<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
BIOSITE DIAGNOSTICS INCORPORATED
- --------------------------------------------------------------------------------
(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.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
Biosite Diagnostics Incorporated
11030 Roselle Street
San Diego, CA 92121
(619) 455-4808
April 16, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
which will be held on May 21, 1998, at 9:00 a.m., at the Doubletree Hotel,
11915 El Camino Real, Del Mar, California.
The formal notice of the Annual Meeting and the Proxy Statement have
been made a part of this invitation.
After reading the Proxy Statement, please mark, date, sign and return,
at an early date, the enclosed proxy in the prepaid envelope to ensure that
your shares will be represented. YOUR SHARES CANNOT BE VOTED UNLESS YOU
SIGN, DATE AND RETURN THE ENCLOSED PROXY OR ATTEND THE ANNUAL MEETING IN
PERSON.
A copy of the Company's Annual Report to Stockholders is also enclosed.
The Board of Directors and Management look forward to seeing you at the
meeting.
Sincerely yours,
Kim D. Blickenstaff
President, Chief Executive Officer,
Secretary and Treasurer
<PAGE>
BIOSITE DIAGNOSTICS INCORPORATED
____________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
____________
The Annual Meeting of Stockholders of Biosite Diagnostics Incorporated
(the "Company") will be held at the Doubletree Hotel, 11915 El Camino Real,
Del Mar, California, on May 21, 1998, at 9:00 a.m., for the following
purposes:
1. To elect two Class I directors.
2. To consider and vote upon a proposal to amend and restate the
Company's 1996 Stock Incentive Plan.
3. To consider and vote upon a proposal to amend and restate the
Company's Employee Stock Purchase Plan.
4. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors.
5. To transact such other business as may properly come before the
Annual Meeting and any adjournment of the Annual Meeting.
The Board of Directors has fixed the close of business on April 6, 1998,
as the record date for determining the stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournment thereof. A complete list
of stockholders entitled to vote will be available at the Secretary's office,
11030 Roselle Street, San Diego, California, for ten days before the meeting.
WHETHER YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OR NOT, WE URGE
YOU TO MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
By order of the Board of Directors.
Kim D. Blickenstaff
President, Chief Executive Officer,
Secretary and Treasurer
April 16, 1998
<PAGE>
BIOSITE DIAGNOSTICS INCORPORATED
____________
PROXY STATEMENT
____________
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Biosite Diagnostics Incorporated, a Delaware
corporation ("Biosite" or the "Company"), with principal executive offices at
11030 Roselle Street, San Diego, California 92121, of proxies in the
accompanying form to be used at the Annual Meeting of Stockholders to be held
at the Doubletree Hotel, 11915 El Camino Real, Del Mar, California, on May
21, 1998, at 9:00 a.m., and any adjournment of the Annual Meeting (the
"Annual Meeting"). The shares represented by the proxies received in
response to this solicitation and not revoked will be voted at the Annual
Meeting. A proxy may be revoked at any time before it is exercised by filing
with the Secretary of the Company a written revocation or a duly executed
proxy bearing a later date or by voting in person at the Annual Meeting. On
the matters coming before the Annual Meeting for which a choice has been
specified by a stockholder by means of the ballot on the proxy, the shares
will be voted accordingly. If no choice is specified, the shares will be
voted FOR the election of the two nominees for Class I director listed in
this Proxy Statement and FOR approval of proposals 2, 3 and 4 described in
the Notice of Annual Meeting and in this Proxy Statement.
Stockholders of record at the close of business on April 6, 1998 are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on such date, the Company had 12,938,308 shares of Common Stock
outstanding and entitled to vote. Each holder of Common Stock is entitled to
one vote for each share held as of the record date.
Directors are elected by a plurality vote. The other matters submitted
for stockholder approval at the Annual Meeting will be decided by the
affirmative vote of a majority of shares present in person or represented by
proxy and entitled to vote on each such matter. Abstentions with respect to
any matter are treated as shares present or represented and entitled to vote
on that matter and thus have the same effect as negative votes. If shares
are not voted by the broker who is the record holder of the shares, or if
shares are not voted in other circumstances in which proxy authority is
defective or has been withheld with respect to any matter, these non-voted
shares are not deemed to be present or represented for purposes of
determining whether stockholder approval of that matter has been obtained.
The expense of printing and mailing proxy materials will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation
may be made by certain directors, officers and other employees of the Company
by personal interview, telephone or telegraph. No additional compensation
will be paid to such persons for such solicitation. The Company will
reimburse brokerage firms and others for their reasonable expenses in
forwarding solicitation materials to beneficial owners of the Company's
Common Stock. The Company has retained Georgeson & Co., Inc. to assist in
the solicitation of proxies at a cost of approximately $6,000.00.
This Proxy Statement and the accompanying form of proxy are being mailed
to stockholders on or about April 16, 1998.
IMPORTANT
WHETHER YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OR NOT, WE URGE
YOU TO MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT AT YOUR
EARLIEST CONVENIENCE IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE.
THIS WILL NOT LIMIT YOUR RIGHTS TO ATTEND OR VOTE AT THE ANNUAL
MEETING.
-1-
<PAGE>
ELECTION OF DIRECTORS
The Company has three classes of directors serving staggered three-year
terms. Class I consists of two directors. Class II and Class III each
consist of three directors. Currently, one Class III director seat is
vacant. Two Class I directors are to be elected at the Annual Meeting for a
term of three years expiring at the Annual Meeting in 2001 or until each such
director's successor shall have been elected and qualified. The other
directors of the Company will continue in office for their existing terms,
which expire in 1999 and 2000 for Class II and Class III directors,
respectively.
COMPOSITION OF BOARD OF DIRECTORS
Unless authority to vote for directors is withheld, it is intended that
the shares represented by the enclosed proxy will be voted for the election
of Lonnie M. Smith and Timothy J. Wollaeger as Class I directors. The
nominees have been nominated as Class I directors by the Nominating Committee
of the Company's Board of Directors. In the event any of such nominees
becomes unable or unwilling to accept nomination or election, the shares
represented by the enclosed proxy will be voted for the election of the
balance of those named and such other nominees as the Board of Directors may
select. The Board of Directors has no reason to believe that any such
nominee will be unable or unwilling to serve. There are no family
relationships among any of the directors or executive officers of the Company.
Set forth below is information regarding the two nominees for Class I
director and the continuing directors of Class II and Class III, including
information furnished by them as to their principal occupations at present
and for the past five years, certain directorships held by each, their ages
as of March 31, 1998 and the year in which each became a director of the
Company.
Name Age
- ---- ---
CLASS I
Lonnie M. Smith........................................................... 53
Mr. Smith joined the Board of Directors in October of 1997. Mr. Smith
is Chief Executive Officer of Intuitive Surgical Inc., a surgical device
company. From 1982 to February 1997, he served as Senior Executive Vice
President in charge of healthcare for Hillenbrand Industries, Inc.
("Hillenbrand"), a diversified public holding company. Mr. Smith was a
director of Hillenbrand from 1981 to February 1997. He had been employed by
Hillenbrand or its subsidiaries in various offices since 1976. Mr. Smith
received a B.S. in Electrical Engineering from Utah State University and an
M.B.A. from Harvard Business School.
Timothy J. Wollaeger........................................................ 54
Mr. Wollaeger has served as Chairman of the Board of Directors since the
Company's inception. He is the general partner of Kingsbury Associates,
L.P., a venture capital firm he founded in December 1993. From May 1990
until December 1993, he was Senior Vice President and a director of Columbia
Hospital Corporation (now Columbia/HCA Healthcare Corporation). From October
1986 until July 1993, he was a general partner of the general partner of
Biovest Partners, a California Limited Partnership ("Biovest"), a seed
venture capital firm. He is a director of Amylin Pharmaceuticals, Inc.
("Amylin") and Aurora Biosciences, Inc., and a founder and director of
several privately held medical products companies. Mr. Wollaeger received a
B.A. in Economics from Yale University and an M.B.A. from Stanford University.
-2-
<PAGE>
CLASS II
Thomas H. Adams............................................................. 55
Dr. Adams joined the Board of Directors in September 1988. He has been
a consultant to Nanogen, Inc., a biotechnology firm developing microchips for
the analysis of molecular information, since June 1997. Dr. Adams was a
founder of Genta Incorporated ("Genta"), a biotechnology company, and was
Chairman of the Board and Chief Executive Officer of Genta from February 1989
to April 1997. He previously served as Chairman of the Board and Chief
Executive Officer of Gen-Probe Incorporated ("Gen-Probe"), which he
co-founded in 1984. Prior to joining Gen-Probe, he held the positions of
Senior Vice President of Research & Development and Chief Technical Officer
at Hybritech Incorporated ("Hybritech"). He had previously held senior
scientific management positions with Technicon Instruments Corp., the Hyland
Laboratories Division of Baxter Travenol, and DuPont. Dr. Adams is a
director of Life Technologies, Inc., La Jolla Pharmaceutical Company and a
private biotechnology company. Dr. Adams received his Ph.D. in Biochemistry
from the University of California at Riverside.
Frederick J. Dotzler........................................................ 52
Mr. Dotzler joined the Board of Directors in July 1989. Mr. Dotzler is
General Partner of Medicus Venture Partners ("Medicus"), a venture capital
firm he founded in 1989. Prior to founding Medicus, Mr. Dotzler was a
general partner of Crosspoint Venture Partners. Previously he held
management positions with Millipore Corporation, G.D. Searle & Co., and IBM.
He is a director of several privately held companies. Mr. Dotzler received a
B.S. in Industrial Engineering from Iowa State University, an M.B.A. from the
University of Chicago, and a degree in Economics from the University of
Louvain, Belgium.
Howard E. Greene, Jr. ...................................................... 55
Mr. Greene joined the Board of Directors in June 1989. Mr. Greene is a
founder and Chairman of the Board of Amylin, a biotechnology company in late
stage development of a drug candidate for diabetes, and he was Chief
Executive Officer of Amylin from inception in September 1987 to July 1996.
From October 1986 until July 1993, Mr. Greene was a general partner of the
general partner of Biovest. From March 1979 to March 1986, he was Chief
Executive Officer of Hybritech, and he was co-inventor of Hybritech's
monoclonal antibody assay technology. Prior to joining Hybritech, he was an
executive with the medical diagnostics division of Baxter Healthcare
Corporation from 1974 to 1979 and a consultant with McKinsey & Company from
1967 to 1974. He is Chairman of the Board of Cytel Corporation, a director
of Allergan, Inc., Neurex Corporation and The International Biotechnology
Trust plc, a foreign biotechnology investment company. Mr. Greene received
an M.B.A. from Harvard University.
CLASS III
Kim D. Blickenstaff......................................................... 45
Mr. Blickenstaff, a founder of the Company, has been a director and
President, Chief Executive Officer, Treasurer, and Secretary since April
1988. Mr. Blickenstaff also is a director of Micro Therapeutics Incorporated
and Medi Spectra Inc. Prior to joining Biosite, he held various positions in
finance, operations, research management, sales management, strategic
planning, and marketing with Baxter Travenol, National Health Laboratories,
and Hybritech. Mr. Blickenstaff holds an M.B.A. from the Graduate School of
Business, Loyola University, Chicago.
-3-
<PAGE>
Gunars E. Valkirs, Ph.D. ................................................... 46
Dr. Valkirs, a founder of Biosite and a co-inventor of certain of its
proprietary technology, has been a director and Vice President, Research and
Development and Chief Technical Officer since 1988. Prior to forming
Biosite, he was a Scientific Investigator with the Diagnostics Research &
Development Group at Hybritech, where he was the primary inventor of
Hybritech's patented ICON technology. Dr. Valkirs holds a Ph.D. in Physics
from the University of California at San Diego.
The Board of Directors held five meetings during the 1997 fiscal year.
All Directors then in office attended at least 75% of the aggregate number of
meetings of the Board and of the Committees on which such Directors served.
The Board of Directors has appointed a Compensation Committee, a
Nominating Committee, an Employee Stock Option Committee, and an Audit
Committee.
The current members of the Compensation Committee are Frederick J.
Dotzler and Timothy J. Wollaeger. The Compensation Committee held one
meeting during the 1997 fiscal year. The Compensation Committee's functions
are to determine and supervise compensation to be paid to officers and
directors of the Company and to assist in the administration of, and grant
options under, the 1996 Stock Incentive Plan, to assist in the administration
of the Amended and Restated 1989 Stock Plan and the Employee Stock Purchase
Plan and to assist in the implementation of, and provide recommendations with
respect to, general and specific compensation policies and practices of the
Company. See "Report to Stockholders on Executive Compensation."
The current members of the Nominating Committee are Kim D. Blickenstaff
and Timothy J. Wollaeger. The Nominating Committee held one meeting during
the 1997 fiscal year. The Nominating Committee's function is to select and
nominate individuals to fill vacancies in the Company's Board of Directors.
The Nominating Committee will not consider nominees recommended by
securityholders.
The sole member of the Employee Stock Option Committee is Kim D.
Blickenstaff. The Employee Stock Option Committee held twenty-two meetings
during 1997. The Employee Stock Option Committee's functions are to assist
in the administration of, and grant options under, the 1996 Stock Incentive
Plan with respect to employees who are not officers or directors of the
Company.
