<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/ Confidential, for Use of the
Filed by a party other than the registrant Commission Only (as permitted
Check the appropriate box: by Rule 14a-6(e)(2)
Preliminary proxy statement / /
Definitive proxy statement /X/
Definitive additional materials / /
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
The Spectranetics Corporation
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 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:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11: (1)
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
- -------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- -------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- -------------------------------------------------------------------------------
(3) Filing party:
- -------------------------------------------------------------------------------
(4) Date filed:
- -------------------------------------------------------------------------------
- -------------
1. Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
THE SPECTRANETICS CORPORATION
96 TALAMINE COURT
COLORADO SPRINGS, CO 80907
(719) 633-8333
_____________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 9, 1997
The Annual Meeting of the Shareholders of THE SPECTRANETICS CORPORATION
will be held at the Colorado Springs Marriott, 5580 Tech Center Drive, Colorado
Springs, Colorado, on June 9, 1997 at 10:00 a.m. for the following purposes:
1. To elect two (2) members of the Board of Directors to serve three-year
terms until the 2000 Annual Meeting of Shareholders, or until
successors are elected and have been duly qualified.
2. To approve the Company's 1997 Equity Participation Plan.
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the current fiscal year.
4. To transact such other business as may properly come before the meeting
or any adjournment(s) thereof.
Only shareholders of record as of the close of business on April 21, 1997,
the record date, will be entitled to notice of and to vote at the Annual Meeting
and any adjournments or postponements thereof.
WE HOPE YOU WILL BE ABLE TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT
YOU PLAN TO ATTEND, PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE
THEIR PROXIES AND VOTE IN PERSON IF THEY SO DESIRE.
BY ORDER OF THE BOARD OF DIRECTORS
James P. McCluskey
Secretary/Treasurer
Colorado Springs, Colorado
April 30, 1997
[LOGO]
<PAGE>
THE SPECTRANETICS CORPORATION
96 TALAMINE COURT
COLORADO SPRINGS, CO 80907
(719) 633-8333
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 9, 1997
PROXY STATEMENT
_______________________
SOLICITATION OF PROXIES
This Proxy Statement is furnished to shareholders in connection with the
Solicitation of Proxies by the Board of Directors of THE SPECTRANETICS
CORPORATION (the "Company" or "SPNC") for use at the Annual Meeting of
Shareholders of the Company (the "Meeting") to be held at the Colorado
Springs Marriott, 5830 Tech Center Drive, Colorado Springs, Colorado, on June
9, 1997, at 10:00 a.m. and at any adjournments or postponements thereof.
This Proxy Statement and Proxy are being mailed to Shareholders on or about
May 9, 1997.
The cost of soliciting Proxies is being borne by the Company. In addition
to the mailings, the Company's officers, directors and other regular employees,
without additional compensation, may solicit Proxies by telephone or by oral
communication or by other appropriate means.
If the enclosed Proxy is properly executed, returned and unrevoked, the
shares represented thereby will be voted in the manner specified. If no
specification is made in an executed Proxy received by the Company, then the
Proxy shall be voted FOR (i) the election of the two (2) nominees to the
Board of Directors listed herein; (ii) approval of the Company's 1997 Equity
Participation Plan; and (iii) ratification of the appointment of KPMG Peat
Marwick LLP as the Company's independent auditors. A Proxy may be revoked by
a shareholder at any time prior to the exercise thereof by written notice to
the Secretary of the Company, by submission of another Proxy bearing a later
date, or by attending the Meeting and voting in person.
Discretionary authority is provided in the Proxy as to matters not
specifically referred to therein. The Board of Directors is not aware of any
other matters which are likely to be brought before the Meeting. However, if
any such matters properly come before the Meeting, the Proxy holder or holders
are fully authorized to vote thereon in accordance with the Proxy holder's or
holders' judgment and discretion.
RECORD DATE AND VOTING SECURITIES
Only holders of record of the Company's $.001 par value common stock
("Common Stock") outstanding as of the close of business on April 21, 1997,
will be entitled to notice of and to vote on matters presented at the Meeting
or any adjournment or postponement thereof. On April 21, 1997, there were
outstanding 18,592,677 shares of Common Stock, which constituted all the
outstanding voting securities of the Company. Each share of Common Stock
will be entitled to one vote on all matters presented at the Meeting, and
there is no cumulative voting. In order to constitute a quorum for the
conduct of business at the Meeting, a majority of the outstanding shares of
Common Stock entitled to vote at the Meeting must be represented at the
Meeting. Shares represented by Proxies that reflect abstentions or "broker
non-votes" (i.e., shares held by a broker or nominee which are represented at
the Meeting, but with respect to which such broker or nominee is not
empowered to vote on a particular proposal) will be counted as shares that
are present and entitled to vote for purposes of determining the presence of
a quorum.
-1-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to the number of
shares of Common Stock of SPNC beneficially owned as of February 28, 1997, by
(i) each person who is known to SPNC to be the beneficial owner of more than
5% of the Common Stock of SPNC; (ii) each of SPNC's Directors; (iii) the
Named Executive Officers (as defined on page 6 hereof); and (iv) all of the
current executive officers and Directors of SPNC as a group. Except as
otherwise indicated, SPNC believes that the beneficial owners of the Common
Stock listed below, based solely on information furnished by such holders,
have sole voting and dispositive power with respect to such shares, subject
to community property laws, where applicable. "Percent Beneficially Owned"
is based on shares of Common Stock outstanding on February 28, 1997.
==============================================================================
SHARES BENEFICIALLY OWNED
---------------------------
PERCENTAGE
NUMBER OF BENEFICIALLY
NAME AND ADDRESS SHARES OWNED
- ------------------------------------------------------------------------------
5% OWNERS
Nazem & Company II, L.P. 826,490 4.4%
Nazem & Associates II, L.P. (1) 826,490 4.4%
Nazem & Company III, L.P. 407,133 2.2%
Nazem & Associates III, L.P. (2) 407,133 2.2%
Fred Nazem (3) 1,244,987 6.7%
Paul Dali (4) 407,133 2.2%
As a group: 1,244,987 6.7%
645 Madison Avenue, 12th Floor
New York, NY 10022
Perkins Capital Management, Inc. (5) 1,403,450 7.5%
730 East Lake Street
Wayzata, MN 55391-1769
DIRECTORS AND NAMED EXECUTIVE OFFICERS (6)
Gary R. Bang (7) 32,200 *
Cornelius C. Bond, Jr. (8) 57,908 *
E. Wyatt Cannady (9) 193,750 1.0%
Emile J. Geisenheimer (10) 103,364 *
Joseph A. Largey (11) 25,000 *
James A. Lent (12) 25,000 *
Joseph M. Ruggio, M.D. 0 *
John G. Schulte 0 *
James P. McCluskey (13) 74,936 *
All current executive officers and
Directors as a group (13 persons) (14) 797,157 4.1%
----------------------
* less than 1%
==============================================================================
(1) Includes 826,490 shares held by Nazem & Company II, L.P. ("Nazem II"), of
which Nazem & Associates II, L.P. ("NA II") is the general partner.
-2-
<PAGE>
(2) Includes 407,133 shares held by Nazem & Company III, L.P. ("Nazem III"), of
which Nazem & Associates III, L.P. ("NA III") is the general partner.
(3) Includes 826,490 shares beneficially owned by NA II, of which Mr. Nazem is
the managing general partner, and 407,133 shares held by NA III, of which
Mr. Nazem is the managing general partner. Mr. Nazem disclaims beneficial
ownership of the shares beneficially owned by NA II and NA III other than
to the extent of his partnership interest.
(4) Includes 407,133 shares held by NA III, of which Mr. Dali is a general
partner. Mr. Dali disclaims beneficial ownership of these shares except to
the extent of his partnership interest.
(5) Based on a Schedule 13G filed by Perkins Capital Management, Inc.
("Perkins"). Perkins has sole voting power with respect to 548,500 shares
and sole dispositive power with respect to 1,403,450 shares.
(6) The address of each of the Directors listed herein is c/o The Spectranetics
Corporation, 96 Talamine Court, Colorado Springs, CO 80907.
(7) Includes options for 25,000 shares which are exercisable within 60 days of
February 28, 1997.
(8) Includes options for 40,224 shares which are exercisable within 60 days of
February 28, 1997.
(9) Includes options for 193,750 shares which are exercisable within 60 days of
February 28, 1997.
(10) Includes options for 93,000 shares which are exercisable within 60 days of
February 28, 1997.
(11) Includes options for 25,000 shares which are exercisable within 60 days of
February 28, 1997.
(12) Includes options for 25,000 shares which are exercisable within 60 days of
February 28, 1997.
(13) Includes 74,936 shares which are exercisable within 60 days of February 28,
1997.
(14) Includes 720,150 shares which are exercisable within 60 days of February
28, 1997.
BOARD OF DIRECTORS
The following table lists the members of the Board of Directors of SPNC,
their ages, their positions and offices with the Company, the year first
elected as a director, and the expiration of their current term.
<TABLE>
DIRECTOR TERM
NAME AGE POSITIONS WITH THE COMPANY SINCE EXPIRES
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joseph A. Largey(1) 50 President, Chief Executive 1997 1997
Officer and Director
E. Wyatt Cannady(2) 58 Director 1994 1997
Gary R. Bang 50 Director 1995 1998
Cornelius C. Bond, Jr. 62 Director 1994 1998
Emile J. Geisenheimer 49 Chairman of the Board of 1990 1999
Directors
James A. Lent(1) 54 Director 1995 1997
Joseph M. Ruggio, M.D. 42 Director 1997 1998
John G. Schulte 48 Director 1996 1999
</TABLE>
- -------------------------
(1) Recommended for re-election to the Board for a three-year term.
(2) Mr. Cannady is not seeking re-election to the Board.
The Board of Directors is divided into three classes, designated Class I,
Class II and Class III. Each class shall consist, as nearly as may be possible,
of one-third of the total number of directors constituting the entire Board of
Directors. At each annual meeting only directors of the class whose term is
expiring will be voted upon, and upon election each such director will serve a
three-year term. The Board of Directors may determine from time to time the
size of the Board of Directors, but in no event can it determine to have a Board
consisting of not less than four nor more than eight directors. If the number
of directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as near equal as
possible, and any additional directors of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director will hold office until the annual
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<PAGE>
meeting for the year in which his term expires and until his successor shall
be elected and qualified, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
The Company is not aware of any family relationships among any of the
directors and executive officers of the Company. All non-employee directors of
the Company are reimbursed for expenses incurred for attendance at meetings of
the Board of Directors and any Board committee.
DIRECTORS COMPENSATION
Currently, non-employee Directors are eligible to participate in the
Company's Stock Option Plan For Outside Directors ("Director Plan"). Beginning
on June 12, 1995, all non-employee Directors were granted a non-qualified stock
option to purchase 75,000 shares of Common Stock to be vested equally over a
three-year term. Any newly elected non-employee Director will be granted a non-
qualified stock option to purchase 75,000 shares of Common Stock upon
appointment to the Board. Every third year anniversary of the initial grant
under this Director Plan, for so long as each non-employee Director remains on
the Board, a non-qualified stock option to purchase 75,000 shares, which vest
equally over a three-year period. The exercise price is equal to the closing
price of the stock as traded on the Nasdaq National Market on the date of grant.
In addition, in April 1997, the Board approved the Company's 1997 Equity
Participation Plan (the "Plan") which, upon approval by the Company's
shareholders at the Meeting, would replace the Director Plan with respect to any
future option grants to non-employee Directors. The Plan provides that any
newly elected non-employee Director will be granted a non-qualified stock option
to purchase 75,000 shares of Common Stock at the then fair market value, which
vests equally over a three-year period. On every third anniversary of each
grant, for so long as each non-employee Director remains on the Board, he or she
will receive an option to purchase 75,000 shares of Common Stock at the then
fair market value, which vests equally over three years. For more information
on the Plan and Board compensation, see "PROPOSAL 2 - APPROVAL OF THE 1997
EQUITY PARTICIPATION PLAN."
Non-employee Directors receive $2,500 for each Board meeting attended in
person and $1,000 for meetings attended by telephone. Board members are
reimbursed for expenses associated with their attendance at Board meetings.
Board members also receive $2,500 per day when serving as a consultant to the
Company. The Chairman of the Board receives a retainer of $10,000 per month for
consulting services rendered to the Company.
