<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ATL Ultrasound, 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] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(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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Notes:
<PAGE>
[LOGO OF ATL ULTRASOUND, INC.]
ATL Ultrasound, Inc.
22100 Bothell Everett Highway
P.O. Box 3003
Bothell, WA 98041-3003
March 31, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual General Meeting of
Shareholders of ATL Ultrasound, Inc. at 9:30 a.m. on Tuesday, May 5, 1998 at
the Four Seasons Olympic Hotel, 411 University Street, Seattle, Washington
98101.
At the Annual General Meeting the Shareholders will be asked to elect
directors to the Board of Directors, to consider and vote upon amendments to
the 1992 Employee Stock and Director Stock Option Plans, and to ratify the
appointment of KPMG Peat Marwick LLP as independent auditors for the Company
for 1998.
The Notice of Meeting and Proxy Statement on the following pages describe in
detail the matters to be presented at the meeting.
Whether or not you plan to attend the meeting, we hope you will have your
stock represented by signing, dating and returning your proxy in the enclosed
envelope as soon as possible. Your stock will be voted in accordance with the
instructions you have given in your proxy. You may, of course, attend the
Annual General Meeting and vote in person even if you have previously returned
your proxy card.
Sincerely,
/s/ Dennis C. Fill
Chairman and
Chief Executive Officer
IMPORTANT
A Proxy Statement and proxy card are enclosed. All shareholders are
urged to complete and mail the proxy card promptly in the enclosed
postage-paid envelope. Any shareholder attending the meeting may
personally vote on all matters which are considered, in which event the
signed proxy is not used.
IT IS IMPORTANT THAT YOUR STOCK BE VOTED.
<PAGE>
[LOGO OF ATL ULTRASOUND, INC.]
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
MAY 5, 1998
To the Shareholders:
The Annual General Meeting of Shareholders of ATL Ultrasound, Inc. will be
held at 9:30 a.m. on Tuesday, May 5, 1998 at the Four Seasons Olympic Hotel,
411 University Street, Seattle, Washington 98101, for the following purposes:
1. To elect eight Directors to hold office until the next Annual General
Meeting of Shareholders and until their respective successors are
elected and qualified;
2. To consider and vote upon a proposal to amend and increase the number of
shares of ATL Common Stock available for issuance under the 1992 Option,
Stock Appreciation Right, Restricted Stock, Stock Grant and Performance
Unit Plan;
3. To consider and vote upon a proposal to increase the number of shares of
ATL Common Stock available for issuance under the Nonemployee Director
Stock Option Plan;
4. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for 1998; and
5. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed March 20, 1998 as the record date for the
determination of shareholders entitled to receive notice of and to vote at the
Annual General Meeting or any adjournment thereof. Only shareholders of record
at the close of business on that date will be entitled to notice of and to
vote at the meeting.
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON, BUT EVEN IF
YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE REQUESTED TO MARK, DATE, SIGN
AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
POSTAGE-PAID ENVELOPE TO ENSURE YOUR REPRESENTATION. SHAREHOLDERS ATTENDING
THE MEETING MAY VOTE IN PERSON EVEN IF THEY HAVE PREVIOUSLY SENT IN A PROXY
CARD.
By Order of the Board of Directors
/s/ W. Brinton Yorks, Jr.
W. Brinton Yorks, Jr.
Secretary
Bothell, Washington
March 31, 1998
<PAGE>
PROXY STATEMENT
ATL ULTRASOUND, INC.
ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, MAY 5, 1998
GENERAL
The enclosed proxy is solicited by the Board of Directors of ATL Ultrasound,
Inc. ("ATL" or the "Company"), for use at the Annual General Meeting of
Shareholders (the "Annual Meeting") to be held at 9:30 a.m. on Tuesday, May 5,
1998 at the Four Seasons Olympic Hotel, 411 University Street, Seattle,
Washington 98101 and at any adjournment thereof.
The address of the principal executive offices of ATL is 22100 Bothell
Everett Highway, P.O. Box 3003, Bothell, WA 98041-3003.
This Proxy Statement and the accompanying proxy are being mailed to the
shareholders of ATL on or about March 30, 1998.
OUTSTANDING SECURITIES AND VOTING RIGHTS
Only holders of record of ATL's common stock (the "Common Stock") at the
close of business on March 20, 1998 will be entitled to vote at the Annual
Meeting. On that date, the Company had outstanding 14,522,907 shares of Common
Stock. Each share of Common Stock is entitled to one vote at the Annual
Meeting. The presence in person or by proxy of the holders of record of one-
third of the outstanding shares of Common Stock issued and outstanding and
entitled to vote is required to constitute a quorum for the transaction of
business at the meeting. Shareholders of record are entitled to vote either by
personal attendance at the meeting or by delivery of the enclosed proxy card.
Abstentions and broker non-votes will be considered represented at the meeting
for the purpose of determining a quorum.
Under Washington law and the Company's Articles of Incorporation, if a
quorum is present at the meeting: (i) the eight nominees for election to the
Board of Directors who receive the largest number of votes cast for the
election of Directors by the shares entitled to vote shall be elected
Directors, and (ii) each of the other matters listed in the accompanying
Notice of Annual General Meeting of Shareholders must be approved by the
affirmative vote of a majority of the shares entitled to vote at the Annual
Meeting. In the election of Directors, any action other than a vote for a
nominee will have the practical effect of voting against the nominee.
Abstention from voting will have the practical effect of voting against any of
the other matters since it is one less vote for approval. Broker nonvotes on
one or more matters will have no impact on such matters since they are not
considered "shares present" for voting purposes.
PROXY VOTING
Shares for which proxies are properly executed and returned will be voted at
the meeting in accordance with the directions noted thereon, and in the
absence of directions to the contrary, such shares will be voted: "FOR" the
election of the nominees for the Board of Directors named in the following
pages, "FOR" the approval of the amendment to the Amended 1992 Option, Stock
Appreciation Right, Restricted Stock, Stock Grant and Performance Unit Plan
(the "1992 Plan"), "FOR" the approval of the amendment to the Nonemployee
Director Stock Option Plan and "FOR" the ratification of the appointment of
KPMG Peat Marwick LLP as independent auditors for the Company for 1998. It is
not expected that any matters other than those referred to in this Proxy
Statement will be brought before the Annual Meeting. If, however, other
matters are properly presented, the persons named as proxies will vote in
accordance with their judgment with respect to such matters. The grant of a
proxy will also confer discretionary authority on the persons named in the
proxy to vote on matters incident to the conduct of the Annual Meeting.
<PAGE>
REVOCATION
Any shareholder giving a proxy may revoke it at any time before it is voted
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 meeting and
electing to vote in person.
PROPOSAL 1: ELECTION OF DIRECTORS
In accordance with the Bylaws of the Company, the Board of Directors has
fixed the number of directors constituting the Board at eight, each to hold
office for a term of one year and until his successor shall have been elected
and qualified. Kirby L. Cramer, Harvey Feigenbaum, Dennis C. Fill, Eugene A.
Larson, Ernest Mario, John R. Miller, Phillip M. Nudelman, and Harry Woolf
have been nominated for election to the Board of Directors for 1998. It is
intended that votes will be cast pursuant to the accompanying proxy for the
election of these nominees, each of whom is at present a Director of the
Company, unless contrary instructions are received. If any nominee should
become unavailable for any reason, it is intended that votes will be cast for
a substitute nominee designated by the Board. The Board has no reason to
believe that any of the nominees named will be unable to serve if elected.
Biographical information regarding each of the nominees for the Board of
Directors is set forth below:
KIRBY L. CRAMER. Mr. Cramer (age 61) has served as a Director since February
26, 1993. Mr. Cramer serves as Chairman of the Organization and Nominating
Committee and is a member of the Audit Committee. Mr. Cramer is the Chairman
Emeritus of Hazleton Laboratories Corporation, a contract biological and
chemical research laboratory, which was acquired by Corning Incorporated in
1987. He is chairman of the boards of Northwestern Trust Company and
SonoSight, Inc. and also president of Keystone Capital Company, an investment
company. Mr. Cramer received his Bachelor of Arts degree from Northwestern
University and Master of Business Administration degree from the University of
Washington and is a graduate of the Harvard Business School's Advanced
Management Program. In 1988 he received an honorary Doctor of Laws degree from
James Madison University. Mr. Cramer chairs the major gifts committee of the
University of Washington Foundation and is past Chairman of the Advisory Board
of the University of Washington School of Business Administration. He is the
past President and Trustee Emeritus of the Darden School Foundation of the
University of Virginia. Mr. Cramer is also a member of the boards of directors
of Immunex Corporation, Unilab Corporation, The Commerce Bank of Washington,
N.A., Landec Corporation, and Pharmaceutical Product Development, Inc.
HARVEY FEIGENBAUM, M.D. Dr. Feigenbaum (age 64) has served as a Director
since January 2, 1987. He is a member of the Organization and Nominating
Committee and is Chairman of ATL's Scientific Advisory Board. Dr. Feigenbaum
has been a Distinguished Professor of Medicine at the Indiana University
Medical Center since 1980 and joined its faculty in 1962. He was elected to
Phi Beta Kappa and received a Bachelor's degree summa cum laude from Indiana
University in 1955, an M.D. from the Indiana School of Medicine in 1958, and
his Cardiovascular Subspecialty, American Board of Internal Medicine in 1969.
Dr. Feigenbaum is a fellow of the American College of Physicians, the American
College of Cardiology, the Council on Clinical Cardiology of the American
Heart Association and the American Institute of Ultrasound in Medicine, as
well as a member of the Editorial Boards of the American Heart Journal, the
American Journal of Cardiology and the journal Circulation. He is the editor
of the Journal of the American Society of Echocardiography. Dr. Feigenbaum is
a director of Regentrief Foundation for Delivery of Healthcare and SpaceLabs
Medical, Inc.
DENNIS C. FILL. Mr. Fill (age 68) has served as a Director, Chairman of the
Board and Chief Executive Officer of ATL and as a member of the Executive
Committee of ATL since November 11, 1986. From 1978 through December 1986, he
served as a member of the board of directors of Squibb Corporation (the former
parent of ATL) and as its President and Chief Operating Officer. Mr. Fill was
also a member of the executive committee and the finance committee of the
Squibb Corporation board of directors. Mr. Fill attended Ealing College, the
Institute of Export and Borough Polytechnic. He also served in the Royal Air
Force. Mr. Fill is a member of the boards of directors of Beckman Coulter,
Inc. and Morton International, Inc.
2
<PAGE>
EUGENE A. LARSON. Mr. Larson (age 55) has served as a Director and a member
of ATL's Scientific Advisory Board since December 22, 1992, and is a member of
the Organization and Nominating Committee. Mr. Larson previously served as a
Director and President of ATL from June 1988 to January 1990. He has served as
a consultant to ATL since January 1993. From January 1991 to December 1992 he
served as Executive Vice President of ATL. Mr. Larson also served as a
consultant to Westmark and ATL in 1987 and 1990 and as ATL's Vice President,
Technology from February 1988 to June 1988. He was Professor of
Entrepreneurship and Innovation, Department of Engineering, Pennsylvania State
University in 1986 and 1987. Mr. Larson was founder and President of Echo
Ultrasound, Inc., a manufacturer of medical ultrasound devices, which was
acquired by Johnson & Johnson in 1982. Previously he was founder and President
of Aerotech Laboratories, a manufacturer of industrial ultrasound electronics,
which was acquired by Smith Kline & French in 1970. He has served as a
director of Geisinger Medical Center and president and director of Lewistown
Hospital. In 1988, he was awarded the Pioneer in Ultrasound Award by the
American Institute of Ultrasound in Medicine. Mr. Larson is a member of the
board of directors of Cytran Corporation.
ERNEST MARIO, PH.D. Dr. Mario (age 59) has been a Director of ATL since
December 4, 1996 and serves as Chairman of the Compensation Committee and is a
member of the Organization and Nominating Committee. He is chairman of the
board and chief executive officer of ALZA Corporation. Dr. Mario joined ALZA
in 1993. Prior to joining ALZA, Dr. Mario served as CEO of Glaxo Holdings
p.l.c. in London, England from 1989 and in 1992 was named to the additional
position of deputy chairman. Dr. Mario earned a bachelor of science degree in
pharmacy at Rutgers University and master's and doctorate degrees in physical
sciences at the University of Rhode Island. Dr. Mario is an adjunct professor
of pharmacy at the University of Rhode Island and holds honorary doctorate
degrees from both the University of Rhode Island and Rutgers. Dr. Mario is
active in numerous education and healthcare organizations, including chairman
of the American Foundation for Pharmaceutical Education and is a trustee of
Duke and Rockefeller Universities. He also serves on the boards of directors
of Catalytica, Inc., Cor Therapeutics Inc., and Pharmaceutical Product
Development, Inc.
JOHN R. MILLER. Mr. Miller (age 59) has served as a Director of ATL since
July 16, 1993 and is a member of the Compensation Committee. He is currently a
senior advisor to Chanen, Painter & Company, Ltd., an investment bank with
offices in Seattle. Mr. Miller is also a board member of the Discovery
Institute and Chairman of Discovery's Cascadia Project in Seattle. From 1985
to 1992 Mr. Miller served as a U.S. Congressman for the First District of
Washington State. While a member of Congress, he served on the Budget
Committee and the Foreign Affairs Committee, including the Subcommittee on
International Economic Policy and Trade and the Subcommittee on International
Operations. Mr. Miller is a member of Phi Beta Kappa and received his Bachelor
of Arts degree from Bucknell University and a Doctor of Laws degree and Master
of Economics degree from Yale University Law and Graduate Schools,
respectively. He is a member of the board of directors of Sino Seattle Snack
Foods and Coach Master International.
PHILLIP M. NUDELMAN, PH.D. Dr. Nudelman (age 62) has served as a Director of
ATL since October 28, 1994 and is Chairman of the Audit Committee. Dr.
Nudelman is currently Chairman and President of Kaiser/Group Health. He has
served as chief executive officer and president of Group Health Cooperative of
Puget Sound from February 1991 to August 1997. Dr. Nudelman joined Group
Health in 1973 as Director of Professional Services and has held positions of
increasing responsibility since then. He received his Bachelor of Science
degree in microbiology, zoology and pharmacy from the University of
Washington, and holds Master of Business Administration and Doctor of
Philosophy degrees in Health Systems Management from Pacific Western
University. Dr. Nudelman is a member of the Board and Chair-elect of the
American Association of Health Plans. Dr. Nudelman is a member of the boards
of directors of Cell Therapeutics, Inc., Intensiva, Inc. and SpaceLabs
Medical, Inc. He also serves on the boards of directors of the Pacific Science
Center, the Associaiton for Washington Business, and is Chair of the Woodland
Park Zoological Society.
HARRY WOOLF, PH.D. Dr. Woolf (age 74) has served as a Director and a member
of the Compensation Committee of ATL since January 2, 1987. He has also served
as Chairman and a member of ATL's Scientific Advisory Board since May 1, 1987.
In 1987 Dr. Woolf completed an 11-year appointment as the director of The
Institute for Advanced Study, Princeton, New Jersey, and is currently
Professor Emeritus at the Institute. Dr. Woolf received his Bachelor of
Science and Master of Arts degrees from the University of Chicago and his
3
<PAGE>
Doctor of Philosophy degree from Cornell University. He has also received
honorary doctorates from Whitman College, American University, Johns Hopkins
University and St. Lawrence University. Dr. Woolf has been honored by election
to the Academie Internationale d'Histoire des Sciences, American Philosophical
Society, Sigma Xi, Phi Beta Kappa and American Academy of Arts and Sciences.
He was a trustee of the Rockefeller Foundation (1984-1994) and of Reed College
(1992-1997). Dr. Woolf was a member of the board of directors of Alex. Brown
Mutual Funds until December 31, 1996 and now serves as president of the
BT/Alex. Brown Flag Funds. He is a member of the board of directors of
Research America. He is also a director of the Johns Hopkins Program for
International Education on Gynecology and Obstetrics and Family Health
International.
During 1997, there were four meetings of the ATL Board of Directors. All
incumbent Directors were in attendance at 75% of such meetings.
DIRECTOR COMPENSATION
Directors who are employees of ATL do not receive any fee for their services
as Directors. Directors who are not employees of ATL are paid an annual
retainer of $30,000 and receive an additional fee of $500 for attendance at
each meeting of the ATL Board plus $500 for attendance at each meeting of a
committee of the ATL Board. A nonemployee Director serving as a committee
chairman receives an additional $1,000 per annum.