The current members of the Audit Committee are Frederick J. Dotzler and
Timothy J. Wollaeger. The Audit Committee held two meetings during the 1997
fiscal year. The Audit Committee's functions are to review the scope of the
annual report, monitor the independent auditor's relationship with the
Company, advise and assist the Board of Directors in evaluating the auditor's
report, supervise the Company's financial and accounting organization and
financial reporting and nominate for stockholder approval at the annual
meeting, with the approval of the Board of Directors, a firm of certified
public accountants whose duty it is to audit the financial records of the
Company for the fiscal year for which it is appointed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE CLASS I DIRECTOR
NOMINEES LISTED ABOVE.
-4-
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of March 31, 1998,
regarding beneficial ownership of the Company's Common Stock by (i) each
director and nominee for director, (ii) each of the Company's officers named
in the Summary Compensation Table set forth herein, (iii) all directors and
executive officers of the Company as a group, and (iv) each person who is
known by the Company to beneficially own more than 5% of the Company's Common
Stock. Except as otherwise indicated and subject to applicable community
property laws, each person has sole investment and voting power with respect
to the shares shown. Ownership information is based upon information
furnished by the respective individuals or entities, as the case may be.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
OWNED OWNED
------------ ------------
<S> <C> <C>
Medicus Venture Partners (1)(2)............ 1,663,344 12.9%
2882 Sand Hill Road
Suite 116
Menlo Park, CA 94025
Wellington Management Company, L.L.P.(3)... 1,222,000 9.5
75 State Street
Boston, MA 02109
Merck KGaA................................. 1,187,667 9.2
Frankfurter Strasse 250
D-64293 Darmstadt
Federal Republic of Germany
Euclid Partners III, L.P. ................. 1,005,869 7.8
50 Rockefeller Plaza
New York, NY 10020
Timothy J. Wollaeger (2)(4)................ 707,800 5.5
c/o Kingsbury Partners L.P.
3655 Nobel Drive, Suite 490
San Diego, CA 92122
Frederick J. Dotzler (1)(2)................ 1,669,334 13.0
Howard E. Greene, Jr. (2)(5)............... 298,712 2.3
Thomas H. Adams, Ph.D. (2)................. 54,618 *
Lonnie Smith............................... 1,510 *
Kim D. Blickenstaff (2).................... 331,202 2.6
Gunars E. Valkirs (2)(6)................... 313,724 2.4
Kenneth F. Buechler (2).................... 309,494 2.4
Charles W. Patrick (2)..................... 88,835 *
Thomas M. Watlington(2).................... 39,041 *
All directors and executive officers as a
group (12 persons)(2)(7)................... 3,998,373 30.0%
</TABLE>
__________
* Less than 1%
-5-
<PAGE>
(1) Includes (i) 704,225 shares held by Medicus Venture Partners 1989, (ii)
520,833 shares held by Medicus Venture Partners 1990, (iii) 333,334 shares
held by Medicus Venture Partners 1991 and (iv) 104,167 shares held by
Medicus Venture Partners 1992 (collectively, the "Medicus Entities"). A
limited partnership affiliated with The Hillman Company and a limited
partnership with general partners Frederick J. Dotzler and John Reher are
each general partners of each of the Medicus Entities, and therefore may be
deemed to be the beneficial owner of these shares because they share the
power to vote and dispose of these shares. The Hillman Company is
controlled by Henry L. Hillman, Elsie Hilliard Hillman and C.G.
Grefenstette, trustees (the "HLH Trustees") of the Henry L. Hillman Trust
U/A dated November 18, 1985 (the "HLH Trust"), which three trustees share
the power to vote and dispose of shares representing a majority of the
voting shares of The Hillman Company. Does not include 143,409 shares held
directly by the HLH Trust or 134,423 shares held directly by Wilmington
Interstate Corporation, an indirect, wholly-owned subsidiary of The Hillman
Company. Also does not include an aggregate of 20,164 shares held by four
irrevocable trusts for the benefit of members of the Hillman family (the
"Family Trusts"), as to which shares the HLH Trustees (other than Mr.
Grefenstette) disclaim beneficial ownership. C.G. Grefenstette and Thomas
G. Bigley are trustees of the Family Trusts and share voting and
dispositive power over the assets of the Family Trusts.
(2) Includes shares which may be acquired pursuant to the exercise of options
within 60 days of March 31, 1998 as follows: Medicus Venture Partners 1997,
785, Mr. Wollaeger, 785, Mr. Greene, 785, Dr. Adams, 785, Mr. Smith 1,510,
Mr. Blickenstaff, 104,292, Dr. Valkirs, 77,698, Dr. Buechler, 90,598, Mr.
Patrick, 43,520, Mr. Watlington, 38,628 and all directors and executive
officers as a group (12 persons), 435,008.
(3) Based on its Schedule 13G dated February 10, 1998, wherein Wellington
Management Company, L.L.P. ("WMC") reported the beneficial ownership of
1,222,000 shares of Company Common Stock. The Schedule 13G states that
such shares are owned by a variety of clients as to whom WMC is an
investment advisor. WMC reports that it has shared power to vote or to
direct the vote of 652,000 of such shares and shared power to dispose or to
direct the disposal of all 1,222,000 shares, and does not have sole voting
or dispositive power with respect to any such shares.
(4) Includes 635,417 shares held by Kingsbury Capital Partners I, L.P. Mr.
Wollaeger is a general partner of the general partner of Kingsbury Capital
Partners I, L.P., and as such, may be deemed to share voting and investment
power with respect to the shares held by the partnership. Mr. Wollaeger
disclaims beneficial ownership of such shares, except to the extent of his
pecuniary interest in such partnership. Includes 6,722 shares held in a
trust for the benefit of Mr. Wollaeger's family as to which Mr. Wollaeger
has shared voting and investment power.
(5) Includes 297,927 shares held in a trust for the benefit of Mr. Greene's
family as to which Mr. Greene has shared voting and investment power.
(6) Includes 235,834 shares held of record by the Valkirs Family Trust.
(7) Includes shares held by entities referenced in footnotes 1, 4, 5 and 6
which are affiliated with certain directors.
-6-
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Information is set forth below concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended December 31, 1995, 1996 and 1997 of those persons who were at December 31,
1997 (i) the Chief Executive Officer and (ii) the other four most highly
compensated executive officers of the Company whose salary and bonus exceeded
$100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
AWARDS
------------
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING
PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($) COMPENSATION ($)(2) OPTIONS (#)
------------------ ---- ------------- --------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
Kim D. Blickenstaff....................... 1997 $205,682 $112,159 $ 1,567 25,000
President and Chief Executive Officer 1996 189,242 92,991 980 100,000(3)
1995 169,633 78,462 900 40,000
Thomas M. Watlington...................... 1997 202,392 32,239 69,214(4) 5,000
Senior Vice President 1996 0(5) 0 0 100,000
Charles W. Patrick........................ 1997 165,697 34,670 574 7,500
Vice President, Sales and Marketing 1996 157,409 29,086 540 50,000(3)
1995 151,000 27,002 59,290(6) 5,000
Gunars E. Valkirs........................ 1997 162,833 58,414 1,287 12,500
Vice President, Research and Development 1996 151,545 60,450 844 50,000(3)
1995 139,208 36,244 793 25,000
Kenneth F. Buechler..................... 1997 152,833 63,414 819 12,500
Vice President, Research 1996 140,466 60,450 768 50,000(3)
1995 125,823 36,244 709 25,000
</TABLE>
_________________
(1) Includes amounts deferred by each individual under the Company's 401(k)
Plan.
(2) Except where noted amounts represent payments on behalf of each individual
for group term life insurance and separate term life insurance.
(3) On September 6, 1996, one half of these options were canceled.
(4) Amount also includes $41,468 of relocation costs and $27,134 related to
income tax associated with the relocation costs.
(5) Mr. Watlington joined the Company in December 1996 and was not compensated
for his services until 1997.
(6) Amount also includes forgiveness of a $36,000 relocation loan made in
August 1990 which was forgiven in August 1995 and $22,776 related to income
taxes associated with the forgiveness of the loan.
-7-
<PAGE>
STOCK OPTIONS
The following tables summarize option grants and exercises during fiscal
1997 to or by the Chief Executive Officer and the Named Executive Officers,
and the value of the options held by such persons at the end of fiscal 1997.
The Company has not granted any Stock Appreciation Rights.
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL RATE
NUMBER % OF OF STOCK PRICE
OF SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/Sh)(3) DATE 5% ($) 10% ($)
------- -------------- -------------- --------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Kim D. Blickenstaff................ 25,000 6.74 12.38 2/27/07 194,643 493,263
Thomas M. Watlington............... 5,000 1.35 12.38 2/27/07 38,929 98,653
Charles W. Patrick................. 7,500 2.02 12.38 2/27/07 58,393 147,979
Gunars E. Valkirs.................. 12,500 3.37 12.38 2/27/07 97,321 246,632
Kenneth F. Buechler................ 12,500 3.37 12.38 2/27/07 97,321 246,632
</TABLE>
________________
(1) These options vest daily over a four-year period commencing on the date of
grant, except that no options are exercisable for the first six months
after the date of grant. The number of shares which have vested under an
option grant is determined by ascertaining the number of days subsequent to
the date of the option grant, multiplying that number of days by the number
of shares subject to the option grant, and in turn multiplying that product
by 0.000684931 (one divided by the product of 365 days and four years).
(2) The Company granted to employees options to acquire 370,600 shares of the
Company's Common Stock in 1997.
(3) The exercise price of each option was equal to 100% of the fair market
value of the Common Stock on the date of grant, as determined by the
Compensation Committee of the Board of Directors.
(4) The potential realizable value of each grant of options has been
calculated, pursuant to the regulations promulgated by the Securities and
Exchange Commission, assuming that the market price of the Common Stock
appreciates in value from the date of grant to the end of the option term
at the annualized rates of 5% and 10% respectively. These values do not
represent the Company's estimate or projection of future Common Stock
value. There can be no assurance that any of the value reflected in the
table will be achieved.
-8-
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND VALUE OF OPTIONS
AT END OF FISCAL 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT END OF OPTIONS AT END OF
FISCAL 1997 (#) FISCAL 1997($)(1)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE (#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------------- ------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Kim D. Blickenstaff........... 0 0 92,494/65,706 557,970/186,646
Thomas M. Watlington.......... 0 0 27,854/77,146 90,577/247,423
Charles W. Patrick............ 16,000 137,200 39,675/24,225 262,985/65,787
Gunars E. Valkirs............. 0 0 71,287/34,413 469,414/102,502
Kenneth F. Buechler........... 1,100 9,438 83,810/34,790 557,103/105,095
</TABLE>
________________
(1) Calculated on the basis of the fair market value of the underlying
securities at December 31, 1997 ($8.875) minus the exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee during 1997 were Mr.
Dotzler and Mr. Wollaeger. There were no interlocks or other relationships
among the Company's executive officers and directors that are required to be
disclosed under applicable executive compensation disclosure regulations.
COMPENSATION OF DIRECTORS
Outside directors of the Company receive $750 to $1,000 for each Board
Meeting attended and $250 to $500 for each committee meeting attended.
Directors are also reimbursed for their expenses for each meeting attended.
Directors are eligible to participate in the 1996 Stock Plan. In February
1997, the Board of Directors approved an annual grant to each non-employee
director of 2,500 non-qualified stock options under the 1996 Stock Plan.
Additionally, in October 1997, the Board of Directors approved a grant of
10,000 non-qualified stock options under the 1996 Stock Plan to Lonnie Smith.
These options vest daily over a four-year period commencing on the date of
grant, and vested options are exercisable commencing on the date of the grant.
Under the 1996 Stock Plan, directors may elect to defer their fees until
they terminate service with the Board of Directors. The deferred fees shall
be deemed invested in Company Common Stock and will be paid in cash in a lump
sum or installments as determined by the Company. Under this arrangement,
Howard Greene and Thomas Adams each have deferred fees equivalent to 112.68
stock units.
PENSION AND LONG-TERM INCENTIVE PLANS
The Company has no pension or long-term incentive plans.
REPORT TO STOCKHOLDERS ON EXECUTIVE COMPENSATION
This report on executive compensation is provided by the Compensation
Committee of the Board of Directors, which is comprised of two non-employee
directors (the "Compensation Committee" or the "Committee"), to assist
stockholders in understanding the objectives and procedures used in
establishing the compensation of the Company's executive officers and
describes the bases on which 1997 compensation determinations were made by
the Committee. In making its determinations, the Compensation Committee
relied in part upon independent surveys and public disclosures of the
compensation of management of companies in the biotechnology industry.
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It is the Company's policy generally to qualify compensation paid to
executive officers for deductibility under section 162(m) of the Internal
Revenue Code. Section 162(m) generally prohibits the Company from deducting
the compensation of executive officers that exceeds $1,000,000 unless that
compensation is based on the satisfaction of objective performance goals.
