<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
VENTRITEX, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as specified in its charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or
14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined.):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of 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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
VENTRITEX, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 14, 1996
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
VENTRITEX, INC., a Delaware corporation (the "Company"), will be held on
Thursday, November 14, 1996 at 10:00 a.m., local time, at the Company's
principal executive offices, 701 East Evelyn Avenue, Sunnyvale, California
94086, for the following purposes:
1. To elect four directors to serve for ensuing terms of one year and
until their successors are elected.
2. To approve and ratify an amendment to the Ventritex, Inc. 1991
Employee Stock Purchase Plan to increase the number of shares of Common
Stock reserved for issuance thereunder by 250,000 shares to a new total of
575,000 shares.
3. To approve and ratify an amendment to the Company's Restated
Certificate of Incorporation for the purpose of increasing the authorized
number of shares of the Company's Common Stock by 65,000,000 shares to a
new total of 100,000,000 shares.
4. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending June 30, 1997.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on September 25, 1996
are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting. However, to
assure your representation at the meeting, you are urged to mark, sign, date and
return the enclosed proxy as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person even if he or she has returned a proxy.
FOR THE BOARD OF DIRECTORS
FRANK M. FISCHER
President and Chief Executive Officer
Sunnyvale, California
October 8, 1996
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
IF YOU ATTEND THE MEETING AND SO DESIRE, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN
PERSON.
THANK YOU FOR ACTING PROMPTLY.
<PAGE> 3
VENTRITEX, INC.
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 14, 1996
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of VENTRITEX, INC., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held Thursday, November 14, 1996 at 10:00 a.m., local
time, or at any adjournment thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting
will be held at the Company's principal executive offices, 701 East Evelyn
Avenue, Sunnyvale, California 94086. The Company's telephone number at that
location is (408) 738-4883.
These proxy solicitation materials and the Annual Report to Stockholders
for the fiscal year ended June 30, 1996 (the "Last Fiscal Year"), including
financial statements, were first mailed on or about October 8, 1996 to all
stockholders entitled to vote at the Annual Meeting.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on September 25, 1996 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. The
Company has one series of common shares outstanding, designated Common Stock. At
the Record Date, 20,895,514 shares of the Company's Common Stock, $0.001 par
value (the "Common Stock"), were issued and outstanding and held of record by
450 stockholders.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person.
VOTING; QUORUM; ABSTENTIONS AND BROKER NON-VOTES
Each stockholder voting for the election of directors (Proposal One) may
cumulate such stockholder's votes and give one candidate a number of votes equal
to the number of directors to be elected (four) multiplied by the number of
shares held by such stockholder, or distribute such stockholder's votes on the
same principle among as many candidates as the stockholder may select, provided
that votes cannot be cast for more than four candidates. However, no stockholder
shall be entitled to cumulate votes unless the candidate's name has been placed
in nomination prior to the voting and the stockholder, or any other stockholder,
has given notice at the Annual Meeting, prior to the voting, of the intention to
cumulate the stockholder's votes. On all other matters (Proposals Two, Three and
Four), each share has one vote.
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock issued and outstanding on the Record
Date and entitled to vote at the Annual Meeting, present in person or
represented by proxy. Shares that are voted "FOR," "AGAINST" or "ABSTAIN" from a
matter are treated as being present at the Annual Meeting for purposes of
establishing a quorum and are also treated as votes eligible to be cast by the
Common Stock, present in person or represented by proxy, at the Annual Meeting
and "entitled to vote on the subject matter" (the "Votes Cast") with respect to
such matter. If a quorum is not present or represented, then either the chairman
of the Annual Meeting or the stockholders
<PAGE> 4
entitled to vote at the Annual Meeting, present in person or represented by
proxy, will have the power to adjourn the Annual Meeting from time to time,
without notice other than an announcement at the Annual Meeting, until a quorum
is present. At any adjourned Annual Meeting at which a quorum is present, any
business may be transacted that might have been transacted at the Annual Meeting
as originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned Annual
Meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the adjourned Annual Meeting.
Although there is no definitive statutory or case law authority in Delaware
as to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both the presence or absence of a
quorum for the transaction of business and the total number of Votes Cast with
respect to a particular matter. Therefore, in the absence of controlling
precedent to the contrary, the Company intends to treat abstentions in this
manner.
Broker non-votes, however, shall be treated differently. In a 1988 Delaware
case, Berlin v. Emerald Partners, the Delaware Supreme Court held that, while
broker non-votes may be counted for purposes of determining the presence or
absence of a quorum for the transaction of business, broker non-votes should not
be counted for purposes of determining the number of Votes Cast with respect to
the particular proposal on which the broker has expressly not voted.
Consequently, broker non-votes with respect to proposals set forth in this Proxy
Statement will not be considered "Votes Cast" and, accordingly, will not affect
the determination as to whether the requisite majority of Votes Cast has been
obtained with respect to a particular matter.
Therefore, for purposes of the election of directors (Proposal One),
neither abstentions nor broker non-votes will have any effect on the outcome of
the vote. For purposes of the approval of the amendment to the Ventritex, Inc.
1991 Employee Stock Purchase Plan (Proposal Two), the approval of the amendment
to the Company's Restated Certificate of Incorporation (Proposal Three) and the
ratification and appointment of Ernst & Young LLP as independent auditors of the
Company (Proposal Four), abstentions will have the same effect as votes against
these proposals and broker non-votes will not have any effect on the outcome of
the vote.
Proxies in the accompanying form that are properly executed and returned
will be voted at the Annual Meeting in accordance with the instructions on the
Proxy. Any properly executed Proxy on which there are no instructions indicated
about a specified proposal will be voted as follows: (i) FOR the election of the
four persons named in this Proxy Statement as the Board of Directors' nominees
for election to the Board of Directors; (ii) FOR the approval of the amendment
to the Ventritex, Inc. 1991 Employee Stock Purchase Plan; (iii) FOR the approval
of the amendment to the Company's Restated Certificate of Incorporation; and
(iv) FOR the ratification of the appointment of Ernst & Young LLP as independent
auditors of the Company. No business other than that set forth in the
accompanying Notice of Annual Meeting of Stockholders is expected to come before
the Annual Meeting. Should any other matter requiring a vote of stockholders
properly arise, the persons named in the Proxy will vote the shares they
represent as the Board of Directors may recommend. The persons named in the
Proxy may also, at their discretion, vote the Proxy to adjourn the Annual
Meeting from time to time.
SOLICITATION
The cost of soliciting proxies will be borne by the Company. The Company
has retained Corporate Investor Communications, Inc., a proxy solicitation firm,
in connection with the Annual Meeting at an estimated cost of $6,000. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone, facsimile or telegram.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 1997 Annual Meeting must be received by
the Company at its principal executive offices no later
2
<PAGE> 5
than July 17, 1997 in order to be considered for inclusion in the Company's
proxy statement and form of proxy relating to that meeting.
SECTION 16(a) COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers and persons who
own more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and reports of changes in the ownership with the
Securities and Exchange Commission (the "SEC"). 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 the copies of such forms submitted to it
during the Last Fiscal Year, the Company believes that, during the Last Fiscal
Year, its officers, directors and 10% stockholders were in compliance with all
applicable filing requirements, with the exception that one director did not
timely file a report of change in ownership on Form 4 with respect to one
transaction, which was subsequently reported on a timely-filed Form 5.
