<PAGE>
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
ABIOMED, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
John F. Thero, Chief Financial Officer
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
____________________________________________________________________
2) Aggregate number of securities to which transaction applies:
____________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
____________________________________________________________________
4) Proposed maximum aggregate value of transaction:
____________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
1) Amount Previously Paid:
____________________________________________________________________
2) Form, Schedule or Registration Statement No.:
____________________________________________________________________
3) Filing Party:
____________________________________________________________________
4) Date Filed:
____________________________________________________________________
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF
ABIOMED, INC.
TO BE HELD ON AUGUST 9, 1995
The Annual Meeting of Stockholders of ABIOMED, Inc. will be held on August 9,
1995 at 8:00 a.m. at the offices of Brown, Rudnick, Freed & Gesmer, 18th
Floor, One Financial Center, Boston, Massachusetts, for the following purpos-
es:
1. To elect six persons to serve as directors.
2. To consider and act upon a proposed amendment to the Company's certif-
icate of incorporation to provide for the classification of the Board
of Directors into three classes of directors with staggered terms of
office and to make certain related changes.
3. To consider and act upon a proposed amendment to the Company's certif-
icate of incorporation regarding the consideration of all relevant
factors in connection with certain business combinations.
4. To consider and act upon a proposed amendment to the Company's certif-
icate of incorporation to increase the number of shares of the
Company's Common Stock authorized thereunder from 10,000,000 to
25,000,000 shares.
5. To consider and act upon a proposed amendment to the Company's 1992
Combination Stock Option Plan to increase the number of shares that
may be issued under that plan.
6. To consider and act upon a proposed amendment to the Company's 1989
Non-Qualified Stock Option Plan for Non-Employee Directors to increase
the number of shares that may be issued under that plan.
7. To consider and act upon any matter incidental to the foregoing pur-
pose and any other matter which may properly come before the Annual
Meeting or any adjourned session thereof.
The Board of Directors has fixed June 16, 1995, as the record date for deter-
mining the stockholders entitled to notice of, and to vote at, the Meeting.
By Order Of The Board Of Directors
DONALD E. PAULSON, Secretary
Boston, Massachusetts
July 6, 1995
YOUR VOTE IS IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO
VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POS-
SIBLE IN THE POSTAGE-PAID ENVELOPE ENCLOSED FOR THAT PURPOSE. EVEN
IF YOU HAVE GIVEN YOUR PROXY, THE PROXY MAY BE REVOKED AT ANY TIME
PRIOR TO EXERCISE BY FILING WITH THE CLERK OF THE COMPANY A WRITTEN
REVOCATION, BY EXECUTING A PROXY WITH A LATER DATE, OR BY ATTENDING
AND VOTING AT THE MEETING.
1
<PAGE>
ABIOMED, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 9, 1995
This proxy statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of ABIOMED, Inc., a Dela-
ware corporation with its principal executive offices at 33 Cherry Hill Drive,
Danvers, Massachusetts 01923 (the "Company"), for use at the Annual Meeting of
Stockholders to be held on August 9, 1995 and at any adjournment or adjourn-
ments thereof (the "Meeting"). The cost of such solicitation will be borne by
the Company. Certain of the officers and regular employees of the Company may
solicit proxies by correspondence, telephone or in person, without extra com-
pensation, and in addition the Company may engage Georgeson to perform addi-
tional solicitation for a fee not to exceed $7,000 plus reasonable out of
pocket expenses. The Company may also pay to banks, brokers, nominees and
other fiduciaries their reasonable charges and expenses incurred in forwarding
proxy material to their principals. It is expected that this proxy statement
and the accompanying proxy will be mailed to stockholders on or about June 30,
1995.
Only stockholders of record at the close of business on June 16, 1995 will
be entitled to receive notice of, and to vote at, the Meeting. As of that
date, there were outstanding and entitled to vote 2,040,000 shares of Class A
Common Stock, $.01 par value (the "Class A Common Stock"), and 4,885,821
shares of Common Stock, $.01 par value (the "Common Stock"), of the Company.
Holders of Class A Common Stock have ten votes per share and holders of Common
Stock have one vote per share on all matters on which they are entitled to
vote. The holders of Common Stock, voting as a separate class, are entitled to
elect 25% of the Board of Directors (rounded up to the nearest whole number),
and the balance of the directors are elected by the holders of both classes of
common stock, voting together as a single class. Directors will be elected by
a plurality of the votes cast by holders of the classes of common stock enti-
tled to vote thereon. Abstentions, including broker non-votes, will have no
effect on the outcome of the vote for the election of directors. Since Propos-
als No. 2, 3 and 4 require the affirmative vote of a majority of the outstand-
ing shares of the relevant classes as indicated under those proposals, absten-
tions and broker non-votes would have the same legal effect as a vote against
those proposals, even though that might not be the intent of the person voting
or giving the proxy. Proposals No. 5 and 6 require the affirmative vote of a
majority of those votes present in person or by proxy at the Meeting and enti-
tled to be voted, provided a quorum is present. Thus, abstentions have the ef-
fect of a vote against Proposals 5 and 6, but a broker non-vote has no effect.
THE ENCLOSED PROXY, IF EXECUTED AND RETURNED, WILL BE VOTED AS DIRECTED ON
THE PROXY OR, IN THE ABSENCE OF SUCH DIRECTION, FOR THE NOMINEES AS DIRECTORS
AND FOR PROPOSALS 2 THROUGH 6. IF ANY OTHER MATTERS SHALL PROPERLY COME BEFORE
THE MEETING, THEY WILL BE VOTED BY THE PROXIES IN ACCORDANCE WITH THEIR BEST
JUDGMENT. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION, BY EXECUTING A PROXY
WITH A LATER DATE, OR BY ATTENDING AND VOTING AT THE MEETING.
The Company's Annual Report to Stockholders for the fiscal year ended March
31, 1995, including financial statements audited by Arthur Andersen LLP. is
being mailed to each of the stockholders simultaneously with this proxy state-
ment.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Meeting, six directors are to be elected. If Proposal No. 2 is ap-
proved, two nominees will be elected as Class I directors to serve an initial
term of one year, two nominees will be elected as Class II directors to serve
an initial term of two years, and two nominees will be elected as Class III
directors to serve an initial term of three years (or, in all cases, until
their successors have been elected and qualified). After this year's election,
election of directors will be for three year terms. If Proposal No. 2 is not
adopted, each director will serve for one year or until his successor is duly
elected and qualified. The persons named below will be nominated by the Board
of Directors for election as directors. The first four named persons are being
nominated for election to the offices for which holders of both Common Stock
and Class A Common Stock vote as a single class; Messrs. Henri A. Termeer and
Desmond H. O'Connell, Jr. are being nominated for election by the holders of
Common Stock, voting as a separate class. With the exception of Desmond H.
O'Connell, Jr., all of these nominees are currently serving as directors of
the Company.
If any nominee at the time of the election is unable or unwilling to serve
or is otherwise unavailable for election, and the Board of Directors desig-
nates another nominee, the persons named as proxies will vote the proxy for
such substitute, if any. The Board of Directors has no reason to believe that
any of the proposed nominees will be unable or unwilling to serve. The pro-
posed nominees are not being nominated pursuant to any arrangement or under-
standing with any person.
INFORMATION ON NOMINEES
Set forth below is certain biographical information furnished by the nomi-
nees, and the class to which such nominee will be elected if Proposal No. 2 is
approved.
<TABLE>
<CAPTION>
Director
Name Age Position Since
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Dr. David M. Lederman (Class I) 50 Chairman of the Board of 1981
Directors President
and Treasurer
Dr. W. Gerald Austen (Class III) 64 Director 1985
Paul Fireman (Class III) 50 Director 1987
John F. O'Brien (Class II) 52 Director 1989
Henri A. Termeer (Class II) 49 Director 1987
Desmond H. O'Connell, Jr. (Class I) 59 Director N/A
</TABLE>
Dr. Lederman founded the Company in 1981 and has served as Chairman of the
Board and Chief Executive Officer since that time. Dr. Lederman has also
served as President of the Company from 1981 through 1990, from 1991 through
1992 and from 1993 to present. Prior to founding the Company, he was a Princi-
pal Research Scientist and subsequently Chairman of the Medical Research Group
at the Everett Division of Avco Corporation. Dr. Lederman holds a Bachelor's
degree in Engineering Physics and a Masters and a Ph.D. degree in Aerospace
Engineering from Cornell University. He has authored
3
<PAGE>
over 40 medical publications, is a member of numerous medical and scientific
professional organizations and is a frequent speaker in forums on cardiac as-
sist systems and on commercialization of government funded technology.
Dr. Austen has served as a director of the Company since 1985. From 1969 to
the present, Dr. Austen has been Chief of the Surgical Services at Massachu-
setts General Hospital, and from 1974 to the present, has been the Edward D.
Churchill Professor of Surgery at Harvard Medical School. Dr. Austen is the
past President of the American College of Surgeons, the American Association
for Thoracic Surgery and the Massachusetts and American Heart Associations, a
Fellow of the American Academy of Arts and Sciences and a member of the corpo-
ration of the Massachusetts Institute of Technology.
Mr. Fireman has served as a director of the Company since 1987. He is the
founder of Reebok International Ltd., a producer, designer, marketer and dis-
tributor of athletic and casual footwear and apparel, and has served as Chief
Executive Officer and a director of that company since 1979 and as Chairman of
the Board of Directors since 1985. Mr. Fireman has been President of Reebok
from 1979 to 1987 and since 1989.
Mr. O'Brien has served as a director since 1989. Since August 1989 he has
been the President and Chief Executive Officer and a director of State Mutual
Life Assurance Company of America. Since January 1995 he has been President,
Chief Executive Officer and a Director of Allmerica Financial Corporation, a
financial services holding company. Mr. O'Brien is also a director and the
Chairman of the Board of The Hanover Insurance Company, The Hanover American
Insurance Company, Citizens Corporation, SMA Life Assurance Company, 440 Fi-
nancial Group of Worcester, Inc. and Allmerica Property & Casualty Companies,
Inc.; a trustee, Chairman of the Board and Chief Executive Officer of
Allmerica Investment Trust; and a trustee and Chairman of the Board of
Allmerica Securities Trust and Allmerica Funds. From 1972 until 1989, Mr.
