its sole discretion, approves the payment
of bonuses from time-to-time to the Company's employees, including its
executive officers, as a medium-term incentive to influence employees to be
productive over the course of each fiscal year. In April, 1994, the
Compensation Committee awarded a bonus of $20,000 to Mr. Huddleston.
LONG-TERM STOCK OWNERSHIP PLANS
The Company has two stock option plans in place which it may use to grant
stock or options to purchase stock to its employees as long-term incentives,
namely, its 1990 Stock Option Plan and its 1991 Stock Option Plan (there are
also certain prior stock option plans in place, however, the Company is not
actively granting stock or options under these plans). These plans afford
the Company with the ability to make stock grants and to grant incentive
stock options, non-qualified stock options, accelerated stock
15
<PAGE>
options, and tandem stock options to the Company's officers, Directors,
employees and consultants.
The Compensation Committee's objective is to grant stock or options to
purchase stock under the 1990 and 1991 Stock Option Plans which will be
subject to vesting conditions based on continued employment. These vesting
requirements are intended to create a more productive workforce by (i)
acting as an inducement for long-term employment with the Company thereby
lending stability to the Company's employee base, and (ii) encouraging more
long-term productivity by the Company's employees as they see their efforts
translate into greater share value.
In March 1994, as part of their respective employment agreements, the
Company agreed to grant incentive stock options under the 1991 Stock Option
Plan to Messrs. Feingold, Lloyd, Manisco and Ziemba to purchase 90,000,
35,000, 35,000 and 40,000 shares of Common Stock, respectively, at $4.75 per
share. The Company further agreed, pursuant to Mr. Huddleston's employment
agreement, to grant non-qualified options to Mr. Huddleston to purchase
40,000 shares of Common Stock at $4.75 per share. The Company also granted
incentive stock options to Mr. Ferguson to purchase 30,000 shares of Common
Stock at $4.75 per share in connection with his appointment as Vice
President - European Affairs. See "Option Grants in 1994 Fiscal Year"
above.
Most of the available shares under the 1990 and 1991 Stock Option Plans
have been issued or reserved for issuance. As of this date the Compensation
Committee is awarding stock and options under these plans as shares become
available based upon the lapse or forfeiture of previously issued options.
In January 1994 the Board of Directors also agreed to extend the term of
all options and warrants granted prior to the date of such meeting to each
of the Company's executive officers and directors until such time as such
persons were no longer an employee, executive officer or director, as the
case may be. This extension does not apply to grants made after the date of
this resolution. See "Compensation of Directors" and "Option Grants in 1994
Fiscal Year," above, for a description of later granted options.
CEO COMPENSATION
Mr. Wolf's base salary, which was last increased in August 1991, has been
and will continue to be adjusted from time to time in accordance with the
philosophy for the determination of executive officer compensation described
above in that section of this report captioned "Base Compensation". Mr.
Wolf's wholly owned corporation, Iotech, Inc., also receives a 1% override
sales commission with respect to sales of the Company's products pursuant to
a Sales Representative Agreement with the Company dating back to Mr. Wolf's
original association with the Company. See "Certain Relationships and
Related Transactions - Transactions With Management and Others," herein.
The Compensation Committee takes payments under this agreement into
consideration as an equivalent to performance based forms of consideration
when deliberating additional compensation, if any, to be provided to Mr.
Wolf.
THE COMPENSATION COMMITTEE
Michael R. Deitz, M.D. Joseph C. Gathe, M.D.
Andrew F. Pollet, Esq. Peter J. Utrata, M.D.
16
<PAGE>
STOCK PERFORMANCE GRAPH
Set forth below is a line graph, assuming an initial investment of $100 on
December 29, 1989, comparing the yearly percentage change in the cumulative
total stockholder return for the last five fiscal years of the Common Stock
relative to the cumulative total stockholder return for the same time period of
(i) U. S. and foreign companies listed on the Nasdaq Stock Market (the "Nasdaq
Index") and (ii) U. S. and foreign companies listed on the Nasdaq Stock Market
(the "Peer Index") who operate in the surgical, medical and dental instrument
and supply industries (based upon Standard Industrial Classification {"SIC"}
codes in the range of 3840 through 3849; the Company's SIC code is 3845). The
Nasdaq Index and the Peer Index were prepared by the Center for Research in
Security Prices ("CSRP") of the University of Chicago's Graduate School of
Business.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG STAAR SURGICAL COMPANY, NASDAQ INDEX AND PEER GROUP
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION> STARR
Measurement Period SURGICAL NASDAQ
(Fiscal Year Covered) COMPANY 500 INDEX Peer Group
- - ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-12/29/89 $100.0 $100.0 $100.0
FYE 12/31/90 $102.7 $ 85.0 $116.9
FYE 12/31/91 $417.9 $135.7 $230.2
FYE 12/31/92 $135.7 $157.4 $187.5
FYE 12/31/93 $146.4 $181.1 $151.6
FYE 12/30/94 $257.1 $175.3 $161.4
</TABLE>
- - ---------------
The lines represent monthly index levels derived from compounded daily
returns that include all dividends. The indexes are reweighted daily,
using market capitalization on the previous trading day. If the monthly
interval, based on fiscal year end, is not a trading day, the preceding
trading day is used. The index level for all series was set to $100 on
November 29, 1989. No trading activity was recorded for the Company
between June 28, 1989 and October 24, 1990. The historical stock
performance depicted on the graph is not necessarily indicative of future
performance. The Company will not make or endorse any predictions as to
future stock performance or dividends.
17
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In February 1994 the Company entered into a consulting agreement with Dr.
Deitz with respect to his services in evaluating new products. This agreement,
which has a three year term, provides for the payment of $7,000 per month to Dr.
Deitz. Compensation under this agreement is separate from compensation payable
to Dr. Deitz for services rendered as a director.
Mr. Wolf owns and is President of Iotech, Inc., which is paid a maximum
1% override sales commissions with respect to sales of the Company's products
pursuant to the terms of a Sales Representative Agreement with the Company when
Mr. Wolf originally became associated with the Company. In December 1994 the
Company and Iotech agreed to extend the term of this agreement for an additional
7 years commencing January 1, 1995. This agreement was originally entered into
with Iotech in September 1983 when the Company determined that it was essential
to engage Iotech's services to build a customer base for intraocular lenses,
based in significant part upon Mr. Wolf's experience in marketing and
distributing intraocular lenses. The Company has since extended the term of
this agreement beyond its initial term to reflect Iotech's continuing efforts to
build and maintain the Company's customer base, as well as Mr. Wolf's agreement
to also become an employee of the Company for a significantly smaller base
compensation than he could otherwise have earned. Commissions are payable on a
quarterly basis determined by a percentage of the Company's gross sales. In
1994 the Company paid Iotech $263,000 in commissions.
In October 1994 the Company's subsidiary, STAAR Surgical Australasia
Pty., Ltd., entered into an agreement with Bionica Pty. Ltd., an Australian
corporation, to purchase its intraocular lens distribution and
phacoemulsification businesses, as well as the rights to use the Bionica name.
Mr. Feingold owned approximately 51% of the outstanding shares of Bionica Pty.
Ltd. at the time of the transaction. As consideration for the acquired
businesses, the Company paid Bionica Pty. Ltd. the sum of $150,000 in cash plus
70,000 shares of restricted stock of the Company, which shares would have a fair
market value of $350,000 if such shares were freely tradable.
Pollet, Skousen & Woodbury, a law firm of which Andrew F. Pollet, a
Director of the Company since September 1990, is the principal stockholder,
received approximately $525,000 in legal fees, costs and expense reimbursements
during the 1994 fiscal year in payment for services which were billed at such
firm's standard billing rates. It is anticipated that Pollet, Skousen &
Woodbury will continue to render legal services throughout fiscal year 1995.
INDEBTEDNESS OF MANAGEMENT TO THE COMPANY IN EXCESS OF $60,000
As of December 30, 1994, John R. Wolf was indebted to the Company in the
amount of $1,194,745. This obligation arose in connection with a promissory
given by Mr. Wolf to the Company in exercise of options and warrants to purchase
640,565 shares of Common Stock in February 1991 for the sum of $1,431,020. This
note, in the original principal amount of $1,431,020, and bearing interest at
the rate of 8%, was payable on February 28, 1994. However, in October 1993, the
Board authorized the extension of the payment date to April 1997, and reduced
this interest rate to 4.07%. This note is secured by a Stock Pledge/Security
Agreement whereby shares of Common Stock are held as collateral by a third party
pledgeholder. The principal amount of this note has since been paid down to
$1,194,745. The highest balance of Mr. Wolf's principal indebtedness to the
Company for the 1994 fiscal year was January 1, 1994 when $1,231,630 was
outstanding which reflected, in addition to the aforesaid note, a $46,875
obligation by Mr. Wolf to the Company under a prior note. This note was given
by Mr. Wolf to the Company in July 1990 in connection with Mr.
18
<PAGE>
Wolf's purchase of 156,250 shares of Common Stock for the amount of $187,500.
The note provided for the purchase price to be paid in sixteen quarterly
installments beginning January 1, 1991 with interest at the rate of 8%. Each
quarterly installment was forgiven as it became due in the event Mr. Wolf
remained employed by the Company at the applicable due date, with the last
quarterly installment being satisfied on January 1, 1994.
As of December 30, 1994, William C. Huddleston was indebted to the
Company in the amount of $197,310. This obligation arose from three promissory
notes. The first promissory note was given to the Company in connection with
Mr. Huddleston's exercise of options and warrants to purchase 99,644 shares of
Common Stock in February 1991 for the sum of $189,933. This note, in the
original principal amount of $119,185, and bearing interest at the rate of 8%,
was payable on February 28, 1994. However, in October 1993, the Board
authorized the extension of the payment date to April 1997, and reduced the
interest rate to 4.07%. This note is secured by a Stock Pledge/Security
Agreement whereby shares of Common Stock are held as collateral by a third party
pledgeholder. The second promissory note was given by Mr. Huddleston in
connection with his exercise of warrants to purchase 16,667 shares of Common
Stock on July 3, 1992 for the sum of $100,002. This note, in the original
principal amount of $80,000, and bearing interest at the rate of 9%, is payable
on March 29, 1995. However, in October 1993, the Board authorized the extension
of the payment date to April 1997, and reduced this interest rate to 4.07%.
This note is secured by a Stock Pledge/Security Agreement whereby shares of
Common Stock are held as collateral by a third party pledgeholder. The third
promissory note was given by Mr. Huddleston in connection with his exercise of
warrants to purchase 12,500 shares of Common Stock in March 1993 for the sum of
$31,250. This note, in the original principal amount of $28,000, and bearing
interest at the rate of 8%, was payable on February 28, 1994. However, in
October 1993, the Board authorized the extension of the payment date to April
1997. This note is secured by a Stock Pledge/Security Agreement whereby shares
of Common Stock are held as collateral by a third party pledgeholder. The
highest balance of Mr. Huddleston's principal indebtedness to the Company under
these notes for the 1994 fiscal year was December 30, 1994.
As of December 30, 1994, Mr. Pollet was indebted to the Company in the
amount of $733,335. This obligation arose in connection with Mr. Pollet's
exercise of warrants to purchase 244,445 shares of Common Stock on May 26, 1992
for the sum of $733,335. This note, bearing interest at the rate of 8%, is
payable on May 31, 1995. However, in October 1993, the Board authorized the
extension of the payment date to April 1997, and reduced the interest rate to
4.07%. This note is secured by a deed of trust on real property. The highest
balance of Mr. Pollet's principal indebtedness to the Company under this note
for the 1994 fiscal year was December 30, 1994.
As of December 30, 1994, Mr. Feingold was indebted to the Company in the
amount of $312,310. This obligation arose from two promissory notes. The first
promissory note was given to the Company in connection with a personal loan.
This note, in the original principal amount of $192,000, and bearing interest at
the rate of 6%, is payable on April 1, 1997. Mr. Feingold is obligated,
however, to repay the loan with the proceeds of the sale of certain improved
property, which property he is obligated to sell upon the completion of
construction of a residence he is building. This note is secured by deeds of
trust on two properties, one improved and one unimproved, both of which are in
second position. The second promissory note was also given to the Company in
connection with a personal loan. This note, in the original principal amount of
$120,000, and bearing interest at the rate of 8%, is payable on April 1, 1997.
This note is secured by a Stock Pledge/Security Agreement whereby shares of
Common Stock are held as collateral by a third party pledgeholder. The highest
balance of Mr. Feingold's principal indebtedness to the Company under these
notes for the 1994 fiscal year was December 30, 1994.
19
<PAGE>
Pursuant to the terms of his employment agreement with the Company, Mr.
Feingold is obligated to maintain collateral with respect to each loan equal to
at least 110% of the outstanding balance of such loan. Mr. Feingold's
employment agreement also provides that the Company shall forgive the
outstanding balance of these loans in the event of: (i) the future sale or
disposition by the Company of substantially all of its business or assets, (ii)
the sale of the capital stock of the Company in connection with the sale or
transfer of a controlling interest in the Company; or (iii) the merger or
consolidation of the Company with another corporation as part of a sale or
transfer of a controlling interest in the Company. Similar forgiveness will be
granted with respect to the outstanding balance of any loans given by the
Company in connection with Mr. Feingold's exercise of incentive stock options
granted under the Employment Agreement provided that such options were exercised
at least ninety days prior to entering into negotiations for such transaction.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES ACT
Section 16(a) of the Securities Act requires the Company's respective
Directors, Executive Officers and persons who own more than 10% of the Common
Stock to file reports of ownership and changes in ownership of the Common Stock
with the SEC and Nasdaq. Directors, Executive Officers and persons who own more
than 10% of the Common Stock are required by SEC regulations to furnish the
Company with copies of all Section 16(a) Forms they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during its 1994 fiscal year the Company's respective Directors,
Executive Officers and persons who own more than 10% of the Common Stock
complied with all Section 16(a) filing requirements, except as follows: Mr.
Wolf did not file a Form 4 for the month of August with respect to one
transaction (the grant of options), Dr. Deitz did not file a Form 4 for the
month of June with respect to two transactions (the grant of options and the
lapse of options), and Mr. Feingold did not file a Form 4 for the month of
October with respect to one transaction (the acquisition of shares by a
corporation controlled by Mr. Feingold in connection with the sale of assets to
the Company). All of the transactions for which Forms 4 were not filed as
hereinabove discussed were reported on such persons' respective timely filed
Forms 5 with respect to the Company's 1994 fiscal year.
20
<PAGE>
APPROVAL OF
PROPOSALS TO ADOPT
CLASSIFIED BOARD PROVISIONS
AND
STOCKHOLDERS' RIGHTS PLAN
Items 2. and 3. on Proxy Card
General
On April 20, 1995, the Board of Directors unanimously adopted
resolutions declaring the advisability, as discussed in more detail
below, of the following two proposals:
1. Item 2 on Proxy Card: Amending the Certificate of
Incorporation of the Company and making conforming
amendments to the Bylaws of the Company in order to: (i)
reorganize the Board of Directors of the Company into
three classes of directors, with the directors in each
class serving three year staggered terms, (ii) limit the
minimum and maximum number of authorized directors
serving on the Board to 3 and 7 persons, respectively,
(iii) require that any vacancies in the number of
directors of the Company be filled solely by the vote of
a majority of directors then in office, (iv) require that
actions by stockholders be taken only at an annual or
special meeting of stockholders and not by written
consent, and (v) require a two-thirds vote of the
stockholders of the Company to amend or repeal any of the
foregoing amendments to the Certificate of Incorporation
and Bylaws (collectively, the "Classified Board
Provisions"); and
2. Item 3 on Proxy Card: Adopting a Stockholders' Rights
Plan (the "Rights Plan") and, in connection therewith,
amending the Certificate of Incorporation of the Company
to increase the authorized shares of Common Stock of the
Company from 20 million shares to 30 million shares.
The specific amendments to the Certificate of Incorporation
and Bylaws contemplated by the proposal to adopt the Classified
Board Provisions and the proposal to ratify the Stockholders'
Rights Plan are excerpted in Appendixes A-1 and A-2 to the Proxy
Statement, respectively. The text of the Rights Plan is excerpted
in Appendix B to the Proxy Statement. Before voting, stockholders
are urged to read carefully the text of Appendixes A and B.
Each of the aforesaid proposals is conditioned upon the
approval of the stockholders of the Company at this Annual Meeting
of Stockholders or any adjournments thereof. The Classified Board
Provision proposal, and the portion of the Rights Plan proposal
relating to increasing the Company's authorized capital, will not
become effective and will not be implemented unless and until such
stockholder approval is obtained; the Rights Plan itself became
effective upon its adoption by the Board of Directors, however, if
this proposal is not ratified by the stockholders of the Company
at this Annual Meeting, the Rights Plan will be deemed null and
void from its inception.
The Classified Board Provision proposal and the Stockholders'
Rights Plan proposal are being presented separately to the
stockholders of the Company. As more fully discussed below, the
Board of Directors believes that the adoption off each of the
proposals are in the best interests of the Company and its
stockholders.
21
<PAGE>
Description of Classified Board Provisions
The adoption of these amendments is intended to act as an
integrated approach to addressing the Board's concerns, as
discussed below in greater particularity, relative to maintaining
management continuity and stability as well as affording necessary
time and flexibility to appropriately respond to hostile tender
offers. As such, the Classified Board Provisions are intended to
be approved as a whole, rather than in their constituent parts, in
order to enhance their effectiveness in meeting the Board's stated
purpose. The following constitutes an analysis of each constituent
part of the Classified Board Provisions.
