Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant X
---
Filed by a Party other than the Registrant
---
Check the appropriate box:
Preliminary proxy statement --- Confidential, for use of the
- - --- Commission only (as permitted
X Definitive proxy statement by Rule 14a-6(e)(2))
- - ---
Definitive additional materials
- - ---
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
- - ---
Lunar Corporation
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(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:
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(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:
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Lunar Corporation
313 West Beltline Highway
Madison, Wisconsin 53713
(608) 274-2663
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE HOLDERS OF THE COMMON STOCK OF LUNAR CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Meeting") of Shareholders
of Lunar Corporation (the "Company") will be held at The Sheraton Madison Hotel,
706 John Nolen Drive, Madison, Wisconsin, on Friday, November 21, 1997, at 2:00
p.m., local time, for the following purposes:
(1) To elect two (2) directors to serve until the 2000 Annual Meeting of
Shareholders.
(2) To consider and vote on a proposal to approve an amendment to the Lunar
Corporation Amended and Restated Stock Option Plan to increase the number of
shares of Common Stock available under the Plan.
(3) To ratify the selection of KPMG Peat Marwick LLP as auditors for the
Company for the fiscal year ending June 30, 1998.
(4) To transact any other business as may properly come before the Meeting or
any adjournments thereof.
Only shareholders of record at the close of business on October 10, 1997, the
record date for the Meeting, shall be entitled to notice of and to vote at the
Meeting or any adjournments thereof.
IMPORTANT
To ensure your representation at the Meeting, please sign and date the enclosed
proxy, and return it immediately in the enclosed stamped envelope. Sending in
your proxy will not prevent you from personally voting your shares at the
Meeting, since you may revoke your proxy by attending the Meeting and voting in
person or by advising the Secretary of the Company in writing (by later-dated
proxy which is voted at the Meeting or otherwise) of such revocation at any time
before it is voted.
By Order of the Board of Directors,
/s/ Richard B. Mazess, Ph.D.
Richard B. Mazess, Ph.D.
President
Madison, Wisconsin
October 29, 1997
Lunar Corporation
313 West Beltline Highway
Madison, Wisconsin 53713
(608) 274-2663
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of the
accompanying Proxy by the Board of Directors of Lunar Corporation (the
"Company") for use at the Annual Meeting (the "Meeting") of Shareholders to be
held at The Sheraton Madison Hotel, 706 John Nolen Drive, Madison, Wisconsin,
Friday, November 21, 1997, at 2:00 p.m., local time, and at any adjournments
thereof.
At the Meeting, shareholders will consider proposals to (1) elect two (2)
directors to serve until the 2000 Annual Meeting of Shareholders, (2) approve an
amendment to the Lunar Corporation Amended and Restated Stock Option Plan (the
"Plan") to increase the number of shares of Common Stock available under the
Plan (the "Plan Amendment"), and (3) ratify the selection of KPMG Peat Marwick
LLP as auditors for the Company for the fiscal year ending June 30, 1998. The
Board of Directors does not know of any other matters to be brought before the
Meeting; however, if other matters should properly come before the Meeting, it
is intended that the persons named in the accompanying Proxy will vote on such
matters at their discretion.
Shareholders who execute proxies retain the right to revoke them at any time
prior to the voting thereof by attending the Meeting and voting in person or by
advising the Secretary of the Company of such revocation in writing (by
later-dated proxy which is voted at the Meeting or otherwise).
PROXY SOLICITATION
Proxies will be solicited by mail. In addition to solicitation by mail, certain
officers and employees of the Company may solicit by telephone, telegraph, and
personally. The cost of the solicitation will be borne by the Company. The
Notice of the Meeting, this Proxy Statement, the accompanying form of Proxy, the
Report on Form 10-K filed with the Securities and Exchange Commission, and the
Annual Report to Shareholders for the fiscal year ended June 30, 1997, were
first mailed to shareholders on or about October 29, 1997.
SHAREHOLDERS ENTITLED TO VOTE
Only holders of record of the shares of Common Stock, $0.01 par value, of the
Company at the close of business on October 10, 1997, the record date for the
Meeting, are entitled to notice of and to vote at the Meeting and at any
adjournments thereof. Shareholders will be entitled to one vote for each full
share held. On October 10, 1997, there were outstanding 8,737,535 shares of
Common Stock of the Company.
VOTING INFORMATION
A shareholder may, with respect to the election of directors, (i) vote for the
election of both nominees named below to serve until the 2000 Annual Meeting of
Shareholders, (ii) withhold authority to vote for both nominees, or (iii) vote
for the election of one nominee and withhold authority to vote for the other
nominee by striking a line through such other nominee's name on the Proxy. A
shareholder may, with respect to each other proposal, (i) vote "FOR" approval or
ratification, (ii) vote "AGAINST" approval or ratification, or (iii) "ABSTAIN"
from voting on such proposal.
Proxies in the accompanying form, properly executed and received by the Company
prior to the Meeting and not revoked, will be voted as directed therein on all
matters presented at the Meeting. In the absence of a specific direction from
the shareholder as to a proposal, the shareholder's Proxy will be voted as to
such proposal "FOR" the election of the director nominees named in this Proxy
Statement,"FOR" the approval of the Plan Amendment, and "FOR" ratification of
the selection of KPMG Peat Marwick LLP as the Company's auditors. If a Proxy is
marked to indicate that all or a portion of the shares represented by such Proxy
are not being voted with respect to a particular proposal, such non-voted shares
will not be considered present and entitled to vote on such proposal, although
such shares may be considered present and entitled to vote on other matters and
will count for purposes of determining the presence of a quorum.
The affirmative vote of a plurality of the votes cast by the shares present in
person or by proxy at the Meeting and entitled to vote in the election of
directors is required to elect directors. Thus, if a quorum is present, the two
persons receiving the greatest number of votes will be elected to serve as
directors. Accordingly, non-voted shares with respect to the election of
directors will not affect the outcome of the election of directors. In addition,
withholding authority to vote for a director nominee will not prevent such
nominee from being elected. If a quorum is present, in order to approve the Plan
Amendment or ratify the selection of KPMG Peat Marwick LLP as the Company's
auditors, the number of votes cast favoring such proposal must exceed the number
of votes cast opposing such proposal. Accordingly, non-voted shares and
abstentions with respect to the proposal to approve the Plan Amendment or ratify
the selection of KPMG Peat Marwick LLP as the Company's auditors will not affect
the determination of whether such matter has been approved or ratified.