BOARD COMMITTEES AND MEETINGS
In 1996, the Board of Directors met eight times and executed two unanimous
written consents. No Director attended fewer than 75% of the Board meetings.
The Company has established an Audit Committee comprised of Messrs. Bond, Lent
and Schulte who met one time in 1996 to review the services rendered by
independent auditors and to analyze accounting procedures of the Company. Mr.
Schulte joined the Audit Committee in August 1996. The Board has established a
Compensation Committee, consisting of Messrs. Lent, Bond and Bang, which met
five times in 1996 to review and approve the Company's compensation and benefit
plans. The Compensation Committee also approves stock option grants to Company
employees. Mr. Lent joined the Compensation Committee in June 1996.
BUSINESS EXPERIENCE OF DIRECTORS
Joseph A. Largey joined SPNC in March 1997 as President, Chief Executive
Officer and a Director. Prior to joining SPNC, he served as executive vice
president for the International Division of Picker International, Inc., a
subsidiary of G.E.C. plc. since November 1985.
Gary R. Bang has served as a Director of SPNC since November 1995. Since
May 1993, he has been the president, chief executive officer and a director of
Target Therapeutics, Inc., a medical device company specializing in the
treatment of vascular diseases of the brain. From 1973 to April 1993, Mr. Bang
served as
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<PAGE>
president of the Pharmaseal Surgical Division of Baxter International. He is
a director of CaRDiMa, a company focused on the diagnosis and treatment of
electrophysiological disorders.
Cornelius C. Bond, Jr. has served as a Director of SPNC since June 1994.
He served as a member of the Board of Directors for Advanced Interventional
Systems, Inc. (LAIS) from 1986 until June 1994 when LAIS merged into SPNC. Mr.
Bond has been a general partner of NEA Partners III, Limited Partnership, a
venture capital firm, since 1981, and is a director of several privately-held
companies.
E. Wyatt Cannady has served as a Director of SPNC since July 1994 and, from
August 1994 to February 1997, served as President and Chief Executive Officer of
SPNC. In February 1997, Mr. Cannady left his officer position with SPNC and
joined Ion Laser Technology, Inc. as president and chief executive officer.
Prior to joining SPNC, from January 1992 to June 1994, he served as president
and chief executive officer of Loredan Biomedical, Inc., which develops and
manufactures rehabilitation and fitness systems. Prior to 1992, Mr. Cannady
served as senior consultant and chief executive officer to several start-up
companies with technology ranging from imaging, instrumentation, monitoring and
disposables in the healthcare industry.
Emile J. Geisenheimer has served as a Director of SPNC since April 1990 and
was appointed Chairman of the Board in June 1996. He has served as president of
Madison Investment Partners, Inc., a private equity investment firm, since
January 1995. Prior to forming Madison Investment Partners, he was general
partner of Nazem and Company, a venture capital management firm, from November
1989 to January 1995.
James A. Lent has served as a Director of SPNC since November 1995. Since
May 1995, Mr. Lent has served as chairman and chief executive officer of DePuy,
Inc., an orthopedic supply company, which is a wholly-owned subsidiary of
Corange Ltd. He served as president and chief executive officer of DePuy, Inc.
from January 1985 to May 1995.
John G. Schulte has served as a Director of SPNC since August 1996. In
December 1996, Mr. Schulte was appointed senior vice president and general
manager of the International and Peripheral Division of Target Therapeutics,
Inc., a medical device company specializing in the treatment of vascular
diseases of the brain. Prior to joining Target Therapeutics, Inc., he served as
president since November 1993 of the U.S. Cardiology Division of C. R. Bard,
Inc., a medical device company specializing in invasive diagnostic cardiology.
From January 1993 to November 1993, Mr. Schulte served as president of Bard
Electrophysiology Division of C. R. Bard, Inc., and from January 1992 to January
1993, he served as president of Bard MedSystems Division of C. R. Bard, Inc.
Joseph M. Ruggio, M.D. has served as a Director of SPNC since February
1997. Since June 1994, Dr. Ruggio has served as president and chief executive
officer of Pacific Cardiovascular Associates Medical Group, Inc., a large
cardiovascular professional corporation. He also serves as president and chief
executive officer of Via Vitae, a cardiovascular disease management company,
which was founded in February 1996 and serves as president and chief executive
officer of UltiMed, Inc., a cardiovascular medical services organization, which
was founded in July 1995. From August 1985 to December 1995, Dr. Ruggio served
as Chairman of the Department of Cardiology and Director of Invasive
Interventional Cardiology for FHP, Inc.
-5-
<PAGE>
EXECUTIVE OFFICERS
The current executive officers of the Company are as follows:
NAME AGE OFFICE
- -------------------------------------------------------------------------------
Joseph A. Largey 50 President and Chief Executive Officer
Adrian E. Elfe 52 Vice President of Quality
Assurance/Regulatory Affairs
Henk Kos 52 Vice President of Marketing and Sales
Lawrence E. Martel, Jr. 46 Vice President of Operations
James P. McCluskey 43 Vice President of Finance, Chief
Financial Officer,
Secretary and Treasurer
Christopher J. Reiser 42 Vice President of Engineering
Each executive officer of the Company serves at the discretion of the Board
of Directors. The Company is not aware of any family relationships among any of
the directors and executive officers of the Company. Biographical information
regarding Mr. Largey is set forth under the heading "BUSINESS EXPERIENCE OF
DIRECTORS."
Adrian E. Elfe was appointed Vice President of Quality Assurance and
Regulatory Affairs in November 1996. He served as Director of Quality Assurance
and Regulatory Compliance since first employed by SPNC in April 1990. Prior to
joining SPNC, Mr. Elfe directed quality system planning and implementation for
nine different companies.
Henk Kos was appointed as Vice President of Marketing and Sales in February
1997. Prior to that time, Mr. Kos served as the General Manager of
Spectranetics International, B.V. in the Netherlands since first employed by
SPNC in January 1993. Prior to joining SPNC, Mr. Kos was an independent
consultant.
Lawrence E. Martel, Jr. was appointed Vice President of Operations of SPNC
in August 1994 and served as director of operations since first employed by SPNC
in January 1993. Prior to that time, he served nine years as vice president of
operations with Mountain Medical Equipment, Inc., a manufacturer of respiratory
medical devices for use in the home health care and health institutional
markets.
James P. McCluskey was appointed Chief Financial Officer of SPNC in June
1995. He was appointed Secretary and Treasurer of SPNC in June 1994. In August
1994, he was named Vice President of Finance of SPNC. From January 1992 to
August 1994, he served as corporate controller for SPNC. He joined SPNC in
January 1991 as the financial reporting manager.
Christopher J. Reiser, Ph.D was appointed Vice President of Engineering in
November 1997. Prior to that time, he served as Director of Engineering of SPNC
since December 1993. Dr. Reiser joined SPNC in December 1992 as Manager of
Laser Product Development. From January 1989 to October 1992, he served as
director of technology at Cymer Laser Technologies, a manufacturer of excimer
laser systems for the semiconductor industry.
-6-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation paid
by SPNC for the fiscal years ended December 31, 1996, 1995 and 1994 to those
persons who were either (i) the Chief Executive Officer of the Company during
the last completed fiscal year or (ii) one of the other four most highly
compensated executive officers who were serving as executive officers on
December 31, 1996, whose total annual salary and bonus exceeded $100,000 (the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------- ------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION OPTIONS (#)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
E. Wyatt Cannady (1) 1996 $175,000 $17,775 (3) ---- ----
President and Chief 1995 175,000 ---- ---- 100,000
Executive Officer 1994 87,500 39,375 (2) ---- 200,000
James P. McCluskey 1996 94,569 12,725 (3) ---- 25,000
Vice President, Finance 1995 87,885 ---- ---- ----
1994 77,069 5,000 (2) ---- 85,000
</TABLE>
1 Mr. Cannady resigned as an officer of SPNC.
2 Incentive compensation bonus paid during 1995 for services rendered in 1994.
3 Incentive compensation bonus paid during 1997 for services rendered in 1996.
GRANTS OF STOCK OPTIONS
The following table sets forth certain information with respect to
individual grants of stock options to the Named Executive Officers during the
year ended December 31, 1996.
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ---------------------------------------------------------------------- ANNUAL
% OF TOTAL RATES OF STOCK PRICE
OPTIONS EXERCISE APPRECIATION FOR
GRANTED TO OR BASE OPTION TERM (1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
E. Wyatt Cannady ---- ---- ---- ---- ---- ----
James P. McCluskey (3) 25,000 5.85% $4.9375 7/19/06 77,629 196,728
</TABLE>
1 Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only. Potential gains are net of the exercise price, but
before taxes associated with the exercise. Amounts represent hypothetical
gains that could be achieved for the respective options if exercised at the
end of the option term. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with the rules of the Securities
and Exchange Commission and do not represent the Company's estimate or
projection of the future Common Stock price. Actual gains, if any, on
option exercises are dependent upon the future financial performance of the
Company, overall market conditions and the option holders' continued
employment through the vesting period. This table does not take into
account any appreciation in the price of the Common Stock from the date of
grant to the date of this Proxy Statement other than the columns reflecting
assumed rates of appreciation of 5% and 10%.
2 Options vest 25% as of July 19, 1997 and 6.25% each calendar quarter
thereafter.
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<PAGE>
STOCK OPTION EXERCISES AND FISCAL YEAR-END STOCK OPTION VALUE
Set forth in the table below is information concerning the value of stock
options held on December 31, 1996 by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
SHARES NUMBER OF VALUE OF UNEXERCISED,
ACQUIRED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ON VALUE HELD AT FISCAL YEAR END (#) FISCAL YEAR END ($)(1)
EXERCISE REALIZED ------------------------------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
E. Wyatt Cannady ---- ---- 168,749 131,251 $546,739 $419,636
James P. McCluskey 12,000 47,298 68,749 37,375 $204,618 $ 40,170
</TABLE>
1 Amounts are based on the closing price of SPNC's stock, as reported on the
Nasdaq National Market, at December 31, 1996 ($4.1875), minus the exercise
price of the option, multiplied by the number of shares to which the option
relates.
COMPENSATION COMMITTEE REPORT
Decisions with regard to the compensation of SPNC's executive officers,
including the Named Executive Officers, are generally made by a three-member
Compensation Committee of the Board. Each member of the Committee is a non-
employee Director. Decisions about awards under certain of SPNC's stock-based
compensation plans are made by the Committee and reported to the Board. All
other decisions by the Committee relating to compensation of SPNC's executive
officers are reviewed by the Board. Generally, the Committee meets in January
following the end of a particular fiscal year to consider prospective calendar-
year salary adjustments, as well as to consider bonus compensation for above-
average performance of executive officers during the prior calendar year. In
addition, the Committee meets on an as-needed basis before Board meetings.
EXECUTIVE OFFICER COMPENSATION POLICIES
The Committee's executive compensation policies are designed to provide
competitive levels of compensation that integrate pay with SPNC's performance,
recognize individual initiative and achievements, and assist SPNC in attracting
and retaining qualified executives. The Committee relies in large part on
independent compensation studies for the determination of competitive
compensation.
In order to implement these objectives, SPNC has developed a
straightforward compensation approach. In general, SPNC compensates its
executive officers through a combination of base salary, annual incentive
compensation in the form of cash bonuses, and long-term incentive compensation
in the form of stock options. In addition, executive officers participate in
benefit plans, including medical, dental, stock purchase and 401-K, that are
available generally to SPNC's employees.
BASE SALARY
Base salary levels for SPNC's executive officers are set generally to be
competitive and targeted at the median range in relation to the salary levels of
executive officers in other companies within the medical device industry or
other companies of comparable size, taking into consideration the position's
complexity, responsibility and need for special expertise. In reviewing
salaries in individual cases the Compensation Committee also takes into account
individual experience and performance. In establishing the salary levels
against the range of
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<PAGE>
comparable companies, the Compensation Committee considered only salaries and
did not consider the competitiveness of the total compensation package.
ANNUAL INCENTIVE COMPENSATION
The Compensation Committee reviews and approves all bonus payments made to
SPNC's executive officers. Payment of bonuses is determined by both corporate
and individual performance criteria. In 1996 the bonuses for executive officers
were based on meeting performance targets for revenue, net income and cash
usage. These bonuses ranged from 22 percent to 37 percent for the executive
officers and up to 50 percent for the president and chief executive officer.
