<PAGE>
- - --------------------------------------------------------------------------------
ALARIS MEDICAL, INC.
(FORMERLY ADVANCED MEDICAL, INC.)
NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JUNE 11, 1997
- - --------------------------------------------------------------------------------
<PAGE>
ALARIS MEDICAL, INC.
10221 WATERIDGE CIRCLE
SAN DIEGO, CALIFORNIA 92121-1579
(619) 566-0426
May 5, 1997
To Our Stockholders:
We enclose herewith:
(i) a notice of Annual Meeting of Stockholders to be held at the
Waldorf-Astoria, 301 Park Avenue, New York, New York at 9:00 a.m. on June
11, 1997;
(ii) a proxy statement describing the matters to be considered at the
meeting; and
(iii) a proxy which, when executed by you and returned to the Company,
will make it possible for your shares to be voted at the meeting in the
event that you are unable to be present in person.
The matters to be acted upon at the Annual Meeting are set forth in the
notice and accompanying proxy statement. Pursuant to stockholder approval,
Advanced Medical, Inc. recently changed its name to Alaris Medical, Inc. As a
result of this name change, this proxy statement has been prepared under the
name Alaris Medical, Inc. We welcome your attendance at the Annual Meeting, but
if you cannot attend, please promptly complete and execute the enclosed proxy
and return it to us in the envelope provided for that purpose (which requires no
postage if mailed in the United States).
Very truly yours,
/s/ William J. Mercer
William J. Mercer
PRESIDENT AND CEO
<PAGE>
ALARIS MEDICAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 11, 1997
May 5, 1997
To Our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Alaris Medical, Inc. (the "Company") will be held at the
Waldorf-Astoria, 301 Park Avenue, New York, New York at 9:00 a.m. on June 11,
1997 for the following purposes:
1. to elect directors;
2. to approve the Company's 1996 Stock Option Plan;
3. to approve the amendment and restatement of the Company's Third
Amended and Restated 1990 Non-Qualified Stock Option Plan for Non-Employee
Directors;
4. to consider and act upon a proposal to ratify the appointment of Price
Waterhouse LLP as independent accountants for the year ending December 31, 1997;
and
5. to transact such other business as may properly come before the Annual
Meeting and all adjournments thereof.
The Board of Directors of the Company has fixed the close of business on
April 23, 1997 as the record date for purposes of determining the stockholders
entitled to notice of, and to vote at, the Annual Meeting.
A list of stockholders entitled to vote at the Annual Meeting will be open
to the examination of any stockholder, for any purpose germane to the meeting,
at the law offices of Gordon Altman Butowsky Weitzen Shalov & Wein, 114 West
47th Street, 21st Floor, New York, New York 10036 during ordinary business hours
for ten days prior to the Annual Meeting. The Annual Meeting may be adjourned
from time to time without notice other than by announcement at the Annual
Meeting.
By Order of the Board of Directors,
/s/ John A. de Groot
John A. de Groot
SECRETARY
<PAGE>
PROXY STATEMENT
ALARIS MEDICAL, INC.
10221 WATERIDGE CIRCLE
SAN DIEGO, CALIFORNIA 92121-1579
(619) 566-0426
MERGER AND NAME CHANGE
On November 26, 1996, IMED Corporation ("IMED"), then a wholly-owned
subsidiary of Advanced Medical, Inc., acquired all of the outstanding stock of
IVAC Holdings, Inc. and its subsidiaries, including IVAC Medical Systems, Inc.
(collectively, "IVAC").
In connection with the acquisition, IMED and IVAC Medical Systems, Inc.
were merged into IVAC Holdings, Inc. (the "Merger"), which then became a
wholly-owned subsidiary of Advanced Medical, Inc.
Pursuant to stockholder approval, Advanced Medical, Inc. recently changed
its name to Alaris Medical, Inc. In connection therewith, IVAC Holdings, Inc.
changed its name to Alaris Medical Systems, Inc. ("Alaris Medical Systems").
ANNUAL MEETING OF STOCKHOLDERS
This proxy statement is furnished to stockholders in connection with the
solicitation by the board of directors of Alaris Medical, Inc. (the "Board of
Directors" or the "Board"), of proxies to be voted at the Annual Meeting of
Stockholders to be held at 9:00 a.m. on June 11, 1997, and all adjournments
thereof (the "Annual Meeting"). The purpose of the Annual Meeting is to elect
directors of Alaris Medical, Inc. (hereinafter referred to as "Alaris Medical"
or the "Company"), to approve the Company's 1996 Stock Option Plan ("1996 Option
Plan"), to approve the amendment and restatement of the Company's Third Amended
and Restated 1990 Non-Qualified Stock Option Plan for Non-Employee Directors
(the "Directors Plan") and to ratify the appointment of Price Waterhouse LLP as
independent accountants for the year ending December 31, 1997. Proxy statements
and forms of proxy are first being sent to stockholders on or about May 12,
1997.
The close of business on April 23, 1997 has been set as the record date of
purposes of determining stockholders entitled to vote at the Annual Meeting. At
the close of business on April 23, 1997, there were outstanding 58,567,377
shares of the Company's common stock, par value $.01 per share ("Common Stock"),
which is the only class of outstanding voting securities of the Company. The
holders of record of a majority of the shares of Common Stock entitled to vote
at the Annual Meeting, present in person or represented by proxy at the Annual
Meeting, shall constitute a quorum for the transaction of business at the Annual
Meeting, but, in the absence of a quorum, the holders of record, present in
person or represented by proxy at such meeting, may vote to adjourn the Annual
Meeting from time to time until a quorum is obtained. Each share of Common
Stock entitles its holder of record to one vote, except with respect to the
election of directors, as described below.
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1
<PAGE>
The election of directors shall be by plurality vote, with each stockholder
having the right to vote his shares cumulatively. See "Election of Directors --
Cumulative Voting Rights," described below. Other than with respect to the
election of directors, the affirmative vote of the holders of a majority of the
shares of Common Stock, present in person or represented by proxy at the Annual
Meeting, is necessary for approval of all matters to be presented at the Annual
Meeting.
The aggregate number of votes cast by all stockholders present in person or
by proxy at the Annual Meeting will be used to determine whether a motion will
carry. Thus, an abstention from voting on a matter by a stockholder, present in
person or by proxy at the Annual Meeting, has no effect on the item on which the
stockholder abstained from voting. In addition, although broker "non-votes"
will be counted for purposes of attaining a quorum, they will have no effect on
the vote.
Proxies may be revoked by the person executing the proxy at any time before
the authority thereby granted is exercised, upon written notice to such effect
received by the Secretary of the Company. Attendance at the Annual Meeting will
not in and of itself constitute revocation of a proxy, although proxies may be
revoked at the Annual Meeting by written notice delivered to the Secretary of
the Company, in which case the shares of Common Stock represented thereby may be
voted in person. Proxies may also be revoked by the submission of subsequently
dated proxies. Shares represented by a valid unrevoked proxy will be voted at
the Annual Meeting or any adjournment thereof as specified therein by the person
giving the proxy; if no specification is made the shares of Common Stock
represented by such proxy will be voted (1) SO as to elect the largest possible
number of the Board of Directors' nominees as directors, (2) TO approve the
Company's 1996 Stock Option Plan, (3) TO approve the amendment and restatement
of the Company's Director Plan, and (4) FOR the ratification of the appointment
of Price Waterhouse LLP as independent accountants of the accounts of the
Company for 1997.
1. ELECTION OF DIRECTORS
CUMULATIVE VOTING RIGHTS
The election of directors will be by a plurality vote. There are currently
six members on the Board of Directors.
The Company's certificate of incorporation and by-laws provide that, in the
election of directors, every holder of Common Stock has the right to vote his
shares cumulatively. Under cumulative voting, the number of shares of Common
Stock a stockholder is entitled to vote multiplied by the number of directors to
be elected represents the number of votes he may cast at such election. A
stockholder may cast all such votes for one nominee or distribute them among any
two or more nominees. As a result, each stockholder, in voting for directors at
the meeting, will be entitled to six votes for each share of Common Stock held.
Six directors are to be elected to serve until the next annual meeting and
until their successors are elected and have qualified. UNLESS OTHERWISE
DIRECTED, IT IS THE INTENTION OF THE PERSONS DESIGNATED AS PROXIES TO CUMULATE
VOTES FOR ONE OR MORE OF THE NOMINEES LISTED BELOW IN A MANNER SO AS TO ELECT
THE LARGEST POSSIBLE NUMBER OF SUCH NOMINEES TO THE BOARD OF DIRECTORS. IF
- - --------------------------------------------------------------------------------
2
<PAGE>
ANY OF SUCH NOMINEES SHOULD BECOME UNAVAILABLE FOR ANY REASON, IT IS INTENDED
THAT PROXIES WILL BE VOTED FOR THE ELECTION OF SUCH OTHER PERSONS AS SHALL BE
DESIGNATED BY THE BOARD OF DIRECTORS.
NOMINEES
Information regarding the nominees for election to the Board of Directors
is set forth below. The information presented with respect to each nominee has
been furnished by that nominee. All current directors have been elected or
appointed, as the case may be, to serve until the next annual meeting and until
their successors are elected and qualified.
NAME POSITION WITH COMPANY AGE DIRECTOR SINCE
- - -------------------- --------------------- --- --------------
Jeffry M. Picower Director, Chairman of the Board 54 March 1993
William J. Mercer Director, President, Chief 49 November 1996
Executive Officer and Chief
Financial Officer
Norman M. Dean Director 77 March 1989
Henry Green Director 54 February 1991
Frederic Greenberg Director 56 June 1995
Richard B. Kelsky Director 42 June 1989
JEFFRY M. PICOWER - Mr. Picower was a director, Vice President and the
Assistant Treasurer of the Company from September 1988 to March 1989 and Vice
Chairman from December 1988 to June 1989. Mr. Picower was re-elected as a
director and Co-Chairman of the Board in March 1993 and became Chairman of the
Board in May 1993. Mr. Picower served as Chief Executive Officer of the Company
from September 7, 1993 to November 26, 1996. He has, since 1984, been Chairman
of the Board and Chief Executive Officer of Monroe Systems for Business, Inc.
("Monroe"), a worldwide office equipment, distribution and service organization.
Mr. Picower has been a director of Physician Computer Network, Inc. ("PCN")
since January 1994 and Chairman of the Board of PCN since June 1994. PCN, a
corporation whose principal shareholder is Mr. Picower, operates a computer
network linking its office-based physician members to health care organizations.
WILLIAM J. MERCER - Mr. Mercer became a director, the President and the
Chief Executive Officer of the Company on November 26, 1996. Mr. Mercer became
the Chief Financial Officer of the Company in March 1997. Prior to November
26, 1996, Mr. Mercer served as President, Chief Executive Officer and a director
of IVAC Medical Systems, Inc., as President and a director of IVAC Holdings,
Inc. since May 1995, and as Chief Executive Officer of IVAC Holdings, Inc. since
January 1996. Prior to joining IVAC Medical Systems, Inc., Mr. Mercer held
various positions at Mallinckrodt Group, Inc. for 17 years, most recently as
Senior Vice President. Mallinckrodt Group, Inc. is an international company
serving specialty markets in human healthcare, chemicals and animal health.
NORMAN M. DEAN - Mr. Dean was first elected to the Board of Directors of
the Company in March 1989. Mr. Dean has been a director and President of
Foothills Financial Corporation, a venture capital company, since January 1985
and Chairman of the Board of Miller Diversified Corp., a commercial cattle
feeder, since May 1990.
- - --------------------------------------------------------------------------------
3
<PAGE>
HENRY GREEN - Mr. Green was President and Chief Operating Officer of the
Company from September 1990 to March 1993 and has been a director of the Company
since 1991. Mr. Green was employed by PCN in March 1993, elected as President
of PCN in May 1993, Chief Executive Officer of PCN in June 1994 and a director
of PCN in July 1993.
FREDERIC GREENBERG - Mr. Greenberg was appointed to the Board of Directors
of the Company on June 7, 1995. Mr. Greenberg is a partner with EGS Partners
LLC, an asset management and merchant banking firm which Mr. Greenberg founded
in 1989. From 1974 to 1989, Mr. Greenberg served as a pharmaceutical analyst
with Goldman Sachs & Company, an investment banking firm. Mr. Greenberg serves
as an advisor to various health care companies and has been a director of PCN
since July 1993.
RICHARD B. KELSKY - Mr. Kelsky has been a director of the Company since
June 1989. Mr. Kelsky is a director of Monroe and from 1984 to 1996 served as
Vice President and General Counsel of Monroe and has served as Vice Chairman of
Monroe since 1996. Mr. Kelsky has been a director of PCN since January 1992.
COMMITTEES OF THE BOARD
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee consists of Messrs. Dean (Chairman) and Greenberg. The
function of the Audit Committee is to recommend the selection of independent
accountants, review the scope of their examination, consider individual audit
matters, monitor adequacy of internal controls, review annual financial
statements, conduct other activities relating thereto as the Audit Committee
deems appropriate and report to the Board of Directors. The Audit Committee met
twice during 1996.
The Compensation Committee consists of Messrs. Dean (Chairman) and Kelsky.
The function of the Compensation Committee is to review and approve the
compensation of the principal officers and employees of the Company and its
subsidiaries. The Compensation Committee met three times during 1996.
The Board of Directors does not have a standing nominating committee or one
performing similar functions.
The Board of Directors met 12 times in 1996. Each of the members of the
Board of Directors attended 75% or more of the aggregate of the total number of
meetings of the Board of Directors and the total number of meetings held by all
committees of the Board on which such director served.
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4
<PAGE>
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not employees of the Company are
paid $10,000 per annum. In addition, every three years such directors have
received options to purchase 12,000 shares of Common Stock pursuant to the
Directors Plan, which options vest at a rate of 4,000 shares per annum. Travel
and accommodation expenses of directors incurred in connection with meetings are
reimbursed by the Company. All of the directors are covered by the Company's
director's liability insurance policy.
In 1996, two directors were each granted an option of 10,000 shares of
Common Stock in consideration for service on a special committee of the Board of
Directors.
In March 1993, the Company and Mr. Green entered into a three-year
consulting agreement. On March 15, 1996, Mr. Green's consulting agreement
expired. The consulting agreement provided for the payment to Mr. Green of
consulting fees in the amount of $100,000 per annum. On March 16, 1996, Mr.
Green became eligible to receive the aforesaid non-employee annual director
compensation of $10,000 and an option to purchase 12,000 shares of Common Stock
under the Directors Plan.