PURPOSES OF THE MEETING
ITEM 1 - ELECTION OF DIRECTORS
The Company's By-Laws authorize the Board of Directors to fix the number of
directors, provided that such number shall be not less than six nor more than
twelve. Currently, the number is fixed at six. The By-Laws stagger the Board of
Directors by dividing the number of directors into three classes, with one class
being elected each year for a term of three years. For the 1997 Annual Meeting,
two directors, Malcolm R. Powell, M.D. and John J. McDonough, are nominees for
election to the Board of Directors.
The table below sets forth certain information with respect to the nominees for
election as directors of the Company to serve until the 2000 Annual Meeting of
Shareholders. Unless otherwise specified, the shares of Common Stock represented
by the proxies solicited hereby will be voted "FOR" the election as directors of
the persons named below who have been nominated by the Board of Directors. If,
at or prior to such person's election, either nominee shall be unwilling or
unable to serve, it is presently intended that the proxies solicited hereby will
be voted for a substitute nominee designated by the Board of Directors. The
Board of Directors has no reason to believe either of the nominees will be
unwilling or unable to serve.
Positions Principal Occupations
Name and Age Held During Past 5 Years
- - --------------------------------------------------------------------------------
To serve until the 2000 Annual Meeting of Shareholders:
Malcolm R. Powell, M.D. Director Director since 1984;
Age 66 President of Nuclear
Medicine Consultants
(nuclear medicine practice).
Chairman and Director of IS2
Research, Inc. since July
1997 (a medical device
manufacturing and contract
research company).
Dr. Powell is a cousin of
Mr. Bradt, a Director of
the Company.
John J. McDonough Director Director since May 1996;
Age 61 President and Chief
Executive Officer of
McDonough Capital Company
LLC (a venture capital
investment company) since
April 1995. Director of
AMRESCO, Inc., Applied
Power, Inc., Newell
Corporation and Plexus
Corporation. Chairman of
SoftNet Systems, Inc. (an
information and document
management services company)
from July 1995 through August
1996 and Chief Executive
Officer from September 1996
through July 1997. Vice
Chairman and a Director of
Dentsply International, Inc.
from 1983 through October
1995 and Chief Executive
Officer from April 1983
through February 1995.
The Board of Directors recommends you vote FOR each of the nominees named above
to serve on the Board of Directors of the Company.
The following table sets forth certain information about the directors of the
Company whose terms of office will continue after the 1997 Annual Meeting.
Positions Principal Occupations
Name and Age Held During Past 5 Years
- - -------------------------------------------------------------------------------
Terms expiring at the 1998 Annual Meeting of Shareholders:
Samuel E. Bradt Director Director since 1984;
Age 59 President of Merganser
Corporation (a business
consulting and venture
capital company) since 1980;
Director and Chief Financial
Officer of Interactive Buyers
Network International Ltd.
(electronic commerce) since
December, 1996; Director of
several privately held
companies. Mr. Bradt is a
cousin of Dr. Powell, a
Director of the Company.
Richard B. Mazess, Ph.D. Chairman of the Founder of the Company;
Age 58 Board, President and President and Director since
Chief Executive 1974; Chairman of the Board
Officer and Director of Bone Care
International, Inc. since
1986; Professor Emeritus of
Medical Physics at the
University of Wisconsin
-Madison since 1985.
Terms expiring at the 1999 Annual Meeting of Shareholders:
John W. Brown Director Director since 1988; Chairman
Age 63 of the Board, Chief Executive
Officer, and President of
Stryker Corporation (medical
devices) since 1977; Director
of First of America since
1992.
Reed Coleman Director Director since 1985; Chairman
Age 64 of Madison-Kipp Corporation
(precision engineered
components)since 1964;
President and owner of The
Reed Company since 1985;
Director of Regal-Beloit
Corporation since 1975, and
several privately held
companies.
Directors do not receive cash compensation for their services to the Company.
During the year ended June 30, 1997, non-employee directors were granted
nonqualified options to purchase 4,500 shares of Common Stock at the fair market
value on the grant date. These options expire ten years after their grant date
and vest in one-third increments on the first three anniversaries of the grant
date.
During the year ended June 30, 1997, a total of 4 meetings of the Board of
Directors were held. All of the directors attended 75% or more of such meetings.
The Board of Directors has an Audit Committee. The Audit Committee, composed of
non-employee directors, oversees the audit of the corporate accounts through
independent public accountants whom it recommends for selection by the Board of
Directors. The Committee reviews the scope of the audit with such accountants
and their related fees. The Audit Committee did not hold any meetings during the
fiscal year ended June 30, 1997. Its members are Mr. Bradt and Mr. Coleman. The
Company does not have a nominating or compensation committee of the Board of
Directors. However, the Plan is administrated by a committee comprised of two
members of the Board of Directors. Its members are Mr. Coleman and Mr. Brown.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors and officers of the Company are required by Section 16 of the
Securities Exchange Act of 1934 to report to the Securities and Exchange
Commission their transactions in, and beneficial ownership of, the Company's
Common Stock, including options to purchase Common Stock. Reports received by
the Company indicate that for the period from July 1, 1996, to June 30, 1997,
all reports were filed on a timely basis except that Mr. Bradt, Dr. Powell and
Mr. Pietropaolo each reported one transaction after the due date for such
report.
ITEM 2 - APPROVAL OF AMENDMENT TO STOCK OPTION PLAN
The Company has used stock options as part of its compensation program for many
years. Management believes that the grant of stock options is critical in
attracting and retaining officers, key employees and consultants who will
contribute to the success and prosperity of the Company. Other than the
Company's 401K profit-sharing plan, stock options are the only element of
long-term compensation used by the Company.
As of October 10, 1997, the number of shares of Common Stock available under the
Plan for the grant of stock options was 234,690. Management is seeking
shareholder approval of an amendment to the Plan (the "Amendment") which would
increase the number of shares available for future grants of stock options by
500,000.
SUMMARY OF THE PLAN. Only nonqualified stock options may be granted under the
Plan. The Plan is administered by a committee (the "Committee") consisting of
two members of the Board of Directors. Mr. Coleman and Mr. Brown presently serve
on the Committee. The Committee has the authority, subject to the terms of the
Plan, to establish eligibility guidelines, select officers, key employees,
consultants and non-employee directors for participation in the Plan and
determine the number of shares of Common Stock subject to a stock option, the
exercise price for such shares of Common Stock, the time and conditions of
exercise, and all other terms and conditions of the stock options. Approximately
250 persons are eligible to receive stock options under the Plan.
Other than to comply with applicable rules and regulations, the Plan may be
amended by the Board of Directors in any respect, except that no amendment may
be made without shareholder approval if such amendment would increase the
maximum number of shares of Common Stock available under the Plan (other than
certain adjustments for changes in the Company's capitalization) or would
otherwise require shareholder approval. The Plan will terminate on November 22,
2001, unless earlier terminated by the Board of Directors.