LONG-TERM INCENTIVE COMPENSATION
SPNC provides long-term incentive compensation through its stock option
plan. The number of shares covered by any grant is generally determined by the
position, the executive officer's salary at the time of grant, amounts granted
in previous years, and the then current stock price. In special cases, however,
grants may be made to reflect increased responsibilities or reward extraordinary
performance.
COMPENSATION PAID TO THE CHIEF EXECUTIVE OFFICER
Effective March 3, 1997, Joseph A. Largey was named President and Chief
Executive Officer of the Company. The Board established Mr. Largey's
compensation package based upon the general factors discussed above and upon an
evaluation of compensation paid to chief executive officers at comparable public
companies and other companies in SPNC's industry. Mr. Largey's compensation
package includes base salary, an annual bonus incentive program, an initial
stock option grant plus additional grants annually to be issued on the
anniverary date of his joining the Company. Mr. Largey also received a signing
bonus and an additional stock option to compensate him for the loss of a bonus
at his previous employer. The Company will pay for Mr. Largey's relocation to
Colorado Springs, Colorado. In the event Mr. Largey is terminated by the
Company without cause, he will be provided 12 months' severance compensation.
Pursuant to the terms of the Employment Agreement dated July 5, 1994
between E. Wyatt Cannady and The Spectranetics Corporation, Mr. Cannady is
employed for a three-year term at a base salary of $175,000 per year with an
annual bonus of up to 50% of his annual salary based on achievement of goals
established by the Board of Directors. An incentive compensation bonus was paid
during 1997 for services rendered in 1996. SPNC granted Mr. Cannady a stock
option to purchase 200,000 shares at date of hire with a vesting rate of 12.5%
on January 21, 1995, 12.5% on July 21, 1995, 1/36th of 75% each subsequent
calendar month thereafter, and 100% of any remaining shares not previously
vested in the event of a sale of the Company. On January 5, 1995, an additional
100,000 shares were granted to Mr. Cannady with the vesting rate of 12.5% on
July 5, 1995, 12.5% on January 5, 1996, 1/36th of 75% each subsequent calendar
month thereafter, and 100% of any remaining shares not previously vested in the
event of a sale of the Company. As 1997 compensation, Mr. Cannady will receive
a salary totaling $87,500 through December 31, 1997, and his options will be
fully vested as of July 5, 1997.
CERTAIN TAX CONSIDERATIONS
During 1995, the Internal Revenue Code of 1986 (the "Code") was amended to
include a provision which denies a deduction to any publicly-held corporation
for compensation paid to any "covered employee" (defined as the Chief Executive
Officer and the corporation's other four most highly compensated officers, as of
the end of a taxable year) to the extent that the compensation exceeds $1
million in any taxable year of the corporation beginning after 1993.
Compensation which is payable pursuant to written binding agreements entered
into before February 18, 1993, and compensation which constitutes "performance-
based compensation" is excludable in applying the $1 million limit. It is SPNC's
policy to qualify compensation paid to its top executives, in a manner
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consistent with SPNC's compensation policies, for deductibility under the new
law in order to maximize SPNC's income tax deductions.
Gary R. Bang
Cornelius C. Bond, Jr.
James A. Lent
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph set forth below compares the cumulative
total shareholder return on SPNC Common Stock for the period from December 31,
1992, to December 31, 1996, with the cumulative total return on the Nasdaq
Composite Index and a peer group index over the same period (assuming the
investment of $100 in SPNC Common Stock, the Nasdaq Composite Index and the peer
group index on December 31, 1992, and reinvestment of all dividends).
[GRAPH]
NASDAQ 100.000 114.793 112.209 158.684 195.214
Peer Group 100.000 70.390 83.121 98.862 91.258
Spectranetis 100.000 22.454 15.675 34.753 58.786
The peer group selected by SPNC is as follows: InnerDyne Inc. (IDYN);
Laserscope Inc. (LSCP); LaserSight Inc. (LASE); Merit Medical Systems Inc.
(MMSI); Quest Medical Inc. (QMED).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
10% of a registered class of the Company's equity securities, to file initial
reports of ownership and reports of changes in ownership with the Securities and
Exchange Commission (the "SEC") and the National Association of Securities
Dealers ("NASD"). Such persons are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of such forms received by it with
respect to fiscal 1996, or written representations from certain reporting
persons, the Company believes that, other than Messrs. Elfe, Martel and
McCluskey who were each late in filing Form 4s and Mr. Schulte who was late in
filing a Form 3, all of its directors and executive officers and persons who own
more than 10% of the Common Stock have complied with the reporting requirements
of Section 16(a).
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ELECTION OF DIRECTORS
(Proposal No. 1)
The current number of members of the Board of Directors is eight (8).
The terms of E. Wyatt Cannady, Joseph A. Largey and James A. Lent expire at
this meeting. E. Wyatt Cannady will not seek re-election. The Board of
Directors recommends that Joseph A. Largey and James A. Lent be re-elected
for a three-year term to expire at the Company's Annual Meeting in 2000.
The nominees have expressed their willingness to serve, but if because of
circumstances not contemplated the nominees are not available for election,
the Proxy holders named in the enclosed Proxy form intend to vote for such
other person or persons as management may nominate. If Joseph A. Largey and
James A. Lent are re-elected to serve on the Board of Directors, there would
remain one (1) vacancy which may or may not be filled by the Board of
Directors in the exercise of its discretion. Information with respect to
each nominee is set forth in the section entitled "BUSINESS EXPERIENCE OF
DIRECTORS."
VOTE AND RECOMMENDATION
Directors will be elected by a favorable vote of a plurality of the
shares of Common Stock present and entitled to vote, in person or by proxy,
at the Annual Meeting. Abstentions or broker non-votes as to the election of
directors will not affect the election of the candidates receiving the
plurality of votes. Unless instructed to the contrary, the shares represented
by the proxies will be voted FOR the election of the two nominees named above
as directors. Although it is anticipated that each nominee will be able to
serve as a director, should any nominee become unavailable to serve, the
proxies will be voted for such other person or persons as may be designated
by the Board.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF THE TWO PERSONS NOMINATED AS DIRECTORS.
APPROVAL OF THE 1997 EQUITY PARTICIPATION PLAN
(Proposal No. 2)
On April 14, 1997, the Board of Directors unanimously adopted The 1997
Equity Participation Plan of The Spectranetics Corporation (the "Plan"),
subject to approval by the Company's shareholders. The principal features of
the Plan are summarized below; the summary is qualified in its entirety by
reference to the Plan, which is attached as Appendix "A" to this Proxy
Statement.
GENERAL
The principal purposes of the Plan are to provide incentives for
officers, employees and consultants of the Company and its subsidiaries
through granting of options, stock appreciation rights ("SARs") and
restricted stock (collectively, "Awards"), thereby stimulating their personal
and active interest in the Company's development and financial success and
inducing them to remain in the Company's employ. In addition to Awards made
to officers, employees and consultants, the Plan permits the granting of
options to the Company's non-employee directors ("Director Options") pursuant
to a formula, as described in further detail below.
No more than 2,500,000 shares of Common Stock of the Company are
authorized for issuance upon exercise of options and SARs or upon vesting of
restricted stock awards under the Plan. The shares available under the Plan
upon exercise of options and SARs and for issuance as restricted stock may be
either previously authorized but unissued shares or treasury shares, and may
be equity securities of the Company other than Common Stock. The Plan
provides for appropriate adjustments in the number and kind of shares subject
to the Plan and to outstanding grants thereunder (including acceleration of
vesting in some instances) in the event of certain corporate transactions, a
change in control of the Company or a recapitalization such as a stock split
or stock dividend. If any portion of an option, SAR or other award terminates
or lapses unexercised, or is canceled upon
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grant of a new option, SAR or other award (which may be at a higher or lower
exercise price than the option, SAR or other award so canceled), the shares
which were subject to the unexercised portion of such option, SAR or other
award, will continue to be available for issuance under the Plan.
AWARDS UNDER THE PLAN TO DATE
The following table sets forth certain information with respect to Awards
pursuant to the Plan during 1997 to the following groups.
OPTION GRANT INFORMATION(1)
<TABLE>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM(2)
----------------------
OPTIONS GRANTED
NAME OF GROUP (SHARES) 5% 10%
------------- --------------- -------- ----------
<S> <C> <C> <C>
All current executive officers as a group ---- ---- ----
All non-employee directors as a group ---- ---- ----
All employees (other than executive officers) as a group ---- ---- ----
</TABLE>
- ------------------
(1) Information regarding each Named Executive Officer is set forth in this
Proxy Statement under "EXECUTIVE COMPENSATION." Future option grants or
other grants to officers, employees and consultants under the Plan are made
at the discretion of the Compensation Committee and are currently not
determinable. Director Options are granted to the Company's independent
non-employee directors pursuant to the formula set forth in the Plan, as
described below.
(2) Potential gains are net of the exercise price, but before taxes associated
with the exercise. Amounts represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. The assumed 5% and 10% rates of stock price appreciation are
provided in accordance with the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of the
future Common Stock price. Actual gains, if any, on option exercises are
dependent upon the future financial performance of the Company, overall
market conditions and the option holders' continued employment through the
vesting period. This table does not take into account any appreciation in
the price of the Common Stock from the date of grant to the date of this
Proxy Statement other than the columns reflecting assumed rates of
appreciation of 5% and 10%.
The closing price of the Common Stock on February 28, 1997 was $3.688 per
share.
ADMINISTRATION
The Compensation Committee of the Board or another committee thereof (the
"Committee") will administer the Plan with respect to grants to employees or
consultants of the Company and the full Board will administer the Plan with
respect to Director Options. The Committee will consist solely of two or more
members of the Board, each of whom is a "non-employee director" for purposes of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended ("Rule 16b-3")
and an "outside director" for the purposes of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). Subject to the terms and
conditions of the Plan, the Board or Committee has the authority to select from
among the eligible employees and consultants the individuals to whom Awards are
to be made and to determine the number of shares to be subject thereto and the
terms and conditions thereof. The Committee (and the Board) are also authorized
to adopt, amend and rescind rules relating to the administration of the Plan.
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ELIGIBILITY
Options, SARs and restricted stock under the Plan may be granted to
individuals who are then officers or other employees of the Company or any of
its present or future subsidiaries. Such Awards also may be granted to
consultants of the Company selected by the Board or Committee for participation
in the Plan. Approximately 150 officers and other employees are eligible to
participate in the Plan. Non-employee directors of the Company may only be
granted Director Options by the Board.
AWARDS UNDER THE PLAN
The Plan provides that the Committee may grant or issue stock options, SARs
and restricted stock, or any combination thereof. Each Award will be set forth
in a separate agreement with the person receiving the Award and will indicate
the type, terms and conditions of the Award.
NONQUALIFIED STOCK OPTIONS ("NQSOS") will provide for the right to
purchase Common Stock at a specified price which, except with respect to NQSOs
intended to qualify as performance-based compensation under Section 162(m) of
the Code, may be less than fair market value on the date of grant (but not less
than par value), and usually will become exercisable (in the discretion of the
Board or Committee) in one or more installments after the grant date, subject to
the participant's continued employment with the Company and/or subject to the
satisfaction of individual or Company performance targets established by the
Board or Committee. NQSOs may be granted for any term specified by the Board or
Committee.
DIRECTOR OPTIONS are NQSOs granted by the Board to non-employee
directors of the Company pursuant to a formula. Under such formula, each
person who becomes a non-employee director on or after the date of adoption
of the Plan shall be granted on the date of his election or appointment an
option to purchase 75,000 shares of Common Stock. Each non-employee director
who has (i) received a grant pursuant to the Plan or pursuant to the
Company's Stock Option Plan For Outside Directors (adopted by the Board on
April 9, 1995) and (ii) served at least three years as a non-employee
director shall be granted on the third anniversary of the date of such grant,
and each third anniversary thereafter (so long as he is a non-employee
director at the close of business on such date), an option to purchase an
additional 75,000 shares of Common Stock. The exercise price of Director
Options shall equal 100% of fair market value of a share of Common Stock on
the grant date. Options granted to non-employee directors shall become
exercisable on the following schedule: Beginning on the first anniversary of
the date of grant, up to 33% of the shares covered by the option; beginning
on the second anniversary of the date of grant, up to 66% of such shares; and
beginning on the third anniversary of the date of grant, and thereafter until
the earlier of expiration of the option's term or termination of the option
in accordance with the Plan, up to 100% of such shares. The options will
vest earlier upon the death or disability of such non-employee Director, upon
an unsuccessful attempt by such non-employee Director to win re-election to
the Board after nomination for election at the recommendation of the Board or
upon the occurrence of certain corporate transactions or events involving a
change in control of the Company, as more specifically provided in the Plan.