Establishment of Classified Board of Directors - Removal of
Directors Only For Cause. As part of the Classified Board
Provisions, the Certificate of Incorporation and the Bylaws of the
Company would divide the Board into three classes of directors,
namely, Class I, Class II and Class III, with the number of
directors in each class to be as nearly equal as possible, and with
each class to be elected for a three year term on a staggered
basis. Insofar as the number of directors of the Company is
presently fixed at five, each class would be comprised of two
directors, except that Class I would consist of one director (See
"Size of the Board of Directors," below). Following the interim
arrangement described below in "Implementation of Classified Board
Provisions," the directors of each class will serve three year
terms, and the term of one class will expire each year. The
amended Certificate of Incorporation would not permit stockholders
or directors to remove directors without cause.
The current Bylaws of the Company provide that directors hold
office until the next annual meeting and until their successors are
elected or qualified, or until their earlier death, resignation or
removal. The current Bylaws of the Company further provide that
directors may be removed from office with or without cause by the
vote of the holders of a majority of the Common Stock at a special
meeting thereof. The term cause is not defined in the Bylaws.
Delaware corporate law provides that a corporation's
Certificate of Incorporation and/or Bylaws may provide that the
directors be divided into up to three classes with each class to
be elected for a period of one to three years. Delaware corporate
law further provides that, if a corporation has a classified Board,
the directors cannot be removed except for cause unless such right
is expressly granted in the Certificate of Incorporation.
Size of the Board of Directors. As part of the Classified
Board Provisions, the Certificate of Incorporation and the Bylaws
of the Company would provide that the Board shall consist of not
fewer than three nor more than seven members, with the exact number
of directors to be fixed, within those limitations, by a vote of
a majority of the entire Board. Additionally, no reduction in the
size of the Board will shorten the term on an incumbent director.
Currently, the Bylaws of the Company provide that the number
of directors shall be fixed by the affirmative vote of a majority
of the Board of Directors or by action of the stockholders of the
Company. By action of the Board of Directors, the present number
of directors is fixed at five.
Delaware law states that the Board of Directors of a
corporation shall consist of one or more members, which number
shall be fixed by the Bylaws of the corporation, unless the
Certificate of Incorporation of the corporation fixes the number
of directors, in which case a change in the number of directors may
be made only by amendment to the Certificate of Incorporation.
22
<PAGE>
Requirement that vacancies in the Board of Directors be filled
solely by the vote of a majority of directors then in office. As
part of the Classified Board Provisions, the Certificate of
Incorporation and the Bylaws of the Company would require any
vacancies and newly created directorships to be filled exclusively
by vote of a majority of the directors then in office, or the sole
remaining director, and not by the stockholders. In addition, any
director so appointed would hold office for a term expiring at the
annual meeting of stockholders at which the term of the class to
which director is appointed expires (rather than at the next annual
meeting, as is presently the case).
Currently, the Bylaws of the Company provide that any
vacancies and newly created directorships resulting from an
increase in the authorized number of directors may be filled by the
vote of a majority of the directors then in office, though less
than a quorum, or the sole remaining director or by the
stockholders at the next annual meeting thereof. Delaware
corporate law provides that vacancies and newly created
directorships will be filled in the same manner as presently
provided in the Bylaws of the Company unless otherwise provided in
a corporation's Certificate of Incorporation or Bylaws.
Requirement that Actions by Stockholders be Taken Only at a
Meeting of Stockholders and not by Written Consent. As part of the
Classified Board Provisions, the Certificate of Incorporation and
the Bylaws of the Company will be amended to provide that
stockholders may only act at an annual or special meeting of
stockholders duly called and to prohibit action by written consent.
Currently, the Company's Bylaws provide that stockholders of the
Company may take any action they otherwise could at a meeting by
written consent, without prior notice and without stockholder vote
at a meeting, so long as the written consent has been signed by
holders of a number of shares who could otherwise authorize such
action at a meeting of stockholders. Delaware corporate law
provides that stockholders can take action by written consent in
the same manner as currently provided in the Company's Bylaws
unless otherwise provided in a corporation's Certificate of
Incorporation or Bylaws.
Requirement for Two-thirds Vote of the Stockholders of the
Company to Amend or Repeal any of the Foregoing Amendments. As
part of the Classified Board Provisions, the Certificate of
Incorporation of the Company will provide that stockholders may
amend the Classified Board Provisions only by a two-thirds vote.
Under Delaware corporate law, the power to amend, alter or repeal
provisions of a corporation's Certificate of Incorporation requires
the approval of both the Board of Directors and the holders of a
majority of the voting power of shares entitled to vote thereon.
A corporation may provide in its Certificate of Incorporation,
however, for a higher percentage vote than is otherwise required
by law for any corporate action. Once such a supermajority
provision is adopted, Delaware corporate law requires an equally
large supermajority vote to amend, alter or repeal such provision.
Currently, the Certificate of Incorporation of the Company contain
no supermajority vote provisions.
Implementation of Classified Board Provisions
Following approval of the Classified Board Provision proposal
by the stockholders of the Company, the Company would file a
Certificate of Amendment to the Certificate of Incorporation of the
Company with the Delaware Secretary of State incorporating the
provisions set forth in Appendix 1-A, and, following the approval
by the Delaware Secretary of State of such filing, the Board would
make the conforming amendments to the Bylaws which are set forth
in Appendix 1-A.
In order to place the classes of directors on a staggered
basis for purposes of annual elections, the directors in Classes
I and II would initially hold office for one and two year terms,
23
<PAGE>
respectively. The director in Class I, who will initially serve
a one year term, will be eligible for re-election to a full three
year term at the Annual Meeting of Stockholders to be held in 1996.
Directors in Class II, who will initially serve two year terms,
will be eligible for re-election for full three year terms at the
Annual Meeting of Stockholders to be held in 1997. Directors in
Class III, who initially serve full three year terms, will be
eligible for re-election for new three year terms at the Annual
Meeting of Stockholders to be held in 1998. Thus, after the
meeting to which this Proxy Statement relates, stockholders will
elect approximately one-third of the directors at each Annual
Meeting of Stockholders. Each director will serve until a
successor is duly elected and qualified or until his earlier death,
resignation or removal.
The Board of Directors as elected in this Annual Meeting of
Stockholders will designate which directors will be appointed to
each class. Assuming the present slate of nominees are reelected
to the Board, such Board would designate Dr. Joseph C. Gathe to
serve in the first class of directors who will initially hold a one
year term, Drs. Peter J. Utrata and Michael R. Deitz to serve in
the second class of directors who will initially hold a two year
term, and Messrs. John R. Wolf and Andrew F. Pollet to serve in the
third class of directors who will initially hold a full three year
term. If the Board of Directors as elected in the pending Annual
Meeting of Stockholders contains persons other than the nominated
slate, then such reconstituted Board of Directors will designate
which directors will be appointed to each class by majority vote
or, if agreement cannot be reached, the designation will be made
by the director with the longest length of prior service on the
Board.
Objectives and Potential Effects of Classified Board
Provisions
The Board of Directors believes that dividing the directors
into three classes and providing that directors will serve three-
year terms rather than one-year terms is in the best interests of
the Company and its stockholders because it should enhance the
likelihood of continuity and stability in the Company's management
and in policies formulated by the Board. At any given time, at
least two-thirds of the directors will have at least one year of
experience as directors of the Company and with its business
affairs and operations. New directors would therefore be given an
opportunity to become familiar with the affairs of the Company and
will be able to benefit from the experience of co-members of the
Board who have served for longer than one year terms. Although no
problems have been experienced by the Company over the past five
years with respect to the continuity and stability of leadership
and policy, the Board believes that a classified Board would
decrease the likelihood of such problems in the future. The Board
also believes that classification will enhance the Company's
ability to attract and retain well qualified individuals who are
able to commit the time and resources to understand the Company and
its business affairs and operations. The continuity and quality
of leadership that results from a classified Board should, in the
opinion of the Board, create long-term value for the stockholders
of the Company.
The Board also believes that the Classified Board Provisions
are in the best interests of the Company and its stockholders
because they should, if adopted, reduce the possibility that a
third party could effect a sudden or surprise change in control of
the Company's Board of Directors. With stockholder approval, many
companies have established classified boards or directors for such
purpose. At least two Annual Meetings of Stockholders, rather than
one, will be required to effect a change in a majority of Board
members. The delay afforded by the Classified Board Provisions
would serve to ensure that the Board, if confronted by a hostile
tender offer, proxy contest or other surprise proposal from a third
party who has acquired a block of the Common Stock, will have
sufficient time to review the proposal, and appropriate
alternatives to the proposal, and to act in a manner which it
believes to be in the best interests of the stockholders.
24
<PAGE>
If a potential acquiror were to purchase a significant or
controlling interest in the Company, such acquiror could, if the
Board is not classified, quickly obtain control of the Board and
thereby remove the Company's management, which could severely
curtail the Company's ability to negotiate effectively with such
potential acquiror on behalf of all other stockholders. The threat
of quickly obtaining control of the Board could deprive the Board
of the time and information necessary to evaluate the proposal, to
study alternative proposals, and to help ensure that the best price
is obtained in any transaction involving the Company which may
ultimately be undertaken. The proposed classification of the Board
is designed to reduce the vulnerability of the Company to an
unsolicited takeover proposal, particularly a proposal that does
not contemplate the acquisition of all of the Company's outstanding
shares, or an unsolicited proposal for the restructuring or sale
of all or part of the Company.
The Classified Board Provisions do not expressly provide for
the removal of directors without cause for several reasons. First,
allowing stockholders to remove a director without cause could be
used to subvert the protections afforded by the creation of a
classified Board. One method employed by takeover bidders to
obtain control of a board of directors is to acquire a significant
percentage of a corporation's outstanding shares through a tender
offer or open market purchases and to use the voting power of those
shares to remove the incumbent directors and replace them with
nominees chosen by the takeover bidder, who would be more willing
to approve the terms of a merger or other business combination on
terms less favorable to the other stockholders of the Company than
those which would have been approved by the removed directors.
Requiring cause in order to remove a director precludes the use of
this strategy, thereby encouraging potential takeover bidders to
obtain the cooperation of the existing Board before attempting a
takeover. Thus, the absence of a provision allowing stockholders
to remove a director without cause is consistent with, and
supportive of, the concept of a classified Board in its intended
effect of moderating the pace of a change in the Board of Directors
of the Company. Second, the Board believes that the Classified
Board Provisions will properly condition a director's continued
service upon his or her ability to serve rather than his or her
position relative to a dominant stockholder.
Fixing a minimum and maximum number of directors also
eliminates another method, similar to that discussed in the
previous paragraph, to subvert the protections afforded by the
creation of a classified Board. Instead of removing incumbent
directors and replacing them with nominees, as discussed above, a
bidder could place an amendment on the ballot at the annual meeting
of stockholders to more than double the number of directors, and
achieve its objective of electing a majority of the Board from the
nominees chosen by the takeover bidder. Thus, this provision is
also consistent with, and supportive of, the concept of a
classified Board.
By taking action by written consent rather than at a meeting
of stockholders, a stockholder is not required to give notice of
the proposed action to all stockholders of the Company.
Prohibiting stockholder action by written consent should give all
stockholders of the Company advance notice of, and the opportunity
to vote on, any proposed stockholder action, and should also
prevent the holders of a majority of the voting power of the
Company from using the written consent procedure to take
stockholder action to the detriment of the minority. Moreover,
such notice would enable stockholders to take action, including
judicial action, in order to protect their interests before the
proposed stockholder action is taken.
Additionally, the elimination of stockholder action by written
consent may prevent untimely action in a context where stockholders
might not have the full benefit of the knowledge, advice and
participation of the Company's management and Board of Directors.
Persons attempting unfriendly takeovers of corporations have, for
example, attempted to use written consent procedures in order
25
<PAGE>
to deal directly with stockholders and avoid negotiations with the
management and Boards of Directors of such corporations.
Prohibiting a stockholder or group of stockholders with less
than two-thirds of the outstanding voting stock from amending or
repealing the Classified Board Provisions is an essential part of
the overall structure being proposed to encourage individuals or
groups who desire to propose takeover bids or similar transactions
to negotiate with the Board of Directors. This provision prevents
a stockholder with a majority of the voting power of the Company
from subverting the requirements of the Classified Board Provisions
or any of them by simply repealing them.
Again, the Classified Board Provisions are intended, in part,
to encourage persons seeking to acquire control of the Company to
initiate such an acquisition through arm's-length negotiations with
the Board of Directors of the Company. The Classified Board
Provisions would not prevent a negotiated acquisition of the
Company with the cooperation of the Board, and a negotiated
acquisition could be structured in such a manner as to shift
control of the Board to representatives of the acquiror as part of
the transaction.
Potential Disadvantages of Classified Board Provisions
The constituent parts of the Classified Board Provisions
operate in complementary fashion, as intended, to generally delay,
deter or impede changes in control of the Board of Directors or the
approval of certain stockholder proposals which would have the
result of effectuating changes in control of the Board of
Directors, even if a majority of the stockholders believe such
change or actions to be in their best interests. For example,
classifying the Board operates to increase the amount of time
required for stockholders to obtain control of the Company without
the cooperation or approval of the incumbent Board, even if such
stockholders hold or were to acquire a majority of the voting
power. Elimination of the right of stockholders to remove
directors without cause may make the removal of any director more
difficult (unless cause is readily apparent), even if a majority
of the stockholders believe such removal to be in their best
interests, and even if the director's performance is arguably
subpar. Restricting stockholder action by written consent may have
the effect of delaying consideration of a stockholder proposal
until the next annual meeting. Requiring a two-thirds vote of
stockholders to amend or repeal the Classified Board Provisions
could, in effect, give minority stockholders the ability to veto
the amendment or repeal of the Classified Board Provisions, even
if otherwise approved by a majority of stockholders. As a result,
there is an increased likelihood that the Classified Board
Provisions could have the effect of entrenching the Board of
Directors and, since the Board has the power to retain and
discharge management, entrenching management.
Additionally, one of the effects of the Classified Board
Provisions may be to discourage certain tender offers and other
attempts to change control of the Company, even though stockholders
might feel such attempts would be beneficial to them or the
Company. Because tender offers for control usually involve a
purchase price higher than the prevailing market price, the
Classified Board Provisions may have the effect of preventing or
delaying a bid for the Company's shares which could be beneficial
to the Company and its stockholders. Moreover, since tender offers
and other attempts to obtain control of a corporation would often
be accompanied by open market purchases in anticipation of such
offers, ass well as other investment and speculative market
activity that may tend to increase the market price of or price
volatility in the Company's stock, stockholders could be deprived
of certain opportunities to sell their shares in the market at
temporarily higher prices.
Even though the adoption of the Classified Board Provisions
may have the disadvantages discussed above, the Board nevertheless
believes that the protections afforded to the stockholders of
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<PAGE>
the Company which will result from the adoption of the Classified Board
Provisions, as discussed above, will materially outweigh any potential harm or
loss of rights discussed above.
At this time the Board knows of no offer to acquire control
of the Company, nor does it know of any effort to remove any
director, either for cause or without cause.
Delaware law
Delaware law provides that before an amendment to the
Certificate of Incorporation may be submitted to stockholders for
their vote, the Board of Directors must declare the advisability
of the amendment. In discharge of this requirement, the Board has
unanimously passed the necessary resolution and formally recommends
an affirmative vote.
Description of Rights Plan
Pursuant to the terms of the Rights Plan, and subject to
stockholder approval at the pending Annual Meeting of Stockholders,
the Company declared a dividend distribution of one Right for each
outstanding share of Common Stock to stockholders of the Company
of record at the close of business on April 20, 1995. Each Right
entitles the registered holder to purchase from the Company one
share of Common Stock at a price of $50 per share (the "Purchase
Price"), subject to adjustment. The Purchase Price shall be paid
in cash by the holder of the Right. The description and the terms
of the Rights are set forth in the Rights Plan.
Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate
Rights Certificates will be distributed. The Rights will separate
from the Common Stock and a Distribution Date will occur upon the
earlier of (i) 10 days following a public announcement that a
person or group of affiliated or associated persons (an "Acquiring
Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock
(the "Stock Acquisition Date"), or (ii) 10 business days following
the commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning 15% or more of such
outstanding shares of Common Stock. Until the Distribution Date,
the Rights will be evidenced by Common Stock certificates and will
be transferred with and only with such Common Stock certificates,
new Common Stock certificates issued after June 6, 1995, will
contain a notation incorporating the Rights Plan by reference, and
the surrender for transfer of any outstanding Common Stock
certificates also will constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on April 20, 2003, unless
earlier redeemed by the Company as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common
Stock as of the close of business on the Distribution Date and,
thereafter, the separate Rights Certificates alone will represent
the Rights. Except as otherwise determined by the Board of
Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
Upon any Person becoming the beneficial owner of 15% or more
of the then outstanding shares of Common Stock (except pursuant to
an offer for all outstanding shares of Common Stock that is
determined by the Board of Directors to be fair to and otherwise
in the best interests of the Company and its stockholders [a
"Qualifying Tender Offer"]), each holder of a Right thereafter will
have the right to receive, upon exercise thereof, the number of
shares of Common Stock as shall
27
<PAGE>
equal the result obtained by (x) multiplying the then current Purchase Price by
the number of shares of Common Stock for which such Right was exercisable
immediately prior to the occurrence of such event and (y) dividing that product
by 50% of the market price per share of Common Stock. Notwithstanding any of the
foregoing, following the occurrence of such event, all rights that are, or
(under certain circumstances specified in the Rights Plan) were beneficially
owned by any Acquiring Person, will be null and void. However, Rights are not
exercisable following the occurrence of either of the events set forth above
until such time as the Rights are no longer redeemable by the Company as set
forth below.