The Company's 1996 Stock Incentive Plan is structured to qualify awards under
such plans as performance-based compensation and to maximize the tax
deductibility of such awards. However, the Company reserves the discretion
to pay compensation to its executive officers that may not be deductible.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Compensation Committee believes that compensation of the Company's
executive officers should:
- encourage creation of stockholder value and achievement of strategic
corporate objectives;
- integrate compensation with the Company's annual and long-term
corporate objectives and strategy, and focus executive behavior on the
fulfillment of those objectives;
- provide a competitive total compensation package that enables the
Company to attract and retain, on a long-term basis, high caliber
personnel;
- provide total compensation opportunity that is competitive with
companies in the biotechnology industry, taking into account relative
company size, performance and geographic location as well as
individual responsibilities and performance; and
- align the interests of management and stockholders and enhance
stockholder value by providing management with longer term incentives
through equity ownership.
KEY ELEMENTS OF EXECUTIVE COMPENSATION
Executive officer compensation is based primarily on the Company's
achievement of certain business objectives including profit levels and return
on equity, the achievement of product development milestones, the initiation
and continuation of corporate collaborations, and the issuance of patents
relating to the Company's proprietary technology and the completion of
financings, as well as individual contribution and achievement of individual
business objectives by each of such officers. Corporate and individual
objectives are established at the beginning of each fiscal year. Performance
by the Company and executive officers is measured by reviewing and
determining if the corporate and individual objectives have been
accomplished. Currently, the Company's compensation structure for executive
officers includes a combination of base salary, cash bonuses and stock
options.
BASE SALARY. Salary levels are largely determined through comparisons
with companies of similar headcount and market capitalizations or complexity
in the medical device and biotechnology industries. Actual salaries are
based on individual performance contributions within a competitive salary
range for each position that is established through job evaluation of
responsibilities and market comparisons. The Compensation Committee, on the
basis of its knowledge of executive compensation in the industry, believes
that the Company's salary levels for the executive officers are at a level
that the Committee, at the time such salary determinations were made,
considered to be reasonable and necessary given the Company's financial
resources and the stage of its development. In February of 1997, the
Compensation Committee set annual salaries for 1997. The Compensation
Committee reviews salaries on an annual basis, with the annual review for
1998 having occurred in January of 1998. At an annual review, the
Compensation Committee may increase each executive officer's salary based on
the individual's contributions and responsibilities over the prior 12 months
and expectations for the next 12 months.
BONUS. The Committee may award bonuses at the end of the fiscal year
based on the Company's achievements and the individual's contributions to
those achievements, if it deems such an award to be appropriate. Based on
the Company's achievement of a number of key objectives in 1997 that were
important for the continued growth and development of the Company, including
raising additional financial resources for the Company through the initial
public offering of the Company's Common Stock, research and development
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milestones, expansion of the Novartis collaboration, and financial
performance, the Committee decided to award cash bonuses for 1997 to certain
officers and key employees.
STOCK OPTIONS. Long-term incentives are provided by means of periodic
grants of stock options. The Company's 1996 Stock Incentive Plan is
administered by the Compensation Committee. The Committee believes that by
granting executive officers an opportunity to obtain and increase their
personal ownership of Company stock, the best interests of stockholders and
executives will be more closely integrated. The options have exercise prices
equal to fair market value on the date of grant, vest over a four-year
period, and expire ten years from the date of grant. Vesting ceases should
the executive leave the Company's employ. These vesting provisions of the
option plan serve to retain qualified employees, providing continuing
benefits to the Company beyond those achieved in the year of grant.
Therefore, executive officers, as well as all employees who work at least 20
hours per week, independent contractors and advisors who perform services for
the Company, are eligible to receive stock options periodically at the
discretion of the Committee. Consideration is given to the executive
officer's performance against the accomplishment of corporate objectives, to
comparisons with other medical device and biotechnology companies at similar
stages of development as determined by independent surveys and the
Committee's knowledge of industry practice, to the number of options
previously granted to each executive officer and to the extent of vesting of
options and/or restricted stock previously awarded to each executive officer.
CHIEF EXECUTIVE OFFICER COMPENSATION
The salary paid to Kim D. Blickenstaff, the Company's President and
Chief Executive Officer, was $205,682 in 1997. In establishing Mr.
Blickenstaff's salary base, the Committee recognized Mr. Blickenstaff's
efforts in advancing the development and growth of the Company and the
corporate objectives achieved in 1997. Specifically, corporate objectives
achieved included the initial public offering, research and development
milestones, corporate collaborations and financial performance. The
Committees determined that these accomplishments were critical to the
Company's future growth and enhancement of stockholder value and,
accordingly, determined to compensate Mr. Blickenstaff for his efforts on
behalf of the Company. In addition, the Compensation Committee reviewed the
results of a survey of executive salaries of the officers of similar
companies in the medical device and biotechnology industries. The Committee
also took into consideration certain traditional performance standards, such
as profit levels and return on equity, in the evaluation of Mr. Blickenstaff's
performance.
Mr. Blickenstaff is a member of the Board of Directors, but did not
participate in matters involving the evaluation of his own performance or the
setting of his own compensation.
The foregoing report has been furnished by the Compensation Committee of
the Board of Directors and shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into
any filing under the Securities Act of 1933 or under the Securities Exchange
Act of 1934, except to the extent the Company specifically incorporates this
report by reference and shall not otherwise be deemed filed under such Acts.
Timothy J. Wollaeger, Chairman
Frederick J. Dotzler
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STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the cumulative total
stockholder return (change in stock price plus reinvested dividends) of the
Company's Common Stock with the Center for Research in Securities Prices
("CRSP") Total Return Index for The Nasdaq Stock Market (U.S. and Foreign)
(the "Nasdaq Composite Index") and the S&P Medical Products & Supplies Index
(the "S&P Medical Products Index") since February 12, 1997 (the effective
date of the Company's initial public offering). The comparisons in the graph
are required by the Securities and Exchange Commission and are not intended
to forecast or be indicative of possible future performance of the Company's
Common Stock.
[GRAPH]
<TABLE>
<CAPTION>
02/12/97 03/31/97 06/30/97 09/30/97 12/31/97
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Biosite $ 100.00 $81.25 $78.12 $72.92 $73.96
Nasdaq Composite 100.00 90.01 106.37 124.51 116.03
S&P Medical Products 100.00 91.52 109.63 113.26 114.73
</TABLE>
Assumes a $100 investment on February 12, 1997 in each of the Company's
Common Stock, the securities comprising the Nasdaq Composite Index, and the
securities comprising the S&P Medical Products Index.
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CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
In June 1994, the Company entered into two agreements with Merck, a
collaborative development agreement and a supply and distribution agreement,
in connection with the Company's development of Triage Cardiac. Merck
beneficially owns more than 5% of the Company's Common Stock and currently
distributes the Triage DOA in certain countries in Europe, Latin America, the
Middle East, Asia and Africa. In December 1997, Merck agreed to terminate
the Triage Cardiac agreements, effective January 31, 1998 in return for the
forgiveness of approximately $1,300,000 owed to the Company by Merck related
to the development of the Triage Cardiac products and a cash payment of
$2,100,000. Merck also agreed to terminate the distributorship agreement for
the Triage DOA product line effective December 31, 1998.
In April 1997, the Company loaned Mr. Blickenstaff, a director and
President, Chief Executive Officer, Secretary and Treasurer of the Company,
$150,000. The promissory note bears interest at 6.39% and is due on April 2,
2002. The note is secured by 50,000 shares of Company Common Stock owned by
Mr. Blickenstaff. In March 1997, the Company loaned Mr. Watlington, Senior
Vice President of the Company, $100,000. The mortgage note bore no interest
and was repaid in full in June, 1997.
The Company believes that the foregoing transactions were in its best
interests. As a matter of policy these transactions were, and all future
transactions between the Company and its officers, directors or principal
shareholders will be, approved by a majority of the independent and
disinterested members of the Board of Directors, on terms no less favorable
to the Company than could be obtained from unaffiliated third parties and in
connection with bona fide business purposes of the Company.
PROPOSAL 2
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE
BIOSITE DIAGNOSTICS INCORPORATED STOCK INCENTIVE PLAN
The 1996 Stock Incentive Plan (the "1996 Plan") was adopted by the Board
of Directors on December 5, 1996, to be effective December 1, 1996, and was
approved by the stockholders in December 1996. The 1996 Plan replaced the
Company's 1989 Stock Plan. Awards are currently made under the 1996 Plan.
Awards previously made under the 1989 Stock Plan, however, continue to be
administered in accordance with the 1989 Stock Plan. On February 27, 1998,
the Board of Directors amended and restated the plan (as amended and
restated, the "Stock Incentive Plan") to reserve an additional 500,000 shares
for issuance under the Stock Incentive Plan, subject to the approval of the
Company's stockholders at the Annual Meeting.
The full text of the Stock Incentive Plan, substantially in the form in
which it will take effect if approved by the Company's stockholders, is set
forth in Exhibit A to this Proxy Statement. The following summary of the
principal features of the Stock Incentive Plan is subject to, and qualified
in its entirety by, Exhibit A.
DESCRIPTION OF THE STOCK INCENTIVE PLAN
PURPOSE
The purpose of the Stock Incentive Plan is to promote the interests of
the Company and its stockholders by encouraging key individuals to acquire
stock or to increase their proprietary interest in the Company. By providing
the opportunity to acquire stock or receive other incentives, the Company
seeks to attract and retain those key employees upon whose judgment,
initiative and leadership the success of the Company largely depends. The
Company's Board of Directors believes that the Stock Incentive Plan will
constitute an important means of compensating key employees.
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SHARES SUBJECT TO THE STOCK INCENTIVE PLAN
The total number of restricted shares, stock units, options and SARs
available for grant under the Stock Incentive Plan is 1,400,000 (which number
includes the 500,000 share increase that stockholders are being asked to
approve), increased by the amount of all remaining shares available for grant
under the 1989 Stock Plan as of December 1, 1996 and subject to anti-dilution
adjustments. If any restricted shares, stock units, options or SARs are
forfeited, or if options or SARs terminate for any other reason prior to
exercise (other than the exercise of a related SAR or option, and including
any forfeiture or termination under the 1989 Stock Plan), then they again
become available for awards under the Stock Incentive Plan.
OUTSTANDING GRANTS
As of March 31, 1998, an aggregate of 225 stock units and 1,525,340
options were outstanding under the 1989 Stock Plan and the 1996 Plan
(collectively, the "Plan"). As of March 31, 1998, approximately 220
employees, 7 directors and 3 consultants or advisors were eligible to
participate in the Plan. On March 31, 1998, the closing price of the
Company's Common Stock on the Nasdaq National Market was $16.3125 per share.
Of the options granted, 522,566 have been exercised. As of March 31, 1998,
an aggregate of 1,924,958 shares are authorized, but unissued under the Plan.
As of March 31, 1998, the following persons or groups had in total
received restricted stock, stock units and/or options under the Plan: (i) the
Chief Executive Officer and the other remaining officers named in the Summary
Compensation Table: Mr. Blickenstaff 228,200 shares, Mr. Watlington 105,000
shares, Mr. Patrick 129,900 shares, Dr. Valkirs 150,700 shares and Dr.
Buechler 150,700 shares; (ii) all current executive officers of the Company
as a group: 862,300 shares; (iii) all current directors who are not executive
officers as a group: 17,500 shares; (iv) the nominees for Class I director:
Mr. Smith 10,000 shares and Mr. Wollaeger 2,500 shares; (v) each associate of
any of such current directors, executive officers or nominees: 2,500 shares;
(vi) each person who has received five percent of options granted other than
those included above: 0; and (vii) all employees and consultants of the
Company: 2,719,326 shares.
ADMINISTRATION
The Stock Incentive Plan is administered by the Board of Directors or
its delegate. The Board, or its delegate, selects the employees of the
Company who will receive awards, determines the size of any award and
establishes any vesting or other conditions. Employees, directors,
consultants and advisors of the Company (or any subsidiary of the Company)
are eligible to participate in the Stock Incentive Plan, although incentive
stock options may be granted only to employees. No individual may receive
options or stock appreciation rights ("SARs") covering more than 250,000
shares in any calendar year. The participation of the outside directors of
the Company is limited to 20% of shares available under the Stock Incentive
Plan.
The Stock Incentive Plan provides for awards in the form of restricted
shares, stock units, options or SARs, or any combination thereof. No payment
is required upon receipt of an award, except that a recipient of newly issued
restricted shares must pay the par value of such restricted shares to the
Company.
RESTRICTED STOCK
Restricted shares are shares of Common Stock that are subject to repurchase
by the Company at the employee's purchase price in the event that the applicable
vesting conditions are not satisfied, and they are nontransferable prior to
vesting (except for certain transfers to a trustee). Restricted shares have the
same voting and dividend rights as other shares of Common Stock.
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STOCK UNITS
A stock unit is an unfunded bookkeeping entry representing the
equivalent of one share of Common Stock, and is nontransferable prior to the
holder's death. A holder of a stock unit has no voting rights or other
privileges as a stockholder but may be entitled to receive dividend
equivalents equal to the amount of dividends paid on the same number of
shares of Common Stock. Dividend equivalents may be converted into additional
stock units or settled in the form of cash, Common Stock or a combination of
both. Stock units, when vested, may be settled by distributing shares of
Common Stock or by a cash payment corresponding to the fair market value of
an equivalent number of shares of Common Stock, or a combination of both.