SHARE OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of September 25, 1996 by (i)
each person known to the Company who beneficially owned more than 5% of the
outstanding shares of its Common Stock, (ii) each director of the Company, (iii)
each officer of the Company named in the table under "EXECUTIVE COMPENSATION --
Summary Compensation Table" below and (iv) all directors and executive officers
as a group. The number and percentage of shares beneficially owned is determined
under SEC rules, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership includes
any shares as to which the individual has sole or shared voting power or
investment power and also any shares which the individual has the right to
acquire within sixty days of September 25, 1996 through the exercise of any
stock option or other right. Unless otherwise indicated, officers and directors
can be reached at the Company's principal executive offices. A total of
20,895,514 shares of the Company's Common Stock were issued and outstanding as
of September 25, 1995.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY APPROXIMATE
NAME AND ADDRESS OWNED(1) PERCENT OWNED(2)
- ------------------------------------------------------------ ------------------- ----------------
<S> <C> <C>
Massachusetts Financial Services............................ 2,461,100 11.8%
500 Boyston Street
Boston, MA 02116
Wellington Management Company............................... 2,050,900 9.8%
75 State Street
Boston, MA 02109
Loomis Sayles & Co., Inc.................................... 1,748,000 8.4%
1 Financial Center, 34th Floor
Boston, MA 02111
Frank M. Fischer(3)......................................... 235,313 1.1%
Richard L. Karrenbrock(4)................................... 214,862 1.0%
Michael B. Sweeney(5)....................................... 180,649 *
Kevin T. Larkin(6).......................................... 96,376 *
Mark J. Meltzer(7).......................................... 80,100 *
Stephen C. Masson(8)........................................ 40,636 *
Walter J. McNerny(9)........................................ 29,700 *
C. Raymond Larkin, Jr.(10).................................. 27,500 *
Robert R. Momsen(11)........................................ 23,507 *
All directors and executive officers as a group
(14 persons)(12).......................................... 1,266,315 5.9%
</TABLE>
3
<PAGE> 6
- ---------------
* Less than one percent.
(1) The persons named in the table, to the Company's knowledge, have sole
voting and investment power with respect to the shares beneficially owned
by them, subject to community property laws.
(2) Percent of the outstanding shares of Common Stock, treating as outstanding
all shares issuable on exercise of options held by the particular
beneficial owner that are included in the first column.
(3) Includes 36,667 shares subject to options exercisable within 60 days of
September 25, 1996.
(4) Includes 17,500 shares subject to options exercisable within 60 days of
September 25, 1996.
(5) Includes 25,000 shares subject to options exercisable within 60 days of
September 25, 1996.
(6) Includes 95,730 shares subject to options exercisable within 60 days of
September 25, 1996.
(7) Includes 66,875 shares subject to options exercisable within 60 days of
September 25, 1996.
(8) Includes 30,354 shares subject to options exercisable within 60 days of
September 25, 1996.
(9) Includes 27,500 shares subject to options exercisable within 60 days of
September 25, 1996.
(10) Includes 27,500 shares subject to options exercisable within 60 days of
September 25, 1996.
(11) Includes 17,500 shares subject to options exercisable within 60 days of
September 25, 1996.
(12) Includes 418,188 shares subject to options exercisable within 60 days of
September 25, 1996, held by the nine directors and officers listed above
and five additional officers not listed above.
PROPOSAL ONE
ELECTION OF DIRECTORS
A Board of four directors will be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the four nominees named below, all of whom are presently directors of the
Company. If any nominee is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. It is not
expected that any nominee will be unable to or will decline to serve as a
director. If stockholders nominate additional persons for election as directors,
the proxy holder will vote all proxies received by him in accordance with
cumulative voting to assure the election of as many of the Board of Directors'
nominees as possible, with the proxy holder making any required selection of
specific nominees to be voted for. The term of office of each person elected as
a director will continue until the next Annual Meeting of Stockholders or until
that person's successor has been elected.
After serving on the Company's Board since 1993, Mr. Walter J. McNerny will
not stand for re-election at the Annual Meeting. Mr. McNerny was a valued member
of the Board, providing mentorship to the executive officer group as well as the
Board through major growth and other challenging stages of the Company's
development.
VOTE REQUIRED
The four nominees receiving the highest number of affirmative votes of the
Votes Cast shall be elected as directors.
4
<PAGE> 7
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE NOMINEES LISTED BELOW.
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- ------------------------------ --- ------------------------------------- --------
<S> <C> <C> <C>
Frank M. Fischer.............. 54 President and Chief Executive Officer 1987
of the Company
Richard L. Karrenbrock........ 70 Investment Banker 1985
C. Raymond Larkin, Jr......... 48 President and Chief Executive 1993
Officer, Nellcor Puritan Bennett
Incorporated
Robert R. Momsen.............. 49 General Partner, InterWest Partners 1986
</TABLE>
Frank M. Fischer became President, Chief Executive Officer and a director
of the Company in July 1987. Mr. Fischer holds an M.S. degree from Rensselaer
Polytechnic Institute. He is also a director of Heartport, Inc. and Heartstream,
Inc.
Richard L. Karrenbrock became a director of the Company in April 1985.
Since 1981, he has been an investment banker and private investor. He was
formerly a director of several medical device companies including Advanced
Cardiovascular Systems, Inc. Mr. Karrenbrock holds an M.B.A. from Harvard
University.
C. Raymond Larkin, Jr. became a director of the Company in February 1993.
Since 1983, he has held various executive positions with Nellcor Incorporated, a
medical products company, for which he served as President from 1989 until
August 1995 when he became President and Chief Executive Officer of Nellcor
Puritan Bennett Incorporated upon the merger of Nellcor Incorporated with
Puritan-Bennett Corporation. Mr. Larkin is also a director of Nellcor Puritan
Bennett Incorporated, ArthroCare Corporation and Neuromedical Systems, Inc. He
holds a B.S. degree from LaSalle University.
Robert R. Momsen became a director of the Company in August 1986. Since
1982, he has been a general partner of the general partner of the InterWest
Partners group of venture capital funds. Mr. Momsen is also a director of COR
Therapeutics, Inc., ArthroCare Corporation, Integ, Inc., Innovasive Devices,
Inc. and Urologix, Inc. He holds an M.B.A. from Stanford University.
There are no family relationships among directors or executive officers of
the Company.
BOARD MEETINGS, COMMITTEES AND DIRECTOR COMPENSATION
The Board of Directors of the Company held four meetings during the Last
Fiscal Year. No incumbent director attended less than 75% of the aggregate of
all meetings of the Board of Directors and any committees of the Board of
Directors on which he served, if any, during his tenure as a director.
The Board of Directors has an Audit Committee and a Compensation Committee.
It does not have a nominating committee or a committee performing the functions
of a nominating committee. From time to time, the Board has created various ad
hoc committees for special purposes. No such committee is currently functioning.
During the last Fiscal Year, the Audit Committee consisted of directors
Karrenbrock, Larkin and Momsen. The Audit Committee is responsible for reviewing
the results and scope of the audit and other services provided by the Company's
independent auditors. The Audit Committee held four meetings during the Last
Fiscal Year.