- - --------------------------------------------------------------------------------
5
<PAGE>
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company, IMED or IVAC to or on behalf of the
Company's Chief Executive Officer and each of the four most highly compensated
executive officers of the Company, IMED or IVAC, other than the Chief Executive
Officer, whose salary and bonus exceeded $100,000 (determined for and as of the
end of 1996) (the "Named Executive Officers") for the years ended December 31,
1994, 1995 and 1996:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- ----------------------
OTHER ALL
ANNUAL SECURITIES OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
YEAR ($) (2) ($) ($)(3) OPTIONS ($)
---- ------- ------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
JEFFRY M. PICOWER (1) 1996 0 0 10,000 0 0
Chairman of the Board of 1995 0 0 10,000 0 0
Alaris Medical and 1994 0 0 12,500 0 0
Alaris Medical Systems, Inc.
WILLIAM J. MERCER 1996 319,334 312,965 0 600,000 2,998,298(4)
President, Chief Executive
Officer and Chief Financial
Officer of Alaris Medical
and Alaris Medical Systems
JOSEPH W. KUHN (5) 1996 226,348 139,236 12,519(6) 175,000 3,413(7)
1995 175,000 60,000 9,250 125,000 2,053
1994 135,500 40,650 9,250 0 2,063
ANTHONY B. SEMEDO 1996 146,808 100,804 0 180,000 671,210(8)
Vice President of Research,
Development and Engineering
of Alaris Medical Systems
JAKE ST. PHILIP 1996 144,894 111,425 0 180,000 607,734(9)
Vice President of Sales
North America
of Alaris Medical Systems
RICHARD M. MIRANDO 1996 181,319 92,401 13,216(10) 180,000 622,680(11)
Vice President of Operations
of Alaris Medical Systems
JOHN A. DE GROOT 1996 131,254 125,232 180,000 384,108(12)
Secretary of Alaris Medical
and Alaris Medical Systems;
Vice President and General
Counsel of Alaris Medical
Systems
- - ------------------------------------
</TABLE>
(1) Mr. Picower does not receive an annual salary or bonus from the Company.
"Other Annual Compensation" for Mr. Picower represents compensation earned
as a director. See "Compensation of Directors."
(2) "Salary" with respect to (i) Messrs. Mercer, Semedo, St. Philip, Mirando
and de Groot consists of eleven months of salary paid by IVAC Medical
Systems, Inc. and one month of salary paid by Alaris
- - --------------------------------------------------------------------------------
6
<PAGE>
Medical Systems and (ii) Mr. Kuhn consists of eleven months of salary paid
by IMED and one month of salary paid by Alaris Medical Systems.
(3) "Other Annual Compensation" includes annual compensation, other than
salary or bonus, including perquisites and other personal benefits where
such exceed the lesser of $50,000 or 10% of each Named Executive Officer's
annual salary and bonus.
(4) Consists of (i) $271,980 in relocation and temporary housing expenses paid
by IVAC Medical Systems, Inc.; (ii) an aggregate contribution of $4,120
made by IVAC Medical Systems, Inc. and Alaris Medical Systems to match
pre-tax elective deferred contributions (included under "Salary") made by
Mr. Mercer to the IVAC Medical Systems, Inc. and Alaris Medical 401(k)
plans (collectively, the "401(k) Plans"); and (iii) $2,722,198 stock
option cancellation payment paid by Alaris Medical Systems in connection
with the Merger for unexercised options previously granted under the IVAC
Holdings, Inc. 1995 stock option plan.
(5) Mr. Kuhn resigned from his position as the Company's Chief Financial
Officer in March 1997. Prior to the Merger, Mr. Kuhn served as President,
Treasurer and Secretary of IMED and as President, Chief Financial Officer,
Treasurer and Secretary of Alaris Medical.
(6) Consists of a car allowance paid by IMED and Alaris Medical Systems.
(7) Consists of contributions made by IMED to Alaris Medical's 401(k) plan on
behalf of Mr. Kuhn to match pre-tax elective deferral contributions
(included under "Salary") made by Mr. Kuhn to such plan.
(8) Consists of (i) $8,568 in relocation expenses paid by IVAC Medical
Systems, Inc.; (ii) an aggregate contribution of $4,404 made by IVAC
Medical Systems, Inc. and Alaris Medical Systems to match pre-tax elective
deferred contributions (included under "Salary") made by Mr. Semedo to the
401(k) Plans; and (iii) $658,238 stock option cancellation payment paid by
Alaris Medical Systems in connection with the Merger for unexercised
options previously granted under the IVAC Holdings, Inc. 1995 stock option
plan.
(9) Consists of (i) $4,504 in relocation expenses paid by IVAC Medical
Systems, Inc.; (ii) an aggregate contribution of $4,346 made by IVAC
Medical Systems, Inc. and Alaris Medical Systems to match pre-tax elective
deferral contributions (included under "Salary") made by Mr. St. Philip to
the 401(k) Plans; and (iii) $598,884 stock option cancellation payment
paid by Alaris Medical Systems in connection with the Merger for
unexercised options previously granted under the IVAC Holdings, Inc. 1995
stock option plan.
(10) Consists of a car allowance paid by IVAC Medical Systems, Inc. and Alaris
Medical Systems.
(11) Consists of (i) an aggregate contribution of $5,440 made by IVAC Medical
Systems, Inc. and Alaris Medical Systems to match pre-tax elective
deferral contributions (included under "Salary") made by Mr. Mirando to
the 401(k) Plans; (ii) $6,727 in housing expenses paid by IVAC Medical
Systems, Inc. and the Company; and (iii) $597,297 stock option
cancellation payment paid by Alaris Medical Systems in connection with the
Merger for unexercised options previously granted under the IVAC Holdings,
Inc. 1995 stock option plan.
(12) Consists of an aggregate contribution of $3,000 made by IVAC Medical
Systems, Inc. and Alaris Medical Systems to match pre-tax elective
deferral contributions (included under "Salary") made by Mr. de Groot to
the 401(k) Plans and (ii) $381,108 stock option cancellation payment paid
by Alaris Medical Systems in connection with the Merger for unexercised
options previously granted under the IVAC Holdings, Inc. 1995 stock option
plan.
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7
<PAGE>
The following table sets forth certain information with respect to stock
options granted during 1996 to each of the Named Executive Officers and Mr. Kuhn
pursuant to the Third Amended and Restated 1988 Stock Option Plan of the Company
(the "1988 Option Plan") and the 1996 Option Plan.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR 1996
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATE
SECURITIES TOTAL OPTIONS EXERCISE OF STOCK APPRECIATION FOR
UNDERLYING GRANTED TO OF BASE THE OPTION TERM
OPTIONS EMPLOYEES DURING PRICE EXPIRATION --------------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- - ----------------- ---------- ---------------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William J. Mercer 600,000 21.1% 3.00 11/26/06 1,132,010 2,868,736
Joseph W. Kuhn 100,000 3.5% 2.437 3/12/06 141,501 358,592
75,000 2.6% 3.00 11/26/06 153,262 388,395
Anthony B. Semedo 180,000 6.3% 3.00 11/26/06 339,603 860,621
Jake St. Philip 180,000 6.3% 3.00 11/26/06 339,603 860,621
Richard M. Mirando 180,000 6.3% 3.00 11/26/06 339,603 860,621
John A. de Groot 180,000 6.3% 3.00 11/26/06 339,603 860,621
- - -----------------------------
</TABLE>
(1) The options on 175,000 shares granted to Mr. Kuhn were made under the 1988
Option Plan.
The following table sets forth certain information with respect to
unexercised stock options during 1996:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISE IN FISCAL YEAR 1996
AND OPTION VALUES AS OF DECEMBER 31, 1996
POTENTIAL REALIZABLE
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE AT 12/31/96 ($) (1) AT 12/31/96 ($) (1)
ACQUIRED REALIZED ---------------------------- ---------------------------
NAME ON EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ----------------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William J. Mercer - - 100,000 500,000 75,000 375,000
Joseph W. Kuhn - - 40,000 260,000 59,688 370,050
Anthony B. Semedo - - 36,000 144,000 27,000 108,000
Jake St. Philip - - 36,000 144,000 27,000 108,000
Richard M. Mirando - - 36,000 144,000 27,000 108,000
John A. de Groot - - 36,000 144,000 27,000 108,000
- - -------------------------------------
</TABLE>
(1) Calculated based on the excess of the closing price of Alaris Medical's
common stock on December 31, 1996 ($3.75) as reported in the American Stock
Exchange Composite Transaction published in THE WALL STREET JOURNAL over
the option exercise price.
- - --------------------------------------------------------------------------------
8
<PAGE>
EMPLOYMENT AGREEMENTS
In August 1996, Mr. Mercer entered into an employment agreement whereby he
became employed full time by Alaris Medical Systems and Alaris Medical upon
consummation of the Merger. The agreement is for a term of five years, subject
to automatic renewal for successive one year periods and to earlier termination
as provided therein. The agreement provides for, among other things, a base
salary of $400,000, certain annual and additional bonuses beginning in the
Company's 1997 fiscal year in an aggregate amount up to 100% of Mr. Mercer's
base annual salary in each such year, options to purchase an aggregate of
600,000 shares of Common Stock, and, in the event Mr. Mercer's employment is
terminated by Alaris Medical Systems or Alaris Medical without cause or
disability (as defined in the agreement), or by Mr. Mercer for good reason (as
defined in the agreement), severance payments in an amount equal to Mr. Mercer's
base salary annually until the end of the employment term. The agreement also
contains certain confidentiality, non-solicitation and non-competition
provisions.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee is composed of non-employee directors who review
recommendations as to senior executive officer compensation which, upon the
approval of the compensation committee, are submitted to the Board of Directors.
The members of the compensation committee also administer the 1988 Option Plan
of the Company under which options have been granted on a discretionary basis to
senior executive officers. A stock option committee of non-employee directors
was appointed by the Board to administer the 1996 Option Plan.
Compensation committee approvals of recommendations with respect to the
compensation of senior executive officers of the Company are made on an
individual basis based on a variety of factors which may include, but are not
limited to, the existing employment contract with such officer, evaluations of
the executive officer's performance, the level of responsibility associated with
the office, recruitment requirements, as well as the performance of the Company.
Recommendations made to the compensation committee are not determined by
reference to formulae. The compensation of the Company's senior executive
officers is structured in a manner that the compensation committee believes will
motivate, reward and retain senior executive officers consistent with the needs
of the Company as they may exist from time to time. The compensation which may
be paid by the Company to its senior executive officers consists of salary,
bonus awards and stock option grants.
Compensation paid by the Company to Mr. Mercer in 1996 was limited to
compensation earned since naming Mr. Mercer the Chief Executive Officer
effective November 26, 1996. Compensation to Mr. Kuhn in 1996 was based upon an
employment agreement. Mr. Kuhn's bonus on account of 1996 was paid pursuant to
the terms and provisions of his employment agreement.
- - --------------------------------------------------------------------------------
9
<PAGE>
This report is provided in accordance with federal securities law
requirements and is not intended to create any contractually binding employment
rights for the benefit of any employee of the Company or its subsidiaries.
COMPENSATION COMMITTEE
----------------------
NORMAN M. DEAN
RICHARD B. KELSKY
STOCK OPTION COMMITTEE
----------------------
NORMAN M. DEAN
FREDERIC GREENBERG
- - --------------------------------------------------------------------------------
10
<PAGE>
2. APPROVAL OF THE COMPANY'S 1996 STOCK OPTION PLAN
GENERAL
On November 26, 1996, the Board adopted, subject to approval by the
stockholders, the 1996 Option Plan. The 1996 Option Plan is intended to allow
the Company to continue to attract and retain qualified employees who contribute
materially to the Company's success, and to provide incentives for them to
promote the growth and financial success of the business of the Company.
Following approval of the 1996 Option Plan, no further grants will be made under
the Company's 1988 Option Plan.
The full text of the 1996 Option Plan is set forth on Exhibit A to this
proxy statement. The material features of the 1996 Option Plan are described
below, but this description is only a summary and is qualified in its entirety
by reference to the actual text of the 1996 Option Plan.
EFFECTIVE DATE OF THE 1996 OPTION PLAN
The 1996 Option Plan was adopted by the Board on November 26, 1996, and
became effective on such date, subject to approval by the stockholders of the
Company at a meeting duly called and held within twelve months following such
date.
TYPES OF AWARDS
Awards under the 1996 Option Plan may be in the form of (i) incentive stock
options ("ISOs"), within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any successor provision thereto, and (ii)
non-qualified stock options ("NQSOs") (collectively, "Options").
ADMINISTRATION
The 1996 Option Plan is administered by a committee appointed by the Board
(the "Committee"), consisting of not less than a sufficient number of
non-employee directors (as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), who are also
"outside directors" (within the meaning of Section 162(m) of the Code) so as to
qualify the Committee to administer the 1996 Option Plan as contemplated by Rule
16b-3 and Section 162(m), respectively. The members of the Committee will not
be allowed to participate in the 1996 Option Plan.
Subject to the express terms of the 1996 Option Plan, the Committee has the
authority to administer the 1996 Option Plan in its sole and absolute
discretion, including, but not limited to, the authority to construe and
interpret the 1996 Option Plan and the authority to determine the eligible
individuals who shall be granted Options and the number of Options to be
granted, the type of Option to be granted, the vesting period, if any, for all
Options granted, the date on which any Option becomes first exercisable, the
number of shares of Common Stock subject to each Option, the exercise price for
the shares of Common Stock subject to each Option and whether each Option to be
granted is an ISO or a NQSO.
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STOCK SUBJECT TO THE 1996 OPTION PLAN
The 1996 Option Plan provides for the issuance of up to 4,000,000 shares of
Common Stock (subject to adjustment as described below) upon exercise of Options
granted under the 1996 Option Plan; PROVIDED, HOWEVER, that no more than 600,000
shares of Common Stock (subject to adjustment as described below) may be awarded
to any officer or employee in any calendar year. To the extent that an Option
terminates without having been exercised, the shares of Common Stock subject to
such award will again be available for distribution in connection with future
awards under the 1996 Option Plan.
In the event of a recapitalization, stock dividend, stock split, or other
change in capitalization affecting the shares of Common Stock, an adjustment
will be made in the aggregate number of shares of Common Stock available for
issuance under the 1996 Option Plan, the number of shares of Common Stock
available for any individual awards, the number and exercise price of shares of
Common Stock subject to outstanding Options, and such other matters as may be
determined to be appropriate by the Committee.
ELIGIBILITY
The individuals eligible for the grant of Options under the 1996 Option
Plan are (i) all directors (except directors eligible to participate in the
Company's Third Amended and Restated 1990 Non-Qualified Stock Option Plan for
Non-Employee Directors), officers and employees, and (ii) such individuals
determined by the Committee to be rendering substantial services as a consultant
or independent contractor to the Company or any subsidiary or affiliate of the
Company, as the Committee shall determine from time to time in its sole and
absolute discretion; PROVIDED, HOWEVER, that only employees of the Company or
any subsidiary thereof shall be eligible to receive ISOs.