Vested stock units will be settled at the time determined by the Compensation
Committee. If the time of settlement is deferred, interest or additional
dividend equivalents may be credited on the deferred payment.
The recipient of restricted shares or stock units may pay all projected
withholding taxes relating to the award with Common Stock rather than cash.
OPTIONS
Options may include nonstatutory stock options ("NSOs") as well as
incentive stock options ("ISOs") intended to qualify for special tax
treatment. The term of an ISO cannot exceed 10 years (five years for 10%
stockholders), and the exercise price of an ISO must be equal to or greater
than the fair market value of the Common Stock on the date of grant (or 110%
of fair market value at the date of grant for 10% stockholders). The exercise
price of an NSO must be equal to or greater than the par value of the Common
Stock on the date of grant.
The exercise price of an option may be paid in any lawful form permitted
by the Compensation Committee, including (without limitation) the surrender
of shares of Common Stock or restricted shares already owned by the optionee.
The Compensation Committee may likewise permit optionees to satisfy their
withholding tax obligation upon exercise of an NSO by surrendering a portion
of their option shares to the Company. The Stock Incentive Plan also allows
the optionee to pay the exercise price of an option by giving "exercise/sale"
or "exercise/pledge" directions. If exercise/sale directions are given, a
number of option shares sufficient to pay the exercise price and any
withholding taxes is issued directly to a securities broker selected by the
Company who, in turn, sells these shares in the open market. The broker
remits to the Company the proceeds from the sale of these shares, and the
optionee receives the remaining option shares. If exercise/ pledge directions
are given, the option shares are issued directly to a securities broker or
other lender selected by the Company. The broker or other lender will hold
the shares as security and will extend credit for up to 50% of their market
value. The loan proceeds will be paid to the Company to the extent necessary
to pay the exercise price and any withholding taxes. Any excess loan proceeds
may be paid to the optionee. If the loan proceeds are insufficient to cover
the exercise price and withholding taxes, the optionee will be required to
pay the deficiency to the Company at the time of exercise.
STOCK APPRECIATION RIGHTS
Stock appreciation rights ("SARs") permit the participant to elect to
receive any appreciation in the value of the underlying stock from the
Company, either in shares of Common Stock or in cash or a combination of the
two, with the Compensation Committee having the discretion to determine the
form in which such payment will be made. The amount payable on exercise of an
SAR is measured by the difference between the market value of the underlying
stock at exercise and the exercise price. SARs may, but need not, be granted
in conjunction with options. Upon exercise of an SAR granted in tandem with
an option, the corresponding portion of the related option must be
surrendered and cannot thereafter be exercised. Conversely, upon exercise of
an option to which an SAR is attached, the SAR may no longer be exercised to
the extent that the corresponding option has been exercised. All options and
SARs are nontransferable prior to the optionee's death.
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VESTING
The Compensation Committee determines the number of restricted shares,
stock units, options or SARs to be included in the award as well as the
vesting and other conditions. The vesting conditions may be based on the
employee's service, his or her individual performance, the Company's
performance or other appropriate criteria. In general, the vesting conditions
will be based on the employee's service after the date of grant. Vesting may
be accelerated in the event of the employee's death, disability or retirement
or in the event of a change in control with respect to the Company.
OTHER PROVISIONS
For purposes of the Stock Incentive Plan, the term "change in control"
is defined as any one of the following: (i) any person is or becomes the
beneficial owner, directly or indirectly, of at least 50% of the combined
voting power of the Company's outstanding securities ordinarily having the
right to vote at elections of directors; (ii) approval by the stockholders of
the Company of a merger or consolidation of the Company with or into another
corporation or entity or any other corporate reorganization in which over 50%
of the combined voting power of the continuing or surviving entity
immediately after the merger, consolidation or reorganization is owned by
persons who were not stockholders of the Company immediately prior to the
merger, consolidation or reorganization; or (iii) a change in the composition
of the Board of Directors in which fewer than half of the incumbent Directors
had been Directors 24 months prior to the change or were elected or nominated
with the affirmative votes of Directors 24 months prior to the change.
Awards under the Stock Incentive Plan may provide that if any payment
(or transfer) by the Company to a recipient would be nondeductible by the
Company for federal income tax purposes, then the aggregate present value of
all such payments (or transfers) will be reduced to an amount which maximizes
such value without causing any such payment (or transfer) to be nondeductible.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of the
Stock Incentive Plan as it relates to share awards, nonqualified stock
options and incentive stock options is intended to be a summary of applicable
federal law. State and local tax consequences may differ.
SHARE AWARDS
If a participant is awarded or purchases shares, the amount by which the
fair market value of the shares on the date of award or purchase exceeds the
amount paid for the shares will be taxed to the participant as ordinary
income. The Company will be entitled to a deduction in the same amount
provided it makes all required withholdings on the compensation element of
the sale or award. The participant's tax basis in the shares acquired is
equal to the share's fair market value on the date of acquisition. Upon a
subsequent sale of any shares, the participant will realize capital gain or
loss (long-term or short-term, depending on whether the shares were held for
more than one year before the sale) in an amount equal to the difference
between his or her basis in the shares and the sale price.
If a participant is awarded or purchases shares that are subject to a
vesting schedule, the participant is deemed to receive an amount of ordinary
income equal to the excess of the fair market value of the shares at the time
they vest over the amount (if any) paid for such shares by the participant.
The Company is entitled to a deduction equal to the amount of the income
recognized by the participant.
Code Section 83(b) permits a participant to elect, within 30 days after
the transfer of any shares subject to a vesting schedule to him or her, to be
taxed at ordinary income rates on the excess of the fair market value of the
shares at the time of the transfer over the amount (if any) paid by the
participant for such shares. Withholding taxes apply at that time. If the
participant makes a Section 83(b) election, any later
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appreciation in the value of the shares is not taxed as ordinary income, but
instead is taxed as capital gain when the shares are sold or transferred.
OPTIONS
Incentive stock options and nonqualified stock options are treated
differently for federal income tax purposes. Incentive stock options are
intended to comply with the requirements of Section 422 of the Code.
Nonqualified stock options need not comply with such requirements.
An optionee is generally not taxed on the grant or exercise of an
incentive stock option. The difference between the exercise price and the
fair market value of the shares on the exercise date will, however, be a
preference item for purposes of the alternative minimum tax. If an optionee
holds the shares acquired upon exercise of an incentive stock option for at
least two years following grant and at least one year following exercise, the
optionee's gain, if any, upon a subsequent disposition of such shares is a
capital gain (or loss). The measure of the gain is the difference between the
proceeds received on disposition and the optionee's basis in the shares
(which generally equals the exercise price). If an optionee disposes of stock
acquired pursuant to exercise of an incentive stock option before satisfying
the one and two-year holding periods described above, the optionee will
recognize both ordinary income and capital gain (or loss) in the year of
disposition. The amount of the ordinary income will be the lesser of (i) the
amount realized on disposition less the optionee's adjusted basis in the
stock (usually the option price) or (ii) the difference between the fair
market value of the stock on the exercise date and the option price. The
balance of the consideration received on such a disposition will be capital
gain if the stock had been held for at least one year following exercise of
the incentive stock option. The Company is not entitled to an income tax
deduction on the grant or exercise of an incentive stock option or on the
optionee's disposition of the shares after satisfying the holding period
requirement described above. If the holding periods are not satisfied, the
Company will be entitled to a deduction in the year the optionee disposes of
the shares, in an amount equal to the ordinary income recognized by the
optionee.
An optionee is not taxed on the grant of a nonqualified stock option. On
exercise, however, the optionee recognizes ordinary income equal to the
difference between the option price and the fair market value of the shares
on the date of exercise. The Company is entitled to an income tax deduction
in the year of exercise in the amount recognized by the optionee as ordinary
income. Any gain on subsequent disposition of the shares is a capital gain if
the shares are held for at least one year following exercise. The Company
does not receive a deduction for this gain.
1997 TAX LAW
The recently enacted 1997 Tax Law provides for lower capital gains rates
if stock is held for eighteen months. The 1997 Tax Law also provides for
even lower applicable capital gains rates for stock acquired after December
31, 2000 in certain circumstances if the stock is held for at least five
years.
STOCK INCENTIVE PLAN BENEFITS
The Board is authorized, within the provisions of the Stock Incentive
Plan, to amend the terms of outstanding restricted shares or stock units, to
modify or extend outstanding options or SARs or to exchange new options for
outstanding options, including outstanding options with a higher exercise
price than the new options. Therefore, the benefits and amounts that will be
received by each of the Named Executive Officers as a group and all other key
employees are not determinable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE AMENDMENT
AND RESTATEMENT OF THE BIOSITE DIAGNOSTICS INCORPORATED STOCK INCENTIVE PLAN.
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PROPOSAL 3
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE
BIOSITE DIAGNOSTICS INCORPORATED EMPLOYEE STOCK PURCHASE PLAN
In order to provide employees of the Company with an opportunity to
purchase Common Stock at a discount through payroll deductions, the Board of
Directors originally adopted the Biosite Diagnostics Incorporated Employee
Stock Purchase Plan on December 5, 1996 under which 100,000 shares of Common
Stock were reserved for issuance (subject to anti-dilution provisions). On
February 27, 1998, the Board of Directors amended and restated the plan (as
amended and restated, the "ESPP"), subject to the approval of the Company's
stockholders at the Annual Meeting, to reserve an additional 250,000 shares
for issuance under the ESPP and to provide the Committee (as defined in the
ESPP) with greater flexibility in the event there are insufficient shares to
accommodate purchases during the following six month purchase period. As of
March 31, 1998, an aggregate of 45,246 shares were available for issuance
under the ESPP (which number does not include the 250,000 share increase that
stockholders are being asked to approve).
The full text of the ESPP, substantially in the form in which it will
take effect if the ESPP is approved by the stockholders, is set forth in
Exhibit B to this Proxy Statement. The following description of the ESPP is
a summary only. It is subject to, and qualified in its entirety by, Exhibit B.
Under the ESPP, an aggregate of 350,000 shares of Common Stock (which
number includes the 250,000 share increase that stockholders are being asked
to approve) have been reserved for issuance, subject to anti-dilution
adjustments. Each regular full-time and part-time employee who works an
average of over 20 hours per week will be eligible to participate in the ESPP
at the beginning of the first participation period after the employee's date
of hire. Eligible employees may elect to contribute up to 15% of their cash
compensation during each six-month "purchase period," subject to certain
statutory limits. Participants may withdraw their contributions at any time
before the close of the purchase period.
At the end of each purchase period, the Company will apply the amount
contributed by the participant during that period to purchase shares of
Company Common Stock, but not more than 2,500 shares. Shares of Company
Common Stock are purchased for 85% of the lower of (i) the market price of
Company Common Stock immediately before the beginning of the applicable
"offering period" or (ii) the market price of Company Common Stock on the
last business day of the purchase period. In general, each offering period
is 24 months long, but a new offering period begins every six months. Thus,
up to four overlapping periods may be in effect at the same time. If the
market price of Company Common Stock is lower when a subsequent offering
period begins, the subsequent offering period automatically becomes the
applicable offering period. A participant cannot purchase Company Common
Stock valued at greater than $25,000 in any one year (measured at the
beginning of the offering periods). All expenses incurred in connection with
the implementation and administration of the ESPP will be paid by the Company.
FEDERAL INCOME TAX CONSEQUENCES
The ESPP is intended to qualify as an "employee stock purchase plan"
under section 423 of the Internal Revenue Code (the "Code"). No income is
recognized by a participant at the time a right to purchase Company Common
Stock is granted. Likewise, no taxable income is recognized at the time of
the purchase, even though the purchase price reflects a discount from the
market value of the shares at that time.
A participant must recognize taxable income upon a disposition of shares
acquired under the ESPP. The tax treatment may be more favorable if the
disposition occurs after the holding-period requirements of section 423 have
been satisfied. To satisfy the holding-period requirements of section 423,
shares acquired under the Plan cannot be disposed of within two years after
the FIRST day of the offering period during which the shares are purchased.
They also cannot be disposed of within one year after they are purchased.
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If the holding period is met, the participant recognizes ordinary income
equal to the LOWER of (a) the excess of the fair market value of the shares
on the date of the disposition over the actual purchase price or (b) 15% of
the fair market value of the shares immediately before the applicable
offering period. The Company will not be entitled to any deduction under
these circumstances.
The excess, if any, of the fair market value of the shares on the date
of the disposition over the sum of the purchase price plus the amount of
ordinary income recognized (as described above) will be taxed as a capital
gain. If a taxable disposition produces a loss (i.e., the fair market value
of the shares on the date of the disposition is less than the purchase price)
and the disposition involves certain unrelated parties, then the loss will be
a long-term capital loss.
If the holding period is not met, the entire difference between the
purchase price and the market value of the shares on the date of purchase
will be taxed to the participant as ordinary income in the year of
disposition. The Company will generally be entitled to a deduction for the
same amount.
