<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a -6(e)
(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
ALARIS MEDICAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
<PAGE>
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
ALARIS MEDICAL, INC.
10221 WATERIDGE CIRCLE
SAN DIEGO, CALIFORNIA 92121-1579
(858) 458-7000
April 26, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of
Stockholders, which will be held at the American Stock Exchange, 86 Trinity
Place, 14th Floor Boardroom, New York, New York at 10:00 a.m. on May 31, 2000.
The notice of the meeting and the proxy statement on the
following pages cover the formal business of the meeting. The meeting will
consider the election of Directors, an amendment to the ALARIS Medical, Inc.
1996 Stock Option Plan, an amendment to the ALARIS Medical, Inc. Third Amended
and Restated 1990 Non-Qualified Stock Option Plan for Non-Employee Directors and
the ratification of the appointment of independent accountants for 2000. I will
report on current operations and discuss our plans for growth. I will also leave
plenty of time for your questions and comments.
Whether or not you plan to attend the 2000 Annual Meeting of
Stockholders, please complete, sign, date and return the accompanying proxy card
in the enclosed envelope in order to make certain that your shares will be
represented and voted.
Thank you for your support and continued interest in ALARIS
Medical, Inc.
Very truly yours,
David L. Schlotterbeck
CHIEF EXECUTIVE OFFICER
<PAGE>
ALARIS MEDICAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 31, 2000
April 26, 2000
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
American Stock Exchange, 86 Trinity Place, 14th Floor Boardroom, New York, New
York at 10:00 a.m. on May 31, 2000 for the following purposes:
1. To elect five Directors;
2. To consider and act upon a proposal to approve an amendment to the
ALARIS Medical, Inc. 1996 Stock Option Plan;
3. To consider and act upon a proposal to approve an amendment to the
ALARIS Medical, Inc. 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
PricewaterhouseCoopers LLP as independent accountants for the year
ending December 31, 2000; 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 10, 2000 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
Annual Meeting, at the law offices of Piper Marbury Rudnick & Wolfe LLP, 1251
Avenue of the Americas, 29th Floor, New York, New York 10020 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,
Hazel M. Aker
SECRETARY
<PAGE>
PROXY STATEMENT
ALARIS MEDICAL, INC.
10221 WATERIDGE CIRCLE
SAN DIEGO, CALIFORNIA 92121-1579
(858) 458-7000
ANNUAL MEETING OF STOCKHOLDERS
This proxy statement and enclosed form of proxy are being 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 10:00 a.m. on May 31,
2000, and all adjournments thereof (the "Annual Meeting"). The purpose of the
Annual Meeting is: (i) to elect five Directors of ALARIS Medical, Inc. ("ALARIS
Medical" or the "Company"); (ii) to consider and act upon a proposal to approve
an amendment to the ALARIS Medical, Inc. 1996 Stock Option Plan (the "1996 Stock
Plan"); (iii) to consider and act upon a proposal to approve an amendment to the
ALARIS Medical, Inc. Third Amended and Restated 1990 Non-Qualified Stock Option
Plan for Non-Employee Directors (the "Directors Plan"); (iv) to ratify the
appointment of PricewaterhouseCoopers LLP as independent accountants for the
year ending December 31, 2000; and (v) to transact such other business as may
properly come before the Annual Meeting and at all adjournments thereof. Proxy
statements and forms of proxy are first being sent to stockholders on or about
April 26, 2000.
The close of business on April 10, 2000 has been set as the record date
for purposes of determining stockholders entitled to notice of and to vote at
the Annual Meeting. At the close of business on April 10, 2000, there were
outstanding 59,297,730 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.
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
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1
<PAGE>
"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 or Assistant 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 or Assistant 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) FOR the approval of
the amendment to the 1996 Stock Plan, (3) FOR the approval of the amendment to
the Directors Plan, and (4) FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as independent accountants of the accounts of the
Company for 2000.
PROPOSAL 1
ELECTION OF DIRECTORS
CUMULATIVE VOTING RIGHTS
The election of Directors will be by a plurality vote. There are
currently five 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 such stockholder 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 Annual Meeting, will be entitled to five votes for each
share of Common Stock held.
Five 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 ANY
OF SUCH NOMINEES SHOULD BECOME UNAVAILABLE FOR ANY REASON, IT IS INTENDED THAT
PROXIES WILL BE VOTED FOR THE ELECTION OF SUCH OTHER PERSON(S) AS SHALL BE
DESIGNATED BY THE BOARD OF DIRECTORS.
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<PAGE>
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 to serve
until the next annual meeting and until their successors are elected and
qualified. Two of the Company's current directors, Jeffry M. Picower and Richard
B. Kelsky, are not standing for re-election to the Board of Directors.
<TABLE>
<CAPTION>
NAME POSITION WITH COMPANY AGE DIRECTOR SINCE
- ---------------------------- --------------------- --- --------------
<S> <C> <C> <C>
David L. Schlotterbeck...... Director, Chief Executive Officer 52 November 1999
Norman M. Dean.............. Director 80 March 1989
Henry Green................. Director 57 February 1991
Barry D. Shalov............. Nominee 58 _
William T. Tumber........... Nominee 66 _
</TABLE>
DAVID L. SCHLOTTERBECK - Mr. Schlotterbeck has been a Director,
President and Chief Executive Officer of ALARIS Medical and ALARIS Medical
Systems, Inc. since November 1, 1999. He joined ALARIS Medical Systems on April
19, 1999 as President and Chief Operating Officer. Previously, Mr. Schlotterbeck
was President and Chief Operating Officer of Pacific Scientific Company, a
former New York Stock Exchange-traded company prior to its acquisition by
Danaher Corporation in March 1998. He was President and Chief Operating Officer
of Pacific Scientific, an international manufacturer of motion control, process
measurement and safety products, from 1997 to March 1998. From 1995 to 1997, he
was President and Chief Executive Officer of Vitalcom, Inc., a medical network
manufacturer. From 1991 to 1994, Mr. Schlotterbeck was Executive Vice President
and Chief Operating Officer for Nellcor, Inc., a medical device manufacturer
subsequently acquired by Mallinckrodt, Inc. Mr. Schlotterbeck is a graduate of
the General Motors Institute with a B.S. in electrical engineering. He holds an
M.S. in electrical engineering from Purdue University, and completed the
Executive Institute at Stanford University in 1984.
NORMAN M. DEAN - Mr. Dean has been a Director of ALARIS Medical since
1989. Mr. Dean has been a Director and Chairman of the Board of Miller
Diversified Corp., a commercial cattle feeder, since May 1990.
HENRY GREEN - Mr. Green was President and Chief Operating Officer of
ALARIS Medical from September 1990 to March 1993 and has been a Director of
ALARIS Medical since 1991. Mr. Green served as an executive officer and director
of Physician Computer Network, Inc. ("PCN") from 1993 until his retirement in
1997. In December 1999, PCN filed for bankruptcy under Chapter 11 of the
Bankruptcy Code as part of an agreement to sell substantially all of its assets
to a third party. The bankruptcy filing resulted from, among other things,
numerous lawsuits filed against PCN, as well as certain of its officers and
directors, including Mr. Green and, in certain instances, Mr. Picower, alleging,
among other things, that PCN issued false and misleading financial statements.
The lawsuits have been settled and PCN's bankruptcy plan was confirmed in March
2000.