O'Brien was employed by Fidelity Investments in various capacities, including
as Group Managing Director of FMR Corp. Mr. O'Brien is also a director of
Cabot Corporation and a Trustee of the Worcester Art Museum and Worcester
Polytechnic Institute.
Mr. Termeer has served as a director of the Company since 1987. Mr. Termeer
has served as President and a director of Genzyme Corporation, a biotechnology
company engaged in the production and marketing of human health care products,
since 1983, as its Chief Executive Officer since 1985, and as its Chairman of
the Board since 1988. Mr. Termeer is Chairman of the Board of Directors of IG
Labs, Xenova Ltd. and Neozyme II Corporation, health care research and devel-
opment companies. He is also a director of AutoImmune, Inc. and Lotus Develop-
ment Corp., and serves as a trustee of Hambrecht & Quist Healthcare Investors
and Hambrecht & Quist Life Sciences Investors.
Mr. O'Connell is being nominated for election as a new director at the 1995
Annual Meeting. Since September 1990, he has been an independent management
consultant. He has served as a director of DNX Corp., a provider of pharmaceu-
tical and biotechnology products since 1991. From December 1992 until December
1993, he served as the Chairman, Management Committee, of Pharmakon Research
International, Inc., a provider of preclinical testing services to pharmaceu-
tical biotechnology companies. During 1991, he briefly served as Chairman of
the Board and Chief Executive Officer of Osteotech, Inc., a
4
<PAGE>
medical products company. Mr. O'Connell was with the BOC Group, PLC, an indus-
trial gas and health care company, in senior management positions from 1980 to
1990 and was a member of the Board of Directors of BOC Group, PLC from 1983 to
1990. From April 1990 until September 1990, Mr. O'Connell was President and
Chief Executive Officer of BOC Health Care. From 1986 to April 1990, he was
Group Managing Director of BOC Group, PLC. Prior to joining BOC, Mr. O'Connell
held various positions at Baxter Laboratories, Inc. including chief executive
of the Therapeutic and Diagnostic Division and Vice President, Corporate De-
velopment. Mr. O'Connell received a B.S. degree from the University of Notre
Dame and received an M.B.A. degree from Harvard University.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held five regular meetings during the fiscal year
ended March 31, 1995. Each director attended at least 75% of the aggregate
number of meetings of the board of directors and committees of which he was a
member held during such fiscal year, with the exception of Henri A. Termeer
and William G. Davis (who is not standing for re-election), each of whom at-
tended 67% of such meetings.
The Board of Directors has an Executive Committee which is currently com-
posed of David M. Lederman, Param I. Singh (who is not standing for re-elec-
tion) and Henri A. Termeer. The Executive Committee has, and may exercise, all
the powers and authority of the Board of Directors, except those which by law
may not be delegated to it by the Board of Directors. The Executive Committee
acted by unanimous written consent one time during the fiscal year ended March
31, 1995.
The Board of Directors has an Audit Committee, currently composed of Henri
A. Termeer, John F. O'Brien and William G. Davis, which met one time during
the fiscal year ended March 31, 1995. The functions performed by this commit-
tee include recommending to the Board of Directors the engagement of the inde-
pendent auditors, reviewing the scope of internal controls and reviewing the
implementation by management of recommendations made by the independent audi-
tors.
The Company has a Compensation Committee, which is currently composed of W.
Gerald Austen, John F. O'Brien and Paul Fireman. The functions of the Compen-
sation Committee include establishing the compensation and bonuses of execu-
tive officers, determining the persons to whom both incentive stock options
and non-qualified stock options will be granted and adopting rules and making
other determinations with respect to the administration of the 1992 Combina-
tion Stock Option Plan, the Employee Stock Purchase Plan and the 401(k) Plan.
During the fiscal year ended March 31, 1995, the Compensation Committee took
action by written consent three times and held one meeting.
The Board of Directors does not have a nominating committee. Changes in di-
rectors are considered by the whole Board of Directors.
5
<PAGE>
SECURITIES BENEFICIALLY OWNED BY CERTAIN PERSONS
The following table sets forth certain information as of June 16, 1995 with
respect to the beneficial ownership of the Company's Class A Common Stock and
Common Stock of each director and nominee for director, each named executive
officer in the Summary Compensation Table under "Executive Compensation," be-
low, all directors and current executive officers of the Company as a group,
and each person known by the Company to be the beneficial owner of five per-
cent or more of the Company's common stock. This information is based upon in-
formation received from or on behalf of the individuals named therein.
<TABLE>
<CAPTION>
Shares of Stock Percent of
Name Beneficially Owned (1)(2) Class (2)
- -------------------------------------------------------------------------------
<S> <C> <C>
David M. Lederman (3) 1,580,200 22.8%
c/o ABIOMED, Inc.
33 Cherry Hill Drive
Danvers, MA 01923
Param I. Singh (4) 720,500 10.4%
c/o ABIOMED, Inc.
33 Cherry Hill Drive
Danvers, MA 01923
W. Gerald Austen (5) 20,000 *
William G. Davis (5) 26,000 *
Paul Fireman (5) 42,500 *
John F. O'Brien (5) 22,000 *
Henri A. Termeer (5) 20,000 *
Desmond H. O'Connell, Jr. - *
Robert T.V. Kung (6) 140,375 2.0%
Bruce J. Shook (7) 14,393 *
All Current Executive 2,585,968 36.6%
Officers and Directors
as a group (9 persons)
(3)(4)(5)(6)(7)
</TABLE>
- -------------------------------------------------------------------------------
* Less than 1%.
(1) Unless otherwise noted, each person identified possesses sole voting and
investment power over the shares listed.
(2) Includes all outstanding shares of Common Stock and Class A Common Stock.
As of June 16, 1995, there were 2,040,000 shares of Class A Common Stock
outstanding, owned as follows: 1,428,000 shares (70%) by Dr. Lederman; and
612,000 shares (30%) by Dr. Singh. Since Class A Common Stock has ten
votes per share, the outstanding shares shown as beneficially owned by
those two persons in the above table represent 57.1% and 24.6%, respec-
tively, of the total voting power of shares of all classes outstanding at
June 16, 1995.
(3) Includes 64,400 shares held by the wife of Dr. Lederman and 23,000 shares
held by a charitable trust, of which Dr. Lederman is a trustee, as to
which Dr. Lederman disclaims beneficial ownership.
(4) Includes 108,000 shares held in trust for the benefit of certain of Dr.
Singh's relatives as to which Dr. Singh disclaims beneficial ownership.
(5) Includes the following shares subject to currently exercisable options:
Dr. Austen--20,000; Mr. Davis--20,000; Mr. Fireman--27,500; Mr. O'Brien--
20,000; Mr. Termeer--20,000.
6
<PAGE>
(6) Includes 18,375 shares subject to currently exercisable options and 60,000
shares held by the wife of Dr. Kung and 12,000 shares held in trust for
the benefit of certain relatives of Dr. Kung, as to which Dr. Kung dis-
claims beneficial ownership.
(7) Includes 14,075 shares subject to currently exercisable options.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation during the last three
fiscal years of (i) the Chief Executive Officer of the Company and (ii) the
three executive officers of the Company, other than the Chief Executive Offi-
cer, who were serving as executive officers at the end of the last fiscal
year, whose annual salary and bonus, if any, exceeded $100,000 for services in
all capacities to the Company during the last fiscal year (the "named execu-
tive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
------------------------------------ -----------------------
Fiscal Other Securities
Name and Year Annual Underlying All Other
Principal Ended Salary Bonus Compensation Options Compensation
Position 3/31 ($) ($) ($) (#) ($) (1)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dr. David M. Lederman 1995 $122,320 - - - $1,038
Chairman of the Board, 1994 124,632 - - - 1,295
President and 1993 121,616 - - - 1,315
Treasurer and Chief
Executive Officer
Dr. Robert T.V. Kung 1995 $122,304 $10,000 - - $1,038
Vice President, 1994 120,263 25,000 - 30,250 1,226
Research
and Development 1993 120,263 6,167 - - 1,297
Dr. Param I. Singh 1995 $122,304 - - - $1,038
Vice President for 1994 83,074 - - - 1,027
Corporate Development 1993 - - - - -
Bruce J. Shook 1995 $101,729 $10,000 - - $ 997
Vice President (Chief 1994 92,016 5,387 - 33,000 907
Operations Officer, 1993 82,953 6,000 - - 879
Cardiovascular
Subsidiary)
- -------------------------------------------------------------------------------------
</TABLE>
(1) Includes (a) the following matching contributions to the Company Employee
Deferred Compensation Profit Sharing Plan and Trust for fiscal 1995: Dr.
Lederman--$650; Dr. Kung--$650; Dr. Singh--$650; and Mr. Shook--$650; (b)
the following life insurance premiums paid for term life insurance in ex-
cess of $50,000 in fiscal 1995: Dr. Lederman--$388; Dr. Kung--$388; Dr.
Singh--$388; and Mr. Shook--$347.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUE
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options at Options at
3/31/95 3/31/95 (1)
Shares Acquired Exercisable/ Exercisable/
on Exercise Value Realized Unexercisable Unexercisable
Name (#) ($) (#) ($)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dr. David M. Lederman - - - -
Dr. Robert T.V. Kung - - 18,375/40,375 $15,188/$5,062
Dr. Param I. Singh - - - -
Bruce J. Shook - - - -
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Based upon the $7.25 closing price of the Company's Common Stock on March
31, 1995 on the NASDAQ National Market System minus the respective option
exercise price.
No options were granted to or exercised by the named executive officers dur-
ing the fiscal year ended March 31, 1995.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an advisory fee of
$1,000 per quarter plus an additional $250 for attendance at each meeting of
the Board of Directors or a committee thereof or consultation at the offices
of the Company.
Indemnification Agreements. The Company has entered into indemnification
agreements with each of its directors and anticipates that it will enter into
similar agreements with any future directors. The Company has also entered
into similar agreements with certain of the Company's officers and top manage-
ment personnel who are not also directors. Generally, the indemnification
agreements attempt to provide the maximum protection permitted by Delaware law
with respect to indemnification of directors.