TERMS OF OPTIONS
GRANT OF OPTIONS. Subject to any applicable requirements of the Code and
any regulations issued thereunder, the date of the grant of an Option shall be
the date on which the Committee determines to grant the Option.
OPTION TERM. The term of any Option granted under the 1996 Option Plan
shall be specified in the stock option agreement but shall be no greater than
ten years from the date of grant, subject to earlier termination as provided
below; PROVIDED, HOWEVER, that no ISO granted to a "ten percent stockholder"
(within the meaning of Section 422(b)(6) of the Code), shall have a term of more
than five years from the date of grant.
EXERCISE PRICE OF ISOS. The exercise price of each share of Common Stock
subject to an ISO shall not be less than the fair market value of a share of
Common Stock on the date of grant of the ISO, except that in the case of a grant
of an ISO to an employee who at the time such ISO was granted was a "ten percent
stockholder" (within the meaning of Section 422(b)(6) of the Code), the exercise
price shall not be less than 110% of the fair market value of a share of Common
Stock on the date of the grant of the ISO.
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EXERCISE PRICE OF NQSOS. The exercise price of each share of Common Stock
subject to a NQSO shall be determined by the Committee at the time of grant but
will not be less than the par value of a share of Common Stock.
EXERCISE PERIOD. Each Option granted under the 1996 Option Plan shall vest
and become first exercisable as determined by the Committee.
METHOD OF EXERCISE. The holder of an Option may exercise the same by
filing with the Corporate Secretary of the Company a written election, in such
form as the Committee may determine, specifying the number of shares of Common
Stock with respect to which such Option is being exercised, and accompanied by
payment in full of the exercise price for such shares of Common Stock. Payment
of the Option price may be made in cash or, if so provided by the Committee in
the stock option agreement, in shares of Common Stock (determined with reference
to their fair market value on the date of exercise), or any combination thereof
or, if permitted by the Committee, in any other manner permitted by law and as
determined by the Committee.
NO STOCKHOLDERS RIGHTS. No optionee and no beneficiary or other person
claiming under or through such optionee will acquire any rights as a stockholder
of the Company by virtue of such optionee having been granted an Option under
the 1996 Option Plan. No optionee and no beneficiary or other person claiming
under or through such optionee will have any right, title or interest in or to
any shares of Common Stock allocated or reserved under the 1996 Option Plan or
subject to any Option, except as to shares of Common Stock, if any, that have
been issued or transferred to such optionee. No adjustment will be made for
dividends or distributions or other rights for which the record date is prior to
the date of exercise of an Option, except as may be provided in the stock option
agreement.
NON-TRANSFERABILITY. No Option or interest therein may be pledged,
hypothecated, encumbered or otherwise made subject to execution, attachment or
similar process and no Option or interest therein shall be assignable or
transferable by the holder otherwise than by (i) will, (ii) the laws of descent
and distribution, or (iii) to a beneficiary upon the death of an optionee, and
an Option shall be exercisable during the lifetime of the holder only by him or
by his guardian or legal representative, except that an Option (other than an
ISO) may be transferred to one or more transferees during the lifetime of the
optionee, and may be exercised by such transferee in accordance with the terms
of such Option, but only if and to the extent such transfers are permitted by
the Committee pursuant to the express terms of the stock option agreement
(subject to any terms and conditions which the Committee may impose thereon). A
transferee or other person claiming any rights under the 1996 Option Plan from
or through any optionee shall be subject to all terms and conditions of the 1996
Option Plan and any stock option agreement applicable to such optionee, except
as otherwise determined by the Committee, and to any additional terms and
conditions deemed necessary or appropriate by the Committee.
TERMINATION OF OPTIONS. Unless otherwise provided by the Committee in the
stock option agreement, in the event the employment of an optionee who is an
officer or employee is terminated for cause, or in the event the services of an
optionee who is a consultant or independent contractor are terminated for cause,
all unexercised Options held by such optionee on the date of such termination
(whether or not vested) will expire immediately. If an optionee
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who is a director (but not an officer or employee) is removed from the Board or
the board of directors of a subsidiary or an affiliate, as the case may be, for
cause (as contemplated by the charter, by-laws or other organizational or
governing documents), all unexercised Options held by such optionee on the date
of such removal (whether or not vested) will expire immediately.
In the event an optionee is no longer a director, officer, employee,
consultant or independent contractor, other than for the reasons set forth in
the preceding paragraph, all Options which remain unvested on the date the
optionee ceases to be a director, officer, employee, consultant or independent
contractor, as the case may be, shall expire immediately, and all Options which
have vested prior to such date shall expire twelve months thereafter unless by
their terms they expire sooner, unless otherwise provided by the Committee in
the stock option agreement.
WITHHOLDING TAX
Prior to issuance of any shares of Common Stock upon exercise of an Option,
the optionee shall pay or make adequate provision for the payment of any
federal, state, local or foreign withholding obligations of the Company or any
subsidiary or affiliate of the Company, if applicable. In the event an optionee
shall fail to make adequate provision for the payment of such obligations, the
Company shall have the right to withhold an amount of shares of Common Stock
otherwise deliverable to the optionee sufficient to pay such withholding
obligations or, in the discretion of the Committee, to refuse to honor the
exercise.
CHANGE OF CONTROL
In the event of a Change of Control (as defined below), unless otherwise
determined by the Committee at the time of grant or by amendment (with the
holder's consent) of such grant, all Options not vested on or prior to the
effective time of any such Change of Control shall vest immediately prior to
such effective time. Unless otherwise determined by the Committee in the stock
option agreement or at the time of a Change of Control, in the event of a Change
in Control all outstanding Options shall terminate and cease to be outstanding
immediately following the Change of Control; PROVIDED, HOWEVER, that no such
Option termination shall occur unless an optionee shall have been given five
business days, following prior written notice, to exercise such optionee's
outstanding vested Options at the effective time of the Change of Control, or to
receive cash in an amount per share of Common Stock subject to such Options
equal to the amount by which the price paid for a share of Common Stock
(determined on a fully diluted basis and taking into account the exercise price,
as determined by the Committee) in the Change of Control exceeds the per share
exercise price of such Options. The Committee in its discretion may make
provisions for the assumption of outstanding Options, or the substitution for
outstanding Options of new incentive awards covering the stock of a successor
corporation or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices so as to prevent dilution or
enlargement of rights.
A "Change of Control" will be deemed to occur on the date any of the
following events occur:
(a) any person or persons acting together which would constitute a "group"
for purposes of Section 13(d) of the Exchange Act (other than the Company, any
subsidiary and
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14
<PAGE>
Jeffry M. Picower (including, any of Mr. Picower's affiliates and any of his
lineal descendants, any widow or then current spouse of Mr. Picower or of any
such lineal descendant, a trust established principally for the benefit of any
of the foregoing, any entity which is at least 90% beneficially owned by any of
the foregoing, and the executor, administrator or personal representative of the
estate of any of the foregoing (the "Picower Group")) beneficially own (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
securities of the Company or any Significant Subsidiary (as defined below)
representing greater than 10% of the total combined voting power of the Company
or the Significant Subsidiary entitled to vote in the election of the board of
directors of the Company or the Significant Subsidiary; PROVIDED, HOWEVER, that
such event shall not constitute a Change of Control unless and until the
combined voting power of such securities owned beneficially, directly or
indirectly, by such person or persons is greater than the combined voting power
of all such securities owned beneficially, directly or indirectly, by Mr.
Picower and the Picower Group;
(b) persons other than the Current Directors (as herein defined)
constitute a majority of the members of the Board (for these purposes, a
"Current Director" means any member of the Board as of November 27, 1996, and
any successor of any such member whose election, or nomination for election by
the Company's stockholders, was approved by at least a majority of the Current
Directors then on the Board or by Mr. Picower or the Picower Group);
(c) the consummation of (i) a plan of liquidation of all or substantially
all of the assets of the Company or any subsidiary owning directly or indirectly
all or substantially all of the consolidated assets of the Company (a
"Significant Subsidiary"), or (ii) an agreement providing for the merger or
consolidation of the Company or a Significant Subsidiary (A) in which the
Company or a Significant Subsidiary is not the continuing or surviving
corporation (other than a consolidation or merger with a wholly-owned subsidiary
of the Company in which all shares of Common Stock of the Company or shares of
common stock in the Significant Subsidiary outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for all or substantially all
of the common stock of the surviving corporation and (if the Company ceases to
exist) the surviving corporation assumes all the Options) or (B) pursuant to
which, even though the Company is the continuing or surviving corporation, the
shares of Common Stock of the Company or common stock in the Significant
Subsidiary are converted into cash, securities or other property; PROVIDED,
HOWEVER, that no "Change of Control" shall be deemed to occur as the result of a
consolidation or merger of the Company or a Significant Subsidiary in which the
holders of the shares of Common Stock of the Company immediately prior to the
consolidation or merger have, as a result thereof, directly or indirectly, at
least a majority of the combined voting power of all classes of voting stock of
the continuing or surviving corporation or its parent immediately after such
consolidation or merger or in which the Board immediately prior to the merger or
consolidation would, immediately after the merger or consolidation, constitute a
majority of the board of directors of the continuing or surviving corporation or
its parent; or
(d) the consummation of an agreement (or agreements) providing for the
sale or other disposition (in one transaction or a series of transactions) of
all or substantially all of the assets of the Company or a Significant
Subsidiary, other than such a sale or disposition immediately after which such
assets will be owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of the shares of Common
Stock immediately prior to such sale or disposition.
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<PAGE>
AMENDMENTS AND TERMINATION
No Option shall be granted pursuant to the 1996 Option Plan on or after
November 26, 2006, but Options theretofore granted may extend beyond that date.
The Board may, insofar as permitted by law, from time to time, with respect
to any shares of Common Stock at the time not subject to Options, suspend or
terminate the 1996 Option Plan or revise or amend the 1996 Option Plan in any
respect whatsoever. However, unless the Board specifically otherwise provides,
any revision or amendment that would cause the 1996 Option Plan to fail to
comply with Sections 422 or 162(m) of the Code or any other requirement of
applicable law or regulation if such amendment were not approved by the
stockholders of the Company, shall not be effective unless and until such
approval is obtained.
No amendment, suspension or termination of the 1996 Option Plan or of any
Option that would adversely affect the right of any optionee with respect to an
Option previously granted under the 1996 Option Plan will be effective without
the written consent of the affected optionee.
SECURITIES LAW REQUIREMENTS
No shares of Common Stock shall be issued under the 1996 Option Plan unless
and until (i) the Company and any optionee have taken all actions required to
register the shares of Common Stock under the Securities Act of 1933, as
amended, or perfect an exemption from the registration requirements thereof,
(ii) any applicable listing requirement of any stock exchange or national market
system on which the shares of Common Stock are listed has been satisfied, and
(iii) any other applicable provision of state or federal law has been satisfied.
The Company shall be under no obligation to register the shares of Common Stock
with the Securities and Exchange Commission or to effect compliance with the
registration or qualification requirements of any state securities laws or stock
exchange.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE 1996 OPTION PLAN
The following is a summary of certain federal income tax aspects of awards
made under the 1996 Option Plan, based upon the laws in effect on the date
hereof.
ISOS
Generally, no taxable income is recognized by the optionee upon the grant
of an ISO or upon the exercise of an ISO either during the period of such
holder's employment with the Company or one of its subsidiaries (as defined in
Section 424(f) of the Code) or within the period ending three months (12 months,
in the event of permanent and total disability or death of the optionee) after
termination of such employment. However, the exercise of an ISO may result in
an alternative minimum tax liability to an optionee since the excess of the fair
market value of the optioned stock at the date of exercise over the exercise
price must be included in alternative minimum taxable income.
If the optionee holds shares of Common Stock acquired upon the exercise
of an ISO for at least two years from the date of grant of the Option and for
at least one year from the date of
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<PAGE>
exercise (the "ISO Holding Period"), any gain on a subsequent sale of such
shares of Common Stock will be considered as long-term capital gain to the
optionee. The gain recognized upon the sale of the shares of Common Stock is
equal to the excess of the selling price of the shares of Common Stock over
the exercise price. However, if the optionee sells the shares of Common Stock
prior to expiration of the ISO Holding Period (a "Disqualifying
Disposition"), generally (a) the optionee will recognize ordinary income in
an amount equal to the lesser of (i) the fair market value of the shares of
Common Stock on the date of exercise, less the exercise price or (ii) the
amount realized on the date of sale, less the exercise price, and (b) if the
selling price of the shares of Common Stock exceeds the fair market value on
the date of exercise, the excess will be taxable to the optionee as
short-term or long-term capital gain (depending on whether the shares of
Common Stock were held for more than one year). Currently, long-term capital
gain is taxable to individuals at a maximum federal income tax rate of 28%,
while items of ordinary income are taxable to individuals at the maximum rate
of 39.6%.
No deduction will be allowed to the Company with respect to ISOs for
federal income tax purposes, unless the optionee sells the shares of Common
Stock in a Disqualifying Disposition. In the case of a Disqualifying
Disposition, the Company will, subject to possible limitations imposed by
Section 162(m) of the Code (see discussion below), be entitled to deduct the
amount of ordinary income recognized by the optionee.
NQSOS
In general, with respect to NQSOs: (i) no income is recognized by the
optionee at the time the Option is granted; (ii) upon exercise of the Option,
the optionee recognizes ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the shares of Common
Stock on the date of exercise; and (iii) at disposition, any appreciation after
the date of exercise is treated as long-term or short-term capital gain,
depending on whether the shares of Common Stock are held for more than one year
by the optionee.
Generally, the Company will, subject to possible limitations imposed by
Section 162(m) of the Code (see discussion below), be entitled to a tax
deduction equal to the amount of ordinary income recognized by the optionee at
the date of exercise, to the extent such income is considered reasonable
compensation. Treasury regulations make the deduction to the Company dependent
on the Company fulfilling certain federal income tax reporting requirements with
respect to such compensation income.
$1 MILLION LIMITATION ON DEDUCTIBLE COMPENSATION
Section 162(m) of the Code generally limits the Company's deduction with
respect to compensation paid to each of its "covered employees" (generally
defined as the chief executive officer and four highest compensated officers of
the corporation other than the chief executive officer) to $1 million per year.
This deduction limit, however, does not apply to certain "performance-based
compensation," including stock options that are granted pursuant to a
stockholder-approved plan at an exercise price which is not less than the fair
market value of the underlying stock at the time of grant. The Company intends
that Options under the 1996 Option Plan granted at not less than fair market
value of the shares of Common Stock will qualify as "performance-based
compensation."