During the Last Fiscal Year, the Compensation Committee consisted of
directors Karrenbrock, McNerny and Momsen. The Compensation Committee reviews
and makes decisions concerning salaries and
5
<PAGE> 8
incentive compensation for officers of the Company. The Compensation Committee
held four meetings during the Last Fiscal Year.
Directors who are not employees of the Company ("Outside Directors") are
paid an annual retainer of $10,000 and are paid $1,000 (plus out-of-pocket
travel expenses) for attending each meeting, including meetings of committees
unless held on the same day as a board meeting. On July 1, 1996, pursuant to the
Company's 1995 Director Option Plan, each Outside Director was granted an option
to purchase 7,500 shares of the Company's Common Stock at an exercise price of
$19.00 per share.
EXECUTIVE COMPENSATION
COMPENSATION TABLES
Summary Compensation Table. The following table sets forth certain
compensation paid by the Company to the Chief Executive Officer and the four
other most highly compensated executive officers of the Company for services
rendered during each of the three fiscal years ended June 30, 1994, 1995 and
1996:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
SECURITIES
UNDERLYING
ANNUAL COMPENSATION OPTIONS
FISCAL ------------------------- (# OF ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) SHARES) COMPENSATION($)
- ------------------------------- ------ --------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Frank M. Fischer, 1996 $ 315,000 $ 45,000 65,000 $ 4,655(2)
President, Chief Executive 1995 $301,154 $ 108,000 65,000 $ 1,500(2)
Officer, Acting CFO 1994 $276,058 $ 150,000 -- --
Michael B. Sweeney, 1996 $ 212,000 $ 60,000 30,000 $ 4,655(2)
Vice President, Clinical 1995 $200,769 $ 50,000 30,000 $ 1,500(2)
Engineering and Regulatory 1994 $180,692 $ 75,000 -- --
Affairs
Mark J. Meltzer, 1996 $ 193,113 $ 56,250 20,000 $ 6,293(2)
Vice President, Patent 1995 $181,390 $ 30,000 15,000 $ 1,500(2)
Counsel 1994 $166,862 $ 45,000 -- --
Kevin T. Larkin, 1996 $ 176,600 $ 50,400 20,000 $ 4,749(2)
Vice President, Marketing 1995 $168,646 $ 45,000 20,000 $ 1,500(2)
and Sales 1994 $164,194 $ 75,000 -- $69,542(3)
Stephen C. Masson(4) 1996 $ 165,000 $ 48,000 25,000 $ 4,420(2)
Vice President, Defibrillator 1995 $ 42,404 $ 70,000 62,500 $ 1,500(2)
Development 1994 $ -- $ -- -- $ --
</TABLE>
- ---------------
(1) Represents discretionary bonus payments determined by the Board of Directors
or the compensation committee thereof.
(2) Represents matching grants to salary deferral plan.
(3) Represents relocation expenses paid to Mr. Larkin.
(4) Mr. Masson became Vice President, Defibrillator Development on April 3,
1995.
6
<PAGE> 9
Option Grants in Last Fiscal Year. The following table sets forth
information with respect to options granted during fiscal 1996 to each executive
officer named in the Summary Compensation Table above:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS VALUE AT ASSUMED ANNUAL
UNDERLYING GRANTED TO EXERCISE OR RATES OF STOCK PRICE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION APPRECIATION FOR OPTION
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE TERM(2)
- --------------------------- ------------- ------------ ----------- -------- -------------------------
5%($) 10%($)
--------- --------
<S> <C> <C> <C> <C> <C> <C>
Frank M. Fischer........... 65,000 6.4% $ 15.63 7/01/06 $638,925 $1,619,163
Michael B. Sweeney......... 30,000 3.0% $ 15.63 7/01/06 $294,889 $ 747,306
Mark J. Meltzer............ 20,000 2.0% $ 15.63 7/01/06 $196,592 $ 498,204
Kevin T. Larkin............ 20,000 2.0% $ 15.63 7/01/06 $196,592 $ 498,204
Stephen C. Masson.......... 25,000 2.5% $ 15.63 7/01/06 $245,741 $ 622,755
</TABLE>
- ---------------
(1) All listed options were granted under the Company's 1995 Stock Option Plan
at an exercise price equal to the fair market value on the date of grant.
These stock options vest as to 25% of the shares from the date of grant at
the end of the first year and 1/48 of the shares per month thereafter, with
full vesting occurring four years after the date of grant.
(2) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates mandated by the Securities and Exchange Commission's rules
and do not represent an estimate or projection by the Company as to the
future price of the Common Stock. The Company did not use an alternative
formula for a grant date valuation, as the Company does not believe that any
formula will determine with reasonable accuracy a present value based on
future factors, which include factors that are unknown and may be volatile
and/or outside the control of the Company.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values. The following table sets forth, for each of the executive officers
named in the Summary Compensation Table above, information with respect to
option exercises during fiscal 1996 and the value of unexercised options at June
30, 1996:
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT FISCAL THE-MONEY OPTIONS AT
SHARES YEAR-END(#) YEAR-END $(2)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank M. Fischer........... -- -- 31,250 113,750 $ 171,044 $ 139,831
Michael B. Sweeney......... -- -- 22,500 52,500 $ 163,388 $ 64,538
Mark J. Meltzer............ -- -- 63,021 36,979 $ 3,281 $ 39,744
Kevin T. Larkin............ -- -- 89,375 50,625 $ 4,375 $ 43,025
Stephen C. Masson.......... 9,750 $ 207,393 23,656 69,844 $ 34,569 $ 123,206
</TABLE>
- ---------------
(1) Based on the closing price of the Company's Common Stock on the date of the
exercise.
(2) Based on a fair market value of $17.13, which was the closing price of the
Company's Common Stock on June 30, 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the Last Fiscal Year, Richard L. Karrenbrock, Walter J. McNerny and
Robert R. Momsen served as members of the Compensation Committee of the Board of
Directors. No member of the Compensation Committee was or is an officer or
employee of the Company or any of its subsidiaries. In addition, during the Last
Fiscal Year, no officer of the Company had an "interlock" relationship to
report.
7
<PAGE> 10
CERTAIN TRANSACTIONS WITH MANAGEMENT
The Company's Certificate of Incorporation provides that to the fullest
extent permitted by Delaware General Corporation Law, as such law currently
exists or as it may be amended in the future, no director of the Company shall
be personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director. The Company's Bylaws authorize the
Company to indemnify its directors and officers to the fullest extent permitted
by Delaware law, as such law currently exists or as it may be amended in the
future. The Company has entered into indemnification agreements with its
officers and directors containing provisions which are in some respects broader
than the specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements may require the Company, among
other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified.
The Company has adopted a severance plan (the "Severance Plan") covering
certain of its employees, including each of its executive officers. This
Severance Plan provides that upon a change of control and upon the event of a
subsequent not-for-cause termination or constructive termination, such employees
would be eligible to receive a severance payment. For this purpose, a "change of
control" is defined as (i) a person acquiring 30% or more of the Company's
outstanding stock, (ii) a change in the composition of the Board of Directors of
the Company occurring within a two-year period, as a result of which fewer than
a majority of the directors are incumbent directors, or (iii) the stockholders
approving a merger or consolidation of the Company with any other corporation as
further described in the Severance Plan. Severance payments under the Severance
Plan vary. Executive officers would receive an amount equal to three times their
annual base salary and target bonus plus $25,000. Other participants would
receive an amount equal to twice their annual base salary and target bonus plus
$12,500. The Severance Plan remains in effect for two years subsequent to a
change of control.
