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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission File No. 1-11083
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Boston Scientific Corporation
(Exact name of Company as specified in its charter)
Delaware 04-2695240
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Boston Scientific Place, Natick, Massachusetts 01760-1537
(Address, including zip code, of principal executive offices)
(508) 650-8000
(Company's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.01 Par Value Per Share
(Title of class)
Securities registered pursuant to Section 12(g) of the Act:
None
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Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ ]
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The aggregate market value of Common Stock held by non-affiliates (persons other
than directors, executive officers, and certain family trusts) of the Company
was approximately $7.1 billion based on the closing price of the Common Stock as
reported in the Wall Street Journal on March 14, 1997.
The number of shares outstanding of the Company's Common Stock as of March 14,
1997 was 178,760,320.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's 1996 Consolidated Financial Statements filed with the
Securities and Exchange Commission as an exhibit hereto and the Proxy Statement
to be filed with the Securities and Exchange Commission on or prior to April 30,
1997 are incorporated by reference into Parts I, II and III.
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PART I
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Item 1. BUSINESS
The Company
Boston Scientific Corporation (the "Company") is a worldwide developer,
manufacturer and marketer of medical devices. The Company sells products in
numerous product categories which are used by physicians to perform minimally
invasive medical procedures. The Company's products are used in a broad range of
interventional medical specialties, including cardiology, gastroenterology,
pulmonary medicine, radiology, urology and vascular surgery. The Company's
products are generally inserted into the human body through natural openings or
small incisions in the skin and can be guided to most areas of the anatomy to
diagnose and treat a wide range of medical problems. These products provide
effective alternatives to traditional surgery by reducing procedural trauma,
complexity, risk to the patient, cost and recovery time.
The Company's history began in the late 1960s when the Company's co-founder,
John Abele, acquired an equity interest in Medi-Tech, Inc., a development
company. Medi-Tech's initial products, a family of steerable catheters, were
introduced in 1969. They were used in some of the first minimally invasive
procedures performed, and versions of these catheters are still being sold
today. In 1979, John Abele joined with Pete Nicholas to form the Company which
indirectly acquired Medi-Tech, Inc. This acquisition began a period of active,
focused marketing, new product development and organizational growth. Since
then, the Company's net sales have increased substantially, growing from $1.8
million in 1979 to $1.46 billion in 1996.
Several strategic acquisitions significantly bolstered the Company's growth over
the past two years. In early 1995, the Company acquired SCIMED Life Systems,
Inc. ("SCIMED"), a leading developer, manufacturer and marketer of devices used
principally to treat cardiovascular disease, Cardiovascular Imaging Systems,
Inc. ("CVIS"), a leading developer, manufacturer and marketer of intraluminal
ultrasound imaging catheters and systems for use in the diagnosis of
cardiovascular and other diseases, and Vesica Medical, Inc. ("Vesica"), a
developer, manufacturer and marketer of medical devices used principally to
treat a form of urinary incontinence. Later in 1995, the Company acquired Meadox
Medicals, Inc. ("Meadox"), a leading developer, manufacturer and marketer of
woven, knitted and collagen-sealed textile vascular prosthesis, and Heart
Technology, Inc. ("Heart Technology"), the developer, manufacturer and marketer
of a rotational ablation system used for the treatment of atherosclerosis in
coronary and peripheral arteries. In 1996, the Company acquired EP Technologies,
Inc. ("EPT"), a developer, manufacturer and marketer of electrophysiology
catheters and systems used to diagnose and treat cardiac tachyarrhythmias,
Symbiosis Corp., formerly a wholly-owned subsidiary of American Home Products
Corporation and a developer and manufacturer of certain specialty medical
devices, including the Radial Jaw(R) and Multibite(TM) biopsy forceps marketed
by the Company, and certain assets of Endotech Ltd. and MinTec Inc. and certain
related companies ("Endotech/MinTec") dedicated to the development and
manufacture of stent grafts for the repair of diseased blood vessels.
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Most recently, on January 20, 1997, the Company entered into an agreement to
acquire Target Therapeutics, Inc. ("Target"), a leading developer, manufacturer
and marketer of micro-catheters and other medical devices used to treat diseases
of the brain associated with stroke and other disease sites accessible through
small vessels of the circulatory system.
A summary of these transactions is set forth below:
<TABLE>
<CAPTION>
Consideration
(rounded to the nearest million)
Date of Shares Cash Transaction
Acquired Company Market Acquisition Issued Paid Type
- ---------------- ------ ----------- ------ ---- ----
<S> <C> <C> <C> <C> <C>
SCIMED cardiology February 24, 1995 52.7 -- stock-for-stock
pooling transaction
CVIS radiology March 9, 1995 -- $ 94 cash purchase
Vesica urology March 23, 1995 -- * cash purchase
Meadox vascular surgery November 16, 1995 10.2 -- stock-for-stock
pooling transaction
Heart Technology cardiology December 29, 1995 11.9 -- stock-for-stock
pooling transaction
EPT electrophysiology January 22, 1996 3.4 -- stock-for-stock
pooling transaction
Symbiosis endoscopy March 14, 1996 -- $153 cash purchase
Endotech/MinTec endovascular May 3, 1996 -- $ 72 cash purchase
surgery
Target** neuro- Expected to close 16.1 -- stock-for-stock
endovascular on April 8, 1997 pooling transaction
therapy
</TABLE>
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*The purchase price is not material to the Company's financial position or
results of operations and the acquisition did not have a material pro forma
impact on the Company's operations.
**The consummation of this transaction is subject to certain conditions,
including obtaining the approval of Target stockholders.
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The Company's growth has also been spurred by certain recent corporate
alliances. Principal among these is the strategic alliance formed in 1995
between the Company and Medinol Ltd. ("Medinol"), an Israeli Company, which is a
leading developer and manufacturer of stents. Under this alliance, the Company
has the exclusive worldwide license to market Medinol's stent products,
including the NIR(TM) coronary stent, which is currently being sold
internationally and clinically tested in the United States.
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These acquisitions and alliances have helped to round-out and fill-in gaps in
the Company's product lines, allowing the Company to offer one of the broadest
product lines in the world for use in minimally invasive procedures. The Company
now maintains strong market share positions with respect to its products in each
of the principal markets in which it competes: cardiology, radiology, endoscopy,
urology, electrophysiology and vascular surgery. Following the anticipated
acquisition of Target, the Company also expects to establish a leadership
position in the neuro-endovascular therapy market.
The acquisitions have also helped the Company to reach a certain strategic mass
which should enable it to compete more effectively in, and better absorb the
pressures of, the current healthcare environment of cost containment,
managed-care, large buying groups and hospital consolidations. Management
believes that the leadership companies of the future in the medical device
industry will be those financially strong, technology driven enterprises which
possess strong market shares, broad product lines, sophisticated manufacturing,
and global operations with direct representation in all major markets. The
Company's acquisition and globalization activities over the past two years have
been directed towards these objectives.
The integration of SCIMED, CVIS, Vesica, Meadox, and Heart is substantially
complete and the integration of EPT, Symbiosis, and Endotech/MinTec is expected
to be substantially complete by the end of 1997. Management believes it has
developed a sound plan for continuing and concluding the integration process,
and that it will achieve that plan. However, in view of the number of major
transactions undertaken by the Company, the dramatic changes in the size of the
Company and the complexity of its organization resulting from these
transactions, management also believes that the successful implementation of its
plan presents a significant degree of difficulty. The failure to integrate these
businesses effectively could adversely affect the Company's operating results in
the near term, and could impair the Company's ability to realize the strategic
and financial objectives of these transactions.
Business Strategy
The Company's mission is to improve the quality of patient care and the
productivity of healthcare delivery through the development and advocacy of less
invasive medical devices and procedures. The Company seeks to accomplish this
mission through the continuing refinement of existing products and procedures
and the investigation and development, as well as the acquisition, of new
technologies which can reduce risk, trauma, cost, procedure time and the need
for aftercare. The Company's strategy has been, and will continue to be, to grow
by identifying those specific therapeutic and diagnostic areas which satisfy the
Company's mission and provide attractive opportunities for long-term growth and
by making the investments necessary to capitalize on these opportunities. Key
elements of this strategy are as follows:
Product Diversity. The Company offers products in numerous product categories
which are used by physicians throughout the world in a broad range of diagnostic
and therapeutic vascular and nonvascular procedures throughout the body. The
breadth and diversity of the Company's product lines permit medical specialists
to satisfy many of their minimally invasive medical device requirements from a
single source. The scope of its products and markets also reduces the
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Company's vulnerability to change in the competitive, regulatory and
technological environments for any single product or market.
Product Innovation. The Company maintains an aggressive product development
program designed to introduce new products and applications on a regular basis.
The specifications and features of new products are typically developed from
market information generated through the interaction of the Company's product
management teams and sales representatives with the worldwide medical community.
The Company expedites the design and development of new products by leveraging
its proprietary core technologies and applications knowledge across its product
lines. Technological innovations developed for a particular application are
often applied to procedures used in other markets served by the Company.
Focused Marketing. The Company markets its products through six principal
divisions: SCIMED (cardiology), Medi-Tech (radiology), Microvasive Endoscopy
(endoscopy), Microvasive Urology (urology), EPT (electrophysiology) and Meadox
(vascular and endovascular surgery). Each of the Company's divisions focuses on
physicians who specialize in the diagnosis and treatment of different medical
conditions and offers products to satisfy their needs. The Company believes that
this focused marketing approach enables it to develop highly knowledgeable and
dedicated sales representatives and to foster close professional relationships
with physicians.
International Presence. Maintaining and expanding its international presence is
an important component of the Company's long-term growth plan. In 1996,
international sales accounted for approximately 39% of the Company's net sales,
up from approximately 33% in 1995 and 29% in 1994. Currently, the Company
operates international manufacturing subsidiaries in the Bahamas, Denmark,
France and Ireland (the Company expects to close certain of its international
manufacturing operations as part of its Company-wide facilities reorganization
and consolidation plans); direct marketing and sales subsidiaries in over
twenty-five countries; and distribution arrangements in over fifty countries.
Through its international presence, the Company seeks to increase net sales and
market share, accelerate the time within which new products can be brought to
market and gain access to worldwide technological developments that may be
implemented across its product lines.
Active Participation in the Medical Community. The Company believes that it has
excellent working relationships with physicians and others in the medical
industry which enable it to gain a detailed understanding of new therapeutic and
diagnostic alternatives, and to respond quickly to the changing needs of
physicians and patients. The Company enhances its presence in the medical
community through active participation in hundreds of medical meetings each
year, by conducting comprehensive training and educational activities and
through employee-authored articles in medical journals and textbooks. Each year,
numerous scientific papers are published and presentations are made describing
clinical applications of the Company's products. The Company believes that these
activities and its advocacy positions contribute to the medical community's
understanding and adoption of minimally invasive techniques and the expansion of
these techniques into new therapeutic and diagnostic areas.
Corporate Culture. Management believes that success and leadership evolves from
a motivating corporate culture which rewards achievement, respects and values
individual employees and customers, and has a long-term focus on quality,
technology, integrity and service. The Company
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believes that its success is attributable in large part to the high caliber of
its employees and the Company's commitment to maintaining the values on which
its success has been based.
Strategic Acquisitions and Alliances. In recent years, the Company has sought
out strategic acquisitions, alliances and venture opportunities which complement
or expand its existing product lines or enhance its technological position. As
the healthcare environment increasingly shifts towards consolidation and
managed-care, the Company expects that it will continue to make acquisitions and
enter into strategic alliances consistent with its corporate mission.
Products
The Company's products are categorized as vascular or nonvascular, depending on
the anatomical system and procedure in which a product is intended to be used.
Generally, vascular products are employed in procedures affecting the heart and
systems which carry blood, while nonvascular products are employed in procedures
affecting other systems and organs. In 1996, approximately 78% of the Company's
net sales were derived from its vascular business and approximately 22% from its
nonvascular business. The Company's principal vascular and nonvascular products
are offered in the following medical areas:
Vascular
Coronary Revascularization. The Company markets a broad line of products used to
treat patients with atherosclerosis. Atherosclerosis, a coronary vessel disease
and a principal cause of heart attacks, is characterized by a thickening of the
walls of the arteries and a narrowing of arterial lumens (openings) caused by
the progressive development of deposits of plaque. Atherosclerosis results in
reduced blood flow to the muscle of the heart. The majority of the Company's
products in this market are used in percutaneous transluminal coronary
angioplasty ("PTCA") and percutaneous transluminal coronary rotational
atherectomy ("PTCRA").
Peripheral Vascular Intervention and Vascular Access. The Company sells various
products designed to treat patients with peripheral vascular disease (disease
which appears in blood vessels other than in the heart), including a broad line
of catheters used in percutaneous transluminal angioplasty ("PTA").
Additionally, the Company's peripheral vascular product line includes medical
devices used in thrombolysis, which is the catheter-based delivery of clot
dissolving agents directly to the site of a blood clot. The Company also markets
vascular access ports as well as peripherally inserted central catheters for use
in patients with impaired venous systems, such as cancer and AIDS patients.
Caval Interruption Systems. The Company markets the Greenfield(R) vena cava
filter system for use in patients who are at risk of developing a pulmonary
embolism due to an existing medical condition or post-surgical complications.
Once the filter is implanted, circulating emboli (blood clots) are captured and
held by the lattice design of the filter, allowing the clots to dissolve
naturally before they can reach the pulmonary system.
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Surgical and Endovascular Grafts. Following the acquisitions of Meadox and
Endotech/Mintec, the Company expanded its product line to include woven, knitted
and collagen-sealed textile grafts, used to repair or replace arteries which
have developed aneurysms or have become partially or completely occluded by
plaque, and endovascular grafts for the treatment of abdominal aortic aneurysms
and peripheral occlusive diseases. Recently, the Company also started marketing
a line of proprietary PTFE grafts used for AV access and the treatment of
peripheral vascular diseases.
Stents. Through its alliance with Medinol, the Company markets the NIR(TM)
coronary stent. The Company also markets a range of other stents for use in both
vascular and non vascular applications, including the Radius(TM) self-expanding
coronary stent, and the Symphony(TM) self-expanding peripheral stent.
Intraluminal Ultrasound Imaging. The Company markets a family of intraluminal
catheter-directed ultrasound imaging systems for diagnostic use in blood
vessels, heart chambers, coronary arteries as well as certain nonvascular
systems. Intraluminal ultrasound imaging is a relatively new technique in which
catheter tip ultrasound transducers provide high resolution internal images of
vascular and nonvascular systems throughout the anatomy.
Electrophysiology ("EP"). The Company's electrophysiology product offerings
include catheters and systems for use in minimally invasive procedures to
diagnose and treat tachyarrhythmias (abnormal heart rhythms). The Company
markets RF generators and steerable ablation catheters, many of which
incorporate proprietary temperature monitoring and control technology, as well
as a line of diagnostic and therapeutic catheters and associated accessories.
Neuro-Endovascular Therapy. The Company currently markets a line of
micro-guidewires and infusion and guiding catheters to treat diseases of the
neurovascular system. With the expected acquisition of Target, the Company would
offer a significantly expanded product line in this market, including the
Guglielmi Detachable Coil(TM) system to treat and prevent the rupture of
cerebral aneurysms that are otherwise either considered to be inoperable or very
high risk for surgery.
Nonvascular
Esophageal, Gastric and Duodenal Intervention. The Company markets a broad range
of products to diagnose, treat and palliate a variety of esophageal, gastric and
duodenal diseases, including esophogitis, gastric esophageal reflux disease,
portal hypertension, peptic ulcers and esophageal cancer. The Company's products
in this area include disposable single and multiple biopsy forceps, balloon
dilatation catheters, multiple banding devices and enteral feeding
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devices. The Company also markets a family of esophogeal stents designed to
offer improved dilatation force and greater resistance to tumor in-growth.
Colorectal Intervention. The Company markets a line of hemostatic catheters,
polypectomy snares and dilatation catheters for the diagnosis and treatment of
polyps, inflammatory bowel disease, diverticulitis and colon cancer.
Pancreatico - Biliary Intervention. The Company sells a variety of products to
treat, diagnose and palliate benign and malignant strictures of the
pancreatico-biliary system (the gall bladder, common bile duct, hepatic duct,
pancreatic duct and the pancreas) and to remove stones found in the common bile
and hepatic ducts. The Company's products include diagnostic catheters used with
contrast medium, balloon dilatation catheters and sphincterotomes. The Company
also markets a temporary biliary stent for palliation and drainage of the common
bile duct.
Pulmonary Intervention. The Company markets devices to diagnose, treat and
palliate chronic bronchitis and lung cancer, including pulmonary biopsy forceps
and balloon catheters used to control bleeding.
Urinary Tract Intervention. The Company sells a variety of products designed
primarily to treat patients with urinary stone disease. Products within this
category include ureteral dilatation balloons used to dilate strictures or
openings for scope access; stone baskets used to manipulate, crush, or remove
the stone; intracorporeal shock wave lithotripsy devices used to disintegrate
stones ureteroscopically; ureteral stents implanted temporarily in the urinary
tract to provide either short-term or long-term drainage; and a wide variety of
guidewires used to gain access to a specific site.
Prostate Intervention. For the treatment of Benign Prostatic Hypertrophy
("BPH"), the Company currently markets an electro-surgical resection device
designed to resect large diseased tissue sites and reduce the bleeding
attributable to the resection procedure (a major cause of patient morbidity in
connection with traditional surgical treatments for BPH), a prostate balloon
dilatation catheter and an automatic disposable needle biopsy system, designed
to take rapid core prostate biopsies. The Company also has the exclusive right
to sell in Europe a microwave based thermotherapy system to treat BPH.
Urinary Incontinence. The Company markets a line of minimally invasive devices
to treat female urinary incontinence. This affliction is commonly treated with
an open bladder neck suspension surgical procedure. The Company's Vesica(R)
system is a less invasive (percutaneous) alternative for treating incontinence
caused by hypermobility that provides suspension and stabilization of the
bladder neck using pelvic bone anchors and support sutures that are deployed
through small incisions. Recently, the Company has expanded its incontinence
product line to include sling technology to treat patients with both
hypermobility and ISD incontinence.
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International Operations
In 1996, international sales accounted for approximately 39% of the Company's
net sales, up from approximately 33% in 1995 and 29% in 1994. Net sales,
operating income and identifiable assets attributable to significant geographic
areas are presented in Note O to the Company's 1996 Consolidated Financial
Statements, filed with the Securities and Exchange Commission as an exhibit
hereto.
Currently, the Company has direct marketing and sales operations in over
twenty-five countries, including Australia, Argentina, Austria, Belgium, Canada,
France, Germany, Hong Kong, Ireland, Italy, Japan, Korea, the Netherlands,
Norway (which serves Norway and Finland), Singapore, Spain, Sweden, Switzerland
and the United Kingdom. In the future, the Company expects to further expand its
direct sales operations in Asia, Eastern Europe and Latin America, as well as
other markets where it can both generate strong net sales and capture a
significant market share. The Company will continue to use distributors in those
smaller markets where it is not economical or strategic to establish a direct
presence. In 1996, less than 4% of net sales were attributable to
distributorship arrangements.
The Company has established international manufacturing operations in the
Bahamas, Denmark, France and Ireland. The Company expects to close certain of
its international manufacturing facilities as part of its Company-wide
facilities reorganization and consolidation plans. Presently, approximately 50%
of the Company's products sold internationally are manufactured at sites outside
of the United States. The Company also maintains an international research and
development facility in Ireland.
The Company's expanded international presence exposes it to certain financial
and other risks. Principal among these is the potentially negative impact of
foreign currency fluctuations on the Company's sales and expenses. Because the
percentage of sales denominated in foreign currencies has been, and is expected
to continue to be, somewhat greater than the percentage of expenses denominated
in foreign currencies, foreign currency fluctuations may also have some impact
on the Company's margins. Any significant changes in the political, regulatory
or economic environment where the Company conducts international operations may
also have a material impact on revenues and profits. See page F-4 of the
Company's 1996 Consolidated Financial Statements filed as an exhibit hereto.
Marketing and Sales
The Company markets its products through six principal divisions, each focusing
upon physicians who specialize in the diagnosis and treatment of different
medical conditions.
SCIMED: markets devices to cardiologists for the nonsurgical diagnosis and
treatment of coronary vascular disease and other cardiac
disorders.
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Medi-Tech: markets therapeutic and diagnostic devices to physicians who
perform interventional image-guided procedures primarily in
the fields of radiology and vascular surgery.
Microvasive markets therapeutic and diagnostic devices which aid
Endoscopy: gastroenterologists and pulmonologists in performing
flexible endoscopy procedures involving the digestive tract
and lungs.
Microvasive offers a broad line of therapeutic and diagnostic devices
Urology: which aid urologists in performing ureteroscopic and other
minimally invasive endoscopic procedures as well as devices
to treat urinary incontinence.
EPT: offers a line of electrophysiology catheters and systems for
use by interventional electrophysiologists in the diagnosis
and treatment of cardiac tachyarrhythmias.
Meadox: markets woven, knitted and collagen-sealed vascular and
endovasular grafts to vascular, cardiothoracic and general
surgeons for use in patients with vessels damaged by
artherosclerosis or aneurysms which need to be bypassed or
replaced.
A dedicated sales force of in excess of 1,200 individuals, including over 600 in
the United States, market the Company's products worldwide. This dedicated force
accounts for over 96% of the Company's net sales. A network of over sixty
dealers, sub-dealers and distributors who offer the Company's products in more
than fifty countries worldwide accounts for the remaining sales. The Company has
also established a dedicated corporate sales force focused principally on
selling to major buying groups and large integrated healthcare networks.
The Company's worldwide customer base includes interventional medical
specialists, including cardiologists, radiologists, gastroenterologists,
urologists, gynecologists, electrophysiologists, pulmonologists and vascular
surgeons. In 1996, the Company sold its products to over 10,000 hospitals,
clinics, out-patient facilities and medical offices. The Company is not
dependent on any single institution and no single institution accounted for more
than 10% of the Company's net sales in 1996.
The majority of the Company's customers typically place frequent, small volume
orders to replace their inventory on a regular basis as specific products are
used. Accordingly, the Company expects delivery to be made within a short period
of time, and the Company ships more than 95% of its products within 24 hours of
receiving an order. Because of this short cycle between order and shipment, the
Company does not have significant backlog. The Company's six distribution
facilities in Watertown, Massachusetts; Maple Grove, Minnesota; Oakland, New
Jersey; Beek, The Netherlands; Tokyo, Japan and Singapore currently serve
substantially all of the Company's distribution needs. In the future, the
Company expects to consolidate its domestic distribution activities into its
Quincy, Massachusetts site. See "Properties".
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Distributed products, which consisted principally of stents, guidewires,
ligating devices and other endoscopic devices, represented approximately 9% of
the Company's 1996 net sales. The Company expects to continue to seek out new
opportunities for distributing complementary products.
Uncertainty remains with regard to future changes within the healthcare
industry. The trend towards managed care and economically motivated buyers in
the United States may result in continued pressure on selling prices of certain
products and resulting compression on gross margins. The United States
marketplace is increasingly characterized by consolidation among healthcare
providers and purchasers of medical devices who prefer to limit the number of
suppliers from whom they purchase medical products. There can be no assurance
that these entities will continue to purchase products from the Company. In
addition, international markets are also being affected by economic pressure to
contain healthcare costs. Although these factors will continue to impact the
rate at which the Company can grow, management believes that it is well
positioned to take advantage of opportunities for growth that exist in the
markets it serves.
Manufacturing; Raw Materials
The Company designs and manufactures the majority of its products in fourteen
manufacturing and development facilities located in the United States, the
Bahamas, Denmark, France and Ireland. (The Company expects to close certain of
its international manufacturing operations as part of its Company-wide
facilities reorganization and consolidation plans.) The majority of the raw
materials used in the manufacture of the Company's products are off-the-shelf
items readily available from several supply sources. Several items are, however,
custom made for the Company to meet its specifications. The Company believes
that, in most of these cases, alternative sources of supply are available or
could be developed within a reasonable period of time. The Company has generally
been able to obtain adequate supplies of all materials, parts and components in
a timely manner from existing sources. However, the inability to develop
alternative sources, if required, or a reduction or interruption in supply or a
significant increase in the price of materials, parts or components could
adversely affect the Company's operations.
Competition
The Company encounters significant competition from various entities across its
product lines and in each market in which its products are sold. The Company's
primary competitors include C.R. Bard, Inc., Cook, Inc., Guidant Corporation,
Johnson & Johnson (including its subsidiary, Cordis Corporation), Medtronic,
Inc., and Pfizer, Inc., as well as a wide range of companies which sell a single
or limited number of competitive products.
The Company believes that its products compete primarily on the basis of their
ability to perform safely and effectively a variety of diagnostic and
therapeutic procedures in a minimally invasive manner, ease of product use,
product reliability and physician familiarity. In the current environment of
managed care, economically motivated buyers and consolidation among U.S. health
care providers, the Company has also been increasingly required to compete on
the basis of cost. The Company believes that its continued competitive success
will depend upon its ability to create or acquire scientifically advanced
technology, apply its technology cost-
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effectively across product lines and markets, develop or acquire proprietary
products, attract and retain scientific personnel, obtain patent or other
protection for its products, obtain required regulatory approvals, and
manufacture and successfully market its products either directly or through
outside parties. There can be no assurance that the Company will be able to
accomplish these objectives or that it will be able to compete successfully in
the future against existing or new competitors. There can also be no assurance
that the Company's operating results will not be adversely affected by increased
price competition.
Research and Development
The Company maintains an active program of new product and technology research
and development. By leveraging the technical and applications knowledge gained
in one medical specialty to other specialties, the Company believes that its
product development process is accelerated and made more cost effective.
Enhancements of existing products or expansions of existing product lines, which
are typically developed within the Company's manufacturing and marketing
operations, account for a significant portion of each year's sales growth.
The Company maintains internal research and development facilities in Natick,
Massachusetts; Maple Grove, Minnesota; Oakland, New Jersey; Miami, Florida;
San Jose, California; Redmond, Washington and Galway, Ireland. The Company
also works with hundreds of leading research institutions, universities and
clinicians around the world in evaluating, developing and clinically testing
its products.
The Company believes its future success will depend upon the strength of its
development efforts. There can be no assurance that the Company will continue to
be successful in identifying, developing and marketing new products or enhancing
its existing products, or that products or technologies developed by others will
not render the Company's products or technologies non-competitive or obsolete.
Regulation
The medical devices manufactured and marketed by the Company in the United
States are subject to regulation by the FDA and, in many instances, by
comparable agencies in foreign countries where these devices are manufactured or
distributed. Under the Federal Food, Drug, and Cosmetic Act, as amended (the
"FDC Act"), manufacturers of medical devices must comply with applicable
provisions of the FDC Act and certain regulations governing the testing,
manufacturing, labeling, marketing and distribution of medical devices. Under
the FDC Act, devices are subject to varying levels of regulatory control, the
most comprehensive of which requires that a clinical evaluation program be
conducted before a device receives pre-market approval by the FDA for commercial
distribution in the United States.
FDA permission to distribute a new device generally can be met in one of two
ways. The first, less rigorous, process applies to any new device that is
substantially equivalent to a device first marketed prior to May 1976 and does
not require pre-market approval ("PMA"). In this case,
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FDA permission to distribute the device can be accomplished by submission of a
pre-market notification submission (a "510(k) Submission"), and issuance by the
FDA of an order permitting commercial distribution. A 510(k) Submission must
provide information supporting its claim of substantial equivalence. If clinical
data from human experience is required to support a 510(k) Submission, this data
must be gathered in compliance with investigational device exemption ("IDE")
regulations for investigations performed in the United States. The FDA must
issue an order finding substantial equivalence before commercial distribution
can occur.
This process may be completed within 90 to 150 days, but it may take much longer
to satisfy FDA requests for additional information. Recently, the FDA reported
the average time to complete this process was approximately 150 days. Changes to
existing devices which do not significantly affect safety or effectiveness can
generally be made by the Company without a 510(k) Submission.
The second, more comprehensive, approval process applies to a new device that is
not substantially equivalent to an existing product. In this case, two steps of
FDA approval are generally required before marketing in the United States can
begin. First, the Company must comply with IDE regulations in connection with
any clinical investigation of the device in the United States. The IDE
regulations require review and approval of clinical testing protocols by an
institutional review board for the participating medical institution. In
addition, for significant risk devices, the FDA itself must approve the IDE.
Second, the FDA must review the Company's PMA application which contains, among
other things, clinical information acquired under the IDE. The PMA application
also contains other information required under the FDC Act such as a full
description of the device and its components; a full description of the methods,
facilities and controls used for manufacturing; and proposed labeling.
The FDA will approve the PMA application if it finds that there is a reasonable
assurance that the device is safe and effective for its intended purpose.
Additional restrictions, including additional patient follow-up for an
indefinite period of time, may be imposed by the FDA as part of the PMA
approval. The FDA will subsequently publish an order approving the PMA for the
device. Interested parties can file comments on the order and seek further FDA
review. Although the PMA review process is required to be completed within 180
days from the date the PMA is accepted for filing, this time period is usually
extended. After the Company receives PMA approval for a medical device, it may
then be required to file PMA supplements for approval by the FDA of certain
types of changes. Supplements to a PMA require submission of additional
information needed to support the change.
The Company is also required to register with the FDA as a device manufacturer
and to provide a list of devices it manufactures. The Company is inspected on a
routine basis for compliance with the FDC Act and applicable regulations, in
particular the FDA's Good Manufacturing Practice ("GMP") regulations. These
regulations require that the Company manufacture its products and maintain its
documents in a prescribed manner with respect to manufacturing, testing and
control activities. Further, the Company is required to comply with various FDA
requirements for labeling. The Medical Device Reporting regulation requires that
the Company provide information to the FDA on deaths or serious injuries alleged
to have been associated with the use
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of certain Company products as well as product malfunctions that would likely
cause or contribute to death or serious injury if the malfunction were to recur.
In addition, the FDA prohibits an approved device from being marketed for
unapproved indications. If the FDA believes the Company is not in compliance
with the FDC Act or regulations, it can institute proceedings to detain or seize
the Company's products, issue a recall, enjoin future violations and assess
civil and criminal penalties against the Company, its officers or its employees.
The FDA may proceed to ban, or request recall, repair, replacement or refund of
the cost of, any device manufactured or distributed by the Company.
International sales of medical devices manufactured in the United States that
are not approved by the FDA for use in the United States, or are banned or
deviate from lawful performance standards, are subject to FDA export
requirements. The Export Reform Act of 1996 has simplified the process of
exporting devices which have not been approved for sale in the United States.
Exported devices are subject to the regulatory requirements of each country to
which the device is exported. In many foreign countries, all regulated medical
products are treated as drugs and the majority of the Company's products are
expected to be so regulated in these countries. Frequently, regulatory approval
may first be obtained in a foreign country prior to application in the United
States to take advantage of differing regulatory requirements. The Company has
achieved International Standards Organization or European Union certification
for most of its United States and European manufacturing facilities. In
addition, the Company is actively pursuing CE Mark qualification in anticipation
of implementation of various medical device directives in the European Union.
The process of obtaining clearance to market products is costly and
time-consuming and can delay the marketing and sale of the Company's products.
No assurance can be given that the FDA would approve a PMA for any of the
Company's new medical devices or that such approval would be received on a
timely basis. Moreover, after approval is given, the FDA can later proceed to
withdraw approval for a cause identified in the FDC Act. In addition, federal
and state regulations regarding the manufacture and sale of medical devices are
subject to future change. The Company cannot predict what impact, if any, such
changes might have on its business. Failure to comply with regulatory
requirements could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company is also subject to environmental laws and regulations both in the
United States and abroad. The operations of the Company, like those of other
medical device companies, involve the use of substances regulated under
environmental laws, primarily in manufacturing and sterilization processes. The
Company believes that compliance with such laws will not have a material impact
on its financial position, results of operations, or liquidity. Given the scope
and nature of such laws, there can, however, be no assurance that such laws
will not have a material impact on the Company.
Third-Party Reimbursement
The Company's products are purchased by hospitals, doctors and other health care
providers, who are reimbursed for the health care services provided to their
patients by third-party payors, such as governmental programs (e.g., Medicare
and Medicaid), private insurance plans and managed care programs. These
third-party payors may deny reimbursement if they should
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determine that a device used in a procedure was not used in accordance with
cost-effective treatment methods, as determined by such third-party payor, or
was used for an unapproved indication. Also, third-party payors are increasingly
challenging the prices charged for medical products and services. There can be
no assurance that the Company's products will be considered cost-effective by
third-party payors, that reimbursement will be available or, if available, that
the third-party payors' reimbursement policies will not adversely affect the
Company's ability to sell its products profitably.
Investigation by Office of the Inspector General of Reimbursement Claims made by
Certain Customers
The Office of the Inspector General (the "OIG") of the United States Department
of Health and Human Services ("HHS") has initiated an investigation regarding
the possible submission of improper claims to the Medicare/Medicaid programs for
reimbursement for procedures using cardiovascular medical devices that were not
approved for marketing by the FDA at the time of use. Beginning in June 1994,
approximately 130 hospitals received subpoenas from HHS seeking information with
respect to reimbursement for procedures using cardiovascular medical devices
(including certain products manufactured by the Company, as well as numerous
other manufacturers) that were subject to investigational exemptions or may not
have been approved for marketing by the FDA at the time of use. The subpoenas
also seek information regarding various types of remuneration, including
payments, gifts, stock and stock options, received by the hospital or its
employees from manufacturers of medical devices. Civil and criminal sanctions
may be imposed against any person participating in an improper claim for
reimbursement under Medicare/Medicaid. The OIG's investigation and any related
change in reimbursement practices may discourage hospitals from participating in
clinical trials or from including Medicare and Medicaid patients in clinical
trials, which could lead to increased costs in the development of new products.
The Company is not able to predict the potential outcome of this matter or when
it will be resolved. There can be no assurance that the OIG's investigation or
any changes in third party payors' reimbursement practices will not materially
adversely affect the medical device industry in general or the Company in
particular.
Patents and Proprietary Rights
The Company relies on a combination of patents, trade secrets and non-disclosure
agreements to protect its intellectual property. The Company holds approximately
537 United States and 354 foreign patents and has pending approximately 531
United States and 606 foreign patent applications that cover various aspects of
its technology. In addition, the Company holds exclusive and non-exclusive
licenses to a variety of third party technologies covered by patents and patent
applications. There can be no assurance that pending patents will result in
issued patents, that patents issued to or licensed by the Company will not be
challenged or circumvented by competitors, or that such patents will be found to
be valid or sufficiently broad to protect the Company's technology or to provide
the Company with a competitive advantage. The Company relies on non-disclosure
agreements with certain employees, consultants and other parties to protect, in
part, trade secrets and other proprietary technology. There can be no assurance
that these agreements will not be breached, that the Company will have adequate
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<PAGE> 17
remedies for any breach, or that others will not independently develop
equivalent proprietary information or that third-parties will not otherwise gain
access to the Company's trade secrets and proprietary knowledge.
There has been substantial litigation regarding patent and other intellectual
property rights in the medical device industry generally, particularly in the
areas in which the Company competes. The Company has been, and will likely
continue to be, forced to defend itself against claims and legal actions
alleging infringement of the patent rights of others. Adverse determinations in
any such litigation could subject the Company to significant liabilities to
third parties, could require the Company to seek licenses from third parties and
could, if such licenses are not available, prevent the Company from
manufacturing, selling or using certain of its products, any of which could have
a material adverse effect on the Company. Additionally, the Company may find it
necessary to initiate litigation to enforce its patent rights, to protect its
trade secrets or know-how and to determine the scope and validity of the
proprietary rights of others. Patent litigation can be costly and
time-consuming, and there can be no assurance that the Company's litigation
expenses will not be significant in the future or that the outcome of such
litigation will be favorable to the Company.
Product Liability
The testing, marketing and sale of human health care products entails an
inherent risk of product liability claims and there can be no assurance that
product liability claims will not be asserted against the Company. Although the
Company maintains product liability insurance, there can be no assurance that
product liability claims will not exceed such insurance coverage limits or that
such insurance will be available in the future on commercially reasonable terms,
if at all. The Company is involved in various suits arising in the normal course
of business from product liability claims. The Company believes the outcome of
these suits, individually and in the aggregate, will not have a material adverse
effect on the Company.
Employees
As of December 31, 1996, the Company had 9,580 employees, including 6,344 in
operations, 670 in administration, 857 in research and development and 1,709 in
selling, marketing, distribution and related administrative support. Of these
employees, 2,372 were employed in the Company's international operations. The
Company believes that the continued success of its business will depend, in
part, on its ability to attract and retain qualified personnel. Competition for
qualified, skilled personnel is intense in the medical device industry. There
can be no assurance that the Company will be able in the future to attract and
retain such personnel.
Seasonality
The Company's business, taken as a whole, is not materially affected by seasonal
factors.
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Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995
This report contains forward-looking statements. The Company desires to take
advantage of the new safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and is including this statement for the express purpose of
availing itself of the protections of the safe harbor with respect to all
forward-looking statements. Several important factors, in addition to the
specific factors discussed in connection with such forward-looking statements
individually, could affect the future results of the Company and could cause
those results to differ materially from those expressed in the forward-looking
statements contained herein. Such additional factors include, among other
things, future economic, competitive and regulatory conditions, demographic
trends, financial market conditions and future business decisions of the Company
and its competitors, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Therefore,
the Company wishes to caution each reader of this report to consider carefully
these factors as well as the specific factors discussed with each
forward-looking statement in this report and as disclosed in the Company's
filings with the Securities and Exchange Commission as such factors, in some
cases, have affected, and in the future (together with other factors) could
affect, the ability of the Company to implement its business strategy and may
cause actual results to differ materially from those contemplated by the
statements expressed herein.
Item 2. PROPERTIES
The Company's world headquarters are in Natick, Massachusetts. It maintains
additional principal administrative offices in Maple Grove, Minnesota; San Jose,
California; Oakland, New Jersey and Paris, France. The Company's principal
research facilities are located in Natick, Massachusetts; Maple Grove,
Minnesota; Oakland, New Jersey; Miami, Florida; San Jose, California; Redmond,
Washington and Galway, Ireland, and its distribution centers are located in
Watertown, Massachusetts; Maple Grove, Minnesota; Oakland, New Jersey; Beek, The
Netherlands; Tokyo, Japan and Singapore. The Company maintains fourteen major
manufacturing facilities, ten in the United States, one in Ireland, one in
France, one in the Bahamas and one in Denmark. (The Company expects to close
certain of its international manufacturing operations as part of its
Company-wide facilities reorganization and consolidation plans.) Many of these
manufacturing facilities produce and manufacture products for more than one of
the Company's divisions.
The Company owns or has long-term leases on all of its major facilities. The
facilities leased from third parties are subject to leases whose terms expire,
subject to renewal options, between 1997 and 2010 and whose current monthly base
rental payments range from approximately $2,000 to approximately $125,000. One
property in Mansfield, Massachusetts is leased from a realty trust for the
benefit of the Company's Chief Executive Officer and his wife pursuant to a
lease whose term expires, subject to renewal options, in 2001 and whose monthly
base rental payment is approximately $38,000. The mortgage debt on this
property, in the principal amount of approximately $300,000 as of December 31,
1996, is guaranteed by the Company. Some of these leases contain escalation
provisions and require that the Company pay for utilities, taxes, insurance and
maintenance expenses. In addition, some of these leases contain provisions which
give the Company an option to purchase the property under certain conditions.
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Although the Company's facilities are adequate to meet its current needs, the
Company has plans to construct and acquire additional space to accommodate its
growth. In keeping with this strategy, the Company completed in 1996
construction of 130,000 square feet of additional workspace at its Galway,
Ireland facility, and recently began construction of an additional 180,000
square feet of workspace at the same facility. The Company commenced
construction of a 248,000 square foot multi-purpose building in Maple Grove,
Minnesota to help consolidate and centralize many of the Company's Minnesota
operations. Similar consolidation plans are being considered for the Company's
Oakland, New Jersey operations and for San Jose, California, where the Company
has already commenced the consolidation of its two Sunnyvale, California
operations into one 160,000 square foot leased site, and where the Company
expects to lease an additional 52,000 square feet of work space. The Company
also intends to expand its Miami, Florida operations by leasing an additional
140,000 square feet of workspace currently under construction adjacent to its
exiting facilities. A 10.8 acre site, with an existing 318,000 square foot
building located adjacent to the Company's headquarters in Natick,
Massachusetts, was acquired in 1996. The Company also entered into a lease with
an option to purchase a 1.3 million square foot warehouse facility in Quincy,
Massachusetts for the purpose, among other things, of centralizing its domestic
distribution center activities.
Item 3. LEGAL PROCEEDINGS
Note K to the Company's 1996 Consolidated Financial Statements, appearing on
pages F-21 and F-22 thereto, (contained in the Company's 1996 Annual Report to
Shareholders and included in Exhibit 13.1 hereto) is incorporated herein by
reference.
Recent Patent Proceedings
On February 28, 1997, C.R. Bard, Inc. ("Bard") filed a suit for patent
infringement against SCIMED alleging that SCIMED is infringing a patent
assigned to Bard. Bard did not identify any specific SCIMED products in the
complaint. The suit was filed in the U.S. District Court for the District of
New Jersey seeking monetary and injunctive relief. The Company is currently
evaluating the complaint.
On March 13, 1997, the Company (through its subsidiaries) filed suits against
Johnson & Johnson (through its subsidiaries) in The Netherlands, United Kingdom
and Belgium, and on March 17, 1997 filed suit in France, seeking a declaration
of noninfringement for the NIR(TM) stent relative to two European patents
licensed to Ethicon, Inc. ("Ethicon"), a Johnson & Johnson subsidiary, as well
as a declaration of invalidity with respect to those patents. On March 18,
1997, the Company (through its subsidiary) filed a similar suit in Germany, but
seeking only a declaration of noninfringement for the NIR stent relative to the
two patents. Most recently, on March 20, 21 and 22, 1997, the Company (through
its subsidiaries) filed additional suits against Johnson & Johnson (through its
subsidiaries) in Sweden, Italy and Spain, respectively, seeking a declaration
of noninfringement for the NIR stent relative to one of the European patents
licensed to Ethicon and a declaration of invalidity in relation to that patent
(in Italy and Spain only). Ethicon and other Johnson & Johnson subsidiaries
filed a cross-border suit in The Netherlands on March 17, 1997, alleging that
the NIR stent infringes one of the European patents licensed to Ethicon. In
this action, they requested relief covering Austria, Belgium, France, Greece,
Italy, The Netherlands, Norway, Spain, Sweden, Switzerland and the United
Kingdom. The Company believes that Johnson & Johnson will be filing shortly a
similar cross-border proceeding in The Netherlands with respect to the second
European patent licensed to Ethicon.
On March 13, 1997, the Company (through its subsidiaries) also filed suits in
The Netherlands and the United Kingdom, and on March 17, 1997 filed suit in
France, seeking a declaration of noninfringement for the Company's LEAP(TM)
balloon in relation to a European patent owned by Cordis Corporation, a Johnson
& Johnson subsidiary.
On March 13, 1997, the Company filed a Motion to Intervene in Johnson & Johnson
Interventional Systems Co. et al. v. Cook, Incorporated et al., an action in
the U.S. District Court for the Southern District of Indiana. The motion seeks
intervention for the purpose of modifying the present protective order to
direct the Clerk of Court to retain, and the parties and their counsel not to
destroy, materials and testimony assembled in that action. In addition, the
Company seeks access to such materials and testimony, and access to materials
filed by the parties in that action under seal. On March 17, 1997, the court
temporarily stayed the return of documents from the court to the parties and
ordered the parties to retain documents relating to the proceeding. A final
decision is expected later in 1997.
On May 31, 1994, SCIMED filed a suit for patent infringement against Advanced
Cardiovascular Systems, Inc. ("ACS"), alleging willful infringement of two of
SCIMED'S U.S. patents by ACS' FLOWTRACK-40(TM) and RX ELIPSE(TM) PTCA
catheters. On November 17, 1995, SCIMED filed a suit for patent infringement
against ACS, alleging willful infringement of three of SCIMED'S U.S. patents by
the ACS RX LIFESTREAM(TM) PTCA catheter. Both suits were filed in the U.S.
District Court for the Northern District of California seeking monetary and
injunctive relief. The cases were sent to consolidated arbitration for a
threshold determination of one issue covered by the November 27, 1991
settlement agreement between the parties. On March 14, 1997, the arbitration
panel reached a final determination in the consolidated arbitration. Pursuant
to this determination, the Company expects to continue its action as to the
ELIPSE product and to dismiss the actions as to the FLOWTRACK and LIFESTREAM
products, as set forth in a supplemental amended complaint filed on March 24,
1997.
The Company is involved in various other lawsuits from time to time. In
management's opinion, the Company is not currently involved in any legal
proceedings other than those specifically identified above which, individually
or in the aggregate, could have a material effect on the financial condition,
operations or cash flows of the Company.
The Company believes that it has meritorious defenses against claims that it
has infringed patents of others. However, there can be no assurance that the
Company will prevail in any particular case. An adverse outcome in one or more
cases in which the Company's products are accused of patent infringement could
have a material adverse effect on the Company.
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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Directors and executive officers of the Company as of December 31, 1996 are
as follows:
Name Age Position
- ---- --- --------
John E. Abele 60 Director, Founder Chairman
Charles J. Aschauer, Jr. 68 Director, Retired Executive Vice
President and Director of
Abbott Laboratories
Randall F. Bellows 68 Director, Retired Executive Vice President of
Cobe Laboratories, Inc.
Michael Berman 39 President--SCIMED and Group President--
Cardiology Businesses
Lawrence C. Best 46 Senior Vice President--Finance &
Administration and Chief Financial Officer
Joseph A. Ciffolillo 58 Director, Retired Executive Vice President
and Chief Operating Officer of Boston
Scientific Corporation
J. Daniel Cole 50 Senior Vice President and
Group President--Vascular Businesses
James M. Corbett 38 President--Boston Scientific International
Joel L. Fleishman 62 Director, President of The Atlantic
Philanthropic Service Company, Inc. and
Professor of Law and Public Policy, Duke
University
Lawrence L. Horsch 62 Director, Chairman of Eagle Management &
Financial Corp.
Paul A. LaViolette 39 Senior Vice President and
Group President--Nonvascular Businesses
C. Michael Mabrey 55 Senior Vice President--Operations
Robert G. MacLean 53 Senior Vice President--Human Resources
N.J. Nicholas, Jr. 57 Director, Private Investor
Peter M. Nicholas 55 Director, Founder, Chief Executive Officer
and Chairman of the Board
Arthur L. Rosenthal 50 Senior Vice President and Chief Development
Officer
Paul W. Sandman 49 Senior Vice President, Secretary and General
Counsel
Dale A. Spencer 51 Director, Former Executive Vice President of
Boston Scientific Corporation
Mr. Aschauer , Mr. Fleishman, Mr. Horsch and Mr. N.J. Nicholas, Jr. serve on the
Audit Committee of the Company. Mr. Aschauer, Mr. Bellows and Mr. Fleishman
serve on the Compensation Committee of the Company.
John E. Abele, a co-founder of the Company, has been a Director of the Company
since 1979 and was Co-Chairman from 1979 to 1995. As of February 1995, Mr. Abele
was elected to the position of Founder Chairman, Office of the Chairman. He was
President of Medi-Tech, Inc. from 1970 to 1983 and prior to that served in
sales, technical and general management positions for Advanced Instruments, Inc.
Mr. Abele received a B.A. degree from Amherst College.
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Charles J. Aschauer, Jr. joined the Company in May 1992 as a Director. Mr.
Aschauer has been retired since April 1989. From 1971 to 1989, Mr. Aschauer was
responsible for Abbott Laboratories' Hospital Products business and retired as
an Executive Vice President and director of Abbott Laboratories. Mr. Aschauer
received a B.B.A. degree from Northwestern University, and a certificate in
International Business Administration from Centre d'Etudes Industrielles in
Geneva, Switzerland.
Randall F. Bellows joined the Company as a Director in February 1995. Mr.
Bellows is a retired Founder and Executive Vice President of Cobe Laboratories,
Inc., a medical device manufacturer, a post he held from 1964 to 1990, and has
served as a director of Cobe since 1964. He was also a director of SCIMED from
1992 to February 1995, and of Ultimate Electronics Inc. since January 1995. Mr.
Bellows received a B.A. degree from the University of Minnesota.
Michael Berman joined the Company as Vice President of Sales and Marketing of
SCIMED in February 1995. In June 1995, Mr. Berman became President of SCIMED and
in December 1996, he was elected to the position of Group President--Cardiology
Businesses. Mr. Berman served as SCIMED's Vice President of Sales and Marketing,
from January 1995 to June 1995, Vice President and Business Manager of New
Modalities, from July 1993 to January 1995, and Vice President of Marketing,
from July 1989 to June 1993. Mr. Berman received B.S. and M.B.A. degrees from
Cornell University.
Lawrence C. Best joined the Company in August 1992 as Senior Vice
President--Finance & Administration and Chief Financial Officer. Previously, Mr.
Best had been a partner at Ernst & Young, certified public accountants, since
1981. From 1979 to 1981, Mr. Best served a term as a Professional Accounting
Fellow in the Office of Chief Accountant at the Securities and Exchange
Commission in Washington, D.C. Mr. Best received a B.B.A. degree from Kent State
University.
Joseph A. Ciffolillo joined the Company in 1983 as President of Medi-Tech. In
1988, he was also named President of Microvasive, and in 1989 he became
Executive Vice President and Chief Operating Officer of the Company. In 1992,
Mr. Ciffolillo became a Director of the Company. In April 1996, he retired from
his position as an executive officer of the Company, but continues to serve as a
Director. From 1962 to 1982, Mr. Ciffolillo was employed by Johnson & Johnson in
a variety of capacities, including Senior Vice President of Codman & Shurtleff,
Inc., a Johnson & Johnson company, and President of Johnson & Johnson Orthopedic
Company. Mr. Ciffolillo also serves as a director of CompDent Corporation,
CardioThoracic Systems, Inc. and Innovasive Devices, Inc. Mr. Ciffolillo
received a B.A. degree from Bucknell University and serves as a trustee for that
institution.
J. Daniel Cole joined the Company as Senior Vice President and Group
President--Vascular Businesses in February 1995. Previously, he had been
President since 1994, Chief Operating Officer since 1993, and Executive Vice
President from April 1993 to May 1994, of SCIMED. From 1990 to 1993, Mr. Cole
was President of Baxter International's Edwards Critical Care Division, a
manufacturer of hemodynamic and pressure monitoring products, and from 1987 to
1990 of Baxter's Minimally invasive Surgery Division, a manufacturer of vascular
surgery and interventional cardiovascular products. Mr. Cole received his B.S.E.
degree from the University of Kansas and a masters degree in engineering from
the U.S. Naval Postgraduate School. After
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completing his military service as a Navy pilot, Mr. Cole earned an M.B.A.
degree from the University of California at Los Angeles (UCLA).
James M. Corbett joined the Company as Vice President--International and as
President--Boston Scientific International in February 1995. Previously, he
served as Vice President and Business Manager of SCIMED International, from
October 1992 to February 1995. Prior to joining SCIMED, Mr. Corbett served as
General Manager for Baxter Japan, based in Tokyo, responsible for Baxter's
Cardiovascular Business from December 1989 to October 1992, and held a series of
sales and marketing positions with the Baxter/American Hospital Supply
Organization from 1982 to 1989. Mr. Corbett received a B.S. degree in business
from the University of Kansas.
Joel L. Fleishman joined the Company in October 1992 as a Director. Mr.
Fleishman became President of The Atlantic Philanthropic Service Company, Inc.
in September 1993. He is also Professor of Law and Public Policy and has served
in various administrative positions, including First Senior Vice President, at
Duke University, since 1971. Mr. Fleishman is a founding member of the governing
board of the Duke Center for Health Policy Research and Education and was a
founding director of Duke University's Terry Sanford Institute of Public Policy.
Mr. Fleishman also serves as Chairman of the Board of Trustees of the Urban
Institute. Mr. Fleishman received A.B., M.A. and J.D. degrees from the
University of North Carolina at Chapel Hill, and an L.L.M. degree from Yale
University.
Lawrence L. Horsch joined the Company as a Director in February, 1995.
Previously, he had been Chairman of the Board of SCIMED from 1977 to June 1994
and a director through February 1995. Since 1990, Mr. Horsch has served as
Chairman of Eagle Management & Financial Corp., a management consulting firm. He
was Chairman and Chief Executive Officer of Munsingwear, Inc., an apparel
company that filed for protection under Chapter 11 of the Federal Bankruptcy
Code in July 1991 and emerged from bankruptcy in September 1991, from 1987 to
1990. Mr. Horsch received a B.A. degree from the University of St. Thomas and an
M.B.A. degree from Northwestern University.
Paul A. LaViolette joined the Company in January 1994 as President, Boston
Scientific International, and Vice President--International. In February 1995,
Mr. LaViolette was elected to the position of Senior Vice President and Group
President--Nonvascular Businesses. Prior to joining the Company, he was employed
by C.R. Bard, Inc. in various capacities, including President, U.S.C.I.
Division, from July 1993 to November 1993, President, U.S.C.I. Angioplasty
Division, from January 1993 to July 1993, Vice President and General Manager,
U.S.C.I. Angioplasty Division, from August 1991 to January 1993, and Vice
President U.S.C.I. Division, from January 1990 to August 1991. Mr. LaViolette
received his B.A. degree from Fairfield University and an M.B.A. degree from
Boston College.
C. Michael Mabrey joined the Company in 1987 as Vice President--Operations of
the Medi-Tech division. From March 1988 to February 1989, he was the Vice
President, Operations of the Medical Device Group of the Company. Mr. Mabrey is
currently Senior Vice President--Operations of the Company, a position he has
held since February 1989. Prior to joining the Company, Mr. Mabrey was Vice
President, Operations of the Medical Products Group of Baxter Healthcare
Corporation. Mr. Mabrey received a B.S. degree from Southwest Missouri State
University.
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Robert G. MacLean joined the Company in April 1996 as Senior Vice
President--Human Resources. Prior to joining the Company, he was Vice
President--Worldwide Human Resources for National Semiconductor Corporation in
Santa Clara, California from October 1992 to March 1996. Mr. MacLean has held
various human resources management positions in the U.S. and Europe during his
career. Prior to his business endeavors, he was Economics Professor at the
University of the Pacific. Mr. MacLean received his bachelor and masters degrees
and completed his doctoral studies in economics from Stanford University.