In the event of a change in control of the Company, any stock option not
previously exercisable in full will become fully exercisable. As more fully set
forth in the Plan, a change in control generally is the acquisition, subject to
certain exemptions, by any person of beneficial ownership of 50% or more of the
Common Stock, a change in the majority of the Board of Directors and approval by
the shareholders of a reorganization, merger, consolidation, or sale of all or
substantially all of the assets of the Company unless certain conditions are
satisfied. This provision could raise the cost to a potential acquiror of
engaging in a transaction that would constitute such a change in control, and,
therefore, could affect the willingness of an acquiror to propose such a
transaction of the terms thereof.
PROPOSED AMENDMENT. The reason for amending the Plan is to provide for an
increase in the number of shares of Common Stock available for future grants of
stock options under the Plan. An aggregate of 1,500,000 shares have previously
been authorized under the Plan. As of October 10, 1997, the number of shares of
Common Stock available under the Plan for the grant of stock options was
234,690. The Amendment would authorize the grant of an additional 500,000 shares
of Common Stock under the Plan which, as of October 10, 1997, represents
approximately 5.7% of the Company's outstanding Common Stock.
FEDERAL TAX CONSEQUENCES. For federal income tax purposes, an optionee will not
realize taxable income upon the grant of the option, but will recognize taxable
income at the time of exercise in the amount of the difference between the
purchase price and the fair market value of the shares purchased on the date of
exercise. At that time, the Company will be entitled to a deduction as
compensation expense in an amount equal to the amount taxable to the participant
as income.
The following table sets forth the number of shares of Common Stock which were
subject to stock options granted to the indicated persons or groups under the
Plan during fiscal year 1997. The number of shares reflected includes the
amounts issued subject to replacement stock options described under "Stock
Option Repricing." All of the stock options were granted at 100% of fair market
value of the Common Stock on the date of grant. On October 10, 1997, the closing
sale price of the Common Stock as reported on The Nasdaq Stock Market was
$19.125 per share.
STOCK OPTION PLAN
Name and Position Number of Shares
- - -------------------------------- ----------------
Richard B. Mazess, Ph.D.
Chairman of the Board,
President, and Chief
Executive Officer 0
Robert A. Beckman
Vice President of Finance 35,000
James V. Pietropaolo
Vice President of Domestic Sales 50,000
Carl E. Gulbrandsen
Former Corporate General
Counsel and Secretary 4,000
All executive officers as a group 139,000
All non-employee directors as a group 91,500
All employees as a group
(other than executive officers) 297,980
Approval of the Plan Amendment will require that the number of votes cast
favoring approval exceeds the number of votes cast opposing approval. Unless
otherwise specified, the shares of Common Stock represented by the proxies
solicited hereby will be voted "FOR" the proposal to approve the Plan Amendment.
The Board of Directors unanimously recommends a vote "FOR" approval of the
Proposed Amendment to the Plan.
ITEM 3 - RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP, Chicago, Illinois, as
independent certified public accountants to act as auditors for the Company for
the fiscal year ending June 30, 1998. KPMG Peat Marwick LLP has examined the
accounts of the Company since March 1990, and in the opinion of management, the
firm should continue as auditors of the Company. Unless otherwise specified, the
shares of Common Stock represented by the proxies solicited hereby will be voted
"FOR" the proposal to ratify the selection of KPMG Peat Marwick LLP as the
Company's auditors.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
meeting, will have an opportunity to make a statement if they wish to do so, and
will be available to respond to appropriate questions.
The Board of Directors recommends you vote FOR the selection of KPMG Peat
Marwick LLP as auditors of the Company for the fiscal year ending June 30, 1998.
SECURITIES BENEFICIALLY OWNED BY PRINCIPAL SHAREHOLDERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company by (i) each director of
the Company, (ii) each executive officer of the Company who is named in the
summary compensation table included in this Proxy Statement, (iii) all directors
and executive officers of the Company as a group, and (iv) each person known by
the Company to be the beneficial owner of more than 5% of the Common Stock of
the Company.
Amount and Nature of Percent
Name Beneficial Ownership of Class(1)
- - -------------------------------------------------------------------------------
Samuel E. Bradt -- *
John W. Brown 114,750(2) 1.3%
Reed Coleman 181,500(3) 2.1
Richard B. Mazess, Ph.D. 2,859,345(4) 32.7
John J. McDonough 12,000 *
Malcolm R. Powell, M.D. 68,485(5) *
Robert A. Beckman 63,737(6) *
James A. Hanson, Ph.D. 144,337(7) 1.6
James V. Pietropaolo -- *
Carl E. Gulbrandsen 13,050(8) *
All Directors and
Executive Officers as a
Group (11 persons) 3,457,204(9) 38.2
RCM Capital Management, L.L.C.
4 Embarcadero Center, Suite 3000
San Francisco, CA 94111 450,400(10) 5.2
Pilgrim Baxter & Associates Ltd.
1255 Drummers Lane
Suite 300
Wayne, PA 19087 784,800(11) 9.0
* Less than 1 percent (1%)
(1) Except as indicated below, (i) represents shares of Common Stock held of
record and beneficially as of the October 10, 1997 record date and (ii) all
shares of Common Stock are held with sole voting and investment power.
Percentage amounts are based upon an aggregate of 9,056,635 shares issued and
outstanding, and shares of Common Stock issuable within 60 days of October 10,
1997 upon exercise of stock options.
(2) Includes 69,750 shares of Common Stock issuable within 60 days upon
exercise of stock options.
(3) Includes 156,750 shares of Common Stock held by The Reed Company, of which
Mr. Coleman is sole owner, and 24,750 shares of Common Stock issuable within 60
days upon exercise of stock options.
(4) Includes 1,358,835 shares of Common Stock held by Dr. Mazess in joint
tenancy with his wife and 587,500 shares of Common Stock held by Dr. Mazess as
custodian for his daughters. Dr. Mazess' address is 313 West Beltline Highway,
Madison, Wisconsin, 53713.
(5) Includes 63,985 shares of Common Stock held in a trust over which Dr.
Powell serves as co-trustee, 5,180 shares of Common Stock held by his daughters,
and 4,500 shares of Common Stock issuable within 60 days upon exercise of stock
options.
(6) Includes 63,600 shares of Common Stock issuable within 60 days upon
exercise of stock options, and 137 shares of Common Stock held by Mr. Beckman as
custodian for his children.
(7) Includes 144,000 shares of Common Stock issuable within 60 days upon
exercise of stock options.
(8) Includes 12,500 shares of Common Stock issuable within 60 days upon
exercise of stock options.