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3
<PAGE>
BARRY D. SHALOV - Mr. Shalov is a partner at the law firm of Piper
Marbury Rudnick & Wolfe LLP. Prior thereto, Mr. Shalov was a partner at the law
firm of Gordon Altman Weitzen Shalov & Wein LLP for more than twenty years.
WILLIAM T. TUMBER - Mr. Tumber was Senior Vice President of C.R. Bard,
Inc. ("Bard"), a medical products manufacturer, from 1996 until his retirement
from Bard in 1998. From 1991 to 1996, he was Group Vice President, responsible
for several of Bard's operating divisions. Mr. Tumber held various other
positions with Bard since 1980, including President of its Davol division. Prior
to joining Bard, Mr. Tumber held a variety of management positions with the
General Electric Company.
COMMITTEES OF THE BOARD
The Board of Directors has an Audit Committee, a Compensation Committee
and Stock Option Committee.
The Audit Committee currently consists of Messrs. Dean (Chairman) and
Kelsky. 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 three times during 1999.
The Compensation Committee currently 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, as well as material compensation plans of the
Company and its subsidiaries.
The Compensation Committee met eight times during 1999.
The Stock Option Committee consists of Messrs. Dean (Chairman) and
Kelsky. The function of the Stock Option Committee is to administer the
Company's 1996 Stock Plan and the Third Amended and Restated 1988 Stock Option
Plan. The Stock Option Committee met eight times during 1999.
The Board of Directors does not have a standing nominating committee or
one performing similar functions.
The Board of Directors met six times in 1999. Each of the members of
the Board of Directors, except Messrs. Green and Picower, attended all of the
meetings of the Board of Directors and meetings of committees of the Board on
which such Director serves. Messrs. Green and Picower each attended five
meetings of the Board of Directors in 1999.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Shalov, one of the Nominees for Director of the Company, is a
partner at Piper Marbury Rudnick & Wolfe LLP, which performs legal services for
the Company.
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not employees of the Company
or its subsidiaries are paid $25,000 per annum and in addition receive $1,000
per Board of Directors and/or Committee meeting attended. Meetings of the
Compensation Committee and Stock Option Committee are held jointly as one
meeting and therefore members of the Committees are paid for one meeting. In
addition, such Directors are entitled to receive options to purchase shares of
Common Stock pursuant to the Directors Plan. 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.
Under the Directors Plan: (i) non-qualified stock options ("NQSOs") to
purchase 10,000 shares of Common Stock are granted automatically to any
non-employee Director who has not declined to participate in the Directors Plan
("Eligible Director") on the next succeeding business day following his or her
becoming an Eligible Director and (ii) NQSOs to purchase 10,000 shares of Common
Stock are granted automatically to each Eligible Director on the anniversary
date of his or her preceding NQSO grant under the Directors Plan and every year
thereafter during the term of the Directors Plan, provided that such Director
remains an Eligible Director on the date of each such additional NQSO grant.
NQSOs vest and become exercisable in one-third increments for each year of an
Eligible Director's service on the Board of Directors of the Company from the
date of grant of the NQSO. NQSOs granted under the Directors Plan are subject to
termination under certain circumstances in the event the Eligible Director
ceases to be an Eligible Director or becomes an employee of the Company.
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5
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes certain information regarding
compensation paid or accrued by the Company or its subsidiaries to or on behalf
of the Company's current Chief Executive Officer, its former Chief Executive
Officer and each of the four most highly compensated executive officers of
ALARIS Medical Systems, Inc., the Company's wholly-owned operating subsidiary
("ALARIS Medical Systems"), whose total annual salary and bonus for the years
ended December 31, 1999, 1998 and 1997 exceeded $100,000 (collectively, the
"Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------ ALL
SECURITIES OTHER
SALARY BONUS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS ($)(6)
- --------------------------- -------- --------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
DAVID L. SCHLOTTERBECK 1999 253,027 55,823 1,000,000(3) 5,000
President and Chief Executive
Officer (1)
WILLIAM J. MERCER 1999 382,470 - - 529,669
Former Chief 1998 434,154 388,800 - 15,761
Executive Officer (2) 1997 400,008 360,000 - 6,366
JOHN A. DE GROOT (4) 1999 222,886 43,201 240,000(5) 5,000
Senior Vice President, Secretary 1998 207,308 172,200 - 5,000
and General Counsel 1997 200,004 87,395 - 3,559
HENK VAN ROSSEM 1999 223,385 25,230 140,000(5) 22,717
Vice President and General 1998 217,925 114,317 - 22,953
Manager, International 1997 200,823 75,594 180,000 44,078
RICHARD M. MIRANDO 1999 215,808 22,880 140,000(5) 5,000
Vice President and General 1998 210,385 92,880 - 5,000
Manager, Instromedix 1997 197,316 71,047 - 4,750
JAKE ST. PHILIP 1999 207,519 27,203 140,000(5) 10,765
Vice President and General 1998 178,595 90,003 - 22,263
Manager, North America 1997 167,127 71,358 - 20,484
- --------------------------
</TABLE>
(1) Mr. Schlotterbeck also served as Chief Operating Officer of the Company
from April 19, 1999 to October 31, 1999.
(2) Mr. Mercer served as Chief Executive Officer of the Company and ALARIS
Medical Systems from November 26, 1996 to October 31, 1999.
(3) Includes an option grant to purchase 500,000 shares of Common Stock which
is contingent on stockholder approval of the amendment to the 1996 Stock
Plan at the Annual Meeting (see Proposal 2).
(4) Mr. de Groot resigned from the Company effective April 14, 2000 to return
to private practice.
(5) Includes an option grant to purchase 85,000 shares of Common Stock which is
contingent on stockholder approval of the amendment to the 1996 Stock Plan
at the Annual Meeting (see Proposal 2).
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(6) These amounts include the following contributions made by the Company in
1999 to match pre-tax elective deferrals to retirement plans made by the
Named Executive Officers: $5,000 for each of Messrs. Schlotterbeck, Mercer,
de Groot, Mirando and St. Philip and $22,717 for Mr. van Rossem. With
respect to Mr. Mercer, this amount also includes $520,662 (including
$66,654 of accrued vacation pay) paid or accrued to Mr. Mercer in
connection with his termination of employment pursuant to the Resignation
and Consulting Agreement among Mr. Mercer, ALARIS Medical and ALARIS
Medical Systems, as well as $2,212 which represents the fair value of
non-cash awards grossed up to cover applicable state and federal income
taxes and a life insurance premium of $1,795 paid by the Company. See
"-Employment Contracts, Termination of Employment and Change-in-Control
Arrangements." With respect to Mr. St. Philip, this amount includes $5,765
in fair value of non-cash awards grossed up to cover applicable state and
federal income taxes.