N.J. Nicholas, Jr. joined the Company as a Director in October 1994. Mr.
Nicholas served as President of Time, Inc. from September 1986 to May 1990 and
Co-Chief Executive Officer of Time Warner, Inc. from May 1990 until February
1992. N.J. Nicholas, Jr. is a director of Xerox Corporation and of Bankers Trust
New York Corporation. Mr. Nicholas received an A.B. degree from Princeton
University and an M.B.A. degree from Harvard Business School. He is also the
brother of Pete Nicholas, Chairman of the Board and Chief Executive Officer of
the Company.
Peter M. Nicholas, a co-founder of the Company, has been the Chief Executive
Officer and a Director of the Company since 1979 and Co-Chairman of the Board
from 1979 to 1995. In February 1995, Mr. Nicholas was elected to the position of
Chairman of the Board. Prior to joining the Company, he was corporate director
of marketing and general manager of the Medical Products Division at Millipore
Corporation, a medical device company, and served in various sales, marketing
and general management positions at Eli Lilly and Company. He is also a trustee
of Duke University. Mr. Nicholas received a B.A. degree from Duke University and
an M.B.A. degree from The Wharton School of the University of Pennsylvania.
Dr. Arthur L. Rosenthal joined the Company in January 1994 as Senior Vice
President and Chief Development Officer. Prior to joining the Company, he was
Vice President--Research & Development, at Johnson & Johnson Medical, Inc., in
Arlington, Texas, where he was responsible for new products, research, clinical,
regulatory and quality assurance from April 1990 to January 1994. From August
1982 through April 1990, Dr. Rosenthal worked at Davol, Inc., a division of C.R.
Bard, first as Vice President--Research & Development until June 1989, and then
as Vice President--Specialty Access Products from June 1989 through April 1990.
Dr. Rosenthal received his B.A. in bacteriology from the University of
Connecticut, and his Ph.D. in biochemistry from the University of Massachusetts.
Paul W. Sandman joined the Company in May 1993 as Senior Vice President,
Secretary and General Counsel. Prior to joining the Company, he was Senior Vice
President, General Counsel and Secretary of Wang Laboratories, Inc. (a computer
company that filed a petition for reorganization under Chapter 11 of the Federal
Bankruptcy Code in August 1992 and emerged from bankruptcy in December 1993)
from March 1992 through April 1993, where he was responsible for legal affairs.
Prior to March 1992, Mr. Sandman was Vice President and Corporate Counsel of
Wang Laboratories, Inc., where he was responsible for corporate and
international legal affairs. Mr. Sandman received his A.B. from Boston College,
and his J.D. from Harvard Law School.
Dale A. Spencer joined the Company as a Director and Executive Vice President,
Office of the Chairman, in February 1995. Previously, he had been Chairman of
the Board since 1994, Chief Executive Officer since 1986, and President since
1982, of SCIMED. In March 1996, Mr.
24
<PAGE> 25
Spencer resigned from his position as an executive officer of the Company, but
continues to serve as a Director to, and a part-time employee of, the Company.
Mr. Spencer received a B.S.E. degree from the University of Maine and an M.B.A.
degree from Southern Illinois University.
25
<PAGE> 26
PART II
- ------------------------------------------------------------------------------
Item 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information set forth under the caption "Market for the Company's Common
Stock and Related Matters" included in the Company's 1996 Consolidated Financial
Statements (contained in the Company's 1996 Annual Report to Shareholders and
included in Exhibit 13.1 filed herewith) is incorporated herein by reference.
The closing price of the Company's Common Stock as reported by The Wall Street
Journal on March 14, 1997 was $64.75.
Item 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Five-Year Selected Financial Data"
included in the Company's 1996 Consolidated Financial Statements (contained in
the Company's 1996 Annual Report to Shareholders and included in Exhibit 13.1
filed herewith) is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The statements and information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in the Company's 1996 Consolidated Financial Statements (contained in
the Company's 1996 Annual Report to Shareholders and included in Exhibit 13.1
filed herewith) are incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and its subsidiaries,
included in the Company's 1996 Consolidated Financial Statements (contained in
the Company's 1996 Annual Report to Shareholders and included in Exhibit 13.1
filed herewith) are incorporated herein by reference.
The statements and information set forth under the caption "Quarterly Results of
Operations" included in the Company's 1996 Consolidated Financial Statements
(contained in the Company's 1996 Annual Report to Shareholders and included in
Exhibit 13.1 filed herewith) are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
26
<PAGE> 27
PART III
- -------------------------------------------------------------------------------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The required information concerning directors and executive officers set forth
in the Company's definitive Proxy Statement to be filed with the Commission on
or before April 30, 1997 is incorporated herein by reference. See also
"Directors and Executive Officers of the Company" following Item 4 herein.
Item 11. EXECUTIVE COMPENSATION
The required information concerning executive compensation set forth in the
Company's definitive Proxy Statement to be filed with the Commission on or
before April 30, 1997 is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The required statements concerning security ownership of certain beneficial
owners and management set forth in the Company's definitive Proxy Statement to
be filed with the Commission on or before April 30, 1997 are incorporated herein
by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The required statements concerning certain relationships and related
transactions set forth in the Company's definitive Proxy Statement to be filed
with the Commission on or before April 30, 1997 are incorporated herein by
reference.
27
<PAGE> 28
PART IV
- -------------------------------------------------------------------------------
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a)(1) Financial Statements.
The response to this portion of Item 14 is set forth under Item 8.
(a)(2) Financial Schedules.
The response to this portion of Item 14 is filed herewith as a separate
attachment to this report.
(a)(3) Exhibits (* documents filed herewith).
Exhibit
No. Title
------- -----
3.1 -- Second Restated Certificate of Incorporation of the
Company (Exhibit 3.1, Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-11083).
3.2 -- Certificate of Amendment of the Second Restated
Certificate of Incorporation of the Registrant (Exhibit
3.2, Annual Report on Form 10-K for the year ended
December 31, 1994, File No. 1-11083).
3.3 -- Restated By-laws of the Company (Exhibit 3.2,
Registration No. 33-46980).
4.1 -- Specimen Certificate for shares of the Company's Common
Stock (Exhibit 4.1, Registration No. 33-46980).
4.2 -- Description of Capital Stock contained in Exhibits 3.1,
3.2 and 3.3.
*10.1 -- Boston Scientific Corporation 1992 Long-Term Incentive
Plan, as amended.
*10.2 -- Boston Scientific Corporation 1992 Non-Employee
Directors' Stock Option Plan, as amended.
*10.3 -- Boston Scientific Corporation 1995 Long-Term Incentive
Plan, as amended.
10.4 -- SCIMED Life Systems, Inc. 1987 Non-Qualified Stock
Option Plan, amended and restated (Exhibit 4.3,
Registration No. 33-89772 which was incorporated by
reference to Exhibit A to SCIMED's Proxy Statement dated
May 23, 1991 for its 1991 Annual Meeting of Shareholders,
Commission File No. 0-9301).
28
<PAGE> 29
Exhibit
No. Title
------- -----
10.5 -- SCIMED Life Systems, Inc. 1991 Directors Stock Option
Plan, as amended (Exhibit 4.2, Registration No. 33-89772
which was incorporated by reference to Exhibit A to
SCIMED's Proxy Statement dated June 8, 1994 for its 1994
Annual Meeting of Shareholders, Commission File No.
0-9301).
10.6 -- SCIMED Life Systems, Inc. 1992 Stock Option Plan
(Exhibit 4.1, Registration No. 33-89772 which was
incorporated by reference to Exhibit A to SCIMED's Proxy
Statement dated May 26, 1992 for its 1992 Annual Meeting
of Shareholders, Commission File No. 0-9301).
10.7 -- Heart Technology, Inc. Restated 1989 Stock Option Plan
(Exhibit 4.5, Registration No. 33-99766 which was
incorporated by reference to Exhibit 10.4 to the
Registration Statement on Form S-1 of Heart Technology,
Registration No. 33-45203).
10.8 -- Heart Technology, Inc. 1992 Stock Option Plan for
Non-Employee Directors (Exhibit 4.6, Registration No.
33-99766 which was incorporated by reference to Exhibit
10.5 to the Registration Statement on Form S-1 of Heart
Technology, Registration No. 33-45203).
10.9 -- Heart Technology, Inc. 1995 Stock and Incentive Plan
(Exhibit 4.7, Registration No. 33-99766 which was
incorporated by reference to Exhibit 10.4 to the Quarterly
Report on 10-Q/A of Heart Technology for its fiscal
quarter ended June 30, 1995, filed on August 30, 1995,
File No. 0-19812).
10.10 -- Cardiovascular Imaging Systems, Inc. 1987 Incentive
Stock Option Plan, as amended (Exhibit 4.2, Registration
No. 33-93790 which was incorporated by reference to CVIS's
Registration Statement on Form S-1 filed on March 11,
1992, Registration No. 33-46330).
10.11 -- EP Technologies, Inc. 1988 Stock Plan (Exhibit 4.7,
Registration No. 33-80265 which was incorporated by
reference to EPT's Registration Statement on Form S-8,
File No. 33-67020).
10.12 -- EP Technologies, Inc. 1991 Stock Option/Stock Issuance
Plan (Exhibit 4.6, Registration No. 33-80265 which was
incorporated by reference to EPT's Registration Statement
on Form S-8, File No. 33-82140).
10.13 -- EP Technologies, Inc. 1992 Stock Option Grant to Dr.
Terry E. Spraker, (Exhibit 4.8, Registration No. 33-80265
which was incorporated by reference to Exhibit 10.15 to
the Annual Report on Form 10-K of EPT for the 1994 Fiscal
Year, File No. 0-22060).
10.14 -- EP Technologies, Inc. 1993 Stock Option/Stock Issuance
Plan, (Exhibit 4.5, Registration No. 33-80265 which was
incorporated by reference to EPT's Registration Statement
on Form S-8, File No. 33-93196).
*10.15 -- Boston Scientific Corporation 401(k) Savings Plan, Amended
and Restated, Effective January 1, 1996.
29
<PAGE> 30
Exhibit
No. Title
-------- -----
*10.16 -- Boston Scientific Corporation Employee Stock Purchase
Plan, as amended.
*10.17 -- Boston Scientific Corporation Deferred Compensation
Plan, Effective January 1, 1996.
10.18 -- Form of Credit Agreement, dated as of June 7, 1996,
among the Company, The Several Lenders and certain other
parties (Exhibit 10.1, Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, File No. 1-11083).
10.19 -- Form of Indemnification Agreement between the Company
and certain Directors and Officers (Exhibit 10.16,
Registration No. 33-46980).
10.20 -- Letter Agreement, dated June 22, 1992, between the
Company and Lawrence C. Best (Exhibit 10.11, Annual Report
on Form 10-K for the year ended December 31, 1993, File
No. 1-11083).
10.21 -- Employment Agreement, dated as of November 8, 1995,
among the Company, SCIMED and Dale A. Spencer (Exhibit 10,
Registration No. 33-88648), as amended by Amendment No. 1,
dated as of November 22, 1995, to that certain Employment
Agreement (Exhibit 10.19, Annual Report Form 10-K for the
year ended December 31, 1995, File No. 1-11083).
10.22 -- Change in Control Employment Agreement, dated as of
September 30, 1994, between SCIMED and J. Daniel Cole,
including executive acknowledgment from the Company dated
November 8, 1994 (Exhibit 10.20, Annual Report on Form
10-K for the year ended December 31, 1995, File No.
1-11083).
*10.23 -- Form of Retention Agreement between the Company and
certain Executive Officers.
10.24 -- Agreement Containing Consent Decree, dated as of February
23, 1995, between the Company and the Federal Trade
Commission (Exhibit 10.16, Annual Report on Form 10-K
for the year ended December 31, 1994, File No. 1-11083).
10.25 -- Agreement and Plan of Merger, dated as of January 20,
1997, among the Company, Patriot Acquisition Corp. and
Target (Exhibit 2, Registration No. 333-22581).
*11 -- Statement regarding computation of per share earnings.
*13.1 -- The Company's 1996 Consolidated Financial Statements
and the inside back cover of the Company's Annual Report
for the year ended December 31, 1996.
13.2 -- Opinion of Ernst & Young LLP (included in the Company's
Annual Report for the year ended December 31, 1996, filed
as Exhibit 13.1 hereto).
*13.3 -- Opinion of Arthur Andersen LLP.
*13.4 -- Opinion of Deloitte & Touche LLP.
*13.5 -- Opinion of Price Waterhouse LLP.
30
<PAGE> 31
Exhibit
No. Title
------- -----
*21 -- List of the Company's subsidiaries as of March 20,
1997. Each subsidiary does business under the corporate
name indicated.
*23.1 -- Consent of Ernst & Young LLP.
*23.2 -- Consent of Arthur Andersen LLP.
*23.3 -- Consent of Deloitte & Touche LLP.
*23.4 -- Consent of Price Waterhouse LLP.
*27.1 -- Financial Data Schedule
(b) Reports on Form 8-K.
The following Reports on Form 8-K were filed during the quarter ended
December 31, 1996 and the quarter ended March 31, 1997:
Current Report on Form 8-K dated January 20, 1997 announcing the
Company's execution of a merger agreement with Target.
31
<PAGE> 32
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 28, 1997
BOSTON SCIENTIFIC CORPORATION
By: LAWRENCE C. BEST
---------------------------------
Lawrence C. Best
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
Dated: March 28, 1997 /s/ JOHN E. ABELE
------------------
John E. Abele
Director, Founder
Dated: March 28, 1997 /s/ CHARLES J. ASCHAUER, JR.
-----------------------------
Charles J. Aschauer, Jr.
Director
Dated: March 28, 1997 /s/ RANDALL F. BELLOWS
-----------------------
Randall F. Bellows
Director
Dated: March 28, 1997 /s/ LAWRENCE C. BEST
---------------------
Lawrence C. Best
Senior Vice President--Finance and
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: March 28, 1997 /s/ JOSEPH A. CIFFOLILLO
-------------------------
Joseph A. Ciffolillo
Director
Dated: March 28, 1997 /s/ JOEL L. FLEISHMAN
----------------------
Joel L. Fleishman
Director
<PAGE> 33
Dated: March 28, 1997 /s/ LAWRENCE L. HORSCH
-----------------------
Lawrence L. Horsch
Director
Dated: March 28, 1997 /s/ N.J. NICHOLAS, JR.
-----------------------
N.J. Nicholas, Jr.
Director
Dated: March 28, 1997 /s/ PETER M. NICHOLAS
----------------------
Peter M. Nicholas
Director, Founder, Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
Dated: March 28, 1997 /s/ DALE A. SPENCER
--------------------
Dale A. Spencer
Director
<PAGE> 34
FINANCIAL STATEMENT SCHEDULE
The following additional consolidated financial statement schedule should be
considered in conjunction with the Company's 1996 Consolidated Financial
Statements (contained in the Company's 1996 Annual Report to Shareholders and
included in Exhibit 13.1 filed herewith):
Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted since the required information is not
present or not sufficiently material to require submission of the schedule, or
because the information required is included in the consolidated financial
statements or the notes thereto.
<PAGE> 35
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
-----------------------------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts--- Deductions Period
- ----------- -------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Reserves and allowances deducted from
asset accounts:
Allowance for uncollectible
amounts............................. $6,372 $2,797 $5,183 (1) $115 (2) $14,237
Year Ended December 31, 1995
Reserves and allowances deducted from
asset accounts:
Allowance for uncollectible
amounts............................. $3,987 $1,789 $957 (1) $361 (2) $6,372
Year Ended December 31, 1994
Reserves and allowances deducted from
asset accounts:
Allowance for uncollectible
amounts............................. $2,792 $838 $392 (1) $35 (2) $3,987
</TABLE>
(1) Charges for sales return allowances, net of actual sales returns. In the
year ended December 31, 1996, amount includes $2,074 related to purchase
accounting adjustments.
(2) Uncollectible accounts written off, net of recoveries.
Certain prior years' amounts have been reclassified to conform to the
current years' presentation.
<PAGE> 1
Exhibit 10.1
-1-
BOSTON SCIENTIFIC
CORPORATION
1992 LONG-TERM INCENTIVE PLAN
<PAGE> 2
-2-
SECTION CONTENTS PAGE
- ------- -------- ----
1. Purpose 1
2. Definitions 1
3. Administration 3
4. Shares of Stock Subject
to the Plan 4
5. Eligibility 5
6. Stock Options 5
7. Stock Appreciation Rights 11
8. Restricted Stock 12
9. Long-Term Performance Awards 15
10. Stock Grants 16
11. Change in Control Provisions 16
12. Amendment and Termination 19
13. Unfunded Status of Plan 20
14. General Provisions 20
15. Term of Plan 21
<PAGE> 3
-3-
BOSTON SCIENTIFIC CORPORATION
1992 LONG-TERM INCENTIVE PLAN
1. Purpose. The purpose of this Plan is to enable key employees of and
consultants to Boston Scientific Corporation (the "Company") to (i) own shares
of stock in the Company, (ii) participate in the shareholder value which has
been created, (iii) have a mutuality of interest with other shareholders and
(iv) enable the Company to attract, retain and motivate key employees and
consultants of particular merit.
2. Definitions. For the purposes of the Plan, the following terms shall
have the meanings set forth below:
(a) Award means the grant or sale pursuant to the Plan of any of Stock
Options, Restricted Stock, Stock Appreciation Rights, Stock Grants, and Long
Term Awards.
(b) Board means the Board of Directors of the Company.
(c) Cause means a felony conviction of a Participant or the failure of a
Participant to contest prosecution for a felony, or a Participant's willful
misconduct or dishonesty, any of which is directly and materially harmful to the
business or reputation of the Company.
(d) Code means the Internal Revenue Code of 1986, as amended from time to
time, or any statute successor thereto, and any regulations issued from time to
time thereunder.
(e) Committee means the Committee referred to in Section 3 of the Plan. For
any period during which no such committee is in existence all authority and
responsibility assigned the Committee under this Plan shall be exercised, if at
all, by the Board.
(f) Company means Boston Scientific Corporation, a corporation organized
under the laws of the State of Delaware (or any successor corporation).
(g) Disability means permanent and total disability as determined under the
Company's long-term disability program for employees then in effect.
<PAGE> 4
-4-
(h) Fair Market Value means, as of any given date, the last reported sales
price of the Stock as reported in The Wall Street Journal for such date or, if
either no such sale is reported or the Stock is not publicly traded on or as of
such date, the fair market value of the Stock as determined by the Committee in
good faith based on the available facts and circumstances at the time.
(i) Incentive Stock Option means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
(j) Long-Term Performance Award or Long-Term Award means an award made
pursuant to Section 9 below that is payable in cash and/or Stock (including
Restricted Stock) in accordance with the terms of the grant, based on Company,
business unit and/or individual performance over a period of at least two years.
(k) Non-Qualified Stock Option means any Stock Option that is not an
Incentive Stock Option.
(l) Participant means an employee or consultant to whom an Award is granted
pursuant to the Plan.
(m) Plan means the Boston Scientific Corporation 1992 Long-Term Incentive
Plan, as set forth herein and as it may be amended from time to time.
(n) Restricted Stock means an Award pursuant to Section 8 below of shares
of Stock subject to restrictions or other forfeiture conditions.
(o) Retirement means cessation of employment and other association with the
Company and any affiliates or subsidiaries of the Company at or after the normal
retirement date specified in the Company's pension or other deferred
compensation plan applicable generally to employees of the Company or, with the
consent of the Committee, any early retirement date so specified.
(p) Stock means the Class B non-voting common stock, $.01 par value per
share, of the Company.
(q) Stock Appreciation Right means the right, pursuant to an Award granted
under Section 7 below, to surrender to the Company all (or a portion) of a Stock
Option in exchange for an amount equal to the
<PAGE> 5
-5-
difference between (i) the Fair Market Value, as of the date such Stock Option
(or such portion thereof) is surrendered, of the shares of Stock covered by such
Stock Option (or such portion thereof), and (ii) the aggregate exercise price of
such Stock Option (or such portion thereof).
(r) Stock Grant means an Award pursuant to Section 10 below of shares of
Stock not subject to restrictions or other forfeiture conditions.
(s) Stock Option or Option means any option to purchase shares of Stock
(including Restricted Stock) granted pursuant to Section 6 below.
In addition, the terms Change in Control and Change in Control Price shall
have meanings set forth, respectively, in Sections 11.2 and 11.3.
3. Administration. The Committee shall consist of not less than two
"disinterested" persons (as such term is defined Rule 16b-3(c)(2)(i) as
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, or any successor definition adopted by the Securities and
Exchange Commission) who shall be appointed by the Board to serve at its
pleasure from time to time. The Committee shall have the authority to grant to
eligible individuals, pursuant to the terms of the Plan: (i) Stock Options, (ii)
Stock Appreciation Rights, (iii) Restricted Stock, (iv) Long-Term Performance
Awards, and/or (v) Stock Grants.
In particular, the Committee shall have the authority:
(i) to select from time to time the officers, other key employees and
consultants of the Company, its subsidiaries and affiliates to whom Awards shall
granted hereunder;
(ii) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock,
Long-Term Performance Awards and Stock Grants or any combination thereof, are to
be granted hereunder;
(iii) to determine the number of shares of Stock to be covered by each
Award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any Award, including, but not limited to, the share price and
any restriction or limitation, or any vesting acceleration or forfeiture waiver
regarding any Stock Option or other award and/or the shares of Stock relating
thereto, based on such factors as the Committee shall determine, in its sole
discretion;
<PAGE> 6
-6-
(v) to determine whether and under what circumstances a Stock Option may be
settled in cash or Stock, including Restricted Stock under Section 6.2(k);
(vi) to determine whether and under what circumstances a Stock Option may
be exercised without a payment of cash under Section 6.2(l); and
(vii) to determine whether, to what extent and under what circumstances
Stock and other amounts payable with respect to an award under this Plan shall
be deferred either automatically or at the election of the Participant.
The Committee shall have the authority in its discretion to adopt, alter
and repeal such administrative rules, guidelines and practices governing the
Plan as it shall, from time to time, deem advisable; to interpret the terms and
provisions of the Plan and any Award issued under the Plan (and any agreements
relating thereto); to resolve all disputes arising under the Plan; and to
otherwise supervise the administration of the Plan. All decisions made by the
Committee pursuant to the provisions of the Plan shall be final and binding upon
all persons having or claiming any interest in the Plan or in any Award pursuant
to the Plan.
4. Shares of Stock Subject to the Plan.
(a) In General. Subject to adjustment pursuant to the subsection (c) of
this Section 4, no more than an aggregate of 5,000,000 shares of Stock may be
granted or awarded pursuant to the Plan. Such shares may be either shares of
Stock which are authorized but unissued or shares of Stock held by the Company
in its treasury. The Company shall at all times reserve and make available in
sufficient number of shares to meet the requirements of the Plan, provided that
following termination of the Plan the number of shares reserved need not exceed
the number of Shares issuable under Awards outstanding from time to time
thereafter.
(b) Computation of Available Shares. For the purpose of computing the total
number of shares of Stock available for Plan purposes at any time during which
the Plan is in effect, there shall be debited against the total number of shares
determined to be available pursuant to paragraphs (a) and (c) of this Section 4
any outstanding Restricted Stock and Stock Grants, and the maximum number of
shares of Stock subject to issuance upon exercise of Options or upon settlement
of other Awards theretofore made under the Plan. In addition, however, shares
related to the unexercised or undistributed portion of any terminated, expired
or forfeited Award for which no material benefit was received by a Participant
<PAGE> 7
-7-
(e.g. dividends, but not including voting rights), or to the portion of any
Award settled in cash, shall be recredited to the number remaining upon such
termination, expiration or forfeiture and thereafter again be available for
distribution in connection with future Awards under the Plan.
(c) Other Adjustment. In the event of any merger, reorganization,
consolidation, recapitalization, Stock dividend, or other change in corporate
structure affecting the Stock, such substitution or adjustment shall be made in
the aggregate number of shares reserved for issuance under the Plan, and in the
number and option price of shares subject to outstanding Options and other stock
based Awards granted under the Plan, as may be determined to be appropriate by
the Committee in its sole discretion, provided that the number of shares subject
to any Award shall always be a whole number. Any such adjusted option price
shall also be used to determine the amount payable by the Company upon the
exercise of any Stock Appreciation Right associated with any Stock Option.
5. Eligibility. Officers and other key employees of or consultants to the
Company, its affiliates and subsidiaries (but excluding members of the Committee
and any person who serves only as a director) who are responsible for or
contribute to, as determined by the Committee in its sole discretion, the
management, growth and/or profitability of the business of the Company and/or
its subsidiaries and affiliates are eligible for Awards under the Plan.
6. Stock Options.
6.1. Provision for Grant. Stock Options may be granted alone, in addition
to or in tandem with other Awards under the Plan. Any Stock Option granted under
the Plan shall be in such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee who is an employee
of the Company, or of any parent or subsidiary corporation of the Company (in
each case as defined in Section 424 of the Code) Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options (in each case with
or without Stock Appreciation Rights). To the extent that any Stock Option does
not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option. In the case of any other person eligible for an
Award under the Plan, any Stock Option granted under the Plan shall be a
Non-Qualified Stock Option (with or without Stock Appreciation Rights).
Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
<PAGE> 8
-8-
as to disqualify the Plan under Section 422 of the Code, or, without the consent
of the optionee(s) affected, to disqualify any Incentive Stock Option under such
Section 422.
6.2. Terms and Conditions. Options granted under the Plan shall be subject
to the following terms and conditions and shall contain such additional terms
and conditions, not inconsistent with the terms of the Plan, as the Committee
shall deem appropriate:
(a) Option Price. The option price per share of Stock purchasable under a
Stock Option shall be determined by the Committee at the time of grant but in
the case of any Incentive Stock Option shall be not less than 100% of the Fair
Market Value of the Stock at the time of grant. However, any Incentive Stock
Option granted to any optionee who, at the time the option is granted, owns more
than 10% of the voting power of all classes of stock of the Company or of a
parent or subsidiary corporation (in each case as defined in Section 424 of the
Code), shall have an exercise price no less than 110% of Fair Market Value per
share on date of the grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the Option is granted. However, any Option granted to any
optionee who, at the time the Option is granted owns more than 10% of the voting
power of all classes of stock of the Company or of a parent or subsidiary
corporation (in each case as defined in section 424 of the Code) may not have a
term of more than five years. No Stock Option may be exercised by any person
after expiration of the term of the Option.
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee at or after grant, provided, however, that, except as provided in
Sections 6.2(g), 6.2(h) and 11, unless otherwise determined by the Committee at
or after grant no Stock Option shall be exercisable during the six months
following the date of the granting of the Option. If the Committee provides, in
its discretion, that any Stock Option is exercisable only in installments, the
Committee may waive such installment exercise provisions at any time at or after
grant in whole or in part, based on such factors as the Committee shall
determine, in its sole discretion.
(d) Method of Exercise. Subject to whatever installment exercise provisions
apply pursuant to Section 6.2(c), Stock Options may be exercised in whole or in
part at any time and from time to time during the option period, by giving
written notice of exercise to the Company specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the purchase
<PAGE> 9
-9-
price, either by certified or bank check, or such other instrument as the
Committee may accept. As determined by the Committee, in its sole discretion, at
or after grant, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or, in the case of the exercise
of a Non-Qualified Stock Option, Restricted Stock subject to an Award hereunder
(based, in each case, on the Fair Market Value of the Stock on the date the
option is exercised, as determined by the Committee); provided, however, that,
in the case of an Incentive Stock Option, the right to make a payment in the
form of already owned shares may be authorized only at the time the option is
granted.
If payment of the option exercise price of a Non-Qualified Stock Option is
made in whole or in part in the form of Restricted Stock, such Restricted Stock
(and any replacement shares relating thereto) shall remain (or be) restricted in
accordance with the original terms of the Restricted Stock Award in question,
and any additional Stock received upon the exercise shall be subject to the same
forfeiture restrictions, unless otherwise determined by the Committee, in its
sole discretion, at or after grant.
If payment of the Option exercise price of a Stock Option is made in whole
or in part in the form of unrestricted Stock already owned by the Participant,
the Company may require that the Stock has been owned by the Participant for a
specified minimum period of time, for the purpose of avoiding any charge to the
Company's earnings, limiting the pyramiding of Stock Option exercises, or such
other purposes as the Company deems appropriate.
No shares of Stock shall be issued until full payment therefor has been
made. An optionee shall generally have the rights to dividends or other rights
of a shareholder with respect to shares subject to the Option when the optionee
has given written notice of exercise, has paid in full for such shares, and, if
requested, has given the representation described in Section 14.1(a).
(e) Replacement Options. If an Option granted pursuant to the Plan may be
exercised by an optionee by means of the delivery of previously acquired Stock
as provided in 6.2(d) above, then the Committee may, in its sole discretion and
at the time of the original option grant, authorize the Participant to
automatically receive a replacement Option pursuant to this part of the Plan to
the extent shares are available under Section 4 at the time such replacement
Option would be issued. Any such replacement Option shall cover such number of
shares as may be determined by the Committee, but in no event more than the
number of shares equal to the difference between the number of shares of the
original Option exercised and the net shares received by the Participant from
such exercise. Any such replacement Option shall have an exercise price equal to
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the then current Fair Market Value of Stock, and a term extending to the
expiration date of the original Option.
The Committee shall have the right, in its sole discretion and at any time, to
discontinue the automatic grant of replacement Options.
(f) Transferability. No Stock Option shall be transferable by the optionee
otherwise than by will or by the laws of descent and distribution, and all Stock
Options shall be exercisable, during the optionee's lifetime, only by the
optionee.
(g) Termination by Reason of Death. If an optionee's employment by or
association with the Company and its subsidiaries and affiliates terminates by
reason of death, any Stock Option held by such optionee may thereafter by
exercised, to the extent then exercisable or on such accelerated basis as the
Committee may determine at or after grant, by the legal representative of the
estate or by the legatee of the optionee under the will of the optionee, for a
period of one year (or such shorter period as the Committee may specify at
grant) from the date of such death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter.
(h) Termination by Reason of Disability or Retirement. If an optionee's
employment by or association with the Company and its subsidiaries and
affiliates terminates by reason of Disability or Retirement, any Stock Option
held by such optionee may thereafter be exercised by the optionee, to the extent
it was exercisable at the time of termination, or on such accelerated basis as
the Committee may determine at or after grant, for a period of three years (or
such shorter period as the Committee may specify at grant) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter; provided, however, that, if the
optionee dies within such three-year period (or such shorter period as the
Committee shall specify at grant), any unexercised Stock Option held by such
optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of twelve months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(i) Other Termination. Unless otherwise determined by the Committee at
grant, if an optionee's employment by or association with the Company and its
subsidiaries and affiliates terminates for any reason other than death,
Disability or Retirement, the Stock Option shall thereupon terminate, except
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that such Stock Option may be exercised, to the extent exercisable at
termination, or on such accelerated basis as the Committee may determine at or
after grant, for a period of three months (or such shorter period as the
Committee shall specific at grant) from the date of such termination or until
the expiration of the stated term of such Stock Option, whichever period is
shorter, if the optionee is involuntarily terminated by the Company without
Cause.
(j) Incentive Stock Option Limitations. To the extent required for
"incentive stock option" status under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the stock with respect
to which Incentive Stock Options granted are exercisable for the first time by
the optionee during any calendar year under the Plan and/or any other stock
option plan of the Company and any parent or subsidiary corporation (within the
meaning of Section 424 of the Code) shall not exceed $100,000.
(k) Cash-out of Option; Settlement of Spread Value in Restricted Stock. On
receipt of written notice to exercise, the Committee may, in its sole
discretion, elect to cash out all or part of the portion of the Option(s) to be
exercised by paying the optionee an amount, in cash or Stock, equal to the
excess of the Fair Market Value of the Stock over the option price (the "Spread
Value") on the effective date of such exercise. In addition, if the Option
agreement so provides at grant or is amended after grant and prior to exercise
to so provide (with the optionee's consent), the Committee may require that all
or part of the shares to be issued with respect to the Spread Value of an
exercised option take the form of Restricted Stock, which shall be valued on the
date of exercise on the basis of the Fair Market Value of such Restricted Stock
determined without regard to the forfeiture restrictions involved, if any.
(l) Cashless Exercise; Satisfaction of Tax Withholdings. To the extent
permitted under the applicable laws and regulations, at the request of a
Participant and with the consent of the Committee, the Company agrees to
cooperate in a "cashless exercise" of an Option. The cashless exercise shall be
effected by the Participant delivering to a registered securities broker
acceptable to the Company instructions to sell a sufficient number of shares of
Stock from which such Option is then exercisable to cover the costs and expenses
associated with such exercise and sale. Under any Option, the Committee may
permit a Participant to pay any applicable withholding taxes by delivering a
sufficient number of previously-owned shares of Common Stock to the Company to
satisfy such taxes or upon Participant's request, by having the Company withhold
the number of shares of Common Stock obtainable on the exercise of an Option
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which when valued at Fair Market Value (determined as of the day preceding the
date of exercise) is equivalent to the minimum required withholding taxes due.
7. Stock Appreciation Rights
7.1. Provision for Grant. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of the grant of such
Stock Option.
7.2. Termination. A Stock Appreciation Right or applicable portion thereof
granted with respect to a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option, except
that, unless otherwise determined by the Committee, in its sole discretion, at
the time of grant, a Stock Appreciation Right granted with respect to less than
the full number of shares covered by a related Stock Option shall not be reduced
until the number of shares covered by an exercise or termination of the related
Stock Option exceeds the number of shares not covered by the Stock Appreciation
Right.
7.3. Manner and Effect of Exercise. A Stock Appreciation Right may be
exercised by an optionee, in accordance with Section 7.4(b), by surrendering the
applicable portion of the related Stock Option. Upon such exercise and
surrender, the optionee shall be entitled to receive an amount determined in the
manner prescribed in Section 7.4(b). Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the extent
the related Stock Appreciation Right has been exercised.
7.4. Other Terms and Conditions. Stock Appreciation Rights granted under
the Plan shall be subject to the following terms and conditions, and shall
contain such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall deem appropriate:
(a) Exercisability. Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock Options to which they
relate, if any, shall be exercisable in accordance with the provisions of
Section 6 and this Section 7 of the Plan; provided, however, that any Stock
Appreciation Right granted subsequent to the grant of the related Stock Option
shall not be exercisable during the first six months of its term, except that
this special limitation shall not apply in the event of death or Disability of
the optionee prior to the expiration of the six-month period and provided,
further, however, that a Stock Appreciation Right granted in connection with an
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Incentive Stock Option may be exercised only if and when the market price of the
Stock subject to the Incentive Stock Option exceeds the exercise price of such
Stock Option.
(b) Amount Payable. Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive up to, but not more than, an amount in
cash and/or shares of Stock equal in value to the excess of the Fair Market
Value of one share of Stock over the option price per share specified in the
related Stock Option, multiplied by the number of shares in respect of which the
Stock Appreciation Right shall have been exercised. The Committee shall
determine the form of payment.
(c) Transferability. Stock Appreciation Rights shall be transferable only
when and to the extent that the underlying Stock Option would be transferable
under Section 6.2(e) of the Plan.
8. Restricted Stock
8.1. Provision for Grant. Shares of Stock may be issued either alone or in
addition to other Awards granted under the Plan at such price, if any, as the
Committee may determine. The Committee may condition the grant of Restricted
Stock upon the completion of additional service, attainment of specified
performance goals or such other factors as the Committee may determine, in its
sole discretion. The provisions of Restricted Stock Awards need not be the same
with respect to each Participants.
8.2. Awards and Certificates. The prospective recipient of a Restricted
Stock Award shall not have any rights with respect to such Award, unless and
until such recipient has executed an agreement evidencing the Award and has
delivered a fully executed copy thereof to the Company, and has otherwise
complied with the applicable terms and conditions of such Award.
8.3. Additional Terms and Conditions. Grants of Restricted Stock may be
made under the following additional terms and conditions:
(a) Purchase Price. The purchase price for shares of Restricted Stock shall
be equal to or less than their Fair Market Value and may be zero.
(b) Acceptance of Awards. Awards of Restricted Stock must be accepted
within a period of 60 days (or such shorter period as the Committee may specify
at grant) after the Award date, by executing a Restricted Stock Award agreement
and paying whatever price (if any) is required pursuant to the terms of the
Award.
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(c) Issuance of Certificates. Each Participant receiving a Restricted Stock
Award shall be issued a stock certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the name of such
Participant, and, if applicable, shall bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Award, substantially
in the following form:
"The transferability of this certificate and the shares of stock represented
hereby are subject to the terms and conditions (including forfeiture) of the
Boston Scientific Corporation 1992 Long-Term Incentive Plan and an Agreement
entered into between the registered owner and Boston Scientific Corporation.
Copies of such Plan and Agreement are on file in the offices of Boston
Scientific Corporation at 480 Pleasant Street, Watertown Massachusetts 02172"
(d) Escrow of Shares. The Committee may require that the stock certificates
evidencing shares of Restricted Stock be held in custody by the Company until
the restrictions thereon shall have lapsed, and that the Participant deliver a
stock power, endorsed in blank, relating to the Stock covered by such Award.
(e) Transferability. Subject to the provisions of this Plan and the Award
agreement, during the period set by the Committee commencing with the date of
such Award (the "Restriction Period"), the Participant shall not be permitted to
sell, transfer, pledge, assign or otherwise encumber shares of Restricted Stock
awarded under the Plan. Within these limits, the Committee, in its sole
discretion, may provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions in whole or in part, based on service,
performance and/or such other factors or criteria as the Committee may
determine, in its sole discretion.
(f) Rights Pending Lapse of Restrictions or Forfeiture of Award. Except as
provided in this subsection (f) and subsection (e) above, the Participant shall
have, with respect to the shares of Restricted Stock, all of the rights of a
shareholder of the Company, including the right to vote the shares, and the
right to receive any cash dividends. The Committee, in its sole discretion, as
determined at the time of Award, may permit or require the payment of cash
dividends to be deferred and, if the Committee so determines, reinvested in
additional Restricted Stock to the extent shares are available under Section 4.
(g) Termination of Employment. Subject to the applicable provisions of the
Award agreement and this Section 8, upon termination of a Participant's
<PAGE> 15
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employment or other association with the Company and its subsidiaries and
affiliates for any reason during the Restriction Period, all shares still
subject to restriction shall be forfeited by the Participant. In the event of
hardship or other special circumstances of a Participant whose employment or
association with the Company and its subsidiaries and affiliates is
involuntarily terminated (other than for Cause), the Committee may, in it sole
discretion, waive in whole or in part any or all remaining restrictions with
respect to such Participant's shares of Restricted Stock, based on such factors
as the Committee may deem appropriate.
(h) Lapse of Restrictions. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to such Restriction
Period, the certificates for such shares shall be delivered to the Participant
promptly if not theretofore so delivered.
9. Long Term Performance Awards
9.1. Provision for Grant. Long-Term Performance Awards may be awarded
either alone or in addition to other Awards granted under the Plan. The
Committee shall determine the nature, length and starting date of the
performance period (the "Performance Period") for each Long-Term Performance
Award, which subject to Section 11 below shall be a period of at least two
years, and shall determine the performance objectives to be used in valuing
Long-Term Performance Awards and determining the extent to which such Long-Term
Performance Awards have been earned. Performance objectives may vary from
Participant to Participant and between groups of Participants and shall be based
upon such Company, business unit and/or individual performance factors and
criteria as the Committee may deem appropriate, including, but not limited to,
earnings per share or return on equity. Performance Periods may overlap and
Participants may participate simultaneously with respect to Long-Term
Performance Awards that are subject to different Performance Periods and/or
different performance factors and criteria.
9.2. Periodical Determination of Performance. At the beginning of each
Performance Period, the Committee shall determine for each Long-Term Performance
Award subject to such Performance Period the range of dollar values or number of
shares of Stock to be awarded to the Participant at the end of the Performance
Period if and to the extent that the relevant measure(s) of performance for such
Long Term Performance Award is (are) met. Such dollar values or number of shares
of Stock may be fixed or may vary in accordance with such performance and/or
other criteria as may be specified by the Committee, in its sole discretion.
<PAGE> 16
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9.3. Adjustment of Awards. In the event of special or unusual events or
circumstances affecting the application of one or more performance objectives to
a Long-Term Performance Award, the Committee may revise the performance
objectives and/or underlying factors and criteria applicable to the Long-Term
Performance Awards affected, to the extent deemed appropriate by the Committee,
in its sole discretion, to avoid unintended windfalls or hardship.
9.3. Termination of Employment. Subject to Section 11 below and unless
otherwise provided in the applicable Award agreement(s), if a Participant
terminates employment or other association with the Company and its affiliates
and subsidiaries during a Performance Period because of death, Disability or
Retirement, such Participant shall be entitled to a payment with respect to each
outstanding Long-Term Performance Award at the end of the applicable Performance
Period (i) based, to the extent relevant under the terms of the award, upon the
Participant's performance for the portion of such Performance Period ending on
the date of termination and the performance of the applicable business unit(s)
for the entire Performance Period, and (ii) prorated, where deemed appropriate
by the Committee, for the portion of the Performance Period during which the
Participant was employed by or associated with the Company and its affiliates
and subsidiaries, all as determined by the Committee, in its sole discretion.
However, the Committee may provide for an earlier payment in settlement of such
award in such amount and under such terms and conditions as the Committee deems
appropriate.
Subject to Section 11 below, if a Participant terminates employment by or
association with the Company and its subsidiaries and affiliates during a
Performance Period for any other reason, then such Participant shall not be
entitled to any payment with respect to the Long-Term Performance Awards subject
to such Performance Period, unless the Committee shall otherwise determine, in
its sole discretion.
9.4. Form of Payment. The earned portion of a Long-Term Performance Award
may be paid currently or on a deferred basis with such interest or earnings
equivalent as may be determined by the Committee, in its sole discretion.
Payment shall be made in the form of cash or whole shares of Stock, including
Restricted Stock, either in a lump sum payment or in annual installments
commencing as soon as practicable after the end of the relevant Performance
Period, all as the Committee shall determine at or after grant.
<PAGE> 17
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10. Stock Grants. In recognition of significant contributions to the
success of the Company, its affiliates and subsidiaries, and in such other
circumstances as the Committee deems appropriate in its sole discretion, shares
of Stock may be issued either alone or in addition to other stock or cash-based
Awards granted under the Plan at such price, if any, as the Committee may
determine. Stock Grants Awards shall be made without forfeiture conditions of
any kind and otherwise pursuant to such terms and conditions as the Committee
may determine, in its sole discretion.
11. Change in Control Provisions.
11.1. Consequences of Event. In the event of a Change in Control the
following acceleration and valuation provisions shall apply:
(a) Any Stock Appreciation Rights outstanding for at least six months and
any Stock Options awarded under the Plan not previously exercisable and vested
shall become fully vested and exercisable.
(b) The restrictions applicable to any Restricted Stock Awards under the
Plan shall lapse and such shares and Awards shall be deemed fully vested.
(c) The value of all shares of Stock subject to outstanding Stock Options
and, to the extent vesting by reason of the Change in Control, Restricted Stock
Awards shall be paid to the holders thereof in cash within thirty days following
the Change of Control (less any applicable exercise price and tax withholdings,
and subject to the surrender of the shares which are the subject of the
Restricted Stock Award) on the basis of the Change in Control Price as of the
date of such Change in Control.
(d) Any outstanding Long-Term Performance Awards shall be vested and paid
out in cash within thirty days following the Change in Control based on prorated
target results for the performance periods in question.
10.2. Change in Control. For purposes of this Plan, a "Change in Control"
means the happening of any of the following:
(a) The acquisition, other than from the Company, by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Company Voting Securities"); provided,
however, that any acquisition by (x) any non-corporate shareholder of the
<PAGE> 18
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Company as of the effective date of the initial registration of an offering of
Stock under the Securities Act of 1933, (y) the Company or any of its
subsidiaries, or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries or (z) any corporation with
respect to which, following such acquisition, more than 60% of, respectively,
the then outstanding shares of common stock of such corporation and combined
voting power of the then outstanding voting 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
and entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Company Voting Securities immediately prior to such
acquisition in substantially the same proportion as their ownership, immediately
prior to such acquisition, of the Outstanding Company Common Stock and Company
Voting Securities, as the case may be, shall not constitute a Change in Control
of the Company; or
(b) Individuals who, as of the effective date of the initial registration
of an offering of Stock under the Securities Act of 1933, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any individual becoming a director subsequent to
such effective date whose election or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act); or
(c) Approval by the shareholders of the Company of a reorganization, merger
or consolidation (a "Business Combination"), in each case, with respect to which
all or substantially all of the individuals and entities who were the respective
beneficial owners of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such Business Combination do not own
beneficially, directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination in substantially the same proportion as their ownership immediately
prior to such Business Combination of the Outstanding Company Common Stock and
Company Voting Securities, as the case may be; or
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(d) a complete liquidation or dissolution of the Company or a sale or other
disposition of all or substantially all of the assets of the Company other than
to a corporation with respect to which, following such sale or disposition, more
than 60% of, respectively, the then outstanding shars of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors is then owned beneficially, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
Company Voting Securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the Outstanding Company
Common Stock and Company Voting Securities, as the case may be, immediately
prior to such sale or disposition.
11.3. Change in Control Price. For purposes of this Plan, "Change in
Control Price" means the highest closing price per share paid in any transaction
on the New York Stock Exchange, or the highest price paid or offered in any bona
fide transaction related to a potential or actual change in control of the
Company, at any time during the preceding sixty day period as determined by the
Committee except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall be
based only on transactions reported for the date on which the Committee decides
to cash out such options.
12. Amendment and Termination. The Board may terminate or amend the Plan at
any time and from time to time; provided, however, that the Board may not,
without approval of the shareholders of the Company, increase the maximum number
of shares of Stock purchasable under the Plan or change the description of the
individuals eligible to receive Awards. No termination of or amendment to the
Plan may adversely affect the rights of a Participant with respect to any Award
theretofore granted under the Plan without such Participant's consent.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Section 4 above, no such
amendment shall impair the rights of any Participant without the Participant's
consent.
13. Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than those of any
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other general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to Awards hereunder, provided, however, unless the Committee otherwise
determines with the consent of the affected Participant, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of the
Plan.
14. General Provisions.
14.1. Investment Representation. The Committee may require each person
acquiring shares pursuant to an Award under the Plan to represent to and agree
with the Company in writing that the Participant is acquiring the shares for
investment without a view to distribution thereof. The certificates for such
shares may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer. All certificates for shares of Stock or other
securities delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of any stock exchange upon which the
Stock is then listed, and any applicable Federal or state securities law, and
the Committee may cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions.
14.2. Adoption of Other Plans. Nothing contained in this Plan shall prevent
the Board of Directors from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.
14.3. No Employment Rights. Neither the establishment or continuation of
the Plan, nor the grant of any Award hereunder, shall confer upon any employee
or consultant of the Company or its affiliates or subsidiaries any right to
continued employment or association with the Company and its affiliates and
subsidiaries, nor shall it interfere in any way with the right of the Company
and its affiliates and subsidiaries to terminate the employment or association
of any of its employees or consultants at any time.
14.4. Tax Withholding. No later than the date as of which an amount first
becomes includible in the gross income of the Participant for Federal income tax
purposes with respect to any Award, the Participant shall pay to the Company, or
make arrangements satisfactory to the Committee regarding the payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
<PAGE> 21
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respect to such amount. Unless otherwise determined by the Committee, the
minimum required withholding obligations may be settled with Stock, including
Stock that is part of the Award that gives rise to the withholding requirement.
The obligations of the Company under the Plan shall be conditional on such
payment or arrangements and the Company shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to the Participant.
14.5. Payments on Death. The Committee shall establish such procedures as
it deems appropriate for a Participant to designate a beneficiary to whom any
amounts payable in the event of the Participant's death are to be paid.
14.6. Governing Law. The Plan and all Awards and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without regard to the conflict of laws principles
thereof.
15. Term of Plan. The Plan shall become effective upon the approval of the
Plan by the shareholders of the Company. No Award shall be granted pursuant to
the Plan on or after the tenth anniversary of the Plan's approval by
shareholders, but Awards theretofore granted may extend beyond that date.
<PAGE> 22
Amendment to Boston Scientific Corporation 1992 Long-Term Incentive Plan
10.2 Pooling-of-Interests Transactions. Notwithstanding anything
contained in Section 10.1, in the event of a merger or consolidation of the
Company with another entity which is intended to qualify for
pooling-of-interests accounting under U.S. Generally Accepted Accounting
Principles pursuant to Accounting Principles Board Opinion No. 16 ("Business
Combinations") or any successor opinion (a "Pooling Transaction"), the
following shall result:
(i) at the closing of a Pooling Transaction in which the Company
is not the surviving corporation (the "Combined Entity"), each
outstanding Stock Option granted hereunder (a "Predecessor Option")
shall be converted into an option (a "Substitute Option") to acquire
common stock of the Combined Entity in the Pooling Transaction, which
Substitute Option shall (A) have the same terms and conditions
(including vesting schedule) as the Predecessor Option, except as
provided in clause (ii) below, and (B) be exercisable at an exercise
price, and for a number of shares of the Combined Entity's common stock,
determined in accordance with Section 424(a) of the Code as if the
conversion of the Predecessor Option into the Successor Option was
intended to constitute "issuing or assuming a stock option in a
transaction to which Section 424(a) applies"; and
(ii) solely in the case of a Pooling Transaction (whether or not
the Company is the Combined Entity) in which, after giving effect to the
closing of such transaction, shareholders of the Company immediately
prior to such closing beneficially own less than 60% or less of the
Combined Entity's voting common stock, all Stock Options granted
hereunder (or Successor Options, if the Company is not the Combined
Entity) shall be fully vested and immediately exercisable upon such
closing.
AMENDMENT NO. 1 TO THE BOSTON SCIENTIFIC CORPORATION
1992 LONG-TERM INCENTIVE PLAN
The Boston Scientific Corporation 1992 Long-Term Incentive Plan (the
"Plan") is hereby amended as follows:
1. Section 6.2(f) of the Plan is amended by deleting the existing Section 6.2(f)
in its entirety and replacing it with the following:
"(f) Transferability. No Option shall be transferable by a Participant
other than by will or by the laws of descent and distribution and all Options
granted thereunder shall be exercisable, during the Participants lifetime, only
by the Participant provided, however, that, subject to such conditions as the
may from time to time establish, Participants may transfer, without payment of
consideration, any Options whenever granted under the Plan to members of their
respective immediate families or to trusts, partnerships, or similar vehicles
established for the benefit of members of their respective immediate families."
2. Section 2(p) of the Plan is amended by deleting the existing Section 2(p) in
its entirety and replacing it with the following:
"(p) Stock means the Common Stock, $.01 par value per share, of the
Company."
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Exhibit 10.2
1992 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. Purpose. The purpose of this Plan is to promote the interests of the
Company and its shareholders by (i) attracting, retaining and motivating top
caliber Directors; (ii) strengthening the mutuality of interest between
Directors and the Company's shareholders; and (iii) enabling Directors to
participate in the long-term success of the business.
2. Definitions. For purposes of the Plan, the following terms shall have
the meanings set forth below:
(a) Board means the Board of Directors of the Company.
(b) Code means the Internal Revenue Code of 1986, as amended, or any
statute successor thereto and any regulations issued from time to time
thereunder.
(c) Committee means any committee of the Board constituting of such persons
as the Board may appoint from time to time to serve at its pleasure for the
purpose of carrying out the responsibilities of the Committee under the Plan.
For any period during which no such committee is in existence, all authority and
responsibility assigned the Committee under this Plan shall be exercised, if at
all, by the Board.
(d) Company means Boston Scientific Corporation, a corporation organized
under the laws of the State of Delaware (or any successor corporation).
(e) Disability means long-term disability as determined under rules and
procedures similar to those that apply in the Company's long-term disability
plan for employees then in effect.
(f) Eligible Director means a member of the Board who is eligible for
grants under the Plan pursuant to the provisions of Section 5.
(g) Fair Market Value means, as of any given date, the last reported sales
price of the Stock as reported in The Wall Street Journal for such date or, if
either no such sale is reported or the Stock is not publicly traded on or as of
such date, the fair market value of the Stock as determined by Committee in good
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faith based on the available facts and circumstances at the time.
(h) Options mean nonqualified stock options granted under this Plan to
purchase Stock.
(i) Option Agreement means an agreement evidencing the grant of an Option
under the Plan, in such form as the Committee may prescribe.
(j) Participant means an Eligible Director who has received an Option grant
under the Plan.
(k) Plan means the Boston Scientific Corporation 1992 Non-Employee
Directors' Stock Option Plan, as set forth herein and as it may be amended from
time to time.
(l) Retirement means cessation of active service as a member of the Board
at or after the normal retirement date specified in the Company's pension or
other deferred compensation plan applicable generally to employees of the
Company or, with the consent of the Board, any early retirement date so
specified.
(m) Stock means the Class B non-voting common stock, $.01 par value per
share, of the Company.
(n) Vesting Period means the three-year period commencing on the date of an
Option grant, over which period shares subject to such Option shall become fully
vested and available for purchase by exercise of the Option, as follows:
(i) one-third on the first anniversary of grant;
(ii) one-third on the second anniversary of the grant; and
(iii) one-third on the third anniversary of the grant.
(o) Vested Shares, as of any date, means those shares of Stock available at
that date for purchase by exercise of the Option, as determined by application
of the Vesting Period for such Option.
In addition, the term Change In Control shall have the meaning set forth in
Section 15 below.
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3. Administration. The Committee shall have authority in its discretion to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to resolve all disputes arising under the Plan, and to
make all other determinations necessary or advisable for the administration of
the Plan. Any determination of the Committee shall be final and binding upon all
persons having or claiming any interest under the Plan or under any Option
granted pursuant to the Plan.
4. Shares of Stock Subject to the Plan. A total of 100,000 shares of Stock
shall be reserved and available for issuance upon exercise of Options granted
under the Plan. Such shares shall consist of Stock held in treasury or
authorized but unissued Stock. If an Option expires or terminates for any reason
without having been exercised in full, the unpurchased shares subject to the
Option shall become available for other Options granted under the Plan.