As approved by the shareholders on May 5, 1993 and amended by shareholders
on May 10, 1995, all Directors who are not employees of ATL are also eligible
for a grant of stock options under the Amended Nonemployee Director Stock
Option Plan (the "Director Plan"). Each nonemployee Director automatically
receives on the first day of July each year an option to purchase 5,000 shares
of ATL Common Stock at an exercise price equal to the fair market value of the
Common Stock on the date of grant. In 1997, Messrs. Cramer, Feigenbaum, Mario,
Miller, Nudelman and Woolf were recipients of grants under the Director Plan.
Dr. Feigenbaum has made arrangements for any proceeds realized from his ATL
stock options to be donated to charity. All nonemployee Directors currently
proposed to serve as Directors are eligible for grants in 1998.
In 1997 Dr. Feigenbaum received $45,000 for his service as a member of ATL's
Scientific Advisory Board. In 1997 Mr. Larson received $188,500 for consulting
services to the Company, a $50,000 one-time bonus for his assistance in the
execution of two projects of strategic importance to the Company and $40,000
for his services as a member of the Scientific Advisory Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1997 Dr. Harry Woolf received $50,000 in his capacity as Chairman of the
Scientific Advisory Board. Dr. Woolf is a member of the Compensation Committee
of the Board.
COMMITTEES OF THE ATL BOARD
ATL has established standing committees of the ATL Board, including Audit,
Compensation, Organization and Nominating, and Executive Committees. In
addition, Directors serving on the Scientific Advisory Board participate in
and direct the setting of ATL's technology strategy. Each of the committees,
while invested with the authority of the full Board, is responsible to the ATL
Board and its activities are therefore subject to approval of the ATL Board.
The functions performed by these committees can be summarized as follows:
AUDIT COMMITTEE. The Audit Committee reviews the accounting principles,
internal accounting controls, audit plan and financial results of ATL in order
to safeguard ATL's assets and to provide for the reliability of its financial
records. The members of the Audit Committee for 1998 are Dr. Nudelman
(Chairman), Mr. Cramer and Dr. Mario. The Audit Committee met four times
during 1997. All members were in attendance at 75% or more of the meetings of
this committee.
4
<PAGE>
COMPENSATION COMMITTEE. The Compensation Committee establishes salaries,
incentives and other forms of compensation for directors, officers and other
executives of ATL and its subsidiaries. This Committee also administers ATL's
various incentive compensation and benefit plans and establishes policies
relating to these plans. The members of the Compensation Committee for 1998
are Dr. Mario (Chairman), Mr. Miller and Dr. Woolf. The Compensation Committee
met four times during 1997. All members were in attendance at all meetings.
ORGANIZATION AND NOMINATING COMMITTEE. The Organization and Nominating
Committee has authority to set policy regarding the organization of the Board
of Directors and its committees, and recommending changes to the Bylaws of the
Company pertaining to such matters. This Committee also has the responsibility
for identifying and nominating new individuals to serve on the ATL Board of
Directors. The members of the Organization and Nominating Committee are Mr.
Cramer (Chairman), Dr. Feigenbaum, Mr. Larson and Dr. Mario. This Committee
did not meet during 1997.
EXECUTIVE COMMITTEE. The Executive Committee has authority, subject to
limitations prescribed by the ATL Board, to exercise, during the intervals
between meetings of the ATL Board, the powers of the full ATL Board, and is
also available, on a standby basis, for use in an emergency or when scheduling
makes it impractical to bring the full ATL Board together for a meeting. The
members of this Committee are Mr. Fill, Dr. Feigenbaum, Mr. Cramer and Mr.
Larson. This Committee met once during 1997.
SCIENTIFIC ADVISORY BOARD. The Scientific Advisory Board meets with a group
of senior scientists of ATL known as the Senior Technical Staff ("STS") and
has the authority to control and direct ATL's technology strategy. Regular
meetings of the STS are held weekly and members of the Scientific Advisory
Board attend these meetings as circumstances dictate. The members of the
Scientific Advisory Board are Dr. Feigenbaum (Chairman), Dr. Woolf and Mr.
Larson.
SECTION 16 REPORTING
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires ATL's officers and directors and persons who own more than 10% of a
registered class of ATL's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commissions (the "SEC").
Officers, directors and shareholders with holdings greater than 10% of the
Company's stock are required by SEC regulations to furnish ATL with copies of
all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it or
written representations from certain reporting persons that no forms were
required for those persons, ATL believes that during calendar year 1997 all
filing requirements applicable to its officers, directors and greater than 10%
shareholders were met, except that in April 1997 Dennis C. Fill amended a
March 1997 Form 4 to include the sale of 5,000 shares of ATL Common Stock and
Castor F. Diaz was late in filing a Form 5 reporting his contribution of 10
shares of ATL Common Stock to the Kirkland Performing Arts association.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of March 1, 1998 known by the
Company with respect to each shareholder to be the beneficial owner of more
than five percent of any class of voting securities of the Company, each
Director and certain Named Executive Officers as described in the Summary
Compensation Table, and all Directors and executive officers of the Company as
a group. Each of the named persons and members of the group has sole voting
and investment power with respect to the shares shown, except as stated below.
As of March 1, 1998 there were 14,464,614 shares of Common Stock issued and
outstanding.
5
<PAGE>
BENEFICIAL OWNERSHIP OF SHARES
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OF
BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------- ------------ -------
5% OWNERS
---------
<S> <C> <C>
Chancellor LGT Asset Management, Inc.............. 1,388,400(2) 9.6%
Fifty California Street, 27th Floor
San Francisco, CA 94111
ICM Asset Management, Inc......................... 1,301,834(3) 9.0%
601 W. Main Avenue, Suite 600
Spokane, WA 99201
Kopp Investment Advisors, Inc..................... 943,600(4) 6.5%
6600 France Avenue So.
Edina, MN 55435
Wellington Management Company..................... 731,950(5) 5.1%
75 State Street
Boston, MA 02109
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
<S> <C> <C>
Donald D. Blem.................................... 33,119(6) *
Kirby L. Cramer................................... 14,000 *
Castor F. Diaz.................................... 47,928(6) *
Harvey Feigenbaum................................. 10,463(7) *
Dennis C. Fill.................................... 382,371(6) 2.6%
Harvey N. Gillis.................................. 11,144(6)(8) *
Eugene A. Larson.................................. 19,900 *
Ernest Mario...................................... 0
John R. Miller.................................... 2,300 *
Phillip M. Nudelman............................... 5,100 *
Jacques Souquet................................... 57,919(6) *
Harry Woolf....................................... 16,000 *
All Directors and Executive Officers as a Group
(12 Persons)..................................... 600,244(1)(6) 4.1%
</TABLE>
- --------
* Under one percent.
(1) Includes Director and executive officer stock options exercisable within
60 days of March 1, 1998.
(2) A wholly owned subsidiary of LGT Asset Management, Inc., along with its
wholly owned subsidiary Chancellor LGT Trust Company, with sole power to
vote and dispose of 1,388,400 shares, based upon publicly available
information reported as of December 31, 1997.
(3) Sole power to vote 983,719 shares and sole power to dispose of 1,301,834
shares, based upon publicly available information reported as of December
31, 1997.
(4) Sole power to vote 138,500 shares, sole power to dispose of 105,000
shares, and shared power to dispose of 838,600 based upon publicly
available information reported as of December 31, 1997.
(5) Shared power to vote 48,650 and shared power to dispose of 731,950
shares, based upon publicly available information reported as of December
31, 1997.
(6) Includes shares held by the Trustee of ATL's Incentive Savings and Stock
Ownership Plan (the "ISSOP/401(k)") for each such executive officer
and/or Director who is a participant in the ISSOP/401(k). Does not
include shares purchased by the Trustee of the ISSOP/401(k) after
December 31, 1997, which shares have not yet been allocated by such
trustee to the accounts of participants in the ISSOP/401(k).
(7) Includes 163 shares owned by Dr. Feigenbaum's wife. Dr. Feigenbaum
disclaims beneficial ownership as to all such shares.
(8) Mr. Gillis resigned from his position with the Company as of February 27,
1998. The position of Sr. Vice President, Finance and Administration, and
Chief Financial Officer is now held by Pamela L.Dunlap.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation for the
fiscal years 1997, 1996 and 1995 for services in all capacities to the Company
and its subsidiaries by persons who at December 31, 1997 were the Chief
Executive Officer and four most highly compensated executive officers of the
Company, other than the Chief Executive Officer (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------------
AWARDS PAYOUT
ANNUAL ---------- -------
COMPENSATION RESTRICTED ALL
--------------- STOCK LTIP OTHER
NAME AND PRINCIPAL SALARY BONUS(1) AWARDS(2) PAYOUTS COMPENSATION(3)
POSITION YEAR ($) ($) ($) ($) ($)
------------------ ---- ------- ------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Fill.......... 1997 605,769 300,000 433,380 164,375 14,902
Chairman and Chief...... 1996 547,019 500,000 320,000 0 13,965
Executive Officer....... 1995 481,730 500,000 0 0 9,240
Harvey N. Gillis(4)..... 1997 262,115 90,000 463,380(4) 55,650 6,154
Sr. Vice President and.. 1996 247,308 150,000 331,313 0 5,993
Chief Financial Officer. 1995 233,800 145,000 0 0 9,000
Castor F. Diaz.......... 1997 262,115 84,000 0 55,650 7,517
Sr. Vice President,..... 1996 250,000 140,000 331,313 0 6,430
Worldwide Sales and Mar-
keting................. 1995 251,014 100,000 78,075 0 52,425(5)
Donald D. Blem.......... 1997 226,153 84,000 180,575 48,300 6,154
Sr. Vice President,..... 1996 207,115 140,000 331,313 0 4,733
Operations.............. 1995 192,000 130,000 0 0 6,030
Jacques Souquet......... 1997 234,231 84,000 288,920 50,400 4,966
Sr. Vice President,
Product................ 1996 207,115 140,000 395,313 0 5,031
Generation.............. 1995 185,846 130,000 0 0 9,240
</TABLE>
- --------
(1) Includes bonus awards earned during the fiscal year under the Company's
Management Incentive Compensation Plan (the "MIC Plan"). See
"Compensation Committee Report on Executive Compensation."
(2) Restricted stock awards generally have a vesting period of four years
with 25% of the award amount vesting each year on the anniversary date of
the award. The rights of a restricted shareholder include the right to
receive any dividends or other distributions made or paid with respect to
such shares. The amounts reported in this table represent the market
value of the shares at the date of grant based upon the fair market value
of the Common Stock reported on the Nasdaq National Market on such date.
At December 31, 1997 Messrs. Fill, Gillis, Diaz, Blem and Souquet held
69,500, 21,750, 8,500, 14,750 and 19,250 shares of restricted stock,
respectively, having a market value of $3,200,648, $1,001,641, $391,446,
$679,274 and $886,510 respectively, based upon the fair market value of
the Common Stock reported on the Nasdaq National Market on December 31,
1997.
(3) Includes both group term life and employer-matching contributions made to
the ISSOP/401(k) Plan.
(4) Mr. Gillis resigned from his position with the Company as of February 27,
1998. 10,250 shares of the 12,000 restricted shares granted to Mr. Gillis
in 1997 were subsequently canceled, due to his resignation. The position
of Sr. Vice President, Finance and Administration, and Chief Financial
Officer is now held by Pamela L. Dunlap.
(5) Includes $18,084 in expatriate benefits, $7,755 and $17,326 in automobile
and housing allowance, respectively. In 1995 Mr. Diaz returned from
overseas assignment in Germany.
7
<PAGE>
OPTION/SAR GRANTS
No option or SAR Grants were made to the Named Executive Officers in 1997
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information as of December 31, 1997,
regarding options held by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END(#) OPTIONS AT FY-END($)(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Fill.......... -- -- 257,500 37,500 7,604,243 532,968
Harvey N. Gillis........ 48,000 1,026,984 6,750 10,250 177,421 226,640
Castor F. Diaz.......... 19,000 429,094 28,000 27,250 810,625 735,265
Donald D. Blem.......... 10,000 229,718 1,750 17,500 24,609 440,718
Jacques Souquet......... 85,000 250,750 25,500 20,500 712,843 460,656
</TABLE>
- --------
(1) This amount is the aggregate number of the outstanding options multiplied
by the difference between the fair market value of the ATL Common Stock
as reported on the Nasdaq National Market on December 31, 1997, minus the
exercise price of such options.
LONG-TERM INCENTIVE AWARDS
The following table sets forth certain information regarding the Company's
Long-Term Incentive Plan awards granted in fiscal year 1997 to the Named
Executive Officers.
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
NUMBER PERFORMANCE UNDER
OF OR OTHER NON-STOCK PRICE-BASED
SHARES, PERIOD PLANS(2)(3)
UNITS UNTIL ---------------------------
OR OTHER MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS(#) OR PAYOUT ($ OR #) ($ OR #) ($ OR #)
---- -------- ----------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Dennis C. Fill................ 1997-1999 0 $156,250 $437,500
Harvey N. Gillis (4).......... -- 1997-1999 0 $ 66,250 $185,500
Castor F. Diaz................ -- 1997-1999 0 $ 66,250 $185,500
Donald D. Blem................ -- 1997-1999 0 $ 57,500 $161,000
Jacques Souquet............... -- 1997-1999 0 $ 60,000 $168,000
</TABLE>
- --------
(1) Similar awards granted in 1993 and 1994 had no value at maturity at the
end of 1995 and 1996, respectively. Awards granted in 1995 had payouts as
shown in the Summary Compensation Table The prospects for awards granted
in 1996 remain unknown.
(2) No payouts will be made prior to the end of the maturation period on
December 31, 1999.
(3) Awards, which are payable in cash, are determined as a percentage (0% to
70%) of a recipient's base salary. In 1997, the base salaries of Messrs.
Fill, Gillis, Diaz, Blem and Souquet were $625,000, $265,000, $265,000,
$230,000 and $240,000, respectively. See "Compensation Committee Report
on Executive Compensation."
(4) Mr. Gillis resigned from his position with the Company as of February 27,
1998.
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Policies. The seven executive officers who operate the Company
on a day-to-day basis (including the Named Executive Officers) direct the
Company's strategies and operations as a management Executive Committee,
chaired by the Chief Executive Officer. The Compensation Committee has
developed and directs a comprehensive program of compensation policies that
aligns the compensation of the executive officers in accordance with goals and
objectives that are consistent with ATL's business strategies. These business
strategies are designed to enhance business financial performance and customer
satisfaction and are thereby aligned with the overall corporate objective of
enhancing shareholder value. ATL's compensation policies are designed to
attract and retain key employees, including executive officers, in competition
with other high-technology companies that endeavor to attract such employees.
The Compensation Committee is advised by an outside compensation consultant
on all aspects of compensation, including base salaries, bonus awards and
incentives, including restricted stock, stock options and long-term incentive
awards.
Compensation Programs. The Compensation Committee and ATL's shareholders
have adopted incentive programs that are directed by the Committee. Awards may
be granted to executive officers in the form of stock options, stock
appreciation rights ("SARs"), restricted stock, performance units, and cash
bonuses under the 1992 Stock and Stock Option Plan and the Management
Incentive Compensation Plan (the "MIC Plan"). Under the Long Term Incentive
Plan, designated officers of ATL may earn incentive awards over a period of
years which are premised on objective measures of company performance. All
awards to executive officers under the above plans must be reviewed and
approved by the Compensation Committee. In addition, all employees are
eligible to participate in the Incentive Savings and Stock Ownership Plan
following the initial three months of employment with ATL.
Compensation of Executive Officers. The total compensation program for
executive officers in 1997, including the Chief Executive Officer, was
balanced among base salary, an annual bonus, long term incentives, restricted
stock and stock option grants vesting over multiple-year periods. The
Compensation Committee considered the advice of an outside consultant in the
area of executive compensation in determining each element of compensation and
each individual's total incentive compensation.
Salaries. The Compensation Committee utilizes an executive salary structure
recommended to the Company by an outside compensation consulting firm and
based upon several industry surveys. Salary ranges were based upon the 50th
and 75th percentile data for comparable positions in high technology companies
comparable to ATL. In 1997 the Compensation Committee adjusted the salaries of
the five Named Executive Officers in line with this structure.
Bonuses. Annual bonuses for all managers and officers of the Company,
including the Named Executive Officers, may be awarded by the Compensation
Committee from an award pool established under the MIC Plan. The size of the
award pool is based on ATL's corporate performance measured by quantified
factors of revenue and earnings, and by strategic factors aligned with ATL's
business plan for the year. Individual bonus awards were made by the
Compensation Committee in consideration of the executive officer's individual
performance as measured by the corporate objectives set for the recipient, and
the effectiveness of the recipient in achieving those objectives.