For example, assume that a stockholder holds Rights to
purchase 100 shares of Common Stock at the $50 Purchase Price, and
further assume that the Common Stock had a per share trading price
of $20 at the time of an event set forth in the preceding
paragraph. As a result, the holder would have the right to
purchase 500 shares of Common Stock for the aggregate purchase
price of $5,000, or $10 per share. The 500 share figure is
determined by (x) multiplying the $50 Purchase Price by 100
(representing the number of shares of Common Stock the holder was
entitled to purchase by virtue of the Rights), and (y) dividing
that product by $10 (or 50% of the $20 market price of the Common
Stock). The $5,000 aggregate purchase price for said 500 shares
is determined by multiplying the 100 shares of Common Stock the
holder was initially entitled to purchase by virtue of the Rights
by the $50 Purchase Price per Right.
In the event that, at any time following the Stock Acquisition
Date, (i) the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving
corporation or (ii) 50% or more of the Company's assets or earning
power is sold or transferred, each holder of a Right (except Rights
which previously have been voided as set forth above) thereafter
shall have the right, upon payment of the Purchase Price (without
giving effect to the adjustments described in the two immediately
preceding paragraphs), to buy such number of shares of common stock
of the acquiring company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the number of shares
of Common Stock for which such Rights were exercisable immediately
prior to the occurrence of such event and (y) dividing that product
by 50% of the market price per share of the common stock of the
acquiring company. The event set forth in this paragraph and in
the preceding paragraph are referred to as the "Triggering Events."
The Purchase Price payable, and the number of shares of the
Common Stock issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or
reclassification of, the Common Stock, (ii) if holders of the
Common Stock are granted certain rights or warrants to subscribe
for the Common Stock or convertible securities at less than the
current market price of the Common Stock, or (iii) upon the
distribution to holders of the Common Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred
to above).
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments amount to at least
1% of the Purchase Price. No fractional shares of Common Stock
will be issued and, in lieu thereof, an adjustment in cash will be
made based on the market price of the Common Stock on the last
trading date prior to the date of exercise.
The Company is only obligated to maintain authorized but
unissued shares of Common Stock for holders of Rights once a
Distribution Event occurs. The Company is permitted, however, if
sufficient shares of unissued but authorized Common Stock are not
available to be purchased by holders of Rights, to distribute to
such holders, in lieu of Common Stock, other securities of the
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Company with equivalent value to the Rights exercised, such as
preferred stock, debt instruments, or reduction in Purchase Price.
At any time until 10 days following the Stock Acquisition
Date, the Company may redeem the Rights in whole, but not in part,
at a price of $.001 per Right, payable in cash or shares of Common
Stock. Under certain circumstances set forth in the Rights Plan,
the decision to redeem shall require the concurrence of a majority
of the Continuing Directors (as hereinafter defined). After the
redemption period has expired, the Company's rights of redemption
may be restated if an Acquiring Person reduces his or her
beneficial ownership to 10% or less of the outstanding shares of
Common Stock in a transaction or series of transactions not
involving the Company. Immediately upon the action of the Board
of Directors ordering redemption of the Rights, with, where
required, the concurrence of the Continuing Directors, the Rights
will terminate and the only right which the holders of Rights will
thereafter have will be to receive the $.001 redemption price.
The term "Continuing Directors" means any member of the Board
of Directors of the Company who was a member of the Board prior to
the date of the Rights Plan, and any person who is subsequently
elected to the Board if such person is recommended or approved by
a majority of the Continuing Directors, but shall not include an
Acquiring Person, or an affiliate or associate of an Acquiring
Person, or any representative of the foregoing.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without
limitation, the right to vote or to receive dividends. While the
distribution of the Rights will not be taxable to stockholders or
to the Company, stockholders may, depending upon the circumstances,
recognize taxable income in the event that the Rights become
exercisable for the Common Stock (or other consideration) of the
Company or for common stock of the acquiring company as set forth.
Any of the provisions of the Rights Plan may be amended by the
Board of Directors of the Company as long as the Rights are then
redeemable including, without limitation, the 15% threshold (but
not, in general, below 10%), the purchase price (but not by more
than 50%), or Final Expiration Date (but not by more than 3
additional years). When the Rights are not redeemable, the
provisions of the Rights Plan may be amended by the Board in order
to cure any ambiguity, to correct or supplement any provision which
may be inconsistent with any other provision or to make changes
which do not affect adversely the interests of holder of Rights;
provided, however, that amendments proposed to be made after a
person becomes an Acquiring Person (other than pursuant to a
Qualifying Tender Offer) may be made only if approved by a majority
of the Continuing Directors.
The Company covenants in the Rights Plan to file a
registration statement under the Securities Act of 1933 with
respect to shares of Common Stock purchasable upon exercise of the
Rights as soon as a Section 11(a)(ii) Event occurs, or as soon as
required by law, and may temporarily suspend, for no more than 90
days, the exercisability of the Rights to permit the registration
statement to become effective.
Objectives and Potential Effects of Rights Plan
The takeover activity of recent years has shown that a bidder
interested in acquiring the Company as cheaply as possible,
together with professional investors seeking a quick profit, could
pursue a takeover of the Company at times, on terms and at prices,
which would not be in the best interests of the Company and its
stockholders and other constituents. These abusive tactics, which
could result in inequitable treatment of the stockholders of the
Company, include so called "two-tier tender offers," in which
stockholders may be coerced into either tendering their shares or
accepting
29
<PAGE>
the risk of receiving "back-end" compensation of substantially less value;
"partial tender offers," in which stockholders may be left holding stock of the
Company with substantially lower market value; tender offers "subject to
financing;" and "creeping" acquisitions in which control of the Company is
sought by market and negotiated purchases. In each case the acquiror would be
acting in his own best interests - to purchase control of the Company at the
cheapest possible price, without regard to the concerns of the Company and its
other stockholders.
The purpose of the Rights Plan is to protect the stockholders
of the Company from these and other types of unsolicited
acquisition tactics that the Board believes could be coercive and
unfair to the stockholders of the Company and not in their best
interests. As such, the Rights Plan is intended to complement the
Classified Board Provisions discussed above. At this time the
Board knows of no offer to acquire the Company and is not seeking
any such offer. It has adopted the Rights Plan as a cautionary
matter for the reasons discussed below.
A major function of the Rights Plan is to give the Board a
greater period of time within which it can properly evaluate an
acquisition offer. A second major function of the Rights Plan is
to induce a bidder for the Company to negotiate with the Board and
thus strengthen the Board's bargaining position vis-a-vis such
bidder. The Board, with its extensive knowledge of the Company
and its prospects, believes it is optimally situated to evaluate
any bids for the Company. The Rights Plan thus enables the Board,
as elected representatives of the stockholders of the Company, to
better protect and further the interests of the stockholders in the
event of an acquisition proposal. The Board gains the opportunity
and additional time to determine if an offer reflects the full
value of the Company and is fair to all stockholders, and if not,
to reject the offer or to seek an alternative that meets these
criteria.
The Board's objective is to hold firm to the Company's growth
strategy and, thus, to maximize long-term stock values for all
stockholders. The Board has confidence in its strategy and
believes that the Company's recent record growth in revenues and
earnings supports its continuation. Despite these financial
results, certain analysts have stated that the price of the Common
Stock, in their opinion, should be higher, which opinion the Board
shares after considering the Company's business and prospects. Due
to these circumstances the Board believes that the Company may be
both susceptible and vulnerable to acquisition tactics which could
be unfair to the stockholders of the Company and not in their best
interests, and that the stockholders of the Company should have the
protection of a Rights Plan. Even though a bidder may offer a
premium over the current market price of the Common Stock, that
premium may not necessarily recognize the intrinsic value of the
Company. It is the judgment of the Board that if an offer were
made for the Company, the Rights Plan would enable the Board to
promote an outcome that is fair to all stockholders and gives them
full value for their stock. Here, as in all its actions, the
Board's objective is to serve the interests of the Company's
stockholders as a whole and, in particular, to maximize the long-
term value of their investment, as opposed to maximizing the
interests of a few investors who, the Board is concerned, may have
as their only objective the realization of their own short-term
profits. The Rights Plan helps make this possible by enabling the
Board to focus on its objectives by reducing the risk of abusive
or coercive or unfair acquisition tactics.
Moreover, the Board believes that a bidder would, after all,
be seeking its own advantage and not that of the stockholders
generally. In contrast to such a bidder, the Board has a legal,
fiduciary duty to all stockholders. The Rights Plan will neither
diminish this obligation nor change the relationship between, or
the respective rights of, the Board and the stockholders. The
Board will continue to direct the Company's business and remain
responsible to the stockholders; the stockholders will continue to
possess the right to vote on extraordinary transactions, such as
mergers, major
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<PAGE>
reorganizations and liquidations, to decide whether to tender their
shares if a tender offer is made, and to decide how to vote a
proxy.
In adopting the Rights Plan and submitting it for stockholder
ratification the Board has given careful and thoughtful
consideration to the interests of the stockholders of the Company
and the effects of the Rights Plan on them. The Board has also
assessed both the current environment of corporate acquisitions and
the Company's particular circumstances and prospects and consulted
with and received the advice of outside legal counsel. In the
course of that review, the Board concluded that numerous means
existed by which a bidder could obtain control of the Company
through tactics that may unfairly pressure the Company's
stockholders to sell their investments at less than full value and
that the Rights Plan was a prudent measure to counteract such
means.
The Board's fiduciary duty to the stockholders of the Company
dictates that it evaluate the merits of each and every acquisition
proposal presented to the Board and seek to insure than any
proposed business combination or acquisition delivers full value
to the stockholders. The Rights Plan is not intended to prevent,
and should not prevent, a well-financed acquisition offer providing
a price that reflects the full value of the Company, or otherwise
deter a serious bidder who wants to acquire the Company in a manner
in which all stockholders receive a price that reflects the full
value of their stock. Furthermore, the Rights Plan will not
prevent a non-negotiated offer because, if the Board determines
that such an offer is in the best interests of all stockholders,
the Board can redeem the rights and thereby permit the offer to be
consummated. Experience demonstrates that acquisition offers have
been made to many companies that have adopted rights plans and
boards of directors of target companies have determined to redeem
these rights in connection with these acquisitions to allow the
acquisition offer to be consummated.
Reason to Increase Authorized Capital
The Certificate of Incorporation of the Company authorizes it
to issue 20 million shares of Common Stock. As of this date,
approximately 12.7 million shares of Common Stock have been issued
by the Company, and approximately 700,000 million shares have been
reserved for issuance under various outstanding stock options and
warrants. The Rights Plan requires the Company to use its best
efforts, at the time of the Triggering Event, to ensure that
sufficient shares of authorized but unissued shares of Common Stock
remain available for potential issuance to the holders of the
rights. Amending the Certificate of Incorporation of the Company
to increase its authorized shares of Common Stock from 20 million
shares to 30 million shares may satisfy the Company's obligation
at the time of the Triggering Event to ensure the availability of
sufficient shares of Common Stock under the Rights Plan, depending
upon the stock price of the Common Stock. Additionally, such
increase in the Company's authorized shares of Common Stock will
position the Company to effect a future forward Common Stock split
(such as a 2-for-1 or 3-for-2 forward split) should the Board
determine such action to be appropriate.
Following approval of the Rights Plan proposal by the
stockholders of the Company, the Company would file a Certificate
of Amendment to the Certificate of Incorporation of the Company
with the Delaware Secretary of State incorporating the provisions
set forth in Appendix 1-B.
Potential Disadvantages of Rights Plan
The Rights Plan will substantially dilute both the voting and
economic interests of any person who attempts to acquire control
of the Company without satisfying the Board as to the fairness of
their offer in relation to the interests of the other stockholders
of the Company. As a result, the Rights Plan would tend to
discourage certain tender offers and other attempts to acquire the
Company
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<PAGE>
or change control of the Company, even though stockholders might feel such
attempt would be beneficial to them or the Company. In addition, the Rights Plan
would discourage tender offers, open market purchases in anticipation of tender
offers, and other investment and speculative market activity that may have the
effect of increasing the market price of or price volatility in the Company's
stock. As a result, stockholders could be deprived of certain opportunities to
sell their shares at temporarily higher prices.
Discouraging tender offers and other attempts to acquire the
Company or change control of the Company could have the effect of
entrenching the Board of Directors and, since the Board has the
power to retain and discharge management, entrenching management.
The adoption of the Rights Plan is not violative of the Bylaws
of the National Association of Securities Dealers (the "NASD"),
under whose NASDAQ National Market System the Common Stock is
traded. However, should a Trigger Event occur under the Rights
Plan, the effect of such provision may violate the prohibition
against stockholder disenfranchisement in the NASD Bylaws, which
could lead to the delisting of the Common Stock on NASDAQ. Many
companies listed on NASDAQ have stockholder rights plans that
operate in the same manner as the Rights Plan. To date, none of
such plans have had their operative provisions triggered, and none
of the companies which have adopted such plans has been delisted
on NASDAQ.
Current Anti-takeover Mechanisms Available to the Company
Authorized But Unissued Preferred Stock The Company is
authorized to issue 20 million shares of Common Stock, $.01 par
value, and 10 million shares of Preferred Stock, $.01 par value
("Preferred Stock"). No shares of Preferred Stock are presently
outstanding. The Board of Directors, without further approval of
the stockholders, may issue the Preferred Stock in one or more
series, and fix, by resolution or resolutions, the designations and
the powers, preferences and relative, participating, optional or
other special rights and qualifications, limitations, or
restrictions thereof, including, without limitation, the dividend
rate, conversion rights, redemption rights, and liquidation
preference of any series of shares of Preferred Stock, fix the
number of shares constituting any such series, and increase or
decrease the number of shares of any such series (but not below the
number of shares then outstanding). The issuance of shares of
Preferred Stock could enable the Board to impede a change in
control of the Company, including by the issuance of warrants or
rights to acquired Preferred Stock in order to discourage or defeat
unsolicited stock accumulation programs or acquisition proposals.
Change of Control Provisions. Employment agreements for
certain executive officers of the Company may be terminated by the
executive in the event of, among other things, the merger or
consolidation of the Company with another corporation as part of
a sale or transfer of a controlling interest (see "Employment
Agreements With Named Executive Officers," herein). Additionally,
certain stock options held by executive officers or directors may
vest in the event of the sale of the capital stock of the Company
in connection with the sale or transfer of a controlling interest
in the Company (see "Compensation of Directors" and "Employment
Agreements With Named Executive Officers," herein). Such payment
obligations in each of such employment agreements or stock options
would make it more expensive for a potential acquiror to acquire
the Company, or to change control of the Board of Directors, and
might discourage efforts to do so.
Section 203 of the Delaware General Corporation Law. Certain
statutory disincentives to takeovers have been enacted under the
Delaware Business Combination Act (the "Business Combination Act").
Specifically, Section 203 of the Delaware General Corporation Law
generally restricts an interested stockholder (defined as a
beneficial owner of 15% or more of stock) from
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<PAGE>
entering into a business combination with the target company for a period of 3
years unless (i) the board of directors of the target company approved the
combination prior to acquisition of the 15% interest, (ii) the interested
stockholder acquires at least 85% of the stock of the target company as part of
the transaction in which 15% is acquired (excluding stock owned by officers who
are also directors and certain voting stock held by employee benefit plans), or
(iii) the board of directors subsequently approves a combination by a majority
vote and two-thirds of other stockholders approve at a duly called stockholders
meeting. A business combination is defined as (x) a merger or consolidation
requiring stockholder approval, (y) the sale, lease, pledge, or other
disposition of assets, including by dissolution, having at least 50% of the
entire value of assets of the company, or (z) the proposed tender or exchange
offer of 50% or more of the voting stock of the target company. Although the
Business Combination Act affords a certain level of statutorily prescribed
disincentives to hostile bidders, there are numerous exceptions to the
Combination Act, and there are also numerous situations in which the Board
believes a hostile bidder may be encouraged to employ coercive or unfair
acquisition tactics notwithstanding these disincentives. For this reason, the
Board believes that the protections afforded by the proposal to adopt the
Classified Board Provisions and the proposal to approve the Rights Plan are
necessary and advisable to protect the interests of the Company and its
stockholders.
Other Provisions. The Board has put on its agenda for future
consideration at a time to be determined the advisability of
establishing certain procedures and time limitations, to be
incorporated into the Bylaws of the Company, relating to the
nominations for election to the Board of Directors. The Board has
also put on its agenda for future consideration at a time to be
determined the review of severance agreements with certain of its
executive officers and directors in the event of a change in
control of the Company. As of this date the Board has not
discussed or reviewed the advisability or any specifics details
relative to any of these matters and does not know, at this date,
if it would take any action with respect to any of these matters.
Vote Required for Approval; Recommendation of the Board of
Directors
The proposal to adopt the Classified Board Provisions and the
proposal to approve the Rights Plan are separate and independent
proposals. Adoption of each proposal requires the affirmative vote
of a majority of the outstanding shares of the Common Stock. The
Board of Directors unanimously recommends that you vote "FOR" the
adoption of the Classified Board Provisions and "FOR" the approval
of the Stockholders' Rights Plan. Proxies solicited by the Board
of Directors will be so voted unless stockholders specify
otherwise.