Substitutions or adjustments shall be made in the aggregate number and kind of
shares reserved for issuance under the Plan and under any outstanding but
unexercised Option in the event of (a) any stock dividend, stock split,
combination of shares, issuance of rights or warrants to purchase stock;
recapitalization or other change in the capital structure of the Company; or (b)
any merger, consolidation, separation, reorganization, partial or complete
liquidation; or (c) any other corporate transaction or event having an effect
similar to the foregoing. Such substitutions or adjustments shall be carried out
by the Committee and shall be made only to the extent necessary to avoid
enlargement or dilution of the remaining reserved shares, the Option grants and
the Stock underlying such grants. No fractional Stock shall be issued or
authorized by reason of any such substitution or adjustment.
5. Eligibility. Only Directors who are not employees of the Company or of
any subsidiary or affiliate of the Company are eligible to receive grants of
Options under the Plan. Any Director to whom Options have been granted and who
thereafter becomes an employee of the Company or of any subsidiary or affiliate
of the Company shall cease to be eligible for any further Option grants under
this Plan while an employee, but shall not, by reason of becoming an employee,
cease to be eligible to retain Options previously granted under the Plan.
6. Terms of Option Grants. Options under the Plan shall be granted on the
following terms:
(a) Timing of Awards. On the effective date of the Plan, each then Eligible
Director shall receive an initial Option grant. During the term of the Plan,
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each Eligible Director shall receive an Option grant on the date of his or her
election or reelection as a Director.
(b) Option Grant. Each Option grant shall consist of an Option to acquire
in aggregate 1,500 shares of Stock and shall be exercisable at a price equal to
the Fair Market Value of the Stock at the time of the grant. No Option granted
hereunder is intended to qualify as an incentive stock option within the meaning
of Section 422 of the Code.
(c) Exercise of Option. An Option may be exercised to the extent of the
Vested Shares thereunder at any time and from time to time during their
respective terms by giving written notice of exercise to the Company specifying
the number of Vested Shares to be purchased. Such notice shall be accompanied by
payment in full of the purchase price, either by certified or bank check.
Payment in full or in part for such exercise may also be made with unrestricted
Stock already owned by the Participant. Such unrestricted Stock shall be priced
at their Fair Market Value on the date of exercise.
If payment for the exercise of an Option is made in whole or in part with
unrestricted Stock, such shares must have been owned and held by the Participant
for a period of six months prior to the date of such payment.
No Stock will be issued under the Plan until full payment for such shares
has been received by the Company. No Eligible Director exercising an Option
shall be considered a shareholder with respect to the Vested Shares so acquired
until a certificate for the same shall have been delivered to the Director.
7. Non-transferability of Options. No Option shall be transferable by a
Participant other than by will or by the laws of descent and distribution, and
all Options granted hereunder shall be exercisable, during the Participant's
lifetime, only by the Participant.
8. Option Agreement. The prospective recipient of an Option Grant shall not
have any rights with respect to such Options to be granted unless, within 30
days of the date of the Option Grant, such recipient delivers an executed copy
of the Option Agreement to the Company, and complies with the applicable terms
and conditions of the Option Agreement.
9. Accelerated Vesting and Forfeiture. Notwith- standing anything to the
contrary in this Plan:
(a) Death, Retirement, etc. In the event a Participant ceases to be a
member of the Board on account of death, Disability, or Retirement, or in the
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event of a Change in Control of the Company while an Eligible Director is a
Participant under the Plan (but without regard to whether the Participant then
ceases to be a member of the Board), all shares available under any Option
theretofor granted to that Participant under this Plan shall automatically
become Vested Shares and such Option shall remain exercisable for the lesser of
three years or the remaining term of the Option (or in the event of a Change in
Control, for the lesser of the remaining term of the Option or the period, not
in excess of three years, that the Stock remains publicly traded).
(b) Other Termination. In the event a Participant ceases to be a
member of the Board for reasons other than as described in Section 9(a) above
and prior to the occurence of a Change in Control while he or she is a
Participant under the Plan, any Option granted to the Participant under this
Plan shall remain exercisable for the lesser of one year from the date of such
event or the remaining term of the Option but only to the extent of the number
of Vested Shares under such Option as of the date of such cessation of service
for which such Option had not previously been exercised. All shares of Stock
subject to the Option which are not then Vested Shares shall thereafter cease to
be available under the Option and shall be forfeited by Participant.
10. Amendment and Termination. The Board may terminate or amend the Plan at
any time and from time to time; provided, however, that the Board may not,
without approval of the shareholders of the Company, increase the maximum number
of shares of Stock purchasable under the Plan or change the description of the
individuals eligible to receive Options; and provided, further, however, that no
amendment of any provision of the Plan governing the amount of Stock and price
under, and timing of, grants of Options pursuant to the Plan (or of any other
provision of the Plan to the extent a limitation on amendments is required to
preserve the status of Eligible Directors as "disinterested" persons under Rule
16b-3 as promulgated by the Securities Exchange Commission under the Securities
Exchange Act of 1934) shall be made more frequently than once in any six month
period, other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act of 1974, or the rules thereunder. No
termination of or amendment to the Plan may adversely affect the rights of a
Participant with respect to any Option held by the Participant as of the date of
such termination or amendment without such Participant's consent.
11. General Provisions.
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11.1. Adoption of Other Plans. Nothing contained in this Plan shall prevent
the Board from adopting other or additional compensation arrangements subject to
shareholder approval if such approval is required and such arrangements may be
either generally applicable or applicable only in specific cases.
11.2. No Additional Rights. Neither the establishment or continuation of
the Plan, nor the grant of any Option hereunder shall confer upon any member of
the Board any right to continue as a member.
11.3. Governing Law. The Plan and all Options and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without regard to the conflict of laws principles
thereof.
12. Term of Plan. The Plan shall become effective upon the approval of the
Plan by the shareholders of the Company. No Options shall be granted pursuant to
the Plan on or after the tenth anniversary of the Plan's approval by
shareholders, but Options theretofore granted may extend beyond that date.
13. Tax Withholding. Any compensation income realized or recognized by a
Participant with respect to the exercise of Options granted under this Plan
shall be subject to withholding by the Company of income or other taxes required
by Federal, state, local or foreign law. Each Participant shall make
arrangements satisfactory to the Committee to satisfy the Company's obligation,
if any, to withhold any tax with respect to such compensation income realized by
the Participant.
14. Definition of Change in Control. For purposes of this Plan, Change in
Control means the occurrence of any of the following:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Company Voting Securities");
provided, however, that any acquisition by (x) any non-corporate shareholder of
the Company as of the effective date of the initial registration of an offering
of Stock under the Securities Act of 1933, (y) the Company or any of its
subsidiaries, or any employee benefit plan (or related trust) sponsored or
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maintained by the Company or any of its subsidiaries or (z) any corporation with
respect to which, following such acquisition, more than 60% of, respectively,
the then outstanding shares of common stock of such corporation and combined
voting power of the then outstanding voting 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
and entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Company Voting Securities immediately prior to such
acquisition in substantially the same proportion as their ownership, immediately
prior to such acquisition, of the Outstanding Company Common Stock and Company
Voting Securities, as the case may be, shall not constitute a Change in Control
of the Company; or
(b) Individuals who, as of the effective date of the initial
registration of an offering of Stock under the Securities Act of 1933,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board, provided that any individual becoming a
director subsequent to such effective date whose election or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of the Directors of the Company (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case, with respect
to which all or substantially all of the individuals and entities who were the
respective beneficial owners of the Outstanding Company Common Stock and Company
Voting Securities immediately prior to such Business Combination do not own
beneficially, directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination in substantially the same proportion as their ownership immediately
prior to such Business Combination of the Outstanding Company Common Stock and
Company Voting Securities, as the case may be; or
(d) a complete liquidation or dissolution of the Company or a sale or
other disposition of all or substantially all of the assets of the Company other
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than to a corporation with respect to which, following such sale or disposition,
more than 60% of, respectively, the then outstanding shars of common stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors is then owned beneficially, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such sale or
disposition in substantially the same proportion as their ownership of the
Outstanding Company Common Stock and Company Voting Securities, as the case may
be, immediately prior to such sale or disposition.
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BOSTON SCIENTIFIC CORPORATION
1992 N0N-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
First Amendment
Pursuant to the provisions of Section 10 of Boston Scientific Corporation's
1992 Non-Employee Directors' Stock Option Plan (the "Plan"), the Board of
Directors of Boston Scientific Corporation hereby (i) amends Section 2(m) of the
Plan by removing the expression "Class B non-voting," (ii) amends Section 6(a)
by removing the expression "his or her election or reelection as a Director" and
replacing it with the expression "each successive annual meeting of the
stockholders of the Company, or special meetings in lieu of such annual
meetings, at which such Eligible Director is elected or reelected to the Board,
or after which such Eligible Director is a member of the Board," and (iii)
amends Section 6(b) of the Plan by replacing the expression "1,500 shares of
Stock" with the expression "2,000 shares of Stock."
All other terms and provisions of the Plan, and any options made
thereunder, remain in full force and effect.
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AMENDMENT NO.1 TO THE BOSTON SCIENTIFIC CORPORATION
1992 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The Boston Scientific Corporation 1992 Non-Employee Directors' Stock Option
Plan (the "Plan") is hereby amended as follows:
1. Section 7 of the Plan is amended by deleting the existing Section 7 in its
entirety and replacing it with the following:
"7. Limited Transferability of Options. No Option shall be transferable by
a Participant other than by will or bt the laws of descent and distribution and
all Options granted thereunder shall be exercisable, during the Participants
lifetime, only by the Participant provided, however, that, subject to such
conditions as the may from time to time establish, Participants may transfer,
without payment of consideration, any Options whenever granted under the Plan to
members of their respective immediate families or to trusts, partnerships, or
similar vehicles established for the benefit of members of their respective
immediate families."
2. Section 2(m) of the Plan is amended by deleting the existing Section 2(m) in
its entirety and replacing it with the following:
"(m) Stock means the Common Stock, $.01 par value per share, of the
Company."
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Exhibit 10.3
BOSTON SCIENTIFIC
CORPORATION
1995
LONG-TERM INCENTIVE PLAN
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<TABLE>
<CAPTION>
SECTION CONTENTS PAGE
<S> <C> <C>
1. Purpose 1
2. Definitions 1
3. Administration 3
4. Shares of Stock Subject
to the Plan 4
5. Eligibility 5
6. Stock Options 6
7. Stock Appreciation Rights 11
8. Restricted Stock 12
9. Long-Term Performance Awards 14
10. Stock Grants 16
11. Change in Control Provisions 16
12. Amendment and Termination 19
13. Unfunded Status of Plan 19
14. General Provisions 20
15. Term of Plan 21
</TABLE>
<PAGE> 3
BOSTON SCIENTIFIC CORPORATION
1995 LONG-TERM INCENTIVE PLAN
1. Purpose. The purpose of this Plan is to enable key employees of
and consultants to Boston Scientific Corporation (the "Company") to (i) own
shares of stock in the Company, (ii) participate in the shareholder value which
has been created, (iii) have a mutuality of interest with other shareholders and
(iv) enable the Company to attract, retain and motivate key employees and
consultants of particular merit.
2. Definitions. For the purposes of the Plan, the following terms
shall have the meanings set forth below:
(a) Award means the grant or sale pursuant to the Plan of any
of Stock Options, Restricted Stock, Stock Appreciation Rights, Stock
Grants, and Long Term Awards.
(b) Board means the Board of Directors of the Company.
(c) Cause means a felony conviction of a Participant or the
failure of a Participant to contest prosecution for a felony, or a
Participant's willful misconduct or dishonesty, any of which is directly
and materially harmful to the business or reputation of the Company.
(d) Code means the Internal Revenue Code of 1986, as amended
from time to time, or any statute successor thereto, and any regulations
issued from time to time thereunder.
(e) Committee means the Committee referred to in Section 3 of
the Plan. For any period during which no such committee is in existence
all authority and responsibility assigned the Committee under this Plan
shall be exercised, if at all, by the Board.
(f) Company means Boston Scientific Corporation, a corporation
organized under the laws of the State of Delaware (or any successor
corporation).
(g) Disability means permanent and total disability as
determined under the Company's long-term disability program for employees
then in effect.
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(h) Fair Market Value means, as of any given date, the last reported
sales price of the Stock as reported in The Wall Street Journal for such date
or, if either no such sale is reported or the Stock is not publicly traded on or
as of such date, the fair market value of the Stock as determined by the
Committee in good faith based on the available facts and circumstances at the
time.
(i) Incentive Stock Option means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
(j) Long-Term Performance Award or Long-Term Award means an award
made pursuant to Section 9 below that is payable in cash and/or Stock (including
Restricted Stock) in accordance with the terms of the grant, based on Company,
business unit and/or individual performance over a period of at least one year.
(k) Non-Qualified Stock Option means any Stock Option that is not an
Incentive Stock Option.
(l) Participant means an employee or consultant to whom an Award is
granted pursuant to the Plan.
(m) Plan means the Boston Scientific Corporation 1995 Long-Term
Incentive Plan, as set forth herein and as it may be amended from time to time.
(n) Restricted Stock means an Award pursuant to Section 8 below of
shares of Stock subject to restrictions or other forfeiture conditions.
(o) Retirement means cessation of employment and other association
with the Company and any affiliates or subsidiaries of the Company at or after
the normal retirement date specified in the Company's pension or other deferred
compensation plan applicable generally to employees of the Company or, with the
consent of the Committee, any early retirement date so specified.
(p) Stock means the common stock, $.01 par value per share, of the
Company.
(q) Stock Appreciation Right means the right, pursuant to an Award
granted under Section 7 below, to surrender to the Company all
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(or a portion) of a Stock Option in exchange for an amount equal to the
difference between (i) the Fair Market Value, as of the date such Stock
Option (or such portion thereof) is surrendered, of the shares of Stock
covered by such Stock Option (or such portion thereof), and (ii) the
aggregate exercise price of such Stock Option (or such portion
thereof).
(r) Stock Grant means an Award pursuant to Section 10 below
of shares of Stock not subject to restrictions or other forfeiture
conditions.
(s) Stock Option or Option means any option to purchase
shares of Stock (including Restricted Stock) granted pursuant to
Section 6 below.
In addition, the terms Change in Control and Change in Control Price
shall have meanings set forth, respectively, in Sections 11.2 and 11.3.
3. Administration. The Committee shall consist of not less than two
"disinterested" persons (as such term is defined Rule 16b-3(c)(2)(i) as
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, or any successor definition adopted by the Securities and
Exchange Commission) who shall be appointed by the Board to serve at its
pleasure from time to time. The Committee shall have the authority to grant to
eligible individuals, pursuant to the terms of the Plan: (i) Stock Options, (ii)
Stock Appreciation Rights, (iii) Restricted Stock, (iv) Long-Term Performance
Awards, and/or (v) Stock Grants.
In particular, the Committee shall have the authority:
(i) to select from time to time the officers, other key
employees and consultants of the Company, its subsidiaries and
affiliates to whom Awards shall granted hereunder;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock, Long-Term Performance Awards and Stock Grants or any
combination thereof, are to be granted hereunder;
(iii) to determine the number of shares of Stock to be covered
by each Award granted hereunder;
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(iv) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Award, including, but not limited
to, the share price and any restriction or limitation, or any vesting
acceleration or forfeiture waiver regarding any Stock Option or other
award and/or the shares of Stock relating thereto, based on such
factors as the Committee shall determine, in its sole discretion;
(v) to determine whether and under what circumstances a
Stock Option may be settled in cash or Stock, including Restricted
Stock under Section 6.2(k);
(vi) to determine whether and under what circumstances a
Stock Option may be exercised without a payment of cash under Section
6.2(l); and
(vii) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the
election of the Participant.
The Committee shall have the authority in its discretion to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall, from time to time, deem advisable; to interpret the terms
and provisions of the Plan and any Award issued under the Plan (and any
agreements relating thereto); to resolve all disputes arising under the Plan;
and to otherwise supervise the administration of the Plan. All decisions made by
the Committee pursuant to the provisions of the Plan shall be final and binding
upon all persons having or claiming any interest in the Plan or in any Award
pursuant to the Plan.
4. Shares of Stock Subject to the Plan.
(a) In General. Subject to adjustment pursuant to the subsection
(c) of this Section 4, no more than an aggregate of 5,000,000 shares of
Stock may be granted or awarded pursuant to the Plan. Such shares may
be either shares of Stock which are authorized but unissued or shares
of Stock held by the Company in its treasury. The Company shall at all
times reserve and make available in sufficient number of shares to meet
the requirements of the Plan, provided that following termination of
the Plan the number of shares reserved need not exceed the number of
Shares issuable under Awards outstanding from time to time thereafter.
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(b) Computation of Available Shares. For the purpose of
computing the total number of shares of Stock available for Plan
purposes at any time during which the Plan is in effect, there shall be
debited against the total number of shares determined to be available
pursuant to paragraphs (a) and (c) of this Section 4 any outstanding
Restricted Stock and Stock Grants, and the maximum number of shares of
Stock subject to issuance upon exercise of Options or upon settlement
of other Awards theretofore made under the Plan. In addition, however,
shares related to the unexercised or undistributed portion of any
terminated, expired or forfeited Award for which no material benefit
was received by a Participant (e.g. dividends, but not including voting
rights), or to the portion of any Award settled in cash, shall be
recredited to the number remaining upon such termination, expiration or
forfeiture and thereafter again be available for distribution in
connection with future Awards under the Plan.
(c) Other Adjustment. In the event of any merger,
reorganization, consolidation, recapitalization, Stock dividend, or
other change in corporate structure affecting the Stock, such
substitution or adjustment shall be made in the aggregate number of
shares reserved for issuance under the Plan, and in the number and
option price of shares subject to outstanding Options and other stock
based Awards granted under the Plan, as may be determined to be
appropriate by the Committee in its sole discretion, provided that the
number of shares subject to any Award shall always be a whole number.
Any such adjusted option price shall also be used to determine the
amount payable by the Company upon the exercise of any Stock
Appreciation Right associated with any Stock Option.
5. Eligibility. Officers and other key employees of or consultants to
the Company, its affiliates and subsidiaries (but excluding members of the
Committee and any person who serves only as a director) who are responsible for
or contribute to, as determined by the Committee in its sole discretion, the
management, growth and/or profitability of the business of the Company and/or
its subsidiaries and affiliates are eligible for Awards under the Plan.
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6. Stock Options.
6.1. Provision for Grant. Stock Options may be granted alone, in
addition to or in tandem with other Awards under the Plan. Any Stock Option
granted under the Plan shall be in such form as the Committee may from time to
time approve. The Committee shall have the authority to grant any optionee who
is an employee of the Company, or of any parent or subsidiary corporation of the
Company (in each case as defined in Section 424 of the Code), Incentive Stock
Options, Non-Qualified Stock Options, or both types of Stock Options (in each
case with or without Stock Appreciation Rights). To the extent that any Stock
Option does not qualify as an Incentive Stock Option, it shall constitute a
separate Non-Qualified Stock Option. In the case of any other person eligible
for an Award under the Plan, any Stock Option granted under the Plan shall be a
Non-Qualified Stock Option (with or without Stock Appreciation Rights).
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the Plan under Section 422 of the Code, or,
without the consent of the optionee(s) affected, to disqualify any Incentive
Stock Option under such Section 422.
6.2. Terms and Conditions. Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem appropriate:
(a) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Committee
at the time of grant but in the case of any Incentive Stock Option
shall be not less than 100% of the Fair Market Value of the Stock at
the time of grant. However, any Incentive Stock Option granted to any
optionee who, at the time the option is granted, owns more than 10% of
the voting power of all classes of stock of the Company or of a parent
or subsidiary corporation (in each case as defined in Section 424 of
the Code) shall have an exercise price no less than 110% of Fair Market
Value per share on date of the grant.
(b) Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Incentive Stock Option shall be exercisable
more than ten years after the date the Option is granted. However, any
Incentive Stock Option granted to any optionee who, at the time the
<PAGE> 9
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Option is granted owns more than 10% of the voting power of all classes
of stock of the Company or of a parent or subsidiary corporation (in
each case as defined in section 424 of the Code) may not have a term of
more than five years. No Stock Option may be exercised by any person
after expiration of the term of the Option.
(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Committee at or after grant, provided, however, that,
except as provided in Sections 6.2(g), 6.2(h) and 11, unless otherwise
determined by the Committee at or after grant no Stock Option shall be
exercisable during the six months following the date of the granting of
the Option. If the Committee provides, in its discretion, that any
Stock Option is exercisable only in installments, the Committee may
waive such installment exercise provisions at any time at or after
grant in whole or in part, based on such factors as the Committee shall
determine, in its sole discretion.
(d) Method of Exercise. Subject to whatever installment
exercise provisions apply pursuant to Section 6.2(c), Stock Options may
be exercised in whole or in part at any time and from time to time
during the option period, by giving written notice of exercise to the
Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either
by certified or bank check, or such other instrument as the Committee
may accept. As determined by the Committee, in its sole discretion, at
or after grant, payment in full or in part may also be made in the form
of unrestricted Stock already owned by the optionee or, in the case of
the exercise of a Non-Qualified Stock Option, Restricted Stock subject
to an Award hereunder (based, in each case, on the Fair Market Value of
the Stock on the date the option is exercised, as determined by the
Committee); provided, however, that, in the case of an Incentive Stock
Option, the right to make a payment in the form of already owned shares
may be authorized only at the time the option is granted.
If payment of the option exercise price of a Non-Qualified
Stock Option is made in whole or in part in the form of Restricted
Stock, such Restricted Stock (and any replacement shares relating
thereto) shall remain (or be) restricted in accordance with the
original terms of the Restricted Stock Award in question, and any
additional Stock received upon the exercise shall be subject to the
same forfeiture restrictions, unless otherwise determined by the
Committee, in its sole discretion, at or after grant.
<PAGE> 10
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If payment of the Option exercise price of a Stock Option is
made in whole or in part in the form of unrestricted Stock already
owned by the Participant, the Company may require that the Stock has
been owned by the Participant for a specified minimum period of time,
for the purpose of avoiding any charge to the Company's earnings,
limiting the pyramiding of Stock Option exercises, or such other
purposes as the Company deems appropriate.
No shares of Stock shall be issued until full payment therefor
has been made. An optionee shall generally have the rights to dividends
or other rights of a shareholder with respect to shares subject to the
Option when the optionee has given written notice of exercise, has paid
in full for such shares, and, if requested, has given the
representation described in Section 14.1.
(e) Replacement Options. If an Option granted pursuant to the
Plan may be exercised by an optionee by means of the delivery of
previously acquired Stock as provided in 6.2(d) above, then the
Committee may, in its sole discretion and at the time of the original
option grant, authorize the Participant to automatically receive a
replacement Option pursuant to this part of the Plan to the extent
shares are available under Section 4 at the time such replacement
Option would be issued. Any such replacement Option shall cover such
number of shares as may be determined by the Committee, but in no event
more than the number of shares equal to the difference between the
number of shares of the original Option exercised and the net shares
received by the Participant from such exercise. Any such replacement
Option shall have an exercise price equal to the then current Fair
Market Value of Stock, and a term extending to the expiration date of
the original Option.
The Committee shall have the right, in its sole discretion and
at any time, to discontinue the automatic grant of replacement Options.
(f) Transferability. No Stock Option shall be transferable by
the optionee otherwise than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee, provided, however, the
Committee may grant Non-Qualified Stock Options that are transferable,
without payment of consideration, to immediate family members of the
optionee or to trusts or partnerships for such family members.
<PAGE> 11
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(g) Termination by Reason of Death. If an optionee's
employment by or association with the Company and its subsidiaries and
affiliates terminates by reason of death, any Stock Option held by such
optionee may thereafter by exercised, to the extent then exercisable or
on such accelerated basis as the Committee may determine at or after
grant, by the legal representative of the estate or by the legatee of
the optionee under the will of the optionee, for a period of one year
(or such shorter period as the Committee may specify at grant) from the
date of such death or until the expiration of the stated term of such
Stock Option, whichever period is the shorter.
(h) Termination by Reason of Disability or Retirement. If an
optionee's employment by or association with the Company and its
subsidiaries and affiliates terminates by reason of Disability or
Retirement, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time
of termination, or on such accelerated basis as the Committee may
determine at or after grant, for a period of three years (or such
shorter period as the Committee may specify at grant) from the date of
such termination of employment or until the expiration of the stated
term of such Stock Option, whichever period is the shorter; provided,
however, that, if the optionee dies within such three-year period (or
such shorter period as the Committee shall specify at grant), any
unexercised Stock Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time of
death for a period of twelve months from the date of such death or
until the expiration of the stated term of such Stock Option, whichever
period is the shorter.
(i) Other Termination. Unless otherwise determined by the
Committee at grant, if an optionee's employment by or association with
the Company and its subsidiaries and affiliates terminates for any
reason other than death, Disability or Retirement, the Stock Option
shall thereupon terminate, except that such Stock Option may be
exercised, to the extent exercisable at termination, or on such
accelerated basis as the Committee may determine at or after grant, for
a period of three months (or such shorter period as the Committee shall
specific at grant) from the date of such termination or until the
expiration of the stated term of such Stock Option, whichever period is
shorter, if the optionee is involuntarily terminated by the Company
without Cause.
<PAGE> 12
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(j) Incentive Stock Option Limitations. To the extent required
for "incentive stock option" status under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
stock with respect to which Incentive Stock Options granted are
exercisable for the first time by the optionee during any calendar year
under the Plan and/or any other stock option plan of the Company and
any parent or subsidiary corporation (within the meaning of Section 424
of the Code) shall not exceed $100,000.
(k) Cash-out of Option; Settlement of Spread Value in
Restricted Stock. On receipt of written notice to exercise, the
Committee may, in its sole discretion, elect to cash out all or part of
the portion of the Option(s) to be exercised by paying the optionee an
amount, in cash or Stock, equal to the excess of the Fair Market Value
of the Stock over the option price (the "Spread Value") on the
effective date of such exercise. In addition, if the Option agreement
so provides at grant or is amended after grant and prior to exercise to
so provide (with the optionee's consent), the Committee may require
that all or part of the shares to be issued with respect to the Spread
Value of an exercised option take the form of Restricted Stock, which
shall be valued on the date of exercise on the basis of the Fair Market
Value of such Restricted Stock determined without regard to the
forfeiture restrictions involved, if any.
(l) Cashless Exercise; Satisfaction of Tax Withholdings. To
the extent permitted under the applicable laws and regulations, at the
request of a Participant and with the consent of the Committee, the
Company agrees to cooperate in a "cashless exercise" of an Option. The
cashless exercise shall be effected by the Participant delivering to a
registered securities broker acceptable to the Company instructions to
sell a sufficient number of shares of Stock from which such Option is
then exercisable to cover the costs and expenses associated with such
exercise and sale. Under any Option, the Committee may permit a
Participant to pay any applicable withholding taxes by delivering a
sufficient number of previously-owned shares of Common Stock to the
Company to satisfy such taxes or upon Participant's request, by having
the Company withhold the number of shares of Common Stock obtainable on
the exercise of an Option which when valued at Fair Market Value
(determined as of the day preceding the date of exercise) is equivalent
to the minimum required withholding taxes due.
<PAGE> 13
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7. Stock Appreciation Rights
7.1. Provision for Grant. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of the grant of such
Stock Option.
7.2. Termination. A Stock Appreciation Right or applicable portion
thereof granted with respect to a given Stock Option shall terminate and no
longer be exercisable upon the termination or exercise of the related Stock
Option, except that, unless otherwise determined by the Committee, in its sole
discretion, at the time of grant, a Stock Appreciation Right granted with
respect to less than the full number of shares covered by a related Stock Option
shall not be reduced until the number of shares covered by an exercise or
termination of the related Stock Option exceeds the number of shares not covered
by the Stock Appreciation Right.
7.3. Manner and Effect of Exercise. A Stock Appreciation Right may be
exercised by an optionee, in accordance with Section 7.4(b), by surrendering the
applicable portion of the related Stock Option. Upon such exercise and
surrender, the optionee shall be entitled to receive an amount determined in the
manner prescribed in Section 7.4(b). Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the extent
the related Stock Appreciation Right has been exercised.
7.4. Other Terms and Conditions. Stock Appreciation Rights granted
under the Plan shall be subject to the following terms and conditions, and shall
contain such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall deem appropriate:
(a) Exercisability. Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the Stock
Options to which they relate, if any, shall be exercisable in
accordance with the provisions of Section 6 and this Section 7 of the
Plan; provided, however, that any Stock Appreciation Right granted
subsequent to the grant of the related Stock Option shall not be
exercisable during the first six months of its term, except that this
special limitation shall not apply in the event of death or Disability
of the optionee prior to the expiration of the six-month period and
provided, further, however, that a Stock Appreciation Right granted in
connection with an Incentive Stock Option may be exercised only if and
when the market price of the Stock
<PAGE> 14
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subject to the Incentive Stock Option exceeds the exercise price of
such Stock Option.
(b) Amount Payable. Upon the exercise of a Stock Appreciation
Right, an optionee shall be entitled to receive up to, but not more
than, an amount in cash and/or shares of Stock equal in value to the
excess of the Fair Market Value of one share of Stock over the option
price per share specified in the related Stock Option, multiplied by
the number of shares in respect of which the Stock Appreciation Right
shall have been exercised. The Committee shall determine the form of
payment.
(c) Transferability. Stock Appreciation Rights shall be
transferable only when and to the extent that the underlying Stock
Option would be transferable under Section 6.2(f) of the Plan.
8. Restricted Stock
8.1. Provision for Grant. Shares of Stock may be issued either alone or
in addition to other Awards granted under the Plan at such price, if any, as the
Committee may determine. The Committee may condition the grant of Restricted
Stock upon the completion of additional service, attainment of specified
performance goals or such other factors as the Committee may determine, in its
sole discretion. The provisions of Restricted Stock Awards need not be the same
with respect to all Participants.
8.2. Awards and Certificates. The prospective recipient of a Restricted
Stock Award shall not have any rights with respect to such Award, unless and
until such recipient has executed an agreement evidencing the Award and has
delivered a fully executed copy thereof to the Company, and has otherwise
complied with the applicable terms and conditions of such Award.
8.3. Additional Terms and Conditions. Grants of Restricted Stock may be
made under the following additional terms and conditions:
(a) Purchase Price. The purchase price for shares of
Restricted Stock shall be equal to or less than their Fair Market Value
and may be zero.
(b) Acceptance of Awards. Awards of Restricted Stock must be
accepted within a period of 60 days (or such shorter period as the
Committee may specify at grant) after the Award date, by executing a
<PAGE> 15
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Restricted Stock Award agreement and paying whatever price (if any) is
required pursuant to the terms of the Award.
(c) Issuance of Certificates. Each Participant receiving a
Restricted Stock Award shall be issued a stock certificate in respect
of such shares of Restricted Stock. Such certificate shall be
registered in the name of such Participant, and, if applicable, shall
bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Award, substantially in the following
form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Boston Scientific
Corporation 1995 Long-Term Incentive Plan and an Agreement
entered into between the registered owner and Boston
Scientific Corporation. Copies of such Plan and Agreement are
on file in the offices of Boston Scientific Corporation at One
Boston Scientific Place, Natick, Massachusetts 01760"
(d) Escrow of Shares. The Committee may require that the stock
certificates evidencing shares of Restricted Stock be held in custody
by the Company until the restrictions thereon shall have lapsed, and
that the Participant deliver a stock power, endorsed in blank, relating
to the Stock covered by such Award.
(e) Transferability. Subject to the provisions of this Plan
and the Award agreement, during the period set by the Committee
commencing with the date of such Award (the "Restriction Period"), the
Participant shall not be permitted to sell, transfer, pledge, assign or
otherwise encumber shares of Restricted Stock awarded under the Plan.
Within these limits, the Committee, in its sole discretion, may provide
for the lapse of such restrictions in installments and may accelerate
or waive such restrictions in whole or in part, based on service,
performance and/or such other factors or criteria as the Committee may
determine, in its sole discretion.
(f) Rights Pending Lapse of Restrictions or Forfeiture of
Award. Except as provided in this subsection (f) and subsection (e)
above, the Participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a shareholder of the Company,
including the right to vote the shares, and the right to receive any
cash dividends. The Committee, in its sole discretion, as determined at
the time of Award, may permit or require the payment of cash dividends
to
<PAGE> 16
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be deferred and, if the Committee so determines, reinvested in
additional Restricted Stock to the extent shares are available under
Section 4.
(g) Termination of Employment. Subject to the applicable
provisions of the Award agreement and this Section 8, upon termination
of a Participant's employment or other association with the Company and
its subsidiaries and affiliates for any reason during the Restriction
Period, all shares still subject to restriction shall be forfeited by
the Participant. In the event of hardship or other special
circumstances of a Participant whose employment or association with the
Company and its subsidiaries and affiliates is involuntarily terminated
(other than for Cause), the Committee may, in it sole discretion, waive
in whole or in part any or all remaining restrictions with respect to
such Participant's shares of Restricted Stock, based on such factors as
the Committee may deem appropriate.
(h) Lapse of Restrictions. If and when the Restriction Period
expires without a prior forfeiture of the Restricted Stock subject to
such Restriction Period, the certificates for such shares shall be
delivered to the Participant promptly if not theretofore so delivered.
9. Long Term Performance Awards
9.1. Provision for Grant. Long-Term Performance Awards may be awarded
either alone or in addition to other Awards granted under the Plan. The
Committee shall determine the nature, length and starting date of the
performance period (the "Performance Period") for each Long-Term Performance
Award, which subject to Section 11 below shall be a period of at least one year,
and shall determine the performance objectives to be used in valuing Long-Term
Performance Awards and determining the extent to which such Long-Term
Performance Awards have been earned. Performance objectives may vary from
Participant to Participant and between groups of Participants and shall be based
upon such Company, business unit and/or individual performance factors and
criteria as the Committee may deem appropriate, including, but not limited to,
earnings per share or return on equity. Performance Periods may overlap and
Participants may participate simultaneously with respect to Long-Term
Performance Awards that are subject to different Performance Periods and/or
different performance factors and criteria.
9.2. Periodical Determination of Performance. At the beginning of each
Performance Period, the Committee shall determine for each Long-Term
<PAGE> 17
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Performance Award subject to such Performance Period the range of dollar values
or number of shares of Stock to be awarded to the Participant at the end of the
Performance Period if and to the extent that the relevant measure(s) of
performance for such Long Term Performance Award is (are) met. Such dollar
values or number of shares of Stock may be fixed or may vary in accordance with
such performance and/or other criteria as may be specified by the Committee, in
its sole discretion.
9.3. Adjustment of Awards. In the event of special or unusual events or
circumstances affecting the application of one or more performance objectives to
a Long-Term Performance Award, the Committee may revise the performance
objectives and/or underlying factors and criteria applicable to the Long-Term
Performance Awards affected, to the extent deemed appropriate by the Committee,
in its sole discretion, to avoid unintended windfalls or hardship.
9.4. Termination of Employment. Subject to Section 11 below and unless
otherwise provided in the applicable Award agreement(s), if a Participant
terminates employment or other association with the Company and its affiliates
and subsidiaries during a Performance Period because of death, Disability or
Retirement, such Participant shall be entitled to a payment with respect to each
outstanding Long-Term Performance Award at the end of the applicable Performance
Period (i) based, to the extent relevant under the terms of the award, upon the
Participant's performance for the portion of such Performance Period ending on
the date of termination and the performance of the applicable business unit(s)
for the entire Performance Period, and (ii) prorated, where deemed appropriate
by the Committee, for the portion of the Performance Period during which the
Participant was employed by or associated with the Company and its affiliates
and subsidiaries, all as determined by the Committee, in its sole discretion.
However, the Committee may provide for an earlier payment in settlement of such
award in such amount and under such terms and conditions as the Committee deems
appropriate.
Subject to Section 11 below, if a Participant terminates employment by
or association with the Company and its subsidiaries and affiliates during a
Performance Period for any other reason, then such Participant shall not be
entitled to any payment with respect to the Long-Term Performance Awards subject
to such Performance Period, unless the Committee shall otherwise determine, in
its sole discretion.
9.5. Form of Payment. The earned portion of a Long-Term Performance
Award may be paid currently or on a deferred basis with such
<PAGE> 18
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interest or earnings equivalent as may be determined by the Committee, in its
sole discretion. Payment shall be made in the form of cash or whole shares of
Stock, including Restricted Stock, either in a lump sum payment or in annual
installments commencing as soon as practicable after the end of the relevant
Performance Period, all as the Committee shall determine at or after grant.
10. Stock Grants. In recognition of significant contributions to the
success of the Company, its affiliates and subsidiaries, and in such other
circumstances as the Committee deems appropriate in its sole discretion, shares
of Stock may be issued either alone or in addition to other stock or cash-based
Awards granted under the Plan at such price, if any, as the Committee may
determine. Stock Grants Awards shall be made without forfeiture conditions of
any kind and otherwise pursuant to such terms and conditions as the Committee
may determine, in its sole discretion.
11. Change in Control Provisions.
11.1. Consequences of Event. In the event of a Change in Control, in
addition to the adjustment provided for in Section 4(c), the Committee may in
its discretion determine whether, with respect to all Stock Options granted and
Awards made before the Change in Control, the following acceleration and
valuation provisions shall apply:
(a) Any Stock Appreciation Rights outstanding for at least six
months and any Stock Options awarded under the Plan not previously
exercisable shall thereupon become fully exercisable.
(b) The restrictions applicable to any Restricted Stock Awards
under the Plan shall lapse.
(c) The value of all shares of Stock subject to outstanding
Stock Options and Restricted Stock Awards shall be paid to the holders
thereof in cash within thirty days following the Change in Control
(less any applicable exercise price and tax withholdings, and subject
to the surrender of the shares which are the subject of the Restricted
Stock Award) on the basis of the Change in Control Price as of the date
of such Change in Control.
(d) Any outstanding Long-Term Performance Awards shall be paid
out in cash within thirty days following the Change in Control based on
prorated target results for the performance periods in question.
<PAGE> 19
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In case of any reorganization, merger or consolidation of the Company into or
with another company or in the case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
each Stock Option and each other Award not otherwise settled in cash pursuant to
the preceding provisions of this Section 11.1 shall be automatically converted
into a stock option or other award which covers shares of stock or other
securities equivalent in kind and value to the shares or other securities the
optionee or holder would have held if the Stock Option or other Award had been
exercised or received in full prior to such reorganization, merger,
consolidation, sale or conveyance and no disposition thereof had subsequently
been made, and the option price under each Stock Option shall be proportionately
adjusted.
11.2. Change in Control. For purposes of this Plan, a "Change in
Control" means the happening of any of the following:
(a) The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either (i)
the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power
of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Company Voting
Securities"); provided, however, that any acquisition by (x) any
non-corporate shareholder of the Company as of the effective date of
the initial registration of an offering of Stock under the Securities
Act of 1933, (y) the Company or any of its subsidiaries, or any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any of its subsidiaries or (z) any corporation with respect
to which, following such acquisition, more than 60% of, respectively,
the then outstanding shares of common stock of such corporation and
combined voting power of the then outstanding voting 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 and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such
acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the Outstanding Company
Common Stock and Company Voting Securities, as the case may be, shall
not constitute a Change in Control of the Company; or
<PAGE> 20
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(b) Continuing Directors constitute less than a majority of
the Board, where a Continuing Director is (i) each person who was a
director of the Company on January 2, 1995, and (ii) each person who
subsequently becomes a director of the Company and whose election or
nomination was approved by a vote of at least a majority of the
Continuing Directors in office at the time of the election or
nomination unless that person became a director in connection with an
actual or threatened election contest; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in
each case, with respect to which all or substantially all of the
individuals and entities who were the respective beneficial owners of
the Outstanding Company Common Stock and Company Voting Securities
immediately prior to such Business Combination do not own beneficially,
directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination in substantially the same proportion as
their ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and Company Voting Securities, as the
case may be; or
(d) a complete liquidation or dissolution of the Company or a
sale or other disposition of all or substantially all of the assets of
the Company other than to a corporation with respect to which,
following such sale or disposition, more than 60% of, respectively, the
then outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote generally in
the election of directors is then owned beneficially, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Company Voting Securities immediately prior to
such sale or disposition in substantially the same proportion as their
ownership of the Outstanding Company Common Stock and Company Voting
Securities, as the case may be, immediately prior to such sale or
disposition.
11.3. Change in Control Price. For purposes of this Plan, "Change in
Control Price" means the highest closing price per share paid in any transaction
on the New York Stock Exchange, or the highest price paid or offered in any bona
fide transaction related to a potential or actual change in
<PAGE> 21
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control of the Company, at any time during the preceding sixty day period as
determined by the Committee except that, in the case of Incentive Stock Options
and Stock Appreciation Rights relating to Incentive Stock Options, such price
shall be based only on transactions reported for the date on which the Committee
decides to cash out such options.
12. Amendment and Termination. The Board may terminate or amend the
Plan at any time and from time to time; provided, however, that the Board may
not, without approval of the shareholders of the Company, increase the maximum
number of shares of Stock purchasable under the Plan or change the description
of the individuals eligible to receive Awards. No termination of or amendment to
the Plan may adversely affect the rights of a Participant with respect to any
Award theretofore granted under the Plan without such Participant's consent.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Section 4 above, no such
amendment shall impair the rights of any Participant without the Participant's
consent.
13. Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than those of any
other general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to Awards hereunder, provided, however, unless the Committee otherwise
determines with the consent of the affected Participant, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of the
Plan.
14. General Provisions.
14.1. Investment Representation. The Committee may require each person
acquiring shares pursuant to an Award under the Plan to represent to and agree
with the Company in writing that the Participant is acquiring the shares for
investment without a view to distribution thereof. The certificates for such
shares may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer. All certificates for shares of Stock or other
securities delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of any stock
<PAGE> 22
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exchange upon which the Stock is then listed, and any applicable Federal or
state securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.
14.2. Adoption of Other Plans. Nothing contained in this Plan shall
prevent the Board of Directors from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.
14.3. No Employment Rights. Neither the establishment or continuation
of the Plan, nor the grant of any Award hereunder, shall confer upon any
employee or consultant of the Company or its affiliates or subsidiaries any
right to continued employment or association with the Company and its affiliates
and subsidiaries, nor shall it interfere in any way with the right of the
Company and its affiliates and subsidiaries to terminate the employment or
association of any of its employees or consultants at any time.
14.4. Tax Withholding. No later than the date as of which an amount
first becomes includible in the gross income of the Participant for Federal
income tax purposes with respect to any Award, the Participant shall pay to the
Company, or make arrangements satisfactory to the Committee regarding the
payment of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee, the minimum required withholding obligations may be settled with
Stock, including Stock that is part of the Award that gives rise to the
withholding requirement. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the Participant.
14.5. Payments on Death. The Committee shall establish such procedures
as it deems appropriate for a Participant to designate a beneficiary to whom any
amounts payable in the event of the Participant's death are to be paid.
14.6. Governing Law. The Plan and all Awards and actions taken
thereunder shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without regard to the conflict of laws principles
thereof.
<PAGE> 23
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15. Term of Plan. The Plan shall become effective upon the approval of
the Plan by the shareholders of the Company. No Award shall be granted pursuant
to the Plan on or after the tenth anniversary of the Plan's approval by
shareholders, but Awards theretofore granted may extend beyond that date.
<PAGE> 24
BOSTON SCIENTIFIC CORPORATION
1995 LONG-TERM INCENTIVE PLAN
First Amendment
Pursuant to the provisions of Section 12 of Boston Scientific Corporation's
1995 Long-Term Incentive Plan (the "Plan"), the Board of Directors of Boston
Scientific Corporation hereby (i) amends Section 4(a) of the Plan to remove the
expression "5,000,000" and replace it with the expression "15,000,000", and (ii)
amends Section 5 of the Plan by inserting the following sentence at the end of
the existing Section 5: "Notwithstanding anything to the contrary in this Plan,
no executive officer of the Company may be granted Awards under the Plan with
respect to more than 1,000,000 shares of Stock during the initial ten-year term
of this Plan."
All other terms and provisions of the Plan, and any Awards made thereunder,
remain in full force and effect.
<PAGE> 25
AMENDMENT NO.1 TO THE BOSTON SCIENTIFIC CORPORATION
1995 LONG-TERM INCENTIVE PLAN
The Boston Scientific Corporation 1995 Long-Term Incentive Plan (the
"Plan") is hereby amended as follows:
1. Section 6(f) of the Plan is amended by deleting the existing Section 6(f) in
its entirety and replacing it with the following:
"(f) Transferability. No Stock Option shall be transferable by an optionee
other than by will or by the laws of descent and distribution and all Options
granted hereunder shall be exercisable, during the Participant's lifetime, only
by the Participant provided, however, that the Committee may grant Non-Qualified
Stock Options that are transferable, subject to such conditions as the Committee
may from time to time establish, without payment of consideration, to immediate
family members of the optionee or to trusts, partnerships, or similar vehicles
established for the benefit of such family members."
2. Section 2(p) of the Plan is amended by deleting the existing Section 2(p) in
its entirety and replacing it with the following:
"(p) Stock means the Common Stock, $.01 par value per share, of the
Company."
<PAGE> 1
Exhibit 10.15
BOSTON SCIENTIFIC CORPORATION
401(k) SAVINGS PLAN
(Amended and Restated, Effective January 1, 1996)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1. INTRODUCTION 5
1.1. Qualification and Purpose. 5
1.2. Merger of Plans 5
1.3. Defined Terms. 5
ARTICLE 2. PARTICIPATION. 6
2.1. Date of Participation. 6
2.2. Duration of Participation 7
ARTICLE 3. CONTRIBUTIONS. 8
3.1. Elective Contributions 8
3.2. Form and Manner of Elections 8
3.3. Matching Contributions 8
3.4. Discretionary Contributions 9
3.5. Qualified Nonelective Contributions 9
3.6. Rollover Contributions. 9
3.7. Employee Contributions 9
3.8. Crediting of Contributions 10
3.9. Time for Making Contributions. 10
3.10. Certain Limits Apply 10
3.11. Return of Contributions 10
3.12. Establishment of Trust. 10
ARTICLE 4. PARTICIPANT ACCOUNTS. 11
4.1. Accounts 11
4.2. Adjustment of Accounts 11
4.3. Investment of Accounts. 11
4.4. Appointment of Investment Manager or Named Fiduciary. 12
4.5. Section 404(c) Compliance 12
4.6. Transfers From Other Plans 12
ARTICLE 5. VESTING OF ACCOUNTS. 14
5.1. Immediate Vesting of Certain Accounts 14
5.2. Deferred Vesting of Discretionary Contribution Accounts. 14
5.3. Special Vesting Rules 14
5.4. Changes in Vesting Schedule 15
5.5. Forfeitures 15
5.6. Vesting of Accounts Transferred From Other Plans 16
ARTICLE 6. WITHDRAWALS PRIOR TO SEPARATION FROM SERVICE. 17
6.1. Hardship Withdrawals 17
6.2. Withdrawals After Age 59-1/2 18
6.3. Restrictions on Certain Distributions 18
6.4. Limitation of Withdrawable Amount. 19
</TABLE>
-1-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
6.5. Required Distributions After Age 70-1/2 19
6.6. Distributions Required by a Qualified Domestic Relations Order 20
6.7. Certain Dispositions. 20
6.8. Spousal Consent to Withdrawals by Certain Former Participants in Other Plans 20
ARTICLE 7. LOANS TO PARTICIPANTS. 21
7.1. In General 21
7.2. Rules and Procedures 21
7.3. Maximum Amount of Loan 21
7.4. Minimum Amount of Loans; Limit on Number of Loans. 22
7.5. Note; Security; Interest 22
7.6. Repayment 22
7.7. Repayment Upon Distribution 22
7.8. Default 22
7.9. Note as Trust Asset 23
7.10. Nondiscrimination 23
7.11. Designation of Accounts 23
7.12. Spousal Consent to Loans to Certain Former Participants in Other Plans 23
ARTICLE 8. BENEFITS UPON DEATH OR SEPARATION FROM SERVICE 24
8.1. Separation from Service for Reasons Other Than Death 24
8.2. Time of Distributions. 24
8.3. Amount of Distribution. 25
8.4. Distributions After a Participant's Death. 25
8.5. Designation of Beneficiary 26
8.6. Direct Rollovers of Eligible Distributions 27
8.7. Special Rules for Former Participants in Merged Plans 28
ARTICLE 9. ADMINISTRATION. 30
9.1. Committee 30
9.2. Powers of Committee 30
9.3. Effect of Interpretation or Determination. 30
9.4. Reliance on Tables, etc 31
9.5. Claims and Review Procedures 31
9.6. Indemnification of Committee and Assistants 31
9.7. Annual Report. 31
ARTICLE 10. AMENDMENT AND TERMINATION. 32
10.1. Amendment 32
10.2. Termination 32
10.3. Distributions upon Termination of the Plan 32
10.4. Merger or Consolidation of Plan; Transfer of Plan Assets 33
ARTICLE 11. LIMITS ON CONTRIBUTIONS 34
11.1. Code Section 404 Limits. 34
</TABLE>
-2-
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
11.2. Code Section 415 Limits 34
11.3. Code Section 402(g) Limits. 36
11.4. Code Section 401(k)(3) Limits. 37
11.5. Code Section 401(m) Limits 42
11.6. Section 401(a)(26)/410(b) Limits. 46
ARTICLE 12. SPECIAL TOP-HEAVY PROVISIONS. 48
12.1. Provisions to apply. 48
12.2. Minimum Contribution 48
12.3. Adjustment to Limitation on Benefits. 49
12.4. Definitions. 49
ARTICLE 13. MISCELLANEOUS. 52
13.1. Exclusive Benefit Rule. 52
13.2. Limitation of Rights 52
13.3. Nonalienability of Benefits 52
13.4. Adequacy of Delivery 52
13.5. Governing law 52
ARTICLE 14. DEFINITIONS. 53
14.1. "Accounts" 53
14.2. "Affiliated Employer" 53
14.3. "Beneficiary" 53
14.4. "Board of Directors" 53
14.5. "Code" 53
14.6. "Committee" 53
14.7. "Company Stock" 53
14.8. "Compensation" 54
14.9. "Disability" 54
14.10. "Discretionary Contribution" 55
14.11. "Discretionary Contribution Account" 55
14.12. "Elective Contribution" 55
14.13. "Elective Contribution Account" 55
14.14. "Eligible Employee" 55
14.15. "Employee" 55
14.16. "Entry Date" 55
14.17. "ERISA" 55
14.18. "Highly Compensated Employee" 56
14.19. "Hour of Service" 57
14.20. "Matching Contribution Account" 59
14.21. "Normal Retirement Age" 59
14.22. "Participant" 59
14.23. "Participating Employer" 59
14.24. "Plan" 59
14.25. "Plan Sponsor" 59
</TABLE>
-3-
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
14.26. "Plan Year" 59
14.27. "Predecessor Employer" 59
14.28. "Qualified Domestic Relations Order" 59
14.29. "Qualified Nonelective Contribution" 60
14.30. "QNEC Account" 60
14.31. "Regulation" 60
14.32. "Required Beginning Date" 60
14.33. "Rollover Contribution" 61
14.34. "Section" 61
14.35. "Trust" 61
14.36. "Trustee" 61
14.37. "Valuation Date" 61
14.38. "Year of Service for Vesting" 61
</TABLE>
-4-
<PAGE> 6
I. ARTICLE INTRODUCTION.
A. QUALIFICATION AND PURPOSE. This document amends and restates the provisions
of the Boston Scientific Corporation Long-Term Savings and Security Plan,
effective as of January 1, 1996 unless otherwise stated herein and renames it
the Boston Scientific Corporation 401(k) Savings Plan. The original effective
date of the Plan was January 1, 1987. The Plan and its related Trust are
intended to qualify as a profit-sharing plan and trust under Code sections
401(a) and section 501(a), the cash or deferred arrangement forming part of the
Plan is intended to qualify under Code section 401(k). The Plan is intended to
constitute a plan described in section 404(c) of ERISA. The provisions of the
Plan and Trust shall be construed and applied accordingly. The purpose of the
Plan is to provide benefits to Participants in a manner consistent and in
compliance with such Code sections and Title I of ERISA.
A. MERGER OF PLANS. The rights of Participants in this Plan or any other plan
which has been merged into this Plan, who ceased to be employed by the
applicable employer prior to January 1, 1996 and have not thereafter been
reemployed by the Employer and the rights of their beneficiaries, shall be
determined in accordance with the terms of the applicable plan at the time they
ceased to be employed.
A. DEFINED TERMS. All capitalized terms used in the following provisions of the
Plan have the meanings given them under Article 14.
-5-
<PAGE> 7
I. ARTICLE PARTICIPATION.
A. DATE OF PARTICIPATION.
(a) Any individual who was a Participant on December 31, 1995
and is an Eligible Employee on January 1, 1996 will, subject to Section
2.2, continue to be a Participant.
(b) Any other individual will become a Participant on the
Entry Date coinciding with or next following the latest of
(1) January 1, 1996;
(2) the date on which he or she becomes an Eligible
Employee;
(3) the date on which he or she attains age 21; and
(4) the 30th day after the date he or she completes
an Hour of Service;
provided that (i) he or she is an Eligible Employee on such Entry Date
and (ii) he or she has in effect on such Entry Date a compensation
reduction authorization described in Section 3.2 which was submitted in
the manner prescribed by the Committee. Unless otherwise provided by
the Committee, an Employee who has satisfied the requirements of (1),
(2), (3) and (4) above, but who has failed to satisfy the requirements
of (i) or (ii) above, will become a Participant on the first Entry Date
coinciding with or next following the January 1, April 1, July 1 or
October 1 on which the requirements of both (i) and (ii) are satisfied.
(c) Unless otherwise provided in Schedule B, in the event the
Employer acquires a business of another employer, through an
acquisition of either assets or stock, an Employee who was employed by
such other employer immediately prior to such acquisition shall have
his or her prior service with such other employer taken into account,
as if it were service with the Employer, for purposes of (b)(4) above.
(d) An Employee who, immediately before becoming an Eligible
Employee, has a contribution agreement in effect with another
Affiliated Employer under a separate plan described in section 401(k)
of the Code shall become a Participant on the payroll date coinciding
with or next following the date he or she becomes an Eligible Employee,
provided that he or she has a compensation reduction authorization in
effect on such payroll date.
-6-
<PAGE> 8
A. DURATION OF PARTICIPATION. An individual who has become a Participant under
the Plan will remain a Participant for as long as an Account is maintained under
the Plan for his or her benefit, or until his or her death, if earlier.