Bonuses awarded to managers and executive officers for 1997 were determined
in accordance with the criteria of the MIC Plan award pool described above. In
1997 the size of the award pool was determined by the measure of achievement
of ten Company priorities which the Board had established at the beginning of
the year. This resulted in a reduced award pool of 70% of the size of the
award pool for 1996, since the Company did not fully achieve a number of these
objectives for 1997.
Equity Awards. From time to time the Compensation Committee grants awards of
restricted stock and stock options under the 1992 Option Plan. The objectives
of these grants are to recognize, reward and retain
9
<PAGE>
individuals in key positions who have exhibited high performance and have high
potential for advancement with ATL. In 1997 the Compensation Committee awarded
restricted stock and stock options to over 100 nonofficer employees of the
Company. No stock option awards were made to any of the Named Executive
Officers in 1997.
In 1996 the Compensation Committee established an incentive program for the
Company's senior vice presidents serving on the management executive
committee. The program would create an award pool of restricted stock vesting
one year following the close of a fiscal year, with the size of the pool based
upon the achievement of pretax profits in excess of the Company's business
plan for the year. Any award pool created is distributed evenly among the
program participants. Vesting is contingent upon the continuous service of the
participants with the Company. No awards were made under this program in 1997.
There are at present no awards or contracts outstanding for SARs or
performance unit awards under any Company plan. In 1997, as in previous years,
the only stock grants awarded by the Compensation Committee were in
recognition of achievements by the Company's sales representatives and senior
scientists.
Long-Term Incentive Awards. The Compensation Committee set the terms of
performance incentives for certain officers including the Named Executive
Officers under the Long Term Incentive Plan in 1997. These incentives are to
be earned over a three-year term as determined by predetermined objective
criteria of corporate performance and will not mature until the end of 1999,
at which time they may or may not have value. The long-term incentive for each
recipient is premised on a fraction of the recipient's base salary and is
limited to a maximum percentage of salary. Similar incentives from 1993 and
1994 had no value at maturity at the end of their respective three year award
cycles. The first awards paid under this program were paid for the 1995-97
award cycle, and amounted to an average of 21% of a recipient's base
compensation.
Compensation of the Chief Executive Officer. Mr. Fill received a restricted
stock award for 12,000 shares of stock in 1997. He received no stock option
grants in 1997. Mr. Fill's restricted stock award vests at retirement. In 1997
the Compensation Committee, upon the advice of an outside compensation
consultant, amended Mr. Fill's employment agreement by resetting the terms of
his post-retirement consulting agreement in consideration of the delayed start
of such agreement, and provided an opportunity for Mr. Fill to earn up to
25,000 shares of restricted stock, vesting upon retirement, if certain key
objectives were achieved by the Company over the next few years. In May, 1997
the Compensation Committee set Mr. Fill's salary at $625,000 in consideration
of the continued progress of the Company toward its key objective of return on
equity. Mr. Fill received a 1997 bonus of $300,000 in consideration of the
Company's near record level revenue and earnings performance for 1997, which
was 60% of the bonus received by Mr. Fill for 1996. Mr. Fill also received a
Long Term Incentive Plan payment of $164,375 for the Company's performance
during the period 1995-97 in accordance with the criteria set out by the
Compensation Committee in 1995 for this award cycle.
Compensation Committee
Mr. Kirby L. Cramer, Chairman
Harry Woolf, Ph.D.
Mr. John R. Miller
10
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The graph set forth below represents the five-year cumulative total return
on shares of ATL Common Stock, the S&P 500 Stock Index, and a Peer Group
Industry Index resulting from an initial assumed investment of $100 in each.
The Peer Group Industry Index is a representative grouping of 98 companies
from SIC Code 3845-- Electromedical & Electrotherapeutic Apparatus* and
includes the reinvestment of both cash and stock dividends. The graph has been
prepared by an outside consulting firm to ATL. The ATL cumulative return is
computed as required by the rules of the SEC to comprise the cumulative total
return on ATL Common from 1992 through 1997.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG
ATL ULTRASOUND, INC., S&P 500 STOCK INDEX AND PEER GROUP INDUSTRY INDEX*
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period ATL INDUSTRY BROAD
(Fiscal Year Covered) ULTRASOUND, INC. INDEX MARKET
- --------------------- ---------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-1992 $100.00 $100.00 $100.00
FYE 1993 $ 95.71 $ 86.73 $110.08
FYE 1994 $105.71 $ 96.04 $111.54
FYE 1995 $140.00 $168.84 $153.45
FYE 1996 $177.14 $178.22 $188.69
FYE 1997 $262.86 $221.46 $251.64
</TABLE>
- --------
* A list of the component companies in this Industry Index will be provided,
at no charge to shareholders, upon request.
Retirement Plan
The ATL Retirement Plan (the "Retirement Plan") was amended effective
January 1, 1995, and provides that upon retirement a participant will receive
a monthly benefit equal to 1.0% of participant's final average monthly
earnings multiplied by the participant's years of credited service, with the
Company. The executive officers participate in the same manner as other
eligible employees in the Retirement Plan, which pays to vested employees the
estimated maximum annual retirement benefits at age 65. A participant is
vested upon the completion of five years of service. Benefits are also
provided to a participant's surviving spouse in the event of the participant's
death prior to retirement.
11
<PAGE>
The following tabulation shows the estimated annual benefits of an employee,
assuming annual benefits to an employee for retirement on January 1, 1998 at
age 65 after selected periods of service under the Retirement Plan, and
including amounts to be paid pursuant to the ATL Supplemental Benefit Plan
(the "Supplemental Plan"), if applicable.
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFIT FOR CREDITABLE SERVICE
---------------------------------------------------
5
AVERAGE ANNUAL EARNINGS YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS
----------------------- ------ -------- -------- -------- -------- --------
$100,000.................. 5,000 10,000 15,000 20,000 25,000 30,000
<S> <C> <C> <C> <C> <C> <C>
200,000.................. 10,000 20,000 30,000 40,000 50,000 60,000
300,000.................. 15,000 30,000 45,000 60,000 75,000 90,000
400,000.................. 20,000 40,000 60,000 80,000 100,000 120,000
500,000.................. 25,000 50,000 75,000 100,000 125,000 150,000
600,000.................. 30,000 60,000 90,000 120,000 150,000 180,000
700,000.................. 35,000 70,000 105,000 140,000 175,000 210,000
800,000.................. 40,000 80,000 120,000 160,000 200,000 240,000
</TABLE>
Amounts shown in the above table will be reduced by the actuarial equivalent
value of amounts distributed from the Discretionary Contribution Plan, which
was terminated in 1989, but in no event will they be less than zero.
Retirement benefits are not offset for Social Security benefits. The Employee
Retirement Income Security Act of 1974, the Internal Revenue Code of 1986, as
amended (the "Code") generally limit the amount of annual pension which may be
paid from a federal income tax qualified plan to varying amounts (currently
$130,000) and the annual earnings which may be taken into account for purposes
of calculation of benefits under a federal income tax qualified plan
(currently $160,000). The actual amounts paid under the Retirement Plan will
be limited to comply with such legislation.
As of December 31, 1997 the number of years of credited service under the
Retirement Plan for Messrs. Fill, Gillis, Diaz, Souquet and Blem were
approximately 11, 5, 10, 8 and 9, respectively. The 1997 earnings for purposes
of calculation of benefits under this Retirement Plan for Messrs. Fill,
Gillis, Diaz, Souquet and Blem are $918,269, $394,615, $394,615, $354,231 and
$341,154, respectively. Subject to the limitations imposed by the Code, as
stated above, 1997 annual earnings in excess of $160,000 shall be disregarded.
The Supplemental Plan is an unfunded plan, not qualified for Federal income
tax purposes, which covers any employee whose benefit under the Retirement
Plan is limited by certain provisions of the Code. Based on earnings as
defined in the Retirement Plan, Messrs. Fill, Gillis, Diaz, Souquet and Blem
would be eligible for benefits under the Supplemental Plan.
EMPLOYMENT AGREEMENTS
Messrs. Fill, Diaz, Blem and Souquet and Ms. Dunlap have each entered into a
Change in Control Employment Agreement with ATL that provides for continued
employment terms equivalent to those immediately prior to a Change of Control
(as defined in the Agreement) for the three years following a Change of
Control. A lump-sum payment equal to three years of salary and bonus is
immediately triggered if, following a Change of Control, employment is
terminated by (i) the employee for "good cause" or during the 30-day window
period one year after the Change of Control or (ii) the employer "without
cause." A Change of Control triggers for all ATL employees an acceleration of
vesting of restricted stock and stock options and payment of the "spread"
between the exercise price of options and the fair market value of the
underlying ATL Common Stock. Mr. Fill's Change of Control Employment Agreement
was amended in 1997 as described in the "Compensation Committee Report On
Executive Compensation--Compensation of the Chief Executive Officer."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See also "Director Compensation" and "Compensation Committee Interlocks And
Insider Participation".
12
<PAGE>
PROPOSAL 2: AMENDMENT OF THE 1992 OPTION, STOCK APPRECIATION RIGHT, RESTRICTED
STOCK, STOCK GRANT AND PERFORMANCE UNIT PLAN
General. The Board of Directors has adopted the Amended 1992 Option, Stock
Appreciation Right, Restricted Stock, Stock Grant and Performance Unit Plan
(the "1992 Plan"), which was approved by the shareholders of the Company on
May 18, 1992. Under the 1992 Plan, the Company is presently authorized to
issue 2,700,000 shares of Common Stock pursuant to awards of incentive stock
options, nonqualified stock options, stock appreciation rights, restricted
stock, stock grants and performance units, of which up to an aggregate of
700,000 shares may be issued as restricted stock awards and stock grants. Of
this authorization, only 8,262 shares were available as of February 28, 1998
for future awards under the 1992 Plan.
Proposed Amendment. The Board of Directors approved a proposed amendment to
the 1992 Plan on February 24, 1998. The Shareholders will be asked at the
Annual Meeting to consider and approve this amendment to the 1992 Plan to
reserve an additional 850,000 shares of Common Stock for issuance pursuant to
awards granted under the 1992 Plan, of which not more than 250,000 may be
issued as restricted stock or stock grant awards. The approved amendments also
sets the minimum holding period for stock options and restricted stock at six
months, redefines the term "Nonemployee Director", and the number of
Nonemployee Directors required to Administer the 1992 Plan, in conformance
with regulations under Section 16(b) of the Securities Exchange Act of 1934,
although the Company has no plans to change its current practice of requiring
stock option and restricted stock grants to vest in annual installments over a
four year term. The 1992 Plan continues to require stock option award option
prices to be not less than 100% of the fair market value for ATL Common Stock
on the date of the grant. The Board of Directors believes that the proposed
amendment to the 1992 Plan is necessary to attract and retain the services of
experienced and knowledgeable employees in a competitive high technology
industry where the Company's competitors are able to attract and retain highly
qualified employees as a result, in part, of their various stock option and
equity participation plans. In making this recommendation the Board is mindful
of the fact that two other medical ultrasound companies have located
facilities within 15 miles of ATL's headquarters and R&D facility during the
past few years. It is important for the Company to be able to provide
continued incentives to its key employees to retain those individuals who are
a critical resource of the Company and to be able to attract new talent so
that the Company can expand into new markets with newly designed products.
Description of the 1992 Plan. There are reserved for issuance upon the
exercise of options, for the issuance of restricted stock and stock grant
awards and for issuance upon the payment of performance units and stock
appreciation rights under the 1992 Plan 2,700,000 shares of Common Stock, of
which no more than 700,000 shares may be issued as restricted stock awards and
stock grants under the Plan. The proposed amendment to the 1992 Plan would
increase the number of shares available under the 1992 Plan to 3,550,000, of
which the number of shares available for restricted stock and stock grant
awards will be 950,000 shares.
Eligibility to Receive Awards. Employees, consultants and independent
contractors of ATL selected by the Company's Compensation Committee are
eligible to receive awards of options, stock appreciation rights, restricted
stock grants and/or performance units under the 1992 Plan. In accordance with
a Plan amendment approved by the Shareholders in 1994 to comply with Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), the
maximum number of shares of Common Stock to which an option or options or
stock appreciation rights may be granted to any eligible employee in any one
fiscal year of the Company shall not exceed ten percent of the aggregate
number of shares of Common Stock authorized for issuance under the plan (the
"Maximum Annual Employee Grant").
Terms and Conditions of Stock Option Grants. The Compensation Committee is
authorized under the 1992 Plan, in its discretion, to issue options under the
1992 Plan as "Incentive Stock Options" (as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code")) or as "Nonqualified
Stock Options" (defined in the 1992 Plan as being all other options granted
thereunder). The option price for each option granted under the 1992 Plan will
be not less than 100% of the fair market value of the Common Stock on the date
of grant, except that, with respect to any Nonqualified Stock Option, the
option price may equal the average daily
13
<PAGE>
fair market value of the ATL Common Stock calculated over any continuous
period of trading days beginning and ending no more than 30 business days
before or after the granting date of such option. For purposes of the 1992
Plan and the Nonemployee Director Plan described in PROPOSAL 3, "fair market
value" means the average of the high and low sales prices of the Common Stock
for the period in question as quoted on the Nasdaq National Market.
Upon exercise the option price is to be paid in full in cash or, to the
extent permitted by the Compensation Committee, in Common Stock owned by the
optionee for at least three months and having a market value on the date of
exercise equal to the aggregate option price, or in a combination of cash and
stock. The option price may also be paid by delivery of a properly executed
exercise notice, together with irrevocable instructions to a broker designated
by the Company to promptly deliver the exercise price to the Company. The
option price under each option will remain constant during the life of such
option, regardless of changes in the market value of the Common Stock. No cash
consideration will be paid to the Company by optionees for the granting of any
option. The optionee must pay to the Company applicable withholding taxes upon
exercise of the option as a condition to receiving the share certificates. The
withholding tax may be paid in cash or by the withholding or delivery of
Common Stock.
Each option will have a term of not more than 10 years from the date of
grant, and may be exercisable in installments as prescribed by the
Compensation Committee in the option grant, but no option can be exercisable
prior to six months following the date of grant except in the case of the
death of an optionee during employment or except as the Compensation Committee
otherwise determines. It is the present intention of the Compensation
Committee to continue its policy that both Nonqualified Stock Options and
Incentive Stock Options granted to employees under the 1992 Plan will become
exercisable in annual installments of 25% of the number of shares initially
granted, commencing on the first anniversary of the grant date, such
installments to be cumulative, and will not be exercisable prior thereto,
except as described below.
If the employment of an optionee is terminated other than by reason of
death, normal or early retirement or disability, the optionee may exercise the
option at any time within one year after such termination (but not after the
expiration date of the option), to the extent of the number of shares
purchasable at the date of termination of employment.
In the event of the termination of the employment of an optionee because of
normal retirement or disability, the optionee may exercise such option at any
time prior to expiration of the option, to the extent of the remaining shares
covered by such option, whether or not such shares had become purchasable by
the optionee at the date of termination of employment. In the event of the
termination of the employment of an optionee because of early retirement, the
optionee may exercise such option at any time prior to expiration of the
option, to the extent of the remaining shares covered by such option, at such
time or times as such option becomes purchasable by the optionee in accordance
with its terms. In the event of the death of an optionee while the optionee is
employed by the Company or any of its subsidiaries or while such option is
otherwise outstanding, the option may be exercised by an optionee's
beneficiary or legal representative at any time within a period of one year
after the optionee's death, but not after the expiration of the option, to the
extent of the remaining shares covered by his or her option, whether or not
such shares had become purchasable by the optionee at the date of the
optionee's death. In the event of the death of an optionee following the
termination of the optionee's employment or following termination of
employment by reason of normal or early retirement or disability, such option
(unless such termination is for cause) may be exercised by the optionee's
beneficiary or legal representative, but only to the extent of the number of
shares purchasable by the optionee pursuant to the provisions of his or her
option at the date of termination of the optionee's employment during the
following periods: i) if the optionee's death was within one year of his
termination of employment due to any reason other than retirement or
disability, then during the remainder of such one-year period or disability;
or ii) if the termination was by reason of normal or early retirement or
disability, then at any time prior to the expiration date of the option.
Notwithstanding the foregoing provisions, but subject to the provisions of
the next paragraph, the Compensation Committee may determine, in its sole
discretion, in the case of any termination of employment that (i) the optionee
may exercise such option to the extent of the remaining shares covered thereby
whether or not such shares had become purchasable by the optionee at the date
of termination of his or her employment and (ii) such option may be exercised
at any time prior to the expiration of the original term of the option.
14
<PAGE>
In the event that an optionee does not remain in the employ of the Company
or of one of its subsidiaries and the termination of the optionee's service is
for cause, the option will automatically terminate on the date of first
notification to the optionee of such termination unless the ATL Compensation
Committee otherwise determines.