If a non-employee director ceases to be a director of the Company for any
reason other than death, disability, retirement from the Board or failure to
be re-elected as a director following his or her nomination by the Board of
Directors for re-election, he or she will have one year in which to exercise
those options which have vested as of their termination as a director. If a
non-employee director retires from the Board, he or she will have three years
in which to exercise those options which have vested as of his or her
retirement as a director. If a non-employee director ceases to be a director
of the Company for reason of death, disability or failure to be re-elected as
a director following his or her nomination by the Board of Directors for
re-election, he or she (or his or her successor) will have three years to
exercise 100% of the options previously granted to him or her under the Plan.
INCENTIVE STOCK OPTIONS ("ISOS"), if granted, will be designed to
comply with the provisions of the Code and will be subject to certain
restrictions contained in the Code. Among such restrictions, ISOs must have an
exercise price not less than the fair market value of a share of Common Stock on
the date of grant, may be granted to employees only, must expire within a
specified period of time following the Optionee's termination of employment, and
must be exercised within the ten years after the date of grant; however, they
may be subsequently modified to disqualify them from treatment as ISOs. In the
case of an ISO granted to an individual who owns (or
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is deemed to own) at least 10% of the total combined voting power of all
classes of stock of the Company, the Plan provides that the exercise price
must be at least 110% of the fair market value of a share of Common Stock on
the date of grant and the ISO must expire upon the fifth anniversary of the
date of its grant.
STOCK APPRECIATION RIGHTS may be granted in connection with stock
options or other Awards, or separately. SARs granted by the Board or Committee
in connection with stock options or other awards typically will provide for
payments to the holder based upon increases in the price of the Company's Common
Stock over the exercise price of the related option or other Awards, but
alternatively may be based upon criteria such as book value. Except as required
by Section 162(m) of the Code with respect to a SAR intended to qualify as
performance-based compensation as described in Section 162(m) of the Code, there
are no restrictions specified in the Plan on the exercise of SARs or the amount
of gain realizable therefrom, although restrictions may be imposed by the Board
or Committee in the SAR agreements. The Board or Committee may elect to pay
SARs in cash or in Common Stock or in a combination of both.
RESTRICTED STOCK may be sold to participants at various prices (but
not below par value) and made subject to such restrictions as may be determined
by the Board or Committee. Typically, restricted stock may be repurchased by
the Company at the original purchase price if the conditions or restrictions are
not met. In general, restricted stock may not be sold, or otherwise transferred
or hypothecated, until restrictions are removed or expire. Purchasers of
restricted stock, unlike recipients of options, will have voting rights and will
receive dividends prior to the time when the restrictions lapse.
PAYMENT FOR SHARES
The exercise or purchase price for all options, SAR and restricted stock
together with any applicable tax required to be withheld, must be paid in full
in cash at the time of exercise or purchase or may, with the approval of the
Committee, be paid in whole or in part in Common Stock owned by the optionee (or
issuable upon exercise of the option) and having a fair market value on the date
of exercise equal to the aggregate exercise price of the shares to be purchased.
The Committee may also provide, in the terms of an option or other right, that
the purchase price may be payable within thirty days after the date of exercise.
The Committee may also authorize other lawful consideration to be applied to the
exercise or purchase price of an award. This may also include services
rendered, or the difference between the exercise price of presently-exercisable
options and the fair market value of the Common Stock covered by such options on
the date of exercise.
AMENDMENT AND TERMINATION
Amendments to the Plan to increase the number of shares of Common Stock as
to which options, SARs and restricted stock may be granted (except for
adjustments resulting from stock splits and the like) require the approval of
the Company's stockholders. In all other respects, the Plan can be amended,
modified, suspended or terminated by the Committee, unless such action would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule. Amendments of the Plan will not, without the consent of the
participant, affect such person's rights under an award previously granted,
unless the award itself otherwise expressly so provides. No options or other
awards under the Plan may be granted or awarded after June 9, 2007.
MISCELLANEOUS PROVISIONS
The Plan specifies that the Company may make loans to Plan participants to
enable them to exercise options, purchase shares or realize the benefits of
other awards granted under the Plan. The terms and conditions of such loans, if
any are made, are to be set by the Committee.
In consideration of receipt of an option, SAR or right to receive
restricted stock, the employee or consultant must agree in the written agreement
embodying such award to remain in the employ of, or to continue as a consultant
for, the Company or a subsidiary of the Company for at least one year after the
award is granted.
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<PAGE>
The dates on which Awards under the Plan first become exercisable and on
which they expire will be set forth in individual options or other agreements
setting forth the terms of the Awards. Such agreements generally will provide
that Awards expire upon termination of the optionee's status as an employee or
consultant, although the Committee may provide that such options continue to be
exercisable following a termination without cause, or following a change in
control of the Company, or because of the grantee's retirement, death,
disability or otherwise. Similarly, restricted stock granted under the Plan
which has not vested generally will be subject to repurchase by the Company in
the event of the grantee's termination of employment or consultancy, although
the Committee may make exceptions, based on the reason for termination or on
other factors, in the terms of an individual restricted stock agreement.
No Award granted under the Plan may be assigned or transferred by the
grantee, except by will or the laws of intestate succession, although the shares
underlying such rights may be transferred if all applicable restrictions have
lapsed. During the lifetime of the holder of any Award, the Award may be
exercised only by the holder.
The Company requires participants to discharge withholding tax obligations
in connection with the exercise of any option or SAR granted under the Plan, or
the lapse of restrictions on restricted stock, as a condition to the issuance or
delivery of stock or payment of other compensation pursuant thereto. Shares
held by or to be issued to a participant may also be used to discharge tax
withholding obligations related to exercise of options or receipt of other
awards, subject to the discretion of the Committee to disapprove such use. In
addition, the Committee may grant to employees a cash bonus in the amount of any
tax related to awards.
SECURITIES LAWS AND FEDERAL INCOME TAXES
SECURITIES LAWS. The Plan is intended to conform to the extent necessary
with all provisions of the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act") and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder, including
without limitation Rule 16b-3. The Plan will be administered, and options will
be granted and may be exercised, only in such a manner as to conform to such
laws, rules and regulations. To the extent permitted by applicable law, the
Plan and options granted thereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
GENERAL FEDERAL TAX CONSEQUENCES. The tax consequences of the Plan under
current federal law are summarized in the following discussion which deals with
the general tax principles applicable to the Plan, and is intended for general
information only. In addition, the tax consequences described below are subject
to the limitation of Section 162(m) of the Code, as discussed in further detail
below. Alternative minimum tax and state and local income taxes are not
discussed, and may vary depending on individual circumstances and from locality
to locality.
NONQUALIFIED STOCK OPTIONS. For Federal income tax purposes, the recipient
of NQSOs granted under the Plan will not have taxable income upon the grant of
the option, nor will the Company then be entitled to any deduction. Generally,
upon exercise of NQSOs the optionee will realize ordinary income, and the
Company will be entitled to a deduction, in an amount equal to the difference
between the option exercise price and the fair market value of the stock at the
date of exercise. An optionee's basis for the stock for purposes of determining
his gain or loss on his subsequent disposition of the shares generally will be
the fair market value of the stock on the date of exercise of the NQSO.
INCENTIVE STOCK OPTIONS. There is no taxable income to an employee when an
ISO is granted to him or when that option is exercised; however, the amount by
which the fair market value of the shares at the time of exercise exceeds the
option price will be an "item of tax preference" for the optionee. Gain
realized by an optionee upon sale of stock issued on exercise of an ISO is
taxable at capital gains rates, and no tax deduction is available to the
Company, unless the optionee disposes of the shares within two years after the
date of grant of the option or within one year of the date the shares were
transferred to the optionee. In such event the difference between the option
exercise price and the fair market value of the shares on the date of the
option's exercise will be taxed at
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ordinary income rates, and the Company will be entitled to a deduction to the
extent the employee must recognize ordinary income. An ISO exercised more
than three months after an optionee's retirement from employment, other than
by reason of death or disability, will be taxed as an NQSO, with the optionee
deemed to have received income upon such exercise taxable at ordinary income
rates. The Company will be entitled to a tax deduction equal to the ordinary
income, if any, realized by the optionee.
STOCK APPRECIATION RIGHTS. No taxable income is realized upon the receipt
of an SAR, but upon exercise of the SAR the fair market value of the shares (or
cash in lieu of shares) received must be treated as compensation taxable as
ordinary income to the recipient in the year of such exercise. The Company will
be entitled to a deduction for compensation paid in the same amount which the
recipient realized as ordinary income.
RESTRICTED STOCK. An employee to whom restricted stock is issued will not
have taxable income upon issuance and the Company will not then be entitled to a
deduction, unless in the case of restricted stock an election is made under
Section 83(b) of the Code. However, when restrictions on shares of restricted
stock lapse, such that the shares are no longer subject to repurchase by the
Company, the employee will realize ordinary income and the Company will be
entitled to a deduction in an amount equal to the fair market value of the
shares at the date such restrictions lapse, less the purchase price therefor.
If an election is made under Section 83(b) with respect to restricted stock, the
employee will realize ordinary income at the date of issuance equal to the
difference between the fair market value of the shares at that date less the
purchase price therefor and the Company will be entitled to a deduction in the
same amount.
SECTION 162(m) LIMITATION. In general, under Section 162(m) of the Code,
income tax deductions of publicly-held corporations may be limited to the extent
total compensation (including base salary, annual bonus, stock option exercises
and non-qualified benefits paid) for certain executive officers exceeds $1
million (less the amount of any "excess parachute payments" as defined in
Section 280G of the Code) in any one year. However, under Section 162(m), the
deduction limit does not apply to certain "performance-based compensation"
established by an independent compensation committee which is adequately
disclosed to, and approved by, stockholders. In particular, stock options and
SARs will satisfy the "performance-based compensation" exception if the awards
are made by a qualifying compensation committee, the plan sets the maximum
number of shares that can be granted to any person within a specified period and
the compensation is based solely on an increase in the stock price after the
grant date (i.e., the option exercise price is equal to or greater than the fair
market value of the stock subject to the award on the grant date).
The Company generally intends to cause the Plan to be in compliance with
the requirements of the performance-based compensation exclusion under Section
162(m), including option pricing requirements and requirements governing the
administration of the Plan, so that the deductibility of compensation paid to
top executives thereunder is not expected to be disallowed.
VOTE AND RECOMMENDATIONS
The affirmative vote of a majority of the outstanding shares of Common
Stock present or represented at the Annual Meeting is required to adopt the
Plan. Abstentions as to this Proposal 2 will be treated as votes against
Proposal 2. Broker non-votes, however, will be treated as unvoted for purposes
of determining approval of Proposal 2 and will not be counted as votes for or
against Proposal 2. Properly executed, unrevoked Proxies will be voted FOR
Proposal 2 unless a vote against Proposal 2 or abstention is specifically
indicated in the Proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
PLAN.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal No. 3)
Action is to be taken by the shareholders at the Meeting with respect to
the ratification of the selection by the Company's Board of Directors, upon
recommendation of the Audit Committee, of KPMG Peat Marwick LLP to be the
independent auditors of the Company for the fiscal year ended December 31, 1997.
KPMG Peat Marwick LLP has served as the Company's independent auditors since
January 1985. KPMG Peat Marwick LLP does not have and has not had at any time
any connection with the Company in the capacity of promoter, underwriter, voting
trustee, director, officer or employee. Neither the Company, nor any officer,
director, or associate of the Company, has any interest in KPMG Peat Marwick
LLP.
A representative of KPMG Peat Marwick LLP will be present at the Meeting
and will have the opportunity to make a statement if he so desires and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF SUCH
APPOINTMENT.
OTHER MATTERS
The Board of Directors knows of no other matters, other than the matters
set forth in this Proxy Statement to be considered at the Meeting. If, however,
any other matters properly come before the Meeting or any adjournment or
adjournments thereof, the persons named in the accompanying Proxy will vote such
Proxy in accordance with their best judgment on any such matter. The persons
named in the accompanying Proxy will also, if in their judgment it is deemed to
be advisable, vote to adjourn the Meeting from time to time.