The excess, if any, of the market value of the shares on the date of
disposition over their market value on the date of purchase will be taxed as
a capital gain (long term or short-term, depending on how long the shares
have been held). If the value of the shares on the date of disposition is
less than their value on the date of purchase, then the difference will
result in a capital loss (long-term or short-term, depending upon the holding
period), provided the disposition involves certain unrelated parties. Any
such loss will not affect the ordinary income recognized upon the disposition.
1997 TAX LAW
In August 1997 new tax legislation was enacted (the "1997 Tax Law")
which provides for lower capital gains rates if stock is held for eighteen
months. The 1997 Tax Law also provides for even lower applicable capital
gains rates for stock acquired after December 31, 2000 in certain
circumstances if the stock is held for at least five years.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE AMENDMENT
AND RESTATEMENT OF THE BIOSITE DIAGNOSTICS INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL 4
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed the firm of Ernst & Young LLP ("Ernst & Young") as the Company's
independent auditors for the fiscal year ended December 31, 1998, subject to
ratification by the stockholders. Representatives of Ernst & Young are
expected to be present at the Company's Annual Meeting. They will have an
opportunity to make a statement, if they desire to do so, and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF ERNST & YOUNG LLP.
STOCKHOLDER PROPOSALS
To be considered for inclusion in the proxy statement for presentation
at the Annual Meeting of Stockholders to be held in 1999 a stockholder
proposal must be received at the offices of the Company, 11030 Roselle
Street, San Diego, CA 92121 not later than December 17, 1998.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company's directors, executive officers,
and any persons holding more than 10% of the Company's Common Stock are
required to report their initial ownership of the Company's Common Stock and
any subsequent changes in that ownership to the SEC. Specific due dates for
these reports have been established and the Company is required to identify
in this Proxy Statement those persons who failed to timely file these
reports. The Company has previously disclosed the delinquent filings of Form
3s in its 10-K for the fiscal year ended December 31, 1996. All of the
remaining filing requirements were satisfied for 1997.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented
at the Annual Meeting. If any other business is properly brought before the
Annual Meeting, it is intended that proxies in the enclosed form will be
voted in accordance with the judgment of the persons voting the proxies.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her
to participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting Biosite Diagnostics
Incorporated, 11030 Roselle Street, San Diego, California, 92121, (619)
455-4808. To provide the Company sufficient time to arrange for reasonable
assistance or accommodation, please submit all requests by May 7, 1998.
Whether you intend to be present at the Annual Meeting or not, we urge
you to return your signed proxy promptly.
By order of the Board of Directors.
Kim D. Blickenstaff
President, Chief Executive Officer,
Secretary and Treasurer
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EXHIBIT A
BIOSITE DIAGNOSTICS INCORPORATED
AMENDED AND RESTATED
1996 STOCK INCENTIVE PLAN
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board on December 5, 1996, and was approved
by the Company's stockholders on December 6, 1996. The Plan is effective
December 1, 1996. However, Articles 7, 8 and 9 shall not apply prior to the
Company's initial public offering. On February 27, 1998, the Plan was
amended by the Board to increase the number of shares under the Plan.
The purpose of the Plan is to promote the long-term success of the
Company and the creation of stockholder value by (a) encouraging Key
Employees to focus on critical long-range objectives, (b) encouraging the
attraction and retention of Key Employees with exceptional qualifications and
(c) linking Key Employees directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing for
Awards in the form of Restricted Shares, Stock Units, Options (which may
constitute incentive stock options or nonstatutory stock options) or stock
appreciation rights.
The Plan shall be governed by, and construed in accordance with, the
laws of the State of California.
ARTICLE 2. ADMINISTRATION.
2.1 COMMITTEE COMPOSITION. The Plan shall be administered by the
Committee. Except as provided below, the Committee shall consist exclusively
of directors of the Company, who shall be appointed by the Board. In
addition, the composition of the Committee shall satisfy:
(a) Such requirements, if any, as the Securities and Exchange
Commission may establish for administrators acting under plans intended to
qualify for exemption under Rule 16b-3 (or its successor) under the
Exchange Act; and
(b) Such requirements as the Internal Revenue Service may establish
for outside directors acting under plans intended to qualify for exemption
under section 162(m)(4)(C) of the Code.
The Board may act on its own behalf with respect to Outside Directors and may
also appoint one or more separate committees composed of one or more officers
of the Company who need not be directors of the Company and who need not
satisfy the foregoing requirements, who may administer the Plan with respect
to Key Employees who are not "covered employees" under section 162(m)(3) of
the Code and who are not required to report pursuant to Section 16(a) of the
Exchange Act.
2.2 COMMITTEE RESPONSIBILITIES. The Committee shall (a) select the
Key Employees who are to receive Awards under the Plan, (b) determine the
type, number, vesting requirements and other features and conditions of such
Awards, (c) interpret the Plan and (d) make all other decisions relating to
the operation of the Plan. The Committee may adopt such rules or guidelines
as it deems appropriate to implement the Plan. The Committee's
determinations under the Plan shall be final and binding on all persons.
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ARTICLE 3. SHARES AVAILABLE FOR GRANTS.
3.1 BASIC LIMITATION. Common Shares issued pursuant to the Plan may
be authorized but unissued shares or treasury shares. The aggregate number
of Common Shares available for Restricted Shares, Stock Units, Options and
SARs awarded under the Plan shall not exceed 1,400,000. Of the Common Shares
available hereunder, no more than 20% in aggregate shall be available with
respect to Outside Directors. The limitation of this Section 3.1 shall be
subject to adjustment pursuant to Article 10. The number of Common Shares
available under this Plan shall be increased by unexercised or forfeited
Common Shares under the Company's 1989 Stock Plan.
3.2 ADDITIONAL SHARES. If Stock Units, Options or SARs are forfeited
or if Options or SARs terminate for any other reason before being exercised,
then the corresponding Common Shares shall again become available for Awards
under the Plan. If Restricted Shares are forfeited before any dividends have
been paid with respect to such Shares, then such Shares shall again become
available for Awards under the Plan. If Stock Units are settled, then only
the number of Common Shares (if any) actually issued in settlement of such
Stock Units shall reduce the number available under Section 3.1 and the
balance shall again become available for Awards under the Plan. If SARs are
exercised, then only the number of Common Shares (if any) actually issued in
settlement of such SARs shall reduce the number available under Section 3.1
and the balance shall again become available for Awards under the Plan.
3.3 DIVIDEND EQUIVALENTS. Any dividend equivalents distributed under
the Plan shall not be applied against the number of Restricted Shares, Stock
Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.
ARTICLE 4. ELIGIBILITY.
4.1 GENERAL RULES. Only Key Employees (including, without
limitation, independent contractors who are not members of the Board) shall
be eligible for designation as Participants by the Committee.
4.2 OUTSIDE DIRECTORS. The Committee may provide that the NSOs that
otherwise would be granted to an Outside Director under this Plan shall
instead be granted to an affiliate of such Outside Director. Such affiliate
shall then be deemed to be an Outside Director for purposes of the Plan,
provided that the service-related vesting and termination provisions
pertaining to the NSOs shall be applied with regard to the service of the
Outside Director.
4.3 INCENTIVE STOCK OPTIONS. Only Key Employees who are common-law
employees of the Company, a Parent or a Subsidiary shall be eligible for the
grant of ISOs. In addition, a Key Employee who owns more than 10% of the
total combined voting power of all classes of outstanding stock of the
Company or any of its Parents or Subsidiaries shall not be eligible for the
grant of an ISO unless the requirements set forth in section 422(c)(6) of the
Code are satisfied.
ARTICLE 5. OPTIONS.
5.1 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms of the Plan
and may be subject to any other terms that are not inconsistent with the
Plan. The Stock Option Agreement shall specify whether the Option is an ISO
or an NSO. The provisions of the various Stock Option Agreements entered into
under the Plan need not be identical. Options may be granted in
consideration of a cash payment or in consideration of a reduction in the
Optionee's other compensation. A Stock Option Agreement may provide that a
new Option will be granted automatically to the Optionee when he or she
exercises a prior Option and pays the Exercise Price in the form described in
Section 6.2.
5.2 NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 10.
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Options granted to any Optionee in a single calendar year shall in no event
cover more than 250,000 Common Shares, subject to adjustment in accordance
with Article 10.
5.3 EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price under an ISO shall in no
event be less than 100% of the Fair Market Value of a Common Share on the
date of grant and the Exercise Price under an NSO shall in no event be less
than the par value of the Common Shares subject to such NSO. In the case of
an NSO, a Stock Option Agreement may specify an Exercise Price that varies in
accordance with a predetermined formula while the NSO is outstanding,
provided that prior to the Company's initial public offering, the NSO
Exercise Price shall be at least 85% (110% for 10% shareholders) of the Fair
Market Value of a Common Share of Stock on the date of grant.
5.4 EXERCISABILITY AND TERM. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable, provided that prior to the Company's initial public offering,
Options shall become exercisable pursuant to a schedule providing for at
least 20% vesting per year over a five-year period (or, in the case of
performance options, to the extent permitted under applicable regulations of
the California Department of Corporations). The Stock Option Agreement shall
also specify the term of the Option; provided that the term of an ISO shall
in no event exceed 10 years from the date of grant. A Stock Option Agreement
may provide for accelerated exercisability in the event of the Optionee's
death, disability or retirement or other events and may provide for
expiration prior to the end of its term in the event of the termination of
the Optionee's service. Notwithstanding the foregoing, no Options may be
accelerated prior to the Company's initial public offering.
Options may be awarded in combination with SARs, and such an Award may
provide that the Options will not be exercisable unless the related SARs are
forfeited. NSOs may also be awarded in combination with Restricted Shares or
Stock Units, and such an Award may provide that the NSOs will not be
exercisable unless the related Restricted Shares or Stock Units are forfeited.
Prior to the Company's initial public offering, Options must be
exercised within 30 days of the termination of employment (six months for
termination on account of death or disability).
5.5 EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become fully
exercisable as to all Common Shares subject to such Option in the event that
a Change in Control occurs with respect to the Company.
5.6 MODIFICATION OR ASSUMPTION OF OPTIONS. Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding options or
may accept the cancellation of outstanding options (whether granted by the
Company or by another issuer) in return for the grant of new options for the
same or a different number of shares and at the same or a different exercise
price. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, alter or impair his or her rights or
obligations under such Option.
5.7 OTHER REQUIREMENTS PRIOR TO COMPANY'S INITIAL PUBLIC OFFERING.
Prior to the Company's initial public offering, Optionees shall receive
Company financial statements at least annually.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 GENERAL RULE. The entire Exercise Price of Common Shares issued
upon exercise of Options shall be payable in cash at the time when such
Common Shares are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment shall be
made only pursuant to the express provisions of the applicable Stock Option
Agreement. The Stock Option Agreement may specify that payment may be made
in any form(s) described in this Article 6.
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(b) In the case of an NSO, the Committee may at any time accept
payment in any form(s) described in this Article 6.
6.2 SURRENDER OF STOCK. To the extent that this Section 6.2 is
applicable, payment for all or any part of the Exercise Price may be made
with Common Shares which have already been owned by the Optionee for more
than six months. Such Common Shares shall be valued at their Fair Market
Value on the date when the new Common Shares are purchased under the Plan.
6.3 EXERCISE/SALE. To the extent that this Section 6.3 is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to a securities broker approved by the
Company to sell Common Shares and to deliver all or part of the sales
proceeds to the Company in payment of all or part of the Exercise Price and
any withholding taxes.
6.4 EXERCISE/PLEDGE. To the extent that this Section 6.4 is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to pledge Common Shares to a securities
broker or lender approved by the Company, as security for a loan, and to
deliver all or part of the loan proceeds to the Company in payment of all or
part of the Exercise Price and any withholding taxes.
6.5 PROMISSORY NOTE. To the extent that this Section 6.5 is
applicable, payment may be made with a full-recourse promissory note;
provided that the par value of the Common Shares shall be paid in cash.
6.6 OTHER FORMS OF PAYMENT. To the extent that this Section 6.6 is
applicable, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
ARTICLE 7. STOCK APPRECIATION RIGHTS.
7.1 SAR AGREEMENT. Each grant of an SAR under the Plan shall be
evidenced by an SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to
any other terms that are not inconsistent with the Plan. The provisions of
the various SAR Agreements entered into under the Plan need not be identical.
SARs may be granted in consideration of a reduction in the Optionee's other
compensation.
7.2 NUMBER OF SHARES. Each SAR Agreement shall specify the number of
Common Shares to which the SAR pertains and shall provide for the adjustment
of such number in accordance with Article 10. SARs granted to any Optionee
in a single calendar year shall in no event pertain to more than 250,000
Common Shares, subject to adjustment in accordance with Article 10.
7.3 EXERCISE PRICE. Each SAR Agreement shall specify the Exercise
Price. An SAR Agreement may specify an Exercise Price that varies in
accordance with a predetermined formula while the SAR is outstanding.
7.4 EXERCISABILITY AND TERM. Each SAR Agreement shall specify the
date when all or any installment of the SAR is to become exercisable. The
SAR Agreement shall also specify the term of the SAR. An SAR Agreement may
provide for accelerated exercisability in the event of the Optionee's death,
disability or retirement or other events and may provide for expiration prior
to the end of its term in the event of the termination of the Optionee's
service. SARs may also be awarded in combination with Options, Restricted
Shares or Stock Units, and such an Award may provide that the SARs will not
be exercisable unless the related Options, Restricted Shares or Stock Units
are forfeited. An SAR may be included in an ISO only at the time of grant
but may be included in an NSO at the time of grant or thereafter. An SAR
granted under the Plan may provide that it will be exercisable only in the
event of a Change in Control.