The 1992 Plan also provides that, if the option grant so states, upon
notification of an intention to exercise a Nonqualified Stock Option, either
in whole or in part, the Compensation Committee may require the optionee to
surrender the option for cancellation, in lieu of exercising it, and receive
in exchange for such surrender a payment in cash and/or shares equal to the
difference between the option price of the shares covered by the option
surrendered for cancellation and the fair market value of such shares on the
date on which the optionee's notice of exercise is received by the Company.
Stock Appreciation Rights. Under the 1992 Plan the Compensation Committee is
authorized to grant stock appreciation rights ("SARs") to eligible employees,
consultants and independent contractors of the Company. An SAR is an incentive
award that permits the holder to receive (per share covered thereby) an amount
equal to the amount by which the fair market value of a share of ATL Common
Stock on the date of exercise exceeds the fair market value of such share on
the date the SAR was granted (the "base price").
The Compensation Committee may grant an SAR separately or in tandem with a
related option and may grant both "general" and "limited" SARS. A general SAR
granted in tandem with a related option will generally have the same terms and
Provisions as the related option with respect to exercisability , and the base
price of such an SAR will generally be equal to the option price under the
related option. Upon the exercise of a tandem SAR the related option will be
deemed to be exercised for all purposes of the 1992 Plan and vice versa.
A general SAR granted separately and not in tandem with any option will have
such terms as the Compensation Committee may determine, subject to the
provisions of the 1992 Plan. Under the 1992 Plan the base price of a stand-
alone SAR may not be less than the fair market value of the ATL Common Stock
determined as in the case of a Nonqualified Stock Option; the term of a stand-
alone SAR may not be greater than 10 years from the date it was granted.
A limited SAR may be exercised only during the 90 days immediately following a
Change of Control (as defined below). For the purpose of determining the
amount payable upon exercise of a limited SAR, the fair market value of a
share of Common Stock will be equal to the higher of (x) the highest fair
market value of the Common Stock during the 90-day period ending on the date
the limited SAR is exercised, determined as in the case of an option, or (y)
whichever of the following is applicable:
(i) the highest per share price paid in any tender or exchange offer
which is in effect at any time during the 90 days preceding the exercise of
the limited right;
(ii) the fixed or formula price for the acquisition of shares of Common
Stock in a merger or similar agreement approved by the stockholders or
Board of Directors, if such price is determinable on the date of exercise;
and
(iii) the highest price per share paid to any stockholder of the Company
in a transaction or group of transactions giving rise to the exercisability
of the limited right.
General SARs granted in tandem with a related option are payable in cash,
Common Stock or any combination thereof as determined in the sole discretion
of the Compensation Committee. Limited SARs are payable only in cash. General
stand-alone SARs are also payable only in cash, unless the Compensation
Committee provides otherwise at the time of grant.
Unless otherwise provided by the Compensation Committee at the time of
grant, the provisions of the 1992 Plan relating to the termination of
employment of a holder of a stock option will apply equally, to the extent
applicable, to the holder of an SAR.
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No SARs have been granted under the 1992 Plan.
Restricted Stock Awards. The Compensation Committee is authorized under the
1992 Plan to issue shares of Common Stock to eligible employees, consultants
and independent contractors of the Company , such shares to be restricted as
hereinafter described. The consideration received for such shares by the
Company is the payment in cash of an amount equal to the par value thereof and
past services of the participant. The recipient of restricted stock will be
recorded as a stockholder of ATL and will have, subject to the restrictions
described below, all the rights of a stockholder with respect to such shares
and will receive all dividends or other distributions made or paid with
respect to such shares; provided that the shares themselves and any new,
additional or different shares or securities which the recipient may be
entitled to receive with respect to such shares by virtue of a stock split or
stock dividend or any other change in the corporate or capital structure of
the Company will be subject to the restrictions described below.
During a period of years following the date of grant, as determined by the
Compensation Committee, which will in no event be less than six months (the
"Restricted Period"), the restricted stock may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of by
the recipient, except in the event of death or the transfer of the restricted
stock to ATL upon termination of the holder's employment. In the event of the
normal retirement or death of the recipient during the Restricted Period, the
restrictions on the shares will immediately lapse. In the event of the early
retirement of the recipient during the Restricted Period, the restrictions on
the shares will continue until they lapse in accordance with the terms of the
grant. If the employment of the recipient by the Company terminates during the
Restricted Period for any reason other than the retirement or death of the
employee, the shares of restricted stock held by the employee will be
forfeited to the Company and the employee must immediately transfer and return
the certificates for the restricted stock to the Company.
Stock Grant Awards. The 1992 Plan authorizes the Compensation Committee to
issue shares of Common Stock to nonofficer employees of the Company. The
consideration received for such shares by ATL is the payment in cash of an
amount equal to the par value thereof and past services. Each recipient of a
stock grant may receive a cash award at the time of grant in an amount
sufficient to offset the recipient's estimated tax liabilities arising from
the grant.
Performance Unit Awards. Performance units awarded under the 1992 Plan will
have a base value, expressed in dollars, determined by the Compensation
Committee on the day on which the award is granted which generally will be the
fair market value of the Common Stock on such day. This value is the "unit
base value". The actual amount paid to the employee, consultant or independent
contractor, as the case may be, by the Company when the award matures at the
end of the award cycle will depend on the achievement of cumulative
performance measures. These measures will be determined by the Compensation
Committee at the time the award is made and may include, but are not limited
to, cumulative targets with respect to earnings per share or pretax profits,
return on shareholders' equity, asset management, cash flow or return on
capital employed of the Company and/or one of its subsidiaries, divisions or
departments. The Compensation Committee will also determine the length of the
award cycle (which may not be less than three years), a payment schedule and
whether the payment will be made in cash, Common Stock or a combination of
cash and Common Stock. The payment schedule will provide a range of
percentages of the unit base value which will be payable to the participant in
the event that cumulative targets, of varying amounts, are achieved.
In instances where performance measures are not achieved, no award will be
payable. The Compensation Committee has discretion under the 1992 Plan to
apply performance measures on an absolute basis or relative to industry
indices and conclusively determine whether the measures have been achieved, as
well as to revise the payment schedules and performance measures formerly
determined by it if, in its judgment, significant economic or other changes
have occurred which were not foreseeable by the Committee when it set the
initial measures.
A performance unit award will terminate if the participant does not remain
in the employ of the Company during the award cycle, except as the
Compensation Committee otherwise determines, and except in the case of death,
normal or early retirement or disability occurring after the first anniversary
of the date of grant of the
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award, in which event, if the performance measure is met, a pro rata portion
of the award will be paid based on the elapsed time of the award cycle prior
to death, retirement or disability.
No payment of a performance unit award will be made prior to the end of an
award cycle, except as the Compensation Committee otherwise determines and
except in the case of death, in which event the participant's beneficiary or
legal representative may elect, subject to the approval of the Compensation
Committee, to have the participant's pro rata portion of the award paid at the
end of the year in which death occurred.
No performance units are outstanding under the 1992 Plan.
Transferability. The recipient's rights to the options, SARS, restricted
stock and performance units may not be assigned or transferred except by will
or the applicable laws of descent or distribution or to a designated
beneficiary.
Capital Adjustments. In the event of any changes in the outstanding stock of
the Company by reason of stock dividends, stock splits, recapitalizations,
mergers, consolidations, combinations or exchanges of shares, splitups, split-
offs, spin-offs, liquidations or other similar changes in capitalization, or
any distribution to stockholders other than cash dividends, the Compensation
Committee shall make such adjustments in the Maximum Annual Employee Grant, if
any, in light of the change or distribution as the Compensation Committee, in
its sole discretion, may make any adjustments it determines to be appropriate
in the outstanding options, stock appreciation rights, restricted shares or
performance units granted under the 1992 Plan and in the total number and
class of shares as to which awards may be made under the 1992 Plan.
Change of Control. Under the 1992 Plan, upon a Change of Control, each
outstanding option and SAR will automatically become exercisable in full for
the total remaining number of shares covered thereby. In addition, during the
90-day period following a Change of Control an optionee may, except in the
case of an option granted in tandem with a SAR, choose to receive cash equal
to the difference between the exercise price of the option and the fair market
value of a share of ATL Common Stock determined as described above for a
limited SAR, in lieu of exercising the option and paying the option price;
provided that an optionee who is an officer or Director of the Company may
only choose to receive cash in such amount if his option was granted six
months prior. Also, all restrictions on shares of restricted stock will lapse
upon a Change of Control, and performance units will be paid pro rata to the
date of a Change of Control, or if the payment of a performance unit was
deferred, then payment upon a Change of Control will also be deferred. A
Change of Control is defined in the 1992 Plan as (i) a change in the Board of
Directors such that a majority of the seats on the Board are occupied by
individuals who were neither nominated by a majority of the Incumbent
Directors (as defined below) of the Company then in office nor appointed by
directors so nominated, (ii) the acquisition by any person (other than the
Company or an ATL employee benefit plan) of, in the case of transactions not
approved by a majority of the directors of the Company who were either
nominated by a majority of the directors of the Company then in office or
appointed by directors so nominated ("Incumbent Directors"), 20% or more of
the combined general voting power of the Common Stock and any other voting
securities of the Company and, in the case of other transactions, 33% or more
of such combined voting power, or (iii) the approval by the stockholders of
the Company of a complete liquidation or dissolution of the Company or a
merger, consolidation or sale of substantially all of the assets of the
Company (collectively, a "Business Combination"), other than a Business
Combination in which all or substantially all of the stockholders of the
Company receive 60% or more of the stock of the corporation resulting from the
Business Combination in substantially the same proportions as their ownership
before the Business Combination, no holder has more than 33% of the combined
voting power of the capital stock of the resulting corporation and at least a
majority of the board of directors of the resulting corporation are Incumbent
Directors.
Administration. The Compensation Committee is authorized to administer the
1992 Plan and consists of at least two members of the Board who have not been
eligible to receive awards under the 1992 Plan or any other discretionary
plans of the Company or its affiliates for one year prior to their service on
the Compensation Committee.
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Amendment and Termination. The 1992 Plan may be terminated, modified or
amended by the shareholders of ATL. The Board of Directors may also terminate
the 1992 Plan, or modify or amend it in certain respects as set forth in the
1992 Plan. No options or awards may be granted under the 1992 Plan after June
26, 2002.
Federal Income Tax Consequences--Option Plans. The Federal income tax
consequences to the Company and to any person granted an award under the 1992
Plan, or under the proposed Nonemployee Director Plan (see PROPOSAL 3, below)
under the existing applicable provisions of the Code and the regulations
thereunder, are substantially as follows.
Under present law and regulations, no income will be recognized by a
participant upon the grant of stock options, SARS, restricted stock (except as
described below) or performance units.
On the exercise of a Nonqualified Stock Option, the optionee will recognize
taxable ordinary income in an amount equal to the excess of the fair market
value of the shares acquired over the option price. Upon a later sale of those
shares, the optionee will have short-term, mid-term or long-term capital gain
or loss, as the case may be, in an amount equal to the difference between the
amount realized on such sale and the tax basis of the shares sold. If payment
of the option price is made entirely in cash, the tax basis of the shares will
be equal to their fair market value on the date of exercise (but not less than
the option price), and their holding period will begin on the day after the
exercise date.
If the optionee uses previously owned shares to exercise an option in whole
or in part the transaction will not be considered to be a taxable disposition
of the previously owned shares. The optionee's tax basis and holding period of
the previously owned shares will be carried over to the equivalent number of
shares received on exercise. The tax basis of the additional shares received
upon exercise will be the fair market value of the shares on the date of
exercise (but not less than the amount of cash, if any, used in payment), and
the holding period for such additional shares will begin on the day after the
exercise date.
The same rules apply to an Incentive Stock Option which is exercised more
than three months after the optionee's termination of employment (or more than
12 months thereafter in the case of permanent and total disability as defined
in the Code).
On the exercise of an Incentive Stock Option during employment or within
three months after the employee's termination of employment (12 months in the
case of permanent and total disability as defined in the Code), for regular
tax purposes the optionee will recognize no income at the time of exercise
(although the employee will have income for alternative minimum income tax
purposes at that time as if the option were a Nonqualified Stock Option) and
no deduction will be allowed to the Company for Federal income tax purposes in
connection with the grant or exercise of the option. If the acquired shares
are sold or exchanged after the later of (a) one year from the date of
exercise of the option, or (b) two years from the date of grant of the option
(the "Holding Period"), the difference between the amount realized by the
holder on that sale or exchange and the option price will be taxed to the
holder as a capital gain or loss. If the shares are disposed of before the
Holding Period requirements are satisfied, then the holder will recognize
taxable ordinary income in the year of disposition in an amount equal to the
excess, on the date of exercise of the option, of the fair market value of the
shares received over the option price paid (or generally, if less, the excess
of the amount realized on the sale of the shares over the option price), and
the holder will have capital gain or loss, long-term or short-term as the case
may be, in an amount equal to the difference between (x) the amount realized
by the holder upon that disposition of the shares and (y) the option price
paid by the holder increased by the amount of ordinary income, if any, so
recognized by the holder. If an optionee uses shares acquired pursuant to the
exercise of an Incentive Stock Option to exercise an Incentive Stock Option
before the Holding Period requirements are satisfied, the optionee will
recognize ordinary income as discussed above, but any further gain realized
upon such exercise will not be recognized until the newly acquired stock is
disposed of.
Upon the receipt of restricted stock, the employee will generally recognize
taxable ordinary income when the shares cease to be subject to restrictions
under the plan equal to the excess of the fair market value of the shares at
that time over the amount, if any, paid for such shares. However, within 30
days after the date the shares are received, the employee may elect under
Section 83 (b) of the Code to recognize taxable ordinary income at the time of
transfer in an amount equal to the excess of the fair market value of the
shares at such
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<PAGE>
time over the amount, if any, paid for such shares. In that case no additional
income will be recognized by the employee upon the lapse of restrictions on
the shares, but, if the shares are subsequently forfeited, the employee may
not deduct the income recognized at the time of receipt of the shares and the
employee will have a capital loss equal to the amount, if any, paid for such
shares. The recipient's holding period for the shares will begin at the time
taxable income is recognized under these rules, and the tax basis in the
shares will be the amount of ordinary income so recognized plus the amount, if
any, paid for the shares. Any dividends received on the restricted shares
prior to the date the employee recognizes income as described above will be
taxable compensation income when received.
Upon payment to a participant in settlement of a stock option or pursuant to
the exercise of SARs or pursuant to a performance unit award the participant
will recognize taxable ordinary income in an amount equal to the cash and the
fair market value of Common Stock received. Upon the issuance of a stock bonus
award the recipient will recognize taxable ordinary income in an amount equal
to the fair market value of the Common Stock received and the amount of any
tax offset cash award made together with the issuance of such stock.
Special rules apply to a Director or officer subject to liability under
Section 16(b) of the Securities and Exchange Act.
In all the foregoing cases the Company may be entitled to a deduction at the
same time and in the same amount as the optionee recognizes ordinary income;
provided the amount of such ordinary income, when added to the optionee's
other compensation is reasonable and is otherwise deductible under the Code.
Those Board members who are not beneficiaries under the 1992 Plan have
unanimously approved the amendment to the 1992 Plan and recommend a vote "FOR"
approval of Proposal 2.
PROPOSAL 3: AMENDMENT TO NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
Nonemployee Director Stock Option Plan. The Company's Nonemployee Director
Stock Option Plan (the "Director Plan") provides for the automatic annual
grant of an option to purchase shares of Common Stock to each nonemployee
Director of the Company. The timing and number of shares which are the subject
of these grants are not determined by the Board, but have been established by
the Shareholders. The Director Plan covers Directors of the Company who are
not otherwise employed by the Company or any parent or subsidiary corporation,
each of whom automatically receives the grant of an option under the Director
Plan on July 1 of each year in which he serves as a Director. As of the date
of this Proxy Statement, the Company has seven nonemployee Directors. Assuming
that each of such persons is re-elected as a Director of the Company at the
Annual Meeting and continues to serve as a Director on July 1, 1998, each of
Messrs. Cramer, Feigenbaum, Larson, Mario, Miller, Nudelman and Woolf will be
entitled to receive grants under the Director Plan.
Proposed Amendment. At the date of this Proxy Statement, only 11,000 shares
of Common Stock remain to be issued under the Director Plan. At the Annual
Meeting, the Shareholders of the Company will be asked to approve an amendment
to the Director Plan, which, if approved, will increase the number of shares
to be issued under the Plan by 100,000 shares of Common Stock. The purpose of
the proposed amendment is to continue to provide incentives that management
believes are necessary in order to attract and retain highly qualified and
experienced outside Directors, and to provide nonemployee Directors with
incentives that are closely aligned with shareholder interests and value.