The indemnification agreements provide that the Company will pay certain
amounts incurred by a director or officer in connection with any civil or
criminal action or proceeding and specifically including actions by or in the
name of the Company (derivative suits) where the individual's involvement is
by reason of the fact that he is or was a director or officer. Such amounts
include, to the maximum extent permitted by law, attorney's fees, judgments,
civil or criminal fines, settlement amounts, and other expenses customarily
incurred in connection with legal proceedings. Under the indemnification
agreements, a director or officer will not receive indemnification if he is
found not to have acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company.
8
<PAGE>
The 1989 Non-Qualified Stock Option Plan for Non-Employee Directors. The
Company has a 1989 Non-Qualified Stock Option Plan for Non-Employee Directors
(the "Directors Plan") which is more fully described under Proposal No. 6 be-
low. Under the Directors Plan, options to purchase Common Stock are granted to
directors of the Company who are not employees of the Company and who do not
own or are not affiliated with any person who owns, directly or indirectly,
more than 5% of the Company's outstanding voting stock (the "Eligible Direc-
tors"). The current Eligible Directors, among those persons nominated for
election as directors at the Meeting, are Dr. Austen and Messrs. Fireman,
O'Brien and Termeer. No options were granted under the Directors Plan in the
fiscal year ended March 31, 1995. If Mr. O'Connell is elected as a director at
the meeting, he will become an Eligible Director and will receive an option to
purchase 12,500 shares under the Directors Plan.
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
Decisions regarding executive compensation are made by the Compensation Com-
mittee of the Board of Directors, which is composed of Dr. Austen and Messrs.
Fireman and O'Brien. The Compensation Committee also administers the Company's
1992 Combination Stock Option Plan (the "Combination Plan"), including deter-
mining the individuals to whom stock options are awarded, the terms upon which
option grants are made, and the number of shares subject to each option
granted under the Combination Plan. No member of the Compensation Committee is
a former or current officer or employee of the Company. Dr. Lederman, while
not a member of the Compensation Committee, makes recommendations to the Com-
pensation Committee regarding executive officer compensation, including the
awards of stock options, and often participates in their deliberations but
does not vote on such matters.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The primary objectives of the Compensation Committee in developing executive
compensation policies are to attract and retain superior talent to enable the
Company to achieve its business objectives and to align the financial inter-
ests of its executive officers with the stockholders of the Company. The com-
pensation of executive officers consists of base compensation, bonus, the
grant of options and participation in benefit plans generally available to em-
ployees.
In setting overall compensation for the last fiscal year, the Compensation
Committee reviewed the recommendations of the Chief Executive Officer and
strove to maintain base compensation for the Company's executive officers at
levels which the Compensation Committee believes are competitive with the com-
pensation of comparable executive officers in similarly situated companies,
while relying upon the Company's Combination Plan and informal bonus program
to provide significant performance incentives. For the last fiscal year, while
the Compensation Committee considered the factors set forth below in reviewing
an executive officer's compensation package, no particular weight was assigned
to any of those factors. Rather the overall compensation of each executive of-
ficer was reviewed as a whole, with substantial weight given to the Chief Ex-
ecutive Officer's recommendations.
9
<PAGE>
Under the Company's bonus program, a discretionary bonus may be paid to each
executive officer. In determining the bonus to be granted to each executive
officer the Compensation Committee reviewed recommendations provided by the
Chief Executive Officer based upon each executive officer's achievement of in-
formal expectations and goals established with the Chief Executive Officer for
the year, and the Company's performance during the year. Such goals may in-
clude the officer's contribution to the short-term financial performance of
the Company as well as achievements in forwarding the Company's research and
development, which the Company believes will be important to its long-term
success. As reflected in the Summary Compensation Table, bonuses for fiscal
1995 were modest, reflecting the Company's stage of development.
Each of the executive officers is eligible to receive grants of options un-
der the Combination Plan. In determining the number of options to be granted
to each executive officer, the Compensation Committee reviews recommendations
provided by the Chief Executive Officer based upon the officer's position of
responsibility and anticipated contribution to the Company, the number of
shares of Common Stock subject to options held or previously granted to the
officer, the individual performance of the officer and the number of shares of
Common Stock held by the officer.
During the fiscal year ended March 31, 1995, Dr. Lederman, the Chief Execu-
tive Officer of the Company, received a base salary of $122,320 and no bonus.
Dr. Lederman's base salary has remained constant since October, 1990. Dr. Led-
erman has never received any options to purchase stock of the Company, since
the Company's option plans prohibit awards to 5% or larger stockholders. The
Compensation Committee believes that the compensation of Dr. Lederman is low
compared to his importance and contributions to the Company, and the compensa-
tion of chief executive officers of similarly situated companies. This low
level of compensation reflects Dr. Lederman's request to limit his compensa-
tion during the year based upon the Company's stage of development. If not for
this request, the Board of Directors would have set Dr. Lederman's compensa-
tion at a higher level to better reflect his importance and contributions to
the Company.
Compensation Committee
Dr. W. Gerald Austen
Paul Fireman
John F. O'Brien
10
<PAGE>
PERFORMANCE GRAPHS
The following graph compares the yearly change in the cumulative total
stockholder return for the Company's last five full fiscal years, based upon
the market price of the Company's Common Stock, with the cumulative total re-
turn on the NASDAQ Stock Market (U.S. Companies) and the NASDAQ Stocks-SIC
Group Code 384 for that period. The performance graph assumes the investment
of $100 on March 30, 1990 in the Company's Common Stock, the NASDAQ Stock Mar-
ket (U.S. Companies) and the NASDAQ Stocks-SIC Group Code 384, and the rein-
vestment of any and all dividends.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
<TABLE>
<CAPTION>
03/30/90 03/28/91 03/31/92 03/31/93 03/31/94 03/31/95
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ABIOMED, Inc. $ 100.0 $ 86.6 $ 135.4 $ 89.0 $ 73.2 $ 70.7
Nasdaq Stock Market (US Companies) $ 100.0 $ 114.2 $ 145.6 $ 167.3 $ 180.6 $ 200.8
NASDAQ Stocks (SIC 3840-3849 US Companies) $ 100.0 $ 167.9 $ 206.4 $ 156.4 $ 147.9 $ 191.0
Surgical, Medical, and Dental Instruments and Supplies
</TABLE>
11
<PAGE>
The second graph compares the yearly change in the cumulative total stock-
holder return for the Company's two full fiscal years since the introduction
of its cardiac assist product to the U.S. market with the total return on the
NASDAQ Stock Market (U.S. Companies) and NASDAQ Stocks SIC Group Code 384 for
that period. Total return was calculated from March 31, 1993 in the same man-
ner as the first graph.
[GRAPH APPEARS HERE]
COMPARISON OF TWO YEAR CUMULATIVE RETURN
<TABLE>
<CAPTION>
03/31/93 03/31/94 03/31/95
-------- -------- --------
<S> <C> <C> <C>
ABIOMED, Inc. $ 100.0 $ 82.2 $ 79.4
Nasdaq Stock Market (US Companies) $ 100.0 $ 107.7 $ 120.0
NASDAQ Stocks (SIC 3840-3849 US Companies) $ 100.0 $ 94.6 $ 122.2
Surgical, Medical, and Dental Instruments and Supplies
</TABLE>
INTRODUCTION TO CHARTER AMENDMENTS
The Board of Directors unanimously has determined that certain amendments to
the Company's Certificate of Incorporation are advisable and has unanimously
voted to recommend them to the Company's stockholders for adoption at the 1995
Annual Meeting. These amendments are being submitted in the form of three sep-
arate proposals: (i) a proposal to create a classified Board of Directors and
make certain related changes; (ii) a proposal directing the Board of Directors
to consider all relevant factors in connection with certain business combina-
tions; and (iii) a proposal to increase the number of authorized shares of
Common Stock (collectively, the "Charter Amendments"). The background, reasons
and effects of the three proposals are set forth below, followed by a more de-
tailed description of each proposal and how it would operate.
PURPOSES AND EFFECTS
At the present time, Dr. David M. Lederman, founder of the Company, and Dr.
Param I Singh, by virtue of their ownership of all of the Class A Common
Stock, hold 57.1% and 24.6%, respectively, of
12
<PAGE>
the total voting power of the Company's common stock. However, in general, a
transfer of any Class A Common Stock by Dr. Lederman will cause all of the
outstanding Class A Common Stock automatically to be converted into Common
Stock, and a transfer by Dr. Singh will cause the transferred shares to con-
vert into Common Stock but will not effect the remaining shares of Class A
Common Stock outstanding. (There are limited exceptions to these provisions
allowing transfer of Class A Common Stock to trusts controlled by one or the
other or both of Dr. Lederman and Dr. Singh.) Dr. Lederman may at some point
in the future wish to dispose of some portion of his Class A Common Stock,
which would cause all of the Class A Common Stock to be converted into Common
Stock. At such time as that might happen, the Company would become more vul-
nerable to certain tactics--such as the accumulation of substantial voting po-
sitions as a prelude to an attempt to take over corporate control or effect
significant corporate restructuring, a proxy fight, and other similar de-
vices--which have become relatively more common in recent years. For the rea-
sons discussed below, the Board of Directors considers that such tactics could
be highly disruptive to a Company and can result in dissimilar and unfair
treatment of a company's stockholders. Proposals No. 2 and 3 are being submit-
ted for stockholder approval as a means of protecting the Company from these
kinds of tactics and Proposal 4 is being submitted for that reason as well as
to have authorized shares available for unrelated purposes.
The Charter Amendments are interrelated but are being presented as three
separate proposals. The Charter Amendments are not being recommended in re-
sponse to any past problems regarding Board of Director continuity or any spe-
cific effort of which the Board of Directors is aware to acquire control, but
rather in anticipation of such activities which might result at such time as
the Class A Common Stock is converted into Common Stock.