7.5 EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the
time of granting an SAR or thereafter, that such SAR shall become fully
exercisable as to all Common Shares subject to such SAR in the event that a
Change in Control occurs with respect to the Company.
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7.6 EXERCISE OF SARS. The exercise of an SAR shall be subject to the
restrictions imposed by Rule 16b-3 (or its successor) under the Exchange Act,
if applicable. If, on the date when an SAR expires, the Exercise Price under
such SAR is less than the Fair Market Value on such date but any portion of
such SAR has not been exercised or surrendered, then such SAR shall
automatically be deemed to be exercised as of such date with respect to such
portion. Upon exercise of an SAR, the Optionee (or any person having the
right to exercise the SAR after his or her death) shall receive from the
Company (a) Common Shares, (b) cash or (c) a combination of Common Shares and
cash, as the Committee shall determine. The amount of cash and/or the Fair
Market Value of Common Shares received upon exercise of SARs shall, in the
aggregate, be equal to the amount by which the Fair Market Value (on the date
of surrender) of the Common Shares subject to the SARs exceeds the Exercise
Price.
7.7 MODIFICATION OR ASSUMPTION OF SARS. Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding SARs or may
accept the cancellation of outstanding SARs (whether granted by the Company
or by another issuer) in return for the grant of new SARs for the same or a
different number of shares and at the same or a different exercise price.
The foregoing notwithstanding, no modification of an SAR shall, without the
consent of the Optionee, alter or impair his or her rights or obligations
under such SAR.
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS.
8.1 TIME, AMOUNT AND FORM OF AWARDS. Awards under the Plan may be
granted in the form of Restricted Shares, in the form of Stock Units, or in
any combination of both. Restricted Shares or Stock Units may also be
awarded in combination with NSOs or SARs, and such an Award may provide that
the Restricted Shares or Stock Units will be forfeited in the event that the
related NSOs or SARs are exercised.
8.2 PAYMENT FOR AWARDS. To the extent that an Award is granted in
the form of newly issued Restricted Shares, the Award recipient, as a
condition to the grant of such Award, shall be required to pay the Company in
cash an amount equal to the par value of such Restricted Shares. To the
extent that an Award is granted in the form of Restricted Shares from the
Company's treasury or in the form of Stock Units, no cash consideration shall
be required of the Award recipients.
8.3 VESTING CONDITIONS. Each Award of Restricted Shares or Stock
Units shall become vested, in full or in installments, upon satisfaction of
the conditions specified in the Stock Award Agreement. A Stock Award
Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The Committee
may determine, at the time of making an Award or thereafter, that such Award
shall become fully vested in the event that a Change in Control occurs with
respect to the Company.
8.4 FORM AND TIME OF SETTLEMENT OF STOCK UNITS. Settlement of vested
Stock Units may be made in the form of (a) cash, (b) Common Shares or (c) any
combination of both, as determined by the Committee. The actual number of
Stock Units eligible for settlement may be larger or smaller than the number
included in the original Award, based on predetermined performance factors.
Methods of converting Stock Units into cash may include (without limitation)
a method based on the average Fair Market Value of Common Shares over a
series of trading days. Vested Stock Units may be settled in a lump sum or in
installments. The distribution may occur or commence when all vesting
conditions applicable to the Stock Units have been satisfied or have lapsed,
or it may be deferred to any later date. The amount of a deferred
distribution may be increased by an interest factor or by dividend
equivalents. Until an Award of Stock Units is settled, the number of such
Stock Units shall be subject to adjustment pursuant to Article 10.
8.5 DEATH OF RECIPIENT. Any Stock Units Award that becomes payable
after the recipient's death shall be distributed to the recipient's
beneficiary or beneficiaries. Each recipient of a Stock Units Award under
the Plan shall designate one or more beneficiaries for this purpose by filing
the prescribed form with the Company. A beneficiary designation may be
changed by filing the prescribed form with the Company at any time before the
Award recipient's death. If no beneficiary was designated or if no designated
beneficiary
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survives the Award recipient, then any Stock Units Award that becomes payable
after the recipient's death shall be distributed to the recipient's estate.
8.6 CREDITORS' RIGHTS. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent
an unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Award Agreement.
ARTICLE 9. VOTING AND DIVIDEND RIGHTS.
9.1 RESTRICTED SHARES. The holders of Restricted Shares awarded
under the Plan shall have the same voting, dividend and other rights as the
Company's other stockholders. A Stock Award Agreement, however, may require
that the holders of Restricted Shares invest any cash dividends received in
additional Restricted Shares. Such additional Restricted Shares shall be
subject to the same conditions and restrictions as the Award with respect to
which the dividends were paid. Such additional Restricted Shares shall not
reduce the number of Common Shares available under Article 3.
9.2 STOCK UNITS. The holders of Stock Units shall have no voting
rights. Prior to settlement or forfeiture, any Stock Unit awarded under the
Plan may, at the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount
equal to all cash dividends paid on one Common Share while the Stock Unit is
outstanding. Dividend equivalents may be converted into additional Stock
Units. Settlement of dividend equivalents may be made in the form of cash, in
the form of Common Shares, or in a combination of both. Prior to
distribution, any dividend equivalents which are not paid shall be subject to
the same conditions and restrictions as the Stock Units to which they attach.
ARTICLE 10. PROTECTION AGAINST DILUTION.
10.1 ADJUSTMENTS. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a
combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise) into a lesser number of Common Shares, a
recapitalization, a spinoff or a similar occurrence, the Committee shall make
such adjustments as it, in its sole discretion, deems appropriate in one or
more of (a) the number of Options, SARs, Restricted Shares and Stock Units
available for future Awards under Article 3, (b) the limitations set forth in
Sections 5.2 and 7.2, (c) the number of NSOs to be granted to Outside
Directors under Section 4.2, (d) the number of Stock Units included in any
prior Award which has not yet been settled, (e) the number of Common Shares
covered by each outstanding Option and SAR or (f) the Exercise Price under
each outstanding Option and SAR. Except as provided in this Article 10, a
Participant shall have no rights by reason of any issue by the Company of
stock of any class or securities convertible into stock of any class, any
subdivision or consolidation of shares of stock of any class, the payment of
any stock dividend or any other increase or decrease in the number of shares
of stock of any class.
10.2 REORGANIZATIONS. In the event that the Company is a party to a
merger or other reorganization, outstanding Options, SARs, Restricted Shares
and Stock Units shall be subject to the agreement of merger or
reorganization. Such agreement may provide, without limitation, for the
assumption of outstanding Awards by the surviving corporation or its parent,
for their continuation by the Company (if the Company is a surviving
corporation), for accelerated vesting and accelerated expiration (provided
the Company has previously had its initial public offering), or for
settlement in cash.
ARTICLE 11. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such awards
may be settled in the form of Common Shares issued under this Plan. Such
Common Shares shall be treated for all purposes under the Plan like Common
Shares issued in settlement of Stock Units and shall, when issued, reduce the
number of Common Shares available under Article 3.
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ARTICLE 12. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
12.1 EFFECTIVE DATE. No provision of this Article 12 shall be
effective unless and until the Board has determined to implement such
provision.
12.2 ELECTIONS TO RECEIVE NSOS, RESTRICTED SHARES OR STOCK UNITS. An
Outside Director may elect to receive his or her annual retainer payments and
meeting fees from the Company in the form of cash, NSOs, Restricted Shares,
Stock Units, or a combination thereof, as determined by the Board. Such
NSOs, Restricted Shares and Stock Units shall be issued under the Plan. An
election under this Article 12 shall be filed with the Company on the
prescribed form.
12.3 NUMBER AND TERMS OF NSOS, RESTRICTED SHARES OR STOCK UNITS. The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise
be paid in cash shall be calculated in a manner determined by the Board. The
terms of such NSOs, Restricted Shares or Stock Units shall also be determined
by the Board.
ARTICLE 13. LIMITATION ON RIGHTS.
13.1 RETENTION RIGHTS. Neither the Plan nor any Award granted under
the Plan shall be deemed to give any individual a right to remain an
employee, consultant or director of the Company, a Parent or a Subsidiary.
The Company and its Parents and Subsidiaries reserve the right to terminate
the service of any employee, consultant or director at any time, with or
without cause, subject to applicable laws, the Company's certificate of
incorporation and by-laws and a written employment agreement (if any).
13.2 STOCKHOLDERS' RIGHTS. A Participant shall have no dividend
rights, voting rights or other rights as a stockholder with respect to any
Common Shares covered by his or her Award prior to the issuance of a stock
certificate for such Common Shares. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date when
such certificate is issued, except as expressly provided in Articles 8, 9 and
10.
13.3 REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under
the Plan shall be subject to all applicable laws, rules and regulations and
such approval by any regulatory body as may be required. The Company
reserves the right to restrict, in whole or in part, the delivery of Common
Shares pursuant to any Award prior to the satisfaction of all legal
requirements relating to the issuance of such Common Shares, to their
registration, qualification or listing or to an exemption from registration,
qualification or listing.
ARTICLE 14. LIMITATION ON PAYMENTS.
14.1 BASIC RULE. Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or transfer
by the Company under the Plan to or for the benefit of a Participant (a
"Payment") would be nondeductible by the Company for federal income tax
purposes because of the provisions concerning "excess parachute payments" in
section 280G of the Code, then the aggregate present value of all Payments
shall be reduced (but not below zero) to the Reduced Amount; provided that
the Committee, at the time of making an Award under this Plan or at any time
thereafter, may specify in writing that such Award shall not be so reduced
and shall not be subject to this Article 14. For purposes of this Article
14, the "Reduced Amount" shall be the amount, expressed as a present value,
which maximizes the aggregate present value of the Payments without causing
any Payment to be nondeductible by the Company because of section 280G of the
Code.
14.2 REDUCTION OF PAYMENTS. If the Auditors determine that any
Payment would be nondeductible by the Company because of section 280G of the
Code, then the Company shall promptly give the Participant notice to that
effect and a copy of the detailed calculation thereof and of the Reduced
Amount, and the
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Participant may then elect, in his or her sole discretion, which and how much
of the Payments shall be eliminated or reduced (as long as after such
election the aggregate present value of the Payments equals the Reduced
Amount) and shall advise the Company in writing of his or her election within
10 days of receipt of notice. If no such election is made by the Participant
within such 10-day period, then the Company may elect which and how much of
the Payments shall be eliminated or reduced (as long as after such election
the aggregate present value of the Payments equals the Reduced Amount) and
shall notify the Participant promptly of such election. For purposes of this
Article 14, present value shall be determined in accordance with section
280G(d)(4) of the Code. All determinations made by the Auditors under this
Article 14 shall be binding upon the Company and the Participant and shall be
made within 60 days of the date when a Payment becomes payable or
transferable. As promptly as practicable following such determination and
the elections hereunder, the Company shall pay or transfer to or for the
benefit of the Participant such amounts as are then due to him or her under
the Plan and shall promptly pay or transfer to or for the benefit of the
Participant in the future such amounts as become due to him or her under the
Plan.
14.3 OVERPAYMENTS AND UNDERPAYMENTS. As a result of uncertainty in
the application of section 280G of the Code at the time of an initial
determination by the Auditors hereunder, it is possible that Payments will
have been made by the Company which should not have been made (an
"Overpayment") or that additional Payments which will not have been made by
the Company could have been made (an "Underpayment"), consistent in each case
with the calculation of the Reduced Amount hereunder. In the event that the
Auditors, based upon the assertion of a deficiency by the Internal Revenue
Service against the Company or the Participant which the Auditors believe has
a high probability of success, determine that an Overpayment has been made,
such Overpayment shall be treated for all purposes as a loan to the
Participant which he or she shall repay to the Company, together with
interest at the applicable federal rate provided in section 7872(f)(2) of the
Code; provided, however, that no amount shall be payable by the Participant
to the Company if and to the extent that such payment would not reduce the
amount which is subject to taxation under section 4999 of the Code. In the
event that the Auditors determine that an Underpayment has occurred, such
Underpayment shall promptly be paid or transferred by the Company to or for
the benefit of the Participant, together with interest at the applicable
federal rate provided in section 7872(f)(2) of the Code.
14.4 RELATED CORPORATIONS. For purposes of this Article 14, the term
"Company" shall include affiliated corporations to the extent determined by
the Auditors in accordance with section 280G(d)(5) of the Code.
ARTICLE 15. WITHHOLDING TAXES.
15.1 GENERAL. To the extent required by applicable federal, state,
local or foreign law, a Participant or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any
withholding tax obligations that arise in connection with the Plan. The
Company shall not be required to issue any Common Shares or make any cash
payment under the Plan until such obligations are satisfied.
15.2 SHARE WITHHOLDING. The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Common Shares that
otherwise would be issued to him or her or by surrendering all or a portion
of any Common Shares that he or she previously acquired. Such Common Shares
shall be valued at their Fair Market Value on the date when taxes otherwise
would be withheld in cash. Any payment of taxes by assigning Common Shares
to the Company may be subject to restrictions, including any restrictions
required by rules of the Securities and Exchange Commission.