Notwithstanding the preceding sentence and unless otherwise expressly provided
for under the Plan, no contributions shall be made with respect to a Participant
who is not an Eligible Employee. In the event a Participant remains an Employee
but ceases to be an Eligible Employee and becomes ineligible for contributions,
such Employee will again become eligible for contributions immediately upon
returning to the class of Eligible Employees. In the event an Employee who is
not an Eligible Employee becomes an Eligible Employee, such Employee will become
a Participant on the first Entry Date on or after becoming an Eligible Employee,
if he or she has satisfied the requirements of Section 2.1. A Participant or
former Participant who is reemployed as an Eligible Employee shall again become
eligible for contributions on the first Entry Date on or after reemployment.
-7-
<PAGE> 9
I. ARTICLE CONTRIBUTIONS.
A. ELECTIVE CONTRIBUTIONS. On behalf of each Participant for whom there is in
effect, for any pay period, a compensation reduction authorization described in
Section 3.2 and who is receiving Compensation from a Participating Employer
during such pay period, such Participating Employer will contribute to the
Trust, as an Elective Contribution, an amount equal to the amount by which such
Compensation was reduced pursuant to the compensation reduction authorization.
Elective Contributions for any pay period in a Plan Year may not be less than 1
percent nor exceed 15 percent of the Participant's Compensation for such pay
period.
A. FORM AND MANNER OF ELECTIONS. A "compensation reduction authorization" is an
authorization from an Eligible Employee to a Participating Employer which
satisfies the requirements of this Section 3.2. Each compensation reduction
authorization shall be in a form prescribed or approved by the Committee, and
may be entered into as of the Entry Date, described in Section 2.1(b) or the
first Entry Date coinciding with or next following the first day of any
subsequent calendar year quarter, upon such prior notice as the Committee may
prescribe. A compensation reduction authorization may be changed by the
Participant, with such prior notice as the Committee may prescribe, as of the
first Entry Date coinciding with or next following the first day of a calendar
quarter. A compensation reduction authorization shall be effective with respect
to Compensation payable on and after the applicable Entry Date. A compensation
reduction authorization may be revoked by the Participant at any time, upon such
prior notice as the Committee may prescribe. A Participant who revokes a
compensation reduction authorization may not enter into a new authorization
until the Entry Date coinciding with or next following the first day of any
subsequent calendar year quarter following the revocation.
A. MATCHING CONTRIBUTIONS.
(a) For each month in a Plan Year, each Participating Employer
will make a Matching Contribution to the Trust for the benefit of each
Participant on whose behalf it made Elective Contributions for the
period. The amount of Matching Contributions made by a Participating
Employer for the month shall be equal to 50% of the Elective
Contributions made on behalf of the Participant for the month which do
not exceed 4% of the Participant's Compensation for such month.
(b) If (i) a Participant is an Eligible Employee on the last
day of the Plan Year, and (ii) the aggregate Matching Contributions
made by his or her Participating Employer under paragraph (a) above to
the Trust for the benefit of such Participant with respect to such Plan
Year are less than the lesser of (1) 50% of the Participant's Elective
Contributions for such Plan Year or (2) 2% of such Participant's
Compensation in such Plan Year, then the Participating Employer
-8-
<PAGE> 10
shall make a further contribution to the Trust, for the benefit of such
Participant, to be credited to his or her Matching Contribution
Account, such that the aggregate Matching Contributions made by the
Participating Employer for the benefit of such Participant for the Plan
Year under this Section shall equal the lesser of the amounts set forth
in clauses (1) and (2) above.
A. DISCRETIONARY CONTRIBUTIONS. For each Plan Year, the Participating Employers
shall contribute to the Plan such other amounts, if any, as the Board of
Directors, in its sole discretion, may determine. Any such Discretionary
Contribution for a Plan Year shall be made in cash or, if the Board of Directors
so directs, in Company Stock, and shall be allocated among and credited to the
Accounts of each Participant who:
(a) is an Eligible Employee on the last day of the Plan Year;
or
(b) has ceased to be an Eligible Employee during the Plan Year
by reason of death or separation from service after attaining age 65 or
on account of Disability,
in proportion to their relative amounts of Compensation for such Plan Year.
A. QUALIFIED NONELECTIVE CONTRIBUTIONS. To the extent necessary to satisfy the
Code Section 401(k)(3) limits with respect to Elective Contributions or the Code
Section 401(m) limits with respect to Matching Contributions, the Plan Sponsor,
in its discretion, may determine whether a Qualified Nonelective Contribution
shall be made to the Trust for a Plan Year and , if so, the amount to be
contributed by such Participating Employer. If the Plan Sponsor determines that
a Qualified Nonelective Contribution shall be made, each Participating Employer
shall contribute its designated portion. A Qualified Nonelective Contribution
for a Plan Year shall be allocated among and credited to the QNEC Accounts of
all Participants who are eligible to receive Elective Contributions for the Plan
Year, in proportion to their relative amounts of Compensation for the Plan Year.
Qualified Nonelective Contributions shall be fully vested and subject to the
same distribution rules as Elective Contributions as of the time such Qualified
Nonelective Contributions are made to the Plan.
A. ROLLOVER CONTRIBUTIONS. An Eligible Employee (whether or not a Participant)
may make a Rollover Contribution to the Plan upon demonstration to the Committee
that the contribution is eligible for transfer to the Plan pursuant to the
rollover provisions of the Code.
A. EMPLOYEE CONTRIBUTIONS. Employee after-tax contributions are neither required
nor permitted under the Plan.
B. CREDITING OF CONTRIBUTIONS. Each type of contribution for a Plan Year shall
be allocated among and credited to the respective Accounts of Participants
-9-
<PAGE> 11
eligible to share in the contributions as of the Valuation Date next following
the date the contributions are received by the Trustee.
A. TIME FOR MAKING CONTRIBUTIONS. Elective Contributions will be paid in cash to
the Trust as soon as such contributions can reasonably be segregated from the
general assets of the Participating Employer, but in any event no later than the
time set forth in Department of Labor Regulations section 25103-102.
A. CERTAIN LIMITS APPLY. All contributions to the Plan are subject to the
applicable limits set forth under Code sections 401(k), 402(g), 401(m), 404, and
415, as further described elsewhere in the Plan. In addition, certain minimum
allocations may be required under Code sections 401(a)(26), 410(b), and 416, as
also further described elsewhere in the Plan.
A. RETURN OF CONTRIBUTIONS. If any contribution by a Participating Employer to
the Trust is (a) made by reason of a mistake of fact, or (b) believed by the
Participating Employer in good faith to be deductible under Code section 404,
but the deduction is disallowed, the Trustee shall, upon request by the
Participating Employer, return to the Participating Employer the excess of the
amount contributed over the amount, if any, that would have been contributed had
there not occurred a mistake of fact or a mistake in determining the deduction.
Such excess shall be reduced by the losses of the Trust attributable thereto, if
and to the extent such losses exceed the gains and income attributable thereto.
In no event shall the return of a contribution hereunder cause any Participant's
Accounts to be reduced to less than they would have been had the mistaken or
nondeductible amount not been contributed. No return of a contribution hereunder
shall be made more than one year after the mistaken payment of the contribution,
or disallowance of the deduction, as the case may be.
A. ESTABLISHMENT OF TRUST. The Plan Sponsor will establish a Trust to accept and
hold contributions made under the Plan. The Trust shall be governed by an
agreement between the Plan Sponsor and the Trustee the terms of which shall be
consistent with the Plan provisions and intended qualification under Code
sections 401(a) and 501(a).
-10-
<PAGE> 12
II. ARTICLE PARTICIPANT ACCOUNTS.
A. ACCOUNTS. The Committee will establish and maintain (or cause the Trustee to
establish and maintain) for each Participant, such Accounts as are necessary to
carry out the purposes of this Plan.
A. ADJUSTMENT OF ACCOUNTS. As of each Valuation Date, each Account will be
adjusted to reflect the fair market value of the assets allocated to the
Account. In so doing,
(a) each Account balance will be increased by the amount of
contributions, income and gain allocable to such Account since the
prior Valuation Date; and
(b) each Account balance will be decreased by the amount of
distributions from the Account and expenses and losses allocable to the
Account since the prior Valuation Date.
Income, expense, gain or loss which is generated by a particular investment
within the Trust shall be allocated among the Accounts invested in that
investment in proportion to the balances of such Accounts as of the immediately
preceding Valuation Date. Any expenses relating to a specific Account or
Accounts, including without limitation commissions or sales charges with respect
to an investment in which the Account participates, may be charged solely to the
particular Account or Accounts.
A. INVESTMENT OF ACCOUNTS.
(a) A Participant's Accounts shall be invested by the Trustee
as the Participant directs from among such investment options as the
Plan Sponsor may make available from time to time. The Committee shall
prescribe the manner in which such directions may be made or changed,
the dates as of which they shall be effective, and the allocation of
Accounts with respect to which no directions are submitted. Any other
assets of the Trust not specified above in this Section shall be
invested by the Trustee in the sole discretion of the Trustee and in
accordance with its fiduciary duties under ERISA; provided, that if an
investment manager or other named fiduciary has been appointed with
respect to all or a portion of such assets, the Trustee shall invest
such portion as the investment manager or other named fiduciary
directs.
(b) The Committee is specifically authorized to establish a
Company Stock investment option. To the extent such Company Stock has
voting rights, or in the event of any tender or exchange offer by any
person for such Company Stock, Participants invested in such Company
Stock fund may direct the Trustee as to the voting and tender of such
Company Stock in accordance with procedures
-11-
<PAGE> 13
established by the Committee. The Committee may also provide for the
temporary suspension of the right of Participants subject to Section 16
of the Securities Exchange Act of 1934 to invest further amounts in the
Company Stock fund following any withdrawal from the portion of such
Participants' Accounts theretofore invested in such Company Stock fund.
The Committee may also establish from time to time a maximum percentage
of any Participant's Accounts which may be invested in the Company
Stock fund.
A. APPOINTMENT OF INVESTMENT MANAGER OR NAMED FIDUCIARY. The Plan Sponsor may
appoint in writing one or more investment managers or other "named fiduciaries"
(within the meaning of ERISA section 402(a)(2)) to manage the investment of all
or designated portions of the assets held in the Trust. The appointment shall be
effective upon acknowledgment in writing by the investment manager or other
named fiduciary that it is a fiduciary with respect to the Plan. An investment
manager must be (a) registered as an investment adviser under the Investment
Advisers Act of 1940, (b) a bank as defined in that Act, or (c) an insurance
company qualified under the laws of more than one state to manage, acquire or
dispose of any assets of the Plan.
A. SECTION 404(C) COMPLIANCE. The Plan is intended to be an "ERISA section
404(c) plan" as described in section 404(c) of ERISA and title 29 of the Code of
Federal Regulations section 2550.404c-1, and shall be administered and
interpreted in a manner consistent with that intent. The investment direction
requirements of Department of Labor regulation section
2550.404c-1(b)(2)(i)(B)(1)(iv) and (b)(2)(i)(A) and the requirements relating to
the investment alternatives under the Plan are intended to be satisfied by
Section 4.3 above, in each case taking into account related communications to
Participants and beneficiaries under the summary plan description for the Plan
and other communications. For purposes of ERISA section 404(c), the "identified
plan fiduciary" obligated to comply with Participant and Beneficiary investment
instructions (except as provided in such section and regulations thereunder),
the identified plan fiduciary obligated to provide Participants and
Beneficiaries with the materials set forth in Department of Labor regulations
section 2550.404c-1(b)(2)(i)(B) and the identified plan fiduciary obligated to
comply with the confidentiality requirements and procedures under Department of
Labor regulations section 2550.404c-1(d)(2)(ii)(E)(4)(viii) relating to employer
securities shall be the Committee. The Committee may decline to implement
Participant and Beneficiary investment instructions which would result in a
prohibited transaction described in ERISA section 406 or section 4975 of the
Code or which would generate income that would be taxable to the Plan.
A. TRANSFERS FROM OTHER PLANS.
(a) Unless otherwise provided herein, in the event that
another plan is merged into the Plan, or accounts are otherwise
transferred to the Plan from another plan, the assets transferred to
the Plan shall be allocated as follows:
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<PAGE> 14
(1) Assets attributable to an individual's elective
contributions and qualified nonelective contributions (if any) shall be
allocated to an Elective Contribution Account for his or her benefit
under the Plan;
(2) Assets attributable to matching employer contributions (if
any), shall be allocated to a Matching Contribution Account for his or
her benefit under the Plan;
(3) Assets attributable to other employer contributions (if
any), shall be allocated to a Discretionary Contribution Account for
his or her benefit under the Plan; and
(4) Assets attributable to an individual's after-tax
contributions (if any) shall be allocated to an After-Tax Contribution
Account for his or her benefit under the Plan.
The assets transferred may be separately accounted for in sub-accounts
under the Plan as determined to be necessary by the Committee in order to
administer the provisions of Articles 5, 6, 7 and 8. Unless otherwise provided
in Schedule B or in an acquisition agreement between a Participating Employer
and the employer maintaining such transferor plan, all assets transferred under
this Section 4.6 shall be invested in accordance with investment directions by
the Participant under Section 4.3 above or, absent such directions, in a fund
designated by the Committee.
(b) Any individual for whom accounts have been transferred
under this Section 4.6 and who has not become a Participant under
Section 2.1 shall be treated as a Participant for purposes of Articles
4, 5, 8, 9, 10 and 13 and, so long as he or she is an Employee,
Articles 6 and 7.
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<PAGE> 15
I. ARTICLE VESTING OF ACCOUNTS.
A. IMMEDIATE VESTING OF CERTAIN ACCOUNTS. A Participant shall at all times have
a vested interest in 100% of his or her Elective Contribution Account, QNEC
Account, Matching Contribution Account, and his or her Rollover Account, if any.
A. DEFERRED VESTING OF DISCRETIONARY CONTRIBUTION ACCOUNTS.
(a) A Participant who on December 31, 1992 had at least three
Years of Service for purposes of calculating vesting, shall have a
vested interest in 100% of his or her Discretionary Contribution
Account, if any.
(b) Effective January 1, 1996, a Participant not described in
(a) above, shall have a vested interest in a percentage of his or her
Discretionary Contribution Account, if any, determined in accordance
with the following schedule and based on his or her Years of Service
for Vesting:
<TABLE>
<CAPTION>
Years of Service Applicable
for Vesting Nonforfeitable Percentage
----------- -------------------------
<S> <C> <C>
less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
</TABLE>
A. SPECIAL VESTING RULES. Notwithstanding any provision of the Plan to the
contrary, a Participant will have a vested interest in 100% of the Accounts
maintained for his or her benefit upon the happening of any one of the following
events:
(a) the Participant's attainment of age 65 while an Employee;
(b) the Participant's separation from service on account of
Disability;
(c) the Participant's death while an Employee;
(d) the termination of the Plan or the complete discontinuance
of Contributions under the Plan; or
(e) the partial termination of the Plan with respect to the
Participant.
A. CHANGES IN VESTING SCHEDULE. A Plan amendment which changes a vesting
schedule under the Plan shall apply with respect to any Participant who has
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<PAGE> 16
completed three Years of Service prior to the expiration of the period described
below only to the extent that the Participant's vested percentage in his or her
Accounts determined under the amendment is greater than the nonforfeitable
percentage of his or her Accounts determined without regard to the amendment.
The period referred to in the preceding sentence will begin on the date the
amendment of the vesting schedule is adopted and will end 60 days after the
latest of the following dates:
(a) the date on which such amendment is adopted;
(b) the date on which such amendment becomes effective; and
(c) the date on which the Participant is issued written notice
of such amendment by the Committee.
A. FORFEITURES.
(a) In general. Any portion of a Participant's Account in
which he or she is not vested upon separation from service for any
reason shall be forfeited as of the earlier of:
(i) the expiration of 5 consecutive Plan Years during
each of which the Participant does not complete 501 Hours of
Service, or
(ii) the end of the calendar month in which the
Participant separates from the service of the Affiliated
Employers.
Any Participant who separates from the service of the Affiliated Employers prior
to earning a vested interest in any of his or her Accounts shall be deemed to
have received a complete distribution of his or her vested interest on the day
he or she separates from service. If the Participant elects to have distributed
less than the entire vested portion of an Account derived from Participating
Employer Contributions in which he or she is less than fully vested, the part of
the nonvested portion that will be treated as a forfeiture is the total
nonvested portion multiplied by a fraction, the numerator of which is the amount
of the distribution and the denominator of which is the total vested value of
the Account.
(b) Certain Restorations. Notwithstanding the preceding
paragraph, if a Participant forfeits any portion of an Account as a
result of the complete distribution of the vested portion of the
Account but thereafter returns to the employ of an Affiliated Employer,
the amount forfeited will be recredited to the Participant's Account if
he or she repays to the Plan the entire amount previously distributed,
without interest, prior to the earlier of (i) the close of the fifth
consecutive Plan Year in each of which the Participant does not
complete at least 501 Hours of Service or (ii) the fifth anniversary of
the date on which the
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Participant is reemployed. In the case of a Participant who had earlier
separated from service prior to earning a vested interest in any of his
or her Accounts and was deemed to have received a distribution of such
vested interest, the amount forfeited will be restored upon the
Participant's reemployment prior to the close of the fifth consecutive
Plan Year in each of which the Participant does not complete at least
501 Hours of Service. A Participant's vested percentage in the amount
recredited under this paragraph will thereafter be determined under the
terms of the Plan as if no forfeiture had occurred. The money required
to effect the restoration of a Participant's Account shall come from
other Accounts forfeited during the Plan Year of restoration, and to
the extent such funds are inadequate, from a special contribution by
the Participant's Participating Employer.
(c) Application of forfeitures. Any forfeitures occurring in a
Plan Year
(i) first will be applied to the restoration of any
Accounts as required for such Year; and
(ii) to the extent amounts remain after the
application of (i) above, will be allocated among and credited
to the Discretionary Contribution Accounts of the remaining
Participants in proportion to their relative amounts of
Compensation for the Plan Year.
A. VESTING OF ACCOUNTS TRANSFERRED FROM OTHER PLANS. In the event that another
plan is merged into the Plan, or accounts are otherwise transferred to the Plan
from another plan, the portion of each Account under this Plan that is
attributable to a vested and nonforfeitable account, or portion of an account,
under the transferor plan shall remain vested and nonforfeitable under this
Plan. The remaining portion of each Account under this Plan that is attributable
to a transferor plan account shall vest in accordance with Section 5.2, unless
otherwise provided in Schedule B.
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<PAGE> 18
II. ARTICLE WITHDRAWALS PRIOR TO SEPARATION FROM SERVICE.
A. HARDSHIP WITHDRAWALS.
(a) Immediate and heavy financial need. A Participant may make
a withdrawal from his or her Elective Contribution Account in the event
of an immediate and heavy financial need arising from
(i) expenses for medical care described in Code
section 213(d) previously incurred by the Participant, his or
her spouse or any of his or her dependents (as defined in Code
section 152) or amounts necessary for these persons to obtain
such medical care;
(ii) costs directly related to the purchase of a
principal residence of the Participant (excluding mortgage
payments);
(iii) the payment of tuition and related educational
fees for the next 12 months of post-secondary education for
the Participant, his or her spouse, children or dependents (as
defined in Code section 152);
(iv) payments necessary to prevent the eviction of
the Participant from his or her principal residence or
foreclosure on the mortgage on that principal residence; or
(v) any other need identified by the Commissioner of
Revenue as a "financial hardship" for purposes of section
401(k) plans through the publication of revenue rulings,
notices and other documents of general applicability.
The Committee's determination of whether there is an immediate and heavy
financial need as defined above shall be made solely on the basis of written
evidence furnished by the Participant. Such evidence must also indicate the
amount of such need.
(b) Distribution of amount necessary to meet need. As soon as
practicable after the Committee's determination that an immediate and
heavy financial need exists with respect to the Participant and that
the Participant has obtained all other distributions (other than
hardship distributions) and all nontaxable loans currently available
under the Plan and all other plans maintained by the Affiliated
Employers, the Committee will direct the Trustee to pay to the
Participant the amount necessary to meet the need created by the
hardship (but not in excess of the value of the Participant's Elective
Contribution Account, determined as of the Valuation Date next
following the Committee's
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<PAGE> 19
determination). The amount necessary to meet the need may include any
amounts necessary to pay any federal, state, or local income taxes or
penalties reasonably anticipated to result from the distribution.
Distribution will be made from the Participant's Elective Contribution
Account (provided that no portion of an Elective Contribution Account
attributable to income earned after December 31, 1988 may be
distributed due to a financial hardship).
(c) Effect of hardship distribution. If a Participant
receives a hardship distribution, then any Elective Contribution
election or any other cash-or-deferred or employee contribution
election in effect with respect to the Participant under the Plan or
any other qualified plan maintained by an Affiliated Employer) shall be
suspended for the 12-month period beginning with the date the
Participant receives the distribution, and the amount of Elective
Contributions made for the benefit of the Participant, together with
any elective deferrals made on behalf of the Participant under any
other plan maintained by the Affiliated Employers for the calendar year
immediately following the calendar year of the hardship distribution,
must not exceed the applicable limit under Code section 402(g) for such
next calendar year, less the amount of such contributions made on
behalf of the Participant for the calendar year of the hardship
distribution.
A. WITHDRAWALS AFTER AGE 59-1/2. A Participant who is an Employee and has
attained age 59-1/2 may make a withdrawal from any one or more of his or her
Accounts for any reason, upon such prior notice as the Committee may prescribe.
Any such withdrawal shall be in the amount specified by the Participant, up to
the vested value of the particular Account determined as of the Valuation Date
next following the Committee's receipt of notice of the withdrawal. Payment to
the Participant shall be made as soon as practicable after such Valuation Date.
A. RESTRICTIONS ON CERTAIN DISTRIBUTIONS. In the case of a Participant whose
Accounts are valued in excess of $3,500 and who has not yet attained the Normal
Retirement Age, no distribution may be made to the Participant under this
Article unless
(a) between the 30th and 90th day prior to the date
distribution is to be made, the Committee notifies the Participant in
writing that he or she may defer distribution until the Normal
Retirement Age and provides the Participant with a written description
of the material features and (if applicable) the relative values of the
forms of distribution available under the Plan; and
(b) the Participant consents to the distribution in writing
after the information described above has been provided to him or her.
Notwithstanding the foregoing, such distribution may commence less than 30 days
after the required notification described above is given, provided that (i) the
Committee clearly informs the Participant that the Participant has a right to a
period of at least 30
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<PAGE> 20
days after receiving the notice to consider whether or not to elect a
distribution; and (ii) the Participant, after receiving the notice, elects a
distribution.
For purposes of this Section, a Participant's Accounts will be considered to be
valued in excess of $3,500 if the value of his or her Accounts exceeds such
amount at the time of the distribution in question or exceeded such amount at
the time of any prior distribution to (or withdrawal by) the Participant under
the Plan.
A. LIMITATION OF WITHDRAWABLE AMOUNT. In the event that there is allocated to a
Participant's Account a promissory note with respect to a loan made from the
Plan, the maximum amount of cash that may be withdrawn from the Account prior to
the Participant's separation from service shall be determined without regard to
the value of such note.
A. REQUIRED DISTRIBUTIONS AFTER AGE 70-1/2.
1. Notwithstanding any provision of the Plan to the contrary, in the
case of a Participant who remains an Employee on or after his or her
Required Beginning Date, the entire vested portion of the Employee's
Accounts will be distributed, beginning on such date and in accordance
with Regulation sections 1.401(a)(9)-1 and 1.401 (a)(9)-2, over a
period not extending beyond the life expectancy of such Employee or the
joint life expectancy of the Employee and his or her Beneficiary.
1. In general, for any calender year (a "distribution year") beginning
with the year prior to a Participant's Required Beginning Date, the
minimum required distribution shall be the quotient obtained by
dividing the Participant;'s vested Account balances by the applicable
life expectancy for the distribution year determined by use of the
expected return multiples in Tables V and VI of Regulation section
1.72-9. The minimum distribution for the first distribution year shall
be made on the April 1st next following the required Beginning Date.
The distribution for each subsequent distribution year shall be made on
the December 31st of that year.
1. The vested Account balances to be used for determining the minimum
distribution for a distribution year are the vested balances as of the
last Valuation Date in the calendar year prior to the distribution
year, increased by any contributions or forfeitures allocated to the
Account and decreased by any distributions made from the Account as of
dates in the calendar year after the last Valuation Date. In the case
of determining the Account balance for purposes of the second
distribution year, the Account balance will be further decreased by any
distribution from the Account made in the second distribution year and
before the Required Beginning Date which is not in excess of the amount
required for the first distribution year.
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<PAGE> 21
1. For purposes of determining the applicable life expectancy for any
distribution year, life expectancies will not be recalculated annually
pursuant to Code section 401(a)(9).
To the extent a Participant changes or revokes a Beneficiary designation after
his or her Required Beginning Date, life expectancies will be decreased (but not
extended) by the measuring life of the substitute Beneficiary.
A. DISTRIBUTIONS REQUIRED BY A QUALIFIED DOMESTIC RELATIONS ORDER. To the extent
required by a Qualified Domestic Relations Order, the Committee shall make
distributions from a Participant's Accounts to alternate payees named in such
order in a manner consistent with the distribution options otherwise available
under the Plan, regardless of whether the Participant is otherwise entitled to a
distribution at such time under the Plan.
A. CERTAIN DISPOSITIONS. In connection with the disposition by a Participating
Employer of at least 85 percent of the assets used by the Participating Employer
in a trade or business to an unrelated corporation, or the disposition of a
Participating Employer's interest in a subsidiary to an unrelated entity,
distribution of the entire vested Account balance of an Employee who continues
employment with the acquirer may be made to the Employee in a single sum, but
only if the acquirer does not maintain the Plan after the disposition, and only
if such distribution is otherwise made in accordance with Code section
401(k)(10).
A. SPOUSAL CONSENT TO WITHDRAWALS BY CERTAIN FORMER PARTICIPANTS IN OTHER PLANS.
In the case of a married Participant for whom amounts have been transferred
under Section 4.6 from another plan and who has at any time elected an annuity
form of payment under Section 8.7, no withdrawal may be made under Sections 6.1
or 6.2 unless (a) his or her spouse consents in writing to such withdrawal, such
consent acknowledges the effect of the withdrawal and is witnessed by a Plan
representative or a notary public, and such consent specifies the form of the
withdrawal (i.e., a lump sum cash payment), or (b) it is established to the
satisfaction of the Committee that the foregoing consent may not be obtained
because the spouse cannot be located, or because of such other circumstances as
the Secretary of the Treasury may prescribe.
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<PAGE> 22
I. ARTICLE LOANS TO PARTICIPANTS.
A. IN GENERAL. Upon the written request of a Participant on a form acceptable to
the Committee, and subject to the conditions of this Article, the Committee
shall direct the Trustee to make a loan from the Trust to the Participant.
Notwithstanding the foregoing, a Participant who is an owner-employee or member
of the family (as defined in Code section 267(e)(4) of an owner-employee is not
eligible to receive a loan under this Article 7. An "owner-employee" shall mean
an owner employee as defined in Code section 401(c)(3), and shall include an
employee or officer of an electing small business (Subchapter S) corporation
which is an Affiliated Employer who owns (or is considered as owning within the
meaning of Code section 318(a)(1)), on any day during the taxable year of such
corporation, more than 5% of the outstanding stock of such corporation. For
purposes of this Article, "Participant" includes any former Participant who is a
"party in interest" within the meaning of ERISA section 3(14) and a deceased
Participant's Beneficiary who has not yet received the entire vested portion of
the Participant's Accounts and who is a "party in interest" as described above.
A. RULES AND PROCEDURES. The Committee shall promulgate such rules and
procedures, not inconsistent with the express provisions of this Article, as it
deems necessary to carry out the purposes of this Article including, but not
limited to, rules for charging loan fees directly to a Participant's Accounts.
All such rules and procedures shall be deemed a part of the Plan for purposes of
the Department of Labor regulation section 2550.408b-1(d). Loans shall not be
made available to Participants who are Highly Compensated Employees in an amount
(determined under Department of Labor regulation section 2550.408b-1(b)) greater
than the amount made available to other Participants.
A. MAXIMUM AMOUNT OF LOAN. The following limitations shall apply in determining
the amount of any loan to a Participant hereunder:
(a) The amount of the loan, together with any other
outstanding indebtedness of the Participant under the Plan or any other
qualified retirement plans of the Affiliated Employers, shall not
exceed $50,000 reduced by the excess of (i) the highest outstanding
loan balance of the Participant from such plans during the one-year
period ending on the day prior to the date on which the loan is made,
over (ii) the Participant's outstanding loan balance from such plans
immediately prior to the loan.
(b) The amount of the loan shall not exceed 50% of the
Participant's vested interest in his or her Accounts, determined as of
the Valuation Date immediately preceding the date of the loan.
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<PAGE> 23
A. MINIMUM AMOUNT OF LOANS; LIMIT ON NUMBER OF LOANS. The amount of any single
loan under this Plan shall not be less than $1,000. No more than two loans may
be outstanding to a Participant at any one time.
A. NOTE; SECURITY; INTEREST. Each loan shall be evidenced by a note signed by
the Participant and shall be secured by the Participant's vested interest in his
or her Accounts, including in such security the note evidencing the loan. The
loan shall bear interest at a reasonable annual percentage interest rate to be
determined by the Committee. In determining the interest rate, the Committee
shall take into consideration interest rates currently being charged by persons
in the business of lending money with respect to loans made in similar
circumstances. The Committee shall make such determination through consultation
with one or more lending institutions, as the Committee deems appropriate.
A. REPAYMENT. Each loan made to a Participant who is receiving regular payments
of compensation from a Participating Employer shall be repayable by payroll
deduction. Loans made to other Participants (and, in all events, where payroll
deduction is no longer practicable) shall be repayable in such manner as the
Committee may from time to time determine. The documents evidencing a loan shall
provide that payments shall be made not less frequently than quarterly and over
a specified term as determined by the Committee (but not to exceed five years;
ten years if the loan is being applied toward the purchase of a principal
residence for the Participant); such documents shall also require that the loan
be amortized with level payments of principal and interest. A Participant may
prepay all, but not less than all, of his or her loan at any time, without
penalty, by paying the loan principal then outstanding together with interest
accrued and unpaid to the date of payment.
A. REPAYMENT UPON DISTRIBUTION. If, at the time benefits are to be distributed
(or to commence being distributed) to a Participant with respect to a separation
from service, there remains any unpaid balance of a loan hereunder, such unpaid
balance shall, to the extent consistent with Department of Labor regulations,
become immediately due and payable in full. Such unpaid balance, together with
any accrued but unpaid interest on the loan, shall be deducted from the
Participant's Accounts, subject to the default provisions below, before any
distribution of benefits is made. Except as may be required in order to comply
(in a manner consistent with continued qualification of the Plan under Code
section 401(a)) with Department of Labor regulations, no loan shall be made or
remain outstanding with respect to a Participant under this Article after the
time distributions to the Participant with respect to a separation from service
are to be paid or commence.
A. DEFAULT. In the event of a default in making any payment of principal or
interest when due under the note evidencing any loan under this Article, if such
default continues for more than 90 days of the due date thereof, the unpaid
principal balance of the note shall immediately become due and payable in full.
Such unpaid
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principal, together with any accrued but unpaid interest, shall thereupon be
deducted from the Participant's Accounts, subject to the further provisions of
this Section. The amount so deducted shall be treated as distributed to the
Participant and applied by the Participant as a payment of the unpaid interest
and principal (in that order) under the note evidencing such loan. In no event
shall the Committee apply the Participant's Accounts to satisfy the
Participant's repayment obligation, whether or not he or she is in default,
unless the amount so applied otherwise could be distributed in accordance with
the Plan.
A. NOTE AS TRUST ASSET. The note evidencing a loan to a Participant under this
Article shall be an asset of the Trust which is allocated to the Account of such
Participant, and shall for purposes of the Plan be deemed to have a value at any
given time equal to the unpaid principal balance of the note plus the amount of
any accrued but unpaid interest.
A. NONDISCRIMINATION. Loans shall be made available under this Article to all
Participants on a reasonably equivalent basis, except that the Committee may
make reasonable distinctions based on creditworthiness.
A. DESIGNATION OF ACCOUNTS. Loans shall be made from the Participant's Accounts
in the following order: (1) from his or her Rollover Account, if any, (2) from
his or her Matching Contribution Account, (3) from his or her Elective
Contribution Account, and (4) from the vested portion of his or her
Discretionary Contribution Account, if any. The crediting of loan repayments
shall be made to the foregoing Accounts in the same order and shall be allocated
among the investment options in accordance with the Participant's then-effective
instructions regarding the investment of contributions made on his or her
behalf.
A. SPOUSAL CONSENT TO LOANS TO CERTAIN FORMER PARTICIPANTS IN OTHER PLANS. In
the case of a married Participant for whom amounts have been transferred under
Section 4.6 from a transferor plan and who has at any time elected an annuity
form of payment under Section 8.7 or under the transferor plan, no loan shall be
made unless (a) the Participant's spouse consents in writing to such loan and to
the use of the Participant's Accounts as security for the loan, and such consent
acknowledges the effect of the loan and the use of the Accounts as security, is
witnessed by a Plan representative or a notary public, and is provided no more
than 90 days before the date on which the loan is to be secured by the Accounts,
or (b) it is established to the satisfaction of the Committee that the foregoing
consent may not be obtained because there is no spouse, because the spouse
cannot be located, or because of such other circumstances as the Secretary of
the Treasury may prescribe.
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<PAGE> 25
II. ARTICLE BENEFITS UPON DEATH OR SEPARATION FROM SERVICE
A. SEPARATION FROM SERVICE FOR REASONS OTHER THAN DEATH. Following a
Participant's separation from the service of an Affiliated Employer for any
reason other than death, the Participant will receive the vested portion of his
or her Accounts in cash in a single sum or, if the Participant elects and the
value of such portion exceeds $3,500, in monthly, quarterly, semi-annual, or
annual installments over a period certain not to exceed the Participant's life
expectancy or the joint life and last survivor expectancy of the Participant and
his or her Beneficiary. An election to receive monthly, quarterly, semi-annual,
or annual installment distributions in lieu of a single sum, and the period over
which such installments are to be made, shall be made by the Participant on a
form approved by the Committee. Notwithstanding the foregoing, in the case of
Participant for whom amounts have been transferred under Section 4.6, the
Participant shall be entitled to elect any other form of distribution of his
benefits hereunder that would have been permitted under the transferor plan, as
set forth in Schedule B.
A. TIME OF DISTRIBUTIONS. Distribution with respect to a Participant's
separation from service normally will be made as soon as practicable after such
separation. In the case of a Participant whose Accounts are valued in excess of
$3,500 and who has not yet attained the Normal Retirement Age, however,
distribution may not be made under this Section unless
(a) between the 30th and 90th day prior to the date
distribution is to be made, the Committee notifies the Participant in
writing that he or she may defer distribution until the Normal
Retirement Age; and
(b) the Participant consents to the distribution in writing
after the information described above has been provided to him or her,
and files such consent with the Committee.
Notwithstanding the foregoing, such distribution may commence less than 30 days
after the required notification described above is given, provided that (i) the
Committee clearly informs the Participant that the Participant has a right to a
period of at least 30 days after receiving the notice to consider whether or not
to elect a distribution; and (ii) the Participant, after receiving the notice,
elects a distribution.
A Participant's Accounts will be considered to be valued in excess of $3,500 if
the value of such Accounts exceeds such amount at the time of the distribution
in question or exceeded such amount at the time of any prior distribution to the
Participant under the Plan. Distribution under this Section in all events will
be made no later than the 60th day after the close of the Plan Year in which
occurs the later of the Participant's separation from service or the
Participant's attainment of the Normal Retirement Age.
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<PAGE> 26
A. AMOUNT OF DISTRIBUTION.
(a) SINGLE SUMS. In the case of a distribution to be made in a
single sum, the amount of the distribution shall be determined as of
the Valuation Date which immediately precedes the date distribution is
to be made.
(b) INSTALLMENTS. In the case of distributions to be made in
monthly, quarterly, semi-annual, or annual installments, the aggregate
installment amount for a particular calendar year (the "installment
year") shall be determined by dividing
(i) the value of the vested portion of the
Participant's Accounts as of the Valuation Date coinciding
with the beginning of the installment year by
(ii) the greater of (A) the number of remaining
installment years in the installment period elected by the
Participant as of the beginning of the installment year and
(B) the number of years in the applicable remaining life
expectancy for the installment year determined pursuant to
Regulation section 1.401(a)(9)-1, or (if the Participant's
Beneficiary is not his or her spouse) the applicable divisor
for the installment period determined under Regulation section
1.401(a)(9)-2. For purposes of determining the amount of any
installment distribution, life expectancies will not be
recalculated annually pursuant to Code section 401(a)(9)
unless the Participant elects otherwise. Any such election
shall be in writing on a form prescribed or approved by the
Committee and filed prior to the Participant's attainment of
age 70-1/2.
A. DISTRIBUTIONS AFTER A PARTICIPANT'S DEATH.
(a) Death Prior to Separation From Service. If a Participant
dies prior to his or separation from the service of the Company, the
Participant's Beneficiary will receive the Participant's Accounts in
either of the following forms, as elected by the Beneficiary on a form
approved by the Committee:
(i) in cash in a single sum as soon as practicable
following the Participant's death (but in no event later than
December 31 of the calendar year following the year of the
Participant's death); or
(ii) in monthly, quarterly, semi-annual, or annual
installments over a period certain not to exceed the life
expectancy of the Beneficiary, such installments to begin not
later than December 31 of the calendar year following the year
of the Participant's death and to be
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<PAGE> 27
made in amounts determined in the same manner as under Section
8.3(b) above.
(b) Death After Separation From Service. If a Participant
dies after separation from service but before the complete distribution
of his or her Accounts has been made, the Participant's Beneficiary
will receive the vested portion of the Participant's Accounts.
Distribution will be made in cash in a single sum as soon as
practicable following the Participant's death (but no later than
December 31 of the calendar year following the year of the
Participant's death) provided, however, that if distribution to the
Participant had begun following his or her separation from service in a
form elected by the Participant, distribution will continue to be made
to the Beneficiary at least as rapidly in such form unless the
Beneficiary elects to receive the distribution in cash in a single sum
as soon as practicable following the Participant's death. Any such
election must be made on a form approved by the Committee and must be
received by the Committee within such period following the
Participant's death as the Committee may prescribe.
Any distribution to a Beneficiary under this Section shall be determined as of
the Valuation Date immediately preceding the date distribution is to be made.
A. DESIGNATION OF BENEFICIARY. Subject to the provisions of this Section, a
Participant's Beneficiary shall be the person or persons and entity or entities,
if any, designated by the Participant from time to time on a form approved by
the Committee. In the absence of an effective beneficiary designation, the full
amount payable upon the death of the Participant shall be paid to his or her
surviving spouse or, if none, to his or her issue per stirpes or, if no issue,
to his or her heirs at law determined under the laws of intestacy of the
jurisdiction of his or her last domicile. If any of such issue is a minor, the
Trustee may deposit his or her share in a savings account to his or her credit.
If any Beneficiary survives the Participant but dies prior to receipt of his or
her interest in the Participant's Account, such beneficiary's remaining interest
shall be paid to the beneficiary's estate (unless the Participant had
effectively designated a successor or contingent Beneficiary for the
Beneficiary's remaining interest). A nonspouse beneficiary designation by a
Participant who is married at the time of his or her death shall not be
effective unless
(a) prior to the Participant's death, the Participant's
surviving spouse consented to and acknowledged the effect of the
Participant's designation of a specific non-spouse Beneficiary
(including any class of Beneficiaries or any contingent Beneficiaries)
on a written form approved by the Committee and witnessed by a notary
public or a duly authorized Plan representative; or
(b) it is established to the satisfaction of the Committee
that spousal consent may not be obtained because there is no spouse,
because the spouse has
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<PAGE> 28
died (evidenced by a certificate of death), because the spouse cannot
be located (based on information supplied by a government agency or
independent investigator), or because of such other circumstances as
the Secretary of the Treasury may prescribe; or
(c) the spouse had earlier executed a general consent form
permitting the Participant (i) to select from among certain specified
beneficiaries without any requirement of further consent by the spouse
(and the Participant designates a Beneficiary from the specified list),
or (ii) to change his or her Beneficiary without any requirement of
further consent by the spouse. Any such general consent shall be on a
form approved by the Committee, and must acknowledge that the spouse
has the right to limit consent to a specific beneficiary and that the
spouse voluntarily elects to relinquish such right.
In the event a spouse is legally incompetent to give consent, the spouse's legal
guardian, even if the guardian is the Participant, may give consent on behalf of
the spouse. Any consent and acknowledgment by (or on behalf of) a spouse, or the
establishment that the consent and acknowledgment cannot be obtained, shall be
effective only with respect to such spouse, but shall be irrevocable once made.
A. DIRECT ROLLOVERS OF ELIGIBLE DISTRIBUTIONS. Notwithstanding any provision of
the Plan to the contrary that may otherwise limit a distributee's election under
this Section, for Plan Years beginning after December 31, 1992, a distributee
may elect, at the time and in the manner prescribed by the Committee, to have
any portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover. For purposes
of this Section, the following terms have the following meanings:
(a) an "eligible rollover distribution" is any distribution of
all or any portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives of the distributee
and the distributee's Beneficiary, or for a specified period of ten
years or more; any distribution to the extent such distribution is
required under Code section 401(a)(9); and the portion of any
distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to
employer securities).
(b) with respect to a distributee other than the Participant's
surviving spouse, an "eligible retirement plan" is an individual
retirement account described in Code section 408(a), an individual
retirement annuity described in Code section 408(b), an annuity plan
described in Code section 403(a), or a qualified trust described in
Code section 401(a). With respect to a distributee who is a
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Participant's surviving spouse, an eligible retirement plan is an
individual retirement account or an individual retirement annuity.
(c) a "distributee" includes an employee or former employee.
In addition, the employee's or former employee's surviving spouse and
the employee's or former employee's spouse or former spouse, who is an
alternate payee under a Qualified Domestic Relations Order, are
distributees with regard to the interest of the spouse or former
spouse.
(d) a "direct rollover" is a payment by the Plan to the
eligible retirement plan specified by the distributee.
A. SPECIAL RULES FOR FORMER PARTICIPANTS IN MERGED PLANS. If the vested portion
of the Account of a Participant for whom accounts have been transferred under
Section 4.6 from a transferor plan to which the requirements of Code section
401(a)(11) were applicable at the time of the transfer, as indicated on Schedule
B, becomes payable under Section 8.1, and if the Participant elects during the
90-day period preceding his or her annuity starting date (or has elected at any
time under the transferor plan) the payment of benefits in the form of a life
annuity, the Participant's vested portion of his or her Accounts shall be
applied to the purchase from an insurance company of a single premium
nontransferable annuity contract providing (a) if the Participant is married on
his or her annuity starting date, an annuity for the life of the Participant,
and upon the death of the Participant providing a further annuity for the life
of the spouse (to whom the Participant was married on his or her annuity
starting date) in an amount equal to 50 percent of the amount of the annuity
payable during the joint lives of the Participant and his or her spouse, and (b)
if the Participant is not married on his or her annuity starting date, an
annuity for the life of the Participant. Any Participant subject to the
provisions of this Section 8.7 may elect, during the 90-day period preceding his
or her annuity starting date, not to have his or her vested Account balance
applied to purchase the annuity described above and either (1) to have his or
her vested Account balance distributed in the form of a single cash lump sum
payment or (2) to have his or her vested Account balance applied to the purchase
from an insurance company of a single premium nontransferable annuity contract
providing any form of optional form of payment provided under the transferor
plan, as described on Schedule B applicable to such transferor plan.
If the Participant is married on his or her annuity starting date, any
election pursuant to the preceding sentence shall be effective only if:
(i) his or her spouse consents in writing to such election
and, if applicable, to distribution of the Participant's vested Account
balance before age 65, such consent acknowledges the effect of the
election and is witnessed by a Plan representative or a notary public,
and such consent either (1) specifies the form of distribution to the
Participant and, if distribution is to be made in installments, any
nonspouse Beneficiary (including any class of Beneficiaries or
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any contingent Beneficiaries), or (2) authorizes the Participant to
change the form of distribution or the Beneficiary without further
consent, or
(ii) it is established to the satisfaction of the Committee
that the foregoing consent may not be obtained because the spouse
cannot be located, or because of such other circumstances as the
Secretary of the Treasury may prescribe,
(iii) the Participant elects a joint and survivor annuity
naming his or her surviving spouse as beneficiary which provides a
survivor annuity greater than 50 percent of the annuity payable during
the joint lives of the Participant and his or her spouse.
Any consent by a spouse under (i) above, or a determination by the Committee
under (ii) above with respect to such spouse, shall be effective only with
respect to such spouse and shall be obtained within 90 days prior to the annuity
starting date. Any such consent shall be irrevocable. Any such consent that
authorizes the Participant to change the form of distribution of the Beneficiary
without further consent must acknowledge the spouse's right to limit consent to
specific form of distribution and Beneficiary and the spouse's voluntary
election to relinquish such right. For purposes of this Section 8.7, the term
"annuity starting date" means the first day of the first period for which an
annuity is payable under the annuity contract described above.
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I. ARTICLE ADMINISTRATION.
A. COMMITTEE. The Plan will be administered by a committee of individuals
selected by the Board of Directors to serve at its pleasure. The Committee will
be a "named fiduciary" for purposes of Section 402(a)(1) of ERISA with authority
to control and manage the operation and administration of the Plan, and will be
responsible for complying with all of the reporting and disclosure requirements
of Part 1 of Subtitle B of Title I of ERISA. The Committee will not, however,
have any authority over the investment of assets of the Trust in its capacity as
Committee.
A. POWERS OF COMMITTEE. The Committee will have full discretionary power to
administer the Plan in all of its details, subject, however, to the requirements
of ERISA. For this purpose the Committee's discretionary power will include, but
will not be limited to, the following authority:
(a) to make and enforce such rules and regulations as it deems
necessary or proper for the efficient administration of the Plan or
required to comply with applicable law;
(b) to interpret the Plan;
(c) to decide all questions concerning the Plan and the
eligibility of any person to participate in the Plan;
(d) to compute the amounts to be distributed under the Plan,
and to determine the person or persons to whom such amounts will be
distributed;
(e) to authorize the payment of distributions;
(f) to keep such records and submit such filings, elections,
applications, returns or other documents or forms as may be required
under the Code and applicable regulations, or under other federal,
state or local law and regulations;
(g) to allocate and delegate its ministerial duties and
responsibilities and to appoint such agents, counsel, accountants and
consultants as may be required or desired to assist in administering
the Plan; and
(h) by written instrument, to allocate and delegate its
fiduciary responsibilities in accordance with ERISA section 405.
A. EFFECT OF INTERPRETATION OR DETERMINATION. Any interpretation of the Plan or
other determination with respect to the Plan by the Committee shall be final and
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conclusive on all persons in the absence of clear and convincing evidence that
the Committee acted arbitrarily and capriciously.
A. RELIANCE ON TABLES, ETC. In administering the Plan, the Committee will be
entitled, to the extent permitted by law, to rely conclusively on all tables,
valuations, certificates, opinions and reports which are furnished by any
accountant, trustee, counsel or other expert who is employed or engaged by the
Committee or by the Plan Sponsor on the Committee's behalf.
A. CLAIMS AND REVIEW PROCEDURES. The Committee shall adopt procedures for the
filing and review of claims in accordance with ERISA section 503.
A. INDEMNIFICATION OF COMMITTEE AND ASSISTANTS. Each Participating Employer
agrees, jointly and severally, to indemnify and defend to the fullest extent of
the law any Employee or former Employee (a) who serves or has served as
Committee, (b) who has been appointed to assist the Committee in administering
the Plan, or (c) to whom the Committee has delegated any of its duties or
responsibilities against any liabilities, damages, costs and expenses (including
attorneys' fees and amounts paid in settlement of any claims approved by the
Plan Sponsor) occasioned by any act or omission to act in connection with the
Plan, if such act or omission to act is in good faith and without gross
negligence.
A. ANNUAL REPORT. The Committee shall submit annually to the Employer a report
showing in reasonable summary form, the financial position of the Trust and
giving a brief account of the operations of the Plan for the past year, and such
further information as the Plan Sponsor may reasonably require.
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II. ARTICLE AMENDMENT AND TERMINATION.
A. AMENDMENT. The Plan Sponsor reserves the power at any time or times to amend
the provisions of the Plan and Trust to any extent and in any manner that it may
deem advisable. Upon delivery to the Trustee and each Participating Employer of
an amendment adopted by the Board of Directors, the Plan shall be amended at the
time and in the manner set forth therein, and all Participants and all persons
claiming an interest hereunder shall be bound thereby. Moreover, the Plan
Sponsor may amend or modify any plan provisions which relate to ERISA section
404(c) compliance, including changes which would eliminate the Plan's status as
an ERISA section 404(c) plan. However, the Plan Sponsor will not have the power:
(a) to amend the Plan or Trust in such manner as would cause
or permit any part of the assets of the Trust to be diverted to
purposes other than for the exclusive benefit of each Participant and
his or her Beneficiary (except as permitted by the Plan with respect to
Qualified Domestic Relations Orders or the return of contributions upon
nondeductibility, mistake of fact, or the failure to qualify
initially), unless such amendment is required or permitted by law,
governmental regulation or ruling; or
(b) to amend the Plan or Trust retroactively in such a manner
as would reduce the accrued benefit of any Participant, except as
otherwise permitted or required by law. For purposes of this paragraph,
an amendment which has the effect of decreasing a Participant's Account
balance or eliminating an optional form of benefit, with respect to
benefits attributable to service before the amendment, shall be treated
as reducing an accrued benefit.
A. TERMINATION. The Plan Sponsor has established the Plan and authorized the
establishment of the Trust with the bona fide intention and expectation that
contributions will be continued indefinitely, but may discontinue contributions
under the Plan or terminate the Plan at any time by written notice delivered to
the Trustee without liability whatsoever for any such discontinuance or
termination. In addition, the Participating Employers will have no obligation or
liability whatsoever to maintain the Plan for any given length of time and may
cease to be Participating Employers in a manner acceptable to the Plan Sponsor.
A. DISTRIBUTIONS UPON TERMINATION OF THE PLAN. Upon termination of the Plan by
the Plan Sponsor, the Trustee will distribute to each Participant (or other
person entitled to distribution) the value of the Participant's Accounts in a
single sum as soon as practicable following such termination. The amount of such
distribution shall be determined as of the Valuation Date immediately preceding
the date distribution is to be made.
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A. MERGER OR CONSOLIDATION OF PLAN; TRANSFER OF PLAN ASSETS. In case of any
merger or consolidation of the Plan with, or transfer of assets and liabilities
of the Plan to, any other plan, provision must be made so that each Participant
would, if the Plan then terminated, receive a benefit immediately after the
merger, consolidation or transfer which is equal to or greater than the benefit
he or she would have been entitled to receive immediately before the merger,
consolidation or transfer if the Plan had then terminated.
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II. ARTICLE LIMITS ON CONTRIBUTIONS.
A. CODE SECTION 404 LIMITS. The sum of the contributions made by each
Participating Employer under the Plan for any Plan Year shall not exceed the
maximum amount deductible under the applicable provisions of the Code. All
contributions under the Plan made by a Participating Employer are expressly
conditioned on their deductibility under Code section 404 for the taxable year
when paid (or treated as paid under Code section 404(a)(6)).
A. CODE SECTION 415 LIMITS.
(a) Incorporation by reference. Code section 415 is hereby
incorporated by reference into the Plan.
(b) Annual addition. The Committee shall determine an "annual
addition" for each Participant for each limitation year, which shall
consist of the following amounts:
(i) Elective Contributions allocated to the
Participant's Accounts for the year;
(ii) Qualified Nonelective Contributions allocated to
the Participant's Accounts for the year;
(iii) amounts allocated to an individual medical
amount (as defined in Code section 415(l)(2)) which is part of
a pension or annuity plan maintained by an Affiliated
Employer; and
(iv) amounts derived from contributions paid or
accrued which are attributable to post-retirement medical
benefits allocated to the separate account of a key employee
(as defined in Code section 419A(d)(3)) under a welfare
benefit fund (as defined in Code section 419(e)) maintained by
an Affiliated Employer.
(c) General limitation on annual additions. The annual
addition of a Participant under (b) above for any limitation year, when
added to the annual additions to his or her accounts for such year
under all other defined contribution plans maintained by the Affiliated
Employers, shall not exceed the lesser of (i) $30,000 (increased from
time to time in accordance with Code section 415(d)), or (ii) 25% of
the Participant's Compensation for such limitation year.
(d) Combined limitations. In the case of a Participant who
also participates in a defined benefit plan maintained by an Affiliated
Employer, the annual addition for a limitation year will, if necessary,
be further limited so that
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the sum of the Participant's defined contribution fraction and his or
her defined benefit plan fraction for such limitation year does not
exceed 1.0.
(i) A Participant's "defined contribution fraction"
shall be a fraction, the numerator of which is the sum of
the annual additions to the Participant's accounts under all
the defined contribution plans (whether or not terminated)
maintained by an Affiliated Employer for the current and all
prior limitation years (including the annual additions
attributable to the Participant's nondeductible employee
contributions to all defined benefit plans, whether or not
terminated, maintained by an Affiliated Employer, and the
annual additions attributable to all welfare benefit funds,
as defined in section 419(e) of the Code, and individual
medical accounts, as defined in section 415(l)(2) of the
Code, maintained by an Affiliated Employer), and the
denominator of which is the sum of the maximum aggregate
amounts for the current and all prior limitation years of
service with the Affiliated Employers (regardless of whether
a defined contribution plan was maintained by an Affiliated
Employer). The maximum aggregate amount in any limitation
year is the lesser of 125 percent of the dollar limitation
determined under Code sections 415(b) and (d) in effect
under Code section 415(c)(1)(A) or 35 percent of the
Participant's Compensation for such year.
(ii) A Participant's "defined benefit fraction"
shall be a fraction, the numerator of which is the sum of
the Participant's projected annual benefits under all the
defined benefit plans (whether or not terminated) maintained
by an Affiliated Employer, and the denominator of which is
the lesser of 125 percent of the dollar limitation
determined for the limitation year under Code sections
415(b) and (d) or 140 percent of the highest average
compensation, including any adjustments under Code section
415(b).
(e) Limitation Year. For purposes of determining the Code
section 415 limits under the Plan, the "limitation year" shall be the
Plan Year.