The Company loaned $300,000 on August 30, 1995 to Robert D. Gaffney, Vice
President of Manufacturing, so that Mr. Gaffney could finance taxes paid in
connection with his exercise of certain non-statutory stock options to purchase
Common Stock of the Company. On April 12, 1996, the Company loaned Mr. Gaffney
an additional $500,000 for the same purpose. On the same date, the Company
canceled the promissory note representing the $300,000 loan and received from
Mr. Gaffney a new promissory note with a principal amount of $810,634.67,
representing the principal and accrued interest on the $300,000 loan and the
principal amount of the $500,000 loan. The $810,634.67 loan bears interest at
5.33% per annum, is due in full in two years and is secured by pledged Common
Stock and a deed of trust against Mr. Gaffney's principal residence.
COMPENSATION COMMITTEE REPORT
The following is provided to stockholders by the members of the
Compensation Committee of the Board of Directors.
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for the administration of the Company's compensation programs. These
programs include base salary for executive officers and both annual and
long-term incentive compensation programs. The Company's compensation programs
are designed to provide a competitive level of total compensation and include
incentive and equity ownership opportunities linked to the Company's performance
and stockholder return.
During the Last Fiscal Year, the Committee, in conjunction with an
independent consulting firm, conducted a review of the Company's executive
compensation programs. As part of this review, the Committee compared the
Company's compensation programs (including base salary, annual incentives
compensation and long-term incentive compensation) with those of certain
competitor companies. Competitive market data were drawn from industry and
geographic competitors, manufacturers of high technology health care products
and compensation surveys.
8
<PAGE> 11
COMPENSATION PHILOSOPHY
The design and implementation of the Company's executive compensation
programs are based on a series of guiding principles derived from the Company's
values, business strategy and management requirements. These principles may be
summarized as follows:
-- Align the financial interests of the management team with the Company
and its stockholders;
-- Attract, motivate and retain high-caliber individuals necessary to
increase total return to stockholders;
-- Provide a total compensation program where a significant portion of pay
is linked to individual achievement and short- and long-term Company
performance; and
-- Emphasize reward for performance at the individual, team and Company
levels.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code adopted under the Federal Revenue Reconciliation Act of
1993. Section 162(m) disallows a tax deduction for any publicly-held corporation
for individual compensation exceeding $1 million in any taxable year for any of
the named executive officers, unless compensation is performance based. Since
the targeted cash compensation of each of the named executive officers is well
below the $1 million threshold and the Committee believes that any options
granted under the Company's stock option plan will meet the requirement of being
performance based under the transition provisions provided in the regulations
under Section 162(m), the Committee believes that Section 162(m) will not reduce
the tax deduction available to the Company. The Company's policy is to qualify
to the extent reasonable its executive officers' compensation for deductibility
under applicable tax laws.
COMPENSATION PROGRAM
The Company's executive compensation program has three major components,
all of which are intended to attract, retain and motivate executive officers
consistent with the principles set forth above. The Committee considers these
components of compensation individually as well as collectively in determining
total compensation for executive officers.
1. Base salary. Each fiscal year the Committee establishes base salaries
for individual executive officers based upon (i) industry and peer group
surveys, (ii) responsibilities, scope and complexity of each position and (iii)
performance judgments as to each individual's past and expected future
contributions. The Committee reviews with the Chief Executive Officer and
approves, with appropriate modifications, an annual base salary plan for the
Company's executive officers other than the Chief Executive Officer. The
Committee reviews and fixes the base salary of the Chief Executive Officer based
on similar competitive compensation data and the Committee's assessment of his
past performance and its expectations as to his future contributions in leading
the Company.
2. Annual cash (short-term) incentives. Annual cash incentives are
established to provide a direct linkage between individual pay and annual
corporate performance. Target annual bonus awards are established for executive
officer positions based upon industry and peer group surveys and range from
approximately 30% to approximately 60% of base salary, with 60% for the chief
executive position. In establishing bonus amounts, the Committee generally
considers the performance of each officer in his or her respective area of
accountability, each officer's respective contribution to the success of the
Company and competitive data for similar positions. In establishing bonus awards
for the Last Fiscal Year, the Committee primarily considered the financial
performance for the Last Fiscal Year. Net sales and operating profitability
during the Last Fiscal Year fell well below targeted levels and resulted in a
significant loss. After considering these criteria, the Committee decided no
bonuses for the Last Fiscal Year would be paid. No executive officer, including
the Chief Executive Officer, received a cash bonus under this plan for Fiscal
1996.
A Retention Bonus Program was created in May 1995. The purpose of the plan
was to retain and focus key employees, including officers, on Ventritex's goals
during the period following approval of competitors' pectorally implantable
defibrillators and before approval of the Company's Cadet implantable
defibrillator. Retention bonuses were based upon 30% of the employee's base
salary as of May 1995. As requested by the Chief Executive Officer, his
retention bonus was reduced from 30% to 15% of his base salary as of May 1995.
9
<PAGE> 12
3. Equity based incentive compensation. Long-term incentives for the
Company's employees are provided under the Company's stock option plans. Each
fiscal year, the Committee considers the desirability of granting to executive
officers long-term incentives in the form of stock options. These option grants
are intended to motivate the executive officers to manage the business to
improve long-term Company performance and align the financial interests of the
management team with the Company and its stockholders. The Committee established
the grants of stock options to executive officers (other than the Chief
Executive Officer) in the Last Fiscal Year, based upon a review with the Chief
Executive Officer of proposed individual awards, taking into account each
officer's scope of responsibility and specific assignments, strategic and
operational goals applicable to the officer, anticipated performance
requirements and contributions of the officer and competitive data for similar
positions. The Committee independently reviewed these same factors in
determining the option grant to the Chief Executive Officer. During the Last
Fiscal Year, an option award of 65,000 shares of Common Stock was granted to the
Chief Executive Officer. All stock options granted to executive officers in the
Last Fiscal Year provide for vesting over a four-year period.
COMPENSATION COMMITTEE MEMBERS:
Richard L. Karrenbrock
Walter J. McNerny
Robert R. Momsen
The foregoing Compensation Committee Report shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, except to the
extent the Company specifically incorporates it by reference into such filing.
STOCK PERFORMANCE GRAPH
The following line graph compares the cumulative total return to
stockholders of the Company's Common Stock at June 30, 1996 since January 22,
1992 (the date the Company first became subject to the reporting requirements of
the Exchange Act) to the cumulative total return over such period of (i) the
"Nasdaq Stock Market -- U.S." index, and (ii) the Hambrecht & Quist "Healthcare,
Excluding Biotechnology" index. The graph assumes the investment of $100 on
January 22, 1992 in the Company's Common Stock and each of such indices (from
December 31, 1991) and reflects the change in the market price of the Company's
Common Stock relative to the noted indices at June 30, 1992, 1993, 1994, 1995
and 1996 and not for any interim period. The Stock Performance Graph is not
necessarily indicative of future price performance.