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<PAGE>
THE FOREGOING IS BASED UPON FEDERAL TAX LAWS AND REGULATIONS AS PRESENTLY
IN EFFECT AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF THE FEDERAL
INCOME TAX ASPECTS OF THE 1996 OPTION PLAN. ALSO, THE SPECIFIC STATE AND LOCAL
TAX CONSEQUENCES TO EACH OPTIONEE UNDER THE 1996 OPTION PLAN MAY VARY, DEPENDING
UPON THE LAWS OF THE VARIOUS STATES AND LOCALITIES AND THE INDIVIDUAL
CIRCUMSTANCES OF EACH OPTIONEE.
THE BOARD UNANIMOUSLY APPROVED THE ADOPTION OF THE 1996 OPTION PLAN AND
RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY VOTE "FOR" APPROVAL OF THE 1996
OPTION PLAN.
3. APPROVAL OF AMENDMENT AND RESTATEMENT OF THE COMPANY'S THIRD
AMENDED AND RESTATED 1990 NON-QUALIFIED STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
GENERAL
In May 1997, the Board adopted, subject to approval by the stockholders,
the amendment and restatement of the Company's Third Amended and Restated 1990
Non-Qualified Stock Option Plan for Non-Employee Directors (the "Directors
Plan"). The amendment of the Directors Plan was adopted by the Board and is
being proposed in order to (i) maintain the Company's ability to attract and
reward its directors by increasing the number of shares of Common Stock subject
to each automatic award under the Directors Plan formula from 12,000 to 15,000,
(ii) make automatic awards under the Directors Plan available to any director
who does not receive a salary as an officer of the Company, and (iii) conform
the Directors Plan to corresponding provisions in the newly adopted 1996 Option
Plan and to changes in applicable law.
The full text of the Directors Plan, as amended, is set forth on Exhibit B
to this proxy statement. The material features of the Directors Plan are
described below, but this description is only a summary and is qualified in its
entirety by reference to the actual text of the Directors Plan.
EFFECTIVE DATE OF THE DIRECTORS PLAN
The Directors Plan was originally adopted by the Board on July 12, 1990,
and became effective on September 7, 1990. The proposed amended and restated
Directors Plan was approved by the Board and became effective in May 1997,
subject to approval by the shareholders of the Company at a meeting duly called
and held within twelve months following the date of Board approval.
TYPES OF AWARDS
The Directors Plan provides for the automatic grant (as described below) of
non-qualified stock options ("Options") to eligible directors.
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ADMINISTRATION
The Directors Plan is administered by a committee appointed by the Board,
consisting of no less than two individuals (the "Plan Committee"). Members of
the Plan Committee are not entitled to participate in the Directors Plan. The
Plan Committee has the authority to administer the Directors Plan in its sole
and absolute discretion; provided, however, that the Plan Committee does not
have the authority to grant Options, to determine the number of shares of Common
Stock subject to Options or the price at which each share of Common Stock
covered by a Option may be purchased pursuant to the Directors Plan, all of
which shall be automatic (as described below). The Plan Committee is authorized
to construe and interpret the Directors Plan and to make all other
determinations necessary or advisable for the administration of the Directors
Plan.
STOCK SUBJECT TO THE DIRECTORS PLAN
The maximum aggregate number of shares of Common Stock authorized for
issuance under the Directors Plan is 250,000 (subject to adjustment as described
below).
If any Option granted under the Directors Plan expires or is terminated for
any reason without having been exercised in full, the shares of Common Stock
allocable to the unexercised portion of such Option shall again become available
for grant pursuant to the Directors Plan.
In the event of any change in capitalization affecting the Common Stock of
the Company, such as a stock dividend, stock split or recapitalization, the Plan
Committee shall make proportionate adjustments with respect to the aggregate
number of shares of Common Stock available for issuance under the Directors
Plan, the number of shares of Common Stock subject to each grant under the
Directors Plan, and the number and exercise price of shares of Common Stock
subject to outstanding Options.
ELIGIBILITY
An individual will be granted Options pursuant to the Directors Plan if
such individual (an "Eligible Director") (i) is a director of the Company, (ii)
is neither an employee nor officer (other than an officer who does not receive a
salary as an officer of the Company) of the Company or of any subsidiary, and
(iii) has not elected to decline to participate in the Directors Plan pursuant
to an irrevocable one-time election made within 30 days after first becoming a
director.
TERMS OF OPTIONS
GRANT OF OPTIONS. Options to purchase 15,000 shares of Common Stock shall
be granted automatically to any Eligible Director who first becomes an Eligible
Director on or after May 1, 1997, on the next succeeding business day following
his becoming an Eligible Director. In addition, Options to purchase 15,000
shares of Common Stock shall be granted automatically to each Eligible Director
on the third anniversary date of his preceding Option grant under the Plan and
every three years thereafter during the term of the Directors Plan, provided
that such director continues to be an Eligible Director on the date of each such
additional grant. Options shall be granted in the aforesaid manner until the
date on which the shares of Common Stock available for
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grant shall no longer be sufficient to permit grants of Options covering 15,000
shares of Common Stock to be made to each Eligible Director entitled to a grant
as of such date, in which event the shares of Common Stock then available for
grant shall be allocated on a pro rata basis among the Eligible Directors
entitled to a grant of Options as of such date.
EXERCISE PRICE. The price at which each share of Common Stock covered by a
Option may be purchased pursuant to the Directors Plan will be equal to the fair
market value of a share of Common Stock on the date of the Option grant.
EXERCISE PERIOD. Except as set forth below, (i) all Options granted to an
Eligible Director prior to May 1, 1997, shall vest and become first exercisable
at the rate of 4,000 shares of Common Stock for each twelve month period of
continuous service on the Board (from the date of Option grant) by such Eligible
Director, and (ii) all Options granted to an Eligible Director on or after May
1, 1997, shall vest and become first exercisable at the rate of 5,000 shares of
Common Stock for each twelve month period of continuous service on the Board
(from the date of Option grant) by such Eligible Director. The failure of a
Option to vest for any reason whatsoever shall cause the Option to expire and be
of no further force or effect. Unless terminated earlier, the term of each
Option shall be five years from the date of grant.
NO STOCKHOLDERS RIGHTS. No optionee and no beneficiary or other person
claiming under or through such optionee will acquire any rights as a stockholder
of the Company by virtue of such optionee having been granted an Option under
the Directors Plan. No optionee and no beneficiary or other person claiming
under or through such optionee will have any right, title or interest in or to
any shares of Common Stock allocated or reserved under the Directors Plan or
subject to any Option, except as to shares of Common Stock, if any, that have
been issued or transferred to such optionee. No adjustment will be made for
dividends or distributions or other rights for which the record date is prior to
the date of exercise, except as may be provided in the stock option agreement.
NON-TRANSFERABILITY. No Option or interest therein may be pledged,
hypothecated, encumbered or otherwise made subject to execution, attachment or
similar process, and no Option or interest therein shall be assignable or
transferable by the holder otherwise than by (i) will, (ii) the laws of descent
and distribution, or (iii) to a beneficiary upon the death of an optionee, and
an Option shall be exercisable during the lifetime of the holder only by him or
by his guardian or legal representative, except that an Option may be
transferred to one or more transferees during the lifetime of the optionee, and
may be exercised by such transferee in accordance with the terms of such Option,
subject to any terms and conditions which the Plan Committee may impose thereon.
A transferee or other person claiming any rights under the Directors Plan from
or through any optionee shall be subject to all terms and conditions of the
Directors Plan and any stock option agreement applicable to such optionee,
except as otherwise determined by the Plan Committee, and to any additional
terms and conditions deemed necessary or appropriate by the Plan Committee.
MANNER OF EXERCISE. An optionee may exercise the same by filing with the
Corporate Secretary of the Company a written election, in such form as the Plan
Committee may determine, specifying the number of shares of Common Stock with
respect to which such Option is being exercised. Such notice shall be
accompanied by payment in full of the exercise price for such shares of Common
Stock. Payment for the shares of Common Stock to be received upon exercise
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of a Option may be made in cash, in shares of Common Stock (determined with
reference to their fair market value on the date of exercise) or any combination
thereof or, if permitted by the Plan Committee, in any other manner permitted by
law and as determined by the Plan Committee.
TERMINATION OF OPTIONS. If an optionee is removed from the Board for cause
(as contemplated by the Company's by-laws), all unexercisable Options held by
such optionee on the date of such removal (whether or not vested) will expire
immediately.
In the event an optionee is no longer a member of the Board, other than by
reason of removal for cause, all Options which remain unvested at the time the
optionee is no longer a member of the Board shall expire immediately, and all
Options which have vested prior to such time shall expire twelve months
thereafter unless by their terms they expire sooner.
In the event an optionee becomes an officer (other than Chairman of the
Board without compensation for services as an officer) or employee of the
Company or a subsidiary (whether or not such optionee remains a member of the
Board) all Options which remain unvested at the time such optionee becomes an
officer or employee of the Company shall expire immediately, and all Options
which have vested prior to such time shall expire twelve months thereafter
unless by their terms they expire sooner.
CHANGE OF CONTROL
In the event of a Change of Control (see "Approval of the Company's 1996
Stock Option Plan (Item 2) - Change of Control"), all Options not vested on or
prior to the effective time of any such Change of Control shall vest immediately
prior to such effective time. Unless otherwise determined by the Plan Committee
at the time of a Change of Control, in the event of a Change in Control all
outstanding Options shall terminate and cease to be outstanding immediately
following the Change of Control; PROVIDED, HOWEVER, that no such Option
termination shall occur unless an optionee shall have been given five business
days, following prior written notice, to exercise such optionee's outstanding
vested Options at the effective time of the Change of Control, or to receive
cash in an amount per share of Common Stock subject to such Options equal to the
amount by which the price paid for a share of Common Stock (determined on a
fully diluted basis and taking into account the exercise price, as determined by
the Plan Committee) in the Change of Control exceeds the per share exercise
price of such Options. The Plan Committee in its discretion may make provisions
for the assumption of outstanding Options, or the substitution for outstanding
Options of new incentive awards covering the stock of a successor corporation or
a parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices so as to prevent dilution or enlargement of
rights.
AMENDMENTS AND TERMINATION
No Option shall be granted pursuant to the Directors Plan on or after
September 7, 2000, but Options theretofore granted may extend beyond such date.
The Board may, insofar as permitted by law, from time to time, with respect
to any shares of Common Stock at the time not subject to Options, suspend or
terminate the Directors Plan or, except as otherwise provided, revise or amend
the Directors Plan in any respect whatsoever. However, any revision or
amendment that would cause the Directors Plan to fail to comply with
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<PAGE>
any requirement of applicable law or regulation if such amendment were not
approved by the stockholders of the Company shall not be effective unless and
until such approval is obtained.
No amendment, suspension or termination of the Directors Plan that would
adversely affect the right of any optionee with respect to an Option previously
granted under the Directors Plan will be effective without the written consent
of such optionee.
SECURITIES LAW REQUIREMENTS
No shares of Common Stock shall be issued under the Directors Plan unless
and until (i) the Company and any optionee have taken all actions required to
register the shares of Common Stock under the Securities Act, or perfect an
exemption from the registration requirements thereof, (ii) any applicable
listing requirement of any stock exchange or national market system on which the
Common Stock is listed has been satisfied, and (iii) any other applicable
provision of state or federal law has been satisfied. The Company shall be
under no obligation to register the shares of Common Stock with the Securities
and Exchange Commission or to effect compliance with the registration or
qualification requirements of any state securities laws or stock exchange.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DIRECTORS PLAN
The federal income tax consequences to the Company and optionee with
respect to the issuance and exercises of Options issued under the Directors Plan
are generally the same as those relating to the issuance and exercise of
non-qualified stock options pursuant to the 1996 Option Plan. For a discussion
of the income tax consequences with respect to such options see "Certain Federal
Income Tax Consequences of the 1996 Option Plan."
OPTIONS TO BE GRANTED
Upon approval of the amendment of the Directors Plan, the Chairman of the
Board will be granted an initial Option to purchase 15,000 shares of Common
Stock under the Directors Plan. No additional Options will be granted to the
present Eligible Directors under the Directors Plan until 1998.
THE BOARD UNANIMOUSLY APPROVED THE ADOPTION OF THE AMENDMENT AND
RESTATEMENT OF THE COMPANY'S THIRD AMENDED AND RESTATED 1990 NON-QUALIFIED STOCK
OPTION PLAN FOR NON-EMPLOYEE DIRECTORS AND RECOMMENDS THAT STOCKHOLDERS OF THE
COMPANY VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE COMPANY'S THIRD AMENDED AND
RESTATED 1990 NON-QUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS.
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22
<PAGE>
PERFORMANCE GRAPH
The graph set forth below represents the cumulative total return from
December 31, 1992 to December 31, 1996 on the Common Stock of the Company, the
American Stock Exchange ("AMEX") Market Value Index, and a Peer Group Index.
The Peer Group Index is a representative grouping of 40 companies from SIC Code
3841 -- Surgical & Medical Instruments & Apparatus -- which had reportable stock
performance from January 1, 1992 to December 31, 1996. The graph has been
prepared by an outside consulting firm to the Company. The graph assumes that
the value of the investment in the Company's Common Stock and each index was
$100 on January 1, 1992 and that all dividends were reinvested.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
FROM JANUARY 1, 1992 TO DECEMBER 31, 1996
AMONG ALARIS MEDICAL, INC.,
AMEX MARKET VALUE INDEX AND PEER GROUP INDEX
[GRAPH]
<TABLE>
<CAPTION>
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11/1/92 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alaris Medical, Inc. $100.00 $61.60 $9.20 $12.80 $19.20 $24.00
- - ----------------------------------------------------------------------------------------------------------------------
Peer Group Index 100.00 83.20 60.75 69.91 119.26 129.89
- - ----------------------------------------------------------------------------------------------------------------------
AMEX Market Value Index 100.00 101.37 120.44 106.39 137.13 144.70
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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23
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DECISIONS CONTRIBUTION
In connection with the financing of the Merger, the Company made a capital
contribution (the "Capital Contribution") of approximately $19.6 million to
IMED. The Capital Contribution was funded in part through the sale to Decisions
Incorporated ("Decisions") by the Company of 13,333,333 shares of Common Stock
for aggregate proceeds of $40.0 million (the "Decisions Contribution"). The
balance of the Capital Contribution was funded with existing cash balances of
the Company. The portion of the net proceeds of the Decisions Contribution not
applied to make the Capital Contribution was used by the Company to redeem
approximately $22.0 million principal amount of its 15% Subordinated Debentures
due 1999 and fund the redemption of the Company's outstanding preferred stock.