If Proposal No. 2 is approved, because only one of the three classes of a
classified Board will be elected annually, at least two annual stockholders'
meetings, instead of one, will be required to effect a change in the control
of the Board through the normal election processes. The classified board
amendment and related changes would require a person seeking to acquire con-
trol of the Company to wait up to two years to obtain control of the Board
even though that person has acquired ownership of a majority or controlling
minority interest in the Company.
The classified board amendment and related changes would thus make it more
difficult and time-consuming for any individual or entity who accumulates a
substantial stock or voting position in the Company to obtain control of the
Board or to effect change in the Company's day-to-day operations. It would
therefore reduce the vulnerability of the Company to takeover proposals that
are not in the best interests of the Company or its stockholders.
The classified board amendment and related changes, of course, would affect
all stockholders, not just those seeking to acquire control of the Company, in
the following ways: (1) because at least two annual meetings will be required
to change majority control on the Board, the amendment would tend to perpetu-
ate present management; (2) forbidding removal of directors except for "cause"
will make it more difficult to remove directors, even if removal were believed
by a majority of the incumbent Board of Directors or stockholders to be in the
Company's best interest, and (3) the amendment may tend to discourage accumu-
lations of large blocks of stock by reducing the control effect of such
blocks, thus reducing temporary fluctuations in market price that could be
caused by such accumulations.
13
<PAGE>
Proposal No. 3 directs the Board of Directors to consider all relevant fac-
tors in connection with certain business combinations. In the opinion of the
Board of Directors, this provision will strengthen its position in dealing
with anyone attempting to take over the Company. The proposed amendment may
discourage some potential purchasers from attempting any tender offer for the
Company and may have significant effects on the ability of stockholders of the
Company to benefit from certain transactions that are opposed by an incumbent
Board of Directors. This provision will tend to induce any persons seeking
control of the Company or a business combination with the Company to negotiate
on terms acceptable to the Board of Directors then in office. It should be
noted, however, that with respect to tender or exchange offers, recommenda-
tions of the Board of Directors are not binding on stockholders once the offer
is made because these offers are made by the offeror to each stockholder indi-
vidually.
Proposal No. 3, if approved, may give comfort to the Company's employees,
customers and other constituencies that the Board of Directors may consider
their interests in deciding whether to recommend a tender or exchange offer or
to authorize a merger. The Board of Directors believes that this would have a
positive impact on the communities in which the Company and its subsidiaries
operate. This proposal also reflects the Board of Directors' concern that the
value of the Company may not be adequately reflected in the market price of
its stock. Therefore, this proposal would explicitly permit the Board of Di-
rectors to compare the consideration to be offered in a proposed acquisition
of the Company with other measures of the Company's worth.
Under certain circumstances, Proposal No. 3 may make it more difficult to
impose legal liability on directors, or to set aside transactions by the Com-
pany, for example, when the director action in question is based on a determi-
nation that relevant non-financial factors outweigh the perceived immediate
economic benefits of a transaction to the Company and its stockholders.
If Proposal No. 4 increasing the authorized number of shares of Common Stock
is adopted, the Company will have available additional shares for issuance for
corporate purposes without the necessity of further stockholder approval. Al-
though the Company is not aware of any proposed takeover attempt, the ability
of the Board of Directors to issue the newly-authorized but unissued shares of
Common Stock might have the effect of discouraging an attempt by another per-
son or entity to effect a takeover or otherwise gain control of the Company,
since the issuance of additional shares of Common Stock would dilute the vot-
ing power of the Common Stock then outstanding. This could include issuances
in private placements, in conjunction with the adoption of a stockholder
rights plan, or otherwise, and in each case this could be accomplished without
further stockholder approval.
ADVANTAGES OF PROPOSALS
The proposed Charter Amendments are intended to encourage persons seeking to
acquire control of the Company to initiate such an acquisition through arm's
length negotiations with the Company's Board. If the Board is presented with a
proposal from a third party who has acquired a substantial block of the
Company's Common Stock, the Directors will be able to evaluate the proposal
and study alternative proposals without the imminent threat of removal. This
will help ensure that the best price is obtained in
14
<PAGE>
any acquisition transaction that may ultimately be consummated. Proposal No. 2
has the additional benefit of promoting continuity in leadership and policy on
the Board and Proposal No. 4 provides additional authorized shares for general
corporate purposes.
DISADVANTAGES OF PROPOSALS
Adoption of the proposed Charter Amendments may deter certain mergers, ten-
der offers, proxy contests or other future takeover attempts which holders of
some or even a majority of the outstanding stock believe to be in their best
interests, and may make removal of management more difficult even if such re-
moval would be beneficial to stockholders generally. Not all takeovers or
changes in control of the Board that are proposed and effected without prior
consultation and negotiation with the incumbent Board are necessarily detri-
mental to the Company and its stockholders. However, the Board believes that
the benefits of seeking to protect its ability to negotiate with the proponent
of an unfriendly or unsolicited proposal to acquire or restructure the Company
outweigh the disadvantages of discouraging such proposals.
The provisions for electing only one out of three classes of the Board annu-
ally, rather than the entire Board, will be applicable to every annual elec-
tion of directors, and not just to any election occurring after a change in
stockholder control of the Company. A classified Board could delay stockhold-
ers who do not like the policies of the Board of Directors from removing a ma-
jority of the Board for up to two years. This would be so even if the only
reason for the attempted action by a shareholder was dissatisfaction with the
performance of the current Board.
RELATIONSHIP OF CHARTER AMENDMENTS TO OTHER PROVISIONS
The Company's Certificate of Incorporation presently contains two provisions
and the By-Laws one which may have the effect of making a change of control
more difficult. Delaware law also contains an important limitation on changes
in control.
Class A Common Stock. The Company has outstanding 2,040,000 shares of Class
A Common Stock, which are beneficially owned by Dr. David M. Lederman, founder
of the Company, and Dr. Param I. Singh. Each share of Class A Common Stock has
ten votes per share upon all matters except the election of those directors
(not less than 25% of the entire board) who are elected by holders of Common
Stock, voting as a separate class. As a result of the Class A Common Stock's
greater voting power, Dr. Lederman has 57.1% and Dr. Singh 24.6% of the total
voting power of shares of all classes of capital stock at June 16, 1995, and
thus control the Company. However, as previously discussed, in general, a
transfer of any Class A Common Stock by Dr. Lederman will cause all of the
outstanding Class A Common Stock automatically to be converted into Common
Stock, and a transfer by Dr. Singh will cause the shares transferred to con-
vert into Common Stock but will not effect conversion of the remaining shares
of Class A Common Stock outstanding.
15
<PAGE>
Preferred Stock. The Company is authorized to issue up to 1,000,000 shares
of Class B Preferred Stock, in one or more series, none of which have yet been
issued. The Board of Directors is authorized, without any further action by
the stockholders, to determine the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption, liquidation prefer-
ences, sinking fund terms and other rights, preferences, privileges and re-
strictions of any series of Class B Preferred Stock, the number of shares con-
stituting any such series and the designation thereof. The Board of Directors
may, without stockholder approval, issue Class B Preferred Stock with rights
and privileges which could, among other things, have the effect of delaying,
deferring or preventing a change in control of the Company. The Company has no
present plans to issue any shares of Class B Preferred Stock.
Notice of Nomination. At a meeting of the Board of Directors on June 15,
1995, the Board of Directors voted to amend Section 2.3 of the Company's By-
Laws to increase the number of days advance written notice of any stockholder
nomination for director from not less than 14 nor more than 50 days to not
less than 45 nor more than 60 days prior to the anticipated date of the annual
meeting for election of directors. The purpose of this amendment is to provide
adequate advance notice to the Company concerning any proposed nominees.
Delaware Statute. Pursuant to Delaware law, Delaware corporations are pro-
hibited from engaging in a wide range of specified transactions with any "in-
terested stockholder", defined to include, among others, any person or entity
who in the last three years obtained 15% or more of any class or series of
stock entitled to vote generally in the election of directors, unless, among
other exceptions, the transaction is approved by (i) the Board of Directors
prior to the date the interested stockholder obtained such status or (ii) the
holders of two-thirds of the outstanding shares of each class or series of
stock entitled to vote generally in the election of directors, not including
those shares owned by the interested stockholder. By virtue of the Company's
decision not to opt out of the provisions of this law, it applies to the Com-
pany.
All of the various provisions described above, as well as Proposals No. 2-4,
could be used by the Board of Directors in a manner calculated to prevent the
removal of management and make more difficult or discourage a change in con-
trol of the Company. Certain aspects of the foregoing provisions were designed
to afford the Board of Directors the opportunity to evaluate the terms of a
takeover attempt without haste or undue pressure, advise stockholders of its
findings, and to negotiate to protect the interests of all stockholders.
The Company is not aware of any efforts to accumulate the Company's securi-
ties or to obtain control of the Company, and the Company has no present in-
tention or agreement to issue any additional shares of Common Stock, other
than pursuant to outstanding options and existing employee benefit and direc-
tor option plans.
16
<PAGE>
PROPOSAL NO. 2
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS
AND RELATED MATTERS
The Board of Directors unanimously recommends that stockholders approve the
amendment of Section 4.2.2 of Article 4 and the addition of a new Article 13
to the Certificate of Incorporation to (i) provide for the classification of
the Company's Board of Directors into three classes, each comprising as nearly
as possible one-third of the directors, (ii) restrict the ability of stock-
holders to enlarge the Board of Directors, (iii) provide that vacancies in the
office of a director shall be in the first instance filled by the remaining
directors, except in the case of the directors elected by the Common Stock
voting as a separate class, (iv) provide that directors may only be removed
"for cause" and only by the class or classes of stock which elected them, and
(v) require an 80% affirmative vote of all votes entitled to be cast by hold-
ers of Common Stock and Class A Common Stock, voting as a single class, to
amend, alter or repeal Section 4.2.2 or Article 13. (See Exhibit A for the en-
tire text of the proposed amendment.)
CLASSIFIED BOARD.
At present, all the Company's directors are elected at each annual meeting
of stockholders for a one year term. If Proposal No. 2 is approved at the 1995
Annual Meeting, the Class I directors would be elected for one year, the Class
II directors for two years and the Class III directors for three years. At
each annual meeting thereafter, the class of directors up for election would
be elected for three years and the directors in the other two classes would
continue in office. The votes required for election would remain unchanged.