(9) Includes 319,100 shares of Common Stock issuable within 60 days upon
exercise of stock options.
(10) Based on a Schedule 13G dated January 30, 1997 furnished to the Company,
RCM Capital Management, L.L.C. (RCM Capital) had sole voting power with respect
to 394,400 shares of Common Stock and sole dispositive power with respect to
450,400 shares of Common Stock. RCM Limited L.P. is the Managing Agent of RCM
Capital and RCM General Corporation is the General Partner of RCM Limited L.P.
Based on a Schedule 13G dated February 7, 1997 furnished by Dresdner Bank AG to
the Company, RCM Capital is a wholly owned subsidiary of Dresdner Bank AG.
(11) Based on a Schedule 13G dated February 14, 1997 furnished to the Company,
Pilgrim Baxter & Associates Ltd., an investment adviser registered under Section
203 of the Investment Advisor Act of 1940 ("Pilgrim Baxter"), and PBHG Growth
Fund, an investment company registered under Section 8 of the Investment Company
Act of 1940, have shared voting power and sole dispositive power with respect to
784,800 shares of Common Stock. Harold J. Baxter is the Chief Executive Officer
of Pilgrim Baxter. Gary L. Pilgrim is the Chief Investment Officer of Pilgrim
Baxter.
EXECUTIVE COMPENSATION
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The following is a report submitted by the Board of Directors addressing the
Company's compensation policy as it related to the Company's executive officers
for fiscal year 1997.
This report by the Board of Directors and the Performance Graph contained in
this Proxy Statement shall not be deemed to be incorporated by reference by any
general statement which incorporates by reference this Proxy Statement into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,
and they shall not otherwise be deemed filed under such Acts.
COMPENSATION POLICY. Due to the Chief Executive Officer's significant holdings
of Common Stock, the Chief Executive Officer has elected to receive a base
salary which is lower than the salary he would otherwise receive given his
duties and responsibilities and the comparative base salaries of the chief
executive officer of companies of similar size. In July 1995, the Chief
Executive Officer requested that the Company reduce his salary and eliminate his
bonus and future commissions. In October 1996, the Chief Executive Officer
resumed his salary at an annual rate of $130,000. Effective July 1997, in
connection with the scheduled annual salary review, his salary was increased to
$145,000. Currently, no bonus or commissions are paid. In accordance with past
practice, the Chief Executive Officer is not granted any options to purchase
Common Stock due to his already significant holdings of Common Stock.
With respect to all executive officers other than the Chief Executive Officer,
the goal of the Company's executive compensation policy is to ensure that an
appropriate relationship exists between executive pay and the creation of
shareholder value, while at the same time motivating and retaining key
employees. To achieve this goal, the Company's executive compensation policy
integrates annual base salary with cash bonuses, commissions, and stock options
based upon corporate performance and individual initiatives and performance.
Measurement of corporate performance is primarily based on Company goals and
industry performance levels. Accordingly, in years in which performance goals
and industry levels are achieved or exceeded, executive compensation would be
higher than in years in which performance is below expectations. Companies used
in comparative analyses for the purpose of determining each executive officer's
compensation are selected by the Board of Directors and include some of the
companies in the Standard & Poor's Medical Products and Supplies Index included
in the Performance Graph set forth in this Proxy Statement. The selection of
such companies is based on various factors, including industry classification
and market capitalization.
Annual base salary is designed to attract and retain qualified executives. In
addition, executive officers are eligible to be granted stock options under the
Amended and Restated Stock Option Plan (the "Plan"). The Board of Directors
believes that stock options ensure that executives have a continuing stake in
the long-term success of the Company and are an effective incentive for
executives to create value for shareholders since the value of a stock option
bears a direct relationship to the Company's stock price. The Plan was
administered in fiscal year 1997 by Mr. Coleman and Mr. Brown.
PERFORMANCE MEASURES. In evaluating annual executive compensation, the Board of
Directors considers both long- and short-term objectives. Specific measures of
short-term goals include earnings per share, sales growth, market share, and
overall profitability in comparison to other companies in competition with the
Company. Longer-term objectives include strategic planning and alliances which
may not immediately impact sales and earnings growth. The Board of Directors
does not assign any specific weights to the foregoing performance measures and
does not use a fixed formula for determining base salary, bonuses, or long-term
compensation.
FISCAL YEAR 1997 COMPENSATION. For fiscal year 1997, the Company's executive
compensation program consisted of base salary, adjusted from the prior year, and
a cash bonus based upon the performance measurements described above. In
addition, three executive officers included in the Summary Compensation Table
received commissions, and three executive officers included in the Summary
Compensation Table were granted options to purchase shares of Common Stock of
the Company. Commissions are paid to more directly compensate executive officers
for changes in the Company's performance. Stock options are granted from time to
time to members of management, based primarily on such person's potential
contribution to the Company's growth and profitability.
The Chief Executive Officer's compensation for fiscal year 1997 consisted of a
base salary of $105,846. As described above, in October 1996, the Chief
Executive Officer resumed his salary at an annual rate of $130,000. In
accordance with past practice, the Chief Executive Officer was not granted stock
options under the Plan during fiscal year 1997 due to his already significant
holdings of Common Stock.
STOCK OPTION REPRICING. In fiscal 1997, in exchange for the forfeiture of
existing vesting provisions, including currently exercisable options, the Board
of Directors approved the repricing of certain outstanding stock options granted
under the Plan having an exercise price in excess of the fair market value of
the Company's Common Stock at the date of the repricing. Many outstanding
options were exercisable at prices that exceeded the market price of the Common
Stock at that time, thereby substantially impairing the effectiveness of such
options as performance incentives. Consistent with the Company's philosophy of
utilizing equity incentives to motivate and retain management and employees, the
Board of Directors felt that it was important to restore the performance
incentives intended to be provided by options through the repricing of options
with exercise prices in excess of the market price at the time of repricing. The
exercise price of the repriced options was set at the fair market value of a
share ($16.50 per share) of the Company's Common Stock on the effective date of
the repricing. A total of 145 option holders holding options to purchase an
aggregate of 342,380 shares of the Company's Common Stock with exercise prices
ranging from $20.58 to $32.75 per share were granted new options on the terms
described above.
The Board of Directors believes that linking executive compensation to corporate
performance results in a better alignment of compensation with the Company's
goals and shareholder interest. As performance goals are met or exceeded,
shareholder value should increase through increases in the market value of the
Company's Common Stock, and the executives will be rewarded commensurately. The
Board of Directors believes that compensation levels during fiscal year 1997
adequately reflect the Company's compensation goals and policies.
Respectfully submitted,
Samuel E. Bradt
John W. Brown
Reed Coleman
Richard B. Mazess, Ph.D.