Mr. Picower, Decisions and JA Special Partnership Limited ("JA Special") owned a
portion of the debentures and the preferred stock so redeemed. In connection
with the Decisions Contribution, Decisions exchanged an aggregate of
$37.5 million in principal amount of convertible promissory notes issued by the
Company for 29,416,086 shares of Common Stock. The balance of the Capital
Contribution was funded with existing cash balances of the Company. Mr. Picower
is the sole stockholder and sole director of Decisions.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, at April 23, 1997, information regarding
the beneficial ownership of Common Stock by (i) all persons known by the Company
who own beneficially more than 5% of the outstanding Common Stock; (ii) each
director of the Company; (iii) each of the Named Executive Officers; and
(iv) all directors and the Named Executive Officers as a group. Unless otherwise
stated, the Company believes that the beneficial owners of the shares listed
below have sole investment and voting power with respect to such shares. In
addition, unless otherwise indicated, each such person's business address is
10221 Wateridge Circle, San Diego, California 92121.
NAME AND ADDRESS OF PERCENTAGE
BENEFICIAL OWNERS NUMBER OF CLASS (1)
----------------- ------ ------------
Jeffry M. Picower . . . . . . . . . . . . . 46,643,209(2) 79.6%
South Ocean Blvd.
Palm Beach, FL 33480
William J. Mercer . . . . . . . . . . . . . 200,000(3) *
Norman M. Dean . . . . . . . . . . . . . . 16,000(4) *
Henry Green . . . . . . . . . . . . . . . . 5,000(5) *
Frederic Greenberg . . . . . . . . . . . . 14,000(6) *
Richard B. Kelsky . . . . . . . . . . . . . 94,100(7) *
Anthony B. Semedo . . . . . . . . . . . . . 36,000(8) *
Jake St. Philip . . . . . . . . . . . . . . 36,000(8) *
Richard M. Mirando . . . . . . . . . . . . 36,000(8) *
John A. de Groot . . . . . . .. . . . . . . 36,000(8) *
All directors and Named Executive Officers
as a group (10 individuals) . . . . . . . 47,116,309(9) 80.5%
- - -----------------------------
* Less than 1%
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24
<PAGE>
(1) Calculated in accordance with Rule 13d-3(d)(1) under the Exchange Act. At
April 23, 1997, the Company had 58,567,377 shares of Common Stock
outstanding.
(2) Includes (i) 20,079,477 shares of Common Stock owned by Decisions;
(ii) 2,489,463 shares of Common Stock owned by JA Special; and (iii)
24,074,269 shares of Common Stock owned by JD Partnership, L.P. ("JD
Partnership"). Mr. Picower is the sole stockholder and sole director of
Decisions, which is the sole general partner of JD Partnership, and the
sole general partner of JA Special. As a result, Mr. Picower shares or has
the sole power to vote or direct the vote of and to dispose or direct the
disposition of such shares of Common Stock and may be deemed to be the
beneficial owner of such shares.
(3) Includes (i) 100,000 shares of Common Stock owned by the William J. Mercer
Trust, of which Mr. Mercer is the trustee and a beneficiary, and (ii)
currently exercisable option on 100,000 shares of Common Stock granted upon
consummation of the Merger under the 1996 Option Plan. In addition,
pursuant to an employment agreement with the Company and IVAC Holdings,
Inc., Mr. Mercer has been granted under the 1996 Option Plan an additional
option on 500,000 shares of Common Stock, 400,000 of which vest over time
and 100,000 of which vest upon the attainment by the Company of certain
operational and financial performance targets.
(4) Includes currently exercisable option on 12,000 shares of Common Stock
under the Directors Plan. Does not include (i) option on an additional
12,000 shares of Common Stock granted under the Directors Plan that vests
over time and (ii) option on 10,000 shares of Common Stock granted in
consideration for service on a special committee of the Board of Directors
of Alaris Medical that vests over time.
(5) Does not include an option to purchase 12,000 of Common Stock granted under
the Directors Plan that vests over time.
(6) Includes currently exercisable option on 4,000 shares of Common Stock
granted under the Directors Plan. Does not include (i) option on an
additional 8,000 shares of Common Stock granted under the Directors Plan
that vests over time and (ii) option on 10,000 shares of Common Stock
granted in consideration for service on a special committee of the Board of
Directors of Alaris Medical that vests over time.
(7) Includes currently exercisable option on 12,000 shares of Common Stock
granted under the Directors Plan. Does not include option on an additional
12,000 shares of Common Stock granted under the Directors Plan that vests
over time.
(8) Represents currently exercisable option on 36,000 shares of Common Stock
granted under the 1996 Option Plan. Does not include option of 144,000
shares of Common Stock granted under the 1996 Option Plan that vests over
time.
(9) Includes currently exercisable options on 244,000 shares of Common Stock
granted under the 1996 Option Plan and option on 20,000 shares of Common
Stock granted under the Directors Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Advanced Medical's executive
officers, directors and persons who beneficially own more than 10% of a
registered class of Advanced Medical's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the American Stock Exchange. Such individuals are required by
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25
<PAGE>
regulations promulgated by the Securities and Exchange Commission to furnish
Advanced Medical with copies of all Section 16(a) reports that they file. Based
solely on review of the copies of such reports furnished to Advanced Medical, or
written representations that no reports were required, Advanced Medical believes
that during 1996, all of its executive officers, directors and greater than 10%
beneficial owners complied with the Section 16(a) filing requirements applicable
to them, except that Mr. Mercer filed one Form 4 approximately one week late
disclosing two transactions involving the purchase of shares of Common Stock.
4. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP was engaged to audit the Company's accounts in 1996.
The Board of Directors, upon the recommendation of the Audit Committee, which is
composed of two directors who are not now officers or otherwise employees of the
Company, selected Price Waterhouse LLP to audit the Company's accounts for the
year ending December 31, 1997.
A representative of Price Waterhouse LLP is expected to be present at the
Annual Meeting and to be available to respond to appropriate questions. The
representative also will have an opportunity to make a statement if he or she so
desires.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF PRICE WATERHOUSE LLP.
ANNUAL REPORT TO STOCKHOLDERS AND
STOCKHOLDER PROPOSALS FOR 1998
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1996 has been mailed concurrently with this proxy statement
to all stockholders entitled to notice of and to vote at the Annual Meeting.
The Annual Report to Stockholders is not incorporated into this proxy statement
and is not considered proxy soliciting material.
Proposals of stockholders intended to be presented for possible action at
the 1998 annual meeting must be received by the Company at its principal
executive offices prior to January 13, 1998 in order for such proposals to be
eligible for inclusion in the Company's proxy materials for its 1998 annual
meeting. All proposals received will be subject to the applicable rules of the
Securities and Exchange Commission.
FORM 10-K FOR FISCAL YEAR 1996
A COPY OF THE COMPANY'S REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1996 ON FORM 10-K, EXCLUSIVE OF EXHIBITS, IS
AVAILABLE WITHOUT CHARGE TO STOCKHOLDERS ON REQUEST AND MAY BE OBTAINED BY
WRITING TO:
CORPORATE COMMUNICATIONS
ALARIS MEDICAL, INC.
10221 WATERIDGE CIRCLE
SAN DIEGO, CALIFORNIA 92121-1579
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26
<PAGE>
OTHER MATTERS
The enclosed proxy is being solicited by the Board of Directors. The cost
of the solicitation will be borne by the Company. In addition to use of the
mails, proxies may be solicited by telephone, telegraph or personal interview by
employees of the Company and its subsidiaries without additional compensation.
The Company will reimburse brokerage firms, banks, trustees, nominees and
other persons authorized by the Company for their out-of-pocket expenses in
forwarding proxy material to the beneficial owners of the Company's stock.
Management does not know of any other matters that will be presented at the
meeting other than matters incident to the conduct thereof. However, if any
matters properly come before the meeting or any adjournments, the holders of the
proxies named in the accompanying form of proxy have discretionary authority to
vote on such matters.
By Order of the Board of Directors,
/s/ John A. de Groot
John A. de Groot
SECRETARY
San Diego, California
May 5, 1997
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27
<PAGE>
EXHIBIT A
ALARIS MEDICAL, INC.
1996 STOCK OPTION PLAN
1. NAME.
The name of this plan is the Alaris Medical, Inc. 1996
Stock Option Plan.
2. DEFINITIONS.
For the purposes of the Plan, the following terms shall
be defined as set forth below:
(a) "Affiliate" means any partnership, corporation,
firm, joint venture, association, trust,
unincorporated organization or other entity (other
than a Subsidiary) that, directly or indirectly
through one or more intermediaries, is controlled
by the Company, where the term "controlled by"
means the possession, direct or indirect, of the
power to cause the direction of the management and
policies of such entity, whether through the
ownership of voting interests or voting
securities, as the case may be, by contract or
otherwise. For purposes of Section 11(a) below,
"Affiliate" means any partnership, corporation,
firm, joint venture, association, trust,
unincorporated organization or other entity that,
directly or indirectly through one or more
intermediaries, is "controlled by" (as defined
above) Jeffry M. Picower.
(b) "Board" means the board of directors of the
Company.
(c) "Cause" as applied to any Participant means: (i)
the conviction of such individual for the
commission of any felony; (ii) the commission by
such individual of any crime involving moral
turpitude (E.G., larceny, embezzlement) which
results in harm to the business, reputation,
prospects or financial condition of the Company,
any Subsidiary or Affiliate; or (iii) the willful
neglect, failure or refusal of such individual to
carry out his duties, which results in harm to
the business,
-A1-
<PAGE>
reputation, prospects or financial condition of
the Company, any Subsidiary or Affiliate, which
neglect, failure or refusal continues for a
period of ten consecutive business days following
notice thereof, or ten cumulative business days
following successive notices thereof, to such
individual from the Company; PROVIDED, HOWEVER,
that such willful neglect, failure or refusal is
not due to the death or disability (I.E., as a
result of an injury or sickness such individual is
rendered unable to perform his duties as an
Officer, Employee, consultant or independent
contractor, as the case may be, on a full-time
basis for an extended period) of such individual
or illness leading to the death or disability of
such individual.
(d) "Code" means the Internal Revenue Code of 1986, as
amended from time to time and the Treasury
regulations promulgated thereunder.
(e) "Committee" means the committee appointed by the
Board to administer the Plan as provided in
Section 4(a).
(f) "Common Stock" means the $.01 par value common
stock of the Company or any security of the
Company identified by the Committee as having been
issued in substitution or exchange therefor or in
lieu thereof.
(g) "Company" means Alaris Medical, Inc., a Delaware
corporation.
(h) "Director" means an individual who: (i) is now, or
hereafter becomes, a member of the Board or of the
board of directors of any Subsidiary or Affiliate;
and (ii) is not eligible to participate in the
Non-Employee Director NQSO Plan.
(i) "Employee" means an individual employed by the
Company, a Subsidiary, or an Affiliate whose wages
are subject to the withholding of federal income
tax under Section 3401 of the Code.
-A2-
<PAGE>
(j) "Exchange Act" means the Securities Exchange Act
of 1934, as amended from time to time, or any
successor statute.
(k) "Fair Market Value" of a Share as of a specified
date means, except as otherwise reasonably
determined by the Committee based on reported
prices of a Share, (i) the average of the highest
and lowest market prices of a Share on such date
as reported in the American Stock Exchange (or the
principal exchange on which the Shares are then
traded) composite transactions published in the
Eastern Edition of THE WALL STREET JOURNAL or, if
no trading of Common Stock is reported for that
day, the next preceding day on which trading was
reported, or (ii) if the Shares are traded in the
over-the-counter market, the average of the
highest bid and lowest asked prices per Share on
the specified date (or the next preceding date on
which trading was reported) as reported through
the NASDAQ system or any successor thereto.
(l) "ISO" means any stock option granted pursuant to
the Plan that is intended to be and is
specifically designated as an "incentive stock
option" within the meaning of Section 422 of the
Code.
(m) "Non-Employee Director NQSO Plan" means the
Company's Third Amended and Restated 1990
Non-Qualified Stock Option Plan for Non-Employee
Directors, as may be amended from time to time.
(n) "NQSO" means any stock option granted pursuant to
the provisions of the Plan that is not an ISO.
(o) "Officer" means an individual elected or appointed
by the Board or by the board of directors of a
Subsidiary or Affiliate or chosen in such other
manner as may be prescribed by the by-laws of the
Company, a Subsidiary or Affiliate, as the case
may be, to serve as such, or, in the case of an
Affiliate which is not a corporation, any
individual elected or appointed to fulfill a
similar
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<PAGE>
function by a body or individual exercising
similar authority.
(p) "Option" means an ISO or a NQSO granted under the
Plan.
(q) "Participant" means an individual who is granted
an Option under the Plan.
(r) "Plan" means this Alaris Medical, Inc. 1996 Stock
Option Plan, as may be amended from time to time.
(s) "Rule 16b-3" means Rule 16b-3 promulgated by the
Securities and Exchange Commission under the
Exchange Act, or any successor or replacement rule
adopted by the Securities and Exchange Commission.
(t) "Share" means one share of Common Stock, adjusted
in accordance with Section 10(b), if applicable.
(u) "Stock Option Agreement" means the written
agreement between the Company and the Participant
that contains the terms and conditions pertaining
to an Option.
(v) "Subsidiary" means any corporation of which the
Company, directly or indirectly, is the beneficial
owner of fifty percent (50%) or more of the total
combined voting power of all classes of its stock
having voting power and which qualifies as a
subsidiary corporation pursuant to Section 424(f)
of the Code.
(w) "Ten Percent Shareholder" means a Participant who
prior to the grant of an ISO owned, directly or
indirectly within the meaning of Section 424(d) of
the Code, ten percent (10%) or more of the total
combined voting power of all classes of stock of
the Company, any Subsidiary or any parent of the
Company (as defined in Section 424(e) of the
Code).
3. PURPOSE.
The purpose of the Plan is to enable the Company to provide
incentives, which are linked directly to increases in
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<PAGE>
shareholder value, to certain key personnel in order that they
will be encouraged to promote the financial success and progress
of the Company.
4. ADMINISTRATION.
(a) COMPOSITION OF THE COMMITTEE.
The Plan shall be administered by a Committee appointed
by the Board, consisting of not less than a sufficient number of
"non-employee directors" (as such term is defined in Rule 16b-3),
who are also "outside directors" (within the meaning of Section
162(m) of the Code) so as to qualify the Committee to administer
the Plan as contemplated by Rule 16b-3 and Section 162(m),
respectively. Members of the Committee shall not be entitled to
participate in the Plan. Subject to the provisions of the first
sentence of this Section 4(a), the Board may from time to time
remove members from, or add members to, the Committee. Vacancies
on the Committee, however caused, shall be filled by the Board.
(b) ACTIONS BY THE COMMITTEE.