Description of the Director Plan. The Director Plan currently authorizes a
total of 105,000 shares of Common Stock that may be subject to option grants,
subject to certain adjustments for reclassifications, reorganizations and
similar corporate transactions. Since only 11,000 shares of this original Plan
allocation remain, it is proposed to increase the total number of shares
authorized for issuance under the Plan to 205,000 shares.
Under the Director Plan, each nonemployee Director automatically receives
each July 1 the grant of an option to purchase 5000 shares of Common Stock,
with an exercise price equal to the fair market value of the number of shares
of Common Stock covered by the option on the date of grant. Options are
exercisable and
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<PAGE>
become fully vested and nonforfeitable on the first anniversary of grant,
assuming that the optionee continues to serve as a Director on such
anniversary. Options expire on the fifth anniversary of grant, subject to
earlier termination in the event an optionee ceases to be a Director of the
Company.
The Director Plan is administered by the Board of Directors, which may
amend, terminate or suspend the Director Plan in certain limited respects;
provided, however, that if required to qualify the Director Plan under SEC
Rule 16b-3, no amendment may be made more than once every six months that
would change the amount, price, timing or vesting of Options, other than to
comport with changes in the Code or the rules and regulations promulgated
thereunder. If required to qualify the Director Plan under Rule 16b-3, no
amendment may be made without approval by the Company's shareholders that
would (a) materially increase the number of shares of Common Stock that may be
issued under the Director Plan, (b) materially modify the requirements as to
eligibility for participation in the Director Plan, or (c) otherwise
materially increase the benefits accruing to participants under the Director
Plan.
An optionee's right to Director stock options may not be assigned or
transferred except by will or applicable laws of descent and distribution or
to a designated beneficiary. If during the term of an option, there is a
change in the outstanding stock of the Company by reason of stock dividends,
stock splits, recapitalization, mergers, consolidation, combinations or
exchanges of shares, split-ups, split-offs, spin-offs, or other similar
changes in capitalization, or any distribution to stockholders other than cash
dividends, the number of and class of shares covered by any outstanding option
and the exercise price per share of the option will be proportionally
adjusted. Immediately prior to certain mergers, consolidations, liquidations
or similar reorganizations of the Company, any option granted under the
Director Plan may be exercised in whole or in part, whether or not the vesting
requirements applicable to such options have been satisfied.
The Director Plan may be terminated, modified, or amended by the
Shareholders of the Company. The Board of Directors may also terminate the
Director Plan, or modify or amend it in certain limited respects.
Federal Tax Consequences. The federal income tax consequences to any person
granted an award under the Director Plan is described under "Proposal 2:
Amendment of ATL's 1992 Option, Stock Appreciation Right, Restricted Stock,
Stock Grant and Performance Unit Plan--Federal Income Tax Consequences--Option
Plans".
Those members of the Board of Directors who are not outside Directors and
are not beneficiaries under the Director Plan have unanimously approved the
amendment to the Nonemployee Director Stock Option Plan and recommend a vote
"FOR" approval of Proposal 3.
PROPOSAL 4: RATIFICATION OF APPOINTMENT OF AUDITORS
Unless instructed to the contrary, it is intended that votes be cast
pursuant to the accompanying proxy for the ratification of the appointment of
KPMG Peat Marwick LLP as independent auditors of the Company for the year
1998. KPMG Peat Marwick LLP has audited the accounts of the Company and
Westmark and its major subsidiaries from 1987 through 1997, and since 1982 for
the units of Squibb Corporation that now comprise ATL. Representatives of KPMG
Peat Marwick LLP are expected to attend the meeting and will have an
opportunity to make a statement and/or to respond to appropriate questions
from shareholders.
In the event this ratification of the appointment of auditors is not made by
a majority of the shares present in person or by proxy and entitled to vote
thereon, the selection of other auditors will be considered and determined by
the Board of Directors.
The Board of Directors has unanimously approved the appointment of KPMG Peat
Marwick LLP as auditors for the Company and its major subsidiaries for 1998
and recommends a vote "FOR" approval of Proposal 4.
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EXPENSES OF SOLICITATION
The accompanying proxy is solicited by and on behalf of the Board whose
notice of meeting is attached to this Proxy Statement, and the entire cost of
such solicitation will be borne by the Company. Georgeson & Co., New York, New
York, will distribute proxy materials to beneficial owners and solicit proxies
by personal interview, mail, telephone and telegram, and will request
brokerage houses and other custodians, nominees and fiduciaries to forward
soliciting material to the beneficial owners of the Common Stock held on the
record date by such persons. The Company will pay Georgeson & Co. a fee of
$6,000 covering its services and will reimburse Georgeson & Co. for payments
made to brokers and other nominees for its expenses in forwarding soliciting
material. Solicitation by personal interview and telephone by Directors,
officers and other employees of ATL will be without special compensation.
OTHER MATTERS
The Company knows of no other matters which are likely to be brought before
the meeting. If, however, other matters not now known or determined come
before the meeting, the persons named in the enclosed proxy or their
substitutes will vote such proxy in accordance with their judgment in such
matters.
PROPOSALS OF SHAREHOLDERS
In order for proposals of shareholders to be considered for inclusion in the
Proxy Statement and proxy for the 1999 Annual General Meeting of Shareholders,
such proposals must be received by the Secretary of ATL by December 1, 1998.
ANNUAL REPORT AND FORM 10-K
A copy of the Company's 1997 Annual Report is being mailed with this Proxy
Statement to each shareholder of record. Shareholders not receiving a copy of
the Annual Report may obtain one without charge by writing or calling ATL
Corporate and Investor Relations, 22100 Bothell Everett Highway, P.O. Box
3003, Bothell, WA 98041-3003, (425) 487-7000.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, as filed with the Securities and Exchange Commission, will
be provided without charge to each shareholder of record who submits a written
request therefor addressed to ATL Corporate and Investor Relations, 22100
Bothell Everett Highway, P.O. Box 3003, Bothell, WA 98041-3003, (425) 487-
7000.
By order of the Board of Directors
/s/ W. Brinton Yorks, Jr.
W. Brinton Yorks, Jr.
Secretary and General Counsel
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ATL ULTRASOUND, INC.
AMENDED 1992 OPTION, STOCK APPRECIATION RIGHT, RESTRICTED STOCK, STOCK GRANT
AND PERFORMANCE UNIT PLAN
1. DEFINITIONS
The following terms have the corresponding meanings for purposes of the Plan:
"Award Cycle" means a period of not less than three fiscal years over which
performance units granted during a particular year are to be earned out.
"Change of Control" means
(a) a "Board Change." For purposes of the Plan, a Board Change shall have
occurred if a majority of the seats (other than vacant seats) on the
Corporation's Board of Directors (the "Board") were to be occupied by
individuals who were neither (i) nominated by a majority of the Incumbent
Directors nor (ii) appointed by directors so nominated. An "Incumbent Director"
is a member of the Board who has been either (i) nominated by a majority of the
directors of the Corporation then in office or (ii) appointed by directors so
nominated, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") ) or other actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board; or
(b) The acquisition by any individual, entity or group (within the meaning of
Section 13(d) (3) or 14(d) (2) of the Exchange Act) (a "Person") of "Beneficial
Ownership" (within the meaning of Rule 13d3 promulgated under the Exchange Act)
of (i) 20% or more of either (A) the then outstanding shares of common stock
(the "Outstanding Corporation Common Stock") or (B) the combined voting power of
the then outstanding voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding Corporation Voting
Securities"), in the case of either (A) or (B) of this clause (i), which
acquisition is not approved in advance by a majority of the Incumbent Directors
or (ii) 33% or more of either (A) the Outstanding Corporation Common Stock or
(B) the Outstanding Corporation Voting Securities, in the case of either (A) or
(B) of this clause (ii), which acquisition is approved in advance by a majority
of the Incumbent Directors; provided, however, that the following acquisitions
shall not constitute a Change of Control: (x) any acquisition by the
Corporation, (y) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Corporation or any corporation controlled by the
Corporation, or (z) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses (i), (ii) and (iii)
of the following subsection (c) are satisfied; or
(c) Approval by the shareholders of the Corporation of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Corporation Common Stock
and Outstanding Corporation Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same proportions as
their ownership, immediately prior to such reorganization, merger or
consolidation, of the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities, as the case may be, (ii) no Person (excluding the
Corporation, any employee benefit plan (or related trust) of the Corporation or
such corporation resulting from such reorganization, merger
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or consolidation and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 33% or more of
the Outstanding Corporation Common Stock or Outstanding Corporation Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 33%
or more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation or the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors, and (iii)
at least a majority of the members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation were Incumbent
Directors at the time of the execution of the initial agreement providing for
such reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation or (ii) the sale or other
disposition of all or substantially all of the assets of the Corporation, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such sale or
other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting Securities, as the
case may be, (B) no Person (excluding the Corporation and any employee benefit
plan (or related trust) of the Corporation or such corporation and any Person
beneficially owning, immediately prior to such sale or other disposition,
directly or indirectly, 33% or more of the Outstanding Corporation Common Stock
or Outstanding Corporation Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 33% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors, and (C) at least a majority of the
members of the board of directors of such corporation were approved by a
majority of the Incumbent Directors at the time of the execution of the initial
agreement or action of the Board providing for such sale or other disposition of
assets of the Corporation.
"Committee" means the Committee provided for in Section 4, which shall
administer the Plan.
"Common Stock" means common stock, par value $0.01 per share, of the
Corporation.
"Corporation" means ATL Ultrasound, Inc., a Washington corporation.
"Designated Beneficiary" means any person designated in writing by a
Participant as a legal recipient of payments due under an award in the event of
the Participant's death, or in the absence of such designation, the
Participant's estate. Such designation must be on file with the Corporation in
order to be effective but, unless the Participant has made an irrevocable
designation, may be changed from time to time by the Participant.
"Fair Market Value" of the Common Stock as of any trading day means the
average (rounded to the next highest cent in the case of fractions of a cent) of
the high and low sales prices of the Common Stock as reported on such trading
day by the NASDAQ National Market System. If no sales price is reported for the
Common Stock on such trading day, then "Fair Market Value" shall mean the
highest bid price reported for the Common Stock on such trading day by the
National Quotation Bureau Incorporated or any similar nationally recognized
organization. The Committee, in its sole discretion, shall make all
determinations required by this definition.
"Participant" means an employee, consultant or independent contractor who has
received an award under the Plan.
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"Payment Schedule" means the schedule adopted by the Committee in accordance
with Section 10 with respect to an Award Cycle to govern determination of the
Payment Value of a performance unit at the end of such Award Cycle in accordance
with Section 10.
"Payment Value" means the value, expressed in dollars, of a performance unit
at the conclusion of an Award Cycle, determined in accordance with Section 10.
"Plan" means this ATL Ultrasound, Inc. Amended 1992 Option, Stock Appreciation
Right, Restricted Stock, Stock Grant and Performance Unit Plan.
"Restricted Stock" means the shares of Common Stock referred to in Section 8.
"Retirement" means the termination of the services of a Participant because of
early or normal retirement as defined in the Westmark Retirement Plan.
"Withholding Tax" means any tax, including any federal, state or local income
tax, required by any governmental entity to be withheld or otherwise deducted
and paid with respect to the transfer of shares of Common Stock as a result of
the exercise of a Nonqualified Stock Option or stock appreciation right, the
payment of performance units or the award of Restricted Stock or stock grants.
2. STOCK SUBJECT TO THE PLAN
There are reserved for issuance upon the exercise of options, for issuance of
Restricted Stock and stock grant awards and for issuance upon the payment of
performance units and stock appreciation rights under the Plan 3,550,000 shares
of Common Stock, of which no more than an aggregate of 950,000 shares may be
issued as Restricted Stock awards and stock grants under the Plan. Such shares
may be authorized and unissued shares of Common Stock or previously outstanding
shares of Common Stock then held in the Corporation's treasury. If any option or
stock appreciation right granted under the Plan shall expire or terminate for
any reason (including, without limitation, by reason of its surrender, pursuant
to the provisions of Section 6(f) or the third paragraph of Section 6(b) or
otherwise, or cancellation, in whole or in part, pursuant to the provisions of
Section 6(c) or otherwise or pursuant to Section 7(f), or the substitution in
place thereof of a new option or stock appreciation right) without having been
exercised in full, the shares subject thereto shall again be available for the
purposes of issuance under the Plan. If shares of Restricted Stock shall be
forfeited and returned to the Corporation pursuant to the provisions of Section
8, such shares shall again be available for the purposes of issuance under the
Plan. In no event shall shares of Common Stock which, under the Plan, are
authorized to be used in payment of performance unit awards be deemed to be
unavailable for purposes of the Plan until such shares have been issued in
payment thereof in accordance with the provisions of Section 10(g). Stock
appreciation rights and performance unit awards providing for payments only in
cash are not subject to the overall limitations referred to above.
3. ADMINISTRATION
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have plenary authority, in its
discretion, to determine the individuals to whom, and the time or times at
which, performance units or Restricted Stock shall be awarded and stock
appreciation rights or options shall be granted (including, without limitation,
whether such options shall be Incentive Stock Options or Nonqualified Stock
Options or a combination thereof, as such terms are defined in Section 6(a)) and
the number of units and/or shares to be covered by each such award or grant. In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective Participants, their present and
potential contributions to the Corporation's success and such other factors as
the Committee in its discretion may deem relevant. Subject to the express
provisions of the Plan, the Committee shall have plenary authority to interpret
the Plan, to prescribe, amend and rescind rules and regulations relating to it,
to determine the terms and provisions of Restricted Stock,
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performance unit, stock appreciation right and option agreements (which need not
be identical) and to make all other determinations necessary or advisable for
the administration of the Plan. The Committee's determinations of the matters
referred to in this Section 3 shall be conclusive. It is the intention of the
Corporation that the Plan and the administration hereof comply in all respects
with Section 16(b) of the Exchange Act, and the rules and regulations
promulgated thereunder, and if any Plan provision is later found not to be in
compliance with Section 16(b), the provision shall be deemed null and void, and
in all events the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3. Notwithstanding anything in the Plan to the
contrary, the Board, in its absolute discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to persons who
are subject to Section 16 of the Exchange Act without so limiting or
conditioning the Plan with respect to other persons.
4. THE COMMITTEE
The Board shall designate a Committee of members of the Board which shall meet
the requirements of Section 16(b) of the Exchange Act. Currently, the Committee
shall consist of at least two or more members of the Board who are nonemployee.
If at any time an insufficient number of nonemployee directors is available to
serve on such Committee, interested directors may serve on the Committee;
however, during such time, no options, stock appreciation rights or Restricted
Stock shall be granted under the Plan to any person if the granting of such
options, stock appreciation rights or Restricted Stock would not meet the
requirements of Section 16(b) of the Exchange Act.
For purposes of this Section 4, a "Nonemployee Director" is a person who meets
the definition of "Nonemployee Director" as set forth in the rules and
regulations promulgated under Section 16(b) of the Exchange Act. Currently, a
Nonemployee Director is a member of the Board who is not (and, during the 12-
month period preceding his appointment as a member of the Committee has not
been) granted or awarded stock, stock appreciation rights or other equity
securities of the Corporation or any affiliated corporation pursuant to the Plan
or any other plan of the Corporation or any affiliated corporation except for
formula plans (as such term is defined in Rule 16b-3 (c) (2) (ii) issued under
the Exchange Act) or ongoing securities acquisition plans (as described in Rule
16b-3 (d) (2) (i) issued under the Exchange Act). The Committee shall be
appointed by the Board, which may from time to time appoint members of the
Committee in substitution for members previously appointed and may fill
vacancies, however caused, in the Committee. The Committee shall select one of
its members as its Chairman and shall hold its meetings at such times and places
as it may determine. A majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by not less than a majority of its
members. Any decision or determination reduced to writing and signed by all the
members shall be fully as effective as if it had been made by a majority vote at
a meeting duly called and held. The Committee may appoint a secretary, shall
keep minutes of its meetings and shall make such rules and regulations for the
conduct of its business as it shall deem advisable.
5. ELIGIBILITY
The Committee may award performance units and Restricted Stock and grant
options and stock appreciation rights only to employees, consultants or
independent contractors (which term as used herein includes officers) of the
Corporation and of its present and future subsidiary corporations
("subsidiaries"). Any person eligible under the Plan may receive one or more
awards of performance units or Restricted Stock or one or more grants of options
or stock appreciation rights, or any combination thereof, as the Committee shall
from time to time determine, and such determinations may be different as to
different Participants and may vary as to different awards and grants.
The maximum number of shares of Common Stock with respect to which an option
or options or a stock appreciation right or stock appreciation rights may be
granted to any eligible employee in any one fiscal year of the Company shall not
exceed ten percent of the aggregate number of shares of Common Stock authorized
for issuance under the plan (the "Maximum Annual Employee Grant").