John J. McDonough
Malcolm R. Powell, M.D.
SUMMARY COMPENSATION TABLE
The table below sets forth the compensation of the Company's Chief Executive
Officer and the four other most highly compensated executive officers of the
Company as of the end of fiscal year 1997.
Long-Term
Annual Compensation Compensation
------------------------ ------------
Other Annual Securities All Other
Name and Fiscal Compensation Underlying Compensation
Principal Position Year Salary($) Bonus($) ($) Options (#) ($)(7)
Richard B.
Mazess, Ph.D.(1) 1997 105,846 -- -- -- 750
Chairman of the 1996 36,356 -- -- -- 1,578
Board, President, 1995 164,346 3,000 -- -- 2,250
and Chief Executive
Officer
Robert A.
Beckman(2) 1997 196,693 30,975 -- 35,000(6) 2,250
Vice President 1996 166,853 2,250 -- 47,000(8) 2,250
of Finance 1995 161,639 23,000 -- 13,500 2,250
James A.
Hanson, Ph.D.(3) 1997 195,439 2,250 -- -- 2,250
Vice President 1996 178,217 2,250 -- -- 2,250
of Marketing 1995 155,885 3,000 -- -- 2,234
James V.
Pietropaolo(4) 1997 136,908 750 55,000 50,000(6) --
Vice President 1996 -- -- -- -- --
of Domestic Sales 1995 -- -- -- -- --
Carl E.
Gulbrandsen(5) 1997 183,846 27,350 -- 4,000(6) 2,250
Former Corporate 1996 173,847 2,250 -- 4,000(9) 2,250
General Counsel 1995 170,002 3,000 -- 7,500 809
and Secretary
(1) Dr. Mazess' salary includes sales-based commissions of $6,548 and $34,539
for fiscal years 1996 and 1995, respectively.
(2) Mr. Beckman's salary includes sales-based commissions of $47,078, $33,006
and $12,639 for fiscal years 1997, 1996 and 1995, respectively. In 1997, Mr.
Beckman's bonus includes $3,750 representing the fair value of 100 shares of
Common Stock awarded under the Company's longevity stock award program upon
providing 10 years of service.
(3) Dr. Hanson's salary includes sales-based commissions of $70,440, $55,411
and $34,539 for fiscal years 1997, 1996 and 1995, respectively.
(4) Mr. Pietropaolo's salary includes sales-based commissions of $38,408 for
fiscal year 1997. Other Annual Compensation for Mr. Pietropaolo represents
reimbursement for costs associated with relocating his residence upon commencing
employment with the Company.
(5) Dr. Gulbrandsen became a consultant to the Company effective October 1,
1997.
(6) Amounts include stock options relating to the granting of replacement stock
options. Mr. Beckman, Mr. Pietropaolo and Dr. Gulbrandsen were granted 25,000,
25,000 and 2,000 stock options as replacement stock options in fiscal 1997. See
"Stock Option Repricing."
(7) Amounts consist of Company contributions to a defined contribution plan.
(8) Represents stock options for 15,000 shares of Lunar Corporation and stock
options for 32,000 shares of Bone Care International, Inc., which was a
subsidiary of Lunar Corporation until May 8, 1996. See "Certain Transactions"
below.
(9) Represents stock options for 4,000 shares of Bone Care International, Inc.,
which was a subsidiary of Lunar Corporation until May 8, 1996. See "Certain
Transactions" below.
TEN-YEAR OPTION REPRICING
The table below provides certain information relating to grants of stock options
made by the Company to executive officers in exchange for previously granted
options since the Company commenced trading on The Nasdaq Stock Market August
14, 1990.
Length of
Number Market Original
of Securities Price Exercise 10-Year Term
Underlying of Stock Price at New Remaining at
Options at Time of Time of Exercise Date of
Name and Position Date Repriced Repricing Repricing Price Repricing
- - --------------------------------------------------------------------------------
FISCAL YEAR ENDED JUNE 30, 1997:
Robert A. Beckman
Vice President 04/22/97 15,000 $16.50 $20.58 $16.50 8.5
of Finance 04/22/97 10,000 $16.50 $27.50 $16.50 9.5
James V. Pietropaolo
Vice President of
Domestic Sales 04/22/97 25,000 $16.50 $27.50 $16.50 9.5
George W. Woolston
Former Vice President
of International
Sales 04/22/97 25,000 $16.50 $27.50 $16.50 9.5
Carl E. Gulbrandsen
Former Corporate
General Counsel
and Secretary 04/22/97 2,000 $16.50 $27.50 $16.50 9.5
FISCAL YEAR ENDED JUNE 30, 1993:
Robert A. Beckman
Vice President
of Finance 09/24/92 25,000 $9.25 $15.50 $9.25 9.7
Carl E. Gulbrandsen
Former Corporate
General Counsel
and Secretary 09/24/92 20,000 $9.25 $15.50 $9.25 9.7
Gregory M. Johnson
Former Vice President
of Sales 09/24/92 5,000 $9.25 $15.50 $9.25 9.7
Michael M. Tesic, Ph.D.
Former Vice President
of Strategic Product
Development 09/24/92 20,000 $9.25 $15.50 $9.25 9.7
Charles W. Bishop, Ph.D.
Former Vice President
of Bone Care
International 09/24/92 25,000 $9.25 $15.50 $9.25 9.7
FISCAL YEAR ENDED JUNE 30, 1992:
Robert A. Beckman
Vice President
of Finance 06/01/92 25,000 $15.50 $20.75 $15.50 9.2
Gregory M. Johnson
Former Vice President
of Sales 06/01/92 5,000 $15.50 $20.75 $15.50 9.2
Michael M. Tesic, Ph.D.
Former Vice President
of Strategic Product
Development 06/01/92 20,000 $15.50 $20.75 $15.50 9.2
Carl E. Gulbrandsen
Former Corporate
General Counsel
and Secretary 06/01/92 20,000 $15.50 $24.75 $15.50 9.6
Charles W. Bishop, Ph.D.
Former Vice President
of Bone Care
International 06/01/92 25,000 $15.50 $20.75 $15.50 9.2
FISCAL YEAR ENDED JUNE 30, 1991:
Robert A. Beckman
Vice President
of Finance 11/16/90 25,000 $8.50 $12.75 $8.50 9.5
Gregory M. Johnson
Former Vice President
of Sales 11/16/90 20,000 $8.50 $12.75 $8.50 9.5
Charles W. Bishop, Ph.D.
Former Vice President
of Bone Care
International 11/16/90 15,000 $8.50 $12.75 $8.50 9.5
AGGREGATED STOCK OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR END STOCK OPTION VALUES
The following table sets forth information on stock options exercised in fiscal
year 1997 by the Company's executive officers named in the Summary Compensation
Table and the value of such officers' unexercised stock options as of June 30,
1997.