The Committee shall hold meetings at such times and
places as it may determine. Acts approved by a majority of the
members of the Committee present at a meeting at which a quorum
is present, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts
of the Committee.
(c) POWERS OF THE COMMITTEE.
Subject to the express terms and conditions hereof, the
Committee shall have the authority to administer the Plan in its
sole and absolute discretion. To this end, the Committee is
authorized to construe and interpret the Plan and to make all
other determinations necessary or advisable for the
administration of the Plan, including, but not limited to, the
authority to determine the eligible individuals who shall be
granted Options, the number of Options to be granted, the vesting
period, if any, for all Options granted hereunder, the date on
which any Option becomes first exercisable, the number of Shares
subject to each Option, the exercise price for the Shares subject
to each Option, and, whether the Option to be granted is an ISO
or a NQSO. The Committee may delegate to an Officer its
authority to grant Options to eligible individuals under the Plan
who are not Officers; provided, however, that Options to
-A5-
<PAGE>
purchase no more than 50,000 Shares may be granted to any
individual in any calendar year pursuant to such delegation of
authority. Any determination, decision or action of the
Committee in connection with the construction, interpretation,
administration or application of the Plan shall be final,
conclusive and binding upon all Participants and any person
validly claiming under or through a Participant.
(d) LIABILITY OF COMMITTEE MEMBERS.
No member of the Board or the Committee will be liable
for any action or determination made in good faith by the Board
or the Committee with respect to the Plan or any grant or
exercise of an Option thereunder.
(e) OPTION ACCOUNTS.
The Committee shall maintain a journal in which a
separate account for each Participant shall be established.
Whenever an Option is granted to or exercised by a Participant,
the Participant's account shall be appropriately credited or
debited. Appropriate adjustment shall also be made in the
journal with respect to each account in the event of an
adjustment pursuant to Section 10(b).
5. EFFECTIVE DATE AND TERM OF THE PLAN.
(a) EFFECTIVE DATE OF THE PLAN.
The Plan was adopted by the Board on November 26, 1996,
and became effective on such date, subject to approval by the
shareholders of the Company at a meeting duly called and held
within twelve months following such date.
(b) TERM OF PLAN.
No Option shall be granted pursuant to the Plan on or
after November 26, 2006, but Options theretofore granted may
extend beyond that date.
6. TYPE OF OPTIONS AND SHARES SUBJECT TO THE PLAN.
Options granted under the Plan may be either ISOs or NQSOs.
Each Stock Option Agreement shall specify whether the Option
covered thereby is an ISO or a NQSO.
The maximum aggregate number of Shares that may be issued
under the Plan is 4,000,000 Shares; PROVIDED, HOWEVER, that no
more than 600,000 Shares (subject to adjustment as
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<PAGE>
described below) shall be awarded to any Participant in any
calendar year. The limitation on the number of Shares which may
be granted under the Plan shall be subject to adjustment as
provided in Section 10(b).
If any Option granted under the Plan expires or is
terminated for any reason, any Shares as to which the Option has
not been exercised shall again be available for purchase under
Options subsequently granted. At all times during the term of
the Plan, the Company shall reserve and keep available for
issuance such number of Shares as the Company is obligated to
issue upon the exercise of all then outstanding Options.
7. SOURCE OF SHARES ISSUED UNDER THE PLAN.
Common Stock issued under the Plan may consist, in whole or
in part, of authorized or unissued Shares or treasury Shares, as
determined in the sole and absolute discretion of the Committee.
No fractional Shares shall be issued under the Plan.
8. ELIGIBILITY.
The individuals eligible for the grant of Options under the
Plan shall be: (i) all Directors, Officers and Employees; and
(ii) such individuals determined by the Committee to be rendering
substantial services as a consultant or independent contractor to
the Company or any Subsidiary or Affiliate of the Company, as the
Committee shall determine from time to time in its sole and
absolute discretion; PROVIDED, HOWEVER, that only Employees of
the Company or any Subsidiary shall be eligible to receive ISOs.
Any Participant shall be eligible to be granted more than one
Option hereunder.
9. OPTIONS.
(a) GRANT OF OPTIONS.
Subject to any applicable requirements of the Code and
any regulations issued thereunder, the date of the grant of an
Option shall be the date on which the Committee determines to
grant the Option.
(b) EXERCISE PRICE OF ISOS.
The exercise price of each Share subject to an ISO
shall not be less than the Fair Market Value of a Share on
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<PAGE>
the date of grant of the ISO, except that in the case of a grant
of an ISO to a Participant who at the time such ISO was granted
was a Ten Percent Shareholder, the exercise price shall not be
less than 110% of the Fair Market Value of a Share on the date of
the grant of the ISO.
(c) EXERCISE PRICE OF NQSOS.
The exercise price of each Share subject to a NQSO
shall be determined by the Committee at the time of grant but
will not be less than the par value of a Share.
(d) EXERCISE PERIOD.
Each Option granted hereunder shall vest and become
first exercisable as determined by the Committee.
(e) TERMS AND CONDITIONS.
All Options granted pursuant to the Plan shall be
evidenced by a Stock Option Agreement (which need not be the same
for each Participant or Option), approved by the Committee which
shall be subject to the following express terms and conditions
and the other terms and conditions as are set forth in this
Section 9, and to such other terms and conditions as shall be
determined by the Committee in its sole and absolute discretion
which are not inconsistent with the terms of the Plan:
(i) the failure of an Option to vest for
any reason whatsoever shall cause the
unvested Option to expire and be of no
further force or effect;
(ii) unless terminated earlier pursuant to
Sections 9(i) or 11, the term of any
Option granted under the Plan shall be
specified in the Stock Option Agreement
but shall be no greater than ten years
from the date of grant; PROVIDED,
HOWEVER, that no ISO granted to a Ten
Percent Shareholder shall have a term of
more than five years from the date of
grant;
(iii) in the case of an ISO, the aggregate
Fair Market Value (determined as of the
time the ISO is granted) of Shares
exercisable for the first time by a
Participant
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<PAGE>
during any calendar year (under the Plan
and any other incentive stock option
plans of the Company, any Subsidiary or
any parent of the Company (as defined in
Section 424(e) of the Code) shall not
exceed $100,000;
(iv) no Option or interest therein may be
pledged, hypothecated, encumbered or
otherwise made subject to execution,
attachment or similar process, and no
Option or interest therein shall be
assignable or transferable by the holder
otherwise than by will or by the laws of
descent and distribution or to a
beneficiary upon the death of a
Participant, and an Option shall be
exercisable during the lifetime of the
holder only by him or by his guardian or
legal representative, except that an
Option (other than an ISO) may be
transferred to one or more transferees
during the lifetime of the Participant,
and may be exercised by such transferee
in accordance with the terms of such
Option, but only if and to the extent
such transfers are permitted by the
Committee pursuant to the express terms
of the Stock Option Agreement (subject
to any terms and conditions which the
Committee may impose thereon). A
transferee or other person claiming any
rights under the Plan from or through
any Participant shall be subject to all
terms and conditions of the Plan and any
Stock Option Agreement applicable to
such Participant, except as otherwise
determined by the Committee, and to any
additional terms and conditions deemed
necessary or appropriate by the
Committee; and
(v) payment for the Shares to be received
upon exercise of an Option may be made
in cash or, if so provided by the
Committee in the Stock Option Agreement,
in Shares (determined with reference to
their Fair Market Value on the date of
exercise), or any combination thereof.
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<PAGE>
(f) ADDITIONAL MEANS OF PAYMENT.
Any Stock Option Agreement may, in the sole and
absolute discretion of the Committee, permit payment by any other
form of legal consideration consistent with applicable law and
any rules and regulations relating thereto, including, but not
limited to, the execution and delivery of a full recourse
promissory note by the Participant to the Company.
(g) EXERCISE.
The holder of an Option may exercise the same by
filing with the Corporate Secretary of the Company a written
election, in such form as the Committee may determine, specifying
the number of Shares with respect to which such Option is being
exercised, and accompanied by payment in full of the exercise
price for such Shares. Notwithstanding the foregoing, the
Committee may specify a reasonable minimum number of Shares that
may be purchased on any exercise of an Option, provided that such
minimum number will not prevent the Participant from exercising
the Option with respect to the full number of Shares as to which
the Option is then exercisable.
(h) WITHHOLDING TAXES.
Prior to issuance of the Shares upon exercise of
an Option, the Participant shall pay or make adequate provision
for the payment of any federal, state, local or foreign
withholding obligations of the Company or any Subsidiary or
Affiliate of the Company, if applicable. In the event a
Participant shall fail to make adequate provision for the payment
of such obligations, the Company shall have the right to withhold
an amount of Shares otherwise deliverable to the Participant
sufficient to pay such withholding obligations or, in the
discretion of the Committee, to refuse to honor the exercise.
(i) TERMINATION OF OPTIONS.
Options granted under the Plan shall be subject to
the following events of termination, unless otherwise provided in
the Stock Option Agreement:
(i) in the event a Participant who is a Director
(but not an Officer or Employee) is removed
from the Board or the board of
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directors of a Subsidiary or an Affiliate, as
the case may be, for cause (as contemplated
by the charter, by-laws or other
organizational or governing documents), all
unexercised Options held by such Participant
on the date of such removal (whether or not
vested) shall expire immediately; and
(ii) In the event the employment of a Participant
who is an Officer or Employee is terminated
for Cause, or in the event the services of a
Participant who is a consultant or
independent contractor are terminated for
Cause, all unexercised Options held by such
Participant on the date of such termination
(whether or not vested) shall expire
immediately; and
(iii) in the event a Participant is no longer a
Director, Officer, Employee, consultant or
independent contractor, other than for the
reasons set forth in Sections 9(i)(i) or
9(i)(ii), all Options which remain unvested
on the date the Participant ceases to be a
Director, Officer or Employee, as the case
may be, shall expire immediately, and all
Options which have vested prior to such date
shall expire twelve months thereafter unless
by their terms they expire sooner.
10. RECAPITALIZATION.
(a) CORPORATE FLEXIBILITY.
The existence of the Plan and the Options granted
hereunder shall not affect or restrict in any way the right or
power of the Board or the shareholders of the Company, in their
sole and absolute discretion, to make, authorize or consummate
any adjustment, recapitalization, reorganization or other change
in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of bonds, debentures,
common stock, preferred or prior preference stock ahead of or
affecting the Company's capital stock or the rights thereof, the
dissolution or liquidation of the Company or any sale or transfer
of all or any part of its assets or business, or any other grant
of rights, issuance of securities, transaction, corporate act or
proceeding
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and notwithstanding the fact that any such activity, proceeding,
action, transaction or other event may have, or be expected to
have, an impact (whether positive or negative) on the value of
any Option or underlying Shares.
(b) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Except as otherwise provided in Section 11, in the
event of any change in capitalization affecting the Common Stock
of the Company, such as a stock dividend, stock split or
recapitalization, the Committee shall make proportionate
adjustments with respect to: (i) the aggregate number of Shares
available for issuance under the Plan; (ii) the number of Shares
available for any individual award; (iii) the number and exercise
price of Shares subject to outstanding Options; PROVIDED,
HOWEVER, that the number of Shares subject to any Option shall
always be a whole number; and (iv) such other matters as shall be
appropriate in light of the circumstances.
11. CHANGE OF CONTROL
In the event of a Change of Control (as defined below),
unless otherwise determined by the Committee at the time of grant
or by amendment (with the holder's consent) of such grant, all
Options not vested on or prior to the effective time of any such
Change of Control shall vest immediately prior to such effective
time. Unless otherwise determined by the Committee in the Stock
Option Agreement or at the time of a Change of Control, in the
event of a Change of Control, all outstanding Options shall
terminate and cease to be outstanding immediately following the
Change of Control; PROVIDED, HOWEVER, that no such Option
termination shall occur unless a Participant shall have been
given five business days, following prior written notice, to
exercise such Participant's outstanding vested Options at the
effective time of the Change of Control, or to receive cash in an
amount per Share subject to such Options equal to the amount by
which the price paid for a Share (determined on a fully diluted
basis and taking into account the exercise price, as determined
by the Committee) in the Change of Control exceeds the per share
exercise price of such Options. The Committee in its discretion
may make provisions for the assumption of outstanding Options, or
the substitution for outstanding Options of new incentive awards
covering the stock of a successor corporation or a parent or
subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices so as to prevent dilution or
enlargement of rights.
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A "Change of Control" will be deemed to occur on the date
any of the following events occur:
(a) any person or persons acting together which would
constitute a "group" for purposes of Section 13(d) of the
Exchange Act (other than the Company, any Subsidiary and Jeffry
M. Picower (including, any of his Affiliates and any lineal
descendant of Mr. Picower, any widow or then current spouse of
Mr. Picower or of any such lineal descendant, a trust established
principally for the benefit of any of the foregoing, any entity
which is at least 90% beneficially owned by any of the foregoing,
and the executor, administrator or personal representative of the
estate of any of the foregoing (the "Picower Group"))
beneficially own (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, securities of the Company or any
Significant Subsidiary (as defined below) representing greater
than 10% of the total combined voting power of the Company or the
Significant Subsidiary entitled to vote in the election of the
board of directors of the Company or the Significant Subsidiary;
PROVIDED, HOWEVER, that such event shall not constitute a Change
of Control unless and until the combined voting power of such
securities owned beneficially, directly or indirectly, by such
person or persons is greater than the combined voting power of
all such securities owned beneficially, directly or indirectly,
by Mr. Picower and the Picower Group;
(b) persons other than the Current Directors (as
herein defined) constitute a majority of the members of the Board
(for these purposes, a "Current Director" means any member of the
Board as of November 27, 1996, and any successor of any such
member whose election, or nomination for election by the
Company's shareholders, was approved by at least a majority of
the Current Directors then on the Board or by Mr. Picower or the
Picower Group);
(c) the consummation of (i) a plan of liquidation of
all or substantially all of the assets of the Company or any
Subsidiary owning directly or indirectly all or substantially all
of the consolidated assets of the Company (a "Significant
Subsidiary"), or (ii) an agreement providing for the merger or
consolidation of the Company or a Significant Subsidiary (A) in
which the Company or the Significant Subsidiary is not the
continuing or surviving corporation (other than a consolidation
or merger with a wholly-owned subsidiary of the Company in which
all Shares of the Company or common stock in the Significant
Subsidiary
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outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for all or substantially all of the
common stock of the surviving corporation and (if the Company
ceases to exist) the surviving corporation assumes all the
Options) or (B) pursuant to which, even though the Company is the
continuing or surviving corporation, the Shares of the Company or
common stock in the Significant Subsidiary are converted into
cash, securities or other property; PROVIDED, HOWEVER, that no
"Change of Control" shall be deemed to occur as the result of a
consolidation or merger of the Company or a Significant
Subsidiary in which the holders of the Shares of the Company
immediately prior to the consolidation or merger have, as a
result thereof, directly or indirectly, at least a majority of
the combined voting power of all classes of voting stock of the
continuing or surviving corporation or its parent immediately
after such consolidation or merger or in which the Board
immediately prior to the merger or consolidation would,
immediately after the merger or consolidation, constitute a
majority of the board of directors of the continuing or surviving
corporation or its parent; or
(d) the consummation of an agreement (or agreements)
providing for the sale or other disposition (in one transaction
or a series of transactions) of all or substantially all of the
assets of the Company or a Significant Subsidiary other than such
a sale or disposition immediately after which such assets will be
owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of the
Shares immediately prior to such sale or disposition.