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INDEPENDENT AUDITORS
The audit committee of the Board has not yet met in order to
select the Company's auditors for its 1995 fiscal year. BDO
Seidman served as the Company's auditors for the 1994 fiscal year.
The Company expects a representative of BDO Seidman to be present
at the meeting.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought
before the Annual Meeting. However, if other matters should come
before the Annual Meeting, it is the intention of each person named
in the proxy to vote such proxy in accordance with his judgment on
such matters.
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Any proposals of security holders which are intended to be
presented at the Annual Meeting of the Company to be held in 1996
must be received by the Company at its principal executive offices
no later than January 6, 1996 (120 days before the month and day
this Proxy Statement was released to the stockholders of the
Company), in order to be considered for inclusion in the Company's
proxy materials relating to that meeting.
TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors
of the Company is not aware of any matters other than those set
forth herein and in the Notice of Annual Meeting of Stockholder
that will come before the meeting. Should any other matters arise
requiring the vote of stockholders, it is intended that proxies
will be voted with respect thereto in accordance with the best
judgment of the person or persons voting the proxies.
By Order of the Board of Directors
/s/ William C. Huddleston
William C. Huddleston
Secretary
Monrovia, California
May 12, 1995
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APPENDIX A-1 TO PROXY STATEMENT
-------------------------------
CLASSIFIED BOARD PROVISIONS
---------------------------
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION:
Three new Articles shall be added to the Company's Certificate of
Incorporation, which Articles shall read substantially as follows:
"TWELFTH: (a) The number of directors that shall constitute the
-------
entire Board of Directors of this Corporation shall be not less than three
(3) nor more than seven (7), subject to the provisions of this Article
TWELFTH. The exact number of directors shall be fixed, within the forgoing
limitations, by the vote of a majority of the entire Board of Directors.
The number of directors which constitutes the whole Board of Directors of
the Corporation shall be designated in the Bylaws of the Corporation.
Directors need not be stockholders. Except as otherwise provided by
statute or this Certificate of Incorporation or the Corporation's By-laws,
the directors shall be elected at the annual meeting of stockholders. Each
director shall hold office until his successor shall have been elected and
qualified, or until his death, or until he shall have resigned, or have
been removed.
(b) The directors of the Corporation shall be divided into three
(3) classes as nearly equal in size as practicable, which classes are
hereby designated Class I, Class II and Class III. The term of office of
the initial Class I directors shall expire at the first regularly-scheduled
annual meeting of stockholders to be held after the annual meeting of
stockholders for 1995 (scheduled to be held on June 6, 1995) or any
adjournments thereof; the term of office of the initial Class II directors
shall expire at the second succeeding annual meeting of stockholders to be
held after the annual meeting of stockholders for 1995 or any adjournments
thereof; and the term of office of the initial Class III directors shall
expire at the third succeeding annual meeting of the stockholders to be
held after the annual meeting of stockholders for 1995 or any adjournments
thereof. For the purposes hereof, the initial Class I, Class II and Class
III directors shall be those directors so designated and elected at the
annual meeting of stockholders for 1995 or any adjournments thereof. The
designation of said directors to Class I, Class II and Class III shall be
by a majority vote of the Board or, if agreement cannot be reached, the
designation of said directors shall be made by the director with the
longest length of prior service on the Board. At each annual meeting after
the annual meeting of stockholders for 1995 or any adjournments thereof,
directors to replace those of the Class whose terms expire at such annual
meeting shall be elected to hold office until the third succeeding annual
meeting and until their respective successors shall have been duly elected
and qualified. If the number of directors is hereafter changed, any newly
created directorships or decrease in directorships shall be so apportioned
among the classes so as to make all classes as nearly equal in number as is
practicable.
(c) Any decrease in the number of directors constituting the
Board of Directors shall be effective at the time of the next succeeding
annual meeting of the stockholders unless there shall be vacancies in the
Board of Directors, in which case such decrease may become effective at any
time prior to the next succeeding annual meeting to the extent of the
number of such vacancies. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
(d) Newly created directorships resulting from any increase in
the number of directors and any vacancies on the Board of Directors
resulting from death, resignation, disqualification, removal or other cause
shall be filled exclusively by the affirmative
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vote of a majority of the remaining members of the Board of Directors (and
not by stockholders), although less than a quorum, or by a sole remaining
director.
(e) Any director may be removed from office only for
cause.
THIRTEENTH: All actions taken by stockholders shall be taken only at
----------
an annual or special meeting of stockholders. No action by stockholders
may be taken by written consent or otherwise without a meeting.
FOURTEENTH: Notwithstanding anything contained in this Certificate of
----------
Incorporation or the Corporation's Bylaws to the contrary, Articles
Twelfth, Thirteenth and Fourteenth of this Certificate of Incorporation,
and Section 11 of Article II, Section 2 of Article III, Section 13 of
Article III, and Section 14 of Article III of the Bylaws, shall not be
altered, amended or repealed, and no provisions inconsistent therewith
shall be adopted, without the affirmative vote of two-thirds or more of the
outstanding stock of the Corporation entitled to vote thereon."
PROPOSED AMENDMENTS TO BYLAWS:
1. Section 11, Article II of the Company's Bylaws shall be deleted and
the following substituted in its place:
"No Action By Consent. All actions taken by stockholders shall be
--------------------
taken only at an annual or special meeting of stockholders in accordance
with the provisions of this Article II. No action by stockholders may be
taken by written consent or otherwise without a meeting."
2. Section 2, Article III of the Company's Bylaws shall be deleted and
the following substituted in its place:
"Number, Qualifications, Election and Term of Office.
---------------------------------------------------
(a) The number of directors that shall constitute the entire Board of
Directors of this Corporation shall consist of a number within the limits
set forth in Article TWELFTH of the Corporation's Certificate of
Incorporation (not less than three (3) nor more than seven (7) persons).
The exact number of directors shall be fixed, within the forgoing
limitations, by the vote of a majority of the entire Board of Directors.
The exact number of directors constituting the entire Board of Directors is
presently fixed at five (5). Directors need not be stockholders. Except
as otherwise provided by statute or this Corporation's Certificate of
Incorporation or these By-laws, the directors shall be elected at the
annual meeting of stockholders. Each director shall hold office until his
successor shall have been elected and qualified, or until his death, or
until he shall have resigned, or have been removed, as hereinafter provided
in these By-laws.
(b) The directors of the Corporation shall be divided into three (3)
classes as nearly equal in size as practicable, which classes are hereby
designated Class I, Class II and Class III. The term of office of the
initial Class I directors shall expire at the first regularly-scheduled
annual meeting of stockholders to be held after the annual meeting of
stockholders for 1995 or any adjournments thereof; the term of office of
the initial Class II directors shall expire at the second succeeding annual
meeting of stockholders to be held after the annual meeting of stockholders
for 1995 or any adjournments thereof; and the term of office of the initial
Class III directors shall expire at the third succeeding annual meeting of
the stockholders to be held after the annual meeting of stockholders for
1995 or any adjournments thereof. For the purposes hereof, the initial
Class I, Class II and Class III directors shall be those directors so
designated
2
<PAGE>
and elected at the annual meeting of stockholders for 1995 or any
adjournments thereof. The designation of said directors to Class I, Class
II and Class III shall be by a majority vote of the Board or, if agreement
cannot be reached, by length of prior service on the Board. At each annual
meeting after the annual meeting of stockholders for 1995 or any
adjournments thereof, directors to replace those of the Class whose terms
expire at such annual meeting shall be elected to hold office until the
third succeeding annual meeting and until their respective successors shall
have been duly elected and qualified. If the number of directors is
hereafter changed, any newly created directorships or decrease in
directorships shall be so apportioned among the classes so as to make all
classes as nearly equal in number as is practicable.
(c) Any decrease in the number of directors constituting the Board of
Directors shall be effective at the time of the next succeeding annual
meeting of the stockholders unless there shall be vacancies in the Board of
Directors, in which case such decrease may become effective at any time
prior to the next succeeding annual meeting to the extent of the number of
such vacancies. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director".
3. Section 13, Article III of the Bylaws shall be deleted entirely and
the following shall substituted in its place:
"Vacancies. Newly created directorships resulting from any increase
---------
in the number of directors and any vacancies on the Board of Directors
resulting from death, resignation, disqualification, removal or other cause
shall be filled exclusively by the affirmative vote of a majority of the
remaining members of the Board of Directors (and not by stockholders),
although less than a quorum, or by a sole remaining director. Each
director so elected shall hold office until his successor shall have been
elected and qualified, or until his death, or until he shall have resigned,
or have been removed, as provided in this Corporation's Certificate of
Incorporation or as herein provided in these By-laws".
4. Section 14, Article III of the Bylaws shall be deleted entirely and
the following shall substituted in its place:
"Removal of Directors. Except as otherwise provided by statute, any
--------------------
director may be removed only for cause".
5. There shall be added to Article VIII of the Bylaws a new paragraph
which states:
"Notwithstanding anything contained in these Bylaws to the contrary,
Section 11 of Article II, Section 2 of Article III, Section 13 of Article
III, and Section 14 of Article III of these Bylaws, shall not be altered,
amended or repealed, and no provisions inconsistent therewith shall be
adopted, except in accordance with Article Fourteenth of the Certificate of
Incorporation of this Corporation."
3
<PAGE>
APPENDIX A-2 TO PROXY STATEMENT
-------------------------------
STOCKHOLDERS' RIGHTS PLAN
-------------------------
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION:
Section (a) of Article FOURTH of the Company's Certificate of Incorporation
shall be deleted entirely and the following shall substituted in its place:
"(a) The Corporation shall be authorized to issue FORTY MILLION
(40,000,000) shares, consisting of THIRTY MILLION (30,000,000) shares of
Common Stock, each of the par value of $.01 ("Common Stock"), and TEN
MILLION (10,000,000) shares of Preferred Stock, each of the par value of
$.01 ("Preferred Stock")."
1
<PAGE>
APPENDIX B TO PROXY STATEMENT
-----------------------------
STOCKHOLDERS' RIGHTS PLAN
-------------------------
STAAR SURGICAL COMPANY
(A DELAWARE CORPORATION)
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY
RIGHTS AGENT
STOCKHOLDERS' RIGHTS PLAN
DATED AS OF APRIL 20, 1995
<PAGE>
STOCKHOLDERS' RIGHTS PLAN
-------------------------
STOCKHOLDERS' RIGHTS PLAN, dated effective as of April 20, 1995 (the
"Plan"), between STAAR SURGICAL COMPANY, A DELAWARE CORPORATION (the "Company"),
---- -------
and AMERICAN STOCK TRANSFER & TRUST COMPANY, A NEW YORK CORPORATION (the "Rights
------
Agent").
- - -----
WHEREAS, on April 20, 1995 (the "Rights Declaration Date"), the Board of
------ ----------- ----
Directors of the Company authorized and declared an dividend distribution of one
(1) Right for each share of common stock, $.01 par value, of the Company (the
"Common Stock") outstanding at the close of business on April 20, 1995 (the
- - ------- -----
"Record Date") and has authorized the issuance of one Right (as such number may
- - ------- ----
hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for
-------------
each share of Common Stock issued between the Record Date (whether originally
issued or delivered from the Company's treasury) and the Distribution Date, each
Right initially representing the right to purchase one share of Common Stock
upon the terms and subject to the conditions hereinafter set forth (the
"Rights");
------
WHEREAS, the Board of Directors expressly made the adoption of the Plan
contingent upon subsequent approval of the stockholders of the Company at the
Annual Meeting of Stockholders to be held on June 6, 1995, and any adjournments
thereof; and
WHEREAS, if this Plan is not approved by the stockholders of the Company at
said Annual Meeting of Stockholders or and any adjournments thereof, this Plan
shall be null and void ab initio and of no further force and effect.
-- ------
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
--------- -------------------
For purposes of this Plan, the following terms have the meanings indicated:
(a) ACQUIRING PERSONS - The term "Acquiring Persons" shall mean any Person
-----------------
who or which, together with all Affiliates and Associates of such Person, shall
be the Beneficial Owner of fifteen percent (15%) or more of the shares of Common
Stock then outstanding. Notwithstanding the foregoing, the term "Acquiring
Person" shall not include:
(i) the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or pursuant
to the terms of any such plan, or
(ii) any Person who or which, together with Affiliates and Associates
of such Person, would be an Acquiring Person solely by reason of (A) being
the Beneficial Owner of shares of Voting Stock of the Company, the
Beneficial Ownership of which was acquired by such Persons pursuant to any
action or transaction or series of related actions or transactions approved
by the Board of Directors (provided, however that at the time of such
-------- -------
approval of the Board of Directors there are then in office not less than
two Continuing Directors (as such term is hereinafter defined) and such
action or transaction or series of related actions or transactions are
approved by a majority of the Continuing Directors then in office) before
such Person otherwise became an Acquiring Person or (B) a reduction in the
number of issued and outstanding shares of Voting Stock of the Company
pursuant to a transaction or a series of related transactions approved by
the Board of Directors (provided that at the time of such approval of the
Board of
1
<PAGE>
Directors there are then in office not less than two Continuing Directors
and such transaction or series of related transactions are approved by a
majority of the Continuing Directors then in office); provided, further,
-------- -------
however, that in the event such Person described in the foregoing clause
------
(ii) does not become an Acquiring Person by reason of subclause (A) or (B)
---- ------------- ---
of said clause (ii), such Person shall nonetheless become an Acquiring
-----------
Person in the event such Person thereafter acquires Beneficial Ownership of
an additional one percent (1%) of the Voting Stock of the Company, unless
the acquisition of such additional Voting Stock would not result in such
Person becoming an Acquiring Person by reason of subclause (A) or (B) of
-------------
subclause (ii).
--------------
(b) ACT - The term "Act" shall mean the Securities Act of 1933, as amended.
---
(c) AFFILIATE AND ASSOCIATES - The term "Affiliate" and Associates" shall
------------------------
have the respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act.
(d) BENEFICIAL OWNER - 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 Persons' Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that a Person
-------- -------
shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
(A) securities rendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, or (B) securities
issuable upon exercise or Rights at any time prior to the occurrence of a
Triggering Event, or (C) securities issuable upon exercise of Rights from
and after the occurrence of a Triggering Event which Rights were acquired
by such Person or any of such Person's Affiliates or Associates prior to
the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the
------------ ----------
"Original Rights") or pursuant to Section 11(i) hereof in connection with
-------------
an adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner"
-------- -------
of, or to "beneficially own," any security under this subparagraph (ii) as
-----------------
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act, and
(B) is not also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
Person (or any Affiliate or Associate thereof) with which such Person (or
any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (d)) or
----------------- -------------
disposing of any voting securities of the Company.
2
<PAGE>
Notwithstanding anything in this Section 1(d) to the contrary, noe of the
------------
Company's directors, officers or financial advisers shall be deemed a
"Beneficial Owner" of, or to "beneficially own," any securities of the Company
owned by any other director, officer or financial adviser of the Company by
virtue of such Persons acting in their capacities as such, including in
connection with the formulation and publication of the Board of Director's
recommendation of its position, and actions taken in furtherance thereof, with
respect to an acquisition proposal relating to the Company or a tender or
exchange offer for the Common Shares of the Company.
Further notwithstanding anything in this Section 1(d) to the contrary, a
------------
Person engaged in the business of underwriting securities shall not be deemed a
"Beneficial Owner" of, or to "beneficially own," any securities acquired in good
faith in a firm commitment underwriting until the expiration of forty (40) days
after the date of such acquisition.
(e) BUSINESS DAY - The term "Business Day" shall mean any day other than a
------------
Saturday, Sunday or a day on which banking institutions in the State of
California or the State of New York are authorized or obligated by law or
executive order to close.
(f) CLOSE OF BUSINESS - The term "close of business" on any given date
-----------------
shall mean 5:00 P.M., California time, on the next succeeding day which is a
Business Day.
(g) COMMON STOCK - The term "Common Stock" shall mean the common stock,
------------
$.01 par value, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock of
such Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(h) CONTINUING DIRECTOR - The term "Continuing Director" shall mean (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 any such
Affiliate or Associate, and was a member of the Board prior to the date of this
Plan, 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 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 the Continuing Directors.
(i) CURRENT MARKET PRICE - The term "current market price" shall have the
--------------------
meaning set forth in Section 11(d) hereof.
-------------
(j) DISTRIBUTION DATE - The term "Distribution Date" shall have the meaning
-----------------
set forth in Section 3(a) hereof.
------------
(k) EXCHANGE ACT - The term "Exchange Act" shall mean the Securities
------------
Exchange Act of 1934, as amended and in effect on the date of this Plan.
(l) "EXPIRATION DATE" - The term "Expiration Date" shall have the meaning
---------------
set forth in Section 7(a) hereof.
------------
(m) FINAL EXPIRATION DATE - the term "Final Expiration Date" shall have the
---------------------
meaning set forth in Section 7(a) hereof.
------------
3
<PAGE>
(n) "PERSON" - The term "Person" shall mean any individual, firm or
------
corporation, partnership or other entity.
(o) PRINCIPAL PARTY - The term "Principal Party" shall have the meaning set
---------------
forth in Section 13(b) hereof.
-------------
(p) PURCHASE PRICE - The term "Purchase Price" shall have the meaning set
--------------
forth in Section 4(a) hereof.
------------
(q) REDEMPTION PRICE - The term "Redemption Price" shall have the meaning
----------------
set forth in Section 23(a) hereof.
-------------
(r) RIGHTS - The term "Rights" shall have the meaning set forth in the
------
WHEREAS clause at the beginning of this Plan.