DATE OF RECEIPT OF SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the Proxy Statement for the 1998
Annual Meeting of Shareholders must be received at the principal executive
offices of the Company on or before December 15, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
James P. McCluskey
Secretary/Treasurer
Dated April 30, 1997
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED
STATES. A PROMPT RETURN OF YOUR PROXY WILL BE APPRECIATED, AS IT WILL SAVE THE
EXPENSE OF FURTHER MAILING.
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APPENDIX "A"
THE 1997 EQUITY PARTICIPATION PLAN
OF
THE SPECTRANETICS CORPORATION
The Spectranetics Corporation, a Delaware corporation, has adopted The
1997 Equity Participation Plan of The Spectranetics Corporation (the "Plan"),
effective June 9, 1997, for the benefit of its eligible employees, consultants
and directors. The Plan consists of two plans, one for the benefit of Employees
(as such term is defined below) and consultants and one for the benefit of
Independent Directors (as such term is defined below).
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, Employees and
consultants to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company stock and/or
rights which recognize such growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, Employees and consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and financial
success of the Company.
ARTICLE I.
DEFINITIONS
1.1. GENERAL. Wherever the following terms are used in this Plan they
shall have the meanings specified below, unless the context clearly indicates
otherwise.
1.2. BOARD. "Board" shall mean the Board of Directors of the Company.
1.3. CHANGE IN CONTROL. "Change in Control" shall mean a change in
ownership or control of the Company effected through either of the following
transactions:
(a) any person or related group of persons (other than the Company or
a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities pursuant to a tender or exchange
offer made directly to the Company's shareholders which the Board does not
recommend such shareholders to accept; or
(b) there is a change in the composition of the Board over a period
of thirty-six (36) consecutive months (or less) such that a majority of the
Board members (rounded up to the nearest whole number) ceases, by reason of one
or more proxy contests for the election of Board members, to be comprised of
individuals who either (i) have been Board members continuously since the
beginning of such period or (ii) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (i) who were still in office at the time such election or
nomination was approved by the Board.
1.4. CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
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1.5. COMMITTEE. "Committee" shall mean the Compensation Committee of
the Board, or another committee of the Board, appointed as provided in
Section 8.1.
1.6. COMMON STOCK. "Common Stock" shall mean the common stock of the
Company, par value $.001 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any preferred
stock and any warrants, options or other rights to purchase Common Stock. Debt
securities of the Company convertible into Common Stock shall be deemed equity
securities of the Company.
1.7. COMPANY. "Company" shall mean The Spectranetics Corporation, a
Delaware corporation.
1.8. CORPORATE TRANSACTION. "Corporate Transaction" shall mean any of
the following stockholder-approved transactions to which the Company is a party:
(a) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change the
State in which the Company is incorporated, form a holding company or effect a
similar reorganization as to form whereupon this Plan and all Options are
assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions to
clause (a), above; or
(c) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are transferred or
issued to a person or persons different from those who held such securities
immediately prior to such merger.
1.9. DIRECTOR. "Director" shall mean a member of the Board.
1.10. EMPLOYEE. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
1.11. EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
1.12. FAIR MARKET VALUE. "Fair Market Value" of a share of Common Stock as
of a given date shall be (i) the closing price of a share of Common Stock on the
principal exchange on which shares of Common Stock are then trading, if any (or
as reported on any composite index which includes such principal exchange), on
the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (ii) if Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, the closing price for the
Common Stock on such date as reported by NASDAQ or such successor quotation
system; or (iii) if Common Stock is not publicly traded on an exchange and not
quoted on NASDAQ or a successor quotation system, the Fair Market Value of a
share of Common Stock as established by the Committee (or the Board, in the case
of Options granted to Independent Directors) acting in good faith.
1.13. GRANTEE. "Grantee" shall mean an Employee or consultant granted a
Stock Appreciation Right under this Plan.
1.14. INCENTIVE STOCK OPTION. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Committee.
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1.15. INDEPENDENT DIRECTOR. "Independent Director" shall mean a member of
the Board who is not an Employee of the Company.
1.16. NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock Option" shall mean
an Option which is not designated as an Incentive Stock Option by the Committee.
1.17. OPTION. "Option" shall mean a stock option granted under Article III
of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
PROVIDED, HOWEVER, that Options granted to Independent Directors and consultants
shall be Non-Qualified Stock Options.
1.18. OPTIONEE. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
1.19. PLAN. "Plan" shall mean The 1997 Equity Participation Plan of The
Spectranetics Corporation.
1.20. QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
1.21. RESTRICTED STOCK. "Restricted Stock" shall mean Common Stock awarded
under Article VI of this Plan.
1.22. RESTRICTED STOCKHOLDER. "Restricted Stockholder" shall mean an
Employee or consultant granted an award of Restricted Stock under Article VI of
this Plan.
1.23. RULE 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under
the Exchange Act, as such Rule may be amended from time to time.
1.24. SECTION 162(m) PARTICIPANT. "Section 162(m) Participant" shall mean
any Employee designated by the Committee as a Employee whose compensation for
the fiscal year in which the Employee is so designated or a future fiscal year
may be subject to the limit on deductible compensation imposed by Section 162(m)
of the Code.
1.25. STOCK APPRECIATION RIGHT. "Stock Appreciation Right" shall mean a
stock appreciation right granted under Article VII of this Plan.
1.26. SUBSIDIARY. "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
50 percent or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
1.27. TERMINATION OF CONSULTANCY. "Termination of Consultancy" shall mean
the time when the engagement of an Optionee, Grantee or Restricted Stockholder
as a consultant to the Company or a Subsidiary is terminated for any reason,
with or without cause, including, but not by way of limitation, by resignation,
discharge, death or retirement; but excluding terminations where there is a
simultaneous commencement of employment with the Company or any Subsidiary. The
Committee, in its absolute discretion, shall determine the effect of all matters
and questions relating to Termination of Consultancy, including, but not by way
of limitation, the question of whether a Termination of Consultancy resulted
from a discharge for good cause, and all questions of whether particular leaves
of absence constitute Terminations of Consultancy. Notwithstanding any other
provision of this Plan, the Company or any Subsidiary has an absolute and
unrestricted right to terminate a consultant's service at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.
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1.28. TERMINATION OF DIRECTORSHIP. "Termination of Directorship" shall
mean the time when an Optionee who is an Independent Director ceases to be a
Director for any reason, including, but not by way of limitation, a termination
by resignation, failure to be elected, death or retirement. The Board, in its
sole and absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Directorship with respect to Independent
Directors.
1.29. TERMINATION OF EMPLOYMENT. "Termination of Employment" shall mean
the time when the employee-employer relationship between an Optionee, Grantee
or Restricted Stockholder and the Company or any Subsidiary is terminated for
any reason, with or without cause, including, but not by way of limitation, a
termination by resignation, discharge, death, disability or retirement; but
excluding (i) terminations where there is a simultaneous reemployment or
continuing employment of an Optionee, Grantee or Restricted Stockholder by the
Company or any Subsidiary, (ii) at the discretion of the Committee, terminations
which result in a temporary severance of the employee-employer relationship, and
(iii) at the discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Committee, in its absolute discretion,
shall determine the effect of all matters and questions relating to Termination
of Employment, including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Employment; PROVIDED, HOWEVER, that, unless otherwise determined by the
Committee in its discretion, a leave of absence, change in status from an
employee to an independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent
that, such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section. Notwithstanding
any other provision of this Plan, the Company or any Subsidiary has an absolute
and unrestricted right to terminate an Employee's employment at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1. SHARES SUBJECT TO PLAN. The shares of stock subject to Options,
awards of Restricted Stock or Stock Appreciation Rights shall be Common Stock,
initially shares of the Company's Common Stock, par value $.001 per share. The
aggregate number of such shares which may be issued upon exercise of such
options or rights or upon any such awards under the Plan shall not exceed Two
Million Five Hundred (2,500,000). The shares of Common Stock issuable upon
exercise of such options or rights or upon any such awards may be either
previously authorized but unissued shares or treasury shares.
2.2. ADD-BACK OF OPTIONS AND OTHER RIGHTS. If any Option, or other
right to acquire shares of Common Stock under any other award under this Plan,
expires or is canceled without having been fully exercised, or is exercised in
whole or in part for cash rather than Common Stock as permitted by this Plan,
the number of shares subject to such Option or other right but as to which such
Option or other right was not exercised prior to its expiration, cancellation or
exercise for cash may again be optioned, granted or awarded hereunder, subject
to the limitations of Section 2.1. Furthermore, any shares subject to Options
or other awards which are adjusted pursuant to Section 9.3 and become
exercisable with respect to shares of stock of another corporation shall be
considered canceled and may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. Shares of Common Stock which are
delivered by the Optionee or Grantee or withheld by the Company upon the
exercise of any Option or other award under this Plan, in payment of the
exercise price thereof, may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. If any share of Restricted Stock is
forfeited by the Grantee or repurchased by the Company pursuant to Section 6.6
hereof, such share may again be optioned, granted or awarded hereunder, subject
to the limitations of Section 2.1. Notwithstanding the provisions of this
Section 2.2, no shares of Common Stock may again be optioned, granted or awarded
if such action would cause an Incentive Stock Option to fail to qualify as an
incentive stock option under Section 422 of the Code.
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ARTICLE III.
GRANTING OF OPTIONS
3.1. ELIGIBILITY. Any Employee or consultant selected by the Committee
pursuant to Section 3.4(a)(i) shall be eligible to be granted an Option.
Each Independent Director of the Company shall be eligible to be granted
Options at the times and in the manner set forth in Sections 3.4(d) and (e).
3.2. DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be granted an
Incentive Stock Option under this Plan if such person, at the time the
Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or any then existing Subsidiary or parent corporation (within the
meaning of Section 422 of the Code) unless such Incentive Stock Option
conforms to the applicable provisions of Section 422 of the Code.
3.3. QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive Stock
Option shall be granted to any person who is not an Employee.
3.4. GRANTING OF OPTIONS.
(a) The Committee shall from time to time, in its absolute discretion,
and subject to applicable limitations of this Plan:
(i) Determine which Employees or consultants (including
Employees or consultants who have previously received Options or other awards
under this Plan) in its opinion should be granted Options;
(ii) Determine the number of shares to be subject to such Options
granted to the selected Employees or consultants;
(iii) Subject to Section 3.3, determine whether such Options are
to be Incentive Stock Options or Non-Qualified Stock Options and whether such
Options are to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; PROVIDED, HOWEVER, that the terms and conditions
of Options intended to qualify as performance-based compensation as described
in Section 162(m)(4)(C) of the Code shall include, but not be limited to,
such terms and conditions as may be necessary to meet the applicable
provisions of Section 162(m) of the Code.
(b) Upon the selection of an Employee or consultant to be granted an
Option, the Committee shall instruct the Secretary of the Company to issue
the Option and may impose such conditions on the grant of the Option as it
deems appropriate. Without limiting the generality of the preceding
sentence, the Committee may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option to an Employee
or consultant that the Employee or consultant surrender for cancellation some
or all of the unexercised Options, awards of Restricted Stock, Stock
Appreciation Rights or other rights which have been previously granted to him
under this Plan or otherwise. An Option, the grant of which is conditioned
upon such surrender, may have an option price lower (or higher) than the
exercise price of such surrendered Option or other award, may cover the same
(or a lesser or greater) number of shares as such surrendered Option or other
award, may contain such other terms as the Committee deems appropriate, and
shall be exercisable in accordance with its terms, without regard to the
number of shares, price, exercise period or any other term or condition of
such surrendered Option or other award.
(c) Any Incentive Stock Option granted under this Plan may be modified
by the Committee to disqualify such option from treatment as an "incentive
stock option" under Section 422 of the Code.
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(d) Each person who becomes an Independent Director shall be granted on
the date of his election or appointment as an Independent Director an Option
to purchase 75,000 shares of Common Stock.
(e) Each Independent Director who has (i) received a grant pursuant to
Section 3.4(d) or pursuant to the Company's Stock Option Plan For Outside
Directors which was adopted by the Board on April 19, 1995 and (ii) served at
least three years as an Independent Director shall be granted on the third
anniversary of the date of such grant, and each third anniversary thereafter
(so long as he is an Independent Director at the close of business on such
date), an Option to purchase an additional 75,000 shares of Common Stock.
ARTICLE IV.
TERMS OF OPTIONS
4.1. OPTION AGREEMENT. Each Option shall be evidenced by a written
Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee (or the Board, in the case of Options granted to
Independent Directors) shall determine, consistent with this Plan. Stock
Option Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain
such terms and conditions as may be necessary to meet the applicable
provisions of Section 162(m) of the Code. Stock Option Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 422 of the Code.