ARTICLE 16. ASSIGNMENT OR TRANSFER OF AWARDS.
16.1 GENERAL. An Award granted under the Plan shall not be
anticipated, assigned, attached, garnished, optioned, transferred or made
subject to any creditor's process, whether voluntarily, involuntarily or by
operation of law, except as approved by the Committee. Notwithstanding the
foregoing, ISOs and, prior to the Company's initial public offering, NSOs may
not be transferable. However, this Article 16 shall not
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preclude a Participant from designating a beneficiary who will receive any
outstanding Awards in the event of the Participant's death, nor shall it
preclude a transfer of Awards by will or by the laws of descent and
distribution.
16.2 TRUSTS. Neither this Article 16 nor any other provision of the
Plan shall preclude a Participant from transferring or assigning Restricted
Shares to (a) the trustee of a trust that is revocable by such Participant
alone, both at the time of the transfer or assignment and at all times
thereafter prior to such Participant's death, or (b) the trustee of any other
trust to the extent approved in advance by the Committee in writing. A
transfer or assignment of Restricted Shares from such trustee to any person
other than such Participant shall be permitted only to the extent approved in
advance by the Committee in writing, and Restricted Shares held by such
trustee shall be subject to all of the conditions and restrictions set forth
in the Plan and in the applicable Stock Award Agreement, as if such trustee
were a party to such Agreement.
ARTICLE 17. FUTURE OF THE PLAN.
17.1 TERM OF THE PLAN. The Plan, as set forth herein, was adopted on
December 5, 1996, and became effective December 1, 1996, except that Articles
7, 8 and 9 shall not be effective prior to the date of the Company's initial
public offering. The Plan shall remain in effect until it is terminated
under Section 17.2, except that no ISOs shall be granted after November 30,
2006.
17.2 AMENDMENT OR TERMINATION. The Board may, at any time and for any
reason, amend or terminate the Plan. An amendment of the Plan shall be
subject to the approval of the Company's stockholders only to the extent
required by applicable laws, regulations or rules. No Awards shall be
granted under the Plan after the termination thereof. The termination of the
Plan, or any amendment thereof, shall not affect any Award previously granted
under the Plan.
ARTICLE 18. DEFINITIONS.
18.1 "AWARD" means any award of an Option, an SAR, a Restricted Share
or a Stock Unit under the Plan.
18.2 "BOARD" means the Company's Board of Directors, as constituted
from time to time.
18.3 "CHANGE IN CONTROL" shall mean the occurrence of any of the
following events:
(a) The consummation of a merger or consolidation of the Company
with or into another entity or any other corporate reorganization, if more
than 50% of the combined voting power of the continuing or surviving
entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
stockholders of the Company immediately prior to such merger, consolidation
or other reorganization;
(b) A change in the composition of the Board, as a result of which
fewer than one-half of the incumbent directors are directors who either:
(A) Had been directors of the Company 24 months prior to such
change; or
(B) Were elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of the directors who
had been directors of the Company 24 months prior to such change and
who were still in office at the time of the election or nomination;
or
(c) Any "person" (as such term is used in sections 13(d) and 14(d)
of the Exchange Act) by the acquisition or aggregation of securities is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the
Company's then outstanding securities ordinarily (and apart from rights
accruing under special circumstances)
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having the right to vote at elections of directors (the "Base Capital
Stock"); except that any change in the relative beneficial ownership of
the Company's securities by any person resulting solely from a reduction
in the aggregate number of outstanding shares of Base Capital Stock, and
any decrease thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company.
The term "Change in Control" shall not include the Company's initial public
offering or a transaction, the sole purpose of which is to change the state
of the Company's incorporation.
18.4 "CODE" means the Internal Revenue Code of 1986, as amended.
18.5 "COMMITTEE" means a committee of the Board, as described in
Article 2.
18.6 "COMMON SHARE" means one share of the common stock of the Company.
18.7 "COMPANY" means Biosite Diagnostics Incorporated, a Delaware
corporation.
18.8 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
18.9 "EXERCISE PRICE," in the case of an Option, means the amount for
which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of an SAR, means an amount, as specified in the applicable SAR
Agreement, which is subtracted from the Fair Market Value of one Common Share
in determining the amount payable upon exercise of such SAR.
18.10 "FAIR MARKET VALUE" means the market price of Common Shares,
determined by the Committee as follows:
(a) If the Common Shares were traded over-the-counter on the date in
question but was not traded on the Nasdaq Stock Market or the Nasdaq
National Market, then the Fair Market Value shall be equal to the mean
between the last reported representative bid and asked prices quoted for
such date by the principal automated inter-dealer quotation system on which
the Common Shares are quoted or, if the Common Shares are not quoted on any
such system, by the "Pink Sheets" published by the National Quotation
Bureau, Inc.;
(b) If the Common Shares were traded over-the-counter on the date in
question and were traded on the Nasdaq Stock Market or the Nasdaq National
Market, then the Fair Market Value shall be equal to the last-transaction
price quoted for such date by the Nasdaq Stock Market or the Nasdaq
National Market;
(c) If the Common Shares were traded on a stock exchange on the date
in question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date; and
(d) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith on such
basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee
shall be based on the prices reported in the Western Edition of THE WALL
STREET JOURNAL. Such determination shall be conclusive and binding on all
persons.
18.11 "ISO" means an incentive stock option described in section 422(b) of
the Code.
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18.12 "KEY EMPLOYEE" means (a) a common-law employee of the Company, a
Parent or a Subsidiary, (b) an Outside Director and (c) a consultant or
adviser who provides services to the Company, a Parent or a Subsidiary as an
independent contractor. Service as an Outside Director or as an independent
contractor shall be considered employment for all purposes of the Plan,
except as provided in Sections 4.2 and 4.3.
18.13 "NSO" means a stock option not described in sections 422 or 423
of the Code.
18.14 "OPTION" means an ISO or NSO granted under the Plan and entitling
the holder to purchase one Common Share.
18.15 "OPTIONEE" means an individual or estate who holds an Option or
SAR.
18.16 "OUTSIDE DIRECTOR" shall mean a member of the Board who is not a
common-law employee of the Company, a Parent or a Subsidiary.
18.17 "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a
Parent on a date after the adoption of the Plan shall be considered a Parent
commencing as of such date.
18.18 "PARTICIPANT" means an individual or estate who holds an Award.
18.19 "PLAN" means this 1996 Stock Incentive Plan of Biosite
Diagnostics Incorporated, as amended from time to time.
18.20 "RESTRICTED SHARE" means a Common Share awarded under the Plan.
18.21 "SAR" means a stock appreciation right granted under the Plan.
18.22 "SAR AGREEMENT" means the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to
his or her SAR.
18.23 "STOCK AWARD AGREEMENT" means the agreement between the Company
and the recipient of a Restricted Share or Stock Unit which contains the
terms, conditions and restrictions pertaining to such Restricted Share or
Stock Unit.
18.24 "STOCK OPTION AGREEMENT" means the agreement between the Company
and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.
18.25 "STOCK UNIT" means a bookkeeping entry representing the
equivalent of one Common Share, as awarded under the Plan.
18.26 "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that
attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
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ARTICLE 19. EXECUTION.
To record the adoption of the Plan by the Board, the Company has caused
its duly authorized officer to affix the corporate name and seal hereto.
BIOSITE DIAGNOSTICS INCORPORATED
By _____________________________
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EXHIBIT B
BIOSITE DIAGNOSTICS INCORPORATED
AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE OF THE PLAN.
The Plan was adopted by the Company's Board of Directors on December 5,
1996. On February 27, 1998, the Plan was amended to increase the number of
shares available under the Plan.
The purpose of the Plan is to provide Eligible Employees with an
opportunity to increase their proprietary interest in the success of the
Company by purchasing Stock from the Company on favorable terms and to pay
for such purchases through payroll deductions. The Plan is intended to
qualify under section 423 of the Internal Revenue Code of 1986, as amended.
SECTION 2. ADMINISTRATION OF THE PLAN.
(a) THE COMMITTEE. The Plan shall be administered by the Committee.
The interpretation and construction by the Committee of any provision of the
Plan or of any right to purchase Stock granted under the Plan shall be
conclusive and binding on all persons.
(b) RULES AND FORMS. The Committee may adopt such rules and forms under
the Plan as it considers appropriate.
SECTION 3. ENROLLMENT AND PARTICIPATION.
(a) OFFERING PERIODS. While the Plan is in effect, two overlapping
Offering Periods shall commence in each calendar year. Except for the first
Offering Period, Offering Periods shall consist of the 24-month periods
commencing on each January 1 and July 1. The first Offering Period shall
commence on the effective date of the Company's initial public offering and
end on December 31, 1998.
(b) ACCUMULATION PERIODS. While the Plan is in effect, two Accumulation
Periods shall commence in each calendar year. Except for the first
Accumulation Period, Accumulation Periods shall consist of the six-month
periods commencing on each January 1 and July 1. The first Accumulation
Period shall commence on the effective date of the Company's initial public
offering and end on June 30, 1997.
(c) ENROLLMENT. Any individual who, on the day preceding the first day
of an Offering Period, qualifies as an Eligible Employee may elect to become
a Participant in the Plan for such Offering Period by executing the
enrollment form prescribed for this purpose by the Committee. The enrollment
form shall be filed with the Company not later than one week prior to the
last working day prior to the commencement of such Offering Period.
(d) DURATION OF PARTICIPATION. Once enrolled in the Plan, a Participant
shall continue to participate until he or she ceases to be an Eligible
Employee, withdraws from the Plan or reaches the end of the Accumulation
Period in which he or she discontinued contributions. A Participant who
discontinued contributions under Section 4(d) or withdrew from the Plan under
Section 5(a) may again become a Participant, if he or she then is an Eligible
Employee, by following the procedure described in Subsection (c) above.
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(e) APPLICABLE OFFERING PERIOD. For purposes of calculating the
Purchase Price under Section 7(b), the applicable Offering Period shall be
determined as follows:
(i) Once a Participant is enrolled in the Plan for an Offering
Period, such Offering Period shall continue to apply to him or her until
the earliest of (A) the end of such Offering Period, (B) the end of his or
her participation under Subsection (d) above or (C) reenrollment in a
subsequent Offering Period under Paragraph (ii) below.
(ii) In the event that the Fair Market Value of Stock on the last
trading day before the commencement of the Offering Period in which the
Participant is enrolled is higher than on the last trading day before the
commencement of any subsequent Offering Period, the Participant shall
automatically be re-enrolled for such subsequent Offering Period.
(iii) When a Participant reaches the end of an Offering Period but
his or her participation is to continue, then such Participant shall
automatically be re-enrolled for the Offering Period that commences
immediately after the end of the prior Offering Period.
SECTION 4. EMPLOYEE CONTRIBUTIONS.
(a) FREQUENCY OF PAYROLL DEDUCTIONS. A Participant may purchase shares
of Stock under the Plan solely by means of payroll deductions. Payroll
deductions, as designated by the Participant pursuant to Subsection (b)
below, shall occur on each payday during participation in the Plan.
(b) AMOUNT OF PAYROLL DEDUCTIONS. An Eligible Employee shall designate
on the enrollment form the portion of his or her Compensation that he or she
elects to have withheld for the purchase of Stock. Such portion shall be a
whole percentage of the Eligible Employee's Compensation, but not less than
1% nor more than 15%.
(c) CHANGING WITHHOLDING RATE. If a Participant wishes to change the
rate of payroll withholding, he or she may do so by filing a new enrollment
form with the Company not later than one week prior to the last working day
prior to the commencement of the Accumulation Period for which such change is
to be effective.
(d) DISCONTINUING PAYROLL DEDUCTIONS. If a Participant wishes to
discontinue employee contributions entirely, he or she may do so by filing a
new enrollment form at any time. Payroll withholding shall cease as soon as
reasonably practicable after such form has been received by the Company.
SECTION 5. WITHDRAWAL FROM THE PLAN.
(a) WITHDRAWAL. A Participant may elect to withdraw from the Plan by
filing the prescribed form with the Company at any time before the last day
of an Accumulation Period. As soon as reasonably practicable thereafter,
payroll deductions shall cease and the entire amount credited to the
Participant's Plan Account shall be refunded to him or her in cash, without
interest. No partial withdrawals shall be permitted.
(b) RE-ENROLLMENT AFTER WITHDRAWAL. A former Participant who has
withdrawn from the Plan shall not be a Participant until he or she re-enrolls
in the Plan under Section 3(b).
SECTION 6. TERMINATION OF EMPLOYMENT OR DEATH.
(a) TERMINATION OF EMPLOYMENT. Termination of employment as an Eligible
Employee for any reason, including death, shall be treated as an automatic
withdrawal from the Plan under Section 5(a). (A transfer from one
Participating Company to another shall not be treated as a termination of
employment.)
(b) DEATH. In the event of the Participant's death, the amount credited
to his or her Plan Account shall be paid to a beneficiary designated by him
or her for this purpose on the prescribed form or, if none, to the
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Participant's estate. Such form shall be valid only if it was filed with the
Company before the Participant's death.