(s) RIGHTS CERTIFICATES - The term "Rights Certificates" shall have the
-------------------
meaning set forth in Section 3(a) hereof.
------------
(t) SECTION 11(A)(II) EVENT - the term "Section 11(a)(ii) Event" shall mean
-----------------------
any event described in Section 11(a)(ii) hereof.
-----------------
(u) SECTION 13 EVENT - The term "Section 13 Event" shall mean any event
----------------
described in clauses (x), (y) or (z) of Section 13(a) hereof.
---------------- --- -------------
(v) STOCK ACQUISITION DATE - The term "Stock Acquisition Date" shall mean
----------------------
the first date of public announcement (which, for purposes of this definition,
shall include, a report filed pursuant to the Exchange Act) by the Company or an
Acquiring Person that an Acquiring Person has become such.
(w) SUBSIDIARY - The term "Subsidiary" shall mean, with reference to any
----------
Person, any corporation of which an amount of voting securities sufficient to
elect at least a majority of the directors of such corporation is beneficially
owned, directly or indirectly, by such Person, or otherwise controlled by such
Person.
(x) TRADING DAY - The term "Trading Day" shall have the meaning set forth
-----------
in Section 11(d) hereof.
-------------
(y) TRIGGERING EVENT - The term "Triggering Event" shall mean any Section
----------------
11(a)(ii) Event or any Section 13 Event.
SECTION 2. APPOINTMENT OF RIGHTS AGENT.
--------- ---------------------------
The Company hereby appoints the Rights Agent to act as agent for the
Company in accordance will the terms and conditions hereof, and the Rights Agent
hereby accepts such appointment. The Company may from time-to-time appoint such
Co-Rights Agents as it may deem necessary or desirable.
SECTION 3. ISSUANCE OF RIGHTS CERTIFICATE.
--------- ------------------------------
(a) PROVISION OF RIGHTS CERTIFICATE. Until the earlier of (i) the close of
-------------------------------
business on the tenth (10th) day after the Stock Acquisition Date (or, if the
tenth (10th) day after the Stock Acquisition Date occurs before the Record Date,
the close of business on the Record Date), or (ii) the close of
4
<PAGE>
business on the tenth (10th) business day (or such later date as may be
determined by action of the Board of Directors {but only if at the time of such
determination by the Board of Directors there are then in office not less than
two Continuing Directors and such action is approved by a majority of the
Continuing Directors then in office} prior to such time as any Person becomes an
Acquiring Person) after the date that a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would be the Beneficial Owner of fifteen
percent (15%) or more of the shares of Common Stock then outstanding (the
earlier of (i) or (ii) being herein referred to as the "Distribution Date"), (x)
------------ ----
the Rights will be evidenced (subject to the provisions of paragraph (b) of this
-------------
Section 3) by the certificates for the Common Stock registered in the names of
- - ---------
the holders of the Common Stock (which certificates for Common Stock shall be
deemed also to be certificates for Rights) and not by separate certificates, and
(y) the Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company). As
soon as practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of Exhibit A hereto (the "Rights
------
Certificates"), evidencing one Right for each share of Common Stock so held,
- - ------------
subject to adjustment as provided herein. In the event that an adjustment in
the number of rights per share of Common Stock has been made pursuant to Section
-------
11(p) hereof, at the time of distribution of the Rights Certificates, the
- - -----
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
-------------
only whole number of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) PROVISION OF SUMMARY OF RIGHTS. As promptly as practicable following
------------------------------
the Record Date, the Company will send a copy of a Summary of Rights, in
substantially the form attached hereto, as Exhibit B (the "Summary of Rights"),
--------- ------- -- ------
by first-class, postage prepaid mail, to each recorded holder of the Common
Stock as of the close of business on the Record Date, at the address of such
holder shown on the records of the Company; provided, however, the Company shall
-------- -------
not be required to send a copy of the Summary of Rights to any stockholders who
have received a copy of this Plan in connection with any proxy materials
delivered to such stockholders which materials seek such stockholders' approval
of this Plan. With respect to certificates for the Common Stock outstanding as
of the Record Date, until the Distribution Date, the Rights will be evidenced by
such certificates for the Common Stock and the registered holders of the Common
Stock shall also be the registered holders of the associated Rights. Until the
earlier of the Distribution Date or the Expiration Date, the transfer of any
certificates representing shares of Common Stock in respect of which Rights have
been issued shall also constitute the transfer of the Rights associated with
such shares of Common Stock.
(c) LEGEND. Rights shall be issued in respect of all shares of Common
------
Stock which are issued after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Certificates representing such shares
of Common Stock shall also be deemed to be certificates for Rights, and shall
bear the following legend:
"THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF
TO CERTAIN RIGHTS AS SET FORTH IN THE STOCKHOLDERS' RIGHTS PLAN DATED
AS OF APRIL 20, 1995 (THE "RIGHTS PLAN") BETWEEN STAAR SURGICAL
COMPANY (THE "COMPANY") AND AMERICAN STOCK TRANSFER & TRUST COMPANY
(THE "RIGHTS AGENT"), THE TERMS OF WHICH ARE HEREBY
5
<PAGE>
INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICES OF THE COMPANY. UNDER CERTAIN CIRCUMSTANCES, AS SET
FORTH IN THE RIGHTS PLAN, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE
CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. THE
RIGHTS AGENT WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE
RIGHTS PLAN, AS IN EFFECT ON THE DATE OF MAILING, WITHOUT CHARGE
PROMPTLY AFTER THE RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER
-----
CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS PLAN, RIGHTS ISSUED TO,
---------------------------------------------------------------------
OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR
--------------------------------------------------------------------
ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE
--------------------------------------------------------------------
RIGHTS PLAN), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR
----------------------------------------------------------------------
BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID."
---------------------------------------------------
With respect to such certificates containing the foregoing legend, until
the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall e
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
SECTION 4. FORM OF RIGHTS CERTIFICATES.
--------- ---------------------------
(a) GENERAL. The Rights Certificates (and the forms of election to
-------
purchase and of assignment to be printed on the reverse thereof) shall be
substantially in the form set forth in Exhibit A hereto and may have such marks
of identification or designation an such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Plan, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time-to-
time be listed, or to conform to usage. Subject to the provisions of Section 11
----------
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
----------
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of shares of Common Stock as shall be set forth therein
at the price set forth therein (such exercise price per share, the "Purchase
--------
Price"), but the amount and type of securities purchasable upon the exercise of
- - -----
each Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.
(b) HELD BY ACQUIRING PERSON. Any Rights Certificate issued pursuant to
------------------------
Section 3(a) or Section 22 hereof that represents Rights beneficially owned by:
- - ------------ ----------
(i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has a primary
purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate
------------
issued pursuant to Section 6 or Section 11 hereof, and any Rights Certificate
--------- ----------
issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
--------- ----------
replacement or adjustment of any other Rights Certificate referred to in this
sentence, shall contain (to the extent feasible) the following legend:
6
<PAGE>
"THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON
OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS PLAN). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND
THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(E) OF SUCH RIGHTS PLAN."
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
--------- ---------------------------------
(a) EXECUTION. The Rights Certificates shall be executed on behalf of the
---------
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be manually countersigned by the
Rights Agent and shall not be valid for any purpose unless so countersigned. In
case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Plan any such person
was not such an officer.
(b) MAINTENANCE OF BOOKS. Following the Distribution Date, the Rights
--------------------
Agent will keep or cause to be kept, at its principal office or offices
designated as the appropriate place for surrender of Rights Certificates upon
exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the name and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates, and the date of each
of the Rights Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
--------- ------------------------------------------------------
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS
---------------------------------------------------------
CERTIFICATES.
------------
(a) TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS. Subject to the
------------------------------------------------------
provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time
------------ ------------ ----------
after the close of business on the Distribution Date, and at or prior to the
close of business on the Expiration Date, any Rights Certificate or Certificates
may be transferred, split up, combined or exchanged for another Rights
Certificate or Certificates, entitling the registered holder thereof to purchase
a like number of shares of Common Stock as the Rights Certificate or
Certificates surrendered then entitled such holder (or former holder in the case
of a transfer) to purchase. Any registered holder desiring to transfer, split
up, combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the principal office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take
any action whatsoever with respect to the transfer of any such surrender Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
------------ ------------ ----------
7
<PAGE>
countersign and deliver to the Person entitled thereto a Rights Certificate or
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates.
(b) LOSS, THEFT, DESTRUCTION OR MUTILATION. Upon receipt by the Company
--------------------------------------
and the Rights Agent of evidence reasonably satisfactory to them of the loss,
theft, destruction or mutilation of a Rights Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to them,
and reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for counter signature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
--------- -------------------------------------------------------------
(a) EXERCISE OF RIGHTS. Subject to Section 7(e) hereof, the registered
------------------ ------------
holder of any Rights Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein including, without limitation, the
restrictions on exercisability set forth in Section 9(c) and Section 23(a)
------------ -------------
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of shares of Common Stock as to which such surrendered Right
are then exercisable, at or prior to the earlier of (i) the close of business on
April 20, 2003, (the "Final Expiration Date"), or (ii) the time at which the
----- ---------- ----
Rights are redeemed as provided in Section 23 hereof (the earlier of (i) and
----------
(ii) being herein referred to as the "Expiration Date").
---------- ----
(b) PURCHASE PRICE. The Purchase Price for each share of Common Stock
--------------
pursuant to the exercise of a Right shall initially be fifty dollars ($50.00),
and shall be subject to adjustment from time-to-time as provided in Section 11
----------
and Section 13(a) hereof and shall be payable in accordance with paragraph (c)
------------- -------------
below.
(c) DELIVERY OF RIGHTS CERTIFICATES. Upon receipt of a Rights Certificate
-------------------------------
representing exercisable Rights, with the form of election to purchase and the
certificate duly executed, accompanied by payment, with respect to each Right so
exercised, of the Purchase Price per one share of Common Stock to be purchased
as set forth below, and an amount equal to any applicable transfer tax, the
Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A)
-------------
requisition from any transfer agent of the shares of Common Stock (or make
available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of shares of Common Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Common Stock issuable upon exercise of the Rights hereunder
with a depositary agent, requisition from the depositary agent depositary
receipts representing such number of shares of Common Stock as are to be
purchased (in which case certificates for the shares of Common Stock represented
by such receipts shall be deposited by the transfer agent with the depositary
agent) and the Company will direct the depositary agent to comply with such
request, (ii) requisition from the Company the amount of cash, if any, to be
paid in lieu of fractional shares in accordance with Section 14 hereof, (iii)
----------
after receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, and (iv) after
8
<PAGE>
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. The payment of the Purchase Price
shall be made in cash or by certified bank check or bank draft payable to the
Company.
(d) PARTIAL EXERCISE. In case the registered holder of any Rights
----------------
Certificate shall exercise less than all the Rights evidenced thereby, a new
Rights Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon the
order of, the registered holder of such Rights Certificate, registered in such
name or names as may be designated by such holder, subject to the provisions of
Section 14 hereof.
- - ----------
(e) RIGHTS HELD BY ACQUIRING PERSON. Notwithstanding anything in this Plan
-------------------------------
to the contrary, from and after the first occurrence of a Section 11(a)(ii)
Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate
or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has a primary purpose or effect the avoidance
of this Section 7(e), shall become null and void without any further action and
------------
no holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Plan or otherwise. The Company
shall use all reasonable efforts to ensure that the provisions of this Section
-------
7(e) and Section 4(b) hereof are complied with, but shall have no liability to
- - ---- ------------
any holder of Rights Certificates or other Persons as a result of its failure to
make any determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f) SATISFACTORY EVIDENCE OF EXERCISE. Notwithstanding anything in this
---------------------------------
Plan to the contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered holder upon the
occurrence of any purported exercise as set forth in this Section 7 unless such
---------
registered holder shall have (i) completed and signed the certificate contained
in the form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise, and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES.
--------- ---------------------------------------------------
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Plan. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
9
<PAGE>
SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
--------- ---------------------------------------------
(a) RESERVATION OF CAPITAL STOCK. The Company covenants and agrees that,
----------------------------
from and after the Distribution Date, it will cause to be reserved and kept
available out of its authorized and unissued shares of Common Stock not reserved
for another purpose the number of shares of Common Stock that, as provided in
this Plan, will be sufficient to permit the exercise in full of all outstanding
Rights; provided, however, that the Company shall not be required to reserve and
-------- -------
keep available shares of Common Stock or other securities sufficient to permit
the exercise in full of all outstanding Rights pursuant to the adjustments set
forth in Section 11(a)(ii) or Section 13 hereof unless the Rights become
----------------- ----------
exercisable pursuant to such adjustments.
(b) LISTING ON STOCK EXCHANGE. So long as the shares of Common Stock
-------------------------
issuable and deliverable upon the exercise of the Rights may be listed on any
national securities exchange, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all shares reserved
for such issuance to be listed on such exchange upon official notice of issuance
upon such exercise.
(c) REGISTRATION. The Company shall use its best efforts to (i) file, as
------------
soon as required by law following the Distribution Date, a registration
statement under the Act, with respect to the securities purchasable upon
exercise of the rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with a prospectus
at all times meeting the requirements of the Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities, and
(B) the date of the expiration of the Rights. The Company will also take such
action as may be appropriate under, or to ensure compliance with, the securities
or "blue sky" laws of the various states in connection with the exercisability
of the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date set forth in clause (i) of the first
----------
sentence of this Section 9(c), the exercisability of the Rights in order to
------------
prepare and file such registration statement and permit it to become effective.
Upon any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as well as
a public announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Plan to the contrary, the Rights shall not
be exercised in any jurisdiction unless the requisite qualification in such
jurisdiction shall have been obtained.
(d) FULLY PAID; NON-ASSESSABLE. The Company covenants and agrees that it
--------------------------
will take all such action as may be necessary to ensure that all shares of
Common Stock delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such shares (subject to payment of the Purchase Price) be
duly and validly authorized and issued and fully paid and nonassessable.
(e) TRANSFER TAXES AND CHARGES. The Company further covenants and agrees
--------------------------
that it will pay when due and payable any and all federal and state transfer
taxes and charges which may be payable in respect of the issuance or delivery of
the Rights Certificates and of any certificates for a number of shares of Common
Stock upon the exercise of Rights. The Company shall not, however, be required
to pay any transfer tax which may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of shares of Common Stock in respect of a name other than
that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
shares of Common Stock in a name other than that of the registered holder upon
the exercise of any Rights until such tax shall have been paid (any such tax
being payable by the holder of such Rights Certificate at the time of surrender)
or until it has been established to the Company's satisfaction that no such tax
is due.
10
<PAGE>
SECTION 10. COMMON STOCK RECORD DATE.
---------- ------------------------
Each Person in whose name any certificate for a number of shares of Common
Stock (or other securities, as the case may be) is issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder of record of
such shares of Common Stock represented thereby on, and such certificates shall
be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the date upon which the Rights Certificate evidenced
such Rights was duly surrendered and payment of the Purchase Price (and all
applicable transfer taxes) was made; provided, however, that if the date of such
-------- -------
surrender and payment is a date upon which the Common Stock transfer books of
the Company are closed, such Person shall be dated, the next succeeding Business
Day on which the Common Stock transfer books of the Company are open. Prior to
the exercise of the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a stockholder of the Company with respect
to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceeding of the Company except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
---------- ----------------------------------------------------------
NUMBER OF RIGHTS.
----------------
The Purchase Price, the number and kind of shares covered by each Right and
the Number of Rights outstanding are subject to adjustment from time-to-time as
provided in this Section 11.
----------
(a) CERTAIN EVENTS.
--------------
(i) STOCK DIVIDEND, SUBDIVISION, COMBINATION OR RECLASSIFICATION. In
------------------------------------------------------------
the event the Company shall at any time after the date of this Plan (A) declare
a dividend on the Common Stock payable in shares of Common Stock, (B) subdivide
the outstanding Common Stock, (C) combine the outstanding Common Stock into a
smaller number of shares, or (D) issue any shares of its capital stock in the
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), except as otherwise provided in this Section 11(a)
-------------
and Section 7(e) hereof, the Purchase Price in effect at the time of the record
------------
date for such dividend or of the effective date of such subdivision, combination
or reclassification, and the number and kind of shares of Common Stock issuable
on such date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares of Common
Stock which, if such Right had been exercised immediately prior to such date and
at a time when the Common Stock transfer books of the Company were open, such
holder would have owned upon such exercise and be entitled to receive by virtue
of such dividend, subdivision, combination or reclassification. If an event
occurs which would require an adjustment under both this Section 11(a)(i) and
----------------
Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i)
- - ----------------- ----------------
shall be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii) hereof.
-----------------
(ii) REDUCTION IN PURCHASE PRICE IN THE EVENT OF STOCK ACQUISITION.