Under the Company's Certificate of Incorporation, the holders of the Company's
Common Stock, voting separately as a class, are entitled to elect not less
than 25% of the directors (presently two) to the Board of Directors and the
balance of the directors are elected by the Common Stock and Class A Common
Stock voting as a single class, with holders of Common Stock having one vote
per share and holders of Class A Common Stock having ten votes per share. The
directors elected by holders of Common Stock voting as a separate class will
be divided among the three classes of directors as evenly as is possible. If
the number of directors is changed, any newly-created directorships or de-
creases in directorships are to be assigned by the Board so as to make all
classes as nearly equal in number as possible.
ENLARGEMENT OF BOARD OF DIRECTORS, FILLING OF VACANCIES AND REMOVAL OF
DIRECTORS.
At the present time, while the Board of Directors has the right to fix the
number of directors, under Section 2.6 of the Company's By-Laws, either the
Board of Directors or the stockholders may enlarge the Board. Under paragraph
(a) of the proposed Article 13, the Board of Directors would have the exclu-
sive power to fix the number of directors and to enlarge the Board.
At the present time, Section 4.2.2(d) of Article 4 of the Certificate of In-
corporation provides that vacancies in the office of a director elected by the
holders of Common Stock voting as a separate class
17
<PAGE>
may be filled by the vote of such holders voting as a separate class, and that
a vacancy in the office of a director elected by the holders of both classes
of common stock voting as a single class may be filled by vote of the holders
of both classes voting as a single class (with one vote per share of Common
Stock and ten votes per share of Class A Common Stock). In the absence of a
stockholder vote, vacancies may be filled by the remaining directors elected
by the same class or classes or, in the absence of any directors so elected,
by all remaining directors. Under the proposed amendments, Section 4.2.2(d)
would provide that the power to fill vacancies in the Board of Directors would
in the first instance be vested in the Board of Directors rather than stock-
holders, except that a vacancy in the office of director elected by the hold-
ers of Common Stock, voting as a separate class, would be filled by the hold-
ers of that class voting as a separate class.
Section 4.2.2(c) presently provides that directors elected by the holders of
the Common Stock voting as a separate class may be removed, with or without
cause, by the holders of that class, that directors elected by both classes
voting as a single class may be removed by the holders of both classes voting
as a single class, with or without cause, and that, to the extent permitted by
law, directors of any class can be removed by the Board of Directors for
cause. Under the proposed amendment to Section 4.2.2(c), directors would be
removable only for cause and only by the stockholders of the class or classes
of stock which were entitled to elect them. The requirement for cause gives
effect to the provisions of Delaware law that members of a classified board of
directors be removable only for cause unless the certificate of incorporation
expressly provides otherwise. The term "for cause" is not defined in the pro-
posed amendment or by Delaware law, and no definitive meaning has been articu-
lated by the courts.
INCREASED STOCKHOLDER VOTE FOR AMENDMENT.
Under Delaware law and the Company's Certificate of Incorporation, amend-
ments to the Certificate require the affirmative vote of a majority of the
votes entitled to be cast by holders of Class A Common Stock and Common Stock
outstanding and entitled to vote, voting as a single class (with holders of
Common Stock having one vote per share and holders of Class A Common Stock
having ten votes per share), and if the amendment would increase or decrease
the aggregate number of authorized shares or adversely affect the powers,
preferences or special rights of a class, than a majority of the outstanding
shares of that class voting as a separate class. However, Delaware law also
permits provisions of a certificate of incorporation to require a greater vote
than that otherwise required by law for any corporate action.
As permitted by Delaware law, Proposal No. 2 requires the affirmative vote
of at least eighty percent (80%) of the votes entitled to be cast by the Com-
mon Stock and the Class A Common Stock (with holders of Common Stock having
one vote per share and holders of Class A Common Stock having ten votes per
share) for any further amendment, alteration or repeal of Section 4.2.2 or Ar-
ticle 13 of the Certificate of Incorporation, in addition to any separate
class vote which might be required by Delaware law.
The 80% vote requirement will give the holders of a minority of the voting
power a veto power over changes to Section 4.2.2 and Article 13, even if the
holders of a majority of the voting power favored
18
<PAGE>
such changes. However, this requirement would hinder attempts by a stockholder
with a majority of the voting power to repeal those provisions to undermine
the operation of the classified board.
The proposed amendments are intended to moderate the pace of any change in
the Board of Directors by extending the time required to replace a majority of
the incumbent directors. The Board of Directors believes that a classified
Board would tend to assure desirable continuity in leadership and policy
since, when the classified Board becomes fully operative, approximately two-
thirds of the directors at any time will have had prior experience on the
Board. The Board of Directors does not believe that the Company has had any
problems in the past with respect to continuity in leadership and policy. The
amendments may also impede assumption of the management of the Company by any
other person or entity which, through a takeover bid or otherwise, might ob-
tain a substantial number of shares of Common Stock. For a discussion of pos-
sible adverse effects, see "Introduction to Charter Amendments."
The Board of Directors has, subject to stockholder approval of Proposal No.
2, amended the Company's By-Laws to conform to the provisions of Proposal No.
2.
The affirmative vote of a majority of the votes entitled to be cast by hold-
ers of the Class A Common Stock and the Common Stock outstanding and entitled
to vote, voting as a single class (with holders of Common Stock having one
vote per share and holders of Class A Common Stock ten votes per share), is
required for the adoption of Proposal No. 2.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
APPROVAL OF PROPOSAL NO. 2.
PROPOSAL NO. 3
AMENDMENT TO CERTIFICATE OF INCORPORATION
REGARDING THE CONSIDERATION OF ALL RELEVANT FACTORS IN
CONNECTION WITH CERTAIN BUSINESS COMBINATIONS
The Board of Directors unanimously recommends that a new Article 14 be added
to the Company's Articles of Incorporation in the form of Exhibit B hereto.
This provision would explicitly direct the Board of Directors to take into ac-
count all relevant of factors in exercising its business judgment in determin-
ing what is in the best interests of the Company and its stockholders in eval-
uating certain tender offers and business combination proposals. Neither the
relative weight to be given each factor nor the method of determining how each
factor is to be ascertained is specified in the amendment. These are to be de-
termined by the Board of Directors at the time of the exercise of its business
judgment.
This proposal, if approved, may give comfort to the Company's customers and
other constituencies that the Board of Directors may consider their interests
in deciding whether to recommend a tender or exchange offer or to authorize a
merger. The Board of Directors believes that this would have a positive impact
on the communities in which the Company and its subsidiaries operate. This
proposal also reflects the Board of Directors' concern that the value of the
Company may not be adequately reflected in the
19
<PAGE>
market price of its stock. Therefore, this proposal would explicitly permit
the Board of Directors to compare the consideration to be offered in a pro-
posed acquisition of the Company with other measures of the Company's worth.
While the value of the consideration offered to the stockholders is a very
important factor when weighing the benefits of a tender offer or other busi-
ness combination proposal, the Board of Directors believes it also appropriate
to consider other relevant factors. For example, the proposed amendment di-
rects the Board of Directors to evaluate the consideration being offered in
relation to the then-current value of the Company in a freely negotiated
transaction and in relation to the Board of Directors' estimate of the future
value of the Company as an independent concern. A takeover bid often places
the target corporation virtually in the position of making a forced sale,
sometimes when the market price of its stock may be temporarily depressed. The
Board of Directors believes that the consideration offered in such a situa-
tion, even though it may be in excess of the then market price, is frequently
less than that which could be obtained in a freely negotiated transaction. On
the other hand, in a freely negotiated transaction, management would have the
opportunity to seek a suitable partner at a time of its choosing and to nego-
tiate for the most favorable price and terms which reflect not only the cur-
rent but also the future value of the Company.
In recent years, a number of companies have adopted charter provisions simi-
lar to Proposal No. 3, and many states other than Delaware have enacted amend-
ments to their corporation laws to accomplish a similar purpose. Under present
Delaware law, absent any charter provision like Proposal No. 3, the Board of
Directors may be limited in its ability to consider any interests other than
those of stockholders. No Delaware case has yet evaluated the impact of a pro-
vision in the certificate of incorporation similar to Proposal No. 3 upon the
decision-making processes of directors.
Adoption of Proposal No. 3 will strengthen the hand of the Board of Direc-
tors in dealing with anyone attempting to take over the Company, but may also
discourage potential purchases which may be advantageous to the Company. See
"Introduction to Charter Amendments".
The affirmative vote of a majority of the votes entitled to be cast by hold-
ers of the Class A Common Stock and Common Stock outstanding and entitled to
vote, voting as a single class (with holders of Common Stock having one vote
per share and holders of Class A Common Stock ten votes per share), is re-
quired for the adoption of Proposal No. 3.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
APPROVAL OF PROPOSAL NO. 3.
PROPOSAL NO. 4
AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors unanimously recommends that the stockholders approve
a proposal to amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Common
20
<PAGE>
Stock, $.01 par value, from 10,000,000 to 25,000,000. The additional shares of
Common Stock would be part of the existing class of Common Stock and, if and
when issued, would have the same rights and privileges as the shares of Common
Stock presently outstanding.
As of June 16, 1995, there were outstanding 4,885,821 shares of Common
Stock. In addition, an aggregate of 2,633,999 shares of Common Stock were re-
served for issuance, 2,040,000 shares upon conversion of shares of Class A
Common Stock, and 593,999 shares upon exercise of options outstanding or op-
tions available to be granted in the future under the Company's various stock
option plans or under outstanding warrants.
Pursuant to Delaware corporate law, the Board of Directors is authorized to
issue from time to time any and all authorized and unissued shares of Common
Stock for any proper corporate purposes without prior stockholder approval,
except as may be required for a particular transaction by the Company's Cer-
tificate of Incorporation, or by the rules of any stock exchange on which the
Company's securities may then be listed.