(f) Order of reductions. To the extent necessary to satisfy
the limitations of Code section 415 for any Participant, the annual
addition which would otherwise be made on behalf of the Participant
under the Plan shall be reduced before the Participant's benefit is
reduced under any and all defined benefit plans, and before the
Participant's annual addition is reduced under any other defined
contribution plan.
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(g) Return of excess contributions. If, as a result of a
reasonable error in estimating a Participant's Compensation for a Plan
Year or limitation year, a reasonable error in determining the amount
of elective deferrals (within the meaning of Code section 402(g)(3))
that may be made with respect to any individual under the limits of
Code section 415, or under such other facts and circumstances as may be
permitted under regulation or by the Internal Revenue Service, the
annual addition under the Plan for a Participant would cause the Code
section 415 limitations for a limitation year to be exceeded, the
excess amounts shall be held in an unallocated suspense account and
allocated in subsequent years in accordance with the rules provided in
Internal Revenue Service Reg. Section 1.415-6(b)(6)(i).
A. CODE SECTION 402(g) LIMITS.
(a) In general. The maximum amount of Elective Contributions
made on behalf of any Participant for any calendar year, when added to
the amount of elective deferrals under all other plans, contracts and
arrangements of an Affiliated Employer with respect to the Participant
for the calendar year), shall in no event exceed the maximum applicable
limit in effect for the calendar year under Regulation section
1.402(g)-1(d). For purposes of the Plan, an individual's elective
deferrals for a taxable year are the sum of the following:
(i) Any elective contribution under a qualified cash
or deferred arrangement (as defined in Code section 401(k)) to
the extent not includible in the individual's gross income for
the taxable year on account of Code section 402(a)(8) (before
applying the limits of Code section 402(g) or this section);
(ii) Any employer contribution to a simplified
employee pension (as defined in code section 408(k) to the
extent not includible in the individual's gross income for the
taxable year on account of Code section 402(h)(1)(B) (before
applying the limits of Code section 402(g)); and
(iii) Any employer contribution to a custodial
account or annuity contract under section 403(b) under a
salary reduction agreement (within the meaning of Code section
3121(a)(5)(D)), to the extent not includible in the
individual's gross income for the taxable year on account of
Code section 403(b) before applying the limits of Code section
402(g).
A Participant will be considered to have made "excess deferrals" for a
taxable year to the extent that the Participant's elective deferrals for the
taxable year exceed the applicable limit described above for the year.
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(b) Distribution of excess deferrals. In the event that an
amount is included in a Participant's gross income for a taxable year
as a result of an excess deferral under Code section 402(g), and the
Participant notifies the Committee on or before the March 1 following
the taxable year that all or a specified part of an Elective
Contribution made for his or her benefit represents an excess deferral,
the Committee shall make every reasonable effort to cause such excess
deferral, adjusted for allocable income, to be distributed to the
Participant no later than the April 15 following the calendar year in
which such excess deferral was made. The income allocable to excess
deferrals is equal to the allocable gain or loss for the taxable year
of the individual, but not the allocable gain or loss for the period
between the end of the taxable year and the date of distribution (the
"gap period"). Income allocable to excess deferrals for the taxable
year shall be determined by multiplying the gain or loss attributable
to the Participant's Elective Contribution Account for the taxable year
by a fraction, the numerator of which is the Participant's excess
deferrals for the taxable year, and the denominator of which is the sum
of the Participant's Elective Contribution Account balance as of the
beginning of the taxable year plus the Participant's Elective
Contributions for the taxable year. No distribution of an excess
deferral shall be made during the taxable year of a Participant in
which the excess deferral was made unless the correcting distribution
is made after the date on which the Plan received the excess deferral
and both the Participant and the Plan designate the distribution as a
distribution of an excess deferral. The amount of any excess deferrals
that may be distributed to a Participant for a taxable year shall be
reduced by the amount of Elective Contributions that were excess
contributions and were previously distributed to the Participant for
the Plan Year beginning with or within such taxable year.
(c) Treatment of excess deferrals. For other purposes of the
Code, including Code sections 401(a)(4), 401(k)(3), 404, 409, 411, 412,
and 416, excess deferrals must be treated as employer contributions
even if they are distributed in accordance with paragraph (b) above.
However, excess deferrals of a non-Highly Compensated Employee are not
to be taken into account for purposes of Code section 401(k)(3) (the
actual deferral percentage test) to the extent the excess deferrals are
prohibited under Code section 401(a)(30). Excess deferrals are also to
be treated as employer contributions for purposes of Code section 415
unless distributed under paragraph (b) above.
A. CODE SECTION 401(k)(3) LIMITS.
(a) In general. Elective Contributions made under the Plan are
subject to the limits of Code section 401(k)(3), as more fully
described below. The Plan provisions relating to the 401(k)(3) limits
are to be interpreted and applied in accordance with Code sections
401(k)(3) and 401(a)(4), which are hereby incorporated by reference,
and in such manner as to satisfy such other
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requirements relating to Code section 401(k) as may be prescribed by
the Secretary of the Treasury from time to time.
(b) Actual deferral ratios. For each Plan Year, the Committee
will determine the "actual deferral ratio" for each Participant who is
eligible for Elective Contributions. The actual deferral ratio shall be
the ratio, calculated to the nearest one-hundredth of one percent, of
the Elective Contributions (plus any Qualified Nonelective
Contributions treated as Elective Contributions) made on behalf of the
Participant for the Plan Year to the Participant's Compensation for the
applicable period. For purposes of determining a Participant's actual
deferral ratio,
(i) Elective Contributions will be taken into account
only if each of the following requirements are satisfied:
(A) the Elective Contribution is allocated
to the Participant's Elective Contribution Account as
of a date within the Plan Year, is not contingent
upon participation in the Plan or performance of
services on any date subsequent to that date, and is
actually paid to the Trust no later than the end of
the 12-month period immediately following the Plan
Year to which the contribution relates; and
(B) the Elective Contribution relates to
Compensation that either would have been received by
the Participant in the Plan Year but for the
Participant's election to defer under the Plan, or is
attributable to services performed in the Plan Year
and, but for the Participant's election to defer,
would have been received by the Participant within
2-1/2 months after the close of the Plan Year.
To the extent Elective Contributions which meet the
requirements of (A) and (B) above constitute excess deferrals,
they will be taken into account for each Highly Compensated
Employee, but will not be taken into account for any
non-Highly Compensated Employee;
(ii) in the case of a Participant who is a Highly
Compensated Employee for the Plan Year and is eligible to
have elective deferrals (and qualified nonelective
contributions, to the extent treated as elective deferrals)
allocated to his or her accounts under two or more cash or
deferred arrangements described in Code section 401(k)
maintained by an Affiliated Employer, the Participant's
actual deferral ratio shall be determined as if such
elective deferrals (as well as qualified nonelective or
qualified ) are made under a single arrangement, and if two
or more of the cash or deferred arrangements have different
Plan Years, all Plan
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Years ending with or within the same calendar year shall be
treated as a single Plan Year;
(iii) for purposes of determining the actual deferral
ratio of a Participant who is a 5 percent owner or one of the
10 most highly paid Highly Compensated Employees, the Elective
Contributions (and any Qualified Nonelective Contributions
treated as Elective Contributions) and Compensation of such
Participant shall include the Elective Contributions (and
Qualified Nonelective Contributions treated as Elective
Contributions) and Compensation for the Plan Year of the
Participant's family members (as defined in Code section
414(q)(6)), such family members shall be disregarded as
separate employees for purposes of determining the actual
deferral ratio of both Highly Compensated Employees and
non-Highly Compensated Employees, and in the event that there
are excess contributions with respect to such family members,
the excess shall be allocated among such family members in
proportion to their Elective Contributions;
(iv) the applicable period for determining
Compensation for each Participant for a Plan Year shall be the
12-month period ending on the last day of such Plan Year;
provided, that to the extent permitted under Regulations, the
Committee may choose, on a uniform basis, to treat as the
applicable period only that portion of the Plan Year during
which the individual was eligible to make Elective
Contributions;
(v) Qualified Nonelective Contributions made on
behalf of Participants who are eligible to receive Elective
Contributions shall be treated as Elective Contributions to
the extent permitted by Regulation section 1.401(k)-1(b)(5);
(vi) in the event that the Plan satisfies the
requirements of Code sections 401(k), 410(a)(4), or 410(b)
only if aggregated with one or more other plans with the same
plan year, or if one or more other plans with the same Plan
Year satisfy such Code sections only if aggregated with this
Plan, then this section shall be applied by determining the
actual deferral ratios as if all such plans were a single
plan;
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<PAGE> 41
(vii) an employee who would be a Participant but for
the failure to make Elective Contributions shall be treated as
a Participant on whose behalf no Elective Contributions are
made; and
(viii) Elective Contributions which are made on
behalf of non-Highly Compensated Employees which could be used
to satisfy the Code section 401(k)(3) limits but are not
necessary to be taken into account in order to satisfy such
limits, may instead be taken into account for purposes of the
Code section 401(m) limits to the extent permitted by
Regulation sections 1.401(m)-1(b)(5).
(c) Actual deferral percentages. The actual deferral ratios
for all Highly Compensated Employees who are eligible for Elective
Contributions for a Plan Year shall be averaged to determine the actual
deferral percentage for the highly compensated group for the Plan Year,
and the actual deferral ratios for all Employees who are not Highly
Compensated Employees but are eligible for Elective Contributions for
the Plan Year shall be averaged to determine the actual deferral
percentage for the nonhighly compensated group for the Plan Year. The
actual deferral percentages for any Plan Year must satisfy at least one
of the following tests:
(i) the actual deferral percentage for the highly
compensated group does not exceed 125% of the actual deferral
percentage for the nonhighly compensated group; or
(ii) the excess of the actual deferral percentage for
the highly compensated group over the actual deferral
percentage for the nonhighly compensated group does not exceed
two percentage points, and the actual deferral percentage for
the highly compensated group does not exceed twice the actual
deferral percentage of the nonhighly compensated group.
(d) Adjustments by Committee. If, prior to the time all
Elective Contributions for a Plan Year have been contributed to the
Trust, the Committee determines that Elective Contributions are being
made at a rate which will cause the Code section 401(k)(3) limits to be
exceeded for the Plan Year, the Committee may, in its sole discretion,
limit the amount of Elective Contributions to be made with respect to
one or more Highly Compensated Employees for the balance of the Plan
Year by suspending or reducing Elective Contribution elections to the
extent the Committee deems appropriate. Any Elective Contributions
which would otherwise be made to the Trust shall instead be paid to the
affected Participant in cash.
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(e) Excess contributions. If the Code section 401(k)(3) limits
have not been met for a Plan Year after all contributions for the Plan
Year have been made, the Committee will determine the amount of excess
contributions with respect to Participants who are Highly Compensated
Employees. To do so, the Committee will reduce the actual deferral
ratio of the Highly Compensated Employee with the highest actual
deferral ratio to the extent necessary to (i) enable the Plan to
satisfy the 401(k)(3) limits or (ii) cause such employee's actual
deferral ratio to equal the actual deferral ratio of the Highly
Compensated Employee with the next highest actual deferral ratio, and
will repeat this process until the Plan satisfies the Code section
401(k)(3) limits. The amount of excess contributions for each Highly
Compensated Employee for the Plan Year shall equal the amount of
Elective Contributions (plus Qualified Nonelective Contributions which
are treated as Elective Contributions for purposes of the Code section
401(k)(3) limits) actually made to the Trust for the Plan Year, less
the product of the (i) the Highly Compensated Employee's reduced actual
deferral ratio as determined under the preceding sentence, and (ii) his
or her Compensation. Any excess contributions will be distributed as
provided below. In no event will excess contributions remain
unallocated or be allocated to a suspense account for allocation in a
future Plan Year.
(f) Family Aggregation. The determination and correction of
excess contributions with respect to a Highly Compensated Employee
whose actual deferral ratio is determined pursuant to the family
aggregation rules will be accomplished by reducing the actual deferral
ratio as required above and allocating the excess contributions for the
family group among family members in proportion to the Elective
Contribution of each family member that is combined to determine the
actual deferral ratio.
(g) Distribution of excess contributions. A Participant's
excess contributions, adjusted for income, will be designated by the
Participating Employer as a distribution of excess contributions and
distributed to the Participant. The income allocable to excess
contributions is equal to the allocable gain or loss for the Plan Year,
but not the allocable gain or loss for the period between the end of
the Plan Year and the date of distribution (the "gap period"). Income
allocable to excess contributions for the Plan Year shall be determined
by multiplying the gain or loss attributable to the Participant's
Elective Contribution Account and QNEC Account balances by a fraction,
the numerator of which is the excess contributions for the Participant
for the Plan Year, and the denominator of which is the sum of the
Participant's Elective Contribution Account and QNEC Account balances
as of the beginning of the Plan Year plus the Participant's Elective
Contributions and Qualified Nonelective Contributions for the Plan
Year. Distribution of excess contributions will be made after the close
of the Plan Year to which the contributions relate, but within 12
months
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after the close of such Plan Year. Excess contributions shall be
treated as annual additions under the Plan, even if distributed under
this paragraph.
(h) Special rules. For purposes of distributing excess
contributions, the amount distributed with respect to a Highly
Compensated Employee for a Plan Year shall be reduced by the amount of
excess deferrals previously distributed to the Highly Compensated
Employee for his or her taxable year ending with or within such Plan
Year.
(i) Recordkeeping requirement. The Committee, on behalf of the
Participating Employers, shall maintain such records as are necessary
to demonstrate compliance with the Code section 401(k)(3) limits,
including the extent to which Qualified Nonelective Contributions are
taken into account in determining the actual deferral ratios.
(j) Excise tax where failure to correct. If the excess
contributions are not corrected within 2-1/2 months after the close of
the Plan Year to which they relate, the Participating Employers will be
liable for a 10 percent excise tax on the amount of excess
contributions attributable to them, to the extent provided by Code
section 4979. Qualified Nonelective Contributions properly taken into
account under this Section for the Plan Year may enable the Plan to
avoid having excess contributions, even if the contributions are made
after the close of the 2-1/2 month period.
A. CODE SECTION 401(m) LIMITS.
(a) In General. Matching Contributions made under the Plan are
subject to the limits of Code section 401(m), as more fully described
below. The Plan provisions relating to the 401(m) limits are to be
interpreted and applied in accordance with Code sections 401(m) and
401(a)(4), which are hereby incorporated by reference, and in such
manner as to satisfy such other requirements relating to Code section
401(m) as may be prescribed by the Secretary of the Treasury from time
to time.
(b) Actual contribution ratios. For each Plan Year, the
Administrator will determine the "actual contribution ratio" for each
Participant who is eligible for Matching Contributions. The actual
contribution ratio shall be the ratio, calculated to the nearest
one-hundredth of one percent, of the sum of the Matching Contributions
and Qualified Nonelective Contributions which are not treated as
Elective Contributions made on behalf of the Participant for the Plan
Year, to the Participant's Compensation for the Plan Year. For purposes
of determining a Participant's actual contribution ratio,
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(i) A Matching Contribution will be taken into
account only if the Contribution is allocated to a
Participant's Account as of a date within the Plan Year, is
actually paid to the Trust no later than 12 months after the
close of the Plan Year, and is made on behalf of a Participant
on account of the Participant's Elective Contributions for the
Plan Year;
(ii) for purposes of determining the actual
contribution ratio of a Participant who is a 5 percent owner
or one of the 10 most highly paid Highly Compensated
Employees, the Matching Contributions and Compensation of such
Participant shall include the Matching Contributions,
Qualified Nonelective Contributions treated as Matching
Contributions, and Compensation for the Plan Year of the
Participant's family members (as defined in Code section
414(q)(6)), and such family members shall be disregarded as
separate employees for purposes of determining the actual
contribution ratio of both Highly Compensated Employees and
non-Highly Compensated Employees;
(iii) in the case of a Participant who is a Highly
Compensated Employee for the Plan Year and is eligible to have
Matching Contributions or employee contributions (including
amount treated as Matching Contributions) allocated to his or
her accounts under two or more plans maintained by an
Affiliated Employer which may be aggregated for purposes of
Code sections 410(b) and 401(a)(4), the Participant's actual
contribution ratio shall be determined as if such
contributions are made under a single plan, and if two or more
of the plans have different Plan Years, all Plan Years ending
with or within the same calendar year shall be treated as a
single Plan Year;
(iv) the applicable period for determining
Compensation for each Participant for a Plan Year shall be the
12-month period ending on the last day of such Plan Year;
provided that to the extent permitted under Regulations, the
Administrator may choose, on a uniform basis, to treat as the
applicable period only that portion of the Plan Year during
which the individual was eligible for Matching Contributions;
(v) Elective Contributions not applied to satisfy the
Code section 401(k)(3) limits and Qualified Nonelective
Contributions not treated as Elective Contributions may be
treated as Matching Contributions to the extent permitted by
Regulation section 1.401(m)-1(b)(5);
(vi) in the event that the Plan satisfies the
requirements of Code sections 401(k), 410(a)(4), or 410(b)
only if aggregated with one or more other plans with the same
Plan Year, or if one or more other plans with the same Plan
Year satisfy such code sections only if aggregated
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with this Plan, then this section shall be applied by
determining the actual deferral ratios as if all such plans
were a single plan; and
(vii) any forfeitures under the Plan which are
applied against Matching Contributions shall be treated as
Matching Contributions.
(c) Actual contribution percentages. The actual contribution
ratios for all Highly Compensated Employees who are eligible for
Matching Contributions for a Plan Year shall be averaged to determine
the actual contribution percentage for the highly compensated group for
the Plan Year, and the actual contribution ratios for all Employees who
are not Highly Compensated Employees but are eligible for Matching
Contributions for the Plan Year shall be averaged to determine the
actual contribution percentage for the nonhighly compensated group for
the Plan Year. The actual contribution percentages for any Plan Year
must satisfy at least one of the following tests:
(i) The actual contribution percentage for the highly
compensated group does not exceed 125% of the actual
contribution percentage for the nonhighly compensated group;
or
(ii) The excess of the actual contribution percentage
for the highly compensated group over the actual contribution
percentage for the nonhighly compensated group does not exceed
two percentage points, and the actual contribution percentage
for the highly compensated group does not exceed twice the
actual contribution percentage of the nonhighly compensated
group.
(d) Multiple use test. In the event that (i) the actual
deferral percentage and actual contribution percentage for the highly
compensated group exceed 125% of the respective actual deferral and
actual contribution percentages for the nonhighly compensated group,
and (ii) the sum of the actual deferral percentage and the actual
contribution percentage for the highly compensated group exceeds the
"aggregate limit" within the meaning of Regulation section
1.401(m)-2(b)(3), the Administrator shall reduce the actual
contribution ratios of Highly Compensated Employees who had both an
actual deferral ratio and an actual contribution ratio for the Plan
Year to the extent required by such section and in the same manner as
described in paragraph (f) below.
(e) Adjustments by Administrator. If, prior to the time all
Matching Contributions for a Plan Year have been contributed to the
Trust, the Administrator determines that such contributions are being
made at a rate which will cause the Code section 401(m) limits to be
exceeded for the Plan Year, the Administrator may, in its sole
discretion, limit the amount of such contributions to be made with
respect to one or more Highly Compensated Employees for the
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balance of the Plan Year by limiting the amount of such contributions
to the extent the Administrator deems appropriate.
(f) Excess aggregate contributions. If the Code section 401(m)
limits have not been satisfied for a Plan Year after all contributions
for the Plan Year have been made, the excess of the aggregate amount of
the Matching Contributions (and any Qualified Nonelective Contribution
or elective deferral taken into account in computing the actual
contribution percentages) actually made on behalf of Highly Compensated
Employees for the Plan Year over the maximum amount of such
contributions permitted under Code section 401(m)(2)(A) shall be
considered to be "excess aggregate contributions". The Administrator
shall determine the amount of excess aggregate contributions made with
respect to each Participant who is a Highly Compensated Employee. To do
so, the Administrator will reduce the actual contribution ratio of the
Highly Compensated Employee with the highest actual contribution ratio
to the extent necessary to (i) enable the Plan to satisfy the section
401(m) limits or (ii) cause such employee's actual contribution ratio
to equal the actual contribution ratio of the Highly Compensated
Employee with the next highest actual contribution ratio, and will
repeat this process until the Plan satisfies the Code section 401(m)
limits. The amount of excess aggregate contributions for each Highly
Compensated Employee for the Plan Year shall equal the amount of
Matching Contributions (plus Elective Contributions and Qualified
Nonelective Contributions which are treated as Matching Contributions
for purposes of the Code section 401(m) limits) actually made to the
Trust for the Plan Year, less the product of (i) the Highly Compensated
Employee's reduced actual contribution ratio as determined under the
preceding sentence, and (ii) his or her Compensation. Any excess
aggregate contributions will be distributed as provided below to the
Highly Compensated Employee to which they are attributable. In no event
will excess aggregate contributions remain unallocated or be allocated
to a suspense account for allocation in a future Plan Year.
(g) Distribution of excess aggregate contributions. A
Participant's excess aggregate contributions, adjusted for income, will
be designated by the Participating Employer as a distribution of excess
aggregate contributions, and distributed to the Participant. The income
allocable to excess aggregate contributions is equal to the allocable
gain or loss for the taxable year of the individual, but not the
allocable gain or loss for the period between the end of the taxable
year and the date of distribution (the "gap period"). Income allocable
to excess aggregate contributions for the taxable year shall be
determined by multiplying the gain or loss attributable to the
Participant's Matching Contribution Account balances by a fraction, the
numerator of which is the excess aggregate contributions for the
Participant for the Plan Year, and the denominator of which is the sum
of the Participant's Matching Contribution Account balances as of the
beginning of the Plan Year plus the Participant's Matching
Contributions for the Plan Year. Distribution of excess aggregate
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contributions will be made after the close of the Plan Year to which
the contributions relate, but within 12 months after the close of such
Plan Year. Excess aggregate contributions shall be treated as employer
contributions for purposes of Code sections 401(a)(4), 404, and 415
even if distributed from the Plan.
(h) Special Rules. For purposes of distributing excess
aggregate contributions, the determination and distribution of excess
aggregate contributions with respect to a Highly Compensated Employee
whose actual contribution ratio is determined pursuant to the family
aggregation rules will be accomplished by reducing the actual
contribution ratio as required above and allocating the excess
aggregate contributions for the family group among family members in
proportion to the Matching Contributions of each family member that is
combined to determine the actual contribution ratio.
(i) Recordkeeping requirement. The Administrator, on behalf of
the Participating Employers, shall maintain such records as are
necessary to demonstrate compliance with the Code section 401(m)
limits, including the extent to which Elective Contributions and
Qualified Nonelective Contributions are taken into account in
determining the actual contribution ratios.
(j) Excise tax where failure to correct. If the excess
aggregate contributions are not corrected within 2-1/2 months after the
close of the Plan Year to which they relate, the Participating
Employers will be liable for a 10 percent excise tax on the amount of
excess aggregate contributions attributable to them, to the extent
provided by Code section 4979. Qualified Nonelective Contributions
properly taken into account under this section for the Plan Year may
enable the Plan to avoid having excess aggregate contributions, even if
the contributions are made after the close of the 2-1/2 month period.
A. SECTION 401(a)(26)/410(b) LIMITS.
(a) Notwithstanding anything in this Plan to the contrary, if
the number of Participants who are eligible to share in any
contribution for a Plan Year is such that the Plan would fail to meet
the requirements of Code sections 410(a)(26), 410(b)(1), or
410(b)(2)(A)(i), because a Participating Employer's contribution would
not be allocated to a sufficient number of Participants, then the group
of Participants eligible to share in the contribution for the Plan Year
will be increased to include such minimum number of Participants who
are not in the service of the Participating Employer on the anniversary
date, as may be necessary to satisfy the applicable tests under the
above Code sections. The Participants who will become eligible to share
in the contribution will be those participants who, when compared to
Participants who are similarly situated, completed the greatest number
of hours of service in the Plan Year before the termination of their
service.
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(b) The preceding paragraph will not be construed to permit
the reduction of any Participant's Account balance, and any amounts
which were allocated to Participants whose eligibility to share in the
contribution did not result from the application of the preceding
paragraph will not be reallocated to satisfy such requirements.
Instead, the Participating Employer will make an additional
contribution equal to the amount which the affected Participants would
have received had they been included initially in the allocation of the
Participating Employer's Contribution, even if it would cause the
contributions of the participating Employer for the Plan Year to exceed
the amount which is deductible by the Participating Employer for such
Plan Year under Code section 404. Any adjustments pursuant to this
paragraph will be considered to be a retroactive amendment of the Plan
which was adopted by the last day of the Plan Year.
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I. ARTICLE SPECIAL TOP-HEAVY PROVISIONS.
A. PROVISIONS TO APPLY. The provisions of this Article shall apply for any
top-heavy Plan Year notwithstanding anything to the contrary in the Plan.
A. MINIMUM CONTRIBUTION. For any Plan Year which is a top-heavy plan year, the
Participating Employers shall contribute to the Trust a minimum contribution on
behalf of each Participant who is not a key employee for such year and who has
not separated from service from the Affiliated Employers by the end of the Plan
Year, regardless of whether or not the Participant has elected to make Elective
Contributions for the Year. The minimum contribution shall, in general, equal 3%
of each such Participant's Compensation, but shall be subject to the following
special rules:
(a) If the largest contribution on behalf of a key employee
for such year, taking into account only Elective Contributions,
Matching Contributions (if any), Discretionary Contributions and
Qualified Nonelective Contributions, is equal to less than 3% of the
key employee's Compensation, such lesser percentage shall be the
minimum contribution percentage for Participants who are not key
employees. This special rule shall not apply, however, if the Plan is
required to be included in an aggregation group and enables a defined
benefit plan to meet the requirements of Code section 401(a)(4) or 410.
(b) No minimum contribution will be required with respect to a
Participant who is also covered by another top-heavy defined
contribution plan of an Affiliated Employer which meets the vesting
requirements of Code section 416(b) and under which the Participant
receives the top-heavy minimum contribution.
(c) If a Participant is also covered by a top-heavy defined
benefit plan of an Affiliated Employer, "5%" shall be substituted for
"3%" above in determining the minimum contribution.
(d) The minimum contribution with respect to any Participant
who is not a key employee for the particular year will be offset by any
Discretionary Contributions and any Qualified Nonelective
Contributions, but not any other type of contribution otherwise made
for the Participant's benefit for such year.
(e) If additional minimum contributions are required under
this Section, such contributions shall be credited to the Participant's
Discretionary Contribution Account.
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(f) A minimum contribution required under this Section shall
be made even though, under other Plan provisions, the Participant would
not otherwise be entitled to receive an allocation for the year because
of (i) the Participant's failure to complete 1,000 hours of service (or
any equivalent provided in the Plan), or (ii) the Participant's failure
to make mandatory contributions or Elective Contributions to the Plan,
or (iii) Compensation less than a stated amount.
A. ADJUSTMENT TO LIMITATION ON BENEFITS. For purposes of the Code section 415
limits, the definitions of "defined contribution plan fraction" and "defined
benefit plan fraction" contained therein shall be modified, for any Plan Year
which is a top-heavy Plan Year, by substituting "1.0" for "1.25" in Code
sections 415(e)(2)(B) and 415(e)(3)(B).
A. DEFINITIONS. For purposes of these top-heavy provisions, the following terms
have the following meanings:
(a) "key employee" means a key employee described in Code
section 416(i)(1), and "non-key employee" means any employee who is not
a key employee (including employees who are former key employees);
(b) "top-heavy plan year" means a Plan Year if any of the
following conditions exist:
(i) the top-heavy ratio for the Plan exceeds 60
percent and the Plan is not part of any required aggregation
group or permissive aggregation group of plans;
(ii) this Plan is a part of a required aggregation
group of plans but not part of a permissive aggregation group
and the top-heavy ratio for the group of plans exceeds 60
percent; or
(iii) the Plan is part of a required aggregation
group and part of a permissive aggregation group of plans and
the top-heavy ratio for the permissive aggregation group
exceeds 60 percent.
(c) "top-heavy ratio":
(i) If the employer maintains one or more defined
contribution plans (including any Simplified Employee Pension
Plan) and the employer has not maintained any defined benefit
plan which during the 5-year period ending on the
determination date(s) has or has had accrued benefits, the
top-heavy ratio for the Plan alone or for the required or
permissive aggregation group as appropriate is a fraction, the
numerator
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of which is the sum of the account balances of all key
employees on the determination date(s) (including any part of
any account balance distributed in the 5-year period ending on
the determination date(s)), and the denominator of which is
the sum of all account balances (including any part of an
account balance distributed in the 5-year period ending on the
determination date(s)), both computed in accordance with Code
section 416. Both the numerator and the denominator of the
top-heavy ratio are increased to reflect any contribution not
actually made as of the determination date, but which is
required to be taken into account on that date under Code
section 416.
(ii) If the employer maintains one or more defined
contribution plans (including any Simplified Employee Pension
Plan) and the employer maintains or has maintained one or more
defined benefit plans which during the 5-year period ending on
the determination date(s) has or has had any accrued benefits,
the top-heavy ratio for any required or permissive aggregation
group as appropriate is a fraction, the numerator of which is
the sum of the account balances under the aggregated defined
contribution plan or plans for all key employees, determined
in accordance with (i) above, and the present value of accrued
benefits under the aggregated defined benefit plan or plans
for all key employees as of the determination date(s), and the
denominator of which is the sum of the account balances under
the aggregated defined contribution plan or plans for all
participants, determined in accordance with (i) above, and the
present value of all accrued benefits under the defined
benefit plan or plans for all participants as of the
determination date(s), all determined in accordance with Code
section 416. The accrued benefits under a defined benefit plan
in both the numerator and denominator of the top-heavy ratio
are increased for any distribution of an accrued benefit made
in the 5-year period ending on the determination date.
(iii) For purposes of (i) and (ii) above, the value
of account balances and the present value of accrued benefits
will be determined as of the most recent valuation date that
falls within or ends with the 12-month period ending on the
determination date, except as provided in Code section 416 for
the first and second plan years of a defined benefit plan. The
account balances and accrued benefits of a participant (A) who
is not a key employee but who was a key employee in a prior
year, or (B) who has not been credited with at least one Hour
of Service with any employer maintaining the plan at any time
during the 5-year period ending on the determination date will
be disregarded. The calculation of the top-heavy ratio, and
the extent to which distributions, rollovers, and transfers
are taken into account will be made in accordance with Code
section 416. Deductible employee contributions will not be
taken into account for purposes of computing the top-heavy
ratio. When
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aggregating plans, the value of account balances and accrued
benefits will be calculated with reference to the
determination dates that fall within the same calendar year.
(iv) The accrued benefit of a Participant other than
a key employee shall be determined under (A) the method, if
any, that uniformly applies for accrual purposes under all
defined benefit plans maintained by the employer, or (B) if
there is no such method, as if such benefit accrued not more
rapidly than the slowest accrual rate permitted under the
fractional rule of Code section 411(b)(1)(C).
(d) The "permissive aggregation group" is the required
aggregation group of plans plus any other plan or plan of the employer
which, when considered as a group with the required aggregation group,
would continue to satisfy the requirements of Code sections 401(a)(4)
and 410.
(e) The "required aggregation group" is (i) each qualified
plan of the employer in which at least one key employee participates or
participated at any time during the determination period (regardless of
whether the plan has terminated), and (ii) any other qualified plan of
the employer which enables a plan described in (i) to meet the
requirements of Code sections 401(a)(4) and 410(b).
(f) For purposes of computing the top-heavy ratio, the
"valuation date" shall be the last day of the applicable plan year.
(g) For purposes of establishing present value to compute the
top-heavy ratio, any benefit shall be discounted only for mortality and
interest based on the interest and mortality rates specified in the
defined benefit plan(s), if applicable.
(h) The term "determination date" means, with respect to the
initial plan year of a plan, the last day of such plan year and, with
respect to any other plan year of a plan, the last day of the preceding
plan year of such plan. The term "applicable determination date" means,
with respect to the Plan, the determination date for the Plan Year of
reference and, with respect to any other plan, the determination date
for any plan year of such plan which falls within the same calendar
year as the applicable determination date of the Plan.
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I. ARTICLE MISCELLANEOUS.
A. EXCLUSIVE BENEFIT RULE. No part of the corpus or income of the Trust
allocable to the Plan will be used for or diverted to purposes other than for
the exclusive benefit of each Participant and Beneficiary, except as otherwise
provided under the provisions of the Plan relating to Qualified Domestic
Relations Orders, the payment of reasonable expenses of administering the Plan,
the return of contributions upon nondeductibility or mistake of fact, or the
failure of the Plan to qualify initially.
A. LIMITATION OF RIGHTS. Neither the establishment of the Plan or the Trust, nor
any amendment thereof, nor the creation of any fund or account, nor the payment
of any benefits, will be construed as giving to any Participant or other person
any legal or equitable right against any Participating Employer or Committee or
Trustee, except as provided herein, and in no event will the terms of employment
or service of any Participant be modified or in any way be affected hereby. It
is a condition of the Plan, and each Participant expressly agrees by his or her
participation herein, that each Participant will look solely to the assets held
in the Trust for the payment of any benefit to which he or she is entitled under
the Plan.
A. NONALIENABILITY OF BENEFITS. The benefits provided hereunder will not be
subject to the voluntary or involuntary alienation, assignment, garnishment,
attachment, execution or levy of any kind, and any attempt to cause such
benefits to be so subjected will not be recognized, except to such extent as may
be required by law, except that if the Committee receives any Qualified Domestic
Relations Order that requires the payment of benefits hereunder or the
segregation of any Account, such benefits shall be paid, and such Account
segregated, in accordance with the applicable requirements of such Order. In
addition, the Account balance may be pledged as security for a loan from the
Plan in accordance with the Plan's loan procedures.
A. ADEQUACY OF DELIVERY. Any payment to be made under the Plan by the Trustee
may be made by the Trustee's check. Mailing to a person or persons entitled to
distributions hereunder at the addresses designated by the Participating
Employer or Committee shall be adequate delivery by the Trustee of such
distributions for all purposes. In the event the whereabout of a person entitled
to benefits under the Plan cannot be determined after diligent search by the
Committee, the Committee may place the benefits in a federally insured,
interest-bearing bank account opened in the name of such person. Such action
shall constitute a full distribution of such benefits under the terms of the
Plan and Trust.
A. GOVERNING LAW. The Plan and Trust will be construed, administered and
enforced according to the laws of Massachusetts to the extent such laws are not
preempted by ERISA.
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II. ARTICLE DEFINITIONS.
Wherever used in the Plan, the following terms have the following
meanings:
A. "ACCOUNTS" mean, for any Participant, the accounts established under the Plan
to which contributions made for the Participant's benefit, and any allocable
income, expense, gain and loss, are allocated.
A. "AFFILIATED EMPLOYER" means (a) the Plan Sponsor, (b) any corporation that is
a member of a controlled group of corporations (as defined in Code section
414(b)) of which the Plan Sponsor is also a member, (c) any trade or business,
whether or not incorporated, that is under common control (as defined in Code
section 414(c)) with the Plan Sponsor, (d) any trade or business that is a
member of an affiliated service group (as defined in Code section 414(m)) of
which the Plan Sponsor is also a member, or (e) to the extent required by
Regulations issued under Code section 414(o), any other organization; provided,
that the term "Affiliated Employer" shall not include any corporation or
unincorporated trade or business prior to the date on which such corporation,
trade or business satisfies the affiliation or control tests of, (b), (c), (d)
or (e) above. In identifying any "Affiliated Employers" for purposes of the Code
section 415 limits, the definitions in Code sections 414(b) and (c) shall be
modified as provided in Code section 415(h).
A. "BENEFICIARY" means any person entitled to receive benefits under the Plan
upon the death of a Participant.
A. "BOARD OF DIRECTORS" means the members of the Board of Directors of Boston
Scientific Corporation.
A. "CODE" means the Internal Revenue Code of 1986, as amended from time to time.
Reference to any section or subsection of the Code includes reference to any
comparable or succeeding provisions of any legislation which amends, supplements
or replaces such section or subsection, and also includes reference to any
Regulation issued pursuant to or with respect to such section or subsection.
A. "COMMITTEE" means the entity or persons appointed by the Board of Directors
to administer the Plan pursuant to its provisions.
A. "COMPANY STOCK" means any stock of the Employer or an Affiliate constituting
a "qualifying employer security" within the meaning of section 407(d)(5) of
ERISA.
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A. "COMPENSATION" means,
(a) for purposes of determining the Code section 415 limits and the
amount of any minimum contribution under the special top-heavy provisions, the
Participant's wages as defined in Code section 3401(a) for purposes of income
tax withholding at the source but determined without regard to any rules that
limit the remuneration included in wages based on the nature or location of the
employment or the services performed; and
(b) for all other purposes under the Plan, the same as in (a) above,
reduced by all of the following items (even if includible in gross income):
reimbursements or other expense allowances, bonuses, deferred compensation, and
moving expenses, provided however that any elective contributions made by the
Participating Employer that are not includible in gross income by reason of Code
section 125, 402(e)(3), 402(h), 403(b), or 451(b) shall in all cases be
includible as "Compensation" for purposes of this paragraph (b). Notwithstanding
the foregoing, for purposes of allocating Discretionary Contributions for a Plan
Year, commissions paid to any field sales commissioned Employee who is a Highly
Compensated Employee for such Plan Year shall be taken into consideration only
to the extent of the less of (i) fifty percent of the amount of the commissions
so paid, and (ii) the amount, not in excess of the commissions so paid, which
when added to all other amounts paid such Employee and qualifying as
Compensation results in an aggregate amount of Compensation of $85,000.
(c) Compensation shall include only that compensation which is actually
paid to the Participant during the applicable Plan Year. With respect to Plan
Years beginning on or after January 1, 1994, for all purposes under the Plan,
Compensation for any individual will be limited for any Plan Year to $150,000 as
adjusted by the Secretary of the Treasury under Code section 401(a)(17). If the
period for determining Compensation used in calculating a Participant's
allocation for a determination period is shorter than 12 months, the annual
Compensation limit shall be an amount equal to the otherwise applicable limit
multiplied by a fraction, the numerator of which is the number of months in the
period, and the denominator of which is 12. In determining the Compensation of a
Participant for purposes of this limitation, the family aggregation rules of
Code section 414(q)(6) shall apply, except that in applying such rules, the term
"family" shall include only the spouse of the Participant and any lineal
descendants of the Participant who have not attained age 19 before the close of
the Plan Year. If, as a result of the application of such rules the adjusted
limitation is exceeded, then the limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation as determined
under this Section prior to the application of this limitation.
A. "DISABILITY" means a medically determinable physical or mental impairment
which makes a Participant unable to engage in any substantial gainful activity
and can be expected to result in death or to be of long-continued and indefinite
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duration, as determined by the Plan Sponsor or an Affiliated Employer after
taking the advice of a qualified physician.
A. "DISCRETIONARY CONTRIBUTION" means a contribution made for the benefit of a
Participant by a Participating Employer in the discretion of the Board of
Directors.
A. "DISCRETIONARY CONTRIBUTION ACCOUNT" means an Account to which Discretionary
Contributions are allocated.
A. "ELECTIVE CONTRIBUTION" means a contribution made to the Plan for the benefit
of a Participant pursuant to a compensation reduction authorization.
A. "ELECTIVE CONTRIBUTION ACCOUNT" means an Account to which Elective
Contributions are allocated.
A. "ELIGIBLE EMPLOYEE" means any Employee who is employed by a Participating
Employer, and who, in the opinion of his or her Participating Employer, may
reasonably be expected to complete 1,000 or more Hours of Service with a
Participating Employer in a Plan Year. Notwithstanding the foregoing, an
Employee employed by a Participating Employer who is not initially deemed to be
an Eligible Employee nevertheless shall be considered an Eligible Employee as of
the first January 1 or July 1 first following a computation period in which he
or she completes 1,000 or more Hours of Service with a Participating Employer,
provided he or she is employed by a Participating Employer on such day. The
initial computation period shall be the 12-consecutive month period beginning on
the date the Employee first performs an Hour of Service (the "employment
commencement date"). The succeeding computation periods commence with the first
Plan Year commencing after the Employee's employment commencement date. In no
event shall a "leased employee" within the meaning of Code section 414(n) become
an Eligible Employee until he or she becomes actually employed by a
Participating Employer.
A. "EMPLOYEE" means, effective as of January 1, 1989, any individual employed by
an Affiliated Employer, including any leased employee and any other individual
required to be treated as an employee pursuant to Code sections 414(n) and
414(o).
A. "ENTRY DATE" means the first day of each full pay period.
A. "ERISA" means the Employee Retirement Income Security Act of 1974, as from
time to time amended, and any successor statute or statutes of similar import.
A. "HIGHLY COMPENSATED EMPLOYEE" means an Employee who is a
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"highly compensated employee" within the meaning of Code section 414(q). The
term Highly Compensated Employee includes highly compensated active Employees
and highly compensated former Employees.
(a) A highly compensated active Employee includes any Employee
who performs service for an Affiliated Employer during the
determination year and who, during the look-back year: (i) received
Compensation from the Affiliated Employers in excess of $75,000 (as
adjusted pursuant to Code section 414(q)(1); (ii) received Compensation
from the Affiliated Employers in excess of $50,000 (as adjusted
pursuant to Code section 414(q)(1) and was a member of the top-paid
group for such year; or (iii) was an officer of the Affiliated
Employers and received Compensation during such year that is greater
than 50 percent of the dollar limitation in effect under Code section
415(b)(1)(A).
(b) A highly compensated active Employee also includes: (i) an
Employee who is described in paragraph (a) if the term "determination
year" is substituted for the term "look-back year", and who is one of
the 100 Employees who received the most Compensation from the Employers
during the determination year; and (ii) an Employee who is a 5 percent
owner at any time during the look-back year or determination year. If
no officer has satisfied the compensation requirement of (a)(iii) above
during either a determination year or look-back year, the highest paid
officer for such year shall be treated as a Highly Compensated
Employee. For this purpose, the determination year shall be the Plan
Year. The look-back year shall be the immediately preceding Plan Year.
(c) The Plan Sponsor may elect, subject to the conditions of
the Regulations under Code section 414(q), to treat as highly
compensated active Employees for any Plan Year those Employees
performing service for an Affiliated Employer during the Plan Year who,
during the Plan Year itself: (i) received Compensation from the
Affiliated Employers in excess of $75,000 (as adjusted pursuant to Code
section 414(q)(1); (ii) received Compensation from the Affiliated
Employers in excess of $50,000 (as adjusted pursuant to Code section
414(q)(1) and was a member of the top-paid group for such year; (iii)
was an officer of the Affiliated Employers and received Compensation
during such year that is greater than 50 percent of the dollar
limitation in effect under Code section 415(b)(1)(A); or (iv) is a 5
percent owner at any time during the Plan Year. If such an election is
made for a Plan Year, the provisions of (a) and (b) above shall not
apply.
(d) A highly compensated former Employee includes any Employee
who separated from service (or was deemed to have separated) prior to
the determination year, performs no service for the Affiliated
Employers during the determination year, and was a highly compensated
active Employee for either the
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separation year or any determination year ending on or after the
Employee's 55th birthday.
(e) If an Employee is, during a determination year or
look-back year, a family member of either a 5 percent owner who is an
active or former Employee or a Highly Compensated Employee who is one
of the 10 most Highly Compensated Employees ranked on the basis of
Compensation paid by the Affiliated Employers during such year, then
the family member and the 5 percent owner or top 10 Highly Compensated
Employee shall be aggregated. In such case, the family member and 5
percent owner or top 10 Highly Compensated Employee shall be treated as
a single Employee receiving compensation and Plan contributions equal
to the sum of such compensation and contributions of the family member
and 5 percent owner or top-ten Highly Compensated Employee. For
purposes of this section, family member includes the spouse, lineal
ascendants and descendants of the employee or former employee and the
spouses of such lineal ascendants and descendants.
(f) The top paid group shall consist of the top 20 percent of
active Employees, ranked on the basis of Compensation received from the
Affiliated Employers during the year.
(g) The number of officers shall be limited to the lesser of
(i) 50 Employees or (ii) the greater of 3 Employees or 10 percent of
the Employees.
(h) The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of employees in
the top-paid group, the top 100 Employees, the number of employees
treated as officers and the compensation that is considered, will be
made in accordance with Code section 414(q).
A. "HOUR OF SERVICE" means, with respect to any Employee,
(a) Each hour for which the Employee is paid or entitled to
payment for the performance of duties for an Affiliated Employer, each
such hour to be credited to the Employee for the computation period in
which the duties were performed;
(b) Each hour for which the Employee is directly or indirectly
paid or entitled to payment by any Affiliated Employer (including
payments made or due from a trust fund or insurer to which the
Affiliated Employer contributes or pays premiums) on account of a
period of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to vacation,
holiday, illness, incapacity, disability, layoff, jury duty, military
duty,
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or leave of absence, each such hour to be credited to the Employee for the
computation period in which such period of time occurs, subject to the following
rules;
(i) No more than 501 Hours of Service shall be
credited under this paragraph (b) to the Employee on account
of any single continuous period during which the Employee
performs no duties;
(ii) Hours of Service shall not be credited under
this paragraph (b) to an Employee for a payment which solely
reimburses the Employee for medically related expenses
incurred by the Employee, or which is made or due under a plan
maintained solely for the purpose of complying with applicable
worker's compensation, unemployment compensation or disability
insurance laws; and
(iii) If the period during which the Employee
performs no duties falls within two or more computation
periods, and if the payment made on account of such period is
not calculated on the basis of units of time, the number of
Hours of Service credited with respect to such period shall be
allocated between not more than the first two such periods
based on the amount of the payment divided by the Employee's
most recent hourly rate of Compensation before the period
during which no duties were performed;
(c) Each hour not counted under paragraph (a) or (b) for which
back pay, irrespective of mitigation of damages, has been either
awarded or agreed to be paid by any Affiliated Employer, each such hour
to be credited to the Employee for the computation period to which the
award or agreement for back pay pertains, provided that crediting of
Hours of Service under this paragraph (c) with respect to periods
described in paragraph (b) above shall be subject to the limitations
and special rules set forth in clauses (i), (ii) and (iii) of paragraph
(b);
(d) Each noncompensated hour while an Employee during a period
of absence from any Affiliated Employer in the armed forces of the
United States if the Employee returns to work for any Affiliated
Employer at a time when he or she has reemployment rights under federal
law, and each noncompensated hour while an Employee on an unpaid leave
of absence granted by the Employer; and
(e) Solely for purposes of Section 5.5, each hour not counted
under paragraph (a) or (b) for which the Employee is absent form work
for maternity or paternity reasons, provided that no more than 501
Hours of Service shall be credited under this paragraph (e) to the
Employee. For purposes of this paragraph, an absence from work for
maternity or paternity reasons means an absence (1) by reason of the
pregnancy of the individual, (2) by reason of the birth of a child of
the individual, (3) by reason of the placement of a child with
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the individual in connection with the adoption of such child by such individual,
or (4) for purposes of caring for such child for a period beginning immediately
following such birth or placement.
Hours of Service to be credited to an Employee under (a), (b) and (c) above will
be calculated and credited pursuant to paragraphs (b) and (c) of Section
2530.200b-2 of the Department of Labor Regulations, which are incorporated
herein by reference. Hours of Service to be credited to an Employee during a
period described in (d) and (e) above will be determined by the Committee with
reference to the individual's most recent normal work schedule, or at the rate
of eight hours per day in the event the Committee is unable to establish such
schedule.
A. "MATCHING CONTRIBUTION ACCOUNT" means an Account to which Matching
Contributions are allocated.
A. "NORMAL RETIREMENT AGE" means age 65.
A. "PARTICIPANT" means each Eligible Employee who participates in the Plan
pursuant to its provisions.
A. "PARTICIPATING EMPLOYER" means the Plan Sponsor and each other Affiliated
Employer that, with the consent of the Board of Directors, adopt the Plan by
executing the Instrument of Participation attached as Schedule A.
A. "PLAN" means the Boston Scientific Corporation 401(k) Savings Plan set forth
herein, and all subsequent amendments thereto.
A. "PLAN SPONSOR" means Boston Scientific Corporation, a Delaware Corporation.
A. "PLAN YEAR" means the calendar year.
A. "PREDECESSOR EMPLOYER" means any trade or business acquired by a
Participating Employer, or any entity from which a Participating Employer has
acquired substantially all of its assets.
A. "QUALIFIED DOMESTIC RELATIONS ORDER" means any judgment, decree or order
(including approval of a property settlement agreement) which constitutes a
"qualified domestic relations order" within the meaning of Code section 414(p).
A judgment, decree or order shall not be considered not to be a Qualified
Domestic Relations Order merely because it requires a distribution to an
alternate payee (or the segregation of accounts pending distribution to an
alternate payee) before the Participant is otherwise entitled to a distribution
under the Plan.
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A. "QUALIFIED NONELECTIVE CONTRIBUTION" means a contribution made in the
discretion of the Plan Sponsor which is designated by the Plan Sponsor as a
Qualified Nonelective Contribution and which falls within the definition of a
"qualified nonelective contribution" under Regulation section 1.401(k)-1(g)(13).
A. "QNEC ACCOUNT" means an Account to which Qualified Nonelective Contributions
are allocated.
A. "REGULATION" means a regulation issued by the Department of Treasury,
including any final regulation, proposed regulation, temporary regulation, as
well as any modification of any such regulation contained in any notice, revenue
procedure, or similar pronouncement issued by the Internal Revenue Service.
A. "REQUIRED BEGINNING DATE" for a Participant shall be determined as follows:
(i) For a Participant who attains age 70-1/2 after
December 31, 1987, the Required Beginning Date is April 1
following the calendar year in which the Participant attains
age 70-1/2.
(ii) For a Participant who attained age 70-1/2 before
January 1, 1988 and is not a 5 percent owner, the Required
Beginning Date is April 1 following the later of (A) the
calendar year in which the Participant attains age 70-1/2, and
(B) the calendar year in which the Participant retires.
(iii) For a Participant who attained age 70-1/2
before January 1, 1988 and is a 5 percent owner, the Required
Beginning Date is April 1 after the later of (A) the calendar
year in which the Participant attains age 70-1/2, and (B) the
earlier of the calendar year in which the Participant retires
or the calendar year with or within which ends the Plan Year
in which the Participant becomes a 5 percent owner.
A Participant shall be a "5 percent owner" for purposes of this definition if
such Participant is a 5 percent owner within the meaning of Code section 416(i)
at any time during the Plan Year ending with or within the calendar year in
which such owner attains age 66-1/2 or any subsequent Plan Year. The
determination of whether or not a Participant is a 5 percent owner will be made
in accordance with Code section 416 but will be made without regard to whether
the Plan is top-heavy.
A. "ROLLOVER CONTRIBUTION" means a contribution made by a Participant which
satisfies the requirements for rollover contributions as set forth in the Plan.
A. "SECTION" means a section of the Plan.
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A. "TRUST" means the trust established under Section 3.12.
A. "TRUSTEE" means the person or persons who are at any time acting as trustee
under the Trust.
A. "VALUATION DATE" means each day on which the New York Stock Exchange is open
for trading.
A. "YEAR OF SERVICE FOR VESTING" means a Plan Year during which the Employee
completes at least 1,000 Hours of Service. The following special rules shall
apply:
(a) Unless otherwise provided in Schedule B, in the event the
Employer acquires a business of another employer, through an
acquisition either of assets or stock of such other employer, an
Employee who was employed by such other employer immediately prior to
such acquisition shall have his or her prior service with such other
employer taken into account, as if it were service with the Employer.
(b) A "leased employee", within the meaning of Code section
414(n) shall accrue Years of Service for vesting purposes and shall be
credited with such Years of Service for Vesting upon hire by a
Participating Employer as a common law employee.
<PAGE> 63
Schedule A
INSTRUMENT OF PARTICIPATION
_________________________, by its duly authorized officer, hereby
adopts and approves the Boston Scientific Corporation 401(k) Savings Plan and
its related Trust, agrees to make contributions thereto and perform such other
actions as may be required thereby, in accordance with the terms and conditions
of said Plan and Trust, and agrees to the appointment of Boston Scientific
Corporation as its agent, to perform such actions on its behalf as may be
permitted under the terms of said Plan and Trust to be the "Employer"
thereunder, of the foregoing to take effect on the ___ day of _________, 199__.
By: _________________________________
Dated: ______________________________
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Schedule B
Special Provisions Regarding Former Participants in Other Plans
The following plans have been merged into this Plan as of the dates
indicated below. Any elections made by participants in such plans with respect
to contributions, beneficiaries, investments, loans or benefit distributions
shall carry over and be treated as if made under this Plan, except as otherwise
provided by the Committee.
1. Cardiovascular Imaging Systems, Inc. 401(k) Salary Reduction Plan
and Trust
Effective ______, 199_, the Cardiovascular Imaging Systems, Inc. 401(k)
salary reduction plan is hereby merged into this Plan.
Special participation rules (Section 2.1(c)): No
Special rules re allocation of transferred accounts
(Section 4.6(a)): No
Special Vesting rules (Sections 5.6 and 14.41): No
QJSA rules applicable (Section 8.7): Yes
Optional forms of payment to preserve (Sections 8.1 and 8.7):
Immediate life annuity.
Immediate life annuity with a period certain of 10, 15, or
20 years.
Immediate annuity for the life of the Participant, with a
survivor annuity for the Participant's beneficiary which is
100%, 66 2/3% or 50% of the amount payable during the life
of the Participant.
Any combination of the above options and the benefit forms
described in Section 8.1.
2. Scimed Life Systems, Inc. Retirement Savings and Profit Sharing Plan
Effective ________, 199_, the Scimed Life Systems, Inc. Retirement
Savings and Profit Sharing Plan is hereby merged into this Plan.
Special participation rules (Section 2.1(c)): No
Special rules re allocation of transferred accounts
(Section 4.6(a)): No
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Special Vesting rules (Sections 5.6 and 14.41): No
QJSA rules applicable (Section 8.7): No
Optional forms of payment to preserve
(Sections 8.1 and 8.7): No
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<PAGE> 1
Exhibit 10.16
BOSTON SCIENTIFIC CORPORATION
1992 EMPLOYEE STOCK PURCHASE PLAN
(Incorporating Amendments Thru February, 1995)
1. Purpose. The Plan is intended to encourage ownership of Stock by
employees of the Company and any Related Corporations and to provide additional
incentive for the employees to promote the success of the business of the
Company and any Related Corporations. It is intended that the Plan shall be an
"employee stock purchase plan" within the meaning of Section 423 of the Code.