OPTION GRANTS IN 1999
The following table sets forth certain information with respect to stock
options granted during 1999 to the Named Executive Officers pursuant to the 1996
Stock Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATE
SECURITIES TOTAL OPTIONS EXERCISE OF STOCK APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE THE OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION --------------------------
GRANTED IN 1999 ($/SHARE) DATE 5% ($) 10% ($)
------------ -------------- --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
David L. Schlotterbeck 300,000 6.2% 3.219 4-16-09 532,418 1,311,370
David L. Schlotterbeck 90,000 1.9% 3.25 5-03-09 161,264 397,200
David L. Schlotterbeck 110,000 2.3% 1.8755 10-29-09 113,742 280,151
David L. Schlotterbeck(1) 500,000 10.3% 2.00 12-23-09 551,466 1,358,287
John A. de Groot 55,000 1.1% 3.25 5-03-09 98,550 242,733
John A. de Groot 100,000 2.1% 1.8755 10-29-09 103,402 254,683
John A. de Groot(1) 85,000 1.8% 2.00 12-23-09 93,749 230,909
Richard M. Mirando 55,000 1.1% 3.25 5-03-09 98,550 242,733
Richard M. Mirando(1) 85,000 1.8% 2.00 12-23-09 93,749 230,909
Henk van Rossem 55,000 1.1% 3.25 5-03-09 98,550 242,733
Henk van Rossem(1) 85,000 1.8% 2.00 12-23-09 93,749 230,909
Jake St. Philip 55,000 1.1% 3.25 5-03-09 98,550 242,733
Jake St. Philip(1) 85,000 1.8% 2.00 12-23-09 93,749 230,909
</TABLE>
(1) Represent grants of "Performance Options" under the 1996 Stock Plan, as
proposed to be amended. Performance Options become exercisable, in percentages
determined by the committee of the Board which administers the 1996 Stock Plan,
if and when the price of the Common Stock reaches certain levels. However, if
such levels are not attained, Performance Options become exercisable seven years
after grant. The price levels and cumulative vesting percentages for the
Performance Options granted are: $7.00 per share (30%), $9.00 per share (60%)
and $11.00 per share (100%). Such grants are contingent on stockholder approval
of the amendment to the 1996 Stock Plan at the Annual Meeting. See Proposal 2.
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<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
AND OPTION VALUES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
SHARES UNDERLYING UNEXERCISED OPTIONS AT 12/31/99
ACQUIRED VALUE OPTIONS AT 12/31/99 ($) (1)
ON REALIZED --------------------------- --------------------------
EXERCISE $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David L. Schlotterbeck - - 75,699 924,301 - -
William J. Mercer - - 400,000 - - -
John A. de Groot - - 169,221 250,779 - -
Richard M. Mirando - - 162,971 157,029 - -
Henk van Rossem - - 153,707 166,293 - -
Jake St. Philip - - 170,547 169,453 - -
- --------------------------
</TABLE>
(1) Calculated based on the closing price of ALARIS Medical's Common Stock on
December 31, 1999 ($1.875) as reported by the American Stock Exchange,
which was lower than the option exercise price.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has entered into letter agreements with Mr.
Schlotterbeck pursuant to which the Company has agreed to pay Mr.
Schlotterbeck a base salary at the annual rate of $452,010. Mr. Schlotterbeck
is also eligible to receive a maximum target annual bonus equal to 100% of
his base salary. If Mr. Schlotterbeck terminates his employment with the
Company for any reason after November 1, 2002, the Company will pay Mr.
Schlotterbeck one year of his then existing base salary as separation pay.
William J. Mercer served as Chief Executive Officer of the Company,
pursuant to an employment agreement with an initial term to expire in August
2001, which provided, among other things, that if Mr. Mercer's employment was
terminated by the Company without cause (as defined therein), the Company
would pay him an amount equal to his base salary until the end of his
employment term. On October 31, 1999, pursuant to a Resignation and
Consulting Agreement, Mr. Mercer resigned his positions with the Company and
ALARIS Medical Systems and his employment agreement was cancelled. In
consideration of Mr. Mercer relinquishing his rights under the employment
agreement, releasing all claims relating to his employment with the Company
and agreeing not to compete with, or solicit employees or customers of, the
Company for a one-year period, the Company agreed to retain Mr. Mercer as a
consultant for a one-year period ending October 31, 2000 (the "Consulting
Period"), at the rate of $37,834 per month. In addition, stock options
previously granted to Mr. Mercer will remain exercisable through the earlier
of (i) October 31, 2000 or (ii) thirty days after the end of the Consulting
Period (if terminated prior to its scheduled expiration).
The Company has in place a severance plan which provides employee
severance pay and benefits in the event of an involuntary termination without
cause. The amount of severance and benefits is based upon position and length
of service with the Company and ranges from a minimum of seven weeks'
compensation up to one year's base salary for senior executives. The Board of
Directors has approved separate change of control agreements under which, in
the event of an involuntary termination related to a change in control of the
Company, certain senior executives, under certain circumstances, would
receive severance of up to two years' base salary and target bonus.
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8
<PAGE>
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
Third Amended and Restated 1988 Stock 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 Stock Plan.
The Compensation Committee's approvals of recommendations regarding
the compensation of senior executive officers of the Company are made on an
individual basis and are based on a variety of factors which may include, but
are not limited to, the executive officer's employment contract (if any),
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, but rather, are based
on market survey data of similar executive positions derived from a variety
of sources as well as the individual's performance during the prior year. The
compensation of the Company's senior executive officers is structured with a
heavy emphasis on variable pay based upon Company performance and individual
performance. The Compensation Committee believes that such a structure
motivates, rewards and helps retain senior executive officers consistent with
the needs of the Company and contributes to shareholder value. The Company
may pay its senior executive officers compensation consisting of base salary,
incentives and/or stock option grants.
CHIEF EXECUTIVE OFFICER SALARY
In October 1999, Mr. Mercer resigned his positions with the Company, and
Mr. Schlotterbeck, who was then President and Chief Operating Officer the
Company, was appointed to the position of Chief Executive Officer, effective
November 1, 1999, at an annual salary of $452,010. As Chief Executive Officer,
Mr. Schlotterbeck is eligible for an incentive payment of up to 100% of his base
salary. For the 1999 fiscal year, the incentive payment was based on a
combination of Mr. Schlotterbeck's individual performance, the performance of
the Company, and the amount of time he spent in the position of Chief Executive
Officer and Chief Operating Officer, respectively. The Compensation Committee
reviewed Mr. Schlotterbeck's and the Company's performance for fiscal 1999 and
awarded Mr. Schlotterbeck a $55,823 incentive payment, which was approved by the
full Board of Directors.
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
RICHARD B. KELSKY
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9
<PAGE>
PERFORMANCE GRAPH
The graph set forth below represents the cumulative total return from
January 1, 1995 to December 31, 1999 on the Common Stock of the Company, the
American Stock Exchange ("AMEX") Market Value Index and an index composed of
a representative grouping of companies from SIC Code 3841 (Surgical & Medical
Instruments & Apparatus) which had reportable stock performance from January
1, 1995 to December 31, 1999 (the "Industry Index"). The graph has been
prepared by an outside consulting firm for 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, 1995 and that all dividends were reinvested.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
FROM JANUARY 1, 1995 TO DECEMBER 31, 1999
AMONG ALARIS MEDICAL, INC.,
AMEX MARKET VALUE INDEX AND INDUSTRY INDEX
[GRAPH]
<TABLE>
<CAPTION>
- ------------------------------ ------------ ------------- ------------- ------------ ------------- -------------
1/1/95 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ------------------------------ ------------ ------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ALARIS Medical, Inc. $100.00 $150.00 $187.50 $243.75 $293.75 $93.75
- ------------------------------ ------------ ------------- ------------- ------------ ------------- -------------
Industry Index $100.00 $170.61 $185.81 $215.53 $294.27 $267.47
- ------------------------------ ------------ ------------- ------------- ------------ ------------- -------------
AMEX Market Value Index $100.00 $128.90 $136.01 $163.66 $161.44 $201.27
- ------------------------------ ------------ ------------- ------------- ------------ ------------- -------------
</TABLE>
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10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, at April 10, 2000, information
regarding the beneficial ownership of Common Stock by (i) all persons known
by ALARIS Medical who own beneficially more than 5% of the outstanding Common
Stock; (ii) each Director and nominee for Director of ALARIS Medical; (iii)
each of the Named Executive Officers; and (iv) all Directors, nominees and
executive officers as a group. Unless otherwise stated, ALARIS Medical
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.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
OWNED OF TOTAL (1)
------------ ------------
<S> <C> <C>
Jeffry M. Picower............................................... 46,672,542 (2) 76.4%
South Ocean Blvd.