The Board of Directors believes that the proposed increase in the number of
authorized shares of Common Stock is in the best interests of the Company and
its stockholders. While the Board of Directors has no specific plan for the
issuance of additional shares of Common Stock, it believes that it is wise to
increase the authorized number of shares at this time to give it the means and
flexibility to take advantage of opportunities by allowing shares of Common
Stock to be issued by the Board of Directors without the delay and expense of
a special meeting of stockholders. For example, the Board of Directors may
deem it appropriate to make a private or public offering of the Company's Com-
mon Stock in order to raise funds for working capital or other purposes, or
the Common Stock may be issued to finance possible future acquisitions, or for
distribution to the Company's stockholders as a stock dividend or stock split,
for distribution pursuant to employee benefit plans or to reserve such shares
for issuance in conjunction with any future adoption of a stockholder rights
plan.
Stockholders of the Company do not now have preemptive rights to subscribe
for or purchase additional shares of Common Stock, and the stockholders will
have no preemptive rights to subscribe for or purchase any of the additional
shares authorized by the proposed amendment.
The affirmative vote by of a majority of the votes entitled to be cast by
holders of the Class A Common Stock and Common Stock outstanding and entitled
to vote, voting as a single class (with holders of Common Stock having one
vote per share and holders of Class A Common Stock ten votes per share), and a
majority of the votes of the Common Stock, voting as a separate class, is re-
quired for the adoption of Proposal No. 4.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR AP-
PROVAL OF PROPOSAL NO. 4.
21
<PAGE>
PROPOSAL NO. 5
AMENDMENT OF THE 1992 COMBINATION STOCK OPTION PLAN
The purpose of the 1992 Combination Stock Option Plan (the "1992 Plan") is
to enable the Company to attract and retain the services of employees in a po-
sition to contribute to the long-term success and growth of the Company and
its subsidiaries by providing them with long-term incentives. On June 15,
1995, the Board of Directors amended the 1992 Plan, subject to stockholder ap-
proval, to increase the number of shares of Common Stock authorized to be is-
sued thereunder from 1,050,000 shares to 1,300,000 shares.
The following is a summary of certain material features of the 1992 Plan.
Stock Available for Options. Under the 1992 Plan, an additional 250,000
shares of Common Stock, for a total of 1,300,000 shares (including shares of
Common Stock that were the subject of awards under the Company's predecessor
ISO Plan and the Non-Qualified Plans which were superseded by the 1992 Plan)
will be available for issuance. As of June 16, 1995, a total of 732,944 shares
were available for issuance under the 1992 Plan, of which options to purchase
387,714 shares (net of cancellations) had been granted and were outstanding on
that date.
Administration. The 1992 Plan is administered by the Compensation Committee,
none of the members of which is eligible to participate in the 1992 Plan while
they are members and for a period of one year thereafter. Subject to the 1992
Plan, the Compensation Committee determines persons to whom options are grant-
ed, the exercise price (for non-qualified stock options), the number of shares
covered by any option, the term of any option and the time during which any
option is exercisable. The Compensation Committee also has the authority to
adopt rules and make other determinations with respect to administration of
the 1992 Plan.
Eligibility. Under the 1992 Plan, incentive stock options may only be
granted to persons who are employees of the Company at the time of grant,
which may include officers and directors (other than members of the Compensa-
tion Committee) who are also employees. Non-qualified stock options may be
granted to persons who are officers, directors or employees of, or consultants
or advisors to, the Company at the time of grant, provided that directors who
are not employees of the Company or who are members of the Compensation Com-
mittee are not eligible to participate in the 1992 Plan.
Exercise Price. Under the 1992 Plan, the purchase price of Common Stock sub-
ject to an incentive stock option may not be less than its fair market value
on the date of grant or, in the case of persons owning stock possessing ten
percent or more of the voting power of all outstanding capital stock of the
Company on the date of grant, not less than 110% of the fair market value of
the Common Stock on the date of grant. To the extent that the aggregate fair
market value of Common Stock (measured at the time of grant) with respect to
which incentive stock options are first exercisable by an employee during any
calendar year under the 1992 Plan and any other plan of the Company providing
for incentive stock options exceeds $100,000, such incentive stock options
shall be treated as options which are not incentive stock options.
22
<PAGE>
Under the 1992 Plan, the Compensation Committee has the authority to grant
non-qualified stock options at any price not less than the par value ($.01 per
share) of the Common Stock. To date all options granted by the Company have
had an exercise price equal to their fair market value on the date of grant.
The Company has no present plans to issue options to any person with an exer-
cise price of less than the fair market value on the date of grant.
Maximum Option Term. Options granted under the 1992 Plan may not be exer-
cised more than ten years from the date of grant, and in the case of incentive
stock options issued to persons owning stock possessing ten percent or more of
the voting power of all outstanding capital stock of the Company on the date
of grant, more than five years from the date of grant.
Exercise of Options. The exercise price of options granted under the 1992
Plan may be paid in cash with Common Stock (valued at fair market value on the
date of purchase), any other property (valued at fair market value on the date
of purchase), or by a combination of cash, stock and other property as the
Compensation Committee may permit.
Exercise Restrictions. No incentive stock option under the 1992 Plan may be
exercised beyond three months after the option holder ceases to be an employee
of the Company, except that the Compensation Committee is authorized to permit
exercise for up to one year after termination of employment by reason of death
or permanent and total disability. No such restrictions apply for non-quali-
fied stock options. Options granted under the 1992 Plan may not be assigned or
transferred except by will or the laws of descent and distribution.
Amendment or Termination of 1992 Plan. The 1992 Plan may be amended, sus-
pended or terminated at any time by the Board of Directors, provided that any
amendment to expand the definition of eligible participants, materially in-
crease the benefits accruing to participants, increase the number of shares of
Common Stock reserved for issuance, extend the term, or otherwise modify the
1992 Plan in any way or manner requiring the approval of the stockholders un-
der the Internal Revenue Code or Section 16 of the Securities Exchange Act of
1934, if applicable to the Company, will be subject to the approval of the
Company's stockholders.
Duration of 1992 Plan. Options under the 1992 Plan may not be granted after
May 1, 2002.
Federal Tax Consequences. The following discussion of the Federal income tax
consequences of the issuance and exercise of options granted under the 1992
Plan is based upon the provisions of the Internal Revenue Code as in effect on
the date of this proxy statement, current regulations thereunder, and existing
administrative rulings of the Internal Revenue Service. It is not intended to
be a complete discussion of all of the Federal income tax consequences of the
1992 Plan or of the requirements that must be met in order to qualify for the
described tax treatment. The 1992 Plan is not qualified under Section 401 of
the Internal Revenue Code and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
23
<PAGE>
Incentive Stock Options.
General Rules. Incentive stock options granted under the 1992 Plan are in-
tended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code. An option holder generally will not recognize taxable income
upon either the grant or the exercise of an incentive stock option (However,
under certain circumstances, there may be alternative minimum tax consequences
on exercise, as discussed below.) An option holder will recognize taxable in-
come upon the disposition of the shares received upon exercise of the option.
In general, any gain recognized upon a disposition will be taxable as long-
term capital gain. A different treatment applies to a "disqualifying disposi-
tion", as discussed below.
Alternative Minimum Tax. In general, for alternative minimum tax (or "AMT")
purposes, an employee must include in alternative minimum taxable income, in
the year of exercise of an incentive stock option, an amount equal to the ex-
cess of the fair market value of the shares issued upon exercise over the ex-
ercise price. The AMT only applies if it produces a greater tax liability than
the conventional tax system.
Disqualifying Dispositions. A "disqualifying disposition" means any disposi-
tion of shares acquired on the exercise of an incentive stock option within
two years of the date the option was granted or within one year of the date
the shares were transferred to the option holder. In general, if an option
holder makes a disqualifying disposition, a portion of the gain will be recog-
nized as ordinary income. Special rules apply to a disqualifying disposition
by gift.
Use of Already Owned Shares. An option holder may pay the exercise price, in
whole or in part, by delivering shares of Common Stock already owned by the
holder. In general he or she will recognize no gain or loss for Federal income
tax purposes on the shares surrendered, but otherwise will be taxed according
to the rules described above. However, if the shares surrendered were acquired
pursuant to an incentive stock option and the required holding periods have
not been satisfied, then the rules regarding disqualifying dispositions, de-
scribed above, will apply to the surrendered shares.
Deduction to Company. The Company will not be entitled to any deduction with
respect to the grant or exercise of incentive stock options so long as the op-
tion holder does not make a disqualifying disposition. If the option holder
does make a disqualifying disposition, the Company will generally be entitled
to a deduction for federal income tax purposes in an amount equal to the tax-
able income recognized by the option holder.
The tax treatment of shares which may be forfeited if the recipient ceases
being employed by the Company vary somewhat from the tax treatment described
above. Although the Company is permitted to issue options to purchase such
shares, it has been the policy of the Company not to issue shares with a sub-
stantial risk of forfeiture. Accordingly, a description of the tax treatment
of such shares is not included in this proxy statement.
24
<PAGE>
Non-Qualified Stock Options.
In General. Non-qualified stock options granted under the 1992 Plan will not
qualify as incentive stock options under Section 422 of the Internal Revenue
Code. The recipient of a non-qualified stock option under the 1992 Plan will
not recognize any taxable income at the time the option is granted. However,
upon exercise, the option holder will generally recognize ordinary taxable in-
come in an amount equal to the excess of the fair market value of the shares
received on the date of exercise over the option exercise price. Upon a subse-
quent sale of those shares, long-term or short-term gain or loss (depending
upon the holding period) will generally be recognized equal to the difference
between the amount realized and the fair market value of the shares on the
date of exercise.
Use of Already Owned Shares. An option holder who pays the exercise price,
in whole or in part, by delivering shares of Common Stock already owned by the
holder will recognize no gain or loss for Federal income tax purposes on the
shares surrendered, but otherwise will be taxed according to the rules de-
scribed above.
Deduction to Company. When the option holder recognizes income, the Company
is generally required to withhold income taxes with respect to that income. If
the Company satisfies its withholding obligations, the Company will generally
be entitled to a compensation deduction for Federal income tax purposes in an
amount equal to the taxable income recognized by the option holder.