2. Definitions. As used in this Plan, the following terms shall have the
meanings set forth below:
(a) Beneficiary means the person designated as beneficiary on the
Optionee's Membership Agreement or, if no such beneficiary is named or no
such Agreement is in effect at the Optionee's death, his or her beneficiary
as determined under the provisions of the Company's program of life
insurance for employees.
(b) Board means the Board of Directors of the Company.
(c) Code means the Internal Revenue Code of 1986, as amended, or any
statute successor thereto, and any regulations issued from time to time
thereunder.
(d) Committee means a committee of the Board consisting of not less
than two directors of the Company who are not employees of the Company or
any Related Corporation, each appointed by the Board from time to time to
serve at its pleasure for the purpose of carrying out the responsibilities
of the Committee under the Plan. For any period during which no such
committee is in existence, all authority and responsibility assigned the
Committee under this Plan shall be exercised, if at all, by the Board.
(e) Company means Boston Scientific Corporation, a Delaware
corporation (or any successor corporation).
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(f) Compensation means the total taxable cash compensation of an
Optionee, exclusive of expense reimbursement or relocation allowances, for
the calendar year last ended prior to the Offering Commencement Date.
(g) Eligible Employee means a person who is eligible under the
provisions of Section 7 to receive an Option as of a particular Offering
Commencement Date.
(h) Fair Market Value means, as of any given date, the last reported
sales price of the Stock as reported in The Wall Street Journal for such
date or, if either no such sale is reported or the stock is not publicly
traded on or as of such date, the fair market value of the Stock as
determined by the Committee in good faith based on the available facts and
circumstances at the time.
(i) Membership Agreement means an agreement whereby an Optionee
authorizes a Participating Employer to withhold payroll deductions from his
or her Compensation and otherwise is in such form as the Committee may
specify.
(j) Offering Commencement Date means any date on which Options are
granted under the Plan as determined by the Committee pursuant to Section
8.
(k) Offering Period means a period of approximately six months
duration, beginning on an Offering Commencement Date and ending on the last
business day of the sixth calendar month ending after such date, during
which Options are granted and outstanding under the Plan pursuant to a
determination by the Committee under Section 4.
(l) Offering Termination Date means the last business day of an
Offering Period, on which Options must, if ever, be exercised.
(m) Option means an option to purchase shares of Stock granted under
the Plan.
(n) Optionee means an Eligible Employee to whom an Option is granted.
(o) Option Shares means shares of Stock purchasable under an Option.
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(p) Participating Employer means the Company or any Related
Corporation which is designated by the Committee as a corporation whose
Eligible Employees are to receive Options as of a particular Offering
Commencement Date.
(q) Plan means this Boston Scientific Corporation 1992 Employees'
Stock Purchase Plan, as set forth herein and as it may be amended from time
to time.
(r) Related Corporation means any corporation which is or during the
term of the Plan becomes a parent corporation of the Company, as defined in
Section 424(e) and (g) of the Code, or a subsidiary corporation of the
Company, as defined in Section 424(f) and (g) of the Code.
(s) Stock means the Class B non-voting common stock, $.01 par value
per share, of the Company.
3. Term of Plan. The Plan shall become effective upon approval of the Plan
by the shareholders of the Company. No option shall be granted under the Plan on
or after the tenth anniversary of such approval but Options theretofore granted
may extend beyond that date.
4. Administration. The Plan shall be administered by the Committee, which
shall determine from time to time whether to grant Options under the Plan as of
any date otherwise qualifying as an Offering Commencement Date. The Committee
shall further determine which (if any) Related Corporation shall be
Participating Employers as of each Offering Commencement Date. The Committee
shall have authority in its discretion to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to the Plan, to resolve all
disputes arising under the Plan, to determine the terms of Options granted under
the Plan, and to make all other determinations necessary or advisable for the
administration of the Plan. Any determination of the Committee shall be final
and binding upon all persons having or claiming any interest under the Plan or
under any Option granted pursuant to the Plan.
5. Amendment and Termination. The Board may terminate or amend the Plan at
any time and from time to time; provided, however, that the Board may not,
without approval of the shareholders of the Company in a manner satisfying the
requirements of Section 423 of the Code, increase the maximum number of shares
of Stock purchasable under the Plan or change the description of individuals
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<PAGE> 4
eligible to receive Options. No termination of or amendment to the Plan may
adversely affect the rights of an Optionee with respect to any Option held by
the Optionee as of the date of such termination or amendment without the
Optionee's consent.
6. Shares of Stock Subject to the Plan. No more than an aggregate of
500,000 shares of Stock may be issued or delivered pursuant to the exercise of
Options granted under the Plan. Shares to be delivered upon the exercise of
Options may be either shares of Stock which are authorized but unissued or
shares of Stock held by the Company in its treasury. If an Option expires or
terminates for any reason without having been exercised in full, the unpurchased
shares subject to the Option shall become available for other Options granted
under the Plan. The Company shall, at all times during which Options are
outstanding, reserve and keep available shares of Stock sufficient to satisfy
such Options, and shall pay all fees and expenses incurred by the Company in
connection therewith. In the event of any capital change in the outstanding
Stock as contemplated by Section 9.6, the number and kind of shares of Stock
reserved and kept available by the Company shall be appropriately adjusted.
7. Eligibility. Each employee of a Participating Employer shall be granted
an Option on each Offering Commencement Date on which such employee meets all of
the following requirements:
(a) The employee is customarily employed by a Participating Employer
for more than twenty hours per week and has been employed by one or more
Participating Employers for at least twelve consecutive months prior to the
applicable Offering Commencement Date.
(b) The employee will not, after grant of the Option, own stock
possessing five or more percent of the total combined voting power or value
of all classes of stock of the Company or of any Related Corporation. For
purposes of this paragraph (b), the rules of Section 424(d) of the Code
shall apply in determining the stock ownership of the employee, and stock
which the employee may purchase under outstanding options shall be treated
as stock owned by the employee.
(c) Upon grant of the Option, the employee's rights to purchase stock
under all employee stock purchase plans (as defined in Section 423(b) of
the Code) of the Company and its Related Corporations will not accrue at a
rate which exceeds $25,000 of fair market value of the stock (determined as
of
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<PAGE> 5
the grant date) for each calendar year in which such option is outstanding
at any time. The accrual of rights to purchase stock shall be determined in
accordance with Section 423(b)(8) of the Code.
8. Offering Commencement Dates. Options shall be granted on the first
business day of any calendar month which is designated by the Committee as the
beginning of an Offering Period.
9. Terms and Conditions of Options.
9.1. General. All Options granted on a particular Offering Commencement
Date shall comply with the terms and conditions set forth in Sections 9.2
through 9.10. Subject to Sections 7(c) and 9.8, each Option granted on a
particular Offering Commencement Date shall entitle the Optionee to purchase
that number of shares equal to the lesser of (a) the result of five percent of
the Optionee's Compensation divided by 85 percent of the Market Value of one
share of Stock on the Offering Commencement Date and then rounded down, if
necessary, to the nearest whole number and (b) any number of shares established
by the Committee as an additional limitation on the maximum number of Option
Shares available under every Option granted on that Offering Commencement Date.
9.2. Purchase Price. The purchase price of Option Shares shall be 85% of
the lesser of (a) the Market Value of the shares as of the Offering Commencement
Date or (b) the Market Value of the shares as of the Offering Termination Date.
9.3. Restrictions on Transfer. Options may not be assigned, transferred,
pledged or otherwise disposed of. An Option may not be exercised by anyone other
than the Optionee during the lifetime of the Optionee. Option Shares may not be
assigned, transferred, pledged or other disposed of, except by will or under the
laws of descent and distribution, until after the first anniversary of the
Offering Termination Date on which acquired (or the death of the Optionee, if
earlier), but thereafter may be sold or otherwise transferred without
restriction. The Optionee shall agree in the Membership Agreement to notify the
Company of any transfer of the Shares within two years of the Offering
Commencement Date of those Shares. The Company shall have the right to place a
legend on all stock certificates instructing the transfer agent to notify the
Company of any transfer of the shares. The Company shall also have the right to
place a legend on certificates setting forth the restriction on transferability
of such shares.
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9.4. Expiration. Each Option shall expire at the close of business on the
Offering Termination Date or on such earlier date as may result from the
operation of Section 9.5.
9.5. Termination of Employment of Optionee. If an Optionee ceases for any
reason to be continuously employed by a Participating Employer, whether due to
death, retirement, voluntary severance, involuntary severance, transfer, or
disaffiliation of a Related Corporation with the Company, his or her Option
shall immediately expire, and the Optionee's accumulated payroll deductions
shall be returned to the Optionee or his or her Beneficiary, as the case may be,
by the Company. For purposes of this Section 9.5, an Optionee shall be deemed to
be employed throughout any leave of absence for military service, illness or
other bona fide purpose which does not exceed the longer of ninety days or the
period during which the Optionee's reemployment rights are guaranteed by statute
or by contract. If the Optionee does not return to active employment prior to
the termination of such period, his or her employment shall be deemed to have
ended on the ninety-first day of such leave of absence.
9.6. Capital Changes Affecting the Stock. In the event that, between the
Offering Commencement Date and the Offering Termination Date of an Option, a
stock dividend is paid or becomes payable in respect of the Stock or there
occurs a split-up or contraction in the number of shares of Stock, the number of
shares for which the Option may thereafter be exercised and the price to be paid
for each such share shall be proportionately adjusted. In the event that, after
the Offering Commencement Date, there occurs a reclassification or change of
outstanding shares of Stock or a consolidation or merger of the Company with or
into another corporation or a sale of conveyance, substantially as a whole, of
the property of the Company, the Optionee shall be entitled on the Offering
Termination Date to receive shares of stock or other securities equivalent in
kind and value to the shares of stock he or she would have held if he or she had
exercised the Option in full immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance and had continued to hold such shares
(together with all other shares and securities thereafter issued in respect
thereof) until the Offering Termination Date. In the event that there is to
occur a recapitalization involving an increase in the par value of the Stock
which would result in a par value exceeding the exercise price under an
outstanding Option, the Company shall notify the Optionee of such proposed
recapitalization immediately upon its being recommended by the Board to the
Company's shareholders, after which the Optionee shall have the right to
exercise his or her Option prior to such recapitalization; if the Optionee fails
to exercise the Option prior to recapitalization, the exercise price under the
Option shall be appropriately adjusted. In the event that, after the Offering
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Commencement Date, there occurs a dissolution or liquidation of the Company,
except pursuant to a transaction to which Section 424(a) of the Code applies,
each Option shall terminate, but the Optionee shall have the right to exercise
his or her Option prior to such dissolution or liquidation.
9.7. Payroll Deductions. An Optionee may purchase shares under his or her
Option during any particular Offering Period by completing and returning to the
personnel department of the Company at least ten business days prior to the
beginning of such Offering Period a Membership Agreement indicating a percentage
(which shall be a full integer between one and ten) of his or her Compensation
which is to be withheld each pay period. The Optionee shall not be permitted to
change the percentage of Compensation withheld during an Offering Period.
However, the Optionee may withdraw all, but not less than all, of his or her
accumulated payroll deductions by submitting a written request therefor to the
personnel department of the Company no later than two weeks prior to the
Offering Termination Date whereupon his or her payroll deduction for the
remainder of the Offering Period shall cease. Any Membership Agreement in effect
for an Offering Period shall remain in effect as to any subsequent Offering
Period unless revoked by a withdrawal of the Optionee's accumulated payroll
deduction amounts or modified by submission of a new Membership Agreement, or
until the Optionee's termination of employment for any reason.
9.8. Exercise of Options. On the Offering Termination Date the Optionee may
purchase the number of shares purchasable by his or her accumulated payroll
deductions, or, if less, the maximum number of shares subject to the Option as
provided in Section 9.1, provided that:
(a) If the total number of shares which all Optionees elect to
purchase, together with any shares already purchased under the Plan,
exceeds the total number of shares which may be purchased under the Plan
pursuant to Section 6, the number of shares which each Optionee is
permitted to purchase shall be decreased pro rata based on the Optionee's
accumulated payroll deductions in relation to all accumulated payroll
deductions currently being withheld under the Plan.
(b) If the number of shares purchasable includes a fraction, such
number shall be adjusted to the next smaller whole number and the purchase
price shall be adjusted accordingly.
Accumulated payroll deductions not withdrawn prior to the Offering Termination
Date shall be automatically applied by the Company toward the purchase of Option
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<PAGE> 8
Shares. Accumulated payroll deductions, to the extent in excess of the aggregate
purchase price of the shares purchased by the Optionee on an Offering
Termination Date, shall be refunded to the Optionee; provided, however, that
where such excess is less than the purchase price for a single share of Stock on
such Date, such excess shall not be refunded but instead shall be carried over
and applied to the purchase of shares in the first following Offering Period
(subject to the possibility of withdrawal by the Optionee in such Period in
accordance with the terms of the Plan).
9.9. Delivery of Stock. Except as provided below, within a reasonable time
after the Offering Termination Date, the Company shall deliver or cause to be
delivered to the Optionee a certificate or certificates for the number of shares
purchased by the Optionee. A stock certificate representing the number of shares
purchased will be issued in the participant's name only, or if the Participant
so requests in writing, not later than the Offering Termination Date, in the
name of the employee and another person of legal age as joint tenants with
rights of survivorship. If any law or applicable regulation of the Securities
and Exchange Commission or other body having jurisdiction in the premises shall
require that the Company or the Optionee take any action in connection with the
shares being purchased under the Option, delivery of the certificate or
certificates for such shares shall be postponed until the necessary action shall
have been completed, which action shall be taken by the Company at its own
expense, without unreasonable delay. The Optionee shall have no rights as a
shareholder in respect of shares for which he or she has not received a
certificate.
Notwithstanding the foregoing, the Company may elect to hold for the
benefit of the Optionee any shares otherwise to be delivered to the Optionee
pursuant to this Section 9.9, or to deliver the same to such agent or agents of
the Company for the benefit of the Optionee as the Company may select, for the
period transfer of such shares is limited by this Plan (and thereafter, until
the Optionee requests delivery of such stock in writing). In that event, the
Optionee shall have all of the rights of a shareholder in the shares so held by
the Company or its agent, except as limited by the restriction on
transferability, from and after the issuance of the same and the Company or its
agent shall adopt reasonable procedures to enable the Optionee to exercise such
rights. In the event of the Optionee's death while any shares are so held, such
shares shall be delivered to the Optionee's Beneficiary promptly following the
Committee's receipt of evidence satisfactory to the Committee of the Optionee's
death.
9.10. Return of Accumulated Payroll Deductions. In the event that the
Optionee or his or her Beneficiary is entitled to the return of accumulated
payroll
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<PAGE> 9
deductions, whether by reason of voluntary withdrawal, termination of
employment, retirement, death, or in the event that accumulated payroll
deductions exceed the price of shares purchased, such amount shall be returned
by the Company to the Optionee or the Beneficiary, as the case may be, as soon
as practicable following the Offering Termination Date of the Offering Period in
which the same were deducted. Accumulated payroll deductions held by the Company
shall not bear interest nor shall the Company be obligated to segregate the same
from any of its other assets.
10. No Enlargement of Employment Rights. Neither the establishment or
continuation of the Plan, nor the grant of any Option hereunder, shall be deemed
to give any employee the right to be retained in the employ of the Company or a
Related Corporation, or any successor to either, or to interfere with the right
of the Company or such Corporation or successor to discharge the employee at any
time.
11. Tax Withholding. If, at any time, the Company or any Related
Corporation is required, under applicable laws and regulations, to withhold, or
to make any deduction of, any taxes or take any other action in connection any
exercise of an Option or transfer of shares of Common Stock, the Company or such
Related Corporation shall have the right to deduct from all amounts paid in cash
any taxes required by law to be withheld therefrom, and in the case of shares of
Common Stock, the Optionee or his or her estate or Beneficiary shall be required
to pay the Company or such Related Corporation the amount of taxes required to
be withheld, or, in lieu thereof, the Company or such Related Corporation shall
have the right to retain, or sell without notice, a sufficient number of shares
of Common Stock to cover the amount required to be withheld, or to make other
arrangements with respect to withholding as it shall deem appropriate.
12. Governing Law. The Plan and all Options and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without regard to the conflict of laws principles
thereof.
<PAGE> 10
BOSTON SCIENTIFIC CORPORATION
1992 EMPLOYEE STOCK PURCHASE PLAN
Second Amendment
Pursuant to the provisions of Section 5 of Boston Scientific Corporation's
1992 Employee Stock Purchase Plan (the "Plan"), the Board of Directors of Boston
Scientific Corporation hereby (i) amends Section 2(s) of the Plan to remove the
expression "Class B non-voting", and (ii) amend Section 6 of the Plan to remove
the expression "500,000" and replace it with the expression "1,500,000."
All other terms and provisions of the Plan, and any options made
thereunder, remain in full force and effect.
<PAGE> 1
Exhibit 10.17
BOSTON SCIENTIFIC CORPORATION
DEFERRED COMPENSATION PLAN
Effective January 1, 1996
<PAGE> 2
TABLE OF CONTENTS
Page
Purpose .....................................................................1
ARTICLE 1
Definitions...............................................................1
ARTICLE 2
Eligibility and Enrollment................................................7
2.1 Participation. ....................................................7
2.2 Enrollment Requirements.............................................7
2.3 Commencement of Participation.......................................7
2.4 Termination of Participation and/or Deferrals.......................7
ARTICLE 3
Deferral Commitments/Interest Crediting/Taxes.............................7
3.1 Minimum Deferral....................................................7
3.2 Maximum Deferral....................................................8
3.3 Election to Defer; Effect of Election Form..........................9
3.4 Withholding of Deferral Amounts.....................................9
3.5 Interest Crediting..................................................9
3.6 Interest Crediting for Installment Distributions...................10
3.7 FICA and Other Taxes...............................................11
3.8 Quarterly Statements...............................................11
ARTICLE 4
Short-Term Payout; Withdrawals; Change in Control........................11
4.1 Short-Term Payout..................................................11
4.2 Other Benefits Take Precedence Over Short-Term Payout..............12
4.3 Withdrawal Payout/Suspensions for Unforeseeable
Financial Emergencies.............................................12
4.4 Withdrawal Election................................................12
4.5 Change in Control..................................................12
ARTICLE 5
Retirement Benefit.......................................................13
5.1 Retirement Benefit.................................................13
5.2 Payment of Retirement Benefit......................................13
5.3 Death Prior to Completion of Retirement Benefit....................13
ARTICLE 6
Pre-Retirement Survivor Benefit..........................................13
6.1 Pre-Retirement Survivor Benefit....................................13
6.2 Payment of Pre-Retirement Survivor Benefit.........................14
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<PAGE> 3
ARTICLE 7
Termination Benefit......................................................14
7.1 Termination Benefit................................................14
7.2 Payment of Termination Benefit.....................................14
ARTICLE 8
Disability Waiver and Benefit............................................14
8.1 Disability Waiver..................................................14
8.2 Continued Eligibility; Disability Benefit..........................15
ARTICLE 9
Beneficiary Designation..................................................15
9.1 Beneficiary........................................................15
9.2 Beneficiary Designation; Change....................................15
9.3 Acknowledgment.....................................................16
9.4 No Beneficiary Designation.........................................16
9.5 Doubt as to Beneficiary............................................16
9.6 Discharge of Obligations...........................................16
ARTICLE 10
Leave of Absence.........................................................16
10.1 Paid Leave of Absence..............................................16
10.2 Unpaid Leave of Absence............................................16
ARTICLE 11
Termination, Amendment or Modification...................................17
11.1 Termination........................................................17
11.2 Amendment..........................................................17
11.3 Plan Agreement.....................................................18
11.4 Effect of Payment..................................................18
ARTICLE 12
Administration...........................................................18
12.1 Committee Duties...................................................18
12.2 Agents.............................................................18
12.3 Binding Effect of Decisions........................................18
12.4 Indemnity of Committee.............................................19
12.5 Employer Information...............................................19
ARTICLE 13
Other Benefits and Agreements............................................19
13.1 Coordination with Other Benefits...................................19
-ii-
<PAGE> 4
ARTICLE 14
Claims Procedures........................................................19
14.1 Presentation of Claim..............................................19
14.2 Notification of Decision...........................................19
14.3 Review of a Denied Claim...........................................20
14.4 Decision on Review.................................................20
14.5 Legal Action.......................................................21
ARTICLE 15
Funding..................................................................21
15.1 No Funding.........................................................21
15.2 Grantor Trust......................................................21
ARTICLE 16
Miscellaneous............................................................21
16.1 Limitation on Benefit Payment......................................21
16.2 Status of Plan.....................................................22
16.3 Unsecured General Creditor.........................................22
16.4 Employer's Liability...............................................22
16.5 Nonassignability...................................................22
16.6 Not a Contract of Employment.......................................22
16.7 Furnishing Information.............................................23
16.8 Terms..............................................................23
16.9 Captions...........................................................23
16.10 Governing Law......................................................23
16.11 Notice.............................................................23
16.12 Successors.........................................................23
16.13 Spouse's Interest..................................................23
16.14 Validity...........................................................24
16.15 Incompetent........................................................24
16.16 Court Order........................................................24
16.17 Distribution in the Event of Taxation..............................24
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<PAGE> 5
BOSTON SCIENTIFIC CORPORATION
DEFERRED COMPENSATION PLAN
Effective January 1, 1996
Purpose
The purpose of this Plan is to provide specified benefits to a select group
of management, highly compensated Employees, and Directors who contribute
materially to the continued growth, development and future business success of
Boston Scientific Corporation, a Delaware corporation, and its subsidiaries, if
any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and
for purposes of Title I of ERISA.
ARTICLE 1
Definitions
For purposes hereof, unless otherwise clearly apparent from the context,
the following phrases or terms shall have the following indicated meanings:
1.1 "Account Balance" shall mean (i) the Deferral Amount, plus (ii) interest
credited in accordance with all the applicable interest crediting
provisions of this Plan, less (iii) all distributions. This account shall
be a bookkeeping entry only and shall be utilized solely as a device for
the measurement and determination of the amounts to be paid to a
Participant pursuant to this Plan.
1.2 "Annual Bonus" shall mean any compensation, in addition to Base Annual
Salary, paid annually to a Participant as an Employee under any Employer's
annual bonus and incentive plans.
1.3 "Annual Deferral Amount" shall mean that portion of a Participant's Base
Annual Salary, Annual Bonus and/or Directors Fees that a Participant
elects to have deferred in accordance with Article 3, for any one Plan
Year. In the event of a Participant's Retirement, Disability (if deferrals
cease in accordance with Section 8.1), death or a Termination of
Employment prior to the end of a Plan Year, such year's Annual Deferral
Amount shall be the actual amount withheld prior to such event.
1.4 "Base Annual Salary" shall mean the annual compensation, excluding
bonuses, commissions, overtime, fringe benefits, stock options, relocation
expenses, incentive payments, non-monetary awards, directors fees and
other fees, automobile and other allowances (whether or not such
allowances are included in the Employee's gross income), paid to a
Participant for employment services rendered.
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<PAGE> 6
Base Annual Salary shall be calculated before reduction for compensation
voluntarily deferred or contributed by the Participant pursuant to all
qualified or non-qualified plans and shall be calculated to include
amounts not otherwise included in the Participant's gross income under
Code Section 125, 402(e)(3), 402(h) or 403(b) pursuant to plans
established by any Employer; provided, however, that all such amounts will
be included in compensation only to the extent that, had there been no
such plan, the amount would have been payable in cash to the Employee.
1.5 "Beneficiary" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 9, that are entitled to
receive benefits under this Plan upon the death of a Participant.
1.6 "Beneficiary Designation Form" shall mean the form established from time
to time by the Committee that a Participant completes, signs and returns
to the Committee to designate one or more Beneficiaries.
1.7 "Board" shall mean the board of directors of the Company.
1.8 "Change in Control" shall mean the first to occur of any of the following:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (i) the then outstanding shares
of Common Stock (the "outstanding Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Company
voting securities"); provided, however, that any acquisition by (x) any
noncorporate shareholder of the Company as of the effective date of the
initial registration of an offering of Common Stock under the Securities
Act of 1933, (y) the company or any of its subsidiaries, or any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any of its subsidiaries or (z) any corporation with respect to which,
following such acquisition, more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and combined voting
power of the then outstanding voting 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 and entities who were the beneficial owners, respectively,
of the outstanding Common Stock and Company voting securities immediately
prior to such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the outstanding
Common Stock and Company voting securities, as the case may be, shall not
constitute a Change in Control; or
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<PAGE> 7
(b) Continuing directors constitute less than a majority of the
Board, where a "continuing director" is (i) each person who was a director
of the Company on January 2, 1995, and (ii) each person who subsequently
becomes a director of the Company and whose election or nomination was
approved by a vote of at least a majority of the continuing directors in
office at the time of the election or nomination unless that person became
a director in connection with an actual or threatened election contest; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "business combination"), with respect to which
all or substantially all of the individuals and entities who were the
respective beneficial owners of the outstanding Common Stock and Company
voting securities immediately prior to such business combination do not
own beneficially, directly or indirectly, more than 60% of, respectively,
the then outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such business combination in substantially the same
proportion as their ownership immediately prior to such business
combination of the outstanding Common Stock and Company voting securities,
as the case may be; or
(d) A complete liquidation or dissolution of the Company or a sale
or other disposition of all or substantially all of the assets of the
Company other than to a corporation with respect to which, following such
sale or disposition, more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election
of directors is then owned beneficially, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the outstanding Common Stock and Company voting
securities immediately prior to such sale or disposition in substantially
the same proportion as their ownership of the outstanding Common Stock and
Company voting securities, as the case may be, immediately prior to such
sale or disposition.
1.9 "Claimant" shall have the meaning set forth in Section 14.1.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as may be amended
from time to time.
1.11 "Committee" shall mean the committee described in Article 12.
1.12 "Common Stock" shall mean the common stock, $.01 par value, of the
Company.
1.13 "Common Stock Option" shall mean the interest crediting option described
in Section 3.5(b).
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<PAGE> 8
1.14 "Company" shall mean Boston Scientific Corporation, a Delaware
corporation, and any successor to all or substantially all of the
Company's assets or business which assumes the obligations of the Company.
1.15 "Crediting Rate" shall mean an interest rate, determined under the Moody's
Rate Option or the Common Stock Option, as elected by the Participant for
each Annual Deferral Amount (or a designated portion thereof).
1.16 "Deferral Amount" shall mean the sum of all of a Participant's Annual
Deferral Amounts.
1.17 "Deduction Limitation" shall mean the limitation described in Section 16.1
on a benefit that may otherwise be distributable pursuant to the
provisions of this Plan.
1.18 "Director" shall mean any member of the board of directors of any
Employer.
1.19 "Directors Fees" shall mean the annual fees paid by any Employer,
including retainer fees and meetings fees, as compensation for serving on
its board of directors.
1.20 "Disability" shall mean a period of disability during which a Participant
qualifies for permanent disability benefits under the Participant's
Employer's long-term disability plan, or, if a Participant does not
participate in such a plan, a period of disability during which the
Participant would have qualified for permanent disability benefits under
such a plan had the Participant been a participant in such a plan, as
determined in the sole discretion of the Committee.
1.21 "Disability Benefit" shall mean the benefit described in Article 8.
1.22 "Election Form" shall mean the form established from time to time by the
Committee that a Participant completes, signs and returns to the Committee
to make an election under the Plan.
1.23 "Eligible Individual" shall mean, initially, an Outside Director of the
Company. Effective as of such date as the Company determines and
communicates in advance to Eligible Individuals, an "Eligible Individual"
means (a) any Vice President, Senior Vice President or member of the
Office of the Chairman of the Company; (b) any Employee of another
Employer if the Employee is designated by the Committee as eligible for
the Plan; and (c) any Director.
1.24 "Employee" shall mean a person who is an employee of any Employer.
1.25 "Employer(s)" shall mean the Company and/or any of its subsidiaries (now
in existence or hereafter formed or acquired) that have been selected by
the Board to participate in the Plan and have adopted the Plan as a
sponsor.
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<PAGE> 9
1.26 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.
1.27 "Market Price" shall mean, as of any trading date, the closing price of
Common Stock on such date (or, if no trading shall have occurred on such
date, on the next previous date on which trading shall have occurred), as
reported on the New York Stock Exchange Composite Tape.
1.28 "Moody's Rate Option" shall mean the interest crediting option described
in Section 3.5(a).
1.29 "Outside Director" shall mean a Director who is not an officer or employee
of the Company or any of its subsidiaries.
1.30 "Participant" shall mean any Eligible Individual (i) who elects to
participate in the Plan, (ii) who signs a Plan Agreement, an Election Form
and a Beneficiary Designation Form, (iii) whose signed Plan Agreement,
Election Form and Beneficiary Designation Form are accepted by the
Committee, (iv) who commences participation in the Plan, and (v) whose
Plan Agreement has not terminated. A spouse or former spouse of a
Participant shall not be treated as a Participant in the Plan, even if he
or she has an interest in the Participant's benefits under the Plan as a
result of applicable law or property settlements resulting from legal
separation or divorce.
1.31 "Plan" shall mean the Boston Scientific Corporation Deferred Compensation
Plan, which shall be evidenced by this instrument and by each Plan
Agreement, as may be amended from time to time.
1.32 "Plan Agreement" shall mean a written agreement, as may be amended from
time to time, which is entered into by and between an Employer and a
Participant. Each Plan Agreement executed by a Participant and the
Participant's Employer shall provide for the entire benefit to which such
Participant is entitled to under the Plan, and the Plan Agreement bearing
the latest date of acceptance by the Committee shall govern such
entitlement. The terms of any Plan Agreement may be varied by Participant,
and any Plan Agreement may provide additional benefits not set forth in
the Plan or limit the benefits otherwise provided under the Plan;
provided, however, that any such additional benefits or benefit
limitations must be agreed to by both the Employer and the Participant.
1.33 "Plan Year" shall mean the twelve (12) month period beginning on January 1
and continuing through December 31.
1.34 "Pre-Retirement Survivor Benefit" shall mean the benefit described in
Article 6.
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<PAGE> 10
1.35 "Retirement", "Retires" or "Retired" shall mean, with respect to an
Employee, severance from employment from all Employers for any reason
other than a leave of absence, death or Disability on or after the earlier
of the attainment of (a) age sixty-five (65) or (b) age fifty-five (55)
with five (5) Years of Service; and shall mean, with respect to a Director
who is not an Employee, severance of his or her directorships with all
Employers on or after the later of (y) the attainment of age seventy (70),
or (z) in the sole discretion of the Committee, an age later than age
seventy (70). If a Participant is both an Employee and a Director,
Retirement shall not occur until he or she Retires as both an Employee and
a Director.
1.36 "Retirement Benefit" shall mean the benefit described in Article 5.
1.37 "Short-Term Payout" shall mean the payout described in Section 4.1.
1.38 "Termination Benefit" shall mean the benefit described in Article 7.
1.39 "Termination of Employment" shall mean the ceasing of employment with all
Employers, or service as a Director of all Employers, voluntarily or
involuntarily, for any reason other than Retirement, Disability, death or
an authorized leave of absence. If a Participant is both an Employee and a
Director, a Termination of Employment shall occur only upon the
termination of the last position held.
1.40 "Unforeseeable Financial Emergency" shall mean an unanticipated emergency
that is caused by an event beyond the control of the Participant that
would result in severe financial hardship to the Participant resulting
from (i) a sudden and unexpected illness or accident of the Participant or
a dependent of the Participant, (ii) a loss of the Participant's property
due to casualty, or (iii) other extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant, all as determined in the sole discretion of the Committee.
1.41 "Years of Service" shall mean the total number of full years in which a
Participant has been an Employee or a Director. Any partial year shall not
be counted.
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<PAGE> 11
ARTICLE 2
Eligibility and Enrollment
2.1 Participation. Participation in the Plan shall be limited to Eligible
Individuals.
2.2 Enrollment Requirements. As a condition to participation, each Eligible
Individual shall complete, execute and return to the Committee a Plan
Agreement, an Election Form and a Beneficiary Designation Form prior to
January 1, 1996 or, if later, within 30 days after the day on which he or
she becomes an Eligible Individual. In addition, the Committee shall
establish from time to time such other enrollment requirements as it
determines, in its sole discretion, are necessary.
2.3 Commencement of Participation. Each Eligible Individual shall commence
participation in the Plan upon satisfaction of all enrollment requirements
set forth in this Plan and required by the Committee, including returning
all required documents to the Committee within the required time frame. If
an Eligible Individual fails to meet all such requirements within the
required time frame, he or she shall not be eligible to participate in the
Plan until the first day of the Plan Year following the delivery to and
acceptance by the Committee of the required documents.
2.4 Termination of Participation and/or Deferrals. If the Committee determines
in good faith that a Participant no longer qualifies as a member of a
select group of management or highly compensated employees, as membership
in such group is determined in accordance with Sections 201(2), 301(a)(3)
and 401(a)(1) of ERISA, the Committee shall have the right, in its sole
discretion, to (i) terminate any deferral election the Participant has
made for the Plan Year in which the Participant's membership status
changes, (ii) prevent the Participant from making future deferral
elections and/or (iii) immediately distribute the Participant's then
Account Balance as a Termination Benefit and terminate the Participant's
participation in the Plan. The Committee may, in its sole discretion,
reinstate the Participant to full Plan participation at such time in the
future as the Participant again becomes a member of the select group
described above.
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<PAGE> 12
ARTICLE 3
Deferral Commitments/Interest Crediting/Taxes
3.1 Minimum Deferral.
(a) Minimum. For each Plan Year, a Participant may elect to defer one or
more of the following forms of compensation in the following minimum
amounts for each deferral elected:
Minimum
Deferral Amount
-------- ------
Base Annual Salary $2,000
Annual Bonus $2,000
Directors Fees $ 0
If an election is made for less than the stated minimum amounts, or
if no election is made, the amount deferred shall be zero.
(b) Short Plan Year. If a Participant first becomes a Participant after
the first day of a Plan Year, the minimum Base Annual Salary
deferral shall be an amount equal to the minimum set forth above,
multiplied by a fraction, the numerator of which is the number of
complete months remaining in the Plan Year and the denominator of
which is 12.
3.2 Maximum Deferral. For each Plan Year, a Participant may elect to defer
Base Annual Salary, Annual Bonus and/or Directors Fees up to the following
maximum percentages for each deferral elected:
Maximum
Deferral Percentage
-------- ----------
Base Annual Salary 50%
Annual Bonus 100%
Directors Fees 100%
Notwithstanding the foregoing, if a Participant first becomes a
Participant after the first day of a Plan Year, the maximum Annual
Deferral Amount shall be limited to the amount of compensation not yet
earned by the Participant as of the date the Participant submits a Plan
Agreement and Election Form that are accepted by the Committee.
-8-
<PAGE> 13
3.3 Election to Defer; Effect of Election Form.
(a) First Plan Year. In connection with a Participant's commencement of
participation in the Plan, the Participant shall make an irrevocable
deferral election for the Plan Year in which the Participant
commences participation in the Plan, along with such other elections
as the Committee deems necessary or desirable under the Plan. For
these elections to be valid, the Election Form must be completed and
signed by the Participant, timely delivered to the Committee (in
accordance with Section 2.3 above) and accepted by the Committee.
(b) Subsequent Plan Years. For each succeeding Plan Year, an irrevocable
deferral election for that Plan Year, and such other elections as
the Committee deems necessary or desirable under the Plan, shall be
made by timely delivering to the Committee, in accordance with its
rules and procedures before the end of the Plan Year preceding the
Plan Year for which the election is made, a new Election Form. If no
Election Form is timely delivered for a Plan Year, there shall be no
Annual Deferral Amount for that Plan Year.
3.4 Withholding of Deferral Amounts. For each Plan Year, the Base Annual
Salary portion of the Annual Deferral Amount shall be withheld in equal
amounts from each regularly scheduled Base Annual Salary payroll. The
Annual Bonus and/or Directors Fees portion of the Annual Deferral Amount
shall be withheld at the time the Annual Bonus or Directors Fees are or
otherwise would be paid to the Participant.
3.5 Interest Crediting. Interest shall be credited and compounded annually on
a Participant's Account Balance. At the time that a Participant makes a
deferral election under Section 3.3 for any Plan Year, the Participant
shall also elect whether interest shall be credited on the Annual Deferral
Amount for such Plan Year on the basis of the Moody's Rate Option or the
Common Stock Option, or whether a designated portion of the Annual
Deferral Amount shall be subject to each such option.
(a) Moody's Rate Option. If this option is elected, interest shall be
credited for each Plan Year to the Annual Deferral Amount (or the
designated portion thereof) at the applicable Moody's rate. The
applicable Moody's rate for a Plan Year shall be the interest rate,
stated as an annual rate, that (i) is published in Moody's Bond
Record under the heading of "Moody's Corporate Bond Yield Averages
-- Av. Corp.," and (ii) is equal to the average corporate bond yield
calculated for the month of September preceding the Plan Year for
which the rate is to be used.
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<PAGE> 14
Interest shall be credited under this option as though the Annual
Deferral Amount for each Plan Year were withheld at the beginning of
the Plan Year or, in the case of the first year of Plan
participation, were withheld on the date that the Participant
commenced participation in the Plan. In the event distribution of
the Annual Deferral Amount is made or commences prior to the end of
a Plan Year, the basis for that year's interest crediting on such
distribution will be a fraction of the full year's interest, based
on the number of full months prior to such distribution or
commencement. For purposes of crediting interest up to the time of a
distribution, each distribution shall be treated as made on the
first day of the month in which the distribution is actually made.
(b) Common Stock Option: If this option is elected for all or a
designated portion of an Annual Deferral Amount, that amount will be
converted hypothetically into Common Stock equivalent units. The
number of such units shall be determined by dividing that part of
the Annual Deferral Amount (or designated portion thereof ) that is
attributable to each calendar quarter by the average of the Market
Prices of Common Stock during the last five (5) trading days of the
preceding calendar quarter. Units will be calculated to the nearest
thousandth. On each dividend payment date for the Common Stock,
dividend equivalents in the form of additional units representing
Common Stock will be credited to the Participant's Account Balance
equal to (i) the per-share cash dividend divided by the average of
the Market Prices of Common Stock on the five (5) trading days
preceding the payment date, multiplied by (ii) the number of such
units reflected in such Account Balance on the day before the
dividend payment date. Upon the Participant's Retirement, death,
Disability, or Termination of Employment, or in the event of a
Short-Term Payout, the Common Stock equivalent units will be valued
for payment by multiplying the applicable number of units by the
average of the Market Prices of Common Stock during the last five
(5) trading days of the month preceding the date on which the Annual
Deferral Amount is to be paid (or on which payments of such Amount
are to commence). If the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind of
shares or other securities, or if additional shares or new or
different shares or other securities are distributed with respect to
such shares of Common Stock or other securities through merger,
consolidation, sale of all or substantially all the property of the
Company, reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other distribution
with respect to such shares of Common Stock Option or other
securities, appropriate adjustments will be made by the Company in
the number of Common Stock equivalent units credited to a
Participant's Account.
3.6 Interest Crediting for Installment Distributions. If a Participant's
benefits under this Plan are to be paid in substantially equal monthly
installments, such payments
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shall be determined by amortizing the Participant's specified benefit over
the number of months elected, using the interest rate determined under the
Moody's Rate Option for each year and treating the first installment
payment as all principal and each subsequent installment payment, first as
interest accrued for the applicable installment period on the unpaid
Account Balance and second as a reduction in the Account Balance. The
Common Stock Option is not available once installment distributions have
begun.
3.7 FICA and Other Taxes. For each Plan Year in which an Annual Deferral
Amount is being withheld for an Employee, the Participant's Employer(s)
shall withhold from that portion of the Participant's Base Annual Salary
and Annual Bonus that is not being deferred, in a manner determined by the
Employer(s), the Participant's share of FICA and other employment taxes.
If necessary, the Committee shall reduce the Annual Deferral Amount in
order to comply with this Section 3.7. In addition, the Participant's
Employer(s), or the trustee of any trust established under Section 15.2,
shall withhold from any payments made to a Participant under this Plan all
federal, state and local income, employment and other taxes required to be
withheld by the Employer(s), or the trustee of the trust, in connection
with such payments, in amounts and in a manner to be determined in the
sole discretion of the Employer(s) or the trustee.
3.8 Quarterly Statements. As soon as practicable after the end of each
calendar quarter, the Committee shall provide a statement to each
Participant showing the Participant's Account Balance as of the end of the
quarter and such other information as the Committee elects to provide. In
determining the Account Balance as of the end of a quarter, the Committee
shall credit interest under the Moody's Rate Option through the last day
of the quarter, and shall value Common Stock equivalent units under the
Common Stock Option based upon the average of the Market Prices of Common
Stock during the last five (5) trading days of the quarter.
ARTICLE 4
Short-Term Payout; Withdrawals; Change in Control
4.1 Short-Term Payout. In connection with each election to defer an Annual
Deferral Amount, a Participant may elect irrevocably to receive a future
"Short-Term Payout" from the Plan. Subject to the Deduction Limitation,
the Short-Term Payout shall be a lump sum payment in an amount that is
equal to such Annual Deferral Amount plus interest credited in the manner
provided in Section 3.5 above on that amount. Subject to the Deduction
Limitation and the other terms and conditions of this Plan, each
Short-Term Payout elected shall be paid within 60 days of the first day of
any Plan Year designated by the Participant that is at least three (3)
years after the first day of the Plan Year in which the Annual Deferral
Amount is actually deferred.
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4.2 Other Benefits Take Precedence Over Short-Term Payout. Should an event
occur that triggers a benefit under Article 5, 6, 7 or 8, any Annual
Deferral Amount, plus interest thereon, that is subject to a Short-Term
Payout election under Section 4.1 shall not be paid in accordance with
Section 4.1, but shall be paid in accordance with the other applicable
Article.
4.3 Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies. If
a Participant experiences an Unforeseeable Financial Emergency, the
Participant may, with the consent of a majority of the disinterested
members of the Committee, (i) suspend any deferrals required to be made by
a Participant and/or (ii) receive from the Plan a partial or full payout
of that portion, if any, of his or her Account Balance as to which
interest is being credited under the Moody's Rate Option. The payout shall
not exceed the amount reasonably needed to satisfy the Unforeseeable
Financial Emergency. Any such suspension shall take effect upon the date
of approval and any payout shall be made within 60 days of the date of
approval. The payment of any amount under this Section 4.3 shall not be
subject to the Deduction Limitation. Any portion of the Participant's
Account Balance as to which interest is being credited under the Common
Stock Option shall not be available for withdrawal under this Section 4.3.
4.4 Withdrawal Election. A Participant (or, after the Participant's death, his
or her Beneficiary) may elect, at any time, to withdraw all of that
portion, if any, of his or her Account Balance as to which interest is
being credited under the Moody's Rate Option, less a withdrawal penalty
equal to 10% of such amount (the net amount to be referred to as the
"withdrawal amount"). This election can be made at any time before or
after Retirement, Disability, death or Termination of Employment, and
whether or not the Participant (or Beneficiary) is in the process of being
paid pursuant to an installment payment schedule. No partial withdrawals
of the withdrawal amount shall be allowed. The Participant (or
Beneficiary) shall make this election by giving the Committee advance
written notice of the election in a form determined from time to time by
the Committee. The Participant (or Beneficiary) shall be paid the
withdrawal amount within 60 days of his or her election. Once the
withdrawal amount is paid to a Participant, the Participant's
participation in the Plan shall terminate and the Participant shall not be
eligible to participate in the Plan again until the beginning of the Plan
Year following the fifth anniversary of the date on which the withdrawal
amount is paid to the Participant. The payment of this withdrawal amount
shall not be subject to the Deduction Limitation. Any portion of the
Participant's Account Balance as to which interest is being credited under
the Common Stock Option shall not be available for withdrawal under this
Section 4.4.
4.5 Change in Control. If a Change in Control occurs, all deferral elections
under the Plan shall automatically cease, and each Participant (or
Beneficiary of a deceased Participant) shall be paid that portion, if any,
of his or her Account Balance as to which interest is being credited under
the Moody's Rate Option. Such portion shall
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be paid in a single lump sum payment as soon as practicable, and no later
than 60 days, after such Change in Control. Any portion of the
Participant's Account Balance as to which interest is being credited under
the Common Stock Option shall not be paid under this Section 4.5 but
shall, instead, be paid out in accordance with the other provisions of the
Plan.
ARTICLE 5
Retirement Benefit
5.1 Retirement Benefit. Subject to the Deduction Limitation, a Participant who
Retires shall receive, as a Retirement Benefit, his or her Account
Balance.
5.2 Payment of Retirement Benefit. A Participant, in connection with his or
her commencement of participation in the Plan, shall elect on an Election
Form to receive the Retirement Benefit in a lump sum or in substantially
equal monthly payments (the latter determined in accordance with Section
3.6 above) over a period of 60 or 120 months. The Participant may annually
change his or her election to an allowable alternative payout period by
submitting a new Election Form to the Committee, provided that Election
Form is submitted at least one (1) year prior to the Participant's
Retirement and is accepted by the Committee in its sole discretion. The
Election Form most recently accepted by the Committee shall govern the
payout of the Retirement Benefit. If a Participant does not make any
election with respect to the payment of the Retirement Benefit, then such
benefit shall be payable in a lump sum. The lump sum payment shall be
made, or installment payments shall commence, no later than 60 days after
the date the Participant Retires. Any payment made shall be subject to the
Deduction Limitation.
5.3 Death Prior to Completion of Retirement Benefit. If a Participant dies
after Retirement but before the Retirement Benefit is paid in full, the
Participant's unpaid Retirement Benefit payments shall continue and shall
be paid to the Participant's Beneficiary (a) over the remaining number of
months and in the same amounts as that benefit would have been paid to the
Participant had the Participant survived, or (b) in a lump sum, if
requested by the Beneficiary and allowed in the sole discretion of the
Committee, that is equal to the Participant's unpaid remaining Account
Balance.
ARTICLE 6
Pre-Retirement Survivor Benefit
6.1 Pre-Retirement Survivor Benefit. Subject to the Deduction Limitation, the
Participant's Beneficiary shall receive a Pre-Retirement Survivor Benefit
equal to the Participant's Account Balance, if the Participant dies before
he or she Retires, experiences a Termination of Employment or suffers a
Disability.
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6.2 Payment of Pre-Retirement Survivor Benefit. A Participant, in connection
with his or her commencement of participation in the Plan, shall elect on
an Election Form whether the Pre-Retirement Survivor Benefit shall be
received by his or her Beneficiary in a lump sum or in equal monthly
payments (the latter determined in accordance with Section 3.6 above) over
a period of 60 or 120 months. The Participant may annually change this
election by submitting a new Election Form to the Committee that is
accepted by the Committee in its sole discretion. The Election Form most
recently accepted by the Committee prior to the Participant's death shall
govern the payout of the Participant's Pre-Retirement Survivor Benefit. If
a Participant does not make any election with respect to the payment of
the Pre- Retirement Survivor Benefit, then such benefit shall be paid in a
lump sum. Despite the foregoing, if the Participant's Account Balance at
the time of his or her death is less than $25,000, payment of the
Pre-Retirement Survivor Benefit may be made, in the sole discretion of the
Committee, in a lump sum or in monthly installment payments that do not
exceed five years in duration. The lump sum payment shall be made, or
installment payments shall commence, no later than 60 days after the date
the Committee is provided with proof that is satisfactory to the Committee
of the Participant's death. Any payment made shall be subject to the
Deduction Limitation.
ARTICLE 7
Termination Benefit
7.1 Termination Benefit. Subject to the Deduction Limitation, the Participant
shall receive a Termination Benefit, which shall be equal to the
Participant's Account Balance, with interest credited in the manner
provided in Section 3.5 above, if a Participant experiences a Termination
of Employment prior to his or her Retirement, death or Disability.
7.2 Payment of Termination Benefit. The Termination Benefit shall be paid in
two (2) installments, with one-half of the Participant's Account Balance
paid within ninety (90) days of the Termination and the remainder paid on
or about January 1 of the year following the year of the Termination. Such
remainder shall be credited with interest under the Moody's Rate Option
until the date paid.
ARTICLE 8
Disability Waiver and Benefit
8.1 Disability Waiver.
(a) Waiver of Deferral. A Participant who is determined by the Committee
to be suffering from a Disability shall be excused from fulfilling
that portion of the Annual Deferral Amount commitment that would
otherwise have been
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withheld from a Participant's Base Annual Salary, Annual Bonus
and/or Directors Fees for the Plan Year during which the Participant
first suffers a Disability. During the period of Disability, the
Participant shall not be allowed to make any additional deferral
elections, but will continue to be considered a Participant for all
other purposes of this Plan.
(b) Return to Work. If a Participant returns to employment, or service
as a Director, with an Employer after a Disability ceases, the
Participant may elect to defer an Annual Deferral Amount for the
Plan Year following his or her return to employment or service and
for every Plan Year thereafter while a Participant in the Plan;
provided such deferral elections are otherwise allowed and an
Election Form is delivered to and accepted by the Committee for each
such election in accordance with Section 3.3 above.
8.2 Continued Eligibility; Disability Benefit. A Participant suffering a
Disability shall, for benefit purposes under this Plan, continue to be
considered to be employed, or in the service of an Employer as a Director,
and shall be eligible for the benefits provided for in Articles 4, 5, 6 or
7 in accordance with the provisions of those Articles. Notwithstanding the
above, the Committee shall have the right, in its sole and absolute
discretion, to pay the Participant a Disability Benefit equal to his or
her Account Balance at the time of the Committee's determination. The
Disability Benefit shall be paid in a lump sum within 60 days of the
Committee's exercise of such right. Any payment made shall be subject to
the Deduction Limitation.
ARTICLE 9
Beneficiary Designation
9.1 Beneficiary. Each Participant shall have the right, at any time, to
designate his or her Beneficiary(ies) (both primary as well as contingent)
to receive any benefits payable under the Plan to a beneficiary upon the
death of a Participant. The Beneficiary designated under this Plan may be
the same as or different from the Beneficiary designation under any other
plan of an Employer in which the Participant participates.
9.2 Beneficiary Designation; Change. A Participant shall designate his or her
Beneficiary by completing and signing the Beneficiary Designation Form,
and returning it to the Committee or its designated agent. A Participant
shall have the right to change a Beneficiary by completing, signing and
otherwise complying with the terms of the Beneficiary Designation Form and
the Committee's rules and procedures, as in effect from time to time. Upon
the acceptance by the Committee of a new Beneficiary Designation Form, all
Beneficiary designations previously filed shall be canceled. The Committee
shall be entitled to rely on the last
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Beneficiary Designation Form filed by the Participant and accepted by the
Committee prior to his or her death.
9.3 Acknowledgment. No designation or change in designation of a Beneficiary
shall be effective until received, accepted and acknowledged in writing by
the Committee or its designated agent.
9.4 No Beneficiary Designation. If a Participant fails to designate a
Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above, or if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the
Participant's designated Beneficiary shall be deemed to be his or her
surviving spouse. If the Participant has no surviving spouse, the benefits
remaining under the Plan to be paid to a Beneficiary shall be payable to
the executor or personal representative of the Participant's estate.
9.5 Doubt as to Beneficiary. If the Committee has any doubt as to the proper
Beneficiary to receive payments pursuant to this Plan, the Committee shall
have the right, exercisable in its discretion, to cause the Participant's
Employer to withhold such payments until this matter is resolved to the
Committee's satisfaction.
9.6 Discharge of Obligations. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to the
Participant, and that Participant's Plan Agreement shall terminate upon
such full payment of benefits.
ARTICLE 10
Leave of Absence
10.1 Paid Leave of Absence. If a Participant is authorized by the Participant's
Employer for any reason to take a paid leave of absence from the
employment of the Employer, the Participant shall continue to be
considered employed by the Employer and the Annual Deferral Amount shall
continue to be withheld during such paid leave of absence in accordance
with Section 3.4.
10.2 Unpaid Leave of Absence. If a Participant is authorized by the
Participant's Employer for any reason to take an unpaid leave of absence
from the employment of the Employer, the Participant shall continue to be
considered employed by the Employer and the Participant shall be excused
from making deferrals until the earlier of the date the leave of absence
expires or the Participant returns to a paid employment status. Upon such
expiration or return, deferrals shall resume for the remaining portion of
the Plan Year in which the expiration or return occurs, based on the
deferral election, if any, made for that Plan Year. If no election was
made for that Plan Year, no deferral shall be withheld.
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<PAGE> 21
ARTICLE 11
Termination, Amendment or Modification
11.1 Termination. Although the Employers anticipate that they will continue the
Plan for an indefinite period of time, there is no guarantee that any
Employer will continue the Plan or will not terminate the Plan at any time
in the future. Accordingly, each Employer reserves the right to
discontinue its sponsorship of the Plan and/or to terminate the Plan, at
any time, with respect to its participating Employees and Directors by the
actions of its board of directors. In addition, the Company may terminate
the Plan with respect to any or all Employers by action of the Board. Upon
the termination of the Plan with respect to any Employer, the Plan
Agreements of the affected Participants who are employed by that Employer,
or in the service of that Employer as a Director, shall terminate and
their Account Balances, determined as if they had experienced a
Termination of Employment on the date of Plan termination or, if Plan
termination occurs after the date upon which a Participant was eligible to
Retire, then with respect to that Participant as if he or she had Retired
on the date of Plan termination, shall be paid to the Participants in
accordance with Article 5 or 7, subject to the following provisions. Prior
to a Change in Control, an Employer shall have the right, in its sole
discretion, and notwithstanding any elections made by the Participant, to
pay such benefits in a lump sum. After a Change in Control, the Employer
shall be required to pay such benefits in a lump sum. The termination of
the Plan shall not adversely affect any Participant or Beneficiary who has
become entitled to the payment of any benefits under the Plan as of the
date of termination; provided, however, that the Employer shall have the
right to accelerate installment payments by paying the present value
equivalent of such payments, using the Crediting Rate (determined under
the Moody's Rate Option) for the Plan Year in which the termination occurs
as the discount rate, in a lump sum or pursuant to a different payment
schedule (provided that the present value of all payments that will have
been received by a Participant at any given point in time under the
different payment schedule shall equal or exceed the present value of all
payments that would have been received at that point in time under the
original payment schedule).