Palm Beach, FL 33480
David L. Schlotterbeck.......................................... 156,095 (3) *
William J. Mercer............................................... 646,200 (4) 1.1%
Norman M. Dean.................................................. 50,333 (5) *
Henry Green..................................................... 70,333 (6) *
Richard B. Kelsky............................................... 116,933 (7) *
Barry D. Shalov................................................. 0 *
William T. Tumber............................................... 0 *
Richard M. Mirando.............................................. 176,295 (8) *
John A. de Groot................................................ 183,795 (9) *
Henk van Rossem................................................. 156,942 (10) *
Jake St. Philip................................................. 175,096 (11) *
All Directors, nominees and executive officers
as a group.................................................... 49,093,671 (12) 80.3%
(17 individuals)
- -------------------------
</TABLE>
* Less than 1%
(1) Calculated in accordance with Rule 13d-3(d)(1) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). At April 10, 2000,
ALARIS Medical had 59,297,730 shares of Common Stock outstanding.
(2) Includes (i) 20,079,477 shares of Common Stock owned by Decisions
Incorporated ("Decisions"); (ii) 2,489,463 shares of Common Stock owned by
JA Special Partnership Limited ("JA Special"); (iii) 24,074,269 shares of
Common Stock owned by JD Partnership, L.P. ("JD Partnership") and; (iv)
currently exercisable option on 29,333 shares of Common Stock granted
under the Directors Plan. Does not include an unvested option to purchase
21,667 shares of Common Stock granted under the Directors Plan that vests
over time. 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) 50,000 shares of Common Stock owned by Mr. Schlotterbeck and
(ii) 580 shares of Common Stock owned by Mrs. Schlotterbeck (spouse), of
which Mr. Schlotterbeck disclaims beneficial ownership. Includes currently
exercisable option on 105,515 shares of Common Stock granted under the
1996 Stock Plan.
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11
<PAGE>
Does not include an unvested option on 394,485 shares of Common Stock that
vests over time. Does not include a Performance Option on 500,000 shares
of Common Stock, the grant of which is contingent on stockholder approval
of Proposal 2.
(4) Includes (i) 206,200 shares of Common Stock owned by the William J. Mercer
Trust, of which Mr. Mercer is the trustee and a beneficiary; (ii) 32,500
shares of Common Stock owned by the William J. Mercer IRA Rollover; (iii)
7,500 shares of Common Stock held by the Nikki Mercer IRA Rollover, of
which Mr. Mercer disclaims any beneficial interest in and (iv) currently
exercisable option on 400,000 shares of Common Stock granted under the
1996 Stock Plan.
(5) Includes: (i) 26,000 shares of Common Stock owned by Mr. Dean, (ii)
currently exercisable option on 15,333 shares of Common Stock under the
Directors Plan and (iii) currently exercisable option on 9,000 shares of
Common Stock granted in consideration for service on a special committee
of the Board of Directors. Does not include: (i) an unvested option on an
additional 16,667 shares of Common Stock granted under the Directors Plan
that vests over time and (ii) an unvested option on 1,000 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.
(6) Includes: (i) 55,000 shares of Common Stock owned by Mr. Green and (ii)
currently exercisable option on 15,333 shares. Does not include an
unvested option to purchase 6,667 of Common Stock granted under the
Directors Plan that vests over time.
(7) Includes (i) 101,600 shares of Common Stock owned by Mr. Kelsky and (ii)
currently exercisable option on 15,333 shares of Common Stock granted
under the Directors Plan. Does not include an unvested option on an
additional 16,667 shares of Common Stock granted under the Directors Plan
that vests over time.
(8) Includes: (i) 10,000 shares of Common Stock owned by Richard M. Mirando,
and (ii) a currently exercisable option on 166,295 shares of Common Stock
granted under the 1996 Stock Plan. Does not include an unvested option of
68,705 shares of Common Stock granted under the 1996 Stock Plan that vests
over time. Does not include a Performance Option on 85,000 shares of
Common Stock the grant of which is contingent on stockholder approval of
Proposal 2.
(9) Includes (i) 5,000 shares of Common Stock owned by John A. de Groot, and
(ii) a currently exercisable option on 178,795 shares of Common Stock
granted under the 1996 Stock Plan. Does not include an unvested option of
156,205 shares of Common Stock granted under the 1996 Stock Plan that
vests over time. Does not include a Performance Option on 85,000 shares of
Common Stock the grant of which is contingent on stockholder approval of
Proposal 2.
(10) Includes currently exercisable option on 156,942 shares of Common Stock
granted under the 1996 Stock Plan. Does not include an unvested option on
78,058 shares of Common Stock granted under the 1996 Stock Plan that vests
over time. Does not include a Performance Option on 85,000 shares of
Common Stock the grant of which is contingent on stockholder approval of
Proposal 2.
(11) Includes: (i) 1,200 shares of Common Stock owned by the Jake P. and Peggy
L. St. Philip Trust and (ii) currently exercisable option on 173,896
shares of Common Stock granted under the 1996 Stock Plan. Does not include
an unvested option on 81,104 shares of Common Stock granted under the 1996
Stock Plan that vests over time. Does not include a Performance Option on
85,000 shares of Common Stock, the grant of which is contingent on
stockholder approval of Proposal 2.
(12) Includes currently exercisable options on 1,726,750 shares of Common Stock
granted under the 1996 Stock Plan and 75,332 shares of Common Stock
granted under the Directors Plan. Does not include: (i) an unvested option
on 1,382,250 shares of Common Stock granted under the 1996 Stock Plan that
vests over time; (ii) an unvested option on an additional 61,668 shares of
Common Stock granted under the Directors Plan that vests over time; (iii)
an unvested option on 1,000 shares of Common Stock granted in
consideration for service on a special committee of the Board of Directors
that vests over time and (iv) a Performance Option on 1,280,000 shares of
Common Stock, the grant of which is contingent on stockholder approval of
Proposal 2.
- -------------------------------------------------------------------------------
12
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires ALARIS Medical's executive officers, Directors and persons who
beneficially own more than 10% of a registered class of ALARIS Medical's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Such individuals are required by regulations
promulgated by the Securities and Exchange Commission to furnish ALARIS Medical
with copies of all Section 16(a) reports that they file. Based solely on review
of the copies of such reports furnished to ALARIS Medical, or written
representations that no reports were required, ALARIS Medical believes that
during 1999, all of its executive officers, Directors and greater-than-10%
beneficial owners complied with the Section 16(a) filing requirements applicable
to them with the exception of the following late filings: (i) Mr. van Rossem
filed late one Form 4 relating to stock options granted to him and (ii) Mr.