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6. OPTION GRANTS
(a) The Committee is authorized under the Plan, in its discretion, to issue
options as "Incentive Stock Options" (as defined in Section 422 of the United
States Internal Revenue Code of 1986, as amended (the "Code")) or as
"Nonqualified Stock Options" (all other options granted hereunder) and the
options shall be designated as Incentive Stock Options or Nonqualified Stock
Options in the applicable option agreement. The purchase price of the Common
Stock under each option granted under the Plan shall be determined by the
Committee but shall be not less than 100% of the Fair Market Value of the Common
Stock at the time such option is granted. Notwithstanding the previous
sentence, any Nonqualified Stock Option may provide that the purchase price be
equal to the average Fair Market Value of the Common Stock over any continuous
period of trading days beginning and ending no more than 30 business days before
or after the date such option is granted.
(b) The Committee shall be authorized in its discretion to prescribe in the
option grant the installments, if any, in which an option granted under the Plan
shall become exercisable, provided that no option shall be exercisable within
six months of the date of grant thereof except as provided in Sections 6(c),
(d), (h), (i) and (j) or except as the Committee otherwise determines. In no
case may an option be exercised as to less than 100 shares at any one time (or
the remaining shares covered by the option if less than 100) during the term of
the option. The Committee shall also be authorized to establish the manner of
the exercise of an option. The term of each option shall be not more than 10
years from the date of grant thereof.
In general, upon exercise, the option price is to be paid in full in cash;
however, the Committee can determine at the time the option is granted for
Incentive Stock Options or at any time prior to exercise for Nonqualified Stock
Options, that additional forms of payment will be permitted. To the extent
permitted by the Committee and applicable laws and regulations (including, but
not limited to, federal tax and securities laws and regulations and state
corporate law), an option may be exercised (i) in Common Stock owned by the
option holder having a Fair Market Value on the date of exercise equal to the
aggregate option price, or in a combination of cash and stock; provided,
however, that payment in stock shall not be made unless such stock shall have
been owned by the option holder for a period of at least three months prior
thereto; or (ii) by delivery of a properly executed exercise notice, together
with irrevocable instructions to a broker designated by the Corporation, all in
accordance with the regulations of the Federal Reserve Board, to deliver
promptly to the Corporation the amount of sale or loan proceeds to pay the
exercise price and any federal, state or local withholding tax obligations that
may arise in connection with the exercise.
In lieu of requiring an option holder to pay cash or stock and to receive in
turn certificates for shares of Common Stock upon the exercise of a Nonqualified
Stock Option, if the option so provides, the Committee may elect to require the
option holder to surrender the option to the Corporation for cancellation as to
all or any portion of the number of shares covered by the intended exercise and
receive in exchange for such surrender a payment, at the election of the
Committee, in cash, in shares of Common Stock or in a combination of cash and
shares of Common Stock, equivalent to the appreciated value of the shares
covered by the option surrendered for cancellation. Such appreciated value
shall be the difference between the option price of such shares (as adjusted
pursuant to Section 15) and the Fair Market Value of such shares, which shall
for this purpose be determined by the Committee taking into consideration all
relevant factors, but which shall not be less than the Fair Market Value of such
shares on the date on which the option holder's notice of exercise is received
by the Corporation. Upon delivery to the Corporation of a notice of exercise of
option, the Committee may avail itself of its right to require the option holder
to surrender the option to the Corporation for cancellation as to shares covered
by such intended exercise. The Committee's right of election shall expire, if
not exercised, at the close of business on the fifth business day following the
delivery to the Corporation of such notice. Should the Committee not exercise
such right of election, the delivery of the aforesaid notice of exercise shall
constitute an
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exercise by the option holder of the option to the extent therein set forth, and
payment for the shares covered by such exercise shall become due immediately.
(c) In the event that a Participant's services for the Corporation or one of
its subsidiaries shall cease and the termination of such individual's service is
for cause, the option shall automatically terminate upon first notification to
the option holder of such termination of services, unless the Committee
determines otherwise, and such option shall automatically terminate upon the
date of such termination of services for all shares which were not purchasable
upon such date. For purposes of this Section 6(c), "cause" is defined as a
determination by the Committee that the option holder (i) has committed a
felony, (ii) has engaged in an act or acts of deliberate and intentional
dishonesty resulting or intended to result directly or indirectly in improper
material gain to or personal enrichment of the individual at the Corporation's
expense, or (iii) has willfully disobeyed the Corporation's appropriate rules,
instructions or orders, and such willful disobeyance has continued for a period
of 10 days following notice thereof from the Corporation.
In the event of the termination of the services of the holder of an option
because of Retirement or disability, he may (unless such option shall have been
previously terminated pursuant to the provisions of the preceding paragraph or
unless otherwise provided in his option grant) exercise such option at any time
prior to the expiration of the option, (i) in the event of disability or normal
Retirement, to the extent of the number of shares covered by such option,
whether or not such shares had become purchasable by him at the date of the
termination of his services and (ii) in the event of early Retirement, to the
extent of the number of shares covered by such option at such time or times as
such option becomes purchasable by him in accordance with its terms. (Although
the option may be exercised after Retirement or disability, under Section 422 of
the Code, if the option has been designated as an Incentive Stock Option, it
must be exercised within three months after the date of Retirement or one year
after the termination of employment due to disability in order to qualify for
incentive stock option tax treatment.)
In the event of the death of an individual to whom an option has been granted
under the Plan, while he is performing services for the Corporation or a
subsidiary, the option theretofore granted to him (unless his option shall have
been previously terminated pursuant to the provisions of this Section 6(c) or
unless otherwise provided in his option grant) may, subject to the limitations
described in Section 6(g), be exercised by his Designated Beneficiary, by his
legatee or legatees of the option under his last will, or by his personal
representatives or distributees, at any time within a period of one year after
his death, but not after the expiration of the option, to the extent of the
remaining shares covered by his option whether or not such shares had become
purchasable by such an individual at the date of his death. In the event of the
death of an individual (i) during the one-year period following termination of
his services or (ii) following termination of his services by reason of
Retirement or disability, then the option (if not previously terminated pursuant
to the provisions of this Section 6(c) ) may be exercised during the remainder
of such one-year period or during the remaining term of the option,
respectively, by his Designated Beneficiary, by his legatee under his last will,
or by his personal representative or distributee, but only to the extent of the
number of shares purchasable by such Participant pursuant to the provisions of
Section 6(d) at the date of termination of his services.
In the event of the termination of the services of the holder of an option,
other than by reason of Retirement, disability or death, he may (unless his
option shall have been previously terminated pursuant to the provisions of this
Section 6(c) or unless otherwise provided in his option grant) exercise his
option at any time within one year after such termination, but not after the
expiration of the option, to the extent of the number of shares covered by his
option which were purchasable by him at the date of the termination of his
services, and such option shall automatically terminate upon the date of such
termination of services for all shares which were not purchasable upon such
date.
(d) Notwithstanding the foregoing provisions, the Committee may determine, in
its sole discretion, in the case of any termination of services, that the holder
of an option may exercise such option to the extent of some or all of the
remaining shares covered thereby whether or not such shares had become
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purchasable by such an individual at the date of the termination of his services
and may exercise such option at any time prior to the expiration of the original
term of the option, except that such extension shall not cause any Incentive
Stock Option to fail to continue to qualify as an Incentive Stock Option without
the consent of the option holder. Options granted under the Plan shall not be
affected by any change of relationship with the Corporation so long as the
holder continues to be an employee, consultant or independent contractor of the
Corporation or of a subsidiary; however, a change in a participant's status from
an employee to a nonemployee (e.g., consultant or independent contractor) shall
result in the termination of an outstanding Incentive Stock Option held by such
participant in accordance with Section 6(c). The Committee, in its absolute
discretion, may determine all questions of whether particular leaves of absence
constitute a termination of services; provided, however, that with respect to
incentive stock options, such determination shall be subject to any requirements
contained in the Code. Nothing in the Plan or in any option granted pursuant to
the Plan shall confer on any individual any right to continue in the employ or
other service of the Corporation or any other person or interfere in any way
with the right of the Corporation or any other person to terminate his
employment or other services at any time.
(e) The date of grant of an option pursuant to the Plan shall be the date
specified by the Committee at the time it grants such option, provided that such
date shall not be prior to the date of such action by the Committee and that the
price shall be determined in accordance with Section 6(a) on such date. The
Committee shall promptly notify a grantee of an award and a written option grant
shall promptly be duly executed and delivered by or on behalf of the
Corporation.
(f) The Committee shall be authorized, in its absolute discretion, to permit
option holders to surrender outstanding options in exchange for the grant of new
options or to require option holders to surrender outstanding options as a
condition precedent to the grant of new options. The number of shares covered
by the new options, the option price (subject to the provisions of Section
6(a)), the option period and other terms and conditions of the new options shall
all be determined in accordance with the Plan and may be different from the
provisions of the surrendered options.
(g) In the event an optionee is granted Incentive Stock Options that in the
aggregate entitle the optionee to purchase, in the first year such options
become exercisable (whether under their original terms or as a result of the
occurrence of an Acceleration Event, as defined below), Common Stock of the
Corporation, any parent corporation or any subsidiary of the Corporation having
a Fair Market Value (determined as of the time such options are granted) in
excess of $100,000, such portion in excess of $100,000 shall be treated as a
Nonqualified Stock Option. Such limitation shall not apply if the Internal
Revenue Service publicly rules, issues a private ruling to the Corporation, any
optionee of the Corporation or any legatee, personal representative or
distributee of an optionee or states in proposed, temporary or final regulations
that provisions which allow the full exercise of an optionee's Incentive Stock
Options upon the occurrence of the relevant Acceleration Event do not violate
Section 422(d) of the Code. An "Acceleration Event" means (i) a determination
of the Committee to allow an optionee to exercise his options in full upon
termination of his employment or other service as provided in Section 6(c) or
(d), (ii) the death of an optionee while he is employed by the Corporation or a
subsidiary, (iii) any Change of Control, or (iv) the optionee's termination of
employment or other service under circumstances that will allow him to exercise
options not otherwise exercisable pursuant to Section 6(j).
(h) Notwithstanding any contrary waiting period, installment period or other
limitation or restriction in any option agreement or in the Plan, in the event
of a Change of Control, each option outstanding under the Plan shall thereupon
become exercisable at any time during the remaining term of the option, but not
after the term of the option, to the extent of the number of shares covered by
the option, whether or not such shares had become purchasable by the Participant
thereunder immediately prior to such Change of Control, subject, however, to the
limitations described in Section 6(g), by the holder of the option.
(i) Anything in the Plan to the contrary notwithstanding, during the 90-day
period from and after a Change of Control (x) an optionee (other than an
optionee who initiated a Change of Control in a capacity
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other than as an officer or a Director of the Corporation) who is an officer or
a Director of the Corporation (within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder) with respect to an
option that was granted at least six months prior to the date of exercise
pursuant to this sentence and is unaccompanied by a stock appreciation right and
(y) any other optionee who is not an officer or a Director with respect to an
option that is unaccompanied by a stock appreciation right shall, unless the
Committee shall determine otherwise at the time of grant, have the right, in
lieu of the payment of the full purchase price of the shares of Common Stock
being purchased under the option and by giving written notice to the
Corporation, to elect (within such 90-day period) to surrender all or part of
the option to the Corporation and to receive in cash an amount equal to the
amount by which the amount determined pursuant to Section 7(d) hereof on the
date of exercise (determined as if the optionee had exercised a limited stock
appreciation right on such date) shall exceed the purchase price per share under
the option multiplied by the number of shares of Common Stock granted under the
stock option as to which the right granted by this sentence shall have been
exercised. Such written notice shall specify the optionee's election to purchase
shares granted under the option or to receive the cash payment referred to in
the immediately preceding sentence.
(j) Notwithstanding the foregoing provisions, the optionee's employment or
other contract with the Corporation may provide that upon termination of his
employment or other services for other than cause or for "good reason" (as
defined in his contract), all stock options shall become immediately
exercisable.
7. STOCK APPRECIATION RIGHTS
(a) Stock appreciation rights may be paid upon exercise in cash, Common Stock
or any combination thereof, as the Committee in its sole discretion may
determine. A stock appreciation right is an incentive award that permits the
holder to receive (per share covered thereby) an amount equal to the amount by
which the Fair Market Value of a share of Common Stock on the date of exercise
exceeds the Fair Market Value of such share on the date the stock appreciation
right was granted.
(b) The Committee may grant a stock appreciation right separately or in
tandem with a related option and may grant both "general" and "limited" stock
appreciation rights. A general stock appreciation right granted in tandem with a
related option will generally have the same terms and provisions as the related
option with respect to exercisability, and the base price of such a stock
appreciation right will generally be equal to the option price under the related
option. Upon the exercise of a tandem stock appreciation right, the related
option will be deemed to be exercised for all purposes of the Plan and vice
versa.
(c) A general stock appreciation right granted separately and not in tandem
with any option will have such terms as the Committee may determine. The base
price of a stand-alone stock appreciation right may not be less than the Fair
Market Value of the Common Stock, determined as in Section 6(a) in the case of a
Nonqualified Stock Option; the term of a stand-alone stock appreciation right
may not be greater than 10 years from the date it was granted.
(d) A limited stock appreciation right may be exercised only during the 90
calendar days immediately following the date of a Change in Control. For the
purpose of determining the amount payable upon exercise of a limited stock
appreciation right, the fair market value of the Common Stock will be equal to
the higher of (x) the highest Fair Market Value of the Common Stock during the
90-day period ending on the date the limited stock appreciation right is
exercised and (y) whichever of the following is applicable:
(i) the highest per share price paid in any tender or exchange offer which
is in effect at any time during the 90 calendar days preceding the exercise of
the limited right;
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(ii) the fixed or formula price for the acquisition of shares of Common
Stock in a merger or similar agreement approved by the Corporation's
shareholders or Board, if such price is determinable on the date of exercise;
and
(iii) the highest price per share paid to any shareholder of the
Corporation in a transaction or group of transactions giving rise to the
exercisability of the limited right. In no event, however, may the holder of a
limited stock appreciation right granted in tandem with a related Incentive
Stock Option receive an amount in excess of the maximum amount which will enable
the option to continue to qualify as an Incentive Stock Option without the
consent of the Participant.
(e) Limited stock appreciation rights are payable only in cash. General
stand-alone stock appreciation rights are payable only in cash, unless the
Committee provides otherwise at the time of grant. General stock appreciation
rights granted in tandem with a related option are payable in cash, Common Stock
or any combination thereof, as determined in the sole discretion of the
Committee. Notwithstanding the foregoing, and to the extent required by Rule
16b-3 promulgated under Section 16(b) of the Exchange Act, a payment, in whole
or in part, of cash upon exercise of a stock appreciation fight may be made to
an optionee who is an officer or director of the Corporation (within the meaning
of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder) only if (i) the fight was granted at least six months prior to the
date of exercise (except that in the event of the death or disability of the
optionee prior to the expiration of the sixmonth period, this limitation shall
not apply) and (ii) the optionee's election to receive cash in settlement of the
fight and the exercise of the right are made (a) during the period beginning on
the third business day following the date of release for publication of the
quarterly or annual summary statements of sales and earnings of the Corporation
and ending on the twelfth business day following such date, (b) six months prior
to the date the stock appreciation right becomes taxable or (c) during the 90-
day period from and after a Change of Control.
(f) Unless otherwise provided by the Committee at the time of grant, the
provisions of Section 6 relating to the termination of the service of a holder
of an option shall apply equally, to the extent applicable, to the holder of a
stock appreciation right.
8. RESTRICTED STOCK AWARDS
(a) The consideration to be received for shares of Restricted Stock issued
hereunder out of authorized but unissued shares or out of treasury shares shall
be equal to cash in an amount equal to the par value thereof and past services
for the Corporation. The recipient of Restricted Stock shall be recorded as a
shareholder of the Corporation, at which time the Corporation, at its
discretion, may either issue a Restricted Stock Certificate or make a book entry
credit in the Corporation's stock ledger to evidence the award of such
Restricted Stock, and the Participant shall have, subject to the provisions
hereof, all the rights of a shareholder with respect to such shares and receive
all dividends or other distributions made or paid with respect to such shares;
provided, that the shares themselves, and any new, additional or different
shares or securities which the recipient may be entitled to receive with respect
to such shares by virtue of a stock split or stock dividend or any other change
in the corporate or capital structure of the Corporation, shall be subject to
the restrictions hereinafter described.