SECTION 7. PLAN ACCOUNTS AND PURCHASE OF SHARES.
(a) PLAN ACCOUNTS. The Company shall maintain a Plan Account on its
books in the name of each Participant. Whenever an amount is deducted from
the Participant's Compensation under the Plan, such amount shall be credited
to the Participant's Plan Account. No interest shall be credited to Plan
Accounts.
(b) PURCHASE PRICE. The Purchase Price for each share of Stock
purchased at the close of an Accumulation Period shall be the lower of:
(i) 85% of the Fair Market Value of such share on the last trading
day before the commencement of the applicable Offering Period (as
determined under Section 3(e)); or
(ii) 85% of the Fair Market Value of such share on the last trading
day in such Accumulation Period.
(c) NUMBER OF SHARES PURCHASED. As of the last day of each Accumulation
Period, each Participant shall be deemed to have elected to purchase the
number of shares of Stock calculated in accordance with this Subsection (c),
unless the Participant has previously elected to withdraw from the Plan in
accordance with Section 5(a). The amount then in the Participant's Plan
Account shall be divided by the Purchase Price, and the number of shares that
results shall be purchased from the Company with the funds in the
Participant's Plan Account. The foregoing notwithstanding, no Participant
shall purchase more than a maximum of 2,500 shares of Stock with respect to
any Accumulation Period nor shares of Stock in excess of the amounts set
forth in Sections 8 and 12(a). The Committee may determine with respect to
all Participants that any fractional share, as calculated under this
Subsection (c), shall be rounded down to the next lower whole share.
(d) AVAILABLE SHARES INSUFFICIENT. In the event that as of the
beginning of an Accumulation Period the Committee determines that the
aggregate number of shares that all Participants are projected or are likely
to elect during an Accumulation Period exceeds the maximum number of shares
remaining available for issuance under Section 12(a), including in connection
with an Offering Period beginning prior to the date of the Accumulation
Period with insufficient shares, then the Committee may either determine that
such shares shall not be made in connection with any previous Offering Period
but shall be added to any new increase in the shares available under the Plan
in a new Offering Period starting on the date of the Accumulation Period with
insufficient shares, or the number of shares to which each Participant is
entitled in any Offering Period shall be determined by multiplying the number
of Shares available for issuance by a fraction, the numerator of which is the
number of shares that such Participant has elected to purchase and the
denominator of which is the number of shares that all Participants have
elected to purchase. In the event the Committee does not make any
determination, the default method for dealing with insufficient shares in an
Accumulation Period shall be the fractional method described in the preceding
sentence.
(e) ISSUANCE OF STOCK. Certificates representing the shares of Stock
purchased by a Participant under the Plan shall be issued to him or her as
soon as reasonably practicable after the close of the applicable Accumulation
Period, except that the Committee may determine that such shares shall be
held for each Participant's benefit by a broker designated by the Committee
(unless the Participant has elected that certificates be issued to him or
her). Shares may be registered in the name of the Participant or jointly in
the name of the Participant and his or her spouse as joint tenants with right
of survivorship or as community property.
(f) UNUSED CASH BALANCES. An amount remaining in the Participant's Plan
Account that represents the Purchase Price for any fractional share shall be
carried over in the Participant's Plan Account to the next Accumulation
Period. Any amount remaining in the Participant's Plan Account that
represents the Purchase
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Price for whole shares that could not be purchased by reason of Subsection
(c) above or Section 12(a) shall be refunded to the Participant in cash,
without interest.
(g) FAILURE OF SHAREHOLDERS TO APPROVE PLAN. In the event shareholders
of the Company do not approve this Plan, the Participant's Plan Account shall
be repaid to the Participant in cash and no Company shares will be purchased
for the Participant under this Plan.
SECTION 8. LIMITATIONS ON STOCK OWNERSHIP.
Any other provision of the Plan notwithstanding, no Participant shall be
granted a right to purchase Stock under the Plan if:
(a) Such Participant, immediately after his or her election to
purchase such Stock, would own stock possessing more than 5% of the total
combined voting power or value of all classes of stock of the Company or
any parent or Subsidiary of the Company; or
(b) Under the terms of the Plan, such Participant's rights to
purchase stock under this and all other qualified employee stock purchase
plans of the Company or any parent or Subsidiary of the Company would
accrue at a rate that exceeds $25,000 of the fair market value of such
stock (determined at the time when such right is granted) for each calendar
year for which such right or option is outstanding at any time.
Ownership of stock shall be determined after applying the attribution rules
of section 424(d) of the Internal Revenue Code of 1986, as amended. For
purposes of this Section 8, each Participant shall be considered to own any
stock that he or she has a right or option to purchase under this or any
other plan, and each Participant shall be considered to have the right to
purchase 2,500 shares of Stock under this Plan with respect to each
Accumulation Period.
SECTION 9. RIGHTS NOT TRANSFERABLE.
The rights of any Participant under the Plan, or any Participant's
interest in any Stock or moneys to which he or she may be entitled under the
Plan, shall not be transferable by voluntary or involuntary assignment or by
operation of law, or in any other manner other than by beneficiary
designation or the laws of descent and distribution. If a Participant in any
manner attempts to transfer, assign or otherwise encumber his or her rights
or interest under the Plan, other than by beneficiary designation or the laws
of descent and distribution, then such act shall be treated as an election by
the Participant to withdraw from the Plan under Section 5(a).
SECTION 10. NO RIGHTS AS AN EMPLOYEE.
Nothing in the Plan shall be construed to give any person the right to
remain in the employ of a Participating Company. Each Participating Company
reserves the right to terminate the employment of any person at any time,
with or without cause.
SECTION 11. NO RIGHTS AS A STOCKHOLDER.
A Participant shall have no rights as a stockholder with respect to any
shares that he or she has purchased, or may have a right to purchase, under
the Plan until the date of issuance of a stock certificate for such shares.
SECTION 12. STOCK OFFERED UNDER THE PLAN.
(a) AUTHORIZED SHARES. The aggregate number of shares of Stock
available for purchase under the Plan shall be 350,000, subject to adjustment
pursuant to this Section 12.
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(b) ANTI-DILUTION ADJUSTMENTS. The aggregate number of shares of Stock
offered under the Plan, the 2,500-share limitation described in Section 7(c)
and the price of shares that any Participant has elected to purchase shall be
adjusted proportionately by the Committee for any increase or decrease in the
number of outstanding shares of Stock resulting from a subdivision or
consolidation of shares, the payment of a stock dividend, any other increase
or decrease in such shares effected without receipt or payment of
consideration by the Company or the distribution of the shares of a
Subsidiary to the Company's stockholders.
(c) REORGANIZATIONS. In the event of a dissolution or liquidation of
the Company, or a merger or consolidation to which the Company is a
constituent corporation, the Plan shall terminate unless the plan of merger,
consolidation or reorganization provides otherwise, and all amounts that have
been withheld but not yet applied to purchase Stock hereunder shall be
refunded, without interest. The Plan shall in no event be construed to
restrict in any way the Company's right to undertake a dissolution,
liquidation, merger, consolidation or other reorganization.
SECTION 13. AMENDMENT OR DISCONTINUANCE.
The Board of Directors shall have the right to amend, suspend or
terminate the Plan at any time and without notice. Except as provided in
Section 12, any increase in the aggregate number of shares of Stock to be
issued under the Plan shall be subject to approval by a vote of the
stockholders of the Company. In addition, any other amendment of the Plan
shall be subject to approval by a vote of the stockholders of the Company to
the extent required by an applicable law or regulation.
SECTION 14. DEFINITIONS.
(a) "ACCUMULATION PERIOD" means a six-month period during which
contributions may be made toward the purchase of Stock under the Plan, as
determined pursuant to Section 3(b).
(b) "BOARD OF DIRECTORS" means the Board of Directors of the Company, as
constituted from time to time.
(c) "COMMITTEE" means a committee of the Board of Directors, consisting
of one or more directors appointed by the Board of Directors.
(d) "COMPANY" means Biosite Diagnostics Incorporated, a Delaware
corporation.
(e) "COMPENSATION" means the total compensation paid in cash to a
Participant by a Participating Company, including salaries, wages, overtime
pay and commissions, but excluding bonuses, incentive compensation, moving or
relocation allowances, car allowances, imputed income attributable to cars or
life insurance, taxable fringe benefits and similar items, all as determined
by the Committee.
(f) "ELIGIBLE EMPLOYEE" means any employee of a Participating Company:
(i) Whose customary employment is for more than five months per
calendar year and for more than 20 hours per week; and
(ii) Who has been an employee of a Participating Company for not
less than one month.
(g) "FAIR MARKET VALUE" shall mean the market price of Stock, determined by
the Committee as follows:
(i) If Stock was traded over-the-counter on the date in question but
was not traded on the Nasdaq Stock Market or the Nasdaq National Market,
then the Fair Market Value shall be equal to the mean between the last
reported representative bid and asked prices quoted for such date by the
principal
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automated inter-dealer quotation system on which Stock is quoted or, if
the Stock is not quoted on any such system, by the "Pink Sheets" published
by the National Quotation Bureau, Inc.;
(ii) If Stock was traded over-the-counter on the date in question
and was traded on the Nasdaq Stock Market or the Nasdaq National Market,
then the Fair Market Value shall be equal to the last-transaction price
quoted for such date by the Nasdaq Stock Market or the Nasdaq National
Market;
(iii) If the Stock was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date; and
(iv) If none of the foregoing provisions is applicable, then the
Fair Market Value shall be determined by the Committee in good faith on
such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee
shall be based on the prices reported in the Western Edition of THE WALL
STREET JOURNAL or as reported directly to the Company by Nasdaq or a
comparable exchange. Such determination shall be conclusive and binding on
all persons.
(h) "OFFERING PERIOD" means a 24-month period with respect to which the
right to purchase Stock may be granted under the Plan, as determined pursuant
to Section 3(a).
(i) "PARTICIPANT" means an Eligible Employee who elects to participate
in the Plan, as provided in Section 3(c).
(j) "PARTICIPATING COMPANY" means the Company and each present or future
Subsidiary, except Subsidiaries excluded by the Committee.
(k) "PLAN" means this Biosite Diagnostics Incorporated Employee Stock
Purchase Plan, as amended from time to time.
(l) "PLAN ACCOUNT" means the account established for each Participant
pursuant to Section 6(a).
(m) "PURCHASE PRICE" means the price at which Participants may purchase
Stock under the Plan, as determined pursuant to Section 7(b).
(n) "STOCK" means the Common Stock of the Company.
(o) "SUBSIDIARY" means a corporation, 50% or more of the total combined
voting power of all classes of stock of which is owned by the Company or by
another Subsidiary.
SECTION 15. EXECUTION.
To record the adoption of the Plan by the Board of Directors, the Company
has caused its duly authorized officer to affix the corporate name and seal
hereto.
BIOSITE DIAGNOSTICS INCORPORATED
By: _____________________________
B-6
<PAGE>
BIOSITE DIAGNOSTICS INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING ON MAY 21, 1998.
Timothy J. Wollaeger and Kim D. Blickenstaff, or each of them, each with
the power of substitution, are hereby authorized to represent as proxies and
vote all shares of stock of Biosite Diagnostics Incorporated (the "Company")
the undersigned is entitled to vote at the Annual Meeting of Stockholders of
the Company to be held at the Doubletree Hotel, 11915 El Camino Real, Del
Mar, California on Thursday, May 21, 1998 at 9:00 a.m. or at any postponement
or adjournment thereof, and instructs said proxies to vote as follows:
Shares represented by this proxy will be voted as directed by the
stockholder. IF NO SUCH DIRECTIONS ARE INDICATED, THE PROXIES WILL HAVE
AUTHORITY TO VOTE FOR THE ELECTION OF THE TWO NOMINEES FOR CLASS I DIRECTOR
AND FOR ITEMS 2, 3 AND 4.
(continued and to be signed on reverse side)
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<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE TWO
NOMINEES FOR CLASS I DIRECTOR AND FOR ITEMS 2, 3 AND 4.
Please mark your votes as indicated in this example /X/
FOR WITHHOLD
all nominees listed AUTHORITY
below (except as to vote for all
marked to the contrary) nominees listed below
1. ELECTION OF DIRECTORS
Nominee: Lonnie M. Smith
Timothy J. Wollaeger
(INSTRUCTION: To withhold authority to vote for
any individual nominee, write that nominee's name
in the space provided below.)
- ---------------------------------------------------
2. To approve the amendment of the FOR AGAINST ABSTAIN
Stock Incentive Plan:
3. To approve the amendment of the ESPP: FOR AGAINST ABSTAIN
4. To ratify the appointment of Ernst & Young LLP FOR AGAINST ABSTAIN
as the Company's independent auditors:
5. In their discretion, upon such other business
as may properly come before the meeting: FOR AGAINST ABSTAIN
/ PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD
/ PROMPTLY, USING THE ENCLOSED ENVELOPE.
Signature(s)______________________________ Dated: ____________________, 1998
Please sign exactly as your name or name(s) appear on this proxy. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If shares are held jointly, each holder should sign.
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FOLD AND DETACH HERE