Lyngsgaard filed his Form 3 and one Form 4 late relating to two grants of stock
options to him.
PROPOSAL 2
APPROVAL OF AMENDMENT TO THE COMPANY'S 1996 STOCK OPTION PLAN
GENERAL
On December 23, 1999, the Board adopted, subject to stockholder
approval, an amendment to the Company's 1996 Stock Plan. The amendment 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 by: (i) authorizing the grant of options on an additional
2,800,000 shares of Common Stock, the exercisability of which is tied to the
performance of the Company's Common Stock, as more fully described below
("Performance Options"); (ii) increasing the number of shares of Common Stock
available for the grant of options (other than Performance Options) from
5,500,000 to 6,700,000 and (iii) increasing from 600,000 to 1,000,000 the
maximum number of shares of Common Stock with respect to which options may be
awarded to any individual during a year.
As of April 10, 2000, of the 5,500,000 shares of Common Stock presently
reserved under the 1996 Stock Plan (prior to giving effect to the amendment)
5,241,949 are subject to currently outstanding Options and 194,426 shares are
available for grant.
The full text of the 1996 Stock Plan (as amended by the amendment), is
set forth on Exhibit A to this Proxy Statement. The material features of the
1996 Stock 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 Stock
Plan.
EFFECTIVE DATE OF THE AMENDMENT
The amendment was adopted by the Board on December 23, 1999, and became
effective on such date, subject to stockholder approval at a meeting duly called
and held within twelve months following such date. The Board, under the 1996
Stock Plan, has awarded Performance
- -------------------------------------------------------------------------------
13
<PAGE>
Options covering a total of 2,333,000 shares of Common Stock to various
employees, in each case, subject to stockholder approval of the amendment.
TYPES OF AWARDS
Awards under the 1996 Stock 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"). Certain NQSOs awarded under the 1996 Stock Plan may be designated as
"Performance Options." Performance Options vest and become exercisable in
percentages determined by the Committee (as defined below), if and when the
price of the Common Stock reaches certain levels at certain dates (the "Target
Prices"). However, if the applicable Target Prices are not achieved by the
applicable dates, Performance Options will become exercisable seven years after
grant. NQSOs which are not designated as Performance Options have no such
performance-based exercise feature.
ADMINISTRATION
The 1996 Stock 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 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 Stock Plan as
contemplated by Rule 16b-3 and Section 162(m), respectively. Members of the
Committee are not allowed to participate in the 1996 Stock Plan.
Subject to the express terms of the 1996 Stock Plan, the Committee has
the authority to administer the 1996 Stock Plan in its sole and absolute
discretion, including, but not limited to, the authority to construe and
interpret the 1996 Stock Plan, as well as the authority to determine individuals
eligible for Option grants, the number of Options to be granted, the type of
Options to be granted, the vesting period, if any, for Options granted, the date
on which all or any portion of Options become exercisable (and, if an Option is
a Performance Option, the Target Price), the number of shares of Common Stock
covered by Options, the exercise price of the shares of Common Stock covered by
Options and whether Options to be granted are ISOs or NQSOs (and, if NQSOs,
whether or not such Options are Performance Options).
STOCK SUBJECT TO THE 1996 STOCK PLAN
The 1996 Stock Plan provides for the issuance of up to 9,500,000 shares
of Common Stock upon exercise of Options granted under the 1996 Stock Plan. A
maximum of 6,700,000 shares of Common Stock may be issued with respect to
Options which are not Performance Options and a maximum of 2,800,000 shares of
Common Stock may be issued with respect to Performance Options. No more than
1,000,000 shares of Common Stock with respect to one or more Options 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
covered thereby will again be available for distribution in connection with
future awards under the 1996 Stock Plan; however, if that Option is a
Performance Option, it may be distributed again only as
- -------------------------------------------------------------------------------
14
<PAGE>
a Performance Option and if that Option is not a Performance Option, it
may be distributed again only as an Option which is not a Performance
Option.
In the event of a recapitalization, stock dividend, stock split, or
other change in capitalization affecting shares of Common Stock, an adjustment
will be made in the aggregate number of shares of Common Stock available for
issuance under the 1996 Stock 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 to the extent that Options
theretofore granted under the 1996 Stock Plan constitute Performance Options,
the Target Price of the shares of Common Stock covered thereby), 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 Stock
Plan are (i) all directors (except directors eligible to participate in the
Directors Plan), 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 determined from time to time in its sole and
absolute discretion. However, only employees of the Company or any subsidiary of
the Company shall be eligible to receive ISOs and only corporate or divisional
vice-presidents or divisional directors (and such other persons as may be
specifically approved by the Committee) shall be eligible to receive Performance
Options.
TERM 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 that Option.
OPTION TERM
The term of any Option granted under the 1996 Stock 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 for below.
However, 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 covered by 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
- -------------------------------------------------------------------------------
15
<PAGE>
price shall not be less than 110% of the fair market value of a share of
Common Stock on the date of ISO was granted.
EXERCISE PRICE OF NQSOS
The exercise price of each share of Common Stock covered by a NQSO
(other than a Performance Option) shall be determined by the Committee at the
time of grant but will not be less then the par value of a share of Common
Stock, nor less than the fair market value of a share of Common Stock, in the
case of Performance Options.
EXERCISE PERIOD
Each Option granted under the 1996 Stock Plan shall vest and become
first exercisable as determined by the Committee. However, each Performance
Option shall vest no later than the date which is seven years from the date of
grant if the Target Price for the shares of Common Stock covered by that
Performance Option shall not have been reached by that date.
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.
NO STOCKHOLDER 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 Stock 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 Stock Plan or covered by 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: (i) by will; (ii) by the laws of descent and distribution; or
(iii) to a beneficiary upon the death of an optionee, and an Option shall be
- -------------------------------------------------------------------------------
16
<PAGE>
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
transferable 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 Stock Plan
from or through any optionee shall be subject to all terms and conditions of
the 1996 Stock 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, if the employment of an optionee who is an officer or employee is
terminated for cause, or if 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 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 (i)
by their terms they expire sooner or (ii) 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 in the 1996 Stock
Plan), unless otherwise determined by the Committee at the time of grant or by
amendment (with the Option holder's consent), all Options (other than
Performance Options) not vested on or prior to the effective
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17
<PAGE>
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 (whether ISOs or NQSOs and whether
or not Performance Options) shall terminate and cease to be outstanding
immediately following the Change of Control. 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 covered by 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 sole 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. Notwithstanding the foregoing, unless otherwise determined by the
Committee at the time of grant or by amendment (with the Option holder's
consent) in the event of a Sale Transaction (as defined in the 1996 Stock
Plan), all Performance Options not then vested shall vest immediately, in
whole or in part, if and only to the extent that the per share price to be
paid in that Sale Transaction equal or exceeds the Target Price of the shares
covered by those Performance Options.