10
<PAGE> 13
COMPARISON OF 53 MONTH CUMULATIVE TOTAL RETURN*
AMONG VENTRITEX, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE HAMBRECHT & QUIST HEALTHCARE EXCLUDING BIOTECH INDEX
<TABLE>
<CAPTION>
HAMBRECHT &
QUIST HEALTH-
CARE EX-
MEASUREMENT PERIOD VENTRITEX, NASDAQ STOCK CLUDING
(FISCAL YEAR COVERED) INC. MARKET- US BIOTECH
<S> <C> <C> <C>
1/22/92 100 100 100
6/92 124 96 79
6/93 139 121 57
6/94 103 122 54
6/95 94 163 77
6/96 95 209 107
</TABLE>
* $100 INVESTED ON 1/22/92 IN STOCK OR ON 12/31/92 IN INDEX INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
The information contained in the Stock Performance Graph shall not be
deemed to be "soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act or the Exchange Act, except to the extent the Company
specifically incorporates it by reference into such filing.
PROPOSAL TWO
APPROVAL AND RATIFICATION OF AMENDMENT
TO THE VENTRITEX, INC. 1991 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Ventritex, Inc. 1991 Employee Stock Purchase Plan (the "Purchase Plan")
was adopted in November 1991. The Purchase Plan is intended to allow employees
of the company and its designated subsidiaries to purchase Common Stock at
regular intervals by means of wage and salary deferrals on a tax-favored basis.
A total of 75,000 shares of Common Stock were originally reserved for issuance
under the Purchase Plan. In April 1994, the Board of Directors amended the 1991
Purchase Plan to increase the number of shares reserved thereunder to 325,000,
which amendment was approved by stockholders in December 1994. 118,268 of such
shares remained available for issuance under the Purchase Plan as of September
25, 1996. The stockholders are being requested to consider and approve the
amendment to the Purchase Plan by increasing the number of shares of Common
Stock reserved for issuance thereunder by 250,000 shares to 575,000 shares.
11
<PAGE> 14
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve and ratify the amendment increasing shares under the 1991 Purchase Plan.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE AMENDMENT TO THE PURCHASE PLAN.
PROPOSED AMENDMENT
The Board of Directors believes that, in order to attract qualified
employees and provide an incentive to its current employees, it is necessary to
offer such employees the opportunity to purchase Common Stock in the Company
pursuant to the Purchase Plan. Accordingly, in July 1996, the Board of
Directors approved an amendment to the Purchase Plan increasing the number of
shares of Common Stock reserved for issuance thereunder by 250,000 shares to an
aggregate of 575,000 shares. The Board of Directors believes that the 250,000
additional shares of Common Stock available for issuance as a result of the
amendment should be sufficient to meet the Company's requirements for
approximately three years.
SUMMARY OF THE PURCHASE PLAN
The central features of the Purchase Plan are outlined below.
Administration. The Purchase Plan, which is intended to qualify under
Section 423 of the Code, is administered by the Board of Directors or a
committee of members of the Board of Directors (the "Administrator"). All
questions of interpretation or application of the Purchase Plan are determined
by the Administrator, and its decisions are final, conclusive and binding upon
all participants.
Eligibility and Participation. Company employees are eligible to
participate in the Purchase Plan if they are customarily employed for at least
20 hours per week and more than five months per year. Moreover, the Board of
Directors may designate that such employees of its subsidiaries are eligible to
participate in the Purchase Plan. However, no employee who owns five percent or
more of the total combined voting power or value of all classes of stock of the
Company or its subsidiaries is eligible to participate. Eligible employees
become participants in the Purchase Plan by filing with the payroll office of
the Company a Subscription Agreement authorizing payroll deductions prior to the
applicable offering date. By executing the Subscription Agreement, each
participant is in effect granted an option to purchase shares of Common Stock.
Unless a participant withdraws from participation in the Purchase plan or his or
her participation is otherwise discontinued, the participant's option for the
purchase of shares will be exercised automatically at the end of the Offering
Period for the maximum number of shares at the applicable price. Approximately
200 employees participate in a typical offering period under the Purchase Plan,
resulting in the issuance of approximately 40,000 shares in each offering
period.
Offering Periods. The Purchase Plan consists of consecutive six-month
offering periods ("Offering Periods"). Shares are purchased on the last day of
each Offering Period (the "Exercise Date"). A new offering commences every six
months, generally on the first business day on or after April 1 and October 1 of
each year. The Administrator may change the commencement date and duration of
Offering Periods without obtaining stockholder approval.
Purchase Price. The Purchase Price per share at which shares are sold
under the Purchase Plan is 85% of the lower of the fair market value of the
Common Stock (a) on the date of commencement of the Offering Period or (b) on
the applicable Exercise Date within such Offering Period. The fair market value
of the Common Stock on a given day is based on the last reported sale price on
the Nasdaq Stock Market.
Adjustment on Changes in Capitalization. In the event any changes are made
in the Company's capitalization, such as a stock split or stock dividend, which
results in an increase or decrease in the number of outstanding shares of Common
Stock without receipt of consideration by the Company, appropriate
12
<PAGE> 15
adjustments will be made by the Board of Directors in the shares subject to
purchase under the Purchase Plan and in the purchase price per share. In the
event of a proposed dissolution or liquidation of the Company, the Offering
Periods will terminate immediately prior to such dissolution or liquidation,
unless the Board of Directors provides otherwise. In the event of a proposed
sale of all or substantially all of the assets of the Company, or a merger of
the Company with or into another corporation, each option of the Purchase Plan
shall be assumed or an equivalent option shall be substituted by such successor
corporation, unless the Board of Directors determines, in the exercise of its
sole discretion and in lieu of such assumption or substitution, to shorten the
Offering Periods then in progress by setting a new Exercise Date.
Non-Assignability. No rights or accumulated payroll deductions of a
participant under the Purchase Plan may be pledged, assigned or transferred for
any reason, and any such attempt may be treated by the Company as an election to
withdraw from the Purchase Plan.
Amendment and Termination of the Purchase Plan. The Board of Directors may
at any time and for any reason terminate or amend the Purchase Plan. Except upon
a change in capitalization, no such termination may affect options previously
granted, provided that an Offering Period may be terminated by the Board of
Directors on any Exercise Date if the Board of Directors determines that the
termination of the Purchase Plan is in the best interest of the Company and its
stockholders. Except upon a change in capitalization, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Rule 16b-3 promulgated
under the Exchange Act, or under Section 423 of the Code (or any successor, rule
or provision or any other applicable law or regulation), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.
Tax Information. The Purchase Plan, and the right to participants to make
purchases thereunder, is intended to qualify under the provisions of Section 421
and 423 of the Code. Under these provisions, no income will be taxable to a
participant until the shares purchased under the Purchase Plan are sold or
otherwise disposed of. Upon a sale or other disposition of the shares, the
participant will generally be subject to tax and the amount of tax will depend
upon the holding period. If the shares are sold or otherwise disposed of more
than two years from the first day of the Offering Period and one year from the
date the shares are purchased, the participant will recognize ordinary income
measured as the lesser of (a) the excess of the fair market value of the shares
at the time of such sale or disposition over the purchase price, or (b) an
amount equal to 15% of the fair market value of the shares as of the first day
of the Offering Period. Any additional gain will be treated as long-term capital
gain. If the shares are sold or otherwise disposed of before the expiration of
these holding periods, the participant will recognize ordinary income generally
measured as the excess of the fair market value of the shares on the date the
shares are purchased over the purchase price. Any additional gain or loss on
such sale or disposition will be long-term or short-term capital gain or loss,
depending on the holding period. The Company is not entitled to a deduction for
amounts taxed as ordinary income or capital gain to a participant except to the
extent of ordinary income recognized by participants upon a sale or disposition
of shares prior to the expiration of the holding period(s) described above.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the Purchase Plan; it does
not purport to be complete, and does not discuss the income tax laws of any
municipality, state or foreign country in which a participant may reside.