-------------------------------------------------------------
In the event that any Person shall, at any time after the Rights Declaration
Date (as defined in the WHEREAS clause at the beginning of this Plan), become an
Acquiring Person, unless the event causing such person to become an Acquiring
Person is an acquisition of shares of Common Stock pursuant to a tender offer or
an exchange offer for all outstanding shares of Common stock at a price and on
terms determined by at least a majority of the members of the Board of Directors
who are not officers of the Company (provided that at the time of such
determination of the Board of Directors there are then in office not less than
two Continuing Directors and such determination is also made by a majority of
the Continuing Directors then in office), after receiving advice from one or
more investment banking firms, to be (a)
11
<PAGE>
at a price which is fair to stockholders (taking into account all factors which
such members of the Board deem relevant including, without limitation, prices
which could reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and (b) otherwise in the best
interests of the Company and its stockholders (a "Qualifying Tender Offer"),
---------- ------ -----
then, subject to the last sentence of Section 23(a) and except as otherwise
-------------
provided in this Section 11, each holder of a Right (except as provided in
----------
Section 7(e) hereof) shall thereafter have the right to receive, upon exercise
- - ------------
thereof, the number of shares of Common Stock as shall equal the result obtained
by (x) multiplying the then current Purchase Price by the number of shares of
Common Stock for which a Right was exercisable immediately prior to the first
occurrence of the Section 11(a)(ii) Event and (y) dividing that product by fifty
percent (50%) of the current market price (as determined pursuant to Section
-------
11(d) hereof) per share of the Common Stock on the date of the occurrence of
- - -----
such Section 11(a)(ii) Event.
(b) GRANT OF SUBSCRIPTION RIGHTS. In case the Company shall fix a record
----------------------------
date for the issuance of rights, options or warrants to all holders of Common
Stock entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Common Stock (or shares
having the same rights, privileges and preference as the shares of Common Stock
["equivalent common stock"]) or securities convertible into Common Stock or
---------- ------ -----
equivalent common stock at a price per share of Common Stock or per share of
equivalent common stock (or having a conversion price per share, if a security
convertible into Common Stock or equivalent common stock) less than the current
stock market price as determined pursuant to Section 11(d) hereof) per share of
-------------
Common Stock on such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding on such record date,
plus the number of shares of Common Stock which the aggregate offering price of
the total number of shares of Common Stock and/or equivalent common stock so to
be offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price, and
the denominator of which shall be the number of shares of Common Stock
outstanding on such record date, plus the number of additional shares of Common
Stock and/or equivalent common stock to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible). In case such subscription price may be paid by delivery of
consideration part or all of which may be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Shares of Common Stock owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed, and in the event that such rights or warrants are not so issued,
the Purchase Price shall be adjusted to be the Purchase Price which would then
be in effect if such record date had not been fixed.
(c) DISTRIBUTION OF PROPERTY. In case the Company shall fix a record date
------------------------
for a distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend out of the
earnings or retained earnings of the Company), assets (other that a dividend in
Common Stock, but including any dividend payable in stock other than Common
Stock) or subscription rights or warrants (excluding those referred to in
Section 11(b) hereof), the Purchase Price to be in effect after such record date
- - -------------
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
current market price (as determined pursuant to Section 11(d) hereof) per share
-------------
of Common Stock on such record date, less the fair market value (as determined
in good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent) of the portion of
the cash, assets or evidences of indebtedness so to be
12
<PAGE>
distributed or of such subscription rights or warrants applicable to a share of
Common stock, and the denominator of which shall be such current market price
(as determined pursuant to Section 11(d) hereof) per share of Common Stock.
-------------
Such adjustments shall be made successively whenever such a record date is
fixed, and in the event that such distribution is not so made, the Purchase
Price shall be adjusted to be the Purchase Price which would have been in effect
if such record date had not been fixed.
(d) DETERMINATION OF MARKET PRICE. For the purpose of any computation
-----------------------------
herein, the "current market price" per share of Common Stock on any date shall
------- ------ -----
be deemed to be the average of the daily closing prices per share of such Common
Stock for the thirty (30) consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that in the event
-------- -------
that the current market price per share of the Common Stock is determined during
a period following the announcement by the issuer of such Common Stock of (A) a
dividend or distribution of such Common Stock payable in shares of such Common
Stock or securities convertible into shares of such Common Stock (other than the
Rights), or (B) any subdivision, combination or reclassification of such Common
Stock, and prior to the expiration of the requisite thirty (30) Trading Day
period after the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the "current market price" shall be properly adjusted to take
into account ex-dividend trading. The closing price for each day shall be the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the NASDAQ National
Market System or such other system then in use, or, if on any such date the
shares of Common Stock are not quoted by NASDAQ, the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported by NASDAQ
or, if the shares of Common Stock are not listed or admitted to trading on
NASDAQ, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors of the Company. If on any such date no
market maker is making a market in the Common Stock, the fair value of such
shares on such date as determined in good faith by the Board of Directors of the
Company shall be used. The term "Trading Day" shall mean a day on which the
------- ---
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Stock is not publicly held
or not so listed or traded, "current market price" per share shall mean the fair
value per share as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.
(e) DE MINIMUS ADJUSTMENTS. Anything herein to the contrary
----------------------
notwithstanding, no adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in the Purchase Price; provided, however, that any adjustments which by
-------- -------
reason of this Section 11(e) are not required to be made shall be carried
-------------
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or to the nearest one-
----------
thousandth of a share of Common Stock or other share as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
-------------
required by this Section 11 shall be made no later than the earlier of (i) three
----------
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) ADJUSTMENTS UPON SECTION 11(a)(ii) OR SECTION 13 EVENTS. If as a
-------------------------------------------------------
result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a)
----------------- -------------
hereof, the holder of any Right thereafter
13
<PAGE>
exercised shall become entitled to receive any shares or fraction of a share of
capital stock other than Common Stock, thereafter the number or fraction of such
other shares so receivable upon exercise of any Right and the Purchase Price
thereof shall be subject to adjustment from time-to-time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k)
------------------------------------------------------
and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect
--- --------------------- --
to the Common Stock shall apply on like terms and to any such other shares.
(g) EVIDENCE OF ADJUSTMENTS. All rights originally issued by the Company
-----------------------
subsequent to any adjustment made to the Purchase Price hereunder shall evidence
the right to purchase, at the adjusted Purchase Price, the number of shares of
Common Stock purchasable from time-to-time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) CALCULATION OF ADJUSTED RIGHTS TO PURCHASE COMMON STOCK. Unless the
-------------------------------------------------------
Company shall have exercised its election as provided in Section 11(i), upon
-------------
each adjustment of the Purchase Price as a result of the calculations made in
Sections 11(b) and (c), each Right outstanding immediately prior to the making
- - --------------
of such adjustment shall thereafter evidence the right to purchase, at the
adjusted Purchase Price, that fraction of a share (or number of shares) of
Common Stock (calculated to the nearest one-thousandth) obtained by (i)
multiplying (x) the number of shares covered by a Right immediately prior to
this adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) ADJUSTMENT IN RIGHTS IN LIEU OF SHARES. The Company may elect on or
--------------------------------------
after the date of any adjustment of the Purchase Price to adjust the number of
Rights, in lieu of any adjustment in the number of shares of Common Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
the adjustment in the number of Rights shall be exercisable for the number of
shares of Common Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificate has been
issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
-------------
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
- - ----------
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders of record in substitution and
replacement for the Rights Certificate held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Rights
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Rights Certificates so to be distributed shall be
issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Rights Certificates on the
record date specified in the public announcement.
(j) NO REQUIREMENT TO AMEND RIGHTS CERTIFICATES. Irrespective of any
-------------------------------------------
adjustment or change in the Purchase Price or the fraction of a share (or number
of shares) of Common Stock issuable
14
<PAGE>
upon the exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to express the Purchase Price per share and the
number of shares which were expressed in the initial Rights Certificates issued
hereunder.
(k) REDUCTION BELOW STATED OR PAR VALUE. Before taking any action that
-----------------------------------
would cause an adjustment reducing the Purchase Price below the then stated or
par value, if any, of the number of shares of Common Stock issuable upon
exercise of the Rights, the Company shall take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue such number of fully paid and nonassessable shares of
Common Stock at such adjusted Purchase Price.
(l) DEFERRAL OF ADJUSTMENT. In any case in which this Section 11 shall
---------------------- ----------
require that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercise after
such record date the number of shares of Common Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of shares of Common Stock and other capital stock or securities of
the Company, if any, issuable upon such exercise on the basis of the Purchase
Price in effect prior to such adjustment; provided, however, that the Company
-------- -------
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares (fractional or
otherwise) or securities upon the occurrence of the event requiring such
adjustment.
(m) REDUCTIONS IN PURCHASE PRICE. Anything in this Section 11 to the
---------------------------- ----------
contrary notwithstanding, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those adjustments expressly required by
this Section 11, as and to the extent that in their good faith judgement the
----------
Board of Directors of the Company shall determine to be advisable in order that
any (i) consolidation or subdivision of the Common Stock, (ii) issuance wholly
for cash of any shares of Common Stock at less than the current market price,
(iii) issuance wholly for cash of shares of Common Stock or securities which by
their terms are convertible into or exchangeable for shares of Common Stock,
(iv) stock dividends, or (v) issuance of rights, options or warrants referred to
in this Section 11, hereafter made by the Company to holders of its Common Stock
----------
shall not be taxable to such stockholders.
(n) COVENANT NOT TO CONSOLIDATE, MERGER OR TRANSFER OR SELL ASSETS OR
-----------------------------------------------------------------
EARNING POWER. The Company covenants and agrees that is shall not, at any time
- - -------------
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in an transaction which complies with Section 11(o)
-------------
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
-------------
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than fifty percent (50%) of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
-------------
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
-------------
owned by such Person or any of its Affiliates and Associates.
15
<PAGE>
(o) COVENANT NOT TO DIMINISH OR ELIMINATE RIGHTS. The Company covenants
--------------------------------------------
and agrees that, after the Distribution Date, it will not, except as permitted
by Section 23 or Section 26 hereof, take (or permit any Subsidiary to take) any
---------- ----------
action if at the time such action is taken it is reasonably foreseeable that
such action will diminish substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.
(p) PROPORTIONATE ADJUSTMENTS. Anything in this Plan to the contrary
-------------------------
notwithstanding, in the event that the Company shall at any time after the
Rights Declaration Date and prior to the Distribution Date (i) declare a
dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common stock, or (iii) combine
the outstanding shares of Common Stock into a small number of shares, the number
of Rights associated with each share of Common stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction, the numerator which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event, and the denominator of which shall be the
total number of share of Common Stock outstanding immediately following the
occurrence of such event.
(q) SUBSTITUTION OF COMMON STOCK EQUIVALENTS. In lieu of issuing shares of
----------------------------------------
Common Stock in accordance with Section 11(a)(ii) hereof, the Board of Directors
-----------------
may, and, in the event that the number of shares of Common Stock which are
authorized by the Company's Certificate of Incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights is not
sufficient to permit the exercise in full of the Rights in accordance with
Section 11(a)(ii) hereof, the Board of Directors shall, to the extent permitted
- - -----------------
by applicable law and any material agreements then in effect to which the
Company is a party, (A) determine the value of the shares of Common Stock (the
"Adjustment Shares") issuable upon the exercise of a Right immediately after the
- - ----------- ------
adjustments provided for in Section 11(a)(ii) (the "Current Value") and (B) with
----------------- ------- -----
respect to each Right (other than Rights which have become void pursuant to the
provisions hereof), make adequate provision to substitute for any or all such
Adjustment Shares, upon payment of the applicable Purchase, Price, (1) cash, (2)
other equity securities of the Company (including, without limitation, shares,
or units of shares of preferred stock which, by virtue of having dividend,
voting and liquidation rights substantially comparable to those of the Common
Stock, are deemed in good faith by the Board of Directors to have substantially
the same value as shares of Common Stock [such shares or units of shares of
preferred stock are herein called "Common Stock equivalents"]), (3) debt
securities of the Company, (4) other assets, (5) a reduction of the Purchases
Price, or (6) any combination of the foregoing having a value which, when added
to the value of the shares of Common Stock actually issued upon exercise of such
Right, shall have an aggregate value equal to the Current Value, where such
aggregate value has been determined in good faith by the Board of Directors
based upon the advice of a nationally recognized independent investment banking
firm selected in good faith by the Board of Directors; provided, however, that
-------- -------
if the Company shall not have made adequate provision to deliver value pursuant
to clause (B) above within thirty (30) days following the date (the "Section
---------- -------
11(a)(ii) Trigger Date") which is the later of (a) the first occurrence of a
- - --------- ------- ----
Section 11(a)(ii) Event and (b) the date on which the Company's right of
redemption pursuant to Section 23(a) expires, then the Company shall be
-------------
obligated to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which shares and cash have an aggregate
value equal to the excess of (x) the Current Value over (y) the Purchase Price
times the number of one and one-half shares of Common Stock for which a Right
was exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event. If, upon the occurrence of a Section 11(a)(ii) Event, the number of
shares of Common Stock that are authorized by the Company's Restated
16
<PAGE>
Certificate of Incorporation but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights are not sufficient to permit
exercise in full of the Rights in accordance with Section 11(a)(ii) hereof, and
-----------------
if the Board of Directors shall determine in good faith that it is likely that
sufficient additional shares of Common Stock could be authorized for issuance
upon exercise in full of the Rights, then, if the Board of Directors so elects,
the thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek stockholder approval for the
authorization of such additional shares (such thirty (30) day period, as it may
be extended, is herein called the "Substitution Period"). To the extent that
------------ ------
the Company determines that some action must be taken pursuant to the first or
second sentence of this Section 11(q), the Company (1) shall provide, subject to
-------------
Section 11(a)(ii) hereof and the last sentence of this Section 11(q), that such
- - ----------------- -------------
action shall apply uniformly to all outstanding Rights and (2) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. For purposes of this
Section 11(q), the value of the Common Stock shall be the Current market price
- - -------------
per share of the Common Stock on the Section 11(a)(ii) Trigger Date and the per
share or per unit value of any "Common Stock equivalent" shall be deemed to
equal the current market price per share of the Common Stock on such date. The
Board of Directors may, but shall not be required to, establish procedures to
allocate the right to receive Common Stock upon the exercise of the Rights among
holders of Rights pursuant to this Section 11(q).
-------------
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
---------- ----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 and Section 13
---------- ----------
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement o the facts accounting for such adjustment, (b)
promptly file with the Rights Agent, and with the transfer agent for the Common
Stock, a copy of such certificate, and (c) mail a brief summary thereof to each
holder of a Rights Certificate (or, if prior to the Distribution Date, to each
holder of a certificate representing shares of Common Stock) in accordance with
Section 25 hereof. The Rights Agent shall be fully protected in relying and on
- - ----------
any such certificate on any adjustment therein contained.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
---------- ------------------------------------------------------
EARNING POWER.
-------------
(a) REDUCTION OF PURCHASE PRICE IN THE EVENT OF CONSOLIDATION, MERGER, OR
---------------------------------------------------------------------
SALE OR TRANSFER OF ASSETS OR EARNING POWER. In the event that, following the
- - -------------------------------------------
Stock Acquisition Date, directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
-------------
hereof), and the Company shall not be the continuing or surviving corporation of
such consolidation or merger, (y) any Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof) shall
-------------
consolidate with, or merge with or into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer) in one transaction or a series of related transactions,
assets or earning power aggregating more than fifty percent (50%) of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company in
one
17
<PAGE>
or more transactions each of which complies with Section 11(o) hereof), then,
-------------
and in each such case, proper provisions shall be made so that: (i) each holder
of a Right, except as provided in Section 7(e) hereof, shall thereafter have the
------------
right to receive, upon the exercise thereof at the then current Purchase Price
(disregarding any adjustment of the Purchase Price pursuant to Section 11(a)(ii)
-----------------
hereof) in accordance with the terms of this Plan, such number of validly
authorized and issued, fully paid, nonassessable and freely tradeable shares of
Common Stock of the Principal Party (as such term is hereinafter defined), not
subject to any liens, encumbrances, rights of first refusal or other adverse
claims, as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of shares of Common Stock for which a Right
is exercisable immediately prior to the first occurrence of a Section 13 Event
(or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of
a Section 13 Event, multiplying the number of shares for which a right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the first occurrence of
a Section 13 Event, shall be referred to as the "Purchase Price" for each Right
-------- -----
and for all purposes of this Plan) by (2) fifty percent (50%) of the current
market price (determined pursuant to Section 11(d)(i) hereof) per share of the
----------------
Common Stock of such Principal Party on the date of consummation of such Section
13 Event; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties of
the Company pursuant to this Plan; (iii) the term "Company" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
----------
following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall
-----------------
be of no effect following the first occurrence of any Section 13 Event.
(b) DEFINITION OF PRINCIPAL PARTY. The term "Principal Party" shall mean:
----------------------------- --------- -----
(i) in the case of any transaction described in clause (x) or (y) of the first
---------- ---
sentence of Section 13(a), the Person that is the issuer of any securities into
-------------
which shares of Common Stock of the Company are converted in such merger or
consolidation, and if no securities are so issued, the Person that is the other
party to such merger or consolidation; and (ii) in the case of any transaction
described in clause (z) of the first sentence of Section 13(a), the Person that
---------- -------------
is the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions; provided, however,
--------- -------
that in any such case, (1) if the Common Stock of such Person is not at such
time and has not been continuously over the preceding twelve (12) month period
registered under Section 12 of the Exchange Act, and such Person is a direct or
indirect Subsidiary of another Person the Common Stock of which is and has been
so registered "Principal Party" shall refer to such other Person; and (2) in
case such Person is a Subsidiary, directly or indirectly, o more than one
Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) COVENANT OF PRINCIPAL PARTY TO PROVIDE SUPPLEMENTAL AGREEMENT. The
-------------------------------------------------------------
Company shall not consummate any such consolidation, merger, sale or transfer
unless the Principal Party shall have s sufficient number of authorized shares
of its Common Stock which have not been issued or reserved for issuance to
permit the exercise in full of the Rights in accordance with this Section 13 and
----------
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing for the
terms set forth in paragraphs (a) and (b) of this Section 13 and further
-------------- --- ----------
providing that, as soon as practicable after the date of any consolidation,
merger or sale of assets mentioned in paragraph (a) of this Section 13, the
------------- ----------
Principal Party will:
18
<PAGE>
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
----------
mergers or consolidations or sales or other transfers. In the event that a
Section 13 Event shall occur at any time after the occurrence of a Section
11(a)(ii) Event, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in Section 13(a).