4.2. OPTION PRICE. The price per share of the shares subject to each
Option shall be set by the Committee; PROVIDED, HOWEVER, that such price
shall be no less than the par value of a share of Common Stock, unless
otherwise permitted by applicable state law, and (i) in the case of Incentive
Stock Options and Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, such price
shall not be less than 100% of the Fair Market Value of a share of Common
Stock on the date the Option is granted; (ii) in the case of Incentive Stock
Options granted to an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation
thereof (within the meaning of Section 422 of the Code) such price shall not
be less than 110% of the Fair Market Value of a share of Common Stock on the
date the Option is granted; and (iii) in the case of Options granted to
Independent Directors, such price shall equal 100% of the Fair Market Value
of a share of Common Stock on the date the Option is granted.
4.3. OPTION TERM. The term of an Option shall be set by the Committee
in its discretion; PROVIDED, HOWEVER, that, (i) in the case of Options granted
to Independent Directors, the term shall be ten (10) years from the date the
Option is granted, without variation or acceleration hereunder except as
provided in Sections 4.4 and 9.3 and subject to Section 5.6, and (ii) in the
case of Incentive Stock Options, the term shall not be more than ten (10) years
from the date the Incentive Stock Option is granted, or five (5) years from such
date if the Incentive Stock Option is granted to an individual then owning
(within the meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any Subsidiary
or parent corporation thereof (within the meaning of Section 422 of the Code).
Except as limited by requirements of Section 422 of the Code and regulations and
rulings thereunder applicable to Incentive Stock Options, the Committee may
extend the term of any outstanding Option in connection with any Termination of
Employment or Termination of Consultancy of the Optionee, or amend any other
term or condition of such Option relating to such a termination.
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4.4. OPTION VESTING.
(a) The period during which the right to exercise an Option in whole
or in part vests in the Optionee shall be set by the Committee and the
Committee may determine that an Option may not be exercised in whole or in
part for a specified period after it is granted; PROVIDED, HOWEVER, that,
unless the Committee otherwise provides in the terms of the Option or
otherwise, no Option shall be exercisable by any Optionee who is then subject
to Section 16 of the Exchange Act within the period ending six months and one
day after the date the Option is granted; and provided, further, that Options
granted to Independent Directors shall become exercisable on the following
schedule: Beginning on the first anniversary of the date of grant, up to 33%
of the shares covered by the Option; beginning on the second anniversary of
the date of grant, up to 66% of such shares; and beginning on the third
anniversary of the date of grant, up to 100% of such shares, without
variation or acceleration hereunder except as provided in this Section 4.4
and Section 9.3. Notwithstanding the foregoing, an Option held by an
Independent Director shall become immediately exercisable in full upon the
death or disability of such Independent Director or upon an unsuccessful
attempt by such Independent Director to win re-election to the Board after
nomination for election at the recommendation of the Board. At any time
after grant of an Option, the Committee may, in its sole and absolute
discretion and subject to whatever terms and conditions it selects,
accelerate the period during which an Option vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment or Termination of Consultancy, as applicable, shall thereafter
become exercisable, except as may be otherwise provided by the Committee in
the case of Options granted to Employees or consultants either in the Stock
Option Agreement or by action of the Committee following the grant of the
Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422
of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year (under
the Plan and all other incentive stock option plans of the Company and any
Subsidiary) exceeds $100,000, such Options shall be treated as Non-Qualified
Options to the extent required by Section 422 of the Code. The rule set
forth in the preceding sentence shall be applied by taking Options into
account in the order in which they were granted. For purposes of this
Section 4.4(c), the Fair Market Value of stock shall be determined as of the
time the Option with respect to such stock is granted.
4.5. CONSIDERATION. In consideration of the granting of an Option, the
Optionee shall agree, in the written Stock Option Agreement, to remain in the
employ of (or to consult for or to serve as an Independent Director of, as
applicable) the Company or any Subsidiary for a period of at least one year
(or such shorter period as may be fixed in the Stock Option Agreement or by
action of the Committee following grant of the Option) after the Option is
granted (or, in the case of an Independent Director, until the next annual
meeting of shareholders of the Company). Nothing in this Plan or in any
Stock Option Agreement hereunder shall confer upon any Optionee any right to
continue in the employ of, or as a consultant for, the Company or any
Subsidiary, or as a director of the Company, or shall interfere with or
restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge any Optionee at any time for any
reason whatsoever, with or without good cause.
ARTICLE V.
EXERCISE OF OPTIONS
5.1. PARTIAL EXERCISE. An exercisable Option may be exercised in whole
or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee (or the Board, in the case of Options
granted to Independent Directors) may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.
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5.2. MANNER OF EXERCISE. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or his office:
(a) A written notice complying with the applicable rules established
by the Committee (or the Board, in the case of Options granted to Independent
Directors) stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to
exercise the Option or such portion;
(b) Such representations and documents as the Committee (or the Board,
in the case of Options granted to Independent Directors), in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any
other federal or state securities laws or regulations. The Committee or
Board may, in its absolute discretion, also take whatever additional actions
it deems appropriate to effect such compliance including, without limitation,
placing legends on share certificates and issuing stop-transfer notices to
agents and registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 9.1 by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised. However,
the Committee (or the Board, in the case of Options granted to Independent
Directors), may in its discretion (i) allow a delay in payment up to thirty
(30) days from the date the Option, or portion thereof, is exercised; (ii)
allow payment, in whole or in part, through the delivery of shares of Common
Stock owned by the Optionee, duly endorsed for transfer to the Company with a
Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof; (iii) allow payment, in
whole or in part, through the surrender of shares of Common Stock then
issuable upon exercise of the Option having a Fair Market Value on the date
of Option exercise equal to the aggregate exercise price of the Option or
exercised portion thereof; (iv) allow payment, in whole or in part, through
the delivery of property of any kind which constitutes good and valuable
consideration; (v) allow payment, in whole or in part, through the delivery
of a full recourse promissory note bearing interest (at no less than such
rate as shall then preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Committee or the Board;
(vi) allow payment, in whole or in part, through the delivery of a notice
that the Optionee has placed a market sell order with a broker with respect
to shares of Common Stock then issuable upon exercise of the Option, and that
the broker has been directed to pay a sufficient portion of the net proceeds
of the sale to the Company in satisfaction of the Option exercise price; or
(vii) allow payment through any combination of the consideration provided in
the foregoing subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of
a promissory note, the Committee (or the Board, in the case of Options
granted to Independent Directors) may also prescribe the form of such note
and the security to be given for such note. The Option may not be exercised,
however, by delivery of a promissory note or by a loan from the Company when
or where such loan or other extension of credit is prohibited by law.
5.3. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company shall
not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory
body which the Committee or Board shall, in its absolute discretion, deem
necessary or advisable;
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(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee (or Board, in the case of
Options granted to Independent Directors) shall, in its absolute discretion,
determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Committee (or Board, in the case of Options granted to
Independent Directors) may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
5.4. RIGHTS AS STOCKHOLDERS. The holders of Options shall not be, nor
have any of the rights or privileges of, shareholders of the Company in
respect of any shares purchasable upon the exercise of any part of an Option
unless and until certificates representing such shares have been issued by
the Company to such holders.
5.5. OWNERSHIP AND TRANSFER RESTRICTIONS. The Committee (or Board, in
the case of Options granted to Independent Directors), in its absolute
discretion, may impose such restrictions on the ownership and transferability
of the shares purchasable upon the exercise of an Option as it deems
appropriate. Any such restriction shall be set forth in the respective Stock
Option Agreement and may be referred to on the certificates evidencing such
shares. The Committee may require the Employee to give the Company prompt
notice of any disposition of shares of Common Stock acquired by exercise of
an Incentive Stock Option within (i) two years from the date of granting such
Option to such Employee or (ii) one year after the transfer of such shares to
such Employee. The Committee may direct that the certificates evidencing
shares acquired by exercise of an Option refer to such requirement to give
prompt notice of disposition.
5.6. LIMITATIONS ON EXERCISE OF OPTIONS GRANTED TO INDEPENDENT
DIRECTORS. No Option granted to an Independent Director may be exercised to
any extent by anyone after the first to occur of the following events:
(a) The expiration of three (3) years from the date of the Optionee's
death;
(b) the expiration of three (3) years from the date of the Optionee's
Termination of Directorship by reason of his permanent and total disability
(within the meaning of Section 22(e)(3) of the Code);
(c) the expiration of three (3) years from the date of the Optionee's
retirement from the Board or an unsuccessful attempt to win re-election to
the Board after nomination for election at the recommendation of the Board;
(d) the expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship for any reason other than such
Optionee's death, his permanent and total disability, retirement from the
Board or an unsuccessful attempt to win re-election to the Board after
nomination for election at the recommendation of the Board; or
(e) The expiration of ten (10) years from the date the Option was
granted.
ARTICLE VI.
AWARD OF RESTRICTED STOCK
6.1. AWARD OF RESTRICTED STOCK.
(a) The Committee may from time to time, in its absolute discretion:
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(b) Select from among the Employees or consultants (including
Employees or consultants who have previously received other awards under this
Plan) such of them as in its opinion should be awarded Restricted Stock; and
(c) Determine the purchase price, if any, and other terms and
conditions applicable to such Restricted Stock, consistent with this Plan.
(d) The Committee shall establish the purchase price, if any, and form
of payment for Restricted Stock; PROVIDED, HOWEVER, that such purchase price
shall be no less than the par value of the Common Stock to be purchased,
unless otherwise permitted by applicable state law. In all cases, legal
consideration shall be required for each issuance of Restricted Stock.
(e) Upon the selection of a Employee or consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company
to issue such Restricted Stock and may impose such conditions on the issuance
of such Restricted Stock as it deems appropriate.
6.2. RESTRICTED STOCK AGREEMENT. Restricted Stock shall be issued only
pursuant to a written Restricted Stock Agreement, which shall be executed by
the selected Employee or consultant and an authorized officer of the Company
and which shall contain such terms and conditions as the Committee shall
determine, consistent with this Plan.
6.3. CONSIDERATION. As consideration for the issuance of Restricted
Stock, in addition to payment of any purchase price, the Restricted
Stockholder shall agree, in the written Restricted Stock Agreement, to remain
in the employ of, or to consult for, the Company or any Subsidiary for a
period of at least one year after the Restricted Stock is issued (or such
shorter period as may be fixed in the Restricted Stock Agreement or by action
of the Committee following grant of the Restricted Stock). Nothing in this
Plan or in any Restricted Stock Agreement hereunder shall confer on any
Restricted Stockholder any right to continue in the employ of, or as a
consultant for, the Company or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge any Restricted Stockholder at any
time for any reason whatsoever, with or without good cause.
6.4. RIGHTS AS STOCKHOLDERS. Upon delivery of the shares of Restricted
Stock to the escrow holder pursuant to Section 6.7, the Restricted
Stockholder shall have, unless otherwise provided by the Committee, all the
rights of a stockholder with respect to said shares, subject to the
restrictions in his Restricted Stock Agreement, including the right to
receive all dividends and other distributions paid or made with respect to
the shares; PROVIDED, HOWEVER, that in the discretion of the Committee, any
extraordinary distributions with respect to the Common Stock shall be subject
to the restrictions set forth in Section 6.5.
6.5. RESTRICTIONS. All shares of Restricted Stock issued under this
Plan (including any shares received by holders thereof with respect to shares
of Restricted Stock as a result of stock dividends, stock splits or any other
form of recapitalization) shall, in the terms of each individual Restricted
Stock Agreement, be subject to such restrictions as the Committee shall
provide, which restrictions may include, without limitation, restrictions
concerning voting rights and transferability and restrictions based on
duration of employment with the Company, Company performance and individual
performance; PROVIDED, HOWEVER, that, unless the Committee otherwise provides
in the terms of the Restricted Stock Agreement or otherwise, no share of
Restricted Stock granted to a person subject to Section 16 of the Exchange
Act shall be sold, assigned or otherwise transferred until at least six
months and one day have elapsed from the date on which the Restricted Stock
was issued, and PROVIDED, FURTHER, that by action taken after the Restricted
Stock is issued, the Committee may, on such terms and conditions as it may
determine to be appropriate, remove any or all of the restrictions imposed by
the terms of the Restricted Stock Agreement. Restricted Stock may not be
sold or encumbered until all restrictions are terminated or expire. Unless
provided otherwise by the Committee, if no consideration was paid by the
Restricted Stockholder upon issuance, a Restricted Stockholder's rights in
unvested Restricted Stock shall lapse upon Termination of Employment or, if
applicable, upon Termination of Consultancy with the Company.