12. SECURITIES LAW REQUIREMENTS.
No Shares shall be issued under the Plan unless and until:
(i) the Company and the Participant have taken all actions
required to register the Shares under the Securities Act of 1933,
as amended, or perfect an exemption from the registration
requirements thereof; (ii) any applicable listing requirement of
any stock exchange or national market system on which the Common
Stock is listed has been satisfied; and (iii) any other
applicable provision of state or federal law has been satisfied.
The Company shall be under no obligation to register the Shares
with the Securities and Exchange Commission or to effect com
pliance with the registration or qualification requirements of
any state securities laws or stock exchange.
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13. AMENDMENT AND TERMINATION.
(a) MODIFICATIONS TO THE PLAN.
The Board may, insofar as permitted by law, from time
to time, with respect to any Shares at the time not subject to
Options, suspend or terminate the Plan or revise or amend the
Plan in any respect whatsoever. However, unless the Board
specifically otherwise provides, any revision or amendment that
would cause the Plan to fail to comply with Section 422 or 162(m)
of the Code or any other requirement of applicable law or
regulation if such amendment were not approved by the
shareholders of the Company, shall not be effective unless and
until such approval is obtained.
(b) RIGHTS OF PARTICIPANT.
No amendment, suspension or termination of the Plan or
of any Option that would adversely affect the right of any
Participant with respect to an Option previously granted under
the Plan will be effective without the written consent of the
affected Participant.
14. MISCELLANEOUS.
(a) SHAREHOLDERS' RIGHTS
No Participant and no beneficiary or other person
claiming under or through such Participant shall acquire any
rights as a shareholder of the Company by virtue of such
Participant having been granted an Option under the Plan. No
Participant and no beneficiary or other person claiming under or
through such Participant will have any right, title or interest
in or to any Shares allocated or reserved under the Plan or
subject to any Options, except as to Shares, if any, that have
been issued or transferred to such Participant. No adjustment
shall be made for dividends or distributions or other rights for
which the record date is prior to the date of exercise of an
Option, except as may be provided in the Stock Option Agreement.
(b) OTHER COMPENSATION ARRANGEMENTS.
Nothing contained in the Plan shall prevent the Board
from adopting other compensation arrangements, subject to
shareholder approval if such approval is required. Such other
arrangements may be either generally applicable or applicable
only in specific cases.
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<PAGE>
(c) TREATMENT OF PROCEEDS.
Proceeds realized from the exercise of Options under
the Plan shall constitute general funds of the Company.
(d) COSTS OF THE PLAN.
The costs and expenses of administering the Plan shall
be borne by the Company.
(e) NO RIGHT TO CONTINUE EMPLOYMENT OR SERVICES.
Nothing contained in the Plan or in any instrument
executed pursuant to the Plan will confer upon any Participant
any right to continue to render services to the Company, a
Subsidiary or Affiliate; to continue as a Director, Officer,
Employee, consultant or independent contractor; or affect the
right of the Company, a Subsidiary, an Affiliate, the Board, the
board of directors of a Subsidiary or an Affiliate, the
shareholders of the Company or a Subsidiary, or the holders of
interests of an Affiliate, as applicable, to terminate the
directorship, office, employment or consultant or independent
contractor relationship, as the case may be, of any Participant
at any time with or without Cause. The term "Cause" as defined
herein is included solely for the purposes of the Plan and is
not, and shall not be deemed to be: (i) a restriction on the
right of the Company, a Subsidiary or Affiliate, as the case may
be, to terminate any Officer or Employee for any reason
whatsoever; or (ii) a part of the employment relationship
(whether oral or written, express or implied) of any such
individual.
(f) SEVERABILITY.
The provisions of the Plan shall be deemed severable
and the validity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions
hereof.
(g) GOVERNING LAW.
The Plan and all actions taken thereunder shall be
enforced, governed and construed by and interpreted under the
laws of the State of Delaware applicable to contracts made and to
be performed wholly within such State without giving effect to
the principles of conflict of laws thereof.
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<PAGE>
(h) HEADINGS.
The headings contained in this Plan are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Plan.
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<PAGE>
EXHIBIT B
THIRD AMENDED AND RESTATED
1990 NON-QUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. NAME.
The name of this plan is the Third Amended and Restated 1990 Non-
Qualified Stock Option Plan for Non-Employee Directors.
2. DEFINITIONS.
For the purposes of the Plan, the following terms shall be defined as
set forth below:
(a) "Board" means the board of directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and the Treasury regulations promulgated
thereunder.
(c) "Committee" means the committee appointed by the Board to
administer the Plan as provided in Section 4(a).
(d) "Common Stock" means the $.01 par value common stock of the
Company or any security of the Company identified by the
Committee as having been issued in substitution or exchange
therefor or in lieu thereof.
(e) "Company" means Alaris Medical, Inc., a Delaware corporation.
(f) "Effective Date" means September 7, 1990.
(g) "Employee" means an individual whose wages are subject to the
withholding of federal income tax under Section 3401 of the Code.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute.
(i) "Fair Market Value" of a Share as of a specified date means,
except as otherwise reasonably determined by the Committee based
on reported prices of a Share, (i) the average of the highest
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and lowest market prices of a Share on such date as reported in
the American Stock Exchange (or the principal exchange on which
the Shares are then traded) composite transactions published in
the Eastern Edition of THE WALL STREET JOURNAL or, if no trading
of Common Stock is reported for that day, the next preceding day
on which trading was reported, or (ii) if the Shares are traded
in the over-the-counter market, the average of the highest bid
and lowest asked prices per Share on the specified date (or the
next preceding date on which trading was reported) as reported
through the NASDAQ system or any successor thereto.
(j) "Non-Employee Director" means an individual who: (i) is now, or
hereafter becomes, a member of the Board; (ii) is neither an
Employee nor an Officer (other than an Officer who does not
receive a salary as an Officer) of the Company or of any
Subsidiary on the date of the grant of the NQSO; and (iii) has
not elected to decline to participate in the Plan pursuant to the
next succeeding sentence. A director otherwise eligible to
participate in the Plan may make an irrevocable, one-time
election, by written notice to the Corporate Secretary of the
Company and the Chairman of the Committee within thirty days
after his initial election or appointment to the Board to decline
to participate in the Plan.
(k) "NQSO" means an option granted under this Plan, which option is
not qualified under Section 422 of the Code.
(l) "Officer" means an individual elected or appointed by the Board
or by the board of directors of a Subsidiary, or chosen in such
other manner as may be prescribed by the by-laws of the Company
or a Subsidiary, as the case may be, to serve as such.
(m) "Participant" means a Non-Employee Director who is granted a NQSO
under the Plan.
(n) "Plan" means this Third Amended and Restated 1990 Non-Qualified
Stock Option Plan for Non-Employee Directors.
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(o) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act, or any successor or
replacement rule adopted by the Securities and Exchange
Commission.
(p) "Share" means one share of Common Stock, adjusted in accordance
with Section 9(b), if applicable.
(q) "Stock Option Agreement" means the written agreement between the
Company and the Participant that contains the terms and
conditions pertaining to the NQSO.
(r) "Subsidiary" means any corporation or entity of which the
Company, directly or indirectly, is the beneficial owner of fifty
percent (50%) or more of the total combined voting power of all
classes of its stock having voting power, unless the Committee
shall determine that any such corporation or entity shall be
excluded hereunder from the definition of the term Subsidiary.
3. PURPOSE.
The purpose of the Plan is to enable the Company to provide
incentives, which are linked directly to increases in shareholder value, to Non-
Employee Directors in order that they will be encouraged to serve on the Board
and exert their best efforts on behalf of the Company.
4. ADMINISTRATION.
(a) COMPOSITION OF THE COMMITTEE.
The Plan shall be administered by a Committee appointed by the Board
consisting of no less than two individuals. Members of the Committee need not
be members of the Board, Officers or Employees of the Company. Members of the
Committee shall not be entitled to participate in the Plan. The Board may from
time to time remove members from, or add members to, the Committee. Vacancies
on the Committee, however caused, shall be filled by the Board.
(b) ACTIONS BY THE COMMITTEE.
The Committee shall hold meetings at such times and places as it may
determine. Acts approved by a majority of the members of the Committee present
at a meeting at which a quorum is present, or acts reduced to or approved in
writing by a
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majority of the members of the Committee, shall be the valid acts of the
Committee.
(c) POWERS OF THE COMMITTEE.
The Committee shall have the authority to administer the Plan in its
sole and absolute discretion; PROVIDED, HOWEVER, that the Committee shall have
no authority to grant NQSOs, to determine the number of Shares subject to NQSOs
or the price at which each Share covered by a NQSO may be purchased pursuant to
the Plan, all of which shall be automatic as described in Section 8. To this
end, the Committee is authorized to construe and interpret the Plan and to make
all other determinations necessary or advisable for the administration of the
Plan. Subject to the foregoing, any determination, decision or action of the
Committee in connection with the construction, interpretation, administration or
application of the Plan shall be final, conclusive and binding upon all
Participants and any person validly claiming under or through a Participant.
(d) LIABILITY OF COMMITTEE MEMBERS.
No member of the Board or the Committee will be liable for any action
or determination made in good faith by the Board or the Committee with respect
to the Plan or any grant or exercise of a NQSO thereunder.
(e) NQSO ACCOUNTS.
The Committee shall maintain a journal in which a separate account for
each Participant shall be established. Whenever NQSOs are granted to or
exercised by a Participant, the Participant's account shall be appropriately
credited or debited. Appropriate adjustment shall also be made in the journal
with respect to each account in the event of an adjustment pursuant to Section
9(b).
5. EFFECTIVE DATE AND TERM OF THE PLAN.
(a) EFFECTIVE DATE OF THE PLAN.
The Plan in its original form was adopted by the Board on July 12,
1990 and became effective on September 7, 1990. The Plan in its first amended
and restated form was adopted by the Board and became effective on June 30,
1992. The Plan in its second amended and restated form was adopted by the Board
and became effective on June 28, 1994. The Plan in its third amended and
restated form was adopted by the Board and became effective on May __, 1997,
subject to approval by the shareholders of the
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Company at a meeting duly called and held within twelve months following the
date of Board approval.
(b) TERM OF PLAN.
No NQSO shall be granted pursuant to the Plan on or after September 7,
2000, but NQSOs theretofore granted may extend beyond that date.
6. SHARES SUBJECT TO THE PLAN.
The maximum aggregate number of Shares which may be subject to NQSOs
granted to Non-Employee Directors under the Plan shall be 250,000. The
limitation on the number of Shares which may be subject to NQSOs under the Plan
shall be subject to adjustment as provided in Section 9(b).
If any NQSO granted under the Plan expires or is terminated for any
reason without having been exercised in full, the Shares allocable to the
unexercised portion of such NQSO shall again become available for grant pursuant
to the Plan. At all times during the term of the Plan, the Company shall
reserve and keep available for issuance such number of Shares as the Company is
obligated to issue upon the exercise of all then outstanding NQSOs.
7. SOURCE OF SHARES ISSUED UNDER THE PLAN.
Common Stock issued under the Plan may consist, in whole or in part,
of authorized and unissued Shares or treasury Shares, as determined in the sole
and absolute discretion of the Committee. No fractional Shares shall be issued
under the Plan.
8. NON-QUALIFIED STOCK OPTIONS.
(a) GRANT OF NQSOS.
An individual who first becomes a Non-Employee Director on or after
May 1, 1997, shall be granted automatically NQSOs to purchase 15,000 Shares on
the next succeeding business day after becoming a Non-Employee Director. In
addition, NQSOs to purchase 15,000 Shares shall be granted automatically to each
Non-Employee Director on the third anniversary date of his preceding NQSO grant
under the Plan and every three years thereafter during the term of the Plan,
provided that said Non-Employee Director continues to be a member of the Board
on the date of each such additional grant. NQSOs shall be granted in the
aforesaid manner until the date on which the Shares available for grant shall no
longer be sufficient to permit grants of NQSOs covering 15,000
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Shares to be made to each Non-Employee Director entitled to a grant as of such
date, in which event the Shares then available for grant shall be allocated on a
PRO RATA basis among the Non-Employee Directors entitled to a grant of NQSOs as
of such date.
(b) EXERCISE PRICE.
The price at which each Share covered by a NQSO may be purchased
pursuant to this Plan shall be equal to the Fair Market Value of a Share on the
date of the NQSO grant.
(c) TERMS AND CONDITIONS.
All NQSOs granted pursuant to the Plan shall be evidenced by a Stock
Option Agreement (which need not be the same for each Participant or NQSO),
approved by the Committee which shall be subject to the following express terms
and conditions and to the other terms and conditions specified in this Section
8, and to such other terms and conditions as shall be determined by the
Committee in its sole and absolute discretion which are not inconsistent with
the terms of the Plan:
(i) except as set forth in Section 10, (A) all NQSOs granted to
a Participant prior to May 1, 1997, shall vest and become
first exercisable at the rate of 4,000 Shares for each
twelve month period of continuous service on the Board (from
the date of grant of the NQSO) by such Participant, and (B)
all NQSOs granted to a Participant on or after May 1, 1997,
shall vest and become first exercisable at the rate of 5,000
Shares for each twelve month period of continuous service on
the Board (from the date of grant of the NQSO) by such
Participant;
(ii) the failure of a NQSO to vest for any reason whatsoever
shall cause the NQSO to expire and be of no further force or
effect;
(iii) unless terminated earlier pursuant to Sections 8(f) or 10,
the term of each NQSO shall be five years from the date of
grant;
(iv) no NQSO or interest therein may be pledged, hypothecated,
encumbered or otherwise made subject to execution,
attachment or similar process, and no NQSO or interest
therein shall be assignable or transferable by the
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holder otherwise than by will or by the laws of descent and
distribution or to a beneficiary upon the death of a
Participant, and an NQSO shall be exercisable during the
lifetime of the holder only by him or by his guardian or
legal representative, except that a NQSO may be transferred
to one or more transferees during the lifetime of the
Participant, and may be exercised by such transferee in
accordance with the terms of such NQSO, subject to any terms
and conditions which the Committee may impose thereon. A
transferee or other person claiming any rights under the
Plan from or through any Participant shall be subject to all
terms and conditions of the Plan and any Stock Option
Agreement applicable to such Participant, except as
otherwise determined by the Committee, and to any additional
terms and conditions deemed necessary or appropriate by the
Committee; and
(v) payment for the Shares to be received upon exercise of a
NQSO may be made in cash or in Shares (determined with
reference to their Fair Market Value on the date of
exercise), or any combination thereof.