11.2 Amendment. The Company may, at any time, amend or modify the Plan in whole
or in part with respect to any or all Employers by action of the Board;
provided, however, that no amendment or modification shall be effective to
decrease or restrict the value of a Participant's Account Balance in
existence at the time the amendment or modification is made, calculated as
if the Participant had experienced a Termination of Employment as of the
effective date of the amendment or modification, or, if the amendment or
modification occurs after the date upon which the Participant was eligible
to Retire, the Participant had Retired as of the effective date of the
amendment or modification. The amendment or modification of the Plan shall
not affect any Participant or Beneficiary who has become entitled to the
payment of benefits under the Plan as of the date of the amendment or
modification; provided, however, that the Company shall have the right to
accelerate installment
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payments by paying the present value equivalent of such payments, using
the Crediting Rate (determined under the Moody's Rate Option) for the Plan
Year of the amendment or modification as the discount rate, in a lump sum
or pursuant to a different payment schedule (provided that the present
value of all payments that will have been received by a Participant at any
given point in time under the different payment schedule shall equal or
exceed the present value of all payments that would have been received at
that point in time under the original payment schedule).
11.3 Plan Agreement. Despite the provisions of Sections 11.1 and 11.2 above, if
a Participant's Plan Agreement contains benefits or limitations that are
not in this Plan document, the Employer may only amend or terminate such
provisions with the consent of the Participant.
11.4 Effect of Payment. The full payment of the applicable benefit under
Articles 5, 6, 7 or 8 of the Plan shall completely discharge all
obligations to a Participant and his or her designated Beneficiaries under
this Plan and the Participant's Plan Agreement shall terminate.
ARTICLE 12
Administration
12.1 Committee Duties. This Plan shall be administered by a Committee which
shall consist of the Board, or such committee as the Board shall appoint.
Members of the Committee may be Participants under this Plan. The
Committee shall also have the discretion and authority to (i) make, amend,
interpret, and enforce all appropriate rules and regulations for the
administration of this Plan and (ii) decide or resolve any and all
questions including interpretations of this Plan, as may arise in
connection with the Plan. Any individual serving on the Committee who is a
Participant will not vote or act on any matter relating solely to himself
or herself. When making a determination or calculation, the Committee
shall be entitled to rely on information furnished by a Participant or the
Company.
12.2 Agents. In the administration of this Plan, the Committee may, from time
to time, employ agents and delegate to them such duties as it sees fit
(including acting through a duly appointed representative) and may from
time to time consult with counsel who may be counsel to any Employer.
12.3 Binding Effect of Decisions. The decision or action of the Committee with
respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules
and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in the Plan, in the absence
of clear and convincing evidence that the Committee acted arbitrarily and
capriciously.
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12.4 Indemnity of Committee. All Employers shall indemnify and hold harmless
the members of the Committee, and any Employee to whom duties of the
Committee may be delegated, against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with
respect to this Plan, except in the case of willful misconduct by the
Committee, any of its members or any such Employee.
12.5 Employer Information. To enable the Committee to perform its functions,
each Employer shall supply full and timely information to the Committee on
all matters relating to the compensation of its Participants, the date and
circumstances of the Retirement, Disability, death or Termination of
Employment of its Participants, and such other pertinent information as
the Committee may reasonably require.
ARTICLE 13
Other Benefits and Agreements
13.1 Coordination with Other Benefits. The benefits provided for a Participant
and Participant's Beneficiary under the Plan are in addition to any other
benefits available to such Participant under any other plan or program for
employees of the Participant's Employer. The Plan shall supplement and
shall not supersede, modify or amend any other such plan or program except
as may otherwise be expressly provided.
ARTICLE 14
Claims Procedures
14.1 Presentation of Claim. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below as a
"Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such Claimant
from the Plan. If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within 60 days after such
notice was received by the Claimant. The claim must state with
particularity the determination desired by the Claimant. All other claims
must be made within 180 days of the date on which the event that caused
the claim to arise occurred. The claim must state with particularity the
determination desired by the Claimant.
14.2 Notification of Decision. The Committee shall consider a Claimant's claim
within a reasonable time, and shall notify the Claimant in writing:
(a) that the Claimant's requested determination has been made, and that
the claim has been allowed in full; or
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(b) that the Committee has reached a conclusion contrary, in whole or in
part, to the Claimant's requested determination, and such notice
must set forth in a manner calculated to be understood by the
Claimant:
(i) the specific reason(s) for the denial of the claim, or any
part of it;
(ii) specific reference(s) to pertinent provisions of the Plan upon
which such denial was based;
(iii) a description of any additional material or information
necessary for the Claimant to perfect the claim, and an
explanation of why such material or information is necessary;
and
(iv) an explanation of the claim review procedure set forth in
Section 14.3 below.
14.3 Review of a Denied Claim. Within 60 days after receiving a notice from the
Committee that a claim has been denied, in whole or in part, a Claimant
(or the Claimant's duly authorized representative) may file with the
Committee a written request for a review of the denial of the claim.
Thereafter, but not later than 30 days after the review procedure began,
the Claimant (or the Claimant's duly authorized representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole discretion,
may grant.
14.4 Decision on Review. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written request
for review of the denial, unless a hearing is held or other special
circumstances require additional time, in which case the Committee's
decision must be rendered within 120 days after such date. Such decision
must be written in a manner calculated to be understood by the Claimant,
and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon which
the decision was based; and
(c) such other matters as the Committee deems relevant.
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14.5 Legal Action. A Claimant's compliance with the foregoing provisions of
this Article 14 is a mandatory prerequisite to a Claimant's right to
commence any legal action with respect to any claim for benefits under
this Plan.
ARTICLE 15
Funding
15.1 No Funding. Nothing in the Plan will be construed to create a trust or to
obligate the Company or any other person to segregate a fund, purchase an
insurance contract, or in any other way currently to fund the future
payment of any benefits hereunder, nor will anything herein be construed
to give any Participant or any other person rights to any specific assets
of the Company or of any other person. The Plan constitutes a mere promise
by the Company to make benefit payments in the future, and is intended to
be unfunded for tax purposes. Any benefits which become payable hereunder
shall be paid from the general assets of the Company, and the rights of
any Participant or of his or her estate or beneficiary shall be those of
an unsecured general creditor.
15.2 Grantor Trust. The Company, in its sole discretion, may establish a trust
(a "grantor trust") of which it is treated as the owner under Subpart E of
Subchapter J, Chapter 1 of the Code to provide for the payment of benefits
hereunder, subject to the claims of the Company's general creditors in the
event of insolvency, and subject to such other terms and conditions as the
Company may deem necessary or advisable to ensure that benefits are not
includable, by reason of the trust, in the income of trust beneficiaries
prior to their actual distribution.
ARTICLE 16
Miscellaneous
16.1 Limitation on Benefit Payment. Except as otherwise provided, this
limitation shall be applied to all distributions that are "subject to the
Deduction Limitation" under this Plan. If an Employer determines in good
faith prior to a Change in Control that there is a reasonable likelihood
that any compensation paid to a Participant for a taxable year of the
Employer would not be deductible by the Employer solely by reason of the
limitation under Code Section 162(m), then to the extent deemed necessary
by the Employer to ensure that the entire amount of any distribution to
the Participant pursuant to this Plan prior to the Change in Control is
deductible, the Employer may defer all or any portion of a distribution
under this Plan. Any amounts deferred pursuant to this limitation shall
continue to be credited with interest in accordance with Section 3.5(a).
The amounts so deferred and interest thereon shall be distributed to the
Participant or his or her Beneficiary (in the event of the Participant's
death) at the earliest possible date, as determined by the Employer in
good faith, on which the deductibility of compensation paid or payable to
the Participant for the taxable year of the Employer during which the
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distribution is made will not be limited by Code Section 162(m) or, if
earlier, the effective date of a Change in Control. Notwithstanding
anything to the contrary in this Plan, the Deduction Limitation shall not
apply to any distributions made after a Change in Control.
16.2 Status of Plan. The Plan is intended to be a plan that is not qualified
within the meaning of Code Section 401(a) and that "is unfunded and is
maintained by an employer primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees" within the meaning of ERISA Sections 201(2), 301(a)(3) and
401(a)(1). The Plan shall be administered and interpreted to the extent
possible in a manner consistent with that intent.
16.3 Unsecured General Creditor. Participants and their Beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights, interests
or claims in any property or assets of an Employer. For purposes of the
payment of benefits under this Plan, any and all of an Employer's assets
shall be, and remain, the general, unpledged unrestricted assets of the
Employer. An Employer's obligation under the Plan shall be merely that of
an unfunded and unsecured promise to pay money in the future.
16.4 Employer's Liability. An Employer's liability for the payment of benefits
shall be defined only by the Plan and the Plan Agreement, as entered into
between the Employer and a Participant. An Employer shall have no
obligation to a Participant under the Plan except as expressly provided in
the Plan and his or her Plan Agreement.
16.5 Nonassignability. Neither a Participant nor any other person shall have
any right to commute, sell, assign, transfer, pledge, anticipate, mortgage
or otherwise encumber, transfer, hypothecate, alienate or convey in
advance of actual receipt, the amounts, if any, payable hereunder, or any
part thereof, which are, and all rights to which are expressly declared to
be, unassignable and non-transferable, except that the foregoing shall not
apply to any court order specified in Section 16.16 below. No part of the
amounts payable shall, prior to actual payment, be subject to seizure,
attachment, garnishment or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant or any
other person, nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.
16.6 Not a Contract of Employment. The terms and conditions of this Plan shall
not be deemed to constitute a contract of employment between any Employer
and the Participant. Such employment is hereby acknowledged to be an "at
will" employment relationship that can be terminated at any time for any
reason, or no reason, with or without cause, and with or without notice,
except as may be expressly provided in a written employment agreement.
Nothing in this Plan shall be deemed to give a Participant the right to be
retained in the service of any
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<PAGE> 27
Employer, either as an Employee or a Director, or to interfere with the
right of any Employer to discipline or discharge the Participant at any
time.
16.7 Furnishing Information. A Participant or his or her Beneficiary will
cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be requested
in order to facilitate the administration of the Plan and the payments of
benefits hereunder, including but not limited to taking such physical
examinations as the Committee may deem necessary.
16.8 Terms. Whenever any words are used herein in the masculine, they shall be
construed as though they were in the feminine in all cases where they
would so apply; and whenever any words are used herein in the singular or
in the plural, they shall be construed as though they were used in the
plural or the singular, as the case may be, in all cases where they would
so apply.
16.9 Captions. The captions of the articles, sections and paragraphs of this
Plan are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.
16.10 Governing Law. Subject to ERISA, the provisions of this Plan shall be
construed and interpreted according to the laws of the Commonwealth of
Massachusetts without regard to its conflict of laws principles.
16.11 Notice. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the address
below:
Plan Committee
c/o General Counsel
Boston Scientific Corporation
1 Boston Scientific Place
Natick, MA 01760-1537
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification. Any notice or filing required
or permitted to be given to a Participant under this Plan shall be
sufficient if in writing and hand-delivered, or sent by mail, to the last
known address of the Participant.
16.12 Successors. The provisions of this Plan shall bind and inure to the
benefit of the Participant's Employer and its successors and assigns and
the Participant and the Participant's designated Beneficiaries.
16.13 Spouse's Interest. The interest in the benefits hereunder of a spouse of a
Participant who has predeceased the Participant shall automatically pass
to the
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<PAGE> 28
Participant and shall not be transferable by such spouse in any manner,
including but not limited to such spouse's will, nor shall such interest
pass under the laws of intestate succession.
16.14 Validity. In case any provision of this Plan shall be illegal or invalid
for any reason, said illegality or invalidly shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as
if such illegal or invalid provision had never been inserted herein.
16.15 Incompetent. If the Committee determines in its discretion that a benefit
under this Plan is to be paid to a minor, a person declared incompetent or
a person incapable of handling the disposition of that person's property,
the Committee may direct payment of such benefit to the guardian, legal
representative or person having the care and custody of such minor,
incompetent or incapable person. The Committee may require proof of
minority, incompetency, incapacity or guardianship, as it may deem
appropriate prior to distribution of the benefit. Any payment of a benefit
shall be a payment for the account of the Participant and the
Participant's Beneficiary, as the case may be, and shall be a complete
discharge of any liability under the Plan for such payment amount.
16.16 Court Order. The Committee is authorized to make any payments directed by
court order in any action in which the Plan or the Committee has been
named as a party. In addition, if a court determines that a spouse or
former spouse of a Participant has an interest in the Plan as the result
of a property settlement or otherwise, the Committee, in its sole
discretion, shall have the right, notwithstanding any election made by a
Participant, to distribute immediately the spouse's or former spouse's
interest in the Plan to that spouse or former spouse.
16.17 Distribution in the Event of Taxation.
If, for any reason, all or any portion of a Participant's benefit under
this Plan becomes taxable to the Participant prior to receipt, a
Participant may petition the Committee for a distribution of that portion
of his or her benefit that has become taxable. Upon the grant of such a
petition, which grant shall not be unreasonably withheld, a Participant's
Employer shall distribute to the Participant immediately available funds
in an amount equal to the taxable portion of his or her benefit (which
amount shall not exceed a Participant's unpaid Account Balance under the
Plan). If the petition is granted, the tax liability distribution shall be
made within
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<PAGE> 29
90 days of the date when the Participant's petition is granted. Such a
distribution shall affect and reduce the benefits to be paid under this
Plan.
-25-
<PAGE> 1
EXHIBIT 10.23
[Date]
[Name]
[Address]
Re: Retention Agreement
Dear [Name]:
Boston Scientific Corporation (the "Company") considers it essential to
the best interests of its stockholders to foster the continuous employment of
key management personnel. Further, the Board of Directors of the Company (the
"Board") recognizes that the possibility of a change in control exists, and that
such possibility, and the uncertainty and questions that it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
management of the Company, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from any
possible change in control of the Company.
In order to induce you to remain in the employ of the Company and in
consideration for your consent to certain amendments to the Company's 1992
Long-Term Incentive Plan (the "1992 LTIP") and certain agreements executed
thereunder, the Company agrees that you shall receive the severance benefits set
forth in this letter agreement (this "Agreement") in the event your employment
with the Company is terminated subsequent to a Change in Control (as defined
herein) under the circumstances described below.
1. Termination Following Change in Control. If a Change in Control
occurs, you will be entitled to the benefits provided in Section 2 hereof upon
the subsequent termination of your employment by the Company without Cause (as
defined herein) or by you for Good Reason (as defined herein) during the
two-year period following such Change in Control (the "Covered Period"). Any
purported termination of your employment by the Company or by you shall be
communicated by a Notice of Termination to the other party hereto in accordance
with Section 8 hereof. For purposes of this Agreement, a "Notice of
<PAGE> 2
2
Termination" shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
2. Compensation Upon Termination.
(a) Severance Benefits. If your employment by the Company shall be
terminated during the Covered Period by the Company without Cause or by you for
Good Reason, then you shall be entitled to the following benefits:
(i) Severance Payments. The Company shall pay you in cash within 5
days of the Date of Termination the full amount of any earned but unpaid
base salary through the Date of Termination at the rate in effect at the
time of the Notice of Termination, plus a cash payment for all unused
vacation time which you may have accrued as of the Date of Termination. The
Company shall also pay you in cash within five days of the Date of
Termination a pro rata portion of the annual bonus for the year in which
your employment terminates, calculated on the basis of your target bonus
for that year and on the assumption that all performance targets have been
or will be achieved. In addition, the Company shall pay you in a cash lump
sum, within five days of the Date of Termination, an amount (the "Severance
Payment") equal to three times the sum of (A) your base salary on the
Termination Date (without giving effect to any salary reductions which
satisfy the definition of "Good Reason"), (B) the greater of (x) the most
recent bonus paid to you (which shall be deemed to be the sum of (I) the
cash bonus amount most recently paid to you and (II) the value of
restricted stock (calculated as of the date of vesting) issued to you as
bonus compensation that vested (other than restricted stock that vested
solely by virtue of the Change in Control) within the immediately preceding
year) plus the value of any other shares of stock issued to you without
forfeiture provisions as bonus compensation within the immediately
preceding year and (y) your target bonus in effect for the year in which
the Change in Control occurred (calculated assuming that all performance
targets have been or will be achieved) and (C) $25,000. The Severance
Payment shall be in lieu of any other severance payments which you are
entitled to receive under any other severance pay plan or arrangement
sponsored by the Company or any of its subsidiaries;
(ii) Benefit Continuation. Subject to your compliance with the
non-solicitation and confidentiality provisions described in Section 6, you
and your eligible dependents shall continue to be eligible to participate
during the Benefit Continuation Period (as hereinafter defined) in the
medical, dental, health, life and other welfare benefit plans and
arrangements applicable to you immediately prior to your termination of
employment on the same terms and conditions in effect for you
<PAGE> 3
3
and your dependents immediately prior to such termination. For purposes of
the previous sentence, "Benefit Continuation Period" means the period
beginning onthe Date of Termination and ending on the earlier to occur of
(i) the third anniversary of the Date of Termination and (ii) the date that
you and your dependents are eligible for coverage under the plans of a
subsequent employer which provide substantially equivalent or greater
benefits to you and your dependents;
(iii) Legal Fees and Expenses. The Company shall also pay you in cash
all legal fees and expenses, if any, incurred by you in contesting or
disputing any such termination or in seeking to obtain or enforce any right
or benefit provided by this Agreement; provided, however, that the amount
of the payments and reimbursements under this Section 2(a)(iii) shall not
exceed $100,000; and provided, further, that no such legal fees or expenses
shall be reimbursed if it is determined by the applicable arbitral panel or
other tribunal that your claim is entirely without merit. Furthermore,
nothing shall prohibit the arbitral panel or other tribunal from awarding
legal fees in excess of $100,000 if, in the interests of fairness and
equity, the arbitral panel or other tribunal deems such award appropriate.
(b) No Mitigation. You shall not be required to mitigate the amount of
any payment or benefit provided for in this Section 2 by seeking other
employment or otherwise.
3. Additional Payment.
(a) Gross-Up Payment. Notwithstanding anything herein to the contrary,
if it is determined that any Payment (as defined herein) would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax, together with any interest or
penalties thereon, is herein referred to as an "Excise Tax"), then you shall be
entitled to an additional cash payment (a "Gross-Up Payment") in an amount that
will place you in the same after-tax economic position that you would have
enjoyed if the Excise Tax had not applied to the Payment. The amount of the
Gross-Up Payment shall be determined by the Accounting Firm (as defined herein)
in accordance with such formula as the Accounting Firm deems appropriate. No
Gross-Up Payments shall be payable hereunder if the Accounting Firm determines
that the Payments are not subject to an Excise Tax. The Accounting Firm shall be
paid by the Company for services performed hereunder.
(b) Determination of Gross-Up Payment. Subject to the provisions of
Section 3(c), all determinations required under this Section 3, including
whether a Gross-Up
<PAGE> 4
4
Payment is required, the amount of the Payments constituting
excess parachute payments, and the amount of the Gross-Up Payment, shall be made
by the Accounting Firm, which shall provide detailed supporting calculations
both to you and the Company within fifteen days of any date reasonably requested
by you or the Company on which a determination under this Section 3 is necessary
or advisable. The Company shall pay you in cash the initial Gross-Up Payment
within five days of the receipt by you and the Company of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by you, the Company shall cause the Accounting Firm to provide you with an
opinion that the Accounting Firm has substantial authority under the Code and
Regulations not to report an Excise Tax on your federal income tax return. Any
determination by the Accounting Firm shall be binding upon you and the Company.
If the initial Gross-Up Payment is insufficient to completely place you in the
same after-tax economic position that you would have enjoyed if the Excise Tax
had not applied to the Payments (hereinafter an "Underpayment"), the Company,
after exhausting its remedies under Section 3(c) below, shall promptly pay you
in cash an additional Gross-Up Payment in respect of the Underpayment.
(c) Procedures. You shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of a Gross-Up Payment. Such notice shall be given as soon as
practicable after you know of such claim and shall apprise the Company of the
nature of the claim and the date on which the claim is requested to be paid. You
agree not to pay the claim until the expiration of the thirty-day period
following the date on which you notify the Company, or such shorter period
ending on the date the Taxes with respect to such claim are due (the "Notice
Period"). If the Company notifies you in writing prior to the expiration of the
Notice Period that it desires to contest the claim, you shall: (i) give the
Company any information reasonably requested by the Company relating to the
claim; (ii) take such action in connection with the claim as the Company may
reasonably request, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably selected by
the Company and reasonably acceptable to you; (iii) cooperate with the Company
in good faith in contesting the claim; and (iv) permit the Company to
participate in any proceedings relating to the claim. You shall permit the
Company to control all proceedings related to the claim and, at its option,
permit the Company to pursue or forgo any and all administrative appeals,
proceedings, hearings, and conferences with the taxing authority in respect of
such claim. If requested by the Company, you agree either to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner and to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts as the
Company shall determine; provided, however, that, if the Company directs you to
pay such claim and pursue a refund, the Company shall advance the amount of such
payment to you on an after-tax and interest-free basis (the "Advance"). The
Company's control of the contest related to the claim shall be limited to the
issues related to the Gross-Up Payment and you shall be entitled to settle or
contest, as the case may be, any other issues raised by the Internal Revenue
Service or other taxing authority. If the
<PAGE> 5
5
Company does not notify you in writing prior to the end of the Notice
Period of its desire to contest the claim, the Company shall pay you in cash an
additional Gross-Up Payment in respect of the excess parachute payments that
are the subject of the claim, and you agree to pay the amount of the Excise Tax
that is the subject of the claim to the applicable taxing authority in
accordance with applicable law.
(d) Repayments. If, after receipt by you of an Advance, you become
entitled to a refund with respect to the claim to which such Advance relates,
you shall pay the Company the amount of the refund (together with any interest
paid or credited thereon after Taxes applicable thereto). If, after receipt by
you of an Advance, a determination is made that you shall not be entitled to
any refund with respect to the claim and the Company does not promptly notify
you of its intent to contest the denial of refund, then the amount of the
Advance shall not be required to be repaid by you and the amount thereof shall
offset the amount of the additional Gross-Up Payment then owing to you.
(e) Further Assurances. The Company shall indemnify you and hold you
harmless, on an after-tax basis, from any costs, expenses, penalties, fines,
interest or other liabilities ("Losses") incurred by you with respect to the
exercise by the Company of any of its rights under this Section 3, including,
without limitation, any Losses related to the Company's decision to contest a
claim or any imputed income to you resulting from any Advance or action taken
on your behalf by the Company hereunder. The Company shall pay all legal fees
and expenses incurred under this Section 3, and shall promptly reimburse you
for the reasonable expenses incurred by you in connection with any actions
taken by the Company or required to be taken by you hereunder. The Company
shall also pay all of the fees and expenses of the Accounting Firm, including,
without limitation, the fees and expenses related to the opinion referred to in
Section 3(b).
[SECTION 3 FOR GROUP B1 AND B2 EXECUTIVES]
3. REDUCTION OF PAYMENTS IF REDUCTION WOULD RESULT IN GREATER AFTER-TAX
AMOUNT. Notwithstanding anything herein to the contrary, if the Payments
constitute a "parachute payment" (as defuned in Section 280g(b)(2) of the
Code), and the net after-tax amount of the parachute payment is less than the
net after-tax amount if the aggregate Payments to be made to yoou were three
times your "base amount" (as defined in Section 280g(b)(3) of the Code), less
$1.00, then the aggregate of the amounts constituting the parachute payment
shall be reduced to an amount that will equal three times your base amount,
less $1.00. The determinations to be made with respect to this Section 3 shall
be made by the Accounting Firm. The Accounting Firm shall be paid by the
Company for services performed hereunder.
<PAGE> 6
6
4. Options.
(a) Amendment to 1992 Long-Term Incentive Plan. The 1992 LTIP has been
amended in accordance with Exhibit A attached hereto. You hereby agree that such
amendment will be applicable to each option to purchase the common stock of the
Company (an "Option") granted to you at any time, whether before, on or after
the date of this Agreement pursuant to the 1992 LTIP.
(b) 1995 Long-Term Incentive Plan. All Options granted to you pursuant
to the Company's 1995 Long-Term Incentive Plan will immediately become
exercisable upon a Change in Control.
5. Successors; Binding Agreement.
(a) Assumption By Successor. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Company in the same
amount and on the same terms as you would be entitled hereunder if you had
terminated your employment for Good Reason following a Change in Control, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "the Company" shall mean the Company as hereinbefore defined and
any successor to its business or assets which assumes and agrees to perform this
Agreement by operation of law, by agreement or otherwise.
(b) Enforceability By Beneficiaries. This Agreement shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
your devisee, legatee or other designee or, if there is no such designee, to
your estate.
<PAGE> 7
7
6. Nonsolicitation; Confidentiality
(a) Nonsolicitation. For three years following your Date of
Termination, you shall not, without the prior written consent of the Company,
directly or indirectly, as a sole proprietor, member of a partnership,
stockholder or investor, officer or director of a corporation, or as an
employee, associate, consultant, independent contractor or agent of any person,
partnership, corporation or other business organization or entity other than the
Company: (i) solicit or endeavor to entice away from the Company or any of its
subsidiaries, any person or entity who is, or, during the then most recent
12-month period, was, employed by, or had served as an agent or key consultant
of, the Company or any of its subsidiaries, or (ii) solicit or endeavor to
entice away from the Company or any of its subsidiaries any person or entity who
is, or was within the then most recent 12-month period, a customer or client (or
reasonably anticipated (to your general knowledge or the public's general
knowledge) to become a customer or client) of the Company or any of its
subsidiaries.
(b) Confidentiality. On and after the date of this Agreement, you will
not, except in the performance of your obligations to the Company hereunder or
as may otherwise be approved in advance by the Board, directly or indirectly,
disclose or use (except for the direct benefit of the Company) any confidential
information that you may learn or have learned by reason of your association
with the Company, any customer or client of the Company or any of their
respective subsidiaries and affiliates. The term "confidential information"
includes all data, analyses, reports, interpretations, forecasts, documents and
information concerning or otherwise reflecting information and concerning the
Company and its affairs, including, without limitation, with respect to
clients, products, policies, procedures, methodologies, trade secrets and other
intellectual property, systems, personnel, confidential reports, technical
information, financial information, business transactions, business plans,
prospects or opportunities, but shall exclude any portion of such information
that (i) was acquired by you prior to your employment by, or other association
with, the Company or any affiliated or predecessor entity, (ii) is or becomes
generally available to the public or is generally known in the industry or
industries in which the Company or any customer or client of the Company
operates, in each case other than as a result of disclosure by you in violation
of this Section 6 or (iii) you are required to disclose under any applicable
laws, regulations or directives of any government agency, tribunal or authority
having jurisdiction in the matter or under subpoena or other process of law. As
used in this Section 6, an "affiliate" of a person or entity is a person or
entity in control of, controlled by, or in common control with, such first
person or entity.
<PAGE> 8
8
7. Definitions. For purposes of this Agreement, the following
capitalized words shall have the meanings set forth below:
"Accounting Firm" shall mean Ernst & Young, LLP or, if such firm is
unable or unwilling to perform such calculations, such other national accounting
firm as shall be designated by agreement between you and the Company.
"Cause" shall mean the willful engaging by you in criminal or
fraudulent acts or gross misconduct that is demonstrably and materially
injurious to the Company, monetarily or otherwise. No act or failure to act on
your part shall be deemed "willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that your action or omission was
in the best interest of the Company. Notwithstanding the foregoing, you shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together with your counsel,
to be heard before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct set forth above in the first sentence of this
subsection and specifying the particulars thereof in detail.
"Change in Control" shall mean the happening of any of the following:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (i) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock") or
(ii) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the selection of directors (the
"Company Voting Securities"); provided, however, that any acquisition by
(x) any non-corporate shareholder of the Company as of the effective date
of the initial registration of an offering of Stock under the Securities
Act of 1933, (y) the Company or any of its subsidiaries, or any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any of its subsidiaries or (z) any corporation with respect to which,
following such acquisition, more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and combined voting
power of the then outstanding voting 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 and entities who were the beneficial owners,
<PAGE> 9
9
respectively, of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of
the Outstanding Common Stock and Company Voting Securities, as the case
may be, shall not constitute a Change in Control of the Company; or
(b) Individuals who, as of the effective date of the initial
registration of an offering of Stock under the Securities Act of 1933,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to such effective date whose election or
nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act); or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case, with
respect to which all or substantially all of the individuals and entities
who were the respective beneficial owners of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such Business
Combination do not own beneficially, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination in substantially the
same proportion as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and Company Voting
Securities, as the case may be; provided, however, that (x) if the Change
in Control occurs as a result of shareholder approval described above and
the Business Combination to which such approval relates (the "Contemplated
Busines Combination") subsequently does not occur, then the Covered Period
shall expire on the sixtieth day (the "Reset Date") following the date the
Board certifies by resolution duly adopted by three quarters of the
Incumb Board then in office that the Business Combination is not reasonably
likely to occur, and (y) following the Reset Date, the provisions of this
Agreement shall remain in effect and a new Covered Period shall commence
upon the occurrence of a subsequent Change in Control; or
(d) A complete liquidation or dissolution of the Company or a sale or
other disposition of all or substantially all of the assets of the Company
other than to a corporation with respect to which, following such sale or
disposition, more than 60%
<PAGE> 10
10
of, respectively, of the Outstanding Company Common Stock and Company
Voting Securities immediately prior to such acquisition in substantially
the same proportion as their ownership, immediately prior to such
acquisition, of the Outstanding Common Stock and Company Voting
Securities, as the case may be, shall not constitute a Change in Control
of the Company; or
(b) Individuals who, as of the effective date of the initial
registration of an offering of Stock under the Securities Act of 1933,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any individual
becoming a director subsequent totion such effective date whose election or
nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of the directorsty then comprising the
Incumbent Board shall be considered as though suchent to individual were a
member of the Incumbent Board, but excluding, for thispany's purpose, any
such individual whose initial assumption of office is inrectors connection
with an actual or threatened election contest relating to the election of
the Directors of the Company (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the shareholders of the Company of a reorganization,
a-11 merger or consolidation (a "Business Combination"), in each case, with
respect to which all or substantially all of the individuals and entities
who were the respective beneficial owners of the Outstanding Company Common
Stock andn, Company Voting Securities immediately prior to such Business
Combination do not own beneficially, directly or indirectly, more than 60%
of, respectively, thee then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the electionot of directors, as the case may be, of the
corporation resulting from such, the Business Combination in substantially
the same proportion as their ownership immediately prior to such Business
Combination of the Outstanding Companytion Common Stock and Company Voting
Securities, as the case may be; provided, however, that (x) if the Change
in Control ame proportion as their ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and Company
Voting Securities, as the case may be; provided, however, that (x) if the
Change in Control
under this Agreement and shall not be offset against or reduce any other amounts
due under this Agreement.
"Good Reason" shall mean, without your express written consent, any of
the following:
(i) A meaningful and detrimental alteration in your position or in
the nature or status of your responsibilities (including those as a
director of the Company, if any) from those in effect immediately prior to
the Change in Control;
<PAGE> 11
11
(ii) A reduction by the Company in your annual base salary as in
effect on the date hereof or as the same may be increased from time to
time; a failure by the Company to increase your salary at a rate
commensurate with that of other key executives of the Company; a reduction
in your annual bonus (expressed as a percentage of base salary) below the
target in effect for you immediately prior to the Change in Control; or any
adverse change in your long-term incentive opportunities in comparison to
those in effect prior to the Change in Control.
(iii) The relocation of the office of the Company where you are
employed at the time of the Change in Control (the "CIC Location") to a
location which is more than 50 miles away from the CIC Location or the
Company's requiring you to be based more than 50 miles away from the CIC
Location (except for required travel on the Company's business to an extent
substantially consistent with your customary business travel obligations in
the ordinary course of business prior to the Change in Control);
(iv) The failure by the Company to continue in effect any incentive
or deferred compensation plan in which you participate or the failure by
the Company to continue your participation therein on at least as favorable
a basis, both in terms of the amount of benefits provided and the level of
your participation relative to other participants, as existed at the time
of the Change in Control;
(v) The failure by the Company to continue to provide you with
benefits at least as favorable as those enjoyed by you under any of the
Company's retirement, life insurance, medical, health and accident,
disability or savings plans in which you were participating at the time of
the Change in Control; the taking of any action by the Company that would
directly or indirectly materially reduce any of such benefits or deprive
you of any material perquisite enjoyed by you at the time of the Change in
Control including without limitation, the use of a car, secretary, office
space, telephones, expense reimbursement and club dues; or the failure by
the Company to provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect at the time
of the Change in Control;
(vi) The failure of the Company to pay you any amounts of salary,
bonus or expense reimbursement then owed to you or the failure of the
Company to adhere to its payroll and other compensation schedules in place
just prior to the Change in Control;
(vii) The failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement, as
contemplated in Section 5 hereof or, if the business of the Company for
which your services are principally
<PAGE> 12
12
performed is sold at any time after a Change in Control, the purchaser
of such business shall fail to agree to provide you with the same or a
comparable position, duties, compensation and benefits (as described in
subsections (iv) and (v) above) as provided to you by the Company
immediately prior to the Change in Control; or
(viii) Any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 1 (and, if applicable, the requirements set out in the definition
of "Cause" above); for purposes of this Agreement, no such purported
termination shall be effective.
"Payment" means (i) any amount due or paid to you under this Agreement,
(ii) any amount that is due or paid to you under any plan, program or
arrangement of the Company and its subsidiaries, and (iii) any amount or benefit
that is due or payable to you under this Agreement or under any plan, program or
arrangement of the Company and its subsidiaries not otherwise covered under
clause (i) or (ii) hereof which must reasonably be taken into account under
Section 280G of the Code and the Regulations in determining the amount of the
"parachute payments" received by you, including, without limitation, any amounts
which must be taken into account under the Code and Regulations as a result of
(x) the acceleration of the vesting of Options, restricted stock or other equity
awards, (y) the acceleration of the time at which any payment or benefit is
receivable by you or (z) any contingent severance or other amounts that are
payable to you.
"Regulations" shall mean the proposed, temporary and final regulations
under Section 280G of the Code or any successor provision thereto.
"Taxes" shall mean the federal, state and local income taxes to which
you are subject at the time of determination, calculated on the basis of the
highest marginal rates then in effect, plus any additional payroll or
withholding taxes to which you are then subject.
8. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to,
General Counsel, Boston Scientific Corporation, One Boston Scientific Place,
Natick, MA 01760-1537, or to you at the address set forth on the
signature page of this Agreement or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
9. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such
<PAGE> 13
13
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party that are not expressly set
forth in this Agreement and this Agreement shall supersede all prior
agreements, negotiations, correspondence, undertakings and communications of
the parties, oral or written, with respect to the subject matter hereof. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the Commonwealth of Massachusetts.
10. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
12. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Boston in accordance with the rules of the American Arbitration Association then
in effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
13. No Contract of Employment. Nothing in this Agreement shall be
construed as giving you any right to be retained in the employ of the Company.
14. Headings. The headings contained in this Agreement are intended
solely for convenience and shall not affect the rights of the parties to this
Agreement.
<PAGE> 14
14
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
BOSTON SCIENTIFIC CORPORATION
By_____________________________
[NAME]
[TITLE]
Agreed to this [ ] day of [ ], 1996
__________________________________
[NAME]
<PAGE> 15
EXHIBIT A
Amendment to Boston Scientific Corporation 1992 Long-Term Incentive Plan
10.2 Pooling-of-Interests Transactions. Notwithstanding anything
contained in Section 10.1, in the event of a merger or consolidation of the
Company with another entity which is intended to qualify for
pooling-of-interests accounting under U.S. Generally Accepted Accounting
Principles pursuant to Accounting Principles Board Opinion No. 16 ("Business
Combinations") or any successor opinion (a "Pooling Transaction"), the following
shall result:
(i) at the closing of a Pooling Transaction in which the Company
is not the surviving corporation (the "Combined Entity"), each
outstanding Stock Option granted hereunder (a "Predecessor Option")
shall be converted into an option (a "Substitute Option") to acquire
common stock of the Combined Entity in the Pooling Transaction, which
Substitute Option shall (A) have the same terms and conditions
(including vesting schedule) as the Predecessor Option, except as
provided in clause (ii) below, and (B) be exercisable at an exercise
price, and for a number of shares of the Combined Entity's common
stock, determined in accordance with Section 424(a) of the Code as if
the conversion of the Predecessor Option into the Successor Option was
intended to constitute "issuing or assuming a stock option in a
transaction to which Section 424(a) applies"; and
(ii) solely in the case of a Pooling Transaction (whether or not
the Company is the Combined Entity) in which, after giving effect to
the closing of such transaction, shareholders of the Company
immediately prior to such closing beneficially own less than 60% or
less of the Combined Entity's voting common stock, all Stock Options
granted hereunder (or Successor Options, if the Company is not the
Combined Entity) shall be fully vested and immediately exercisable upon
such closing.
<PAGE> 1
Boston Scientific Corporation
Exhibit 11
COMPUTATION OF PER SHARE EARNINGS
Year Ended December 31,
------------------------------
1996 1995 1994
---- ---- ----
(in thousands, except
per share information)
Primary
Average shares outstanding ................... 177,696 175,485 172,107
Net effect of dilutive stock options
and warrants-based on the treasury
stock method using average market
price .................................. 3,597 2,049 2,090
-------- -------- --------
Total ........................................ 181,293 177,534 174,197
======== ======== ========
Net income ................................... $167,106 $ 6,440 $135,307
======== ======== ========
Per share amount ............................. $ 0.92 $ 0.04 $ 0.78
======== ======== ========
Fully Diluted
Average shares outstanding ................... 177,696 175,485 172,107
Net effect of dilutive stock options
and warrants--based on the treasury
stock method using year-end market
price, if higher than average market
price .................................. 5,031 2,272 2,594
-------- -------- --------
Total ........................................ 182,727 177,757 174,701
======== ======== ========
Net income ................................... $167,106 $ 6,440 $135,307
======== ======== ========
Per share amount ............................. $ 0.91 $ 0.04 $ 0.77
======== ======== ========
<PAGE> 1
[LOGO]
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
1996 CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE - F-2 FINANCIAL HIGHLIGHTS
PAGE - F-2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PAGE - F-7 CONSOLIDATED STATEMENTS OF INCOME
PAGE - F-8 CONSOLIDATED BALANCE SHEETS
PAGE - F-10 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PAGE - F-11 CONSOLIDATED STATEMENTS OF CASH FLOWS
PAGE - F-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE - F-25 FIVE-YEAR SELECTED FINANCIAL DATA
PAGE - F-26 REPORT OF INDEPENDENT AUDITORS
PAGE - F-27 QUARTERLY RESULTS OF OPERATIONS
PAGE - F-28 MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED MATTERS
<PAGE> 2
FINANCIAL HIGHLIGHTS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,462,043 $1,129,185 $ 888,572
Gross profit 1,061,077 804,122 608,800
Operating income 309,498 74,921 207,134
Net income 167,106 6,440 135,307
Net income per common share $ 0.92 $ 0.04 $ 0.78
</TABLE>
1996 and 1995 amounts include $128 million ($114 million, net-of-tax) and $237
million ($195 million, net-of-tax), respectively, of non-recurring and special
charges recorded in connection with Boston Scientific's 1996 and 1995 mergers
and acquisitions.
See notes to consolidated financial statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the past two years, Boston Scientific Corporation (Boston Scientific or
the Company) has consummated several alliances that are expected to improve the
strategic position of the Company to take advantage of additional significant
growth opportunities in less invasive medicine. In 1995, the Company merged with
SCIMED Life Systems, Inc. (SCIMED), Cardiovascular Imaging Systems, Inc. (CVIS),
Vesica Medical, Inc. (Vesica), Meadox Medicals, Inc. (Meadox) and Heart
Technology, Inc. (Heart). In 1996, the Company acquired EP Technologies, Inc.
(EPT), Symbiosis Corporation (Symbiosis) and Endotech Ltd. and MinTec Inc., and
certain related companies (Endotech/MinTec).
In addition, on January 20, 1997, the Company announced its intention to merge
in a tax-free, stock-for-stock transaction with Target Therapeutics, Inc.
(Target) to be accounted for as a pooling-of-interests. Target designs,
develops, manufactures and markets catheter-based disposable and implantable
medical devices used in minimally invasive procedures to treat neurovascular
diseases and disorders. Under the terms of the merger agreement, Target
shareholders would receive 1.07 shares of Boston Scientific common stock in
exchange for each share of Target common stock. The merger is expected to close
during the second quarter of 1997 and is subject to the approval of the
shareholders of Target.
The Company has substantially completed the integration of SCIMED, CVIS, Vesica,
Meadox, and Heart, and is completing the integrations of EPT, Symbiosis, and
Endotech/MinTec. Integration plans of all acquisitions consummated by December
31, 1996 are expected to be substantially completed by the end of 1997.
Management believes it has developed a sound plan for continuing and concluding
the integration process, and that it will achieve that plan. However, in view of
the number of major transactions undertaken by the Company, the dramatic changes
in the size of the Company and the complexity of its organization resulting from
these transactions, management also believes that the successful implementation
of its plan presents a significant degree of difficulty. The failure to
integrate these businesses effectively could adversely affect the Company's
operating results in the near term, and could impair the Company's ability to
realize the strategic and financial objectives of these transactions.
The restated historical results of operations are not necessarily indicative of
the operating results or financial position that would have occurred if the
mergers and acquisitions had been consummated during the periods presented, nor
are they necessarily indicative of future operating results or financial
position.
F-2
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 3
YEARS ENDED DECEMBER 31, 1996 AND 1995
Net sales increased 29.5% in 1996 to $1,462 million from $1,129 million in 1995.
Net income for the year increased to $167 million, or $0.92 per share, as
compared to $6 million, or $0.04 per share, for the prior year. Net income for
the year ended December 31, 1996, excluding special charges related to 1996 and
1995 acquisitions, increased 39% to $281 million from $202 million during the
year ended December 31, 1995.
United States (U.S.) revenues increased approximately 19% from 1995 to $897
million in 1996, while international revenues, including export sales, increased
approximately 51% from 1995 to $565 million in 1996. International sales as a
percentage of worldwide sales increased from 33% in 1995 to 39% in 1996. The
increase in international sales reflects results from the Company's strategy to
build its international organization. International sales during 1996 were
negatively impacted compared to 1995 by approximately $21 million of unfavorable
exchange rate movements caused primarily by the strengthening of the U.S. dollar
versus major European currencies and the Japanese yen. Worldwide vascular sales
increased 28% from 1995 to 1996, from $891 million to $1,143 million, and
worldwide non-vascular sales during the same periods increased 34% from $238
million to $319 million.
During 1996, the Company accelerated its forward build and spend programs so as
to be in a position to take advantage of the expanded market opportunities it
expects in 1997 and beyond. The programs impacted the Company's manufacturing,
selling, general and administrative costs. The Company's ability to benefit from
its forward build and spend programs may be limited by risks and uncertainties
related to competitive offerings, timing and scope of regulatory approvals,
infrastructure development, continued international expansion, rights to
intellectual property, and the ability of the Company to implement its overall
business strategy.
Gross profit as a percentage of net sales was approximately 72.6% and 71.2%
during 1996 and 1995, respectively. During 1996, the Company's gross margins
improved as a result of the Company's U.S. cost containment programs, an
increase in the percentage of international sales compared to U.S. sales, and
certain benefits of converting from selling through international distributors
to direct sales operations. However, the positive impact of these initiatives
was offset by the forward spend programs discussed previously, a slight decline
in average selling prices due to continuing pressure on healthcare costs and
increased competition, and a shift in the Company's product sales mix. In
addition, gross margins were negatively impacted by the unfavorable foreign
exchange rate movements discussed above.
Uncertainty remains with regard to future changes within the healthcare
industry. The trend towards managed care and economically motivated buyers in
the U.S. may result in continued pressure on selling prices of certain products
and resulting compression on gross margins. The U.S. marketplace is increasingly
characterized by consolidation among healthcare providers and purchasers of
medical devices who prefer to limit the number of suppliers from whom they
purchase medical products. There can be no assurance that these entities will
continue to purchase products from the Company. In addition, international
markets are also being affected by economic pressure to contain healthcare
costs. Although these factors will continue to impact the rate at which Boston
Scientific can grow, the Company believes that it is well positioned to take
advantage of opportunities for growth that exist in the markets it serves.
Selling, general and administrative expenses increased 32% from $373 million in
1995 to $492 million in 1996, and increased as a percentage of sales from 33% to
34% of net sales. The increase reflects continued expansion of the Company's
domestic and international sales organizations and related marketing support.
Royalty expenses decreased 39% from $25 million in 1995 to $15 million in 1996
and decreased from approximately 2% of net sales to 1% of net sales. The
decrease is primarily attributable to a reduction in sales of certain of the
Company's PTCA products that are subject to royalties. However, the reduction
was partially offset by royalties due under several strategic alliances that the
Company initiated in 1996 and prior years.
Research and development expenses increased 24% from $94 million in 1995 to $116
million in 1996 and remained approximately 8% of net sales. The increase in
dollars reflects increased spending in regulatory, clinical research and various
other product development programs, and reflects the Company's continued
commitment to refine existing products and procedures and to develop new
technologies that provide simpler, less traumatic, less costly and more
efficient diagnosis and treatment. The trend in countries around the world
toward more stringent regulatory requirements for product clearance and more
vigorous enforcement activities has generally caused or may cause medical device
manufacturers to experience more uncertainty, greater risk and higher expenses.
In addition, regulatory approval times for new products continue to be lengthy,
a concern of medical device manufacturers generally. Several of the research and
development projects acquired in connection with the Company's strategic
acquisitions have been completed. Costs for ongoing development activities are
attributable primarily to clinical studies, design, prototype development and
testing. The Company estimates that approximately $5 million will be expensed
during each of the next several years in connection with completion of acquired
research and development projects.
Interest and dividend income was $4 million as compared to $15 million in 1995.
The decrease is primarily attributable to a decrease in the Company's average
cash and marketable securities balance resulting from the use of cash to finance
several of the Company's strategic alliances and infrastructure build during the
second half of 1995 and throughout 1996. Interest expense increased from $10
million in 1995 to $11 million in 1996. The increase in interest expense is
primarily attributable to interest on borrowings used principally to finance the
acquisitions of Symbiosis and Endotech/MinTec and the Company's stock repurchase
program. Other income (expense), net, changed from income of $4 million in 1995
to expense of $6 million in 1996. The change is primarily attributable to net
foreign exchange losses recorded in 1996 of $2 million compared to net gains of
$8 million recorded in 1995.
F-3
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
As Boston Scientific has expanded its international operations, its sales and
expenses denominated in foreign currencies have expanded and that trend is
expected to continue. Thus, certain sales and expenses have been, and are
expected to be, subject to the effect of foreign currency fluctuations. In
addition, because the percentage of sales denominated in foreign currencies has
been and is expected to continue to be somewhat greater than the percentage of
expenses denominated in foreign currencies, foreign currency fluctuations may
have some impact on margins.
The Company enters into forward foreign exchange contracts to hedge foreign
currency transactions on a continuing basis for periods consistent with
commitments. The Company does not engage in speculation. The Company's foreign
exchange contracts, which were immaterial at December 31, 1996, do not subject
the Company to material risk due to exchange rate movements because gains and
losses on these contracts offset losses and gains on the assets and liabilities
being hedged. Although the Company engages in hedging transactions that may
offset the effect of fluctuations in foreign currency exchange rates on foreign
currency denominated assets and liabilities, financial exposure may nonetheless
result, primarily from the timing of transactions and the movement of exchange
rates. Further, any significant changes in the political, regulatory or economic
environment where the Company conducts international operations may have a
material impact on revenues and profits.
The Company's effective tax rate was approximately 92% in 1995 and 44% in 1996.
The effective tax rates for 1995 and 1996 include the impact of non-recurring
and special charges (see discussion following). Excluding these items, the pro
forma effective tax rate improved from approximately 37% during 1995 to 34%
during 1996. During 1995, the Company reorganized its international legal
structure, which has contributed to a reduction in the effective tax rate. The
Company expects to continue to realize tax benefits from its new international
legal structure. Changes in tax laws and regulations may impact the Company's
ability to realize these tax benefits.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Net sales increased 27% in 1995 to $1,129 million from $889 million in 1994. Net
income for the year decreased to $6 million, or $0.04 per share, as compared to
$135 million, or $0.78 per share, for the prior year. The reduction in net
income from 1994 to 1995 was attributable to $237 million ($195 million,
net-of-tax) of non-recurring and special charges recorded in 1995 in connection
with the acquisitions of SCIMED, CVIS, Vesica, Meadox and Heart.
U.S. revenues increased approximately 20% from 1994 to $754 million in 1995,
while international revenues, including export sales, increased approximately
45% from 1994 to $375 million in 1995. International sales as a percentage of
worldwide sales increased from 29% in 1994 to 33% in 1995. The increase in
international sales reflects results from the Company's strategy to strengthen
its international presence by converting several of its distributor
relationships to direct sales operations. International sales during 1995 and
1994 were also positively impacted by approximately $18 million and $3 million,
respectively, of favorable exchange rate movements caused primarily by the
weakening of the U.S. dollar versus major European currencies and the Japanese
yen. Worldwide vascular sales increased 29% from 1994 to 1995, from $692 million
to $891 million, and worldwide non-vascular sales during the same periods
increased 21% from $197 million to $238 million.
Gross profit as a percentage of net sales was approximately 71% and 69% during
1995 and 1994, respectively. During 1995, the Company's gross margins improved
as a result of the Company's U.S. cost containment programs, an increase in the
percentage of international sales compared to U.S. sales, the benefits of
converting from selling through international distributors to direct sales
operations, and a shift in the Company's product sales mix. However, the
positive impact of these initiatives was partially offset by a slight decline in
average selling prices due to continuing pressure on healthcare costs and
increased competition.
Selling, general and administrative expenses increased 25% from $299 million in
1994 to $373 million in 1995, but these expenses decreased from approximately
34% to 33% of net sales. The increase in overall expense dollars reflects
continued expansion of the Company's domestic and international sales
organizations and related marketing support.
Royalty expenses decreased from $26 million to $25 million during 1995 and
decreased as a percentage of net sales from approximately 3% of net sales to 2%
of net sales. The decrease is primarily attributable to a decrease in SCIMED's
EXPRESS(R) catheter sales.
Research and development expenses increased 22% from $77 million in 1994 to $94
million in 1995 and decreased as a percentage of net sales from approximately 9%
of net sales to 8% of net sales. The increase in dollars resulted from increased
spending in regulatory, clinical research and various other product development
programs, and reflects the Company's continued commitment to refine existing
products and procedures and to develop new technologies that provide simpler,
less traumatic, less costly and more efficient diagnosis and treatment.
Interest and dividend income increased 9% from $13 million in 1994 to $15
million in 1995. Higher average interest rates earned on investments were offset
somewhat by a reduction of the Company's investment holdings resulting from its
strategic initiatives. Interest expense was $10 million and $8 million in 1995
and 1994, respectively. 1995 interest expense was incurred primarily to purchase
Heart's new headquarters facility. Other income (expense), net, improved from $3
million expense in 1994 to income of $4 million in 1995. The improvement is
primarily attributable to approximately $8 million of net foreign exchange gains
recorded in 1995 compared to approximately $3 million of net foreign exchange
gains recorded in 1994, and, in 1994, the Company recorded $3 million for
litigation settlement expense.
The Company's effective tax rate was approximately 35% in 1994 and 92% in 1995.
The effective tax rate for 1995 includes the impact of non-recurring and special
charges (see discussion following) and results for 1994 include $7 million in
benefit for income taxes resulting from the reversal of a deferred
F-4
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 5
tax asset valuation allowance. Excluding these items, the pro forma effective
tax rate was approximately 38% during 1994 and 37% during 1995. During 1995, the
Company reorganized its international legal structure which contributed to a
reduction in the effective tax rate. However, the benefits were offset by the
impact of Heart's reporting income tax expense for the first time.
LIQUIDITY AND CAPITAL RESOURCES
During 1996, the Company continued to invest in several strategic initiatives in
order to take advantage of certain growth opportunities that exist in less
invasive medicine. Cash, cash equivalents, short-term investments, and treasury
securities totaled approximately $81 million as of December 31, 1996 compared to
$161 million as of December 31, 1995. Working capital was reduced from $291
million at December 31, 1995 to $285 million at December 31, 1996, and cash
provided by operating activities increased from $20 million during 1995 to $134
million during 1996. The decrease in cash and marketable securities is primarily
attributable to approximately $225 million paid in conjunction with the
Company's acquisitions of Symbiosis and Endotech/MinTec, capital expenditures
incurred primarily to expand the Company's manufacturing and distribution
facilities in Europe, cash used to repurchase the Company's common stock,
payment of merger-related costs and net payments on line of credit borrowings.
The cash expenditures were partially offset by proceeds received in connection
with the Company's initiation of a commercial paper program. The increase in
cash provided from operating activities was primarily attributable to increased
profits and a reduction in merger-related payments from 1995 to 1996.
During 1996, accounts receivable increased as a result of the Company's
international sales growth, while inventory increases have resulted from the
Company's overall increase in sales and the shift from international
distributors to direct sales forces. Selling directly to international customers
has resulted in accounts receivable increasing by a greater percentage than
sales. The process of developing new products, gaining regulatory approval, and
manufacturing new products in a well-established timeline should assist in
management of inventory levels. Although no significant issues have arisen in
the past, there can be no assurance that current or future suppliers of the
Company's raw materials will be able to continue to meet the quality and
quantity demands of the Company at current suppliers' prices.
Cash used for investing activities for 1996 was $398 million and was used
primarily for the purchases of Symbiosis and Endotech/MinTec, and for purchases
of property, plant and equipment.
During 1996, net cash provided by financing activities was approximately $208
million and consisted primarily of proceeds from the issuances of commercial
paper and proceeds from the exercise of stock options and the purchase of stock
under the Company's employee stock purchase plan.
In connection with the acquisitions of SCIMED, CVIS, Vesica, Meadox, Heart, EPT,
Symbiosis and Endotech/MinTec, the Company recorded non-recurring and special
charges of approximately $237 million ($195 million, net-of-tax) and $128
million ($114 million, net-of-tax) during 1995 and 1996, respectively. Estimated
costs include those typical in a merging of operations and relate to, among
other things, rationalization of facilities, workforce reductions, unwinding of
various contractual commitments, asset writedowns and other integration costs.