(b) During a period of years following the date of grant, as determined by
the Committee, which shall in no event be less than six months (the "Restricted
Period"), the Restricted Stock or any rights thereto may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of by the
recipient, except in the event of death or the transfer thereof to the
Corporation under the provisions of the next succeeding paragraph. In the event
of the death or normal Retirement of the recipient during the Restricted Period,
such restrictions shall immediately lapse, and the recipient or, in the case of
the recipient's death, his Designated Beneficiary, the legatee under his last
will or his personal representative or distributee shall be free to transfer,
encumber or otherwise dispose of the Restricted Stock. In the event of the early
Retirement of the recipient during the Restricted Period, such restrictions
shall continue until they lapse in accordance with the terms of the grant.
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Except as provided in Section 8(c), in the event that, during the Restricted
Period, the service of the recipient by the Corporation or one of its
subsidiaries is terminated for any reason (including termination with or without
cause by the Corporation or such subsidiary or resignation by the recipient),
other than termination of service due to the Retirement or death of the
recipient, then the shares of Restricted Stock held by him shall be forfeited to
the Corporation and the recipient shall immediately transfer and return to the
Corporation the certificates, if any have been issued to him, representing all
the Restricted Stock and the recipient's rights as a shareholder with respect to
the Restricted Stock shall cease, effective with such termination of service.
Notwithstanding the foregoing, the recipient's service contract with the
Corporation may provide that upon termination of his service for other than
cause or for good reason, all Restricted Stock shall cease to be subject to such
restrictions.
A recipient's rights to Restricted Stock may not be assigned or transferred
except upon death by will, descent or distribution. In the event of any attempt
by the recipient to sell, exchange, transfer, pledge or otherwise dispose of
shares of Restricted Stock in violation of the provisions hereof, such shares
shall be forfeited to the Corporation.
(c) Notwithstanding the Restricted Period contained in the grant of
Restricted Stock, in the event of a Change of Control (as defined in Section 1),
all restrictions on shares of Restricted Stock shall immediately lapse and such
Restricted Shares shall become immediately transferable and nonforfeitable.
(d) Notwithstanding anything contained in the Plan to the contrary, the
Committee may determine, in its sole discretion, in the case of any termination
of a recipient's service, that the restrictions on some or all of the shares of
Restricted Stock awarded to a recipient shall immediately lapse and such
Restricted Shares shall become immediately transferable and nonforfeitable.
9. STOCK GRANT AWARDS
(a) Each nonofficer employee of the Corporation is eligible to receive a
grant of Common Stock as a stock bonus (i) at the end of each fiscal year or
(ii) if the employee terminates prior to year-end, at the time of termination.
The number of shares to be granted shall be determined by setting a percentage
of the employee's salary at the fiscal year-end or time of termination and
dividing that amount by the price per share of the Common Stock or by any other
method determined by the Committee. For this purpose, the price for the Common
Stock shall be the Fair Market Value on the date of grant and each grant shall
be for full shares only; any fractional shares resulting from this calculation
shall be disregarded. The consideration to be received for shares of Common
Stock issued under this Section 9(a) shall be cash in an amount equal to the par
value thereof and past services for the Corporation.
(b) In addition, each recipient of a stock grant under Section 9(a) may be
granted a cash award at the time the shares are issued in an amount sufficient
to offset the recipient's estimated tax liabilities arising from the issuance of
the Common Stock under Section 9(a).
(c) Determinations regarding eligibility for grants under Section 9 (a), the
amount of individual grants of Common Stock, the amount of the cash offset
award, the interpretation of Section 9 and all other matters relating to the
administration of Section 9 are within the sole discretion of the Committee.
10. PERFORMANCE UNIT AWARDS
(a) Performance units which are awarded to a Participant shall have a "unit
base value," expressed in dollars, determined by the Committee on the day on
which the award is granted and generally determined to be the Fair Market Value
of the Common Stock on such day. The performance units will also have a Payment
Value at the end of the applicable Award Cycle contingent upon the performance
of the Corporation and/or of such Participant's subsidiary, division or
department during the Award Cycle.
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The performance measures may include, but shall not be limited to, cumulative
growth in earnings per share or pretax profits, return on shareholders' equity,
asset management, cash flow or return on capital employed. Such measures may be
applied on an absolute basis or relative to industry indices and shall be
defined in a manner which the Committee shall deem appropriate. For each
performance unit awarded, the Committee shall determine the length of the Award
Cycle, which shall be a period of not less than three fiscal years, and shall
establish a Payment Schedule based upon the performance measures determined for
such performance unit and the length of the Award Cycle, setting forth a range
of Payment Values corresponding to performance levels targeted for the
Corporation or such subsidiary, division or department. If during the course of
an Award Cycle there should occur, in the opinion of the Committee, significant
changes in economic conditions or in the nature of the operations of the
Corporation or a subsidiary, division or department which the Committee did not
foresee in establishing the performance measures for such Award Cycle and which,
in the Committee's sole judgment have, or are expected to have, a substantial
effect on the performance of the Corporation or of a Participant's subsidiary,
division or department during such Award Cycle, the Committee may revise the
Payment Schedule and performance measures formerly determined by it in such
manner as the Committee, in its sole judgment, may deem appropriate except as
otherwise provided in Section 10(1).
(b) In determining the number of performance units to be awarded, the
Committee shall take into account a person's responsibility level, performance,
potential, cash compensation level and such other considerations as it deems
appropriate.
(c) Except as otherwise provided in Section 10(l), an award of performance
units to a Participant shall terminate for all purposes if the services of the
Participant for the Corporation or one of its subsidiaries ceases during the
Award Cycle, except in the case of death, disability or retirement under the
Corporation's pension plan (including early retirement at the request of the
Corporation), in which case (and provided that the Participant at the time of
death, disability or retirement as aforesaid shall have maintained his
employment or other qualifying relationship with the Corporation or one of its
subsidiaries continuously during the period commencing on the date the award was
granted and ending on the first anniversary thereof) the Participant will be
entitled to payment (such payment to be made in accordance with the provisions
of Section 10(d)) of the same portion of the Payment Value of the award the
Participant would otherwise have been paid (such Payment Value, if any, to be
determined at the conclusion of the applicable Award Cycle in accordance with
the provisions of Sections 10(a) and 10(e) unless otherwise provided in Section
10(l)) as the portion of the Award Cycle during which the Participant maintained
such relationship with the Corporation bears to the full Award Cycle. Under
particular circumstances, the Committee may make other determinations with
respect to Participants whose services do not meet the foregoing requirements,
including the waiver of any of the requirements of this subsection (c) relating
to periods of continuous service.
(d) Except as otherwise provided in Section 10(l), unless the Committee
otherwise determines, no payment with respect to performance units will be made
to a Participant prior to the end of such Participant's Award Cycle; provided,
however, that if a Participant should die during an Award Cycle and his award
shall not have been terminated hereunder prior to his death, such Participant's
Designated Beneficiary, the legatee under the Participant's last will, his
personal representative or his distributee may elect instead, subject to the
approval of the Committee, to have the pro rata portion of the Participant's
Payment Value determined by the Committee as of the end of the year during which
such Participant's death occurred, based upon application of the Payment
Schedule to the part of the Award Cycle which shall have elapsed (for such
purpose, the cumulative growth rate or improvement achieved in the applicable
performance measures to the end of the fiscal year in which death occurs will be
assumed to continue for the Award Cycle), in which event such pro rata portion
shall be paid in cash or Common Stock, as provided in Section 10(g), as soon as
practicable following such year (or in such number of installments as shall have
been requested by the Participant and approved by the Committee) to such
Participant's Designated Beneficiary or legal representative.
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(e) Except as otherwise provided in Section 10(d) in the case of death, or in
Section 10(l) in the case of a Change in Control, a Participant's interest in
any performance units awarded to him shall mature on the last day of the Award
Cycle for such award. The Payment Value of a performance unit shall be the
dollar amount calculated on the basis of the Payment Schedule applicable to such
Award Cycle.
(f) The total amount of Payment Value due a Participant at the conclusion of
an Award Cycle shall be paid on such date following the conclusion of such Award
Cycle as the Committee shall designate, except as specifically otherwise
provided in the Plan; provided, however, that the Committee shall have
authority, if it deems appropriate, to defer payment (in cash or in stock or
both in specified percentages) of the Payment Value due a Participant if the
Participant shall request the Committee to do so at any time prior to the last
year of the Award Cycle for such award. In respect of awards made or to be made
in one or more deferred installments in cash, interest shall be credited
semiannually on each such award at a rate to be determined semiannually by the
Committee, but in no event shall such rate be less than the average rate on 10-
year AAA new industrial corporate bonds during each such semiannual period as
calculated on the basis of the average of such rates for each calendar week
ending during the period January 1 through June 30 and July 1 through December
31; provided that awards made during any such six-month period shall be credited
on the basis of the average rate for that period; and provided further that
installments paid during any six-month period shall be credited with interest on
the basis of the average rate for the next preceding six-month period. in each
case adjusted for the number of days such award was to be credited. Unless paid
to the recipient of such award at the time credited, interest at the foregoing
rate shall be credited on the interest so credited until so paid. The foregoing
minimum interest rate for any award that is payable in one or more deferred
installments under the Plan may not be modified without the prior written
consent of the Participant.
Whenever an award is made in one or more deferred installments in Common
Stock, the Committee may determine that there shall be credited on such award an
amount equivalent to the dividends which would have been paid with respect to
such shares of Common Stock if they had been issued and outstanding. Such
dividend equivalents shall be credited on the dividend record dates until
certificates for such shares shall have been delivered to the recipient of such
award or until such earlier date as the Committee may determine.
Such interest and dividend equivalents shall be paid to the recipient of any
such award in cash (or in property if the related dividend shall have been in
property) at such time or times during the deferred period of such award or at
the same time as the cash or shares of Common Stock to which such interest and
dividend equivalents apply, all as the Committee shall determine. The Committee
may also determine that any such dividend equivalents may be used to purchase
additional shares of outstanding Common Stock (such shares to be valued for such
purpose at Fair Market Value on the dividend record date) to be added to the
shares of Common Stock covered by such award and held subject to the same terms
and conditions, including provisions relating to the payment of amounts
equivalent to dividends thereon.
(g) Except as otherwise provided in Section 10(l), the Committee in its
discretion may determine at the time of grant or at the end of the Award Cycle
as to each Participant whether the payment of the Payment Value due a
Participant shall be made (i) in cash, (ii) in shares of Common Stock (valued at
the average Fair Market Value of the Common Stock for the five trading days
immediately preceding the date of payment), or (iii) in a combination of cash
and shares of Common Stock so valued.
(h) If the payment of any award shall be deferred until after the termination
of the services of the recipient by the Corporation or one of its subsidiaries,
the cash or Common Stock covered by such award, together with any deferred
interest or dividend equivalents thereon, shall be delivered in not more than 20
annual installments, commencing not later than the January 31 after such
termination of services (or such other date as the Committee from time to time
shall determine), all as the Committee may determine. If the payment of an
award under the Plan is deferred, such payment thereafter may be accelerated so
that such payment shall be made immediately or at such earlier time or in such
less
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number of installments, in each case as the Committee may from time to time
determine, but only with the prior written consent of the Participant.
(i) A Participant to whom any award has been made shall not have any interest
beyond that of a general creditor of the Corporation in the cash or Common Stock
awarded, or in any interest or dividend equivalents credited to him until the
cash has been paid to him or the certificates for the Common Stock have been
delivered to him, as the case may be, in accordance with the provisions of the
Plan.
(j) In the case of the death of the recipient of an award, before or after the
termination of his services, any unpaid installments of such deferred award
shall pass to the Designated Beneficiary, the legatee under the Participant's
last will, his personal representative or his distributee. Unpaid installments
of a deferred award shall be paid either in the same installments as originally
provided or otherwise as the Committee may determine in individual cases.
(k) Subject to the provisions of Section 10(l), in any case in which payment
of an award is to be made in Common Stock, the Corporation shall have the right,
in lieu of delivering the certificate or certificates for any or all of the
stock which would otherwise be deliverable to the Participant pursuant to the
Plan, to pay to such Participant on the date on which such certificate or
certificates would otherwise be deliverable an amount in cash equal to the Fair
Market Value of such Common Stock on such date or dates as may be determined by
the Committee, but not more than five trading days prior to such date, all as
the Committee may determine in individual cases.
(l) Anything herein to the contrary notwithstanding, in the event of a Change
of Control, with respect to any unmatured performance unit awards which a
Participant held immediately prior to such Change of Control, the Participant
will be entitled to immediate payment in cash (unless payment of such
performance unit awards shall be deferred in accordance with Section 10(f), in
which event the amount provided to be payable by this Section 10(l) shall also
be so deferred) in an amount equal to the value of such units determined in
accordance with the Payment Schedule applicable to such awards, based on the
cumulative, growth rate in the Corporation's reported earnings per share for all
previously elapsed fiscal years, if any, included in the Award Cycles for such
awards and the actual or presumed cumulative growth rate in the earnings per
share for the balance of each Award Cycle, determined as follows: (i) if such
Change of Control occurs prior to the completion of the first fiscal year of an
Award Cycle, the cumulative growth rate to be utilized for the balance of the
Award Cycle shall be the cumulative growth rate in the Corporation's earnings
per share in the four fiscal years preceding the first year and (ii) if such
Change of Control occurs during any subsequent fiscal year of an Award Cycle,
the cumulative growth rate to be utilized for the balance of the Award Cycle
shall be the cumulative growth rate of the preceding fiscal year(s) in that
Award Cycle prior to the fiscal year in which occurs the Change of Control. In
the event that a performance measure other than earnings per share is employed,
similar adjustments shall be made for such holders of unmatured performance
units. The Committee may in its discretion determine that such historical
financial data are not appropriate or not available and may use the latest
budgets, projections, forecasts or plans for the Corporation or its business
units or subsidiaries. Except as expressly set forth in this Section 10(l),
upon the occurrence of a Change of Control, no change(s) shall be made in the
terms of any performance unit (including, without limitation, its unit base
value, Payment Value or performance criteria) or in the underlying accounting
assumptions or practices for purposes of determining the amount due thereunder,
which change(s) would lessen the value of any performance unit to the holder
thereof
11. WITHHOLDING TAXES
In connection with the transfer of shares of Common Stock as a result of the
exercise of a Nonqualified Stock Option or stock appreciation right, the payment
of performance units or the award of Restricted Stock or stock grants, the
Corporation (a) shall not issue a certificate for such shares until it has
received payment from the Participant of any Withholding Tax in cash or by the
retention or acceptance
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upon delivery thereof by the Participant of shares of Common Stock sufficient in
Fair Market Value to cover the amount of such Withholding Tax and (b) shall have
the right to retain or sell without notice, or to demand surrender of, shares of
Common Stock in value sufficient to cover any Withholding Tax. The Corporation
shall have the right to withhold from any cash amounts due from the Corporation
to the award recipient pursuant to the Plan an amount equal to the Withholding
Tax. In either case, the Corporation shall make payment (or reimburse itself for
payment made) to the appropriate taxing authority of an amount in cash equal to
the amount of such Withholding Tax, remitting any balance to the Participant.
For purposes of this Section 11, the value of shares of Common Stock so retained
or surrendered shall be equal to the Fair Market Value of such shares on the
date that the amount of the Withholding Tax is to be determined (the "Tax
Date"), and the value of shares of Common Stock so sold shall be the actual net
sale price per share (after deduction of commissions) received by the
Corporation.
Notwithstanding the foregoing, the Participant may elect, subject to approval
by the Committee, to satisfy the obligation to pay any Withholding Tax, in whole
or in part, by providing the Corporation with funds sufficient to enable the
Corporation to pay such Withholding Tax or by having the Corporation retain or
accept upon delivery thereof by the Participant shares of Common Stock
sufficient in Fair Market Value to cover the amount of such Withholding Tax.
Each election by a Participant to have shares retained or to deliver shares for
this purpose shall be subject to the following restrictions: (i) the election
must be in writing and made on or prior to the Tax Date and (ii) if the
Participant is subject to Section 16 of the Exchange Act, an election to have
shares retained to satisfy the Withholding Tax must be an irrevocable election
made at least six months prior to the Tax Date or the withholding election must
become effective during the ten-businessday period beginning on the third
business day following the date on which the Corporation releases for
publication its annual or quarterly summary statements of sales and earnings and
ending on the twelfth business day following the date of release thereof.
12. TRANSFERABILITY AND OWNERSHIP RIGHTS OF OPTIONS, STOCK APPRECIATION RIGHTS
AND PERFORMANCE UNITS
No option or stock appreciation fight granted or performance unit awarded
under the Plan shall be transferable otherwise than pursuant to the designation
of a Designated Beneficiary or by will, descent or distribution, and an option
or stock appreciation fight may be exercised, during the lifetime of the holder
thereof, only by him. The holder of an option, stock appreciation right or
performance unit award shall have none of the rights of a shareholder until the
shares subject thereto or awarded thereby shall have been registered in the name
of such holder on the transfer books of the Corporation.