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6.6. REPURCHASE OF RESTRICTED STOCK. The Committee shall provide in
the terms of each individual Restricted Stock Agreement that the Company
shall have the right to repurchase from the Restricted Stockholder the
Restricted Stock then subject to restrictions under the Restricted Stock
Agreement immediately upon a Termination of Employment or, if applicable,
upon a Termination of Consultancy between the Restricted Stockholder and the
Company, at a cash price per share equal to the price paid by the Restricted
Stockholder for such Restricted Stock; PROVIDED, HOWEVER, that provision may
be made that no such right of repurchase shall exist in the event of a
Termination of Employment or Termination of Consultancy without cause, or
following a change in control of the Company or because of the Restricted
Stockholder's retirement, death or disability, or otherwise.
6.7. ESCROW. The Secretary of the Company or such other escrow holder
as the Committee may appoint shall retain physical custody of each
certificate representing Restricted Stock until all of the restrictions
imposed under the Restricted Stock Agreement with respect to the shares
evidenced by such certificate expire or shall have been removed.
6.8. LEGEND. In order to enforce the restrictions imposed upon shares
of Restricted Stock hereunder, the Committee shall cause a legend or legends
to be placed on certificates representing all shares of Restricted Stock that
are still subject to restrictions under Restricted Stock Agreements, which
legend or legends shall make appropriate reference to the conditions imposed
thereby.
6.9. PROVISIONS APPLICABLE TO SECTION 162(m) PARTICIPANTS.
(a) Notwithstanding anything in the Plan to the contrary, the
Committee may grant Restricted Stock awards to a Section 162(m) Participant
that vest upon the attainment of performance targets for the Company which
are related to one or more of the following performance goals: (i) pre-tax
income, (ii) operating income, (iii) cash flow, (iv) earnings per share, (v)
return on equity, (vi) return on invested capital or assets and (vii) cost
reductions or savings.
(b) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect
to Restricted Stock which may be granted to one or more Section 162(m)
Participants, no later than ninety (90) days following the commencement of
any fiscal year in question or any other designated fiscal period (or such
other time as may be required or permitted by Section 162(m) of the Code),
the Committee shall, in writing, (i) designate one or more Section 162(m)
Participants, (ii) select the performance goal or goals applicable to the
fiscal year or other designated fiscal period, (iii) establish the various
targets and bonus amounts which may be earned for such fiscal year or other
designated fiscal period and (iv) specify the relationship between
performance goals and targets and the amounts to be earned by each Section
162(m) Participant for such fiscal year or other designated fiscal period.
Following the completion of each fiscal year or other designated fiscal
period, the Committee shall certify in writing whether the applicable
performance targets have been achieved for such fiscal year or other
designated fiscal period. In determining the amount earned by a Section
162(m) Participant, the Committee shall have the right to reduce (but not to
increase) the amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the fiscal year or
other designated fiscal period.
ARTICLE VII.
STOCK APPRECIATION RIGHTS
7.1. GRANT OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right may
be granted to any Employee or consultant selected by the Committee. A Stock
Appreciation Right may be granted (i) in connection and simultaneously with the
grant of an Option, (ii) with respect to a previously granted Option, or (iii)
independent of an Option. A Stock Appreciation Right shall be subject to such
terms and conditions not inconsistent with this Plan as the Committee shall
impose and shall be evidenced by a written Stock Appreciation Right Agreement,
which shall be executed by the Grantee and an authorized officer of the Company.
The Committee, in its discretion, may determine whether a Stock Appreciation
Right is to qualify as performance-based
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compensation as described in Section 162(m)(4)(C) of the Code and Stock
Appreciation Right Agreements evidencing Stock Appreciation Rights intended
to so qualify shall contain such terms and conditions as may be necessary to
meet the applicable provisions of Section 162(m) of the Code. Without
limiting the generality of the foregoing, the Committee may, in its
discretion and on such terms as it deems appropriate, require as a condition
of the grant of a Stock Appreciation Right to an Employee or consultant that
the Employee or consultant surrender for cancellation some or all of the
unexercised Options, awards of Restricted Stock, Stock Appreciation Rights or
other rights which have been previously granted to him under this Plan or
otherwise. A Stock Appreciation Right, the grant of which is conditioned
upon such surrender, may have an exercise price lower (or higher) than the
exercise price of the surrendered Option or other award, may cover the same
(or a lesser or greater) number of shares as such surrendered Option or other
award, may contain such other terms as the Committee deems appropriate, and
shall be exercisable in accordance with its terms, without regard to the
number of shares, price, exercise period or any other term or condition of
such surrendered Option or other award.
7.2. COUPLED STOCK APPRECIATION RIGHTS.
(a) A Coupled Stock Appreciation Right ("CSAR") shall be related to a
particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.
(b) A CSAR may be granted to the Grantee for no more than the number
of shares subject to the simultaneously or previously granted Option to which
it is coupled.
(c) A CSAR shall entitle the Grantee (or other person entitled to
exercise the Option pursuant to this Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the difference obtained
by subtracting the Option exercise price from the Fair Market Value of a
share of Common Stock on the date of exercise of the CSAR by the number of
shares of Common Stock with respect to which the CSAR shall have been
exercised, subject to any limitations the Committee may impose.
7.3. INDEPENDENT STOCK APPRECIATION RIGHTS.
(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An ISAR
shall be exercisable in such installments as the Committee may determine. An
ISAR shall cover such number of shares of Common Stock as the Committee may
determine; provided, however, that unless the Committee otherwise provides in
the terms of the ISAR or otherwise, no ISAR granted to a person subject to
Section 16 of the Exchange Act shall be exercisable until at least six months
have elapsed from (but excluding) the date on which the Option was granted.
The exercise price per share of Common Stock subject to each ISAR shall be
set by the Committee. An ISAR is exercisable only while the Grantee is an
Employee or consultant; provided that the Committee may determine that the
ISAR may be exercised subsequent to Termination of Employment or Termination
of Consultancy without cause, or following a change in control of the
Company, or because of the Grantee's retirement, death or disability, or
otherwise.
(b) An ISAR shall entitle the Grantee (or other person entitled to
exercise the ISAR pursuant to this Plan) to exercise all or a specified
portion of the ISAR (to the extent then exercisable pursuant to its terms)
and to receive from the Company an amount determined by multiplying the
difference obtained by subtracting the exercise price per share of the ISAR
from the Fair Market Value of a share of Common Stock on the date of exercise
of the ISAR by the number of shares of Common Stock with respect to which the
ISAR shall have been exercised, subject to any limitations the Committee may
impose.
7.4. PAYMENT AND LIMITATIONS ON EXERCISE.
(a) Payment of the amount determined under Section 7.2(c) and 7.3(b)
above shall be in cash, in Common Stock (based on its Fair Market Value as of
the date the Stock Appreciation Right is exercised)
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or a combination of both, as determined by the Committee. To the extent such
payment is effected in Common Stock it shall be made subject to satisfaction
of all provisions of Section 5.3 above pertaining to Options.
(b) Grantees of Stock Appreciation Rights may be required to comply
with any timing or other restrictions with respect to the settlement or
exercise of a Stock Appreciation Right, including a window-period limitation,
as may be imposed in the discretion of the Board or Committee.
7.5. CONSIDERATION. In consideration of the granting of a Stock
Appreciation Right, the Grantee shall agree, in the written Stock Appreciation
Right Agreement, to remain in the employ of, or to consult for, the Company or
any Subsidiary for a period of at least one year after the Stock Appreciation
Right is granted (or such shorter period as may be fixed in the Stock
Appreciation Right Agreement or by action of the Committee following grant of
the Restricted Stock). Nothing in this Plan or in any Stock Appreciation Right
Agreement hereunder shall confer on any Grantee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Grantee at any
time for any reason whatsoever, with or without good cause.
ARTICLE VIII.
ADMINISTRATION
8.1. COMPENSATION COMMITTEE. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the
Committee under this Plan) shall consist solely of two or more Independent
Directors appointed by and holding office at the pleasure of the Board, each
of whom is both a "non-employee director" as defined by Rule 16b-3 and an
"outside director" for purposes of Section 162(m) of the Code. Appointment
of Committee members shall be effective upon acceptance of appointment.
Committee members may resign at any time by delivering written notice to the
Board. Vacancies in the Committee may be filled by the Board.
8.2. DUTIES AND POWERS OF COMMITTEE. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance
with its provisions. The Committee shall have the power to interpret this
Plan and the agreements pursuant to which Options, awards of Restricted Stock
or Stock Appreciation Rights are granted or awarded, and to adopt such rules
for the administration, interpretation, and application of this Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan with
respect to Options granted to Independent Directors. Any such grant or award
under this Plan need not be the same with respect to each Optionee, Grantee
or Restricted Stockholder. Any such interpretations and rules with respect
to Incentive Stock Options shall be consistent with the provisions of Section
422 of the Code. In its absolute discretion, the Board may at any time and
from time to time exercise any and all rights and duties of the Committee
under this Plan except with respect to matters which under Rule 16b-3 or
Section 162(m) of the Code, or any regulations or rules issued thereunder,
are required to be determined in the sole discretion of the Committee.
8.3. MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. The Committee shall act
by a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members
of the Committee.
8.4. COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. Members
of the Committee shall receive such compensation for their services as
members as may be determined by the Board. All expenses and liabilities
which members of the Committee incur in connection with the administration of
this Plan shall be borne by the Company. The Committee may, with the
approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be
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final and binding upon all Optionees, Grantees, Restricted Stockholders, the
Company and all other interested persons. No members of the Committee or
Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan, Options, awards
of Restricted Stock or Stock Appreciation Rights and all members of the
Committee and the Board shall be fully protected by the Company in respect of
any such action, determination or interpretation.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
9.1. NOT TRANSFERABLE. Options, Restricted Stock awards or Stock
Appreciation Rights under this Plan may not be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution or pursuant to a QDRO, unless and until such rights or awards
have been exercised, or the shares underlying such rights or awards have been
issued, and all restrictions applicable to such shares have lapsed. No
Option, Restricted Stock award or Stock Appreciation Right or interest or
right therein shall be liable for the debts, contracts or engagements of the
Optionee, Grantee or Restricted Stockholder or his successors in interest or
shall be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such disposition
be voluntary or involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null
and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.
During the lifetime of the Optionee or Grantee, only he may exercise an
Option or other right or award (or any portion thereof) granted to him under
the Plan, unless it has been disposed of pursuant to a QDRO. After the death
of the Optionee or Grantee, any exercisable portion of an Option or other
right or award may, prior to the time when such portion becomes unexercisable
under the Plan or the applicable Stock Option Agreement or other agreement,
be exercised by his personal representative or by any person empowered to do
so under the deceased Optionee's or Grantee's will or under the then
applicable laws of descent and distribution.
9.2. AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN. Except as
otherwise provided in this Section 9.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from
time to time by the Board or the Committee. However, without approval of the
Company's shareholders given within twelve months before or after the action
by the Board or the Committee, no action of the Board or the Committee may,
except as provided in Section 9.3, increase the limits imposed in Section 2.1
on the maximum number of shares which may be issued under this Plan, and no
action of the Board or the Committee may be taken that would otherwise
require stockholder approval as a matter of applicable law, regulation or
rule. No amendment, suspension or termination of this Plan shall, without
the consent of the holder of Options, Restricted Stock awards or Stock
Appreciation Rights alter or impair any rights or obligations under any
Options, Restricted Stock awards or Stock Appreciation Rights theretofore
granted or awarded, unless the award itself otherwise expressly so provides.
No Options, Restricted Stock or Stock Appreciation Rights may be granted or
awarded during any period of suspension or after termination of this Plan,
and in no event may any Incentive Stock Option be granted under this Plan
after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's shareholders under Section 9.4.
9.3. CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, ACQUISITION OR
LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS.