Shares Number of Securities
Acquired Value Underlying Unexercised Value of Unexercised In-the
on Real- Stock Options at Fiscal Money Stock Options at
Exercise ized Year End (#) Fiscal Year End ($)(2)
Name (#) (1)($) ----------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
- - -------------------------------------------------------------------------------
Richard B.
Mazess -- -- -- -- -- --
Robert A.
Beckman 25,000 822,562 48,900 49,600 739,320 493,380
James A.
Hanson 60,000 2,273,025 142,500 3,000 3,044,310 43,260
James V.
Pietropaolo -- -- -- 25,000 -- 131,250
Carl E.
Gulbrandsen 2,000 52,180 15,000 18,500 216,470 251,685
(1) Fair market value of underlying securities at exercise minus the exercise
price (i.e., value before income taxes payable as a result of the exercise). The
annualized value realized was $132,886, $238,118, and $12,424 for
Mr. Beckman, Dr. Hanson and Dr. Gulbrandsen, respectively.
(2) Based upon the closing price of the Company's Common Stock of $21.75 on
June 30, 1997, as reported by the The Nasdaq Stock Market minus the exercise
price.
STOCK OPTION GRANTS IN FISCAL YEAR 1997
The following table sets forth information with respect to individual stock
option grants during fiscal 1997 to the Company's executive officers named in
the Summary Compensation Table.
Number of % of Total Potential Realizable Value
Securities Options at Assumed Annual Rates of
Underlying Granted Stock Price Appreciation for
Options During Exercise Option Term(5),(6)
Granted(1) Fiscal Year Price(4) Expiration 0% 5% 10%
Name (#) 1997 ($/Share) Date ($) ($) ($)
- - --------------------------------------------------------------------------------
Richard B.
Mazess -- -- -- -- -- -- --
Robert A.
Beckman 25,000(2) 4.7 16.50 4/22/2007 0 259,000 657,500
10,000(3) 1.9 27.50 10/9/2006 0 172,900 438,300
James A.
Hanson -- -- -- -- -- -- --
James V.
Pietropaolo 25,000(2) 4.7 16.50 4/22/2007 0 259,500 657,500
25,000(3) 4.7 27.50 10/9/2006 0 432,250 1,095,750
Carl E.
Gulbrandsen 2,000(2) 0.4 16.50 4/22/2007 0 20,760 52,600
2,000(3) 0.4 27.50 10/9/2006 0 34,580 87,660
(1) All stock options were granted under the Company's Amended and Restated
Stock Option Plan. These options are nonqualified and vest 20% each year on the
first five anniversaries of the grant date.
(2) Amounts represent the granting of replacement stock options which remain
outstanding. Equal amounts of previously granted stock options were terminated
in fiscal 1997. See "Stock Option Repricing."
(3) These stock options were subsequently replaced with repriced stock options
and, accordingly, are no longer outstanding. See "Stock Option Repricing."
(4) All grants were made at 100% of fair market value as of the grant date.
(5) The dollar amounts under these columns are the result of calculations at
the 5% and 10% assumed annual growth rates mandated by the Securities and
Exchange Commission and, therefore, are not intended to forecast possible future
appreciation, if any, in the Company's Common Stock price. The calculations were
based on the exercise prices and the 10-year term of the options. No gain to the
optionees is possible without an increase in stock price, which will benefit all
shareholders proportionately.
(6) The "Potential Realizable Value" to all shareholders of the Company as a
group which would result from the application of the same assumptions to the
8,721,425 shares of Common Stock outstanding at June 30, 1997, at the closing
price of $21.75 per share of Common Stock on June 30, 1997, as reported by The
Nasdaq Stock Market is an incremental gain of $0, $119,309,094, and $302,284,591
for 0%, 5%, and 10%, respectively.
PERFORMANCE GRAPH
The following table compares the cumulative total shareholder return on the
Company's Common Stock for the five-year period ended June 30, 1997, with the
cumulative total shareholder return of Standard & Poor's 500 Stock Index (the
"S&P 500") and Standard and Poor's Medical Products and Supplies Index (the
"S&P Med Products").
6/30/92 06/30/93 06/30/94 6/30/95 6/30/96 6/30/97
S&P 500 $100 $114 $115 $145 $183 $247
S&P Med Products $100 $78 $83 $120 $147 $174
Lunar Corporation $100 $66 $75 $159 $313 $197
The Performance Graph assumes $100 invested on June 30, 1992 in each of the
Company's Common Stock, the S&P 500 Index and the S&P Med Products Index. The
graph also assumes the reinvestment of dividends.
CERTAIN TRANSACTIONS
DISTRIBUTION OF COMMON STOCK OF BONE CARE
On May 8, 1996, the Company, which then held 97.3% of the issued and outstanding
shares of the common stock of Bone Care International, Inc. (Bone Care),
distributed to its shareholders of record as of April 24, 1996, all of the
shares of Bone Care common stock then owned by the Company in a transaction
intended to qualify as a tax-free distribution (the "Distribution"). As a result
of the Distribution, Bone Care became a separate publicly owned company.
Dr. Mazess, the Chairman of the Board, President and Chief Executive Officer of
the Company, is also the Chairman of the Board of Bone Care and is the
beneficial owner of approximately 34% of the outstanding capital stock of Bone
Care. Mr. Beckman, Vice President of Finance of the Company, is also a director
of Bone Care and served as the Vice President of Finance of Bone Care until
November 14, 1996. Dr. Gulbrandsen, Corporate General Counsel and Secretary of
the Company until September 30, 1997, also served as Corporate General Counsel
and Secretary of Bone Care until September 30, 1997.
DISTRIBUTION AGREEMENT
In connection with the Distribution, the Company and Bone Care entered into a
distribution agreement (the "Distribution Agreement") providing for, among other
things, the principal corporate transactions required to effect the
Distribution, the conditions to the Distribution, the allocation between the
Company and Bone Care of certain liabilities and certain other agreements
governing the relationship between the Company and Bone Care with respect to or
in connection with the Distribution.
TAX DISAFFILIATION AGREEMENT
In connection with the Distribution, the Company and Bone Care entered into a
tax disaffiliation agreement which provides, among other things, for (i) a
contribution of $725,000 by the Company to Bone Care completed prior to the
Distribution to reflect federal income tax savings previously realized by the
Company that were attributable to losses incurred by Bone Care prior to the
Distribution and (ii) cross indemnification by each party for certain tax
liabilities.