The affirmative vote of a majority of the votes of holders of the Class A
Common Stock and the Common Stock (voting together as a single class, with the
holders of Class A Common Stock having ten votes per share and the holders of
Common Stock one vote per share) present in person or by proxy at the Meeting
is required for adoption of Proposal No. 5.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
PROPOSAL NO. 5.
PROPOSAL NO. 6
AMENDMENT TO THE 1989 NON-QUALIFIED
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The purpose of the Company's 1989 Non-Qualified Stock Option Plan for Non-
Employee Directors (the "Director Plan") is to attract and retain the services
of experienced and knowledgeable non-employee directors for the benefit of the
Company and its stockholders and to provide additional incentives for such in-
dependent directors to continue to work for the best interests of the Company
and its stockholders through continuing ownership of is Common Stock.
On June 15, 1995 the Board of Directors amended the Directors Plan, subject
to stockholder approval, to increase the number of shares authorized to be is-
sued under the plan from 150,000 shares to 200,000 shares.
25
<PAGE>
The following is a summary of the material features of the Directors Plan,
as proposed to be amended.
Stock Available for Options. It is proposed to increase the number of shares
of Common Stock which may be issued upon exercise of options under the Direc-
tors Plan from 150,000 to 200,000. Shares subject to an option that ceases to
be exercisable for any reason are available for subsequent option grants.
Through June 15, 1995, options to purchase an aggregate of 95,000 shares had
been granted under the Directors Plan.
Administration. The Directors Plan is administered by the Board of Direc-
tors. The Board of Directors is required to grant options under the Directors
Plan as described below. Its authority under the Directors Plan is otherwise
limited to adopting rules and regulations for the administration of the Direc-
tors Plan. The Board of Directors is not liable for any act, omission, inter-
pretation, construction or determination made in good faith in connection with
its responsibilities under the Directors Plan.
Eligibility. Only directors of the Company who are not also employees of the
Company and who do not own or are not affiliated with any person who owns, di-
rectly or indirectly, more than 5% of the vote of the Company's outstanding
voting stock are eligible to receive options under the Directors Plan (the
"Eligible Directors"). Currently the Eligible Directors are Dr. Austen, Mr.
Davis (who is not standing for reelection), Mr. Fireman, Mr. O'Brien and Mr.
Termeer. Mr. O'Connell will become an Eligible Director if he is elected at
the Meeting.
Grant and Vesting. The Directors Plan provides that each newly elected Eli-
gible Director will receive an option to purchase 12,500 shares upon being
elected as a director. Thereafter, each Eligible Director will be granted a
new option to purchase 12,500 shares on July 1 of each successive fifth year.
The options so granted vest over an approximately five year period at the rate
of 2,500 shares per year, commencing on June 30 of the year following the date
of grant. No options were granted under the Directors Plan in the fiscal year
ended March 31, 1995. If Mr. O'Connell is elected as a director at the Meet-
ing, he will become an Eligible Director and will receive an option to pur-
chase 12,500 shares under the Directors Plan.
Exercise Price. The purchase price of Common Stock subject to an option
granted under the Directors Plan is the fair market value of the Common Stock
on the date the option is granted, but in no event less than the par value of
the shares.
Exercise of Options. The exercise price must be paid in full upon exercise
of an option, and may be paid in cash, with Common Stock (valued at fair mar-
ket value on the date of exercise) or any combination of cash and Common
Stock.
Rights in the Event of Termination, Death or Disability. If an Eligible Di-
rector ceases to be a director, all options held by that person that are not
then exercisable terminate. Under the Directors Plan, options that are exer-
cisable at the time the Eligible Director ceases to be a director will remain
exercisable until the earlier to occur of one year following such termination
or ten years after the date the option is granted.
26
<PAGE>
Transfer Restrictions. An option is exercisable only by the option holder
during the holder's lifetime, and no option or right or interest in an option
is assignable or transferable by the holder except by will or the laws of de-
scent and distribution.
Amendment or Termination of Directors Plan. The Board of Directors may, at
any time, amend, suspend or terminate the Directors Plan. Any such amendment
which materially increases the number of shares which may be subject to op-
tions granted under the Directors Plan, the benefits accruing to participants
in the Directors Plan, or the requirements for eligibility to participate in
the Directors Plan, is subject to stockholder approval. Furthermore, the Board
of Directors may not amend the Directors Plan more often than once every six
months to change the amount and price of securities to be awarded and the tim-
ing of such awards, other than to comport with changes in the Internal Revenue
Code and the Employee Retirement Income Security Act of 1974. (Under current
law, the Directors Plan is not qualified under Section 401 of the Internal
Revenue Code and is not subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended.) No amendment, suspension or termina-
tion of the Directors Plan may adversely affect the rights of an option holder
without the holder's consent.
Duration of the Directors Plan. The Directors Plan may be discontinued at
any time by the Board of Directors. If not earlier discontinued, it will ter-
minate on July 10, 1999. No option may be granted under the Directors Plan af-
ter the date of termination. Termination will not affect the validity of op-
tions granted prior to the date of termination.
Federal Tax Consequences of the Directors Plan. In general, the tax treat-
ment of options offered under the Directors Plan is the same as the treatment
of non-qualified options offered under the 1992 Plan. Thus, a recipient of an
option under the Directors Plan will not recognize any taxable income at the
time the option is granted.
Tax Treatment of Exercise and Effect of Section 16(b). The tax treatment of
the exercise of an option under the Directors Plan is somewhat different than
the treatment described under the 1992 Plan. This is because Eligible Direc-
tors under the Directors Plan generally will be subject to Section 16(b) of
the Securities Exchange Act of 1934 ("Section 16(b)") upon their sale of
shares of Common Stock. The Internal Revenue Code provides that in the case of
exercise of an option by someone whose sale of Common Stock would subject the
holder to liability under Section 16(b), recognition of income by the option
holder will be postponed. The Internal Revenue Service regulations have not
yet been amended to conform with the revised rules under Section 16(b). Howev-
er, it is generally anticipated that the recognition date will be the earlier
of (i) the date six months after the date the option was granted or (ii) the
first day on which the sale of the shares would not subject the option holder
to liability under Section 16(b). (It is possible that the six month period
will instead run from the option holder's most recent purchase of Common Stock
prior to his or her exercise of the option.) At that time, the option holder
will generally recognize ordinary taxable income in an amount equal to the ex-
cess of the then fair market value of the shares of Common Stock over the Ex-
ercise Price. However, if that date is after the date of exercise, the option
holder may make an election pursuant to Section 83(b) of the Internal Revenue
Code within 30 days after exercise, in which case the option holder will rec-
ognize ordinary taxable income at the time the option is exercised and not on
the later date.
27
<PAGE>
Use of Already Owned Shares. The tax treatment of purchase of shares with
already owned shares is the same as described above for non-qualified stock
options under the 1992 Plan.
Deduction to Company. The Company generally will be entitled to a compensa-
tion deduction for Federal income tax purposes at the same time as, and in the
same amount that, the option holder recognizes ordinary taxable income, pro-
vided that the Company satisfies its withholding obligations.
Tax Treatment of Sales of Shares. The tax treatment of the sale of shares
acquired pursuant to the Directors Plan is generally the same as the treatment
of non-qualified shares under the 1992 Plan, discussed above. However, the
holding period for these shares will begin when the Section 16(b) restriction
lapses, or when the holder acquires the shares if an election pursuant to Sec-
tion 83(b) is made.
The affirmative vote of a majority of the votes of holders of Class A Common
Stock and Common Stock (voting together as a single class, with the holders of
Class A Common Stock having ten votes per share and the holders of Common
Stock having one vote per share) present in person or by proxy at the Meeting
is required for adoption of Proposal No. 6.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
PROPOSAL NO. 6.
OTHER MATTERS
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP as the independent
certified public accountants to audit the consolidated financial statements of
the Company for the fiscal year ending March 31, 1996. That firm has served as
the Company's auditors since 1983.
A representative of Arthur Andersen LLP will be at the Meeting and will be
given an opportunity to make a statement, if so desired. The representative
will be available to respond to appropriate questions.
REPORTING UNDER SECTION 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership and changes of ownership
on Forms 3, 4 and 5 with the Securities and Exchange Commission and NASDAQ,
and furnish the Company with copies of such Forms.
Based solely on the Company's review of the copies of such Forms it has re-
ceived and written representations from certain reporting persons that they
were not required to file Forms 5 with respect to the Company's most recent
fiscal year, the Company believes that all of its current executive officers,
directors and greater than 10% stockholders complied with all Section 16(a)
filing requirements applicable to them during the Company's fiscal year ended
March 31, 1995.
28
<PAGE>
OTHER PROPOSED ACTION
The Board of Directors knows of no other business to come before the Meet-
ing. However, if any other business should properly be presented to the Meet-
ing, the proxies will be voted in accordance with the judgment of the person
or persons holding the proxies.
STOCKHOLDER PROPOSALS
Proposals which stockholders intend to present at the Company's 1996 Annual
Meeting of Stockholders and wish to have included in the Company's proxy mate-
rials must be received by the Company no later than March 2, 1996.
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement has been or will be specifically in-
corporated by reference into any filing by the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
the sections of the Proxy Statement entitled "Compensation Committee Report on
Executive Compensation" and "Performance Graph" shall not be deemed to be so
incorporated, unless specifically otherwise provided in any such filing.
ANNUAL REPORT AND FORM 10-K
Additional copies of the Annual Report to Stockholders for the fiscal year
ended March 31, 1995 and copies of the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1995 as filed with the Securities and Ex-
change Commission are available to stockholders without charge upon written
request addressed to: Investor Relations, ABIOMED, Inc., 5 Cherry Hill Drive,
Suite 310, Danvers, Massachusetts 01923.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
STOCKHOLDERS ARE URGED TO FILL IN, SIGN AND RETURN THE ACCOMPANY-
ING FORM OF PROXY IN THE ENCLOSED ENVELOPE.