PROPOSAL THREE
APPROVAL AND RATIFICATION OF AMENDMENT TO
VENTRITEX, INC. CERTIFICATE OF INCORPORATION
GENERAL
The Company's current Restated Certificate of Incorporation (the
"Certificate") provides that the Company's authorized capital stock shall
consist of 5,000,000 shares of Preferred Stock, par value $.001 per share, and
35,000,000 shares of Common Stock, par value $.001 per share. In August 1996,
the Company completed a public offering of its convertible subordinated notes,
which are convertible into an aggregate of approximately 3,350,000 shares of
Common Stock. As a result of the offering of these convertible notes, the number
of shares of Common Stock that remain authorized but not issued or reserved for
issuance, as of the Record Date, is approximately 7,000,000 shares. The Company
believes it is important to retain a significant reserve of authorized but not
issued or reserved Common Stock that could be used to declare stock dividends or
stock splits, raise additional capital through the sale of securities, acquire
another company or its business or assets, create negotiating leverage and
flexibility in the event of an unfriendly takeover bid or establish a strategic
relationship with a corporate partner, among other uses. In July 1996, the Board
of Directors authorized an amendment to the Certificate to increase the
authorized number of shares of Common Stock to 100,000,000 shares.
13
<PAGE> 16
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve and ratify the amendment to the Certificate increasing the authorized
shares of Common Stock.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION.
CURRENT NUMBER OF SHARES OUTSTANDING AND SUBJECT TO OPTIONS
At the Record Date, 20,895,514 shares of Common Stock were issued and
outstanding, approximately 2,711,604 additional shares were issuable upon
exercise of outstanding options, approximately 614,707 shares were reserved for
future grants under the Company's stock option plans, and an additional 118,268
shares were reserved for issuance under the Company's 1991 Employee Stock
Purchase Plan. No shares of Preferred Stock were outstanding or subject to
options.
WORDING OF AMENDMENT
Under the proposed amendment, Paragraph 1 of Article IV of the Certificate
would be amended to read as follows:
The Corporation is authorized to issue two classes of stock to be
designated, respectively, Preferred Stock, par value $.001 per share
("Preferred"), and Common Stock, par value $.001 per share ("Common").
The total number of shares of Common that the Corporation shall have
authority to issue is 100,000,000. The total number of shares of
Preferred that the Corporation shall have authority to issue is
5,000,000. The Preferred may be issued from time to time in one or more
series.
If the Amendment is adopted, it will become effective upon the
filing of the amendment with the Delaware Secretary of State.
EFFECT OF AMENDMENT
If approved, the proposed amendment to the Certificate would authorize
additional shares of Common Stock that will be available in the event that the
Board of Directors determines to authorize stock dividends or stock splits, to
raise additional capital through the sale of securities, to acquire another
company or its business or assets, to create negotiating leverage and
flexibility in the event of an unfriendly takeover bid or to establish a
strategic relationship with a corporate partner, among other uses. If the
proposed amendment is adopted, 65,000,000 additional shares of Common Stock of
the Company will be available for issuance at the discretion of the Board of
Directors, except that certain large issuances of shares may require stockholder
approval in accordance with the requirements of The Nasdaq Stock Market and
certain stock-based employee benefit plans may require stockholder approval in
order to obtain desirable treatment under tax or securities laws and accounting
regulations.
14
<PAGE> 17
The Board of Directors believes it desirable that the Company have the
flexibility to issue the additional shares as described above. As is typical in
publicly held technology companies, the holders of Common Stock have no
preemptive rights to purchase any stock of the Company. Stockholders should be
aware that the issuance of additional shares could have a dilutive effect on
earnings per share and on the equity ownership of the present holders of Common
Stock. No actions are currently being taken with respect to any large issuance
of additional shares.
The flexibility of the Board of Directors to issue additional shares of
stock could enhance the Board's ability to negotiate on behalf of the
stockholders in an unfriendly takeover situation. Although it is not the purpose
of the proposed amendment, the authorized but unissued shares of Common Stock
(as well as the existing authorized but unissued shares of Preferred Stock) also
could be used by the Board of Directors to discourage, delay or make more
difficult a change in the control of the Company.
In August 1994, the Board of Directors adopted the Preferred Shares Rights
Agreement (the "Rights Agreement") and issued under the Rights Agreement, as a
dividend to the holders of Common Stock, rights to purchase Preferred Stock
which may be converted, under certain circumstances, into Common Stock. The
Rights Agreement is designed to protect stockholders against the adverse
consequences of partial takeovers and other abusive takeover tactics which the
Board of Directors believes are not in the best interests of the Company's
stockholders by providing for certain rights to acquire the Common Stock of the
Company or of an acquiring entity upon the occurrence of certain events. These
rights, should they become exercisable, could possibly deter a potential
takeover of the Company. In the event the rights become exercisable, the Company
might have to issue a substantial number of new shares of Common Stock. Although
under the Rights Agreement the Company is not now obligated (but must use best
efforts) to reserve shares of Common Stock for issuance thereunder, a failure to
have sufficient shares available could result in a delay or failure of
implementation of the Rights Agreement. An increase in the authorized number of
shares of Common Stock could therefore make a change in control of the Company
more difficult by facilitating the operation of the Rights Plan.
PROPOSAL FOUR
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending June 30, 1997 and recommends that the stockholders vote FOR confirmation
of such selection. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection. Ernst & Young LLP has audited
the Company's annual financial statements since its inception. Representatives
of Ernst & Young LLP are expected to be present at the Annual Meeting with the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
VOTE REQUIRED
The affirmative vote of the majority of the Votes Cast will be required to
ratify the appointment of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending June 30, 1997.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 1997.
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<PAGE> 18
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. Should any other matter requiring a vote of stockholders properly
arise, the persons named in the Proxy will vote the shares they represent as the
Board of Directors may recommend.
It is important that your stock be represented at the Annual Meeting
regardless of the number of shares which you hold. You are, therefore, urged to
execute and return the accompanying Proxy in the enclosed envelope, at your
earliest convenience.
THE BOARD OF DIRECTORS
Dated: October 8, 1996
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<PAGE> 19
VENTRITEX, INC.
1991 EMPLOYEE STOCK PURCHASE PLAN
(as proposed to be amended November 14, 1996)
The following constitute the provisions of the 1991 Employee Stock
Purchase Plan of Ventritex, Inc.
1. Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended. The provisions of the Plan, accordingly, shall be construed so as to
extend and limit participation in a manner consistent with the requirements of
that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "Common Stock" shall mean the Common Stock of the
Company.
(d) "Company" shall mean Ventritex, Inc., a California
corporation.