13. HOLDING PERIODS
(a) If a director or officer subject to Section 16 of the Exchange Act sells
shares of Common Stock obtained upon the exercise of a stock option within six
months after the date the option was granted, the option grant will no longer be
exempt from Section 16(b) and will retroactively be deemed a nonexempt purchase
as of the date of the option grant.
(b) In order to obtain certain tax benefits afforded to incentive stock
options under Section 422 of the Code, an optionee must hold the shares issued
upon the exercise of an incentive stock option for two years after the date of
grant of the option and one year from the date of exercise. An optionee may be
subject to the alternative minimum tax at the time of exercise of an incentive
stock option. The Committee may require an optionee to give the Corporation
prompt notice of any disposition in advance of the required holding period of
shares Of Common Stock acquired by exercise of an incentive stock option. Tax
advice should be obtained when exercising any option and prior to the
disposition of the shares issued upon the exercise of any option.
14. SECTION 16(b) COMPLIANCE AND BIFURCATION OF PLAN
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It is the intention of the Corporation that, if any of the Corporation's
equity securities are registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, the Plan shall comply in all respects with Rule 16b-3 under the
Exchange Act and, if any Plan provision is later found not to be in compliance
with such Section, the provision shall be deemed null and void, and in all
events the Plan shall be construed in favor of its meeting the requirements of
Rule 16b-3. Notwithstanding anything in the Plan to the contrary, the Board, in
its absolute discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to participants who are officers
and directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other participants.
15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
Except as otherwise provided in Section 6(h) and Section 10(l), in the event
of any changes in the outstanding stock of the Corporation by reason of stock
dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, split-ups, split-offs, spin-offs,
liquidations or other similar changes in capitalization, or any distribution to
shareholders other than cash dividends, the Committee shall make such
adjustments, if any, in light of the change or distribution as the Committee in
its sole discretion shall determine to be appropriate, (i) in the number and
class of shares or rights subject to options and stock appreciation rights and
the exercise prices of the options and stock appreciation rights covered
thereby, (ii) in the number of shares of Common Stock covered by a performance
unit award for which certificates have not been delivered, any dividend
equivalents to which deferred awards of Common Stock are entitled, and the
performance measures established by the Committee under Section 10(a), and (iii)
in the Maximum Annual Employee Grant. In the event of any such change in the
outstanding Common Stock of the Corporation, the aggregate number and class of
shares available under the Plan and the maximum number of shares as to which
options may be granted and stock appreciation rights or performance units
awarded and the maximum number of shares of Restricted Stock which may be
awarded shall be appropriately adjusted by the Committee.
16. AMENDMENT AND TERMINATION
Unless the Plan shall theretofore have been terminated as hereinafter
provided, the Plan shall terminate on, and no awards of performance units, stock
appreciation rights, or Restricted Stock or options shall be made after, June
26, 2002; provided, however, that such termination shall have no effect on
awards of performance units, stock appreciation rights, Restricted Stock or
options made prior thereto. The Plan may be terminated, modified or amended by
the shareholders of the Corporation. The Board of Directors of the Corporation
may also terminate the Plan, or modify or amend the Plan in such respects as it
shall deem advisable in order to conform to any change in any law or regulation
applicable thereto, or in other respects; however, to the extent required by
applicable law or regulation, shareholder approval will be required for any
amendment which will (a) materially increase the total number of shares as to
which options may be granted or which may be used in payment of performance unit
awards or stock appreciation right awards under the Plan or which may be issued
as Restricted Stock, (b) materially change the class of persons eligible to
receive awards of performance units or Restricted Stock and grants of stock
appreciation rights or options, (c) materially increase the benefits accruing to
participants under the Plan, or (d) otherwise require shareholder approval under
any applicable law or regulation. The amendment or termination of the Plan
shall not, without the consent of the recipient of any award under the Plan,
alter or impair any rights or obligations under any award theretofore granted
under the Plan.
17. EFFECTIVENESS OF THE PLAN
The Plan shall become effective on June 26, 1992. The Committee may in its
discretion authorize the awarding of performance units and Restricted Stock and
the granting of options and stock appreciation rights, the payments, issuance or
exercise of which, respectively, shall be expressly subject to the conditions
that (a) the shares of Common Stock reserved for issuance under the Plan shall
have been duly listed, upon official notice of issuance, upon each stock
exchange in the United States upon which the
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Common Stock is traded and (b) a registration statement under the Securities Act
of 1933, as amended, with respect to such shares shall have become effective.
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ATL ULTRASOUND, INC.
AMENDED NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
ARTICLE I PURPOSES
The purposes of the ATL Ultrasound, Inc. Stock Option Plan for Nonemployee
Directors (the "Plan") are to attract and retain the services of experienced and
knowledgeable nonemployee directors ATL Ultrasound, Inc. (the "Corporation")
and to provide an incentive for such directors to increase their proprietary
interests in the Corporation's long-term success and progress.
ARTICLE II SHARES SUBJECT TO THE PLAN
Subject to adjustment in accordance with Article VI hereof, the total
number of shares of the Corporation's common stock, $.0l par value per share
(the "Common Stock"), for which options may be granted under the Plan is 205,000
(the "Shares"). The Shares shall be shares presently authorized but unissued or
subsequently acquired by the Corporation and shall include shares representing
the unexercised portion of any option granted under the Plan which expires or
terminates without being exercised in full.
ARTICLE III ADMINISTRATION OF THE PLAN
The administrator of the Plan (the "Plan Administrator") shall be the Board
of Directors of the Corporation (the "Board"). Subject to the terms of the
Plan, the Plan Administrator shall have the power to construe the provisions of
the Plan, to determine all questions arising thereunder and to adopt and amend
such rules and regulations for the administration of the Plan as it may deem
desirable. No member of the Plan Administrator shall participate in any vote by
the Plan Administrator on any matter materially affecting the rights of any such
member under the Plan.
ARTICLE IV PARTICIPATION IN THE PLAN
Each member of the Board elected or appointed who is not otherwise an
employee of the Corporation or any parent or subsidiary corporation (an
"Eligible Director") shall automatically receive the grant of an option
to purchase 5,000 Shares on the first day of July in each year that the Eligible
Director serves.
ARTICLE V OPTION TERMS
Each option granted to an Eligible Director under the Plan and the issuance
of Shares thereunder shall be subject to the following terms:
1. OPTION AGREEMENT
Each option granted under the Plan shall be evidenced by an option
agreement (an "Agreement") duly executed on behalf of the Corporation. Each
Agreement shall comply with and be subject to the terms and conditions of the
Plan. Any Agreement may contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Plan Administrator.
2. OPTION EXERCISE PRICE
The option exercise price for an option granted under the Plan shall be the
fair market value of the Shares covered by the option at the time the option is
granted. For purposes of the Plan, "fair market value" shall be the average of
the high and low sales prices at which the Common Stock was sold on such date as
reported by the
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NASDAQ National Market System on such date or, if no Common Stock was traded on
such date, on the next preceding date on which Common Stock was so traded.
3. VESTING AND EXERCISABILITY
An option shall become fully vested and become nonforfeitable on July 1 of
the year following the year in which the option was granted if the optionee has
continued to serve as a Director until such date.
4. TIME AND MANNER OF EXERCISE OF OPTION
Each option may be exercised in whole or in part at any time and from time
to time; provided, however, that no fewer than 100 Shares (or the remaining
Shares then purchasable under the option, if less than 100 Shares) may be
purchased upon any exercise of option rights hereunder and that only whole
Shares will be issued pursuant to the exercise of any option.
Any option may be exercised by giving written notice, signed by the person
exercising the option, to the Corporation stating the number of Shares with
respect to which the option is being exercised, accompanied by payment in full
for such Shares, which payment may be in whole or in part (i) in cash or by
check or (ii) in shares of Common Stock already owned for at least three (3)
months by the person exercising the option, valued at fair market value at the
time of such exercise.
5. TERM OF OPTIONS
Each option shall expire five (5) years from the date of the granting
thereof, but shall be subject to earlier termination as follows:
(a) In the event that an optionee ceases to be a director of the
Corporation for any reason other than the death of the optionee, the
options granted to such optionee may be exercised by him or her only within
one (1) year after the date such optionee ceases to be a director of the
Corporation.
(b) In the event of the death of an optionee, whether during the
optionee's service as a director or during the one (1) year period referred
to in Section 5 (a), the options granted to such optionee shall be
exercisable, and such options shall expire unless exercised within one (1)
year after the date of the optionee's death, by the legal representatives
or the estate of such optionee, by any person or persons whom the optionee
shall have designated in writing on forms prescribed by and filed with the
Corporation or, if no such designation has been made, by the person or
persons to whom the optionee's rights have passed by will or the laws of
descent and distribution.
6. TRANSFERABILITY
During an optionee's lifetime, an option may be exercised only by the
optionee. Options granted under the Plan and the rights and privileges conferred
thereby shall not be subject to execution, attachment or similar process and may
not be transferred, assigned, pledged or hypothecated in any manner (whether by
operation of law or otherwise) other than by will or by the applicable laws of
descent and distribution except that, to the extent permitted by applicable law
and Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Plan Administrator may permit a
recipient of an option to designate in writing during the optionee's lifetime a
beneficiary to receive and exercise options in the event of the optionee's death
(as provided in Section 5(b)). Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any option under the Plan or of any right or
privilege conferred thereby, contrary to the provisions of the Plan, or the sale
or levy or any attachment or similar process upon the rights and privileges
conferred hereby, shall be null and void.
7. PARTICIPANT'S OR SUCCESSOR'S RIGHTS AS SHAREHOLDER
Neither the recipient of an option under the Plan nor the optionee's
successor(s) in interest shall have
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any rights as a shareholder of the Corporation with respect to any Shares
subject to an option granted to such person until such person becomes a holder
of record of such Shares.
8. LIMITATION AS TO DIRECTORSHIP
Neither the Plan nor the granting of an option nor any other action taken
pursuant to the Plan shall constitute or be evidence of any agreement or
understanding, express on implied, that an optionee has a right to continue as a
director for any period of time or at any particular rate of compensation.
9. REGULATORY APPROVAL AND COMPLIANCE
The Corporation shall not be required to issue any certificate or
certificates for Shares upon the exercise of an option granted under the Plan,
or record as a holder of record of Shares the name of the individual exercising
an option under the Plan, without obtaining to the complete satisfaction of the
Plan Administrator the approval of all regulatory bodies deemed necessary by the
Plan Administrator, and without complying, to the Plan Administrator's complete
satisfaction, with all rules and regulations under federal, state or local law
deemed applicable by the Plan Administrator.
ARTICLE VI CAPITAL ADJUSTMENTS
The aggregate number and class of Shares for which options may be granted
under the Plan, the number and class of Shares covered by each automatic grant
and each outstanding option and the exercise price per Share thereof (but not
the total price) shall all be proportionately adjusted for any stock dividends,
stock splits, recapitalizations, combinations or exchanges of shares, split-ups,
split-offs, spinoffs, or other similar changes in capitalization. Upon the
effective date of a dissolution or liquidation of the Corporation with one or
more corporations which results in more than eighty percent of the outstanding
voting shares of the Corporation being owned by one or more affiliated
corporations or other affiliated entities, or of a transfer of all or
substantially all the assets or more than eighty percent of the then outstanding
shares of the Corporation to another corporation or other entity, this Plan and
all options granted hereunder shall terminate. In the event of such dissolution,
liquidation, reorganization, merger, consolidation, transfer of assets or
transfer of stock, each optionee shall be entitled, for a period of twenty days
prior to the effective date of such transaction, to purchase the full number of
shares under his or her option which he or she is otherwise would have been
entitled to purchase during the remaining term of such option.
Adjustments under this Article IV shall be made by the Plan Administrator,
whose determination shall be final. In the event of any adjustment in the
number of Shares covered by any option, any fractional Shares resulting from
such adjustment shall be disregarded and each such option shall cover only the
number of full Shares resulting from such adjustment.
ARTICLE VII EXPENSES OF THE PLAN
All costs and expenses of the adoption and administration of the Plan shall
be borne by the Corporation; none of such expenses shall be charged to any
optionee.
ARTICLE VIII EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective on May 5, 1993. The Plan shall continue in
effect until it is terminated by action of the Board or the Corporation's
shareholders, but such termination shall not affect the then-outstanding terms
of any options.
ARTICLE IX TERMINATION AND AMENDMENT OF THE PLAN
The Board may amend, terminate or suspend the Plan at any time, in its sole
and absolute discretion; provided, however, that if required to qualify the Plan
under Rule 16b-3 promulgated under Section 16(b) of the Exchange Act, no
amendment may be made more than once every six (6) months that would change the
amount, price, timing or vesting of the options, other than to comport with
changes in the Internal Revenue Code of 1986, as
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amended, or the rules and regulations promulgated thereunder; and provided,
further, that if required to qualify the Plan under Rule 16b-3, no amendment
that would
(a) materially increase the number of Shares that may be issued
under the Plan,
(b) materially modify the requirements as to eligibility for
participation in the Plan, or
(c) otherwise materially increase the benefits accruing to
participants under the Plan shall be made without the approval of
the Corporation's shareholders.
ARTICLE X COMPLIANCE WITH RULE 16b-3
It is the intention of the Corporation that the Plan comply in all respects
with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act and that
Plan participants remain disinterested persons ("disinterested persons") for
purposes of administering other employee benefit plans of the Corporation and
having such other plans be exempt from Section 16 (b) of the Exchange Act.
Therefore, if any Plan provision is later found not to be in compliance with
Rule 16b-3 or if any Plan provision would disqualify Plan participants from
remaining disinterested persons, that provision shall be deemed null and void,
and in all events the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3.
Adopted by the Corporation's Board of Directors on February 26, 1993 and
approved by the Corporation's Shareholders and effective on May 5, 1993.
Amended and approved by the Corporation's Directors and Shareholders effective
on May 10, 1995 and May 8, 1996. As proposed to the Shareholders March 30,
1998.
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P R O X Y
ATL ULTRASOUND, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints DENNIS C. FILL, KIRBY L. CRAMER and HARRY WOOLF,
Ph.D., or any one of them, Proxies with full power of substitution, to vote the
shares of ATL Ultrasound, Inc. which the undersigned is entitled to vote at the
Annual General Meeting of Shareholders of ATL Ultrasound, Inc., to be held on
Tuesday, May 5, 1998, at 9:30 a.m. at the Four Seasons Olympic Hotel, 411
University Street, Seattle Washington, and at any adjournment thereof, on the
matters set forth on the reverse side.
THE MATTERS TO BE VOTED UPON, THE INSTRUCTIONS AND A SPACE FOR YOUR VOTE AND
SIGNATURE ARE SET FORTH ON THE REVERSE SIDE.
If this Proxy relates to shares held for the undersigned in the ATL Ultrasound,
Inc. Incentive Savings and Stock Ownership Plan or the Spacelabs Medical, Inc.
Incentive Savings and Stock Ownership Plan, then when properly executed, it
shall constitute instructions to the plan's trustees to vote in the manner
directed herein.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
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| SEE REVERSE |
| SIDE |
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[X] Please mark your votes as in this example. 9868
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THIS PROXY WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER(S); IF NOT OTHERWISE
SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2, 3 AND 4 AND IN THE
DISCRETION OF THE PROXIES UPON ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE
THE MEETING.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4:
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1. Election of Directors
FOR WITHHELD
[_] [_]
For, except vote withheld from the following nominee(s):
________________________________________________________
Nominees: Kirby L. Cramer, Harvey Feigenbaum, Dennis C. Fill, Eugene A. Larson,
Ernest Mario, John R. Miller, Phillip M. Nudelman and Harry Woolf.
2. AMENDMENT TO 1992 PLAN.
Approve an amendment to increase the number of shares available for issuance
under the 1992 Plan by 850,000 shares.
FOR [_] AGAINST [_] ABSTAIN [_]
3. AMENDMENT TO NONEMPLOYEE DIRECTOR STOCK OPTION PLAN. Approve an amendment to
increase the number of shares available for issuance under the Director Plan
by 100,000 shares.
FOR [_] AGAINST [_] ABSTAIN [_]
4. RATIFICATION OF AUDITORS. Ratification of the appointment of KPMG Peat
Marwick LLP as independent auditors for the year ending in December 31, 1998.
FOR [_] AGAINST [_] ABSTAIN [_]
SIGNATURE(S) _______________________________________DATE ______________________
Please date and sign your name(s) exactly as it appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as it appears hereon.
Second signature is required if stock jointly held.