-------------
(d) QUALIFYING TENDER OFFER. Notwithstanding anything in this Plan to the
-----------------------
contrary, Section 13 shall not be applicable to a transaction described in
----------
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
- - ----------------- --- -------------
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock which complies with the provisions of Section 11(a)(ii) hereof (or
-----------------
a wholly owned Subsidiary of any such Person or Persons); (ii) the price per
share of Common Stock offered in such transaction is not less than the price per
share of Common Stock paid to all holders of shares of Common Stock whose shares
were purchased pursuant to such tender offer or exchange offer; and (iii) the
form of consideration being offered to the remaining holders of shares of Common
Stock pursuant to such transaction is the same as the form of consideration paid
pursuant to such tender offer or exchange offer. Upon consummation of any such
transaction contemplated by this Section 13(d), all Rights hereunder shall
-------------
expire.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
---------- ---------------------------------------
(a) CASH IN LIEU OF FRACTIONAL RIGHTS. The Company shall not be required
---------------------------------
to issue fractions of Rights, except prior to the Distribution Date as provided
in Section 11(p) hereof, or to distribute Rights Certificates which evidence
-------------
fractional rights. In lieu of such fractional Rights, there shall be paid to
the registered holders of the Rights Certificates with regard to which such
fractional Rights would be otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For purposes of
this Section 14(a), the current market value of a whole Right shall be the
-------------
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price of the Rights for any day shall be the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other over-the-counter system then in use,
or on any such date the Rights are not quoted by any such organization, the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on such principal national stock
exchange on which the Rights are listed or admitted to trading, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on such principal national securities exchange, or if the
Rights are not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
19
<PAGE>
(b) CASH IN LIEU OF FRACTIONAL SHARES. The Company shall not be required
---------------------------------
to issue fractions of shares of Common Stock upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Common Stock. In
lieu of fractional shares of Common Stock the Company may pay to the registered
holders of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of a share of Common Stock. For purposes of this Section 14(b), the
-------------
current market value of a share of Common Stock shall be the closing price of a
share of Common Stock (as determined pursuant to Section 11(d) hereof) for the
-------------
Trading Day immediately prior to the date of such exercise.
(c) WAIVER OF RIGHT HOLDER. The holder of a Right by the acceptance of the
----------------------
Rights expressly waives his right to receive any fractional Rights or any
fractional shares of Common Stock upon exercise of a Right, except as permitted
by this Section 14.
----------
SECTION 15. RIGHTS OF ACTION.
---------- ----------------
All rights of action in respect of this Plan, excepting the rights of
action given to the Rights Agent under Section 18 hereof, are vested in the
----------
respective registered holders of the Rights Certificates (and, prior to the
Distribution Date, the registered holders of the Common Stock); and any
registered holder of any Rights Certificate (or, prior to the Distribution Date,
of the Common Stock), without the consent of the Rights Agent or of the holder
of any other Rights Certificate (or, prior to the Distribution Date, of the
Common Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Rights Certificate and in this Plan. Without limiting the
foregoing or any remedies available to the holders of the Rights, the holders of
the Rights would not have an adequate remedy at law for any breach of this Plan
and shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Plan.
SECTION 16. AGREEMENT OF RIGHTS HOLDERS.
---------- ---------------------------
Every holder of a Right by accepting of the same consents and agrees with
the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(b) hereof, the Company and the
------------ ------------
Rights Agent may deem and treat the person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of Section 7(e)
------------
hereof, shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Plan to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a Right
or other Person as a result of its inability
20
<PAGE>
to perform any of its obligations under this Plan by reason of any preliminary
or permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligations; provided, however, the Company must use its
-------- -------
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
SECTION 17. HOLDER OF RIGHTS CERTIFICATE NOT DEEMED A STOCKHOLDER.
---------- -----------------------------------------------------
No holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the fraction of a
share (or number of shares) of Common Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 24 hereof), or to receive dividends or subscription rights,
----------
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
---------- ---------------------------
(a) COMPENSATION; INDEMNITY; LIMITATION ON LIABILITY. The Company agrees
------------------------------------------------
to pay to the Rights Agent reasonable compensation for all services rendered by
it hereunder and, from time-to-time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and disbursements and other disbursements
incurred in the administration and execution of this Plan in the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without gross negligence, bad faith or willful misconduct on
the part of the Rights Agent, for anything done or omitted by the Rights Agent
in connection with the acceptance and administration of this Plan, including the
costs and expenses of defending against any claim of liability in the premises.
Anything in this Plan to the contrary notwithstanding, in no event shall the
Rights Agent be liable for special, indirect or consequential loss or damage of
any kind whatsoever (including, but not limited to, lost profits) even if the
Rights Agent has been advised of the likelihood of such loss or damage and
regardless of the form of action.
(b) RELIANCE. The Rights Agent shall be protected and shall incur no
--------
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Plan in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons or
otherwise upon the advice of counsel as set forth in Section 20(a) hereof.
-------------
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
---------- ---------------------------------------------------------
(a) MERGER OR CONSOLIDATION. Any corporation into which the rights Agent
-----------------------
or any successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Rights Agents or any successor Rights Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Rights Agent or
21
<PAGE>
any successor Rights Agent, shall be the successor to the Rights Agent under
this Plan without the execution or filing of any paper or any further action on
the part of any of the parties hereto; provided, however, that such corporation
-------- --------
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights
----------
Agent shall succeed to the agency created by this Plan, any of the Rights Agent
may adopt the countersignature of a predecessor Rights Agent and deliver such
Rights Certificate so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
this Plan.
(b) USE OF PRIOR NAME. In case at any time the name of the Rights Agent
-----------------
shall be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificate shall have the full force provided in the Rights Certificates and in
this Plan.
SECTION 20. DUTIES OF RIGHTS AGENT.
---------- ----------------------
The Rights Agent undertakes the duties and obligations imposed by this Plan
upon the following terms and conditions, by all of which the Company and the
holders of Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Plan the Rights
Agent shall deem it necessary or desirable that any fact or matter (including,
without limitation, the identity of any Acquiring Person and the determination
of "current market price") be proved or established by the Company prior to
taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by a certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, if any, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Plan in reliance
upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Plan or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Plan or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or in
22
<PAGE>
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Plan or in any Rights
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Section 11 or Section 13 hereof or responsible for the manner,
---------- ----------
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after actual notice of any
such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock to be issued pursuant to this Plan or any Rights Certificate or
as to whether any shares of Common Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Plan.
(g) The Rights Agent is hereby authorized and directed to accept
instructions will respect to the performance of its duties hereunder from the
Chairman of the Board, the Vice Chairman of the Board, if any, the President,
any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any
Assistant Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer or for any delay in waiting for thise
instructions.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Plan. Nothing herein shall preclude the Rights Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agent, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorney or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
-------- -------
selection and continued employment thereof.
(j) No provision of this Plan shall require the Rights Agent to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder or in the exercise of its rights if there shall
be reasonable grounds for believing that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause (1) and/or (2)
---------- ---
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
23
<PAGE>
SECTION 21. CHANGE OF RIGHTS AGENT.
---------- ----------------------
The Rights Agent or any successor rights Agent may resign and be discharged
from its duties under this Plan upon sixty (60) days' notice in writing mailed
to the Company, and to each transfer agent of the Common Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon sixty (60) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to the transfer agent of the Common Stock,
by registered or certified mail, and to the holders of the Rights Certificates
by first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of sixty (60) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then any registered holder of any Rights Certificates may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of any state of the United States, in good standing, which is authorized under
such laws to exercise corporate trust powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least one
hundred million dollars ($100,000,000). After appointment, the successor Rights
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment, the Company
shall file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Stock and mail a notice thereof in writing to the
registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
----------
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES.
---------- -----------------------------------
Notwithstanding any of the provisions of this Plan or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Plan. In addition,
in connection with the issuance or sale of shares of Common Stock following the
Distribution Date and prior to the redemption or expiration of the Rights, the
Company (a) shall, with respect to shares of Common Stock so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement, or upon the exercise, conversation or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
-------- -------
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
24
<PAGE>
SECTION 23. REDEMPTION AND TERMINATION.
---------- --------------------------
(a) REDEMPTION OF RIGHTS. The Board of Directors of the Company may, at
--------------------
its option, at any time prior to the earlier of (i) the close of business on the
tenth (10th) day following the Stock Acquisition Date (or, if the Stock
Acquisition Date shall have occurred prior to the Record Date, the close of
business on the tenth (10th) day following the Record Date) subject to extension
by the Company pursuant to Section 26 hereof, or (ii) the Final Expiration Date,
----------
redeem all but not less than all the then outstanding Rights at a redemption
price of $.001 per Right, as such amount may be appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred to as the
"Redemption Price") and the Company may, at its option, pay the Redemption Price
- - ----------- -----
either in shares of Common Stock (based on the "current market price", as
defined in Section 11(d) hereof, of the shares of Common Stock at the time of
-------------
redemption) or cash; provided, however, if the Board of Directors of the Company
-------- -------
authorizes redemption of the Rights in either of the circumstances set forth in
clauses (1) and (2) below, then there must be Continuing Directors then in
- - ----------- ---
office and such authorization shall require the concurrence of a majority of
such Continuing Directors: (2) such authorization occurs on or after the time a
Person becomes an Acquiring Person, or (2) such authorization occurs on or after
the date of a change (resulting from a proxy or consent solicitation) in a
majority of the directors in office at the commencement of such solicitation of
any Person who is a participant in such solicitation has stated (or, if upon the
commencement of such solicitation, a majority of the Board of Directors of the
Company has determined in good faith) that such person (or any of its Affiliates
or Associates) intends to take, or may consider taking, any action which would
result in such Person becoming an Acquiring Person or which would cause the
occurrence of a Triggering Event unless, concurrent with such solicitation, such
Person (or one or more of its Affiliates or Associates) is making a cash tender
offer pursuant to a Schedule 14D-1 (or any successor form) filed with the
Securities and Exchange Commission for all outstanding shares of Common Stock
not beneficially owned by such Person (or by its Affiliates or Associates);
provided further, however, that if, following the occurrence of a Stock
- - -------- -------
Acquisition Date and following the expiration of the right or redemption
hereunder but prior to any Triggering Event, (1) a Person who is an Acquiring
Person shall have transferred or otherwise disposed of a number of shares of
Common Stock in one transaction or a series of transactions, not directly or
indirectly involving the Company or any of its Subsidiaries, which did not
result in the occurrence of a Triggering Event such that such Person is
thereafter a Beneficial Owner of ten percent (10%) or less of the outstanding
shares of Common Stock, and (2) there are no other Persons, immediately
following the occurrence of the event described in clause (1), who are Acquiring
----------
Persons, then the right of redemption shall be reinstated and thereafter be
subject to the provisions of this Section 23. Notwithstanding anything
----------
contained in this Plan to the contrary, the Rights shall not be exercisable
after the first occurrence of a Section 11(a)(ii) Event until such time as the
Company's right of redemption hereunder has expired.
(b) EFFECTIVENESS; NOTICE. Immediately upon the action of the Board of
---------------------
Directors of the Company ordering the redemption of the Rights, evidence of
which shall have been filed with the Rights Agent and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the Board
of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the registry books of the Right Agent or, prior
to the Distribution Date, on the registry books of the Transfer Agent for the
Common Stock; provided, however, that the failure to give, or any defect in, any
-------- -------
such notice shall not affect the validity of such redemption. Any notice which
is mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made.
25
<PAGE>
SECTION 24. NOTICE OF CERTAIN EVENTS.
---------- ------------------------
(a) GENERAL. In case the Company shall propose, at any time after the
-------
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Common Stock or to make any other distribution to the holders of
Common Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Common
Stock rights or warrants to subscribe for or to purchase any additional shares
of Common Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Common Stock (other
than a reclassification involving only the subdivision of outstanding shares of
Common Stock), or (iv) to effect any consolidation or merger into or with any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), or to effect any sale or other transfer (or
-------------
to permit one or more of its Subsidiaries to effect any sale or other transfer),
in one transaction or a series of related transactions, of more than fifty
percent (50%) of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company and/or
any of its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding
- - -------------
up of the Company, then, in each such case, the Company shall give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 25 hereof, a notice of such proposed action, which shall specify the
- - ----------
record date for the purposes of such stock dividend, distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of Common Stock, if
any such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least twenty (20) days prior
---------- ----
to the record date for determining holders of the shares of Common Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Common Stock
whichever shall be the earlier.
(b) SECTION 11(a)(ii) EVENTS. In case any other events set forth in
------------------------
Section 11(a)(ii) hereof shall occur, then, in any such case, (i) the Company
- - -----------------
shall as soon as practicable thereafter give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 25 hereof, a
----------
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof,
-----------------
and (ii) all references in the preceding paragraph to Common Stock shall be
deemed thereafter to refer, if appropriate, to other securities.
SECTION 25. MANNER OF NOTICES.
---------- -----------------
Notices or demands authorized by this Plan to be given or made by the
Rights Agent or by the holder of any Rights Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage prepaid
addressed (until another address is filed in writing with the Rights Agent) as
follows:
STAAR Surgical Company
1911 Walker Avenue
Monrovia, California 91016
Attention: Chairman of the Board and
Chief Executive Officer
26
<PAGE>
Copy to:
Pollet, Skousen & Woodbury, a Law Corporation
10900 Wilshire Boulevard, Suite 500
Los Angeles, California 90024
Attention: John M. Woodbury, Jr., Esq.
Subject to the provisions of Section 21, any notice or demand authorized by
----------
this Plan to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Vice President, Stock Transfer
Notices or demands authorized by this Plan to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage pre-paid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
SECTION 26. SUPPLEMENTS AND AMENDMENTS.
---------- --------------------------
(a) BEFORE RIGHTS REDEEMABLE. For as long as the Rights are then
------------------------
redeemable and except as provided in paragraph (c) of this Section 26, the
------------- ----------
Company may in its sole and absolute discretion, and the Rights Agent shall if
the Company so directs, supplement or amend any provision of this Plan without
the approval of any holders of the Rights or the Common Stock (notwithstanding
their approval or ratification of this Plan) including, without limitation: (i)
lowering the thresholds set forth in Sections 1(a) and 3(a) to not less than the
------------- ----
greater of (x) the sum of .001% and the largest percentage of the outstanding
shares of Common Stock then known by the Company to be beneficially owned by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or pursuant to the
terms of any such plan) and (y) ten percent (10%); (ii) fixing a Final
Expiration Date later than the date set forth in Section 7(a) hereof (but not to
------------
exceed three {3} years in addition to the date initially specified in said
Section); or (iii) increasing the Purchase Price (but not by an amount exceeding
fifty percent (50%) or the original Purchase Price), as it may be adjusted
pursuant to the terms of this Plan.
(b) AFTER RIGHTS REDEEMABLE. At any time when the Rights are not then
-----------------------
redeemable and except as provided in paragraph (c) of Section 26, the Company
------------- ----------
may, and the Rights Agent shall if the Company so directs, supplement or amend
this Plan without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable, provided, however, that: (1) no such supplement or
-------- -------
amendment pursuant to clause (iii) above shall (A) lengthen any time period
------------
relating to when Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) lengthen any other time period unless such lengthening is for
the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights; and (2) no such supplement or amendment
pursuant to clause (iv) above shall materially adversely affect the interest of
-----------
the holders of Rights Certificates as such.
27
<PAGE>
(c) AFTER PERSON BECOMES ACQUIRING PERSON. Notwithstanding anything
-------------------------------------
contained in this Plan to the contrary, supplements or amendments may be made
after the time that any Person becomes an Acquiring Person (other than pursuant
to a Qualifying Tender Offer) only if at the time of the action of the Board of
Directors approving such supplement or amendment there are then in office not
less than two Continuing Directors and such supplement or amendment is approved
by a majority of the Continuing Directors then in office.
(d) SUPPLEMENT OR AMENDMENT BY RIGHTS AGENT. Upon the delivery of a
---------------------------------------
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
-------
26, the Rights Agent shall execute such supplement or amendment.
- - --
SECTION 27. SUCCESSORS.
---------- ----------
All the covenants and provisions of this Plan by or for the benefit of the
Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
SECTION 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS.
---------- -----------------------------------------------------
For all purposes of this Plan, any calculation of the number of shares of
common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company (with, where
specifically provided for herein, the concurrence of the Continuing Directors)
shall have the exclusive power and authority to administer this Plan and to
exercise all rights and powers specifically granted to the Board (with, where
specifically provided for herein, the concurrence of the Continuing Directors)
or to the Company, or as may be necessary or advisable in the administration of
this Plan, including, without limitation, the right and power to (i) interpret
the provisions of this Plan and (ii) make all determinations deemed necessary or
advisable for the administration of this Plan. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
----------
all omissions with respect to the foregoing) which are done or made by the Board
(with, where specifically provided for herein, the concurrence of the Continuing
Directors) in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject the Board or the Continuing Directors to any liability to the
holders of the Rights.
SECTION 29. BENEFITS OF PLAN.
---------- ----------------
Nothing in this Plan shall be construed to give to any Person other than
the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, registered holders of the
Common Stock) any legal or equitable right, remedy or claim under this Plan; but
this Plan shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock).