AMENDMENTS AND TERMINATION
No Option shall be granted pursuant to the 1996 Stock 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 Stock Plan or revise or amend the 1996 Stock Plan
in any respect whatsoever. However, unless the Board specifically otherwise
provides, any revision or amendment that would cause the 1996 Stock 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 Stock Plan or of
any Option that would adversely affect the right of any optionee with respect to
an Option previously granted under the 1996 Stock 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 Stock 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
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18
<PAGE>
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 STOCK PLAN
The following is a summary of certain federal income tax aspects of
awards made under the 1996 Stock 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) within the period ending three months (12 months, in
the event of permanent and total disability of the optionee) after termination
of such employment, or following the optionee's death. 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 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 disposes of 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 20%, 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
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19
<PAGE>
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 by a committee of
outside directors pursuant to a stockholder-approved plan that satisfies certain
requirements at an exercise price which is not less then the fair market value
of the underlying stock at the time of grant. The Company intends that Options
under the 1996 Stock Plan granted at not less then fair market value of the
shares of Common Stock will qualify as "performance-based compensation."
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 STOCK PLAN. ALSO, THE SPECIFIC STATE AND
LOCAL TAX CONSEQUENCES TO EACH OPTIONEE UNDER THE 1996 STOCK PLAN MAY VARY,
DEPENDING UPON THE LAWS OF THE VARIOUS STATES AND LOCALITIES AND THE INDIVIDUAL
CIRCUMSTANCES OF EACH OPTIONEE.
The following table summarizes the grants of Performance Options that
have been made under the 1996 Stock Plan. Any future awards are subject to the
discretion of the Committee and therefore are not determinable at this time.
- -------------------------------------------------------------------------------
20
<PAGE>
NEW PLAN BENEFITS
1996 Stock Option Plan
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- -----------------------------------------------
NAME AND POSITION NUMBER OF SHARES UNDERLYING OPTIONS
- ----------------------------------------------------------------- -----------------------------------------------
<S> <C>
David L. Schlotterbeck 500,000
President and Chief Executive Officer
- ----------------------------------------------------------------- -----------------------------------------------
John A. de Groot 85,000
Senior Vice President, Secretary and General Counsel
- ----------------------------------------------------------------- -----------------------------------------------
Richard M. Mirando 85,000
Vice President and General Manager, Instromedix
- ----------------------------------------------------------------- -----------------------------------------------
Henk van Rossem 85,000
Vice President and General Manager, International
- ----------------------------------------------------------------- -----------------------------------------------
Jake St. Philip 85,000
Vice President and General Manager, North America
- ----------------------------------------------------------------- -----------------------------------------------
Other Executive Officers 440,000
- ----------------------------------------------------------------- -----------------------------------------------
Non-Executive Officer Employee Group 1,053,000
- ----------------------------------------------------------------- -----------------------------------------------
Total 2,333,000
- ----------------------------------------------------------------- -----------------------------------------------
</TABLE>
All Performance Options granted under the 1996 Stock Plan are not yet
exercisable because the Target Prices have not yet been attained. The weighted
average exercise price of such Performance Options is $2.01 per share.
THE BOARD UNANIMOUSLY APPROVED THE ADOPTION OF THE AMENDMENT TO THE
1996 STOCK PLAN AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY VOTE "FOR"
APPROVAL OF THE AMENDMENT.
PROPOSAL 3
APPROVAL OF AMENDMENT TO THE COMPANY'S THIRD AMENDED AND
RESTATED 1990 NON-QUALIFIED STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
GENERAL
On April 17, 2000, the Board adopted, subject to stockholder approval,
an amendment to the Directors Plan to: (i) increase the number of shares of
Common Stock available for the grant of options from 250,000 to 500,000 and (ii)
extend the term of the Directors Plan from September 7, 2000 to September 7,
2005. The amendment to the Directors Plan was adopted by the Board and is being
proposed in order to maintain the Company's ability to attract and reward its
directors.
As of April 10, 2000, of the 250,000 shares of Common Stock presently
reserved under the Directors Plan, 147,000 are subject to currently outstanding
options, and 59,800 shares are available for grant.
- -------------------------------------------------------------------------------
21
<PAGE>
The full text of the Directors Plan (as amended by the amendment) 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 AMENDMENT
The amendment was adopted by the Board on April 17, 2000, and became
effective on such date, subject to stockholder approval at a meeting duly called
and held within twelve months following such date.
TYPES OF AWARDS
The Directors Plan provides for the automatic grant (as described
below) of non-qualified stock options (as used in this Proposal 4, "Options") to
eligible directors.
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 500,000 (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
- -------------------------------------------------------------------------------
22
<PAGE>
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 10,000 shares of Common Stock
shall be granted automatically to any Eligible Director who first becomes an
Eligible Director on or after May 28, 1998, on the next succeeding business day
following his becoming an Eligible Director. In addition, (i) Options to
purchase 10,000 shares of Common Stock shall be granted automatically to each
Eligible Director on the anniversary date of his preceding Option grant under
the Directors Plan and every year 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; and (ii) the Chairman of the Board shall be
granted Options to purchase 16,000 Shares on May 28, 1998, which Options shall
be immediately vested and exercisable. Options shall be granted in the aforesaid
manner until the date on which the shares of Common Stock available for grant
shall no longer be sufficient to permit grants of Options covering 10,000 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 an 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, all Options granted to an
Eligible Director shall vest and become first exercisable at the rate of
one-third of the shares of Common Stock subject to the Options for each twelve
month period of continuous service on the Board (from the date of Option grant)
by such Eligible Director. The failure of an 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
- -------------------------------------------------------------------------------
23
<PAGE>
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 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 (as defined in the Directors Plan),
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
- -------------------------------------------------------------------------------
24
<PAGE>
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, 2005, 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 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 Stock Option Plan. For a
discussion of the income tax consequences with respect to such options see
Proposal 2 - "Approval of Amendment to the Company's 1996 Stock Option Plan --
Certain Federal Income Tax Consequences of the Plan."
THE BOARD UNANIMOUSLY APPROVED THE ADOPTION OF THE AMENDMENT TO THE
DIRECTORS PLAN AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY VOTE "FOR"
APPROVAL OF THE AMENDMENT.
- -------------------------------------------------------------------------------
25
<PAGE>
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP was engaged to audit the Company's accounts
in 1999. 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 PricewaterhouseCoopers LLP to audit the
Company's accounts for the year ending December 31, 2000.
A representative of PricewaterhouseCoopers 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 PRICEWATERHOUSECOOPERS LLP.
- -------------------------------------------------------------------------------
26
<PAGE>
ANNUAL REPORT TO STOCKHOLDERS AND
STOCKHOLDER PROPOSALS FOR 2001
A copy of the Company's Annual Report to Stockholders for the fiscal
year ended December 31, 1999, 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.
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's annual meetings, consistent with regulations adopted by
the Securities and Exchange Commission (the "Commission"). Proposals submitted
for inclusion in the Company's Proxy Statement and form of proxy for the 2001
Annual Meeting of Stockholders are subject to the requirements of Rule 14a-8 of
the proxy rules adopted by the Commission, and must be received by the Company
not later than December 27, 2000. If a stockholder intends to present a proposal
for consideration at the 2001 Annual Meeting outside the processes of Rule
14a-8, the Company must receive notice of such proposal on or before March 12,
2001, or such notice will be considered untimely under Rule 14a-4(c)(1) of the
Commission's proxy rules, and the Company's proxies will have discretionary
voting authority with respect to such proposal, if presented at the meeting,
without including information regarding such proposal in its proxy materials.