(a) Subject to Section 9.3(e), in the event that the Committee (or the
Board, in the case of Options granted to Independent Directors) determines that
any dividend or other distribution (whether in the form of cash, Common Stock,
other securities, or other property), recapitalization, reclassification, stock
split, reverse
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stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer,
exchange or other disposition of all or substantially all of the assets of
the Company (including, but not limited to, a Corporate Transaction or Change
in Control), or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event,
in the Committee's sole discretion (or in the case of Options granted to
Independent Directors, the Board's sole discretion), affects the Common Stock
such that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan or with respect to an
Option, Restricted Stock award or Stock Appreciation Right then the Committee
(or the Board, in the case of Options granted to Independent Directors)
shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options, or Stock Appreciation
Rights may be granted under the Plan, or which may be granted as Restricted
Stock (including, but not limited to, adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued),
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options or Stock Appreciation
Rights and in the number and kind of shares of outstanding Restricted Stock,
and
(iii) the grant or exercise price with respect to any Option or
Stock Appreciation Right.
(b) Subject to Sections 9.3(b)(vii) and 9.3(e), in the event of any
Corporate Transaction, Change in Control or other transaction or event
described in Section 9.3(a) or any unusual or nonrecurring transactions or
events affecting the Company, any affiliate of the Company, or the financial
statements of the Company or any affiliate, or of changes in applicable laws,
regulations, or accounting principles, the Committee (or the Board, in the
case of Options granted to Independent Directors) in its discretion is hereby
authorized to take any one or more of the following actions whenever the
Committee (or the Board, in the case of Options granted to Independent
Directors) determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any option, right or other
award under this Plan, to facilitate such transactions or events or to give
effect to such changes in laws, regulations or principles:
(i) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case
of Options granted to Independent Directors) may provide, either by the terms
of the agreement or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the optionee's request,
for either the purchase of any such Option, Stock Appreciation Right or any
Restricted Stock for an amount of cash equal to the amount that could have
been attained upon the exercise of such option, right or award or realization
of the optionee's rights had such option, right or award been currently
exercisable or payable or fully vested or the replacement of such option,
right or award with other rights or property selected by the Committee (or
the Board, in the case of Options granted to Independent Directors) in its
sole discretion;
(ii) In its sole and absolute discretion, the Committee (or the
Board, in the case of Options granted to Independent Directors) may provide,
either by the terms of such Option, Stock Appreciation Right or Restricted Stock
or by action taken prior to the occurrence of such transaction or event that it
cannot be exercised after such event;
(iii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case
of Options granted to Independent Directors) may provide, either by the terms
of such Option, Stock Appreciation Right or Restricted Stock or by action
taken prior to the occurrence of such transaction or event, that for a
specified period of time prior to such transaction or event, such
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option, right or award shall be exercisable as to all shares covered thereby,
notwithstanding anything to the contrary in (i) Section 4.4 or (ii) the
provisions of such Option, Stock Appreciation Right or Restricted Stock;
(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case
of Options granted to Independent Directors) may provide, either by the terms
of such Option, Stock Appreciation Right or Restricted Stock or by action
taken prior to the occurrence of such transaction or event, that upon such
event, such option, right or award be assumed by the successor or survivor
corporation, or a parent or subsidiary thereof, or shall be substituted for
by similar options, rights or awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices;
(v) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case
of Options granted to Independent Directors) may make adjustments in the
number and type of shares of Common Stock (or other securities or property)
subject to outstanding Options or Stock Appreciation Rights and in the number
and kind of outstanding Restricted Stock and/or in the terms and conditions
of (including the grant or exercise price), and the criteria included in,
outstanding options, rights and awards and options, rights and awards which
may be granted in the future;
(vi) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide either by the
terms of a Restricted Stock award or by action taken prior to the occurrence
of such event that, for a specified period of time prior to such event, the
restrictions imposed under a Restricted Stock Agreement upon some or all
shares of Restricted Stock may be terminated, and, in the case of Restricted
Stock, some or all shares of such Restricted Stock may cease to be subject to
repurchase under Section 6.6 or forfeiture under Section 6.5 after such
event; and
(vii) None of the foregoing discretionary actions taken under
Section 9.3(b) shall be permitted with respect to Options granted under
Sections 3.4(d) and (e) to Independent Directors to the extent that such
discretion would be inconsistent with applicable exemptive conditions of Rule
16b-3.
(c) In the event of a Change in Control or a Corporate Transaction, to
the extent that the Board does not have the ability under Rule 16b-3 to take
or to refrain from taking the discretionary actions set forth in Section
9.3(b)(iii) above, each Option granted to an Independent Director shall,
immediately prior to the effective date of the Corporate Transaction or
Change in Control, automatically become fully exercisable for all of the
shares of Common Stock at the time subject to such rights or fully vested, as
applicable, and may be exercised for any or all of those shares as fully
vested shares of Common Stock.
(d) Subject to Section 9.3(e) and 9.8, the Committee (or the Board, in
the case of Options granted to Independent Directors) may, in its discretion,
include such further provisions and limitations in any Option, Stock
Appreciation Right or Restricted Stock agreement or certificate, as it may
deem equitable and in the best interests of the Company.
(e) With respect to Options and Stock Appreciation Rights which are
granted to Section 162(m) Participants and are intended to qualify as
performance-based compensation under Section 162(m)(4)(C), no adjustment or
action described in this Section 9.3 or in any other provision of the Plan
shall be authorized to the extent that such adjustment or action would cause
the Plan to violate Section 422(b)(1) of the Code or would cause such option
or stock appreciation right to fail to so qualify under Section 162(m)(4)(C),
as the case may be, or any successor provisions thereto. Furthermore, no
such adjustment or action shall be authorized to the extent such adjustment
or action would result in short-swing profits liability under Section 16 or
violate the exemptive conditions of Rule 16b-3 unless the Committee (or the
Board, in the case of Options granted to Independent Directors) determines
that the option or other award is not to comply with such exemptive
conditions. The number of shares of Common Stock subject to any option,
right or award shall always be rounded to the next whole number.
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9.4. APPROVAL OF PLAN BY STOCKHOLDERS. This Plan will be submitted for
the approval of the Company's shareholders within twelve months after the
date of the Board's initial adoption of this Plan. Options and Stock
Appreciation Rights may be awarded prior to such stockholder approval,
provided that such Options and Stock Appreciation Rights shall not be
exercisable and such Restricted Stock shall not vest prior to the time when
this Plan is approved by the shareholders, and provided further that if such
approval has not been obtained at the end of said twelve-month period, all
Options and Stock Appreciation Rights previously granted and all Restricted
Stock previously awarded under this Plan shall thereupon be canceled and
become null and void.
9.5. TAX WITHHOLDING. The Company shall be entitled to require payment
in cash or deduction from other compensation payable to each Optionee,
Grantee or Restricted Stockholder of any sums required by federal, state or
local tax law to be withheld with respect to the issuance, vesting or
exercise of any Option, Restricted Stock or Stock Appreciation Right. The
Committee (or the Board, in the case of Options granted to Independent
Directors) may in its discretion and in satisfaction of the foregoing
requirement allow such Optionee, Grantee or Restricted Stockholder to elect
to have the Company withhold shares of Common Stock otherwise issuable under
such Option or other award (or allow the return of shares of Common Stock)
having a Fair Market Value equal to the sums required to be withheld.
9.6. LOANS. The Committee may, in its discretion, extend one or more
loans to Employees in connection with the exercise or receipt of an Option or
Stock Appreciation Right granted under this Plan or the issuance of
Restricted Stock awarded under this Plan. The terms and conditions of any
such loan shall be set by the Committee.
9.7. FORFEITURE PROVISIONS. Pursuant to its general authority to
determine the terms and conditions applicable to awards under the Plan, the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall have the right (to the extent consistent with the applicable
exemptive conditions of Rule 16b-3) to provide, in the terms of Options or
other awards made under the Plan, or to require the recipient to agree by
separate written instrument, that (i) any proceeds, gains or other economic
benefit actually or constructively received by the recipient upon any receipt
or exercise of the award, or upon the receipt or resale of any Common Stock
underlying such award, must be paid to the Company, and (ii) the award shall
terminate and any unexercised portion of such award (whether or not vested)
shall be forfeited, if (a) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs prior to a specified date,
or within a specified time period following receipt or exercise of the award,
or (b) the recipient at any time, or during a specified time period, engages
in any activity in competition with the Company, or which is inimical,
contrary or harmful to the interests of the Company, as further defined by
the Committee (or the Board, as applicable).
9.8. LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND PERFORMANCE-BASED
COMPENSATION. Notwithstanding any other provision of this Plan, this Plan,
and any Option or Stock Appreciation Right granted, or Restricted Stock
awarded, to any individual who is then subject to Section 16 of the Exchange
Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable
law, the Plan, Options, Stock Appreciation Rights and Restricted Stock
granted or awarded hereunder shall be deemed amended to the extent necessary
to conform to such applicable exemptive rule. Furthermore, notwithstanding
any other provision of this Plan, any Option or Stock Appreciation Right
which is granted to a Section 162(m) Participant and is intended to qualify
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or
any regulations or rulings issued thereunder that are requirements for
qualification as performance-based compensation as described in Section
162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the extent
necessary to conform to such requirements.
9.9. EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The adoption
of this Plan shall not affect any other compensation or incentive plans in
effect for the Company or any Subsidiary. Nothing in this Plan shall be
construed to limit the right of the Company (i) to establish any other forms
of incentives or compensation for Employees, Directors or Consultants of the
Company or any Subsidiary or (ii) to grant or assume
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<PAGE>
options or other rights otherwise than under this Plan in connection with any
proper corporate purpose including but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, partnership, limited liability company, firm or association.
9.10. COMPLIANCE WITH LAWS. This Plan, the granting and vesting of
Options, Restricted Stock awards and Stock Appreciation Rights under this
Plan and the issuance and delivery of shares of Common Stock and the payment
of money under this Plan or under Options, Stock Appreciation Rights or
Restricted Stock awarded hereunder are subject to compliance with all
applicable federal and state laws, rules and regulations (including but not
limited to state and federal securities law and federal margin requirements)
and to such approvals by any listing, regulatory or governmental authority as
may, in the opinion of counsel for the Company, be necessary or advisable in
connection therewith. Any securities delivered under this Plan shall be
subject to such restrictions, and the person acquiring such securities shall,
if requested by the Company, provide such assurances and representations to
the Company as the Company may deem necessary or desirable to assure
compliance with all applicable legal requirements. To the extent permitted
by applicable law, the Plan, Options, Restricted Stock awards, and Stock
Appreciation Rights granted or awarded hereunder shall be deemed amended to
the extent necessary to conform to such laws, rules and regulations.
9.11. TITLES. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Plan.
9.12. GOVERNING LAW. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State
of Colorado without regard to conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of The Spectranetics Corporation on April 14, 1997.
Executed on this ____ day of _______________, 1997.
-----------------------------------
James P. McCluskey,
Secretary/Treasurer
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<PAGE>
SPECTRANETICS
96 TALAMINE COURT
COLORADO SPRINGS, CO 80907
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Joseph A. Largey and James P. McCluskey, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of The Spectranetics Corporation held of record by the
undersigned on April 21, 1997, or with respect to which the undersigned is
otherwise entitled to vote or act, at the Annual Meeting of Shareholders to be
held on June 9, 1997, or any adjournment thereof.
1. Election of Directors
/ / FOR the nominees listed below / / WITHHOLD AUTHORITY to vote for
(except as marked to the nominees
the contrary below, see listed below.
instructions).
Joseph A. Largey and James A. Lent
2. Proposal to approve the Company's 1997 Equity Participation Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Proposal to ratify the
appointment of KPMG Peat Marwick
LLP as independent auditors for
the current fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
(PLEASE SIGN ON REVERSE SIDE)
<PAGE>
In their discretion, the Proxies are authorized to vote upon such business as
may properly come before the meeting or any adjournment thereof, upon matters
incident to the conduct of the meeting and upon the election of substituted
nominees for Director designated by the Board of Directors if the person named
in Proposal 1 above is unable to serve as a Director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPSOSALS 1, 2 AND 3.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN. IN THE
ABSENCE OF INSTRUCTIONS, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
Receipt of Notice of the Annual Meeting of
Shareholders and the accompanying Proxy
Statement is hereby acknowledged. Please sign
exactly as name appears below. When shares
are held by joint tenants, both should sign.
When signing as attorney, as executor,
administrator, trustee, or guardian, please
give full title as such. If a corporation,
please sign in full corporate name by
President or other authorized officer. If a
partnership, please sign in partnership name
by authorized person.
Dated: --------------------------- , 1997
---------------------------------------------
Signature of Shareholder
---------------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