LOANS TO EXECUTIVE OFFICERS
In connection with Mr. Pietropaolo's commencement of employment, the Company
provided a bridge loan in the amount of $165,000. The loan was outstanding for a
total of 7 days and was repaid in full with interest of $192 computed at the
annual rate of 6.07%.
Subsequent to June 30, 1997, in connection with Mr. James T. Karam's
commencement of employment as Vice President of Operations, the Company provided
a bridge loan in the amount of $100,000. The loan was outstanding for a total of
26 days and was repaid in full with interest of $418 computed at the annual rate
of 5.87%.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the Company's proxy materials for the
1998 Annual Meeting of Shareholders, written notice of any shareholder proposal
must be delivered or mailed to and received at the Company's principal executive
offices at 313 West Beltline Highway, Madison, Wisconsin 53713 by July 1, 1998.
FINANCIAL STATEMENTS
A copy of the Annual Report to Shareholders of the Company, and the Report on
Form 10-K filed with the Securities and Exchange Commission containing audited
consolidated financial statements for the fiscal year ended June 30, 1997, is
enclosed herewith.
By Order of the Board of Directors,
/s/ Richard B. Mazess, Ph.D.
Richard B. Mazess, Ph.D.
President
Madison, Wisconsin
October 29, 1997
Proxy for
Lunar Corporation
Annual Meeting of Shareholders
November 21, 1997
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY.
The undersigned hereby appoints ROBERT A. BECKMAN and CHARLES V. SWEENEY, and
each of them, as proxies, with full power of substitution, to vote for the
undersigned all shares of the Common Stock of LUNAR CORPORATION (the "Company"),
which the undersigned, as designated below, would be entitled to vote if
personally present at the Annual Meeting of Shareholders to be held at The
Sheraton Madison Hotel, 706 John Nolen Drive, Madison, Wisconsin, on Friday,
November 21, 1997, at 2:00 p.m., local time, and at any adjournments thereof.
(1) Elect Directors
/ / GRANT AUTHORITY / / WITHHOLD AUTHORITY
to vote for nominees to vote for nominees
listed below listed below
Instructions: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below.
Malcolm R. Powell, M.D. John J. McDonough
(2) Approve an amendment to the Lunar Corporation Amended and Restated Stock
Option Plan to increase the number of shares of Common Stock available under the
Plan.
/ / For / / Against / / Abstain
(3) Ratify selection of KPMG Peat Marwick LLP as auditors of the Company for
the fiscal year ending June 30, 1998.
/ / For / / Against / / Abstain
(4) In their discretion, upon such other matters as may properly come before
the meeting or any adjournments thereof.
This proxy will be voted as specified. IF NO CONTRARY SPECIFICATION IS MADE, IT
WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES NAMED ON THE REVERSE
SIDE AND FOR ITEMS 2 AND 3, AND, IN THE DISCRETION OF THE PERSONS DESIGNATED
HEREIN AS PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS THEREOF.
Please date this proxy and sign exactly as your name or names appear therein. If
shares are jointly owned, one or more joint owners should sign. Administrators,
executors, trustees and others signing in representative capacity should
indicate the capacity in which they sign. The undersigned hereby revokes all
proxies heretofore given to vote at the aforesaid meeting.
Dated , 1997
---------------------------- -------------------------------
Co-Owner Sign Here Shareholder Sign Here
EXHIBIT 10.1
LUNAR CORPORATION
AMENDED AND RESTATED
STOCK OPTION PLAN
1. Plan. To provide incentives to officers, key employees and
consultants of Lunar Corporation (the "Company"), its subsidiaries, and
any other entity (collectively "subsidiaries") designated by the Board
of Directors of the Company (the "Board"), and members of the Board to
contribute to the success and prosperity of the Company, based upon the
ownership of the common stock, par value $.01, of the Company ("Common
Stock"), the Committee hereinafter designated, may grant nonqualified
stock options to officers, key employees, consultants and eligible
members of the Board on the terms and subject to the conditions stated
in this Plan.
2. Eligibility. Officers, key employees and consultants of the
Company and its subsidiaries and members of the Board who are not
employees of the Company ("non-employee directors") shall be eligible,
upon selection by the Committee, to receive stock options as the
Committee, in its discretion, shall determine.
3. Shares Issuable. The maximum number of shares of Common Stock
to be issued after the effective date of this Plan pursuant to all
grants of stock options hereunder shall be 1,000,000, subject to
adjustment in accordance with Section 5. Shares of Common Stock
subject to a stock option granted hereunder, which are not issued by
reason of the expiration, cancellation or other termination of such
stock option, shall again be available for future grants of stock
options under this Plan.
Shares of Common Stock to be issued may be authorized and unissued
shares of Common Stock, treasury stock, or a combination thereof.
To the extent required by Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the rules and regulations
thereunder, the maximum number of shares of Common Stock with respect
to which options may be granted during any calendar year to any person
shall be 100,000, subject to adjustment as provided in Section 5.
4. Administration of the Plan. This Plan shall be administered
by a committee designated by the Board (the "Committee") consisting of
two or more members of the Board, each of whom shall be a "Non-Employee
Director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and an "outside
director" within the meaning of Section 162(m) of the Code.
The Committee shall, subject to the terms of this Plan, establish
eligibility guidelines, select officers, key employees, consultants and
non-employee directors for participation in this Plan and determine the
number of shares of Common Stock subject to a stock option granted
hereunder, the exercise price for such shares of Common Stock, the time
and conditions of vesting or exercise and all other terms and
conditions of the stock option, including, without limitation, the form
of the option agreement. The Committee may establish rules and
regulations for the administration of the Plan, interpret the Plan and
impose, incidental to the grant of a stock option, conditions with
respect to the grant or award of stock options or competitive
employment or other activities not inconsistent with or conflicting
with this Plan. All such rules, regulations and interpretations
relating to this Plan adopted by the Committee shall be conclusive and
binding on all parties. All grants of stock options under this Plan
shall be evidenced by written agreements between the Company and the
optionees, and no such grant shall be valid until so evidenced.
5. Changes in Capitalization. Appropriate adjustments shall be
made by the Committee in the maximum number of shares to be issued
under the Plan and the maximum number of shares which are subject to
any stock option granted hereunder, and the exercise price therefor, to
give effect to any stock splits, stock dividends and other relevant
changes in the capitalization of the Company occurring after the
effective date of this Plan (which shall not include the sale by the
Company of shares of Common Stock or securities convertible into shares
of Common Stock).
6. Effective Date and Term of Plan. This Plan shall be submitted
to the shareholders of the Company for approval and, if approved, shall
become effective on the date thereof. This Plan shall terminate ten
years after it becomes effective unless terminated prior thereto by
action of the Board. No further grants shall be made under this Plan
after termination, but termination shall not affect the rights of any
optionee under any grants made prior to termination.