29
<PAGE>
EXHIBIT A
1. Paragraphs (c) and (d) and (g) of Section 4.2.2 of Article 4 would be
amended so that Section 4.2.2 as amended would read in its entirety as fol-
lows:
4.2.2 Voting Rights and Powers.
(a) Except as specified hereafter, and except as otherwise required by law
with respect to all matters upon which stockholders are entitled to
vote or give consent, the holders of the outstanding shares of the Com-
mon Stock and the holders of the outstanding shares of the Class A Com-
mon Stock shall vote together as a single class, and every holder of
the outstanding shares of the Common Stock shall be entitled to cast
thereon one (1) vote in person or by proxy for each share of the Common
Stock standing in his or her name, and every holder of outstanding
shares of the Class A Common Stock shall be entitled to cast thereon
ten (10) votes in person or by proxy for each share of Class A Common
Stock standing in his or her name.
(b) Subject to paragraph (f) below, the holders of the Common Stock, voting
as a separate class, shall be entitled to elect that number of direc-
tors which constitutes 25% of the total number of the directors, and if
such 25% is not a whole number, then the holders of Common Stock will
be entitled to elect the nearest higher whole number of directors which
constitutes 25% of such membership. The remaining directors will be
elected in accordance with paragraph (a).
(c) Any director elected by the holders of Common Stock voting as a sepa-
rate class under paragraph (b) above may only be removed for cause by
the holders of the Common Stock voting as a separate class. The remain-
ing directors may be removed only for cause by the stockholders voting
in accordance with paragraph (a).
(d) So long as there is any Class A Common Stock outstanding, any vacancy
in the office of a director electable by the holders of Common Stock
voting as a separate class may be filled by a vote of such holders vot-
ing as a separate class, and in the absence of such a stockholder vote,
such vacancy may be filled by the remaining directors elected by the
Common Stock voting as a separate class, and in the absence of any di-
rectors so elected, by all the remaining directors. So long as there is
any Class A Common Stock outstanding, any vacancy in the office of a
director electable by the holders of both classes of common stock vot-
ing as a single class shall be filled by the remaining directors
elected by both classes, and in the absence of any directors so elect-
ed, by the holders of both classes of common stock voting as a single
class. At such time as there is no longer any Class A Common Stock out-
standing, any vacancy in the office of director shall be filled by the
remaining directors, and in the absence of any directors, by the stock-
holders. Unless the conditions set forth in paragraph (f) exist in re-
spect of the next annual meeting of stockholders, the Board of Direc-
tors may be enlarged by the Board of Directors only to the extent that
twenty-five percent (25%) of the enlarged Board of Directors consists
of directors either (i) elected by the holders of the Common Stock or
(ii) appointed by directors elected by the holders of Common Stock vot-
ing as a separate class.
30
<PAGE>
(e) The holders of Common Stock shall be entitled to vote as a separate
class on such other matters as may be required by law to be voted upon
by them as a separate class.
(f) The holders of the Common Stock shall not be entitled to separately
vote as set forth in paragraphs (b)-(d) above if on the date for taking
a record for any stockholder meeting at which directors are to be
elected, the number of issued and outstanding shares of Common Stock
(exclusive of any shares held in the corporation's treasury) is less
than ten percent (10%) of the aggregate number of issued and outstand-
ing shares of both Common Stock and Class A Common Stock (exclusive of
shares held in the corporation's treasury). In such case, all directors
to be elected shall be elected by holders of Common Stock and Class A
Common Stock voting together as a single class in accordance with para-
graph (a) above.
(g) This Certificate of Incorporation may be amended to change the powers,
preferences, relative voting power or special rights of the shares of
the Common Stock or the Class A Common Stock so as to affect either
class adversely relative to the other, but any proposal to do so shall
require the approval of a majority of the votes entitled to be cast by
the holders of the class adversely affected by the proposed amendment,
voting separately as a class, in addition to the approval of a majority
of the votes entitled to be cast by the holders of the Common Stock and
the Class A Common Stock voting together as a single class as hereinbe-
fore provided. In addition, this Section 4.2.2 shall not be amended,
altered or repealed except by the affirmative vote of eighty percent
(80%) of the votes entitled to be cast by the stockholders voting in
accordance with paragraph (a).
2. Article 13 would be added to read in its entirety as follows:
13. CLASSIFIED BOARD OF DIRECTORS
(a) The number of directors of the corporation shall be the number, not
less than 3 nor more than 12, fixed from time to time by the Board of
Directors. The Board of Directors may be enlarged only by vote of a ma-
jority of the directors then in office.
(b) Commencing at the annual meeting of the stockholders in 1995, the di-
rectors shall be divided into three classes, designated Class I, Class
II and Class III. Each class shall consist, as nearly as may be possi-
ble, of one third of the number of directors constituting the entire
Board of Directors. At the annual meeting of the stockholders held in
1995, Class I directors shall be elected for a one year term, Class II
directors shall be elected for a two year term, and Class III directors
shall be elected for a three year term, and in each case until their
successors are duly elected and qualified. Commencing in 1996, at each
annual meeting of the stockholders successors to the class of directors
whose terms expire at that annual meeting of stockholders shall be
elected by stockholders for a three year term and until their succes-
sors are duly elected and qualified. If the number of directors consti-
tuting the entire Board of Directors shall be changed as provided in
paragraph (a) of this Article 13, the increase or decrease shall be ap-
portioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible.
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<PAGE>
(c) Any director elected to fill a vacancy resulting from an increase in
any class or from the removal from office, death, disability, resigna-
tion or disqualification of a director or other cause shall hold office
for the remaining term of the class to which such director is elected.
No decrease in the size of the Board of Directors shall have the effect
of removing or shortening the term of any incumbent director.
(d) Whenever the holders of any series of Preferred Stock issued pursuant
to the provisions of Part 4.4 of Article 4 of this certificate of in-
corporation shall have the right, voting as a separate class, to elect
directors, the election, term of office, filling of vacancies and other
terms of such directorships shall be governed by the terms of this cer-
tificate of incorporation applicable to such series or by the resolu-
tion or resolutions of the Board of Directors providing for such se-
ries, as the case may be, and such directorships shall not be divided
into classes or otherwise subject to this Article 13 unless expressly
so provided therein.
(e) This Article 13 shall not be amended, altered or repealed except by the
affirmative vote of eighty percent (80%) of the votes entitled to be
cast by stockholders voting in accordance with Section 4.2.2(a) of Ar-
ticle 4.
32
<PAGE>
EXHIBIT B
Article 14 would be added to read in its entirety as follows:
14. CONSIDERATION OF RELEVANT FACTORS IN BUSINESS COMBINATIONS.
The Board of Directors of the corporation, when evaluating any offer of
another party to (i) purchase or exchange any securities or property
for any outstanding equity securities of the corporation, (ii) merge or
consolidate the corporation with another corporation, or (iii) purchase
or otherwise acquire all or substantially all of the properties and as-
sets of the corporation, shall, in connection with the exercise of its
judgment in determining what is in the best interests of the corpora-
tion and its stockholders, give due consideration to all relevant fac-
tors, including without limitation: (a) not only the price or other
consideration being offered in relation to the then current market
price of the corporation's outstanding shares of capital stock, but
also the Board of Directors' estimate of the future value of the corpo-
ration as an independent going concern and the unrealized value of its
property and assets; (b) the financial and managerial resources and fu-
ture prospects of the other party; and (c) the possible social, legal,
environmental and economic effects of the transaction on the business
of the corporation and its subsidiaries and on the employees, custom-
ers, suppliers and creditors of the corporation and its subsidiaries
and the effects on the communities in which the corporation's facili-
ties are located. In evaluating any such offer on the basis of the
foregoing factors, the directors shall be deemed to be performing their
duly authorized duties and acting in good faith and in the best inter-
ests of the corporation within the meaning of Section 145 of the Gen-
eral Corporation Law of Delaware, as it may be amended from time to
time.
33
<PAGE>
PROXY ABIOMED, Inc. PROXY
The undersigned hereby appoints David M. Lederman and Donald E. Paulson,
and each of them, with full power of substitution, attorneys and proxies to
represent the undersigned at the 1995 Annual Meeting of Stockholders of ABOIMED,
Inc. to be held on August 9, 1995 and at any adjournment or adjournments
thereof, with all power which the undersigned would possess if personally
present, and to vote all shares of stock which the undersigned may be entitled
to vote at said meeting upon the election of directors and others matters as
more fully described in the notice of and Proxy Statement for the meeting in
accordance with the following instructions and with discretionary authority upon
such other matters as may come before the meeting.
1. Election of Directors (check one)
FOR ALL NOMINEES EXCEPT AS WITHHOLD AUTHORITY
MARKED BELOW ON ALL NOMINEES
--------- --------
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
David M. Lederman, John F. O'Brien, W. Gerald Austen, Henri A. Termeer, Paul
Fireman, Desmond H. O'Connell, Jr.
- -------------------------------------------------------------------------------
2. Amendment of certificate of incorporation to provide for classified board
of directors and related charges.
[_] For [_] Against [_] Abstain
3. Amendment of certificate of incorporation regarding consideration of all
relevant factors in connection with certain business combinations.
[_] For [_] Against [_] Abstain
4. Amendment of certificate of incorporation to increase authorized Common
Stock from 10,000,000 to 25,000,000 shares.
[_] For [_] Against [_] Abstain
5. Amendment to 1992 Combination Stock Option Plan to increase shares
authorized to be issued under plan.
[_] For [_] Against [_] Abstain
6. Amendment to 1989 Non-Qualified Stock Option Plan to Non-Employee Directors
to increase shares authorized to be issued under plan.
[_] For [_] Against [_] Abstain
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT WILL BE VOTED AS
DIRECTED BY THE UNDERSIGNED AND IF NO DIRECTION IS INDICATED, IT WILL BE VOTED
FOR THE ELECTION OF DIRECTORS AND FOR THE PROPOSALS DESCRIBED IN THE NOTICE OF
AND PROXY STATEMENT FOR THE MEETING.
(Please execute and return in the enclosed envelope.)
Dated:________, 1995
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(INSTRUCTIONS: SIGNATURES SHOULD BE THE SAME AS THE NAME PRINTED HEREON,
EXECUTORS, ADMINISTRATORS, TRUSTEES, GUARDIANS, ATTORNEYS AND OFFICERS OF
CORPORATIONS SHOULD ADD THEIR TITLES WHEN SIGNING.)