(d) ADDITIONAL MEANS OF PAYMENT.
Any Stock Option Agreement may, in the sole and absolute discretion of
the Committee, permit payment by any other form of legal consideration
consistent with applicable law and any rules and regulations relating thereto,
including, but not limited to, the execution and delivery of a full recourse
promissory note by the Participant to the Company.
(e) EXERCISE.
The holder of a NQSO may exercise the same by filing with the
Corporate Secretary of the Company a written election, in such form as the
Committee may determine, specifying the number of Shares with respect to which
such NQSO is being exercised. Such notice shall be accompanied by payment in
full of the exercise price for such Shares. Notwithstanding the foregoing, the
Committee may specify a reasonable minimum number of Shares that may be
purchased on any exercise of an Option, provided that such minimum number will
not prevent the
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Participant from exercising the Option with respect to the full number of Shares
as to which the Option is then exercisable.
(f) TERMINATION OF NQSOS.
NQSOs granted under the Plan shall be subject to the following events
of termination:
(i) in the event a Participant is removed from the Board for
cause (as contemplated by the Company's by-laws), all
unexercised NQSOs held by such Participant on the date of
such removal (whether or not vested) will expire
immediately;
(ii) in the event a Participant is no longer a member of the
Board, other than by reason of removal for Cause, all NQSOs
which remain unvested at the time the Participant is no
longer a member of the Board shall expire immediately, and
all NQSOs which have vested prior to such time shall expire
twelve months thereafter unless by their terms they expire
sooner; and
(iii) in the event a Participant becomes an Officer or Employee of
the Company or a Subsidiary (whether or not such Participant
remains a member of the Board) all NQSOs which remain
unvested on the date such Participant becomes an Officer or
Employee of the Company shall expire immediately, and all
NQSOs which have vested prior to such date shall expire
twelve months thereafter unless by their terms they expire
sooner.
9. RECAPITALIZATION.
(a) CORPORATE FLEXIBILITY.
The existence of the Plan and the NQSOs granted hereunder shall
not affect or restrict in any way the right or power of the Board or the
shareholders of the Company, in their sole and absolute discretion, to make,
authorize or consummate any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of bonds, debentures, common stock,
preferred or prior preference stocks ahead of or affecting the Company's capital
stock or the rights thereof, the
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dissolution or liquidation of the Company or any sale or transfer of all or any
part of its assets or business, or any other grant of rights, issuance of
securities, transaction, corporate act or proceeding and notwithstanding the
fact that any such activity, proceeding, action, transaction or other event may
have, or be expected to have, an impact (whether positive or negative) on the
value of any NQSO or underlying Shares.
(b) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Except as otherwise provided in Section 10 below, in the event of any
change in capitalization affecting the Common Stock of the Company, such as a
stock dividend, stock split or recapitalization, the Committee shall make
proportionate adjustments with respect to: (i) the aggregate number of Shares
available for issuance under the Plan; (ii) the number of shares subject to each
grant under the Plan; (iii) the number and exercise price of Shares subject to
outstanding NQSOs; and (iv) such other matters as shall be appropriate in light
of the circumstances; PROVIDED, HOWEVER, that the number of Shares subject to
any NQSO shall always be a whole number.
10. CHANGE OF CONTROL
In the event of a Change of Control (as defined below), all NQSOs not
vested on or prior to the effective time of any such Change of Control shall
vest immediately prior to such effective time. Unless otherwise determined by
the Committee at the time of a Change of Control, in the event of a Change of
Control all outstanding NQSOs shall terminate and cease to be outstanding
immediately following the Change of Control; PROVIDED, HOWEVER, that no such
NQSO termination shall occur unless a Participant shall have been given five
business days, following prior written notice, to exercise such Participant's
outstanding vested NQSOs at the effective time of the Change of Control, or to
receive cash in an amount per Share subject to such NQSOs equal to the amount by
which the price paid for a Share (determined on a fully diluted basis and taking
into account the exercise price, as determined by the Committee) in the Change
of Control exceeds the per share exercise price of such NQSOs. The Committee in
its discretion may make provisions for the assumption of outstanding NQSOs, or
the substitution for outstanding NQSOs of new incentive awards covering the
stock of a successor corporation or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices so as to
prevent dilution or enlargement of rights.
A "Change of Control" will be deemed to occur on the date any of
the following events occur:
-B9-
<PAGE>
(a) any person or persons acting together which would constitute a
"group" for purposes of Section 13(d) of the Exchange Act (other than the
Company, any Subsidiary and Jeffry M. Picower (including, any of his Affiliates
and any lineal descendant of Mr. Picower, any widow or then current spouse of
Mr. Picower or of any such lineal descendant, a trust established principally
for the benefit of any of the foregoing, any entity which is at least 90%
beneficially owned by any of the foregoing, and the executor, administrator or
personal representative of the estate of any of the foregoing (the "Picower
Group")) beneficially own (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, securities of the Company or any Significant Subsidiary
(as defined below) representing greater than 10% of the total combined voting
power of the Company or the Significant Subsidiary entitled to vote in the
election of the board of directors of the Company or the Significant Subsidiary;
PROVIDED, HOWEVER, that such event shall not constitute a Change of Control
unless and until the combined voting power of such securities owned
beneficially, directly or indirectly, by such person or persons is greater than
the combined voting power of all such securities owned beneficially, directly or
indirectly, by Mr. Picower and the Picower Group;
(b) persons other than the Current Directors (as herein defined)
constitute a majority of the members of the Board (for these purposes, a
"Current Director" means any member of the Board as of May 1, 1997, and any
successor of any such member whose election, or nomination for election by the
Company's shareholders, was approved by at least a majority of the Current
Directors then on the Board or by Mr. Picower or the Picower Group);
(c) the consummation of (i) a plan of liquidation of all or
substantially all of the assets of the Company or any Subsidiary owning directly
or indirectly all or substantially all of the consolidated assets of the Company
(a "Significant Subsidiary"), or (ii) an agreement providing for the merger or
consolidation of the Company or a Significant Subsidiary (A) in which the
Company or a Significant Subsidiary is not the continuing or surviving
corporation (other than a consolidation or merger with a wholly-owned subsidiary
of the Company in which all Shares of the Company or common stock in the
Significant Subsidiary outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for all or substantially all of the common
stock of the surviving corporation and (if the Company ceases to exist) the
surviving corporation assumes all the NQSOs) or (B) pursuant to which, even
though the Company is the continuing or surviving corporation, the Shares of the
-B10-
<PAGE>
Company or common stock in the Significant Subsidiary are converted into cash,
securities or other property; PROVIDED, HOWEVER, that no "Change of Control"
shall be deemed to occur as the result of a consolidation or merger of the
Company or a Significant Subsidiary in which the holders of the Shares of the
Company immediately prior to the consolidation or merger have, as a result
thereof, directly or indirectly, at least a majority of the combined voting
power of all classes of voting stock of the continuing or surviving corporation
or its parent immediately after such consolidation or merger or in which the
Board immediately prior to the merger or consolidation would, immediately after
the merger or consolidation, constitute a majority of the board of directors of
the continuing or surviving corporation or its parent; or
(d) the consummation of an agreement (or agreements) providing for
the sale or other disposition (in one transaction or a series of transactions)
of all or substantially all of the assets of the Company or a Significant
Subsidiary other than such a sale or disposition immediately after which such
assets will be owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of the Shares
immediately prior to such sale or disposition.
11. SECURITIES LAW REQUIREMENTS.
No Shares shall be issued under the Plan unless and until: (i) the
Company and the Participant have taken all actions required to register the
Shares under the Securities Act of 1933, as amended, or perfect an exemption
from the registration requirements thereof; (ii) any applicable listing
requirement of any stock exchange or national market system on which the Common
Stock is listed has been satisfied; and (iii) any other applicable provision of
state or federal law has been satisfied. The Company shall be under no
obligation to register the Shares with the Securities and Exchange Commission or
to effect compliance with the registration or qualification requirements of any
state securities laws or stock exchange.
12. AMENDMENT AND TERMINATION.
(a) MODIFICATIONS TO THE PLAN.
The Board may, insofar as permitted by law, from time to time, with
respect to any Shares at the time not subject to NQSOs, suspend or terminate the
Plan or, subject to Sections 8(a) and 8(b), revise or amend the Plan in any
respect whatsoever. However, any revision or amendment that would cause the
Plan to fail to comply with any requirement of applicable law or
-B11-
<PAGE>
regulation if such amendment were not approved by the shareholders of the
Company shall not be effective unless and until such approval is obtained.
(b) RIGHTS OF PARTICIPANT.
No amendment, suspension or termination of the Plan or of any NQSO
that would adversely affect the right of any Participant with respect to a NQSO
previously granted under the Plan will be effective without the written consent
of the affected Participant.
13. MISCELLANEOUS
(a) SHAREHOLDERS' RIGHTS.
No Participant and no beneficiary or other person claiming under or
through such Participant shall acquire any rights as a shareholder of the
Company by virtue of such Participant having been granted a NQSO under the Plan.
No Participant and no beneficiary or other person claiming under or through such
Participant will have any right, title or interest in or to any Shares allocated
or reserved under the Plan or subject to any NQSO, except as to Shares, if any,
that have been issued or transferred to such Participant. No adjustment shall
be made for dividends or distributions or other rights for which the record date
is prior to the date of exercise.
(b) OTHER COMPENSATION ARRANGEMENTS.
Nothing contained in the Plan shall prevent the Board from adopting
other compensation arrangements, subject to shareholder approval if such
approval is required. Such other arrangements may be either generally
applicable or applicable only in specific cases.
(c) TREATMENT OF PROCEEDS.
Proceeds realized from the exercise of NQSOs under the Plan shall
constitute general funds of the Company.
(d) COSTS OF THE PLAN.
The costs and expenses of administering the Plan shall be borne by the
Company.
(e) NO RIGHT TO CONTINUE AS DIRECTOR.
-B12-
<PAGE>
Nothing contained in the Plan or in any instrument executed pursuant
to the Plan will confer upon any Participant any right to continue as a member
of the Board or affect the right of the Company, the Board or the shareholders
of the Company to terminate the directorship of any Participant at any time with
or without cause.
(f) SEVERABILITY.
The provisions of the Plan shall be deemed severable and the validity
or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
(g) GOVERNING LAW.
The Plan and all actions taken thereunder shall be enforced, governed
and construed by and interpreted under the laws of the State of Delaware
applicable to contracts made and to be performed wholly within such State
without giving effect to the principles of conflict of laws thereof.
(h) HEADINGS.
The headings contained in this Plan are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Plan.
-B13-
<PAGE>
ALARIS MEDICAL, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 11, 1997
The undersigned stockholder of ALARIS MEDICAL, INC. (the "Company") hereby
appoints JOHN A. de GROOT, RICHARD B. KELSKY AND HENRY GREEN, or any of them,
with full power of substitution and revocation, proxies of the undersigned to
vote all shares of Common Stock of the Company which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders
of the Company (the "Annual Meeting") to be held on Wednesday, June 11, 1997
at 9:00 a.m. at the Waldorf-Astoria, 301 Park Avenue, New York, New York and
at any adjournment thereof, with respect to:
1. The election of Directors;
2. The approval of the Company's 1996 Stock Option Plan;
3. The approval of the amendment and restatement of the Company's Third
Amended and Restated 1990 Non-Qualified Stock Option Plan for
Non-Employee Directors;
4. The ratification of the appointment of Price Waterhouse LLP as
independent accountants for the fiscal year ending December 31, 1997; and
5. The transaction of such other business as may properly come before the
Annual Meeting.
The proxy will be voted in accordance with the instructions given on the
other side, and in the discretion of the proxies upon such other matters as
may properly come before the Meeting. IF NO INSTRUCTIONS ARE GIVEN, THIS
PROXY WILL BE VOTED (1) SO AS TO ELECT THE LARGEST POSSIBLE NUMBER OF THE
BOARD OF DIRECTORS' NOMINEES, (2) TO APPROVE THE COMPANY'S 1996 STOCK OPTION
PLAN, (3) TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE COMPANY'S THIRD
AMENDED AND RESTATED 1990 NON-QUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE
DIRECTORS AND (4) FOR THE RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE
LLP AS INDEPENDENT ACCOUNTANTS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
^ FOLD AND DETACH HERE ^
<PAGE>
Please mark your vote
as indicated in this / X /
example
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE FOR ITEM 1.
ITEM 1--Election of Directors, Nominees: Norman M. Dean, Henry Green,
Frederic Greenberg, Richard B. Kelsky, William J. Mercer, and Jeffry M.
Picower.
The Board of Directors WITHHOLD
Recommends Stockholders Authority to vote for all nominees
Vote FOR Item 1. listed above
FOR the nominees listed above (except as written to the contrary below) and,
unless otherwise indicated, with discretion of the proxies to cumulate votes,
in their sole and absolute discretion, for one or more of such nominees in
such manner so as to elect the largest number of such nominees.
(To withhold authority to vote for To vote cumulatively, write
any nominee write that nominee's "Cumulate For" and the number of
name in the space provided below) shares and the name(s) of the
nominee(s) in the space provided
below.
- - ----------------------------------- ---------------------------------
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE FOR ITEM 2.
ITEM 2--The approval of the Company's 1996 Stock Option Plan;
FOR AGAINST ABSTAIN
----- ------- -------
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE FOR ITEM 3.
ITEM 3--The approval of the amendment and restatement of the Company's Third
Amended and Restated 1990 Non-Qualified Stock Option Plan for Non-Employee
Directors;
FOR AGAINST ABSTAIN
----- ------- -------
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE FOR ITEM 4.
ITEM 4--The ratification of the appointment of Price Waterhouse LLP as
independent accountants for the fiscal year ending December 31, 1997.
FOR AGAINST ABSTAIN
----- ------- -------
Please mark, date and sign exactly as your name(s) appear(s) above and return
in the enclosed envelope. If acting as attorney, executor, administrator,
trustee, guardian, etc., please give full title. If the signer is a
corporation, please sign the full corporate name by fully authorized officer.
If shares are held jointly, each stockholder named should sign.
Dated:____________________________________________, 1997
________________________________________________________
Signature
________________________________________________________
Signature if held jointly
__________
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