During 1996, cash payments related to these charges were approximately $60
million and estimated cash payments for 1997 are $47 million. The Company
expects to record non-recurring and special charges during 1997 in conjunction
with merging the Target business with subsidiaries of the Company, if the merger
is consummated.
During 1996, the Company resumed its program to repurchase stock. The Company is
authorized to purchase on the open market up to approximately 20 million shares
of the Company's common stock. Purchases will be made at prevailing prices as
market conditions and cash availability warrant. Stock repurchased under the
Company's systematic plan will be used to satisfy the Company's obligations
pursuant to its employee benefit and incentive plans. During 1996, the Company
repurchased 1.3 million shares of its common stock at an aggregate cost of $52
million. Prior to 1996, a total of 4.9 million shares of the Company's common
stock was repurchased under the program.
As part of the stock repurchase program, the Company sold European equity put
options to an independent broker-dealer during 1996 and prior years. Each
option, if exercised, obligates the Company to purchase from the broker-dealer a
specified number of shares of the Company's common stock at a predetermined
exercise price. The put options are exercisable only on the first anniversary of
the date the options were sold. During 1996, the Company sold European put
options for 600,000 shares and received proceeds of approximately $3 million.
Proceeds are recorded as a reduction to the cost of the Company's treasury
stock. Repurchase prices relating to put options outstanding at December 31,
1996 range from $41.10 per share to $41.75 per share. The Company's contingent
obligation to repurchase shares upon exercise of the outstanding put options
approximated $25 million at December 31, 1996. At December 31, 1996, the
aggregate contingent repurchase obligation has been reclassified from permanent
equity and is presented as a contingent stock repurchase obligation. Prior to
1996, the Company sold European put options for one million shares.
Since early 1995, the Company has entered into several transactions involving
acquisitions and alliances, certain of which have involved equity investments.
As the healthcare environment continues to undergo rapid change, management
expects that it will continue focusing on strategic initiatives and/or make
additional investments in existing relationships. In addition, the Company
expects to incur capital expenditures of approximately $200 million in 1997,
including construction of additional manufacturing and distribution space and
development of a global information system. The Company expects that its cash
and cash equivalents, marketable securities, cash flows from operating
activities, and borrowing capacity will be sufficient to meet its projected
operating cash needs, including integration costs at least through the end of
1997.
F-5
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company is involved in various lawsuits, including product liability suits,
from time to time in the normal course of business. In management's opinion, the
Company is not currently involved in any legal proceeding other than those
specifically identified in the notes to the consolidated financial statements
which, individually or in the aggregate, could have a material effect on the
financial condition, operations and cash flows of the Company. The Company
believes that it has meritorious defenses against claims that it has infringed
patents of others. However, there can be no assurance that the Company will
prevail in any particular case. An adverse outcome in one or more cases in which
the Company's products are accused of patent infringement could have a material
adverse effect on the Company.
Further, product liability claims may be asserted in the future relative to
events not known to management at the present time. The Company has insurance
coverage which management believes is adequate to protect against such product
liability losses as could otherwise materially affect the Company's financial
position.
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This report contains forward-looking statements. The Company desires to take
advantage of the new safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and is including this statement for the express purpose of
availing itself of the protections of the safe harbor with respect to all
forward-looking statements. Forward-looking statements contained in this report
include, but are not limited to, statements with respect to: (a) the Company's
forward build and spend programs; (b) the Company's plans to continue to invest
aggressively in its global systems and worldwide manufacturing and distribution
capacity; (c) the potential impacts of continued consolidation among healthcare
providers, trends towards managed care, and healthcare cost containment; (d) the
Company's belief that it is well positioned to take advantage of opportunities
for growth that exist in the markets it serves; (e) the Company's continued
commitment to refine existing products and procedures and to develop new
technologies that provide simpler, less traumatic, less costly and more
efficient diagnosis and treatment; (f) the research and development expenditures
that will be incurred to complete purchased research and development projects;
(g) the ability of the Company to realize tax benefits from its new
international legal structure; (h) the process and plan for the integration of
businesses acquired by the Company; (i) the potential effect of foreign currency
fluctuations on revenues, expenses and resulting margins; (j) the ability of the
Company to manage accounts receivable and inventory levels; and (k) the ability
of the Company to meet its projected cash needs through the end of 1997. Several
important factors, in addition to the specific factors discussed in connection
with such forward-looking statements individually, could affect the future
results of the Company and could cause those results to differ materially from
those expressed in the forward-looking statements contained herein. Such
additional factors include, among other things, future economic, competitive and
regulatory conditions, demographic trends, financial market conditions and
future business decisions of Boston Scientific and its competitors, all of which
are difficult or impossible to predict accurately and many of which are beyond
the control of Boston Scientific. Therefore, the Company wishes to caution each
reader of this report to consider carefully these factors as well as the
specific factors discussed with each forward-looking statement in this report
and as disclosed in the Company's filings with the Securities and Exchange
Commission as such factors, in some cases, have affected, and in the future
(together with other factors) could affect, the ability of the Company to
implement its business strategy and may cause actual results to differ
materially from those contemplated by the statements expressed herein.
F-6
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 7
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 1,462,043 $ 1,129,185 $ 888,572
Cost of products sold 400,966 325,063 279,772
----------- ----------- -----------
Gross profit 1,061,077 804,122 608,800
Selling, general and administrative expenses 491,813 373,390 299,292
Royalties 15,130 24,874 25,682
Research and development expenses 116,295 93,843 76,692
Purchased research and development 96,000 32,646
Special charges 32,341 204,448
----------- ----------- -----------
751,579 729,201 401,666
----------- ----------- -----------
Operating income 309,498 74,921 207,134
Other income (expense):
Interest and dividend income 4,475 14,638 13,408
Interest expense (11,184) (9,591) (8,378)
Other, net (5,818) 3,837 (3,306)
----------- ----------- -----------
Income before income taxes 296,971 83,805 208,858
Income taxes 129,865 77,365 73,551
----------- ----------- -----------
Net income $ 167,106 $ 6,440 $ 135,307
=========== =========== ===========
Net income per common share $ 0.92 $ 0.04 $ 0.78
=========== =========== ===========
Primary weighted average number of common shares 181,293 177,534 174,197
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-7
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 8
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31, 1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 58,497 $ 117,321
Short-term investments 17,051 38,832
Treasury security 5,000 5,000
Trade accounts receivable, net 298,886 214,232
Inventories 226,213 148,572
Deferred income taxes 101,064 31,149
Prepaid expenses and other current assets 42,167 20,085
---------- ----------
Total current assets 748,878 575,191
Property, plant, equipment and leaseholds, net 347,186 256,093
Other assets:
Intangibles, net 308,408 137,704
Investments 77,890 70,415
Deferred income taxes 37,852
Other assets 29,766 32,679
---------- ----------
416,064 278,650
---------- ----------
$1,512,128 $1,109,934
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-8
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 9
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31, 1996 1995
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Commercial paper $ 212,500
Bank obligations 28,056 $ 57,520
Accounts payable 64,453 43,058
Accrued expenses 83,807 63,264
Accrual related to special charges 48,144 80,144
Income taxes payable 24,934 26,112
Other current liabilities 1,929 13,625
----------- -----------
Total current liabilities 463,823 283,723
Accrual related to special charges 37,699
Deferred income taxes 59,975
Other long-term liabilities 47,204 14,362
Commitments and contingencies
Contingent stock repurchase obligation 24,855
Stockholders' equity:
Preferred stock, $ .01 par value - authorized 25,000,000 shares,
none issued and outstanding
Common stock, $ .01 par value - authorized 300,000,000 shares,
179,101,866 shares issued at December 31, 1996 and
179,079,298 shares issued at December 31, 1995 1,791 1,791
Additional paid-in capital 380,967 386,610
Retained earnings 585,057 417,951
Foreign currency translation adjustment (37,994) (14,739)
Unrealized gain on available-for-sale securities, net 10,193 8,833
Treasury stock, at cost - 643,991 shares at December 31, 1996
and 2,425,490 shares at December 31, 1995 (23,743) (26,296)
----------- -----------
Total stockholders' equity 916,271 774,150
----------- -----------
$ 1,512,128 $ 1,109,934
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-9
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 10
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
UNREALIZED
COMMON STOCK FOREIGN GAIN ON
-------------------- ADDITIONAL CURRENCY AVAILABLE-
SHARES PAR PAID-IN RETAINED TRANSLATION FOR-SALE TREASURY
ISSUED VALUE CAPITAL EARNINGS ADJUSTMENT SECURITIES, NET STOCK TOTAL
----------- ------ --------- --------- ---------- -------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 176,457,515 $1,764 $ 322,213 $ 288,532 $ (1,847) $(65,366) $ 545,296
Net income 135,307 135,307
Foreign currency translation
adjustment 1,563 1,563
Issuance of common stock under
options, warrants and stock
purchase plans 1,567,054 16 9,215 (408) 1,540 10,363
Sale of common stock 594,000 6 17,554 17,560
Tax benefit relating to incentive
stock option and employee stock
purchase plans 5,613 5,613
Expiration of contingent stock
repurchase obligation 10,938 10,938
Net change in equity investments $ 13 13
Other (901) 6,904 5,555 12,459
----------- ------ --------- --------- -------- -------- --------- --------
BALANCE AT DECEMBER 31, 1994 178,617,668 1,786 372,437 423,431 (284) 13 (58,271) 739,112
Net income 6,440 6,440
Foreign currency translation
adjustment (14,455) (14,455)
Issuance of common stock under
options, warrants, and
stock purchase plans 461,630 5 1,283 (600) 31,975 32,663
Tax benefit relating to incentive
stock option and employee stock
purchase plans 13,068 13,068
Change in fiscal year of a
pooled entity (11,456) (11,456)
Net change in equity investments 8,820 8,820
Other (178) 136 (42)
----------- ------ --------- --------- -------- -------- --------- --------
BALANCE AT DECEMBER 31, 1995 179,079,298 1,791 386,610 417,951 (14,739) 8,833 (26,296) 774,150
Net income 167,106 167,106
Foreign currency translation
adjustment (23,255) (23,255)
Issuance of common stock under
options, warrants, and
stock purchase plans 22,568 (13,571) 52,343 38,772
Purchase of common stock
for treasury (52,313) (52,313)
Contingent stock repurchase
obligation (24,855) 2,523 (22,332)
Tax benefit relating to incentive
stock option and employee stock
purchase plans 32,783 32,783
Net change in equity investments 1,360 1,360
----------- ------ --------- --------- -------- -------- --------- --------
BALANCE AT DECEMBER 31, 1996 179,101,866 $1,791 $ 380,967 $ 585,057 $(37,994) $ 10,193 $ (23,743) $916,271
=========== ====== ========= ========= ======== ======== ========= ========
</TABLE>
See notes to consolidated financial statements.
F-10
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 11
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 167,106 $ 6,440 $ 135,307
Adjustments to reconcile net income to cash
provided by operating activities:
Net cash adjustment to conform year end
of pooled entity (11,472)
Depreciation and amortization 61,400 40,532 37,804
Deferred income taxes (12,426) (8,907) (21,957)
Noncash special charges write-offs 110,378 47,883
Exchange (gain) loss 2,095 (7,617) (2,800)
Increase (decrease) in cash flows from operating
assets and liabilities net-of-effects from
purchase acquisitions:
Trade accounts receivable (94,449) (69,294) (34,304)
Inventories (87,887) (47,038) (24,119)
Prepaid expenses and other assets (18,710) 11,738 (3,592)
Accounts payable and accrued expenses 30,655 8,928 11,393
Special charges and merger-related accrual (60,420) 67,312 (3,441)
Other liabilities 27,682 (27,488) (2,394)
Other, net 8,918 8,800 4,697
--------- --------- ---------
Cash provided by operating activities 134,342 19,817 96,594
INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net (135,320) (69,726) (80,859)
Acquisitions of businesses, net-of-cash acquired (241,580) (87,783)
Net maturities of held-to-maturity short-term investments 28,152 5,033 49,323
Purchases of available-for-sale securities (22,217) (8,210) (7,000)
Sales of available-for-sale securities 12,557 64,678 9,057
Payments for acquisitions of certain technologies (24,879) (9,009) (18,737)
Increase in equity investments (8,116) (67,485) (6,419)
Sales of equity investments 16,693
Other (6,835) (307) (12,509)
--------- --------- ---------
Cash used in investing activities (398,238) (172,809) (50,451)
FINANCING ACTIVITIES:
Net increase in commercial paper 212,500
Proceeds from notes payable and long-term borrowings 27,400 54,542
Principal payments on notes payable (27,357) (67,097) (11,351)
Proceeds from issuances of shares of common stock,
net-of-tax benefits 71,555 45,729 33,356
Acquisition of treasury stock, net-of-proceeds
from put options (49,790)
Other 752 (61)
--------- --------- ---------
Cash provided by financing activities 207,660 5,971 76,547
Effect of foreign exchange rates on cash (2,588) (4,939) (1,477)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents (58,824) (151,960) 121,213
Cash and cash equivalents at beginning of year 117,321 269,281 148,068
--------- --------- ---------
Cash and cash equivalents at end of year $ 58,497 $ 117,321 $ 269,281
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-11
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Note A to Note B)
NOTE A -- MERGERS AND ACQUISITIONS
On February 24, 1995, Boston Scientific Corporation (Boston Scientific or the
Company) completed its merger with SCIMED Life Systems, Inc. (SCIMED) in a
stock-for-stock transaction. The transaction, which is accounted for as a
pooling-of-interests, was effected through the exchange of 3.4152 shares of the
Company's common stock in exchange for each SCIMED share held. Approximately
52.7 million shares of common stock were issued in connection with the SCIMED
merger. SCIMED is a leader in the development, manufacture and marketing of
medical devices primarily to treat cardiovascular disease.
On March 9, 1995, the Company completed its merger with Cardiovascular Imaging
Systems, Inc. (CVIS), which is accounted for under the purchase method of
accounting. CVIS shareholders received $10.50 per share for an aggregate
purchase price of approximately $94 million (or approximately $82 million, net
of cash acquired, cash received and to be received from a third party under an
agreement, signed in conjunction with the acquisition, to license certain
intravascular ultrasound technology). CVIS develops, manufactures and markets
intravascular ultrasound imaging catheters and systems to aid in the diagnosis
of cardiovascular disease.
On March 23, 1995, the Company completed the acquisition of Vesica Medical, Inc.
(Vesica), a urology-based company focused principally on the treatment of a form
of urinary stress incontinence. The acquisition is accounted for under the
purchase method of accounting. The purchase price is not material to the
Company's financial position or results of operations and the acquisition did
not have a material pro forma impact on the Company's operations.
On November 16, 1995, the Company completed its merger with Meadox Medicals,
Inc. (Meadox). To effect the merger, Boston Scientific exchanged approximately
10.2 million shares of the Company's common stock for all the issued and
outstanding capital stock of Meadox on a fully-diluted basis in a
stock-for-stock, pooling-of-interests transaction. Meadox, a global leader in
textile vascular prostheses, markets a broad range of woven, knitted and
collagen-sealed grafts.
On December 29, 1995, the Company completed its merger with Heart Technology,
Inc. (Heart) in a stock-for-stock transaction. The transaction, which is
accounted for as a pooling-of-interests, was effected through the exchange of
0.675 shares of the Company's common stock for each Heart share held.
Approximately 11.9 million shares of the Company's common stock were issued in
connection with the Heart merger. Heart develops, manufactures and markets the
Rotablator system, a unique high-speed, diamond tip rotational device for the
treatment of atherosclerosis in coronary and peripheral arteries.
On January 22, 1996, the Company completed its merger with EP Technologies, Inc.
(EPT) in a stock-for-stock transaction. The transaction, which is accounted for
as a pooling-of-interests, was effected through the exchange of 0.297 shares of
the Company's common stock for each EPT share held. Approximately 3.4 million
shares of the Company's common stock were issued in conjunction with the EPT
merger. EPT designs, develops, manufactures and markets advanced
electrophysiology catheters and systems for use in minimally invasive procedures
to diagnose and treat tachyarrhythmias (abnormally rapid heart rates resulting
from defective or diseased cardiac tissues that interfere with the normal
conduction of electrical activity responsible for heart muscle contraction).
On March 14, 1996, the Company acquired Symbiosis Corporation (Symbiosis),
formerly a wholly-owned subsidiary of American Home Products Corporation. Boston
Scientific purchased Symbiosis, a developer and manufacturer of specialty
medical devices, for approximately $153 million in a cash transaction. The
acquisition was accounted for using the purchase method of accounting.
On May 3, 1996, Boston Scientific acquired assets from Endotech, Ltd. and
MinTec Inc., and certain related companies (Endotech/MinTec) dedicated to the
development of stent graft technology for the repair of diseased blood vessels.
The Company purchased Endotech/MinTec's assets for approximately $72 million in
a cash transaction accounted for using the purchase method of accounting.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and its subsidiaries, substantially all of which are
wholly-owned, and include the results of SCIMED, Meadox, Heart, and EPT
accounted for as poolings-of-interests, for all periods presented. The
statements also include the results of CVIS, beginning in March 1995, the
results of Symbiosis, beginning in March 1996 and the results of
Endotech/MinTec, beginning in May 1996. Investments in affiliates, representing
20% to 50% of the ownership of such companies, are accounted for under the
equity method. Investments in affiliates, representing less than 20% of the
ownership of such companies, are accounted for under the cost method.
ACCOUNTING ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FISCAL YEAR: The Company has a fiscal year ending on December 31. In connection
with the SCIMED merger, effective January 1, 1995, SCIMED changed its fiscal
year end from the last day of February to December 31. As a result of the change
in SCIMED's fiscal year, the operations for the period January 1, 1995 through
February 28, 1995 have been included in the results of operations of Boston
Scientific both for the years ended December 31, 1995 and 1994. Summarized
results of SCIMED's operations for this two-month period are: Net sales: $55
million; Gross margin: $42 million; Operating income: $18 million; Net income:
$11 million.
TRANSLATION OF FOREIGN CURRENCY: All assets and liabilities of foreign
subsidiaries are translated at the rate of exchange at year end while sales and
expenses are translated at the average rates in effect during the year. The net
effect of
F-12
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 13
these translation adjustments is shown in the accompanying financial statements
as a component of stockholders' equity.
CASH AND CASH EQUIVALENTS: The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.
SHORT-TERM INVESTMENTS: Short-term investments are recorded at fair value, which
approximates cost.
CONCENTRATION OF CREDIT RISK: Financial instruments that potentially subject the
Company to concentration of credit risk consist primarily of temporary cash and
cash equivalents, marketable securities and accounts receivable. The Company
invests its excess cash primarily in high quality securities and limits the
amount of credit exposure to any one financial institution. The Company's
investment policy limits exposure to concentration of credit risk and changes in
market conditions.
The Company provides credit, in the normal course of business, primarily to
hospitals, private and governmental institutions and healthcare agencies and
doctors' offices. The Company performs ongoing credit evaluations of its
customers and maintains allowances for potential credit losses which, when
realized, have been within the range of management's expectations. Credit risk
on trade receivables is minimized as a result of the large and diverse nature of
the Company's worldwide customer base.
INVENTORIES: Inventories are stated at the lower of first-in, first-out cost or
market.
PROPERTY, PLANT, EQUIPMENT AND LEASEHOLDS: Property, plant, equipment and
leaseholds are stated at historical cost. Expenditures for maintenance and
repairs are charged to expense; betterments are capitalized. The Company
provides for depreciation and amortization by the straight-line method at rates
which are intended to depreciate and amortize the cost of these assets over
their estimated useful lives. Buildings and improvements are depreciated over a
15- to 40-year life; equipment and office furniture and fixtures are depreciated
over a 2- to 7-year life.
INTANGIBLE ASSETS: Intangibles assets are amortized using the straight-line
method over the following lives:
Patents and trademarks ........................................ 3 - 20 years
Licenses ...................................................... 3 - 20 years
Purchased technologies ........................................ 3 - 20 years
Excess of cost over net assets acquired ....................... 15 - 40 years
Other intangibles ............................................. Various
The Company examines the carrying value of its goodwill and other long-lived
intangible assets to determine whether there are any impairment losses. If
indicators of impairment were present in long-lived intangible assets used in
operations, and future cash flows were not sufficient to recover the assets'
carrying amount, an impairment loss would be charged to expense in the period
identified. No event has been identified that would impair the value of material
long-lived intangible assets recorded in the accompanying consolidated financial
statements.
INCOME TAXES: The Company utilizes the liability method for accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
Taxes are not provided on unremitted earnings of subsidiaries outside the United
States (U.S.) where such earnings are permanently reinvested. At December 31,
1996, unremitted earnings of non-U.S. subsidiaries were $196 million. When these
earnings are distributed in the form of dividends or otherwise, the Company will
be subject to both U.S. income taxes and foreign withholding taxes less an
adjustment for applicable foreign tax credits. It is not practical to estimate
the amount of taxes payable on these foreign earnings. Research and development
tax credits are recorded as a reduction in income tax expense in the year
realized.
FOREIGN EXCHANGE CONTRACTS: The Company enters into forward foreign exchange
contracts to hedge foreign currency transactions on a continuing basis for
periods consistent with commitments. The Company does not engage in speculation.
The Company's foreign exchange contracts, which were immaterial at December 31,
1996, do not subject the Company to material balance sheet risk due to exchange
rate movements because gains and losses on these contracts offset losses and
gains on the assets and liabilities being hedged. During 1996, net foreign
currency transaction and translation net gains (losses) that are reflected as
Other Income (Expense) on the Consolidated Statements of Income totaled
approximately $2 million of net foreign exchange losses compared to $8 million
and $3 million of net foreign exchange gains in 1995 and 1994, respectively.
Although the Company engages in hedging transactions that may offset the effect
of fluctuations in foreign currency exchange rates on foreign currency
denominated assets and liabilities, financial exposure may nonetheless result,
primarily from the timing of transactions and the movement of exchange rates.
Further, any significant changes in the political, regulatory or economic
environment where the Company conducts international operations may have a
material impact on revenues and profits.
REVENUE RECOGNITION: The Company recognizes revenue from the sale of its
products when the products are shipped to its customers. The Company allows its
customers to return certain products for credit. The Company also allows
customers to return defective or damaged products for credit or replacement.
Returned merchandise will be accepted only with written authorization from the
Company. Accruals are made and evaluated for adequacy on a monthly basis for all
returns.
RESEARCH AND DEVELOPMENT: Research and development costs are expensed as
incurred.
NET INCOME PER COMMON SHARE: Net income (loss) per common share is based upon
the weighted average number of common shares, common share equivalents and the
dilutive effect of European put options, if applicable, outstanding each year.
F-13
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Note B continued to Note E)
STOCK COMPENSATION ARRANGEMENTS: The Company accounts for its stock compensation
arrangements under the provisions of APB Opinion No. 25, "Accounting for Stock
Issued to Employees", and intends to continue to do so.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting and Disclosure of Stock-Based
Compensation". These provisions require the Company to disclose pro forma net
income and earnings per share amounts as if compensation expense related to
grants of stock options were recognized based on new fair value accounting rules
(see Note J).
RECLASSIFICATIONS: Certain prior years' amounts have been reclassified to
conform to the current years' presentation.
NOTE C -- CASH, CASH EQUIVALENTS AND INVESTMENTS
Cash, cash equivalents, and investments, stated at fair market value, consisted
of the following:
<TABLE>
<CAPTION>
Fair Gross Gross
Market Unrealized Unrealized Amortized
(In thousands) Value Gains Losses Cost
------ --------- ---------- ---------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
AVAILABLE-FOR-SALE:
Cash and money market accounts ........................... $ 46,748 $ 46,748
Equity securities (with a readily determinable
fair value) ............................................ 31,468 $ 17,369 $ 1,808 15,907
Corporate obligations:
Within one year ...................................... 3,997 3,997
U.S. debt securities:
Within one year ...................................... 9,765 9,765
-------- -------- -------- --------
$ 91,978 $ 17,369 $ 1,808 $ 76,417
======== ======== ======== ========
HELD-TO-MATURITY:
U.S. debt securities:
Within one year ...................................... $ 16,749 $ 16,749
======== ========
DECEMBER 31, 1995
AVAILABLE-FOR-SALE:
Cash and money market accounts ........................... $ 68,606 $ 68,606
Repurchase agreements .................................... 4,830 4,830
Equity securities (with a readily determinable
fair value) ............................................ 19,694 $ 12,975 $ 496 7,215
Corporate obligations:
Within one year ...................................... 3,998 3,998
Greater than one year ................................ 3,980 3,980
U.S. debt securities:
Within one year ...................................... 17,735 43 17,692
Greater than one year ................................ 17,192 25 17,167
-------- -------- -------- --------
$136,035 $ 13,043 $ 496 $123,488
======== ======== ======== ========
HELD-TO-MATURITY:
Corporate obligations:
Within one year ...................................... $ 810 $ 810
U.S. debt securities:
Within one year ...................................... 44,091 44,091
-------- --------
$ 44,901 $ 44,901
======== ========
</TABLE>
The Company has no trading securities. Unrealized gains and temporary losses for
available-for-sale securities are excluded from earnings and are reported,
net-of-tax, as a separate component of shareholders' equity until realized. The
cost of available-for-sale securities is based on the specific identification
method.
At December 31, 1996 and 1995, the Company had investments totaling $50 million
and $51 million, respectively, in which the fair market value was not readily
determinable.
F-14
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 15
NOTE D -- OTHER BALANCE SHEET INFORMATION
Components of other selected captions in the Consolidated Balance Sheets at
December 31 consisted of:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
-------- --------
<S> <C> <C>
TRADE ACCOUNTS RECEIVABLE
Accounts receivable $313,123 $220,604
Less allowances 14,237 6,372
-------- --------
$298,886 $214,232
======== ========
INVENTORIES
Finished goods $125,778 $ 75,892
Work-in-process 42,632 35,178
Raw materials 57,803 37,502
-------- --------
$226,213 $148,572
======== ========
DEPRECIABLE ASSETS AND LEASEHOLDS
Land $ 32,573 $ 24,323
Buildings and improvements 173,169 136,726
Equipment 217,547 150,718
Office furniture and fixtures 41,184 30,718
Leasehold improvements 40,901 28,021
-------- --------
505,374 370,506
Less accumulated depreciation and amortization 158,188 114,413
-------- --------
$347,186 $256,093
======== ========
INTANGIBLE ASSETS
Patents and trademarks $119,894 $ 58,103
Licenses 45,924 38,630
Purchased technologies 77,099 29,635
Excess of cost over net assets acquired 117,256 50,251
Other intangibles 12,707 3,775
-------- --------
372,880 180,394
Less accumulated amortization 64,472 42,690
-------- --------
$308,408 $137,704
======== ========
ACCRUED EXPENSES
Payroll and related liabilities $ 30,840 $ 31,608
Royalties payable 3,464 7,497
Commissions payable 6,720 4,484
Other 42,783 19,675
-------- --------
$ 83,807 $ 63,264
======== ========
</TABLE>
NOTE E -- CREDIT ARRANGEMENTS
The Company's borrowings at December 31 consisted of:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper $212,500
Bank obligations 28,056 $ 57,520
</TABLE>
At December 31, 1995, the Company had line of credit agreements with two U.S.
banks (the Credit Agreements) that provided maximum worldwide borrowings of $71
million. On April 1, 1996, the Company increased its maximum worldwide
borrowings provided under the Credit Agreements to $121 million. The term of the
increased borrowings extended through June 7, 1996, at which time, the Credit
Agreements were terminated and replaced by a new $350 million revolving line of
credit with a syndicate of U.S. and international banks (New Credit Agreement).
Under the New Credit Agreement, the Company has the option to borrow amounts at
various interest rates, payable quarterly in arrears. The term of the borrowings
extends through June 6, 2001; use of the borrowings is unrestricted and the
borrowings are unsecured. The New Credit Agreement requires the Company to
maintain a minimum consolidated tangible net worth and a ratio of consolidated
funded debt to consolidated tangible net worth. At December 31, 1996, the
Company did not have any outstanding borrowings under the New Credit Agreement.
During the second quarter of 1996, the Company initiated a commercial paper
program. The commercial paper is supported by the Company's New Credit
Agreement; outstanding commercial paper reduces available borrowings under the
New Credit Agreement. Proceeds from issuing the commercial paper were used for
repayment of a $100 million short-term
F-15
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Note E continued to Note H)
seller-financed loan associated with the acquisition of Symbiosis, repayment of
borrowings under the Credit Agreements, and repurchase of the Company's common
stock. The remaining proceeds primarily were used for general operating
purposes. At December 31, 1996, the Company had approximately $213 million in
commercial paper outstanding with interest rates ranging from 5.55% to 6.03%.
The Company has uncommitted credit facilities with several Japanese banks that
provide for borrowings and promissory notes discounting of up to 9 billion yen,
or approximately $78 million. At December 31, 1996, borrowings outstanding under
these credit facilities were 3 billion yen, or approximately $24 million and
were borrowed at rates of approximately 1%. During 1996, approximately $130
million of receivables were discounted through promissory notes. At December 31,
1996, approximately $30 million of receivables were discounted at average
discount rates of approximately 2% and $3 million of the facilities was used to
support other Company obligations; thus, the net availability under these credit
lines was $21 million. The Company also has credit lines totaling $1 million
with various other international banks. At December 31, 1996, the Company did
not have any outstanding borrowings under these additional lines of credit.
At December 31, 1995, the interest rate on domestic revolving lines of credit
borrowings ranged from 6.25% to 6.33% and interest rates on foreign revolving
lines of credit borrowings ranged from 1.125% to 10.28%.
Interest paid, including interest paid under capital leases and mortgage loans,
but excluding interest paid on a patent litigation judgment (in 1995 and 1994),
amounted to $13 million in 1996, $6 million in 1995 and $4 million in 1994.
NOTE F -- LEASES
Rent expense amounted to $21 million in 1996, $14 million in 1995 and $13
million in 1994. These amounts include rent expense paid to related parties of
$1 million during each of 1996, 1995 and 1994.
Future minimum rental commitments as of December 31, 1996 under capital and
operating lease agreements are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
Capital Operating
(In thousands) Leases Leases
------- -------
<S> <C> <C>
1997 $ 4,473 $16,484
1998 1,085 12,386
1999 1,107 10,081
2000 1,128 6,909
2001 1,151 4,423
Thereafter 8,706 22,103
------- -------
Total minimum lease payments 17,650 $72,386
Amount representing interest 6,844 =======
-------
Present value of minimum
lease payments $10,806
=======
</TABLE>
NOTE G -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments. However, considerable judgment
is required in interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that the Company could realize in a current market exchange.
CASH AND CASH EQUIVALENTS: The carrying amounts reported in the balance sheets
for cash and cash equivalents are valued at cost which approximates their fair
value.
INVESTMENTS: The fair values for marketable debt and equity securities are based
on quoted market prices when readily determinable.
COMMERCIAL PAPER AND BANK OBLIGATIONS: The carrying amounts of the Company's
borrowings under its commercial paper program and its financing agreements
approximate their fair value.
FORWARD FOREIGN EXCHANGE CONTRACTS: The fair values of the Company's forward
foreign exchange contracts, which were immaterial at December 31, 1996 and 1995,
are estimated based on quoted market prices of comparable contracts.
The carrying amounts and fair values of the Company's financial instruments at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash,
cash equivalents,
and investments $108,727 $108,727 $180,936 $180,936
Liabilities:
Commercial paper 212,500 212,500
Bank obligations 28,056 28,056 57,520 57,520
</TABLE>
F-16
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 17
NOTE H -- INCOME TAXES
Income (loss) before income taxes consisted of:
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Domestic $ 251,937 $ 64,305 $ 214,204
Foreign 45,034 19,500 (5,346)
--------- --------- ---------
$ 296,971 $ 83,805 $ 208,858
========= ========= =========
The provision for income taxes consisted of:
<CAPTION>
Year Ended December 31,
(In thousands) 1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 111,763 $ 65,023 $ 77,604
State 8,268 6,123 10,932
Foreign 22,260 15,126 6,972
-------- --------- ---------
142,291 86,272 95,508
-------- --------- ---------
Deferred:
Federal 3,739 3,503 (2,588)
State 281 465 (214)
Foreign (16,446) (12,875) (6,655)
-------- --------- ---------
(12,426) (8,907) (9,457)
-------- --------- ---------
129,865 77,365 86,051
Deferred tax assets valuation allowance (12,500)
-------- --------- ---------
$ 129,865 $ 77,365 $ 73,551
========= ========= =========
<CAPTION>
The reconciliation of taxes on income at the federal statutory rate to the
actual provision for income taxes is:
Year Ended December 31,
(In thousands) 1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Tax at statutory rate $ 103,940 $ 29,332 $ 73,100
Tax credits (6,017) (6,731) (2,162)
Reversal of valuation allowance on deferred tax assets (12,500)
Stock award 3,213
State income taxes, net of federal benefit 8,549 5,467 7,251
Effect of dividends from wholly-
owned foreign subsidiaries 4,930 4,491 (815)
Effect of foreign tax rates 5,194 3,594 2,071
Foreign sales corporation (4,247) (2,041) (1,527)
Non-deductible merger-related expenses 15,002 41,155
Tax-exempt income (267) (1,338) (1,196)
Other, net 2,781 3,436 6,116
-------- --------- ---------
$ 129,865 $ 77,365 $ 73,551
========= ========= =========
</TABLE>
F-17
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Note H continued to Note J)
Significant components of the Company's deferred tax assets and liabilities at
December 31 consisted of:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Inventory costs $ 7,998 $ 4,540
Deferred intercompany sales 59,357 18,546
Tax benefit of U.S. net operating loss and tax credits 22,696 35,326
Tax benefit of foreign net operating loss 1,759 3,606
Reserves and accruals 10,766 6,250
Capitalized research and development 3,384 5,199
Merger-related expenses 26,069 34,698
Other 8,787 8,130
--------- ---------
Deferred tax assets 140,816 116,295
Less valuation allowance on deferred tax assets (23,672) (28,367)
--------- ---------
$ 117,144 $ 87,928
========= =========
Deferred tax liabilities:
Tax over book depreciation $ (41,284) $ (1,809)
Unremitted earnings of subsidiaries (25,355) (8,500)
Research and development (1,396) (3,098)
Other (2,652) (1,806)
--------- ---------
Deferred tax liabilities (70,687) (15,213)
--------- ---------
46,457 72,715
Deferred SFAS No. 115 adjustment (5,368) (3,714)
--------- ---------
$ 41,089 $ 69,001
========= =========
</TABLE>
At December 31, 1996, the Company had U.S. tax net operating loss carryforwards
and research and development tax credits of approximately $23 million that will
expire periodically beginning in the year 2004. In addition, the Company had
foreign net operating loss carryforwards of $2 million that will expire
periodically beginning in the year 1998. The Company established a valuation
allowance of $24 million for these carryforwards primarily attributable to the
carryforwards acquired as part of the Company's 1995 and 1996 mergers and
acquisitions.
Income taxes paid amounted to $80 million in 1996, $79 million in 1995, and $92
million in 1994.
NOTE I -- STOCKHOLDERS' EQUITY
PREFERRED STOCK: The Company is authorized to issue 25 million shares of
preferred stock in one or more series and to fix the powers, designations,
preferences and relative, participating, option or other rights thereof,
including dividend rights, conversion rights, voting rights, redemption terms,
liquidation preferences and the number of shares constituting any series,
without any further vote or action by the Company's stockholders. At December
31, 1996, the Company had no shares of preferred stock outstanding.
COMMON STOCK: The Company is authorized to issue 300 million shares of common
stock, $.01 par value per share. Holders of common stock are entitled to one
vote per share. Holders of common stock are entitled to receive dividends when
and if declared by the Board of Directors and to share ratably in the assets of
the Company legally available for distribution to its stockholders in the event
of liquidation. Holders of common stock have no preemptive, subscription,
redemption or conversion rights. The holders of common stock do not have
cumulative voting rights. The holders of a majority of the shares of common
stock can elect all of the Directors and can control the management and affairs
of the Company.
During 1996, the Company resumed its program to repurchase stock. The Company is
authorized to purchase on the open market up to approximately 20 million shares
of the Company's common stock. Purchases will be made at prevailing prices as
market conditions and cash availability warrant. Stock repurchased under the
Company's systematic plan will be used to satisfy its obligations pursuant to
employee benefit and incentive plans. During 1996, the Company repurchased
approximately 1.3 million shares of its common stock at an aggregate cost of $52
million. Prior to 1996, a total of 4.9 million shares of the Company's common
stock was repurchased under the program.
As part of the stock repurchase program, the Company sold European equity put
options to an independent broker-dealer during 1996 and prior years. Each
option, if exercised, obligates the Company to purchase from the broker-dealer a
specified number of shares of the Company's common stock at a predetermined
exercise price. The put options are exercisable only on the first anniversary of
the date the options were sold. During 1996, the Company sold European put
options for 600,000 shares and received proceeds of approximately $3 million.
Proceeds are recorded as a reduction to the cost of the Company's treasury
stock. Repurchase prices relating to put options outstanding at December 31,
1996 range from $41.10 per share to $41.75 per share. The Company's contingent
obligation to repurchase shares upon exercise of the outstanding put options
approximated $25 million at
F-18
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 19
December 31, 1996. At December 31, 1996, the aggregate contingent repurchase
obligation has been reclassified from permanent equity and is presented as a
contingent stock repurchase obligation. Prior to 1996, the Company sold European
put options for one million shares, none of which were outstanding after
December 31, 1994.
NOTE J -- STOCK OWNERSHIP PLANS
EMPLOYEE AND DIRECTOR STOCK OWNERSHIP PLANS
Boston Scientific's 1992 and 1995 Long-Term Incentive Plans provide for the
issuance of up to 20 million shares of common stock. The terms of these two
plans are similar. The plans cover officers, employees and consultants of and to
the Company and provide for the grant of various incentives, including qualified
and non-qualified options, stock grants, share appreciation rights and
performance awards. Options granted to purchase shares of common stock are
either immediately exercisable or exercisable in installments as determined by
an appointed committee consisting of two or more non-employee directors
(Committee), and, in the case of any qualified options, expire within ten years
from date of grant. In the case of qualified options, if an employee owns more
than 10% of the voting power of all classes of stock, the option granted will be
at 110% of the fair market value of the Company's common stock on the date of
grant, and will expire over a period not to exceed five years.
The Committee may also make stock grants in which shares of common stock may be
issued to officers, employees and consultants at a purchase price less than fair
market value. The terms and conditions of such issuances, including whether
achievement of individual or Company performance targets is required for the
retention of such awards, are determined by the Committee. The Committee may
also issue shares of common stock and/or authorize cash awards under the
incentive plans in recognition of the achievement of long-term performance
objectives established by the Committee. Stock grants for 1,000 shares, 29,000
shares and 15 shares were issued to employees during 1996, 1995 and 1994,
respectively.
Boston Scientific's 1992 Non-Employee Directors' Stock Option Plan provides for
the issuance of up to 100,000 shares of common stock and authorizes the
automatic grant to outside directors of options to acquire 2,000 shares of
common stock generally on the date of each annual meeting of the Stockholders of
the Company. Options under this plan are exercisable ratably over a three-year
period and expire ten years from the date of grant.
Prior to their mergers with Boston Scientific, each of SCIMED, CVIS, Meadox,
Heart, EPT and Symbiosis had stock ownership plans. Substantially all
outstanding options were converted into Boston Scientific options using the
applicable exchange rates and the option prices were adjusted accordingly (see
Note A). No future grants are anticipated to be made under these plans. Shares
reserved for issuance under all of the Company's plans totaled approximately 25
million at December 31, 1996.
If the Company had elected to recognize compensation expense for the granting of
options under the aforementioned stock option plans based on the fair values at
the grant dates consistent with the methodology prescribed by Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation", net income and earnings per share would have been reported as the
following pro forma amounts:
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands, except per share data) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income As reported $167,106 $ 6,440
Pro forma 153,700 400
- --------------------------------------------------------------------------------
Earnings per share As reported $ 0.92 $ 0.04
Pro forma 0.85
- --------------------------------------------------------------------------------
</TABLE>
The fair value of the stock options used to calculate the pro forma net income
and earnings per share amounts above is estimated using the Black-Scholes
options pricing model with the following weighted average assumptions for 1996
and 1995: dividend yield of 0%, expected volatility of 37.7%, a weighted average
risk-free interest rate of 6.12% and 5.95%, respectively, actual forfeitures of
194,000 and 78,000 options, respectively, and a weighted average expected life
of 3.8 years and 4 years, respectively. The weighted average grant-date fair
value of options granted during 1996 and 1995 calculated using the Black-Scholes
options pricing model is $15.07 and $10.37, respectively. The effects on 1995
and 1996 pro forma amounts of expensing the estimated fair value of stock
options are not necessarily representative of the effects on reporting the
results of operations for future years as the periods presented include only one
and two years of option grants under the Company's plans.
F-19
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Note J continued to Note K)
Information related to stock options at December 31 under the aforementioned
stock ownership plans is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
(Option amounts in thousands) Options Price Options Price Options Price
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 12,852 $17.05 11,819 $11.96 10,524 $11.06
Granted 2,646 42.76 3,971 28.27 3,371 13.56
Exercised 2,508 13.16 2,386 11.09 1,133 7.19
Canceled 366 24.27 552 14.60 943 13.39
Outstanding at December 31 12,624 23.00 12,852 17.05 11,819 11.96
Exercisable at December 31 4,643 14.89 5,244 13.57 5,772 9.84
- --------------------------------------------------------------------------------------------------
</TABLE>
Below is additional information related to stock options outstanding and
exercisable at December 31, 1996:
<TABLE>
<CAPTION>
Stock Options Stock Options
(Option amounts in thousands) Outstanding Exercisable
- ---------------------------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Contractual Exercise Exercise
Range of Exercise Prices Options Life Price Options Price
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ .00-10.00 127 6.0 $ 4.25 113 $ 3.59
10.01-20.00 6,308 6.8 12.82 3,844 12.80
20.01-30.00 3,655 8.3 27.45 609 27.13
30.01-40.00 42 7.4 32.58 34 34.08
40.01-50.00 2,238 9.3 41.84 43 43.09
50.01-60.00 254 9.8 53.63
- ---------------------------------------------------------------------------------------------
12,624 7.7 $23.00 4,643 $14.89
=============================================================================================
</TABLE>
WARRANTS
Information related to warrants activity is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
(Warrant amounts in thousands) Warrants Price Warrants Price Warrants Price
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 446 $ 1.40 706 $ 2.93 1,321 $1.57
Exercised 412 0.43 220 2.07 615 0.01
Canceled 40 24.76
- ---------------------------------------------------------------------------------------------------
Outstanding at December 31 34 $13.15 446 $ 1.40 706 $2.93
===================================================================================================
</TABLE>
STOCK PURCHASE PLAN
Boston Scientific's 1992 Employee Stock Purchase Plan (Stock Purchase Plan)
provides for the granting of options to purchase up to 1.5 million shares of the
Company's common stock to all eligible employees. Under the Stock Purchase Plan,
each eligible employee is granted, at the beginning of each six-month period
designated by the Committee as an offering period, an option to purchase a
number of shares equal to not more than 5% of the employee's prior year's
adjusted gross income divided by 85% of the fair market value of the Company's
common stock as of the beginning of that offering period. Such options may be
exercised only to the extent of accumulated payroll deductions at the end of the
offering period, at a purchase price equal to 85% of the fair market value of
the Company's common stock at the beginning or end of each offering period,
whichever is less.
During 1996, approximately 120,000 shares were issued at prices ranging from
$36.125 to $39.419 per share. During 1995, approximately 133,000 shares were
issued at prices ranging from $13.60 to $21.463 per share, and, during 1994,
114,000 shares were issued at prices ranging from $8.606 to $11.475 per share.
At December 31, 1996, there were 1,089,000 shares available for issuance under
the Stock Purchase Plan.
F-20
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 21
NOTE K -- COMMITMENTS AND CONTINGENCIES
Schneider (Europe) AG and Schneider (USA) Inc., subsidiaries of Pfizer, Inc.,
have alleged that the Company's Synergy(TM) products infringe one of their
patents. On May 13, 1994, the Company filed a lawsuit against them in the U.S.
District Court for the District of Massachusetts seeking a declaratory judgment
that this patent is invalid and that the Company's Synergy products do not
infringe the patent. The Schneider companies filed counterclaims against the
Company, alleging the Company's willful infringement of the patent and seeking
monetary and injunctive relief. The parties have made cross motions for summary
judgment on various aspects of the case.
On May 31, 1994, SCIMED Life Systems, Inc. (SCIMED) filed a suit for patent
infringement against Advanced Cardiovascular Systems, Inc. (ACS), alleging
willful infringement of two of SCIMED's U.S. patents by ACS's FLOWTRACK-40(TM)
and RX ELIPSE(TM) PTCA catheters. Suit was filed in the U.S. District Court for
the Northern District of California and seeks monetary and injunctive relief.
The case has been sent to arbitration for a threshold determination of one issue
covered by the November 27, 1991 Settlement Agreement (the Settlement Agreement)
between the parties. The arbitration hearing was held in October 1996 and a
final decision is expected in the early part of 1997.
On November 17, 1995, SCIMED filed a suit for patent infringement against ACS,
alleging willful infringement of three of SCIMED's U.S. patents by the ACS RX
LIFESTREAM(TM) PTCA catheter. Suit was filed in the U.S. District Court for the
Northern District of California and seeks monetary and injunctive relief. The
case has also been sent to arbitration under the terms of the Settlement
Agreement. The arbitration hearing was held in October 1996 and a final decision
is expected in the early part of 1997.
On October 10, 1995, ACS filed a suit for patent infringement against SCIMED,
alleging willful infringement of four U.S. patents licensed to ACS by SCIMED'S
EXPRESS PLUS(TM) and EXPRESS PLUS II(TM) PTCA catheters. Suit was filed in the
U.S. District Court for the Northern District of California and seeks monetary
and injunctive relief. SCIMED has answered, denying the allegations of the
complaint.
On December 15, 1995, the Company and SCIMED filed a suit for restraint of
trade, unfair competition and conspiracy to monopolize against ACS and the
Schneider companies, alleging certain violations of state and federal antitrust
laws arising from the improper prosecution, enforcement and cross-licensing of
U.S. patents relating to rapid exchange balloon dilatation angioplasty
catheters. Suit was filed in the U.S. District Court for the District of
Massachusetts and seeks monetary, declaratory and injunctive relief. The
defendants have moved for dismissal.
On March 12, 1996, ACS filed two suits for patent infringement against SCIMED,
alleging in one case the willful infringement of a U.S. patent by SCIMED's
EXPRESS PLUS, EXPRESS PLUS II and LEAP EXPRESS PLUS PTCA catheters, and in the
other case the willful infringement of a U.S. patent by SCIMED's BANDIT(TM) PTCA
catheter. The suits were filed in the U.S. District Court for the Northern
District of California and seek monetary and injunctive relief. SCIMED has
answered, denying the allegations of the complaint.
On November 9, 1994, Target Therapeutics, Inc. (Target) filed a lawsuit in the
U.S. District Court for the Northern District of California alleging that
SCIMED's VENTURE(R) and VENTURE II(TM) microcatheters infringe a patent assigned
to Target. On May 2, 1996, the District Court entered an order granting a
preliminary injunction prohibiting SCIMED from marketing or selling the accused
product. On July 1, 1996, the Court of Appeals for the Federal Circuit stayed
the preliminary injunction pending a decision on SCIMED's appeal of the District
Court's order. In view of the announced merger between the Company and Target, a
decision on the appeal has been stayed until April 14, 1997.
On April 5, 1995, C.R. Bard, Inc. (Bard) filed a lawsuit in the U.S. District
Court for the District of Delaware alleging that certain Company products,
including the Company's Max Force TTS(TM) catheter, infringes a patent assigned
to Bard. The lawsuit seeks a declaratory judgment that the Company has infringed
the Bard patent, preliminary and permanent injunctions enjoining the
manufacture, use or sale of the Max Force TTS catheter or any other infringing
product, monetary damages and expenses. The Company has answered, denying the
allegations of the complaint.
On March 25, 1996, Cordis Corporation, a subsidiary of Johnson & Johnson
Company, filed a suit for patent infringement against SCIMED, alleging the
infringement of five U.S. patents by SCIMED's LEAP(TM) balloon material, used in
certain models of SCIMED's BANDIT and EXPRESS PLUS products. The suit was filed
in the U.S. District Court for the District of Minnesota and seeks monetary and
injunctive relief. SCIMED has answered, denying the allegations of the
complaint.
On March 7, 1996, Cook Inc. filed suit in the Regional Court, Division for
Patent Disputes, in Munich, Germany against MinTec, Inc. Minimally Invasive
Technologies alleging that the Cragg EndoPro(TM) System I and Stentor(TM)
endovascular device infringe a certain Cook patent. Since the purchase of the
assets of the Endotech/MinTec companies by the Company, the Company has assumed
control of the litigation. The defendant has answered, denying the allegations.
Supplemental hearings are scheduled for July 1997.
On September 1, 1995, a purported class action lawsuit was filed in the Court of
Chancery in the State of Delaware in and for New Castle County captioned Kinder
v. Auth, et al., alleging breaches of fiduciary duty by the Board of Directors
of Heart Technology, Heart Technology and the Company in connection with the
Agreement and Plan of Merger entered into between the Company and Heart
Technology. In January 1996, the parties agreed to settle the suit for an amount
the Company does not deem to be material.
The Company is involved in various other lawsuits from time to time. In
management's opinion, the Company is not currently involved in any legal
proceedings other than those specifically identified above which, individually
or in the aggregate, could have a material effect on the financial condition,
operations or cash flows of the Company.
F-21
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Note K continued to Note N)
The Company believes that it has meritorious defenses against claims that it has
infringed patents of others. However, there can be no assurance that the Company
will prevail in any particular case. An adverse outcome in one or more cases in
which the Company's products are accused of patent infringement could have a
material adverse effect on the Company.
Further, product liability claims may be asserted in the future relative to
events not known to management at the present time. The Company has insurance
coverage which management believes is adequate to protect against such product
liability losses as could otherwise materially affect the Company's financial
position.
NOTE L -- BUSINESS COMBINATIONS
In 1996, Boston Scientific consummated its merger with EPT. The acquisition is
accounted for as a pooling-of-interests (see Note A), thus, the combined
consolidated financial statements serve as the basis for historical financial
statements of Boston Scientific. Combined and separate results of Boston
Scientific and EPT for 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Combined
Boston Boston
(In thousands) Scientific EPT Scientific
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1995:
Net sales $1,106,681 $ 22,504 $1,129,185
Net income (loss) 8,408 (1,968) 6,440
Year ended December 31, 1994:
Net sales $ 876,822 $ 11,750 $ 888,572
Net income (loss) 144,714 (9,407) 135,307
- --------------------------------------------------------------------------------
</TABLE>
The restated financial data is not necessarily indicative of the operating
results or financial position that would have occurred if the EPT merger had
been consummated during the periods presented, nor is it necessarily indicative
of future operating results or financial position.
Additionally, during March 1996 the Company also completed its merger with
Symbiosis which has been accounted for as a purchase (see Note A). The
consolidated financial statements include the Symbiosis operating results from
the date of acquisition. The purchase price of the Symbiosis acquisition ($153
million) has been allocated to the assets acquired based on their estimated fair
values. This accounting treatment resulted in approximately $146 million of
intangible assets that will be amortized over their estimated period of benefit.
Approximately $39 million of the acquisition cost represented purchased research
and development. The Company also recorded a deferred tax liability of
approximately $39 million representing the tax effect of timing differences
recorded as part of the acquisition. The following unaudited pro forma
information presents a summary of consolidated results of operations of the
Company and Symbiosis as if the acquisition had occurred at the beginning of
1995, with pro forma adjustments to give effect to amortization of intangibles,
reduction in interest income on acquisition financing and certain other
adjustments together with the related tax effects:
<TABLE>
<CAPTION>
Year Ended December 31,
- ----------------------------------------------------------------------
(In thousands, except per share data) 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Net sales $1,466,219 $ 1,152,117
Net income (loss) 205,593 (16,994)
Net income (loss) per share $ 1.12 $ (0.10)
- ----------------------------------------------------------------------
</TABLE>
On May 3, 1996, Boston Scientific acquired assets from Endotech/MinTec, a
company dedicated to the development of stent graft technology for the repair of
diseased blood vessels. The Company purchased Endotech/MinTec's assets for
approximately $72 million in a cash transaction. The transaction, which was
accounted for under the purchase method of accounting, was financed from the
Company's available cash and borrowings under its financing arrangements (see
Note E). The purchase price was allocated to the assets acquired based on their
estimated fair values. The treatment resulted in approximately $14 million of
intangible assets that will be amortized over their estimated period of benefit.
The acquisition did not have a material pro forma impact on the Company's
operations, other than approximately $57 million of the acquisition cost
representing purchased research and development.
F-22
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 23
NOTE M -- MERGER-RELATED CHARGES AND EXPENSES
In 1996, the Company recorded special charges of $128 million which primarily
related to the merger with EPT and the acquisitions of Symbiosis and
Endotech/MinTec. Charges include $96 million for purchased research and
development, $5 million in direct transaction costs and $12 million of estimated
costs to be incurred in merging the separate operating businesses of EPT with
subsidiaries of Boston Scientific. Estimated costs include those typical in a
merging of operations and relate to, among other things, rationalization of
facilities, workforce reductions, unwinding of various contractual commitments,
asset writedowns and other integration costs. The majority of the remaining $15
million, which is primarily non-deductible for tax purposes, represents a change
in management's estimates of the merger-related charges recorded in 1995. The
change to prior year estimates relates primarily to the costs of unwinding
various contractual obligations and the rationalization of facilities.
In connection with the 1995 acquisitions of SCIMED, CVIS, Vesica, Meadox and
Heart, the Company recorded non-recurring and special charges of $237 million.
Estimated costs include purchased research and development and those costs
typical in a merging of operations and relate to, among other things,
rationalization of facilities, workforce reductions and unwinding of various
contractual commitments.
The special charges are determined based on formal plans approved by the
Company's management using the best information available to it at the time. The
workforce-related initiatives involve substantially all of the Company's
employee groups. The amounts the Company may ultimately incur may change as the
plans are executed.
The activity impacting the accrual related to these charges during 1996 and
1995, net of reclassifications made by management based on available
information, is summarized in the table below:
<TABLE>
<CAPTION>
Charges to Charges Charges to Charges Balance at
Operations in Utilized in Operations