SECTION 30. SEVERABILITY.
---------- ------------
If any term, provision, covenant or restriction of this Plan is held by a
court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Plan shall remain in full force and effect and shall in no
way be affected, impaired or invalidated; provided, however, that
-------- -------
notwithstanding anything in this Plan to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language form
this Plan would adversely affect the purpose or effect of this Plan, the right
of redemption set forth in Section 23 hereof shall be reinstated and shall not
----------
expire unit the close of business on the tenth (10th) day following the date of
such determination by the
28
<PAGE>
Board of Directors. Without limiting the foregoing, if any provision requiring
that a determination be made by less than the entire Board (or at a time or with
the concurrence of a group of directors consisting of less than the entire
Board) is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, such determination shall then be made by the
Board in accordance with applicable law and the Company's Certificate of
Incorporation and By-laws.
SECTION 31. GOVERNING LAW.
---------- -------------
This Plan, each Right and each Rights Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Delaware and for all
purposes shall be governed by and construed in accordance with the laws of such
State applicable to contracts made and to be performed entirely within such
State, except that the rights and obligations of the Rights Agent shall be
governed by the laws of the State of New York.
SECTION 32. COUNTERPARTS.
---------- ------------
This Plan may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.
SECTION 33. DESCRIPTIVE HEADINGS.
---------- --------------------
Descriptive headings of the several Sections of this Plan are inserted for
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be duly
executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: STAAR SURGICAL COMPANY
By: /s/ William C. Huddleston By: /s/ John R. Wolf
------------------------- ---------------------------------
Name: William C. Huddleston Name: John R. Wolf
Title: Secretary Title: President and Chairman of
the Board
Attest: AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: ________________________ By: ________________________
Name: ________________________ Name: ________________________
Title: ________________________ Title: ________________________
29
<PAGE>
EXHIBIT A
---------
[FORM OF RIGHTS CERTIFICATE]
----------------------------
CERTIFICATE NO. R - ________________ _________________ (_________) RIGHTS
NOT EXERCISABLE AFTER APRIL 20, 2003 OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE
STOCKHOLDERS' RIGHTS PLAN. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN
THE STOCKHOLDERS' RIGHTS PLAN) AND ANY SUBSEQUENT HOLDER OF THE RIGHTS
MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR
BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE STOCKHOLDERS'
RIGHTS PLAN). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH PLAN.]/1/
RIGHTS CERTIFICATE
STAAR SURGICAL COMPANY
This certifies that
_____________________________________________, or
registered assigns, is the registered owner of the number of Rights set forth
above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Stockholders' Rights Plan, dated as of April
20, 1995 (the "Rights Plan"), between Staar Surgical Company, a Delaware
corporation (the "Company"), and American Stock Transfer & Trust Company, a New
York corporation (the "Rights Agent"), to purchase from the Company at any time
prior to 5:00 p.m. (New York time) on April 20, 2003 at the office or offices of
the Rights Agent designated for such purpose, or its successors as Rights Agent,
one (1) fully paid, non-assessable share of common stock, par value $.01 (the
"Common Stock"), of the Company, at a purchase price of fifty dollars ($50.00)
per share (the "Purchase Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The Purchase Price shall be paid in cash. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, and the number and Purchase Price as of April 20, 1995,
based on the Common Stock as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Plan), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Plan), (ii) a
transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under
certain circumstances specified in the Rights Plan, a transferee of person who,
after such transfer, became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of such Section 11(a)(ii) Event.
As provided in the Rights Plan, the Purchase Price and the number and kind
of shares of Common Stock or other capital stock or other securities, which may
be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events.
- - ----------------
/1/ The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
1
<PAGE>
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Plan, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Rights Plan
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the
Company and the holders of the Rights Certificates, which limitations of rights
include the temporary suspension of the exercisability of such Rights under the
specific circumstances set forth in the Rights Plan. Copies of the Rights Plan
are on file at the above-mentioned office of the Rights Agent and are also
available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares of Common Stock as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered shall
have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Plan the Rights evidenced by this
Certificate may be redeemed by the Company at its option at a redemption price
of $.001 per Right at any time prior to the earlier of the close of business on
(i) the tenth (10th) day following the Stock Acquisition Date (as such time
period may be extended pursuant to the Rights Plan) and (ii) the Final
Expiration Date. Under certain circumstances set forth in the Rights Plan, the
decision to redeem shall require the concurrence of a majority of the Continuing
Directors. After the expiration of the redemption period, the company's right
of redemption may be reinstated if an Acquiring Person reduces his beneficial
ownership to ten percent (10%) or less of the outstanding shares of Common Stock
in a transaction or series of transactions not involving the Company.
No fractional shares of Common Stock will be issued upon the exercise of
any Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Rights Plan.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Common Stock or
of any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Plan or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights Plan), or
to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Plan.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
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<PAGE>
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of ____________ __, 19__
Attest: STAAR SURGICAL COMPANY
By: _____________________ By: _________________________
Name: William C. Huddleston Name: John R. Wolf
Title: Secretary Title: President and Chairman
of the Board
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: ________________________
Authorized Signature
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[FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if
such holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _____________________________ hereby sells, assigns and
transfers unto (print name and address of transferee)___________________________
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________________
_________________ Attorney, to transfer the within Rights Certificate on the
books of the within-named Company, with full power of substitution.
Dated: ___________________, 19__
-------------------------------
Signature
Signature Guaranteed:
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [_] is [_] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Plan);
(2) after due inquiry and to the best knowledge of the undersigned, it
[_] did [_] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: _________________ , 19__
-------------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
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FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: STAAR Surgical Company
The undersigned hereby irrevocably elects to exercise _____________________
(______________) Rights represented by this Rights Certificate to purchase the
shares of Common Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon
the exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to: (Please insert name, address, and
social security or other identifying number) ___________________________________
________________________________________________________________________________
____________________________. If such number of Rights shall not be all the
Rights evidenced by this Rights Certificate, a new Rights Certificate for the
balance of such Rights shall be registered in the name of and delivered to:
(Please insert name, address, and social security or other identifying
number)_________________________________________________________________________
____________________________________________________.
Dated: ____________________, 19__
__________________________________
Signature
Signature Guaranteed:
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [_] are [_] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Plan);
(2) after due inquiry and to the best knowledge of the undersigned, it
[_] did [_] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _______________, 19__
__________________________________
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the fact of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
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EXHIBIT B
---------
SUMMARY OF RIGHTS TO PURCHASE COMMON STOCK
------------------------------------------
On April 20, 1995, the Board of Directors of STAAR Surgical Company (the
"Company") unanimously adopted a resolution approving the immediate
effectiveness of a Stockholders' Rights Plan (the "Rights Plan"), subject to
subsequent approval of the Rights Plan by the stockholders of the Company at the
Annual Meeting of Stockholders of the Company on June 6, 1995, or any
adjournments thereof. On June 6, 1995 the stockholders of the Company approved
the adoption of the Plan.
Pursuant to the terms of the Rights Plan, the Company declared a dividend
distribution of one Right for each outstanding share of Common Stock to
stockholders of the Company of record at the close of business on April 20,
1995. Each Right entitles the registered holder to purchase from the Company
one share of Common Stock at a price of $50.00 per share (the "Purchase Price"),
subject to adjustment. The Purchase Price shall be paid in cash. The
description and the terms of the Rights are set forth in the Rights Plan.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock (the "Stock
Acquisition Date"), or (ii) 10 business days following the commencement of a
tender offer or exchange offer that would result in a person or group
beneficially owning 15% or more of such outstanding shares of Common Stock.
Until the Distribution Date, (i) the Rights will be evidenced by Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after June 6, 1995, will
contain a notation incorporating the Rights Plan by reference and (iii) the
surrender for transfer of any outstanding Common Stock certificates also will
constitute the transfer of the Rights associated with the Common Stock
represented by such certificates.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on April 20, 2003, unless earlier redeemed by the
Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
Upon any Person becoming the beneficial owner of 15% or more of the then
outstanding shares of Common Stock (except pursuant to an offer for all
outstanding shares of Common Stock that is determined by the Board of Directors
to be fair to and otherwise in the best interests of the Company and its
stockholders [a "Qualifying Tender Offer"]), each holder of a Right thereafter
will have the right to receive, upon exercise thereof, the number of shares of
Common Stock as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the number of shares of Common Stock for which such
Right was exercisable immediately prior to the occurrence of such event and (y)
dividing that product by 50% of the market price per share of Common Stock.
Notwithstanding any of the foregoing, following the occurrence of such event,
all rights that are, or (under certain circumstances specified in the Rights
Plan) were beneficially owned by any Acquiring Person, will be null and void.
However, Rights are not exercisable following the occurrence of either of the
events set forth above until such time as the Rights are no longer redeemable by
the Company as set forth below.
For example, assume that a stockholder holds Rights to purchase 100 shares
of Common Stock at the $50 Purchase Price, and further assume that the Common
Stock had a per share trading price of
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$20 at the time of an event set forth in the preceding paragraph. As a result,
the holder would have the right to purchase 500 shares of Common Stock for the
aggregate purchase price of $5,000, or $10 per share. The 500 share figure is
determined by (x) multiplying the $50 Purchase Price by 100 (representing the
number of shares of Common Stock the holder was entitled to purchase by virtue
of the Rights), and (y) dividing that product by $10 (or 50% of the $20 market
price of the Common Stock). The $5,000 aggregate purchase price for said 500
shares is determined by multiplying the 100 shares of Common Stock the holder
was initially entitled to purchase by virtue of the Rights by the $50 Purchase
Price per Right.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation or (ii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a Right
(except Rights which previously have been voided as set forth above) thereafter
shall have the right, upon payment of the Purchase Price (without giving effect
to the adjustment described in the immediately preceding paragraph), to buy such
number of shares of common stock of the acquiring company as shall equal the
result obtained by (x) multiplying the then current Purchase Price by the number
of shares of Common Stock for which such Rights were exercisable immediately
prior to the occurrence of such event and (y) dividing that product by 50% of
the market price per share of the common stock of the acquiring company. The
event set forth in this paragraph and in the preceding paragraph are referred to
as the "Triggering Events."
The Purchase Price payable, and the number of shares of the Common Stock
issuable, upon exercise of the Rights are subject to adjustment from time to
time prevent to dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Common Stock, (ii) if
holders of the Common Stock are granted certain rights or warrants to subscribe
for the Common Stock or convertible securities at less than the current market
price of the Common Stock, or (iii) upon the distribution to holders of the
Common Stock of evidences of indebtedness or assets (excluding regular quarterly
cash dividends) or of subscription rights or warrants (other than those referred
to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Common Stock will be issued and, in lieu
thereof, an adjustment in cash will be made based on the market price of the
Common Stock on the last trading date prior to the date of exercise.
The Company is only obligated to maintain authorized but unissued shares of
Common Stock for holders of Rights once a Distribution Event occurs. The
Company is permitted, however, if sufficient shares of unissued but authorized
Common Stock are not available to be purchased by holders of Rights, to
distribute to such holders, in lieu of Common Stock, other securities of the
Company with equivalent value to the Rights exercised, such as preferred stock,
debt instruments, or reduction in Purchase Price.
At any time until 10 days following the Stock Acquisition Date, the Company
may redeem the Rights in whole, but not in part, at a price of $.001 per Right,
payable in cash or shares of Common Stock. Under certain circumstances set
forth in the Rights Plan, the decision to redeem shall require the concurrence
of a majority of the Continuing Directors (as hereinafter defined). After the
redemption period has expired, the Company's rights of redemption may be
restated if an Acquiring Person reduces his or her beneficial ownership to 10%
or less of the outstanding shares of Common Stock in a transaction or series of
transactions not involving the Company. Immediately upon the action of the
Board of Directors ordering redemption of the Rights, with, where required, the
concurrence of the Continuing Directors, the Rights will terminate and the only
right which the holders of Rights will thereafter have will be to receive the
$.001 redemption price.
The term "Continuing Directors" means any member of the Board of Directors
of the Company who was a member of the Board prior to the date of the Rights
Plan, and any person who is subsequently elected to the Board if such person is
recommended or approved by a majority of the
2
<PAGE>
Continuing Directors, but shall not include an Acquiring Person, or an affiliate
or associate of an Acquiring Person, or any representative of the foregoing.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for the Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth.
Any of the provisions of the Rights Plan may be amended by the Board of
Directors of the Company as long as the Rights are then redeemable including,
without limitation, the 15% threshold (but not, in general, below 10%), the
purchase price (but not by more than 50%), or Final Expiration Date (but not by
more than 3 additional years). When the Rights are not redeemable, the
provisions of the Rights Plan may be amended by the Board in order to cure any
ambiguity, to correct or supplement any provision which may be inconsistent with
any other provision or to make changes which do not affect adversely the
interests of holder of Rights; provided, however, that amendments proposed to be
-------- -------
made after a person becomes an Acquiring Person (other than pursuant to a
Qualifying Tender Offer) may be made only if approved by a majority of the
Continuing Directors.
The Company covenants in the Rights Plan to file a registration statement
under the Securities Act of 1933 with respect to shares of Common Stock
purchasable upon exercise of the Rights as soon as a Section 11(a)(ii) Event
occurs, or as soon as required by law, and may temporarily suspend, for no more
than 90 days, the exercisability of the Rights to permit the registration
statement to become effective.
A copy of the Rights Plan has been filed with the Securities and Exchange
Commission as an Exhibit to a Proxy Statement dated May ____, 1995. A copy of
the Rights Plan is available free of charge from the Rights Agent. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Plan, which is incorporated herein by
reference.
3
<PAGE>
PRELIMINARY COPY
PROXY PROXY
STAAR SURGICAL COMPANY
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 6, 1995
The undersigned hereby appoints JOHN R. WOLF and WILLIAM C. HUDDLESTON and
each of them (with full power to act without the other) the true and lawful
proxies of the undersigned, each having full power to substitute, to represent
the undersigned and to vote all shares of stock of STAAR SURGICAL COMPANY (the
"Company") which the undersigned would be entitled to vote if personally present
at the Annual Meeting of Stockholders of the Company to be held at the Holiday
Inn, 924 West Huntington Drive, Monrovia, California, on Tuesday, June 6, 1995,
at the hour of 10:00 a.m., prevailing local time, or any adjournments thereof.
1. FOR [_] WITHHOLD [_] election of the following nominees in the Notice of
Annual Meeting and Proxy Statement as directors of the Company:
John R. Wolf, Michael R. Deitz, M.D., Joseph C. Gathe, M.D.
Andrew F. Pollet, Esq., and Peter J. Utrata, M.D.
2. FOR [_] AGAINST [_] the adoption of an amendment of the Certificate of
Incorporation and Bylaws of the Company to implement the following
changes recommended by the Board of Directors (the "Classified Board
Provisions"): (i) reorganize the Board of Directors of the Company into
three classes of directors, with the directors in each class serving
three year staggered terms; (ii) limit the minimum and maximum number of
authorized directors serving on the Board to 3 and 7 persons,
respectively; (iii) require that vacancies in the number of directors of
the Company be filled solely by the vote of a majority of directors then
in office; (iv) require that actions by stockholders of the Company be
taken only at an annual or special meeting and not by written consent;
and (v) require a two-thirds vote of the stockholders of the Company
to amend or repeal any of the foregoing amendments to the Certificate of
Incorporation and Bylaws of the Company.
3. FOR [_] AGAINST [_] the adoption of a Stockholders' Rights Plan and, in
connection therewith, to increase the Company's authorized shares of
Common Stock from 20 million shares to 30 million shares.
4. Upon all such other matters that may properly be brought before such
Annual Meeting, or any adjournments thereof, as to which the undersigned
hereby confers discretionary authority upon said proxies.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
UNLESS DIRECTION IS GIVEN TO WITHHOLD AUTHORITY FOR ANY NOMINEE, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE AFORESAID FIVE
---
DIRECTOR NOMINEES TO SERVE ON THE COMPANY'S BOARD OF DIRECTORS; "FOR" THE
---
ADOPTION OF THE AFORESAID AMENDMENTS TO THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BYLAWS ESTABLISHING A CLASSIFIED BOARD OF DIRECTORS AND
RELATED MATTERS; AND "FOR" THE RATIFICATION OF THE AFORESAID STOCKHOLDERS'
---
RIGHTS PLAN AND THE INCREASE IN THE COMPANY'S AUTHORIZED SHARES OF COMMON STOCK
IN CONNECTION THEREWITH. THE UNDERSIGNED MAY WITHHOLD AUTHORITY TO VOTE FOR THE
ELECTION OF ANY INDIVIDUAL NOMINEE BY LINING THROUGH THE NOMINEE'S NAME ABOVE.
All other proxies heretofore given by the undersigned to vote shares of stock
of the Company which the undersigned would be entitled to vote if personally
present at said Annual Meeting or any adjournment thereof are hereby expressly
revoked. This proxy may be revoked at any time prior to the voting hereof.
NOTE: PLEASE DATE THIS PROXY AND SIGN IT EXACTLY AS YOUR NAME OR NAMES APPEAR
ON YOUR SHARES. IF SIGNING AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, GUARDIAN OR
TRUSTEE, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN FULL
CORPORATE NAME BY DULY AUTHORIZED OFFICER OR OFFICERS, AFFIX CORPORATE SEAL AND
ATTACH A CERTIFIED COPY OF RESOLUTION OR BYLAWS EVIDENCING AUTHORITY.
_____________________________
(Date)
______________________________
(Signature)
______________________________
(Signature)