Proposals should be directed to the attention of the Legal Department of the
Company at the Company's principal executive offices.
Under the Company's By-Laws, if a stockholder wishes to nominate a
Director or bring other business before the Company's annual meeting, (i) the
stockholder's written notice must be received by the Secretary or Assistant
Secretary of the Company not less than sixty nor more than ninety days prior to
the first anniversary of the preceding year's annual meeting (subject to
adjustment if the subsequent year's meeting date is substantially moved) and
(ii) the notice must contain the specific information required in the Company's
By-Laws. A copy of the Company's By-Laws may be obtained by writing to the Legal
Department of the Company at the Company's principal executive offices. Please
note that these requirements relate only to matters a stockholder wishes to
bring before the annual meeting. They do not apply to proposals that a
stockholder wishes to have included in the Company's proxy statement.
FORM 10-K FOR FISCAL YEAR 1999
A COPY OF THE COMPANY'S REPORT FOR THE YEAR ENDED DECEMBER 31, 1999 ON
FORM 10-K, EXCLUSIVE OF EXHIBITS, IS INCLUDED IN THE COMPANY'S ANNUAL REPORT TO
STOCKHOLDERS, AND 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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27
<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,
Hazel M. Aker
SECRETARY
San Diego, California
April 26, 2000
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28
<PAGE>
EXHIBIT A
ALARIS MEDICAL, INC.
1996 STOCK OPTION PLAN
(AS AMENDED EFFECTIVE DECEMBER 23, 1999)
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 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 or
the Picower Group (as defined in Section 11(b)(i) below).
(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, 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
- -------------------------------------------------------------------------------
A-1
<PAGE>
full-time basis for an extended period) of such individual
or illness leading to the death or disability of such
individual.
(d) "Closing Price" means, except as otherwise reasonably
determined by the Committee based on reported prices of a
Share, (i) the daily closing price of a Share 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 (ii) if the Shares are traded in the over-the-counter
market, the daily average of the highest bid and lowest
asked prices per Share as reported through the NASDAQ system
or any successor thereto.
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time and the Treasury regulations promulgated
thereunder.
(f) "Committee" means the Board or a committee appointed by the
Board to administer the Plan as provided in Section 4(a).
(g) "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.
(h) "Company" means ALARIS Medical, Inc., a Delaware
corporation.
(i) "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.
(j) "Employee" means an individual employed by the Company, a
Subsidiary, or an Affiliate whose wages, if an employee in
the United States, are subject to the withholding of federal
income tax under Section 3401 of the Code.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute.
(l) "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
- -------------------------------------------------------------------------------
A-2
<PAGE>
date on which trading was reported) as reported through
the NASDAQ system or any successor thereto.
(m) "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.
(n) "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.
(o) "NQSO" means any stock option granted pursuant to the
provisions of the Plan that is not an ISO.
(p) "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
function by a body or individual exercising similar
authority.
(q) "Option" means an ISO or a NQSO (including a NQSO which is
designated as a Performance Option) granted under the Plan.
(r) "Participant" means an individual who is granted an Option
under the Plan.
(s) "Performance Option" means any NQSO which is designated as a
Performance Option and is subject to the performance vesting
provisions set forth in Section 9(d) and the Stock Option
Agreement.
(t) "Plan" means this ALARIS Medical, Inc. 1996 Stock Option
Plan, as it may be amended from time to time.
(u) "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.
(v) "Share" means one share of Common Stock, adjusted in
accordance with Section 10(b), if applicable.
(w) "Stock Option Agreement" means the written agreement between
the Company and the Participant that contains the terms and
conditions pertaining to an Option.
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A-3
<PAGE>
(x) "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.
(y) "Target Date" means the date, as described in Section 9(d),
on which a Target Price is achieved with respect to a
Performance Option.
(z) "Target Price" means a target price of a Share, as
determined by the Committee in its sole and absolute
discretion and so designated in the Stock Option Agreement,
upon the attainment of which the applicable Vesting
Percentage portion of a Performance Option shall become
vested, as described in Section 9(d).
(aa) "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).
(bb) "Vesting Percentage" means a specified percentage of a
Performance Option, as determined by the Committee in its
sole and absolute discretion and set forth in the Stock
Option Agreement, which shall become vested upon the
attainment of a Target Price in accordance with Section
9(d).
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 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 the Board or a committee
appointed by the Board. Members of that 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, that committee. Vacancies on that committee, however caused, shall
be filled by the Board.
(b) ACTIONS BY THE COMMITTEE.
The Committee shall hold meetings (in person or telephonically)
at such times and places as it may determine. Acts approved by a majority of the
members of the Committee present
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A-4
<PAGE>
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 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 or cause to be maintained 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, which was obtained at a meeting held on June 11, 1997. An amendment of
the Plan was approved by the Board and became effective on May 28, 1998, subject
to approval by the shareholders of the Company, which was obtained at a meeting
held on June 24, 1998. A further amendment of the Plan was approved by the Board
and became effective on December 23, 1999, subject to approval by the
shareholders of the Company at a meeting duly called and held within twelve
months following such date.
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A-5
<PAGE>
(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
Option that is a Performance Option must be a NQSO. Each Stock Option
Agreement shall specify whether the Option covered thereby is an ISO or a
NQSO and, in the case of a NQSO, whether the Option is a Performance Option.
The maximum aggregate number of Shares that may be issued with
respect to Options (other than Performance Options) under the Plan is
6,700,000 Shares. The maximum number of Shares that may be issued with
respect to Performance Options under the Plan is 2,800,000. However, no more
than 1,000,000 Shares (subject to adjustment as described below) shall be
awarded with respect to any one or more Options granted 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; PROVIDED,
HOWEVER, that (i) Shares which were subject to Performance Options shall
again be available for purchase only under Performance Options subsequently
granted, and (ii) Shares which were subject to Options which were not
Performance Options shall again be available for purchase only under Options
subsequently granted which are not Performance Options. 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 (i) only
Employees of the Company or any Subsidiary shall be eligible to receive ISOs,
and (ii) only Officers and Employees who are appointed or designated as
corporate or divisional vice presidents or directors of the Company (and such
other categories of Employees and consultants and independent contractors as
shall be specifically
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<PAGE>
approved by the Committee) shall be eligible to receive Performance Options.
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 AND PERFORMANCE OPTIONS.
The exercise price of each Share subject to an ISO or a
Performance Option shall be determined by the Committee but shall not be less
than the Fair Market Value of a Share at the close of business on the business
day immediately preceding the date of grant of the ISO or Performance Option, as
the case may be; PROVIDED HOWEVER, 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 at the close of business on the business day immediately
preceding the date of grant of the ISO.
(c) EXERCISE PRICE OF NQSOS (OTHER THAN PERFORMANCE OPTIONS).
The exercise price of each Share subject to a NQSO (other than a
Performance Option) shall be determined by the Committee at the time of grant
but shall 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 in its sole and absolute discretion
and set forth in the Stock Option Agreement. Notwithstanding the foregoing, the
vesting schedule applicable to each Performance Option shall be subject to the
following requirements; PROVIDED, HOWEVER, that notwithstanding the failure to
achieve any applicable Target Price(s), an outstanding Performance Option shall
vest on the date that is seven (7) years after the date of grant of the
Performance Option.