(e) "Compensation" shall mean all base straight time
gross earnings, exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses, commissions and other compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole
discretion as eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an
employee of the Company for purposes of tax withholding under the Code whose
customary employment with the Company or any Designated Subsidiary is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either
<PAGE> 20
by statute or by contract, the employment relationship will be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each
Offering Period.
(i) "Exercise Date" shall mean the last day of each
Offering Period.
(j) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:
(1) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sale price for the Common Stock (or the mean of the closing bid and
asked prices, if no sales were reported), as quoted on such exchange (or the
exchange with the greatest volume of trading in Common Stock) or system on the
date of such determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable, or;
(2) If the Common Stock is quoted on the NASDAQ
system (but not on the National Market System thereof) or is regularly quoted
by a recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in the Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith
by the Board.
(k) "Offering Period" shall mean a period of
approximately six (6) months, commencing on the first Trading Day on or after
April 1 and terminating on the last Trading Day in the period ending the
following September 30, or commencing on the first Trading Day on or after
October 1 and terminating on the last Trading Day in the period ending the
following March 31, during which an option granted pursuant to the Plan may be
exercised. Notwithstanding the foregoing, the first Offering Period shall
commence on the first Trading Day on or after the closing of the initial public
offering of Common Stock pursuant to an effective registration statement under
the Securities Act of 1933, and shall
-2-
<PAGE> 21
terminate on the last Trading Day in the period ending September 30, 1992.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85%
of the Fair Market Value of a share of Common Stock on the Enrollment Date or
on the Exercise Date, whichever is lower.
(n) "Reserves" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for
issuance under the Plan but not yet placed under option.
(o) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the
Company or a Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary.
(p) "Trading Day" shall mean a day on which national stock
exchanges and the National Association of Securities Dealers Automated
Quotation (NASDAQ) System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)) shall be
eligible to participate in the Plan so long as such Employee (i) is employed by
the Company on a given Enrollment Date and (ii) has been continuously employed
by the Company for at least three (3) consecutive months (except that, for
Employees subject to Section 16 of the Securities Exchange Act of 1934, such
period shall be six (6) consecutive months unless the shareholders of the
Company have approved the amendment of this paragraph reducing such period to
three (3) consecutive months).
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) if,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) which permits his or her rights to purchase stock under
all employee stock purchase plans of the Company and its subsidiaries to accrue
at a rate which exceeds Twenty-Five
-3-
<PAGE> 22
Thousand Dollars ($25,000) worth of stock (determined at the fair market value
of the shares at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by
consecutive Offering Periods as described in Section 2(k), or on such other
date as the Board shall determine, and continuing thereafter until terminated
in accordance with Section 19 hereof. The Board shall have the power to change
the duration of Offering Periods (including the commencement dates thereof)
with respect to future offerings without shareholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's payroll
office at least five (5) business days prior to the applicable Enrollment Date,
unless a later time for filing the subscription agreement is set by the Board
for all eligible Employees with respect to a given Offering Period.
(b) Payroll deductions for a participant shall commence
on the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable,
unless sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her
subscription agreement, he or she shall elect to have payroll deductions made
on each pay day during the Offering Period in an amount not less than one
percent (1%) nor more than ten percent (10%) of the Compensation which he or
she receives on each pay day during the Offering Period, and the aggregate of
such payroll deductions during the Offering Period shall not exceed ten percent
(10%) of the participant's Compensation during said Offering Period.
(b) All payroll deductions made for a participant shall
be credited to his or her account under the Plan and will be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
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<PAGE> 23
(c) A participant may discontinue his or her
participation in the Plan as provided in Section 10 hereof, or may decrease the
rate of his or her payroll deductions during the Offering Period by completing
or filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate
shall be effective with the first full payroll period following five (5)
business days after the Company's receipt of the new subscription agreement
unless the Company elects to process a given change in participation more
quickly. A participant may not increase the rate of his or her payroll
deductions during the Offering Period. A participant's subscription agreement
shall remain in effect for successive Offering Periods unless terminated as
provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof,
a participant's payroll deductions may be decreased to 0% at such time during
any Offering Period which is scheduled to end during the current calendar year
(the "Current Offering Period") that the aggregate of all payroll deductions
which were previously used to purchase stock under the Plan in a prior Offering
Period which ended during that calendar year plus all payroll deductions
accumulated with respect to the Current Offering Period equal $21,250. Payroll
deductions shall recommence at the rate provided in such participant's
subscription agreement at the beginning of the first Offering Period which is
scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock.
At any time, the Company may, but will not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on the Exercise Date of such Offering Period (at
the applicable Purchase Price) up to a
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<PAGE> 24
number of shares of the Company's Common Stock determined by dividing such
Employee's payroll deductions accumulated prior to such Exercise Date and
retained in the Participant's account as of the Exercise Date by the applicable
Purchase Price; provided that in no event shall an Employee be permitted to
purchase during each Offering Period more than a number of Shares determined by
dividing $12,500 by the Fair Market Value of a share of the Company's Common
Stock on the Enrollment Date, and provided further that such purchase shall be
subject to the limitations set forth in Sections 3(b) and 12 hereof. Exercise
of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof, and shall expire on
the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the
Plan as provided in Section 10 hereof, his or her option for the purchase of
shares will be exercised automatically on the Exercise Date, and the maximum
number of full shares subject to option shall be purchased for such participant
at the applicable Purchase Price with the accumulated payroll deductions in his
or her account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided
in Section 10 hereof. Any other monies left over in a participant's account
after the Exercise Date shall be returned to the participant. During a
participant's lifetime, a participant's option to purchase shares hereunder is
exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date
on which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all
the payroll deductions credited to his or her account and not yet used to
exercise his or her option under the Plan at any time by giving written notice
to the Company in the form of Exhibit B to this Plan. All of the participant's
payroll deductions credited to his or her account will be paid to such
participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period will be automatically terminated,
and no further payroll deductions for the purchase of shares will be made
during the Offering Period. If a participant withdraws from an
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<PAGE> 25
Offering Period, payroll deductions will not resume at the beginning of the
succeeding Offering Period unless the participant delivers to the Company a new
subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as
defined in Section 2(g) hereof), for any reason, including by virtue of him or
her having failed to remain an Employee of the Company for at least twenty (20)
hours per week during an Offering Period in which the Employee is a
participant, he or she will be deemed to have elected to withdraw from the Plan
and the payroll deductions credited to such participant's account during the
Offering Period but not yet used to exercise the option will be returned to
such participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 14 hereof, and such participant's option will be
automatically terminated.
(c) A participant's withdrawal from an Offering Period
will not have any effect upon his or her eligibility to participate in any
similar plan which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering Period
from which the participant withdraws.
11. Interest. No interest shall accrue on the payroll deductions
of a participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be 575,000
shares, subject to adjustment upon changes in capitalization of the Company as
provided in Section 18 hereof. If on a given Exercise Date the number of
shares with respect to which options are to be exercised exceeds the number of
shares then available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.
(b) The participant will have no interest or voting right
in shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the
Plan will be registered in the name of the participant or in the name of the
participant and his or her spouse.
13. Administration.
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<PAGE> 26
(a) Administrative Body. The Plan shall be administered
by the Board or a committee of members of the Board appointed by the Board.
The Board or its committee shall have full and exclusive discretionary
authority to construe, interpret and apply the terms of the Plan, to determine
eligibility and to adjudicate all disputed claims filed under the Plan. Every
finding, decision and determination made by the Board or its committee shall,
to the full extent permitted by law, be final and binding upon all parties.