7. Amendments. This Plan may be amended by the Board in any
respect, except that no amendment may be made without shareholder
approval if such amendment would (a) increase the maximum number of
shares of Common Stock available for issuance under this Plan (other
than as provided in Section 5) or (b) otherwise require shareholder
approval.
8. Existing Stock Options. Stock options granted by the Company
prior to the date of shareholder approval of this Plan shall continue
in effect in accordance with their terms.
9. Grants of Stock Options. Options to purchase shares of Common
Stock may be granted hereunder to such eligible officers, key
employees, consultants, and non-employee directors as may be selected
by the Committee.
10. Option Price. The option price per share of Common Stock
purchasable upon exercise of an option granted hereunder shall be
determined by the Committee; provided, however, that the option price
per share of Common Stock purchasable upon exercise of an option
granted under this Plan shall be 100% of the fair market value of a
share of Common Stock on the date of grant of such option. For
purposes hereof, "fair market value" shall be determined by the
Committee.
11. Stock Option Period. Each stock option granted hereunder may
be granted at any time on or after the effective date, and prior to the
termination, of this Plan. The Committee shall determine whether such
stock option shall become exercisable in cumulative or non-cumulative
installments or in full at any time. An exercisable stock option may
be exercised in whole or in part with respect to whole shares of Common
Stock only. The period for the exercise of each stock option shall be
determined by the Committee.
12. Exercise of Stock Options. (a) Upon exercise, the option
price may be paid in cash, in shares of Common Stock having a fair
market value on the date of exercise equal to the option price, or in a
combination thereof. The Company may arrange or approve of a cashless
option exercise procedure which complies with the provisions of Section
16 of the Exchange Act and the rules and regulations thereunder.
(b) An option may be exercised during an optionee's continued
employment with the Company or one of its subsidiaries, or service on
the Board, as the case may be, and, except in the event of such
optionee's death, within a period of 30 days following termination of
such employment or service, but only to the extent exercisable and
within the term of such option at the time of the termination of such
employment or service; provided, however, that if employment of the
optionee by the Company or one of its subsidiaries or service on the
Board shall have terminated by reason of retirement after age 60, then
the option may be exercised within a period not in excess of one year
following such termination of employment or service on the Board, but
only to the extent exercisable and within the term of such option at
the time of such termination of employment or service.
(c) No option shall be transferable except that in the event of
the death of an optionee (i) during employment or service on the Board,
as the case may be, (ii) within a period of one year after termination
of employment or service on the Board, as the case may be, by reason of
retirement after age 60 at a time when the option is otherwise
exercisable or (iii) within 30 days after termination of employment or
service on the Board, as the case may be, for any other reason,
outstanding stock options may be exercised, but only to the extent
exercisable and within the term of such option prior to the application
of this Section 12, by the executor, administrator or personal
representative of such deceased optionee within one year of the death
of such optionee in the case of clauses (i) and (ii) or within 90 days
of the death of such optionee in the case of clause (iii).
13. Acceleration of Options upon a Change in Control. The
following provisions shall apply in the event of a "Change in Control":
(a) In the event of a Change in Control, any stock options not
previously exercisable in full shall become fully exercisable.
(b) For purposes hereof, "Change in Control" means:
(1) The acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act, of
50% or more of the then outstanding shares of Common Stock (the
"Outstanding Common Stock"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (A) any
acquisition by the Company, (B) any acquisition by an employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, (C) any acquisition by an
underwriter or underwriters as part of a bona fide public distribution
of securities of the Company or (D) any acquisition by any Person which
beneficially owned as of the effective date of this Plan, 30% or more
of the outstanding Common Stock; and provided further that, for
purposes of clause (A), if any Person (other than the Company or any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company) shall become the
beneficial owner of 50% or more of the outstanding Common Stock by
reason of an acquisition by the Company and such Person shall, after
such acquisition by the Company, become the beneficial owner of any
additional shares of the Outstanding Common Stock and such beneficial
ownership is publicly announced, such additional beneficial ownership
shall constitute a Change in Control;
(2) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of such Board; provided, however, that any individual who
becomes a director of the Company subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was
approved by the vote of at least a majority of the directors then
comprising the Incumbent Board shall be deemed to have been a member of
the Incumbent Board; and provided further, that no individual who was
initially elected as a director of the Company as a result of an actual
or threatened election contest, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act, or any other
actual or threatened solicitation of proxies or consents by or on
behalf of any Person other than the Board shall be deemed to have been
a member of the Incumbent Board;
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation unless, in any such case,
immediately after such reorganization, merger or consolidation, (i)
more than 50% of the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
and more than 50% of the combined voting power of the then outstanding
securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals or entities
who were the beneficial owners, respectively, of the Outstanding Common
Stock immediately prior to such reorganization, merger or consolidation
and in substantially the same proportions relative to each other as
their ownership, immediately prior to such reorganization, merger or
consolidation, of the Outstanding Common Stock, (ii) no Person (other
than the Company, any employee plan (or related trust) sponsored or
maintained by the Company or the corporation resulting from such
reorganization, merger or consolidation (or any corporation controlled
by the Company) and any Person which beneficially owned, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 30% or more of the Outstanding Common Stock) beneficially
owns, directly or indirectly, 50% or more of the then outstanding
shares of common stock of such corporation or 50% or more of the
combined voting power of the then outstanding securities of such
corporation entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the Board of directors of
the corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board providing for
such reorganization, merger or consolidation; or
(4) Approval by the shareholders of the Company of (i) a plan of
complete liquidation or dissolution of the Company or (ii) the sale or
other disposition of all or substantially all of the assets of the
Company other than to a corporation with respect to which, immediately
after such sale or other disposition, (A) more than 50% of the then
outstanding shares of common stock thereof and more than 50% of the
combined voting power of the then outstanding securities thereof
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Common Stock immediately prior to such
sale or other disposition and in substantially the same proportions
relative to each other as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Common Stock, (B) no
Person (other than the Company, any employee benefit plan (or related
trust) sponsored or maintained by the Company or such corporation (or
any corporation controlled by the Company) and any Person which
beneficially owned, immediately prior to such sale or other
disposition, directly or indirectly, 30% or more of the Outstanding
Company Common Stock) beneficially owns, directly or indirectly, 50% or
more of the then outstanding shares of common stock thereof or 50% or
more of the combined voting power of the then outstanding securities
thereof entitled to vote generally in the election of directors and (C)
at least a majority of the members of the Board of directors thereof
were members of the Incumbent Board at the time of the execution of the
initial agreement or action of the Board providing for such sale or
other disposition.