(i) The Committee shall designate one or more Vesting
Percentage(s) and a Target Price applicable to each
such Vesting Percentage with respect to each
Performance Option granted pursuant to this Plan. The
total sum of such designated Vesting Percentages (or,
in the case of only one Vesting Percentage, such
Vesting Percentage) shall equal 100% of such
Performance Option.
(ii) That portion of each Performance Option equal to a
designated Vesting Percentage shall vest and become
first exercisable on the date ("Target Date") on which
the Closing Price has equaled or exceeded the Target
Price applicable to such Vesting Percentage
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<PAGE>
with respect to the Shares on each day (with
exception permitted for up to six days) during the
ninety calendar day period preceding such Target Date.
(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 when due to vest
pursuant to its terms 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
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
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A-8
<PAGE>
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.
(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 directors of
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<PAGE>
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;
(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 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
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A-10
<PAGE>
always be a whole number; (iv) the Target Price with respect to any
Performance Options; and (v) such other matters as shall be appropriate in
light of the circumstances.
11. CHANGE OF CONTROL
(a) 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 (other than Performance 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 (including Performance 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
at the discretion of the Committee 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 sole and absolute 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.
(b) A "Change of Control" will be deemed to occur on the date
any of the following events occur:
(i) 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 (any one or more of the foregoing being
sometimes referred to herein as 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
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A-11
<PAGE>
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;
(ii) 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);
(iii) the consummation of (A) 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 (B) an
agreement providing for the merger or consolidation of
the Company or a Significant Subsidiary (1) 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 Common Stock 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
outstanding Options) or (2) 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
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A-12
<PAGE>
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
(iv) 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.
(c) Notwithstanding the foregoing provisions of this Section 11,
unless otherwise determined by the Committee at the time of
grant or by amendment (with the holder's consent) of such
grant, in the event of a Sale Transaction (as defined
below), all Performance Options not fully vested on or prior
to the effective time of any such Sale Transaction shall
vest immediately prior to such effective time, in whole or
in part, if and only to the extent the price to be paid per
Share (determined on a fully diluted basis and taking into
account the exercise price, as determined by the Committee)
in the Sale Transaction equals or exceeds the Target Price
with respect to the applicable vesting percentage of such
Performance Option. For purposes of this Section 11, a "Sale
Transaction" will be deemed to have occurred on the date any
of the following events shall have occurred:
(i) 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, Jeffry M. Picower and the Picower Group)
acquire all or substantially all of the Common Stock of
the Company;
(ii) the consummation of (A) a plan of liquidation of all or
substantially all of the assets of the Company, or (B)
an agreement providing for the merger or consolidation
of the Company (1) in which the Company 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
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 outstanding Options)
or (2) pursuant to which, even though the Company is
the continuing or surviving corporation, the shares of
Common Stock are converted into cash, securities or
other property; PROVIDED,
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A-13
<PAGE>
HOWEVER, that no "Sale Transaction" shall be deemed to
occur as the result of a consolidation or merger of
the Company in which the holders of the shares of
Common Stock 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
(iii) 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 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 of the Company 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 compliance with the registration or qualification requirements of any
state securities laws or stock exchange.
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.
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A-14
<PAGE>
(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 Option, 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.
(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
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A-15
<PAGE>
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.
(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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A-16
<PAGE>
EXHIBIT B
THIRD AMENDED AND RESTATED
1990 NON-QUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED EFFECTIVE APRIL 17, 2000)
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 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
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B-1
<PAGE>
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.
(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.
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B-2
<PAGE>
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 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
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B-3
<PAGE>
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 third amended and
restated form was amended by the Board effective May 28, 1998, 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. The Plan, as amended,
was again amended by the Board effective April 17, 2000, 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.
(b) TERM OF PLAN.
No NQSO shall be granted pursuant to the Plan on or after September 7,
2005, 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 500,000. 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
28, 1998, shall be granted automatically NQSOs to purchase 10,000 Shares on the
next succeeding business day after becoming a Non-Employee Director. In
addition, (i) NQSOs to purchase 10,000 Shares shall
- -------------------------------------------------------------------------------
B-4
<PAGE>
be granted automatically to each Non-Employee Director on each anniversary
date of his preceding automatic NQSO grant under the Plan and every year
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; and (ii) the Chairman of the Board shall be granted a NQSO
to purchase 16,000 Shares on May 28, 1998, which NQSO shall be immediately
vested and exercisable. 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 10,000 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 Sections 8(a) and 10, all NQSOs
granted to a Participant shall vest and become first
exercisable at the rate of one-third of the Shares subject
to the NQSOs for each twelve month period of continuous
service on the Board (from the date of grant of the NQSO)
by such Participant, rounded down to the nearest whole
number for each of the first two twelve month periods and
rounded up to the nearest whole number for the third twelve
month period of service;
(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 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
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B-5
<PAGE>
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
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
- -------------------------------------------------------------------------------
B-6
<PAGE>
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 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
- -------------------------------------------------------------------------------
B-7
<PAGE>
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:
(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 NQSO,
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"
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B-8
<PAGE>
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 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.
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B-9
<PAGE>
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.
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.
- -------------------------------------------------------------------------------
B-10
<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.
- -------------------------------------------------------------------------------
B-11
<PAGE>
ALARIS MEDICAL, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 31, 2000
The undersigned stockholder of ALARIS MEDICAL, INC. (the "Company")
hereby appoints Hazel M. Aker, Norman M. Dean and David L. Schlotterbeck, 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, May 31, 2000 at 10:00 a.m. at the American Stock Exchange, 86 Trinity
Place, 14th Floor Boardroom, New York, New York and at any adjournment thereof,
with respect to:
1. The election of Directors;
2. The approval of an amendment to the Company's 1996 Stock
Option Plan;
3. The approval of an amendment to the Company's Third Amended
and Restated 1990 Non-Qualified Stock Option Plan for
Non-Employee Directors;
4. The ratification of the appointment of PricewaterhouseCoopers
LLP as independent accountants for the fiscal year ending
December 31, 2000; 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 Annual 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 AMENDMENT TO THE COMPANY'S 1996 STOCK
OPTION PLAN, (3) TO APPROVE THE AMENDMENT TO 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 PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT ACCOUNTANTS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
Please mark you vote as
indicated in this
example. / X /
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE FOR PROPOSAL 1.
PROPOSAL 1 - Election of Directors, Nominees: Norman M. Dean, Henry Green, David
L. Schlotterbeck, Barry D. Shalov and William T. Tumber.
The Board of Directors WITHHOLD
Recommends Stockholders Authority to vote for all nominees
Vote FOR PROPOSAL 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.
<TABLE>
<S> <C>
(To withhold authority to vote for To vote cumulatively, write "Cumulate For" and the
any nominee write that nominee's number of shares and the name(s) of the nominee(s)
name in the space provided below) in the space provided below.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE FOR PROPOSAL 2.
PROPOSAL 2 - The approval of the amendment to the Company's 1996 Stock Option
Plan.
FOR AGAINST ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE FOR PROPOSAL 3.
PROPOSAL 3 - The approval of the amendment to 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 PROPOSAL 4.
PROPOSAL 4 - The ratification of the appointment of PricewaterhouseCoopers LLP
as independent accountants for the fiscal year ending December 31, 2000.
FOR AGAINST ABSTAIN
<PAGE>
Signature Signature Date
----------------- --------------- ----------
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.