Members of the Board who are eligible Employees are permitted to participate in
the Plan, provided that:
(1) Members of the Board who are eligible to
participate in the Plan may not vote on any matter affecting the administration
of the Plan or the grant of any option pursuant to the Plan.
(2) If a Committee is established to administer
the Plan, no member of the Board who is eligible to participate in the Plan may
be a member of the Committee.
(b) Rule 16b-3 Limitations. Notwithstanding the
provisions of Subsection (a) of this Section 13, in the event that Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any successor provision ("Rule 16b-3") provides specific
requirements for the administrators of plans of this type, the Plan shall be
only administered by such a body and in such a manner as shall comply with the
applicable requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no
discretion concerning decisions regarding the Plan shall be afforded to any
committee or person that is not "disinterested" as that term is used in Rule
16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to receive
any cash from the participant's account under the Plan in the event of such
participant's death prior to exercise of the option. If a participant is
married and the designated beneficiary is not the spouse, spousal consent shall
be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the
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<PAGE> 27
death of a participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such participant's death, the
Company shall deliver such shares and/or cash to the executor or administrator
of the estate of the participant, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to any one or
more dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees at least annually, which statements will set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the Reserves as well as the price
per share of Common Stock covered by each option under the Plan which has not
yet been exercised shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration".
Such adjustment shall
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<PAGE> 28
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Offering Period will
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, each option under the Plan shall
be assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Exercise Date (the "New Exercise Date"). If the Board shortens
the Offering Period then in progress in lieu of assumption or substitution in
the event of a merger or sale of assets, the Board shall notify each
participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for his option has been changed to the
New Exercise Date and that his option will be exercised automatically on the
New Exercise Date, unless prior to such date he has withdrawn from the Offering
Period as provided in Section 10 hereof. For purposes of this paragraph, an
option granted under the Plan shall be deemed to be assumed if, following the
sale of assets or merger, the option confers the right to purchase, for each
share of option stock subject to the option immediately prior to the sale of
assets or merger, the consideration (whether stock, cash or other securities or
property) received in the sale of assets or merger by holders of Common Stock
for each share of Common Stock held on the effective date of the transaction
(and if such holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Common Stock); provided, however, that if such consideration received in the
sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the participant, provide
for the consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent
-10-
<PAGE> 29
equal in fair market value to the per share consideration received by holders
of Common Stock and the sale of assets or merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the
price per share of Common Stock covered by each outstanding option, in the
event the Company effects one or more reorganizations, recapitalizations,
rights offerings or other increases or reductions of shares of its outstanding
Common Stock, and in the event of the Company being consolidated with or merged
into any other corporation.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section
18 hereof, no such termination can affect options previously granted, provided
that an Offering Period may be terminated by the Board of Directors on any
Exercise Date if the Board determines that the termination of the Plan is in
the best interests of the Company and its shareholders. Except as provided in
Section 18 hereof, no amendment may make any change in any option theretofore
granted which adversely affects the rights of any participant. To the extent
necessary to comply with Rule 16b-3 or under Section 423 of the Code (or any
successor rule or provision or any other applicable law or regulation), the
Company shall obtain shareholder approval in such a manner and to such a degree
as required.
(b) Without shareholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the
Offering Periods, limit the frequency and/or number of changes in the amount
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied
toward the purchase of Common Stock for each participant properly correspond
with amounts withheld from the participant's Compensation, and establish such
other limitations or procedures as the Board (or its committee) determines in
its sole discretion advisable which are consistent with the Plan.
20. Notices. All notices or other communications by a participant
to the Company under or in connection with the Plan
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<PAGE> 30
shall be deemed to have been duly given when received in the form specified by
the Company at the location, or by the person, designated by the Company for
the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be
issued with respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment
and without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the shareholders of the Company. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 19 hereof.
23. Additional Restrictions of Rule 16b-3. The terms and
conditions of options granted hereunder to, and the purchase of shares by,
persons subject to Section 16 of the Exchange Act shall comply with the
applicable provisions of Rule 16b-3. This Plan shall be deemed to contain, and
such options shall contain, and the shares issued upon exercise thereof shall
be subject to, such additional conditions and restrictions as may be required
by Rule 16b-3 to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
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<PAGE> 31
EXHIBIT A
VENTRITEX, INC.
1991 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
Original Application Enrollment Date:
- ------ -----------
[Change in Payroll Deduction Rate]
- ------
Change of Beneficiary(ies)
- ------
1. ________________________________________ hereby elects to participate
in the Ventritex, Inc. 1991 Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan") and subscribes to purchase shares of
the Company's Common Stock in accordance with this Subscription
Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (not less than 1% and not
more than 10%) during the Offering Period in accordance with the
Employee Stock Purchase Plan. (Please note that no fractional
percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete "Ventritex, Inc. 1991 Employee
Stock Purchase Plan." I understand that my participation in the
Employee Stock Purchase Plan is in all respects subject to the terms
of the Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse Only):
_____________________________________________________________________
_____________________________________________________________________.
6. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Enrollment Date (the first day of
the Offering Period during which I purchased such shares), I will be
treated for federal income tax purposes as having received ordinary
income at the time of
<PAGE> 32
such disposition in an amount equal to the excess of the fair market
value of the shares at the time such shares were delivered to me over
the price which I paid for the shares. I HEREBY AGREE TO NOTIFY THE
COMPANY IN WRITING WITHIN 30 DAYS AFTER THE DATE OF ANY DISPOSITION OF
MY SHARES AND I WILL MAKE ADEQUATE PROVISION FOR FEDERAL, STATE OR
OTHER TAX WITHHOLDING OBLIGATIONS, IF ANY, WHICH ARISE UPON THE
DISPOSITION OF THE COMMON STOCK. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to
meet any applicable withholding obligation including any withholding
necessary to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by
me. If I dispose of such shares at any time after the expiration of
the 2-year holding period, I understand that I will be treated for
federal income tax purposes as having received income only at the time
of such disposition, and that such income will be taxed as ordinary
income only to the extent of an amount equal to the lesser of (1) the
excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or
(2) 15% of the fair market value of the shares on the first day of the
Offering Period. The remainder of the gain, if any, recognized on
such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase
Plan.
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<PAGE> 33
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)
----------------------------------------------------------
(First) (Middle) (Last)
- -------------------------------- --------------------------------------------
Relationship
--------------------------------------------
(Address)
NAME: (Please print)
----------------------------------------------------------
(First) (Middle) (Last)
- -------------------------------- --------------------------------------------
Relationship
--------------------------------------------
(Address)
Employee's Social
Security Number:
--------------------------------------------
Employee's Address:
--------------------------------------------
--------------------------------------------
--------------------------------------------
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<PAGE> 34
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
--------------------- -------------------------------------------
Signature of Employee
-------------------------------------------
Spouse's Signature (If beneficiary
other than spouse)
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<PAGE> 35
EXHIBIT B
VENTRITEX, INC.
1991 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Ventritex,
Inc. 1991 Employee Stock Purchase Plan which began on ____________, 19____ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant
----------------------------------------
----------------------------------------
----------------------------------------
Signature
----------------------------------------
Date:
----------------------------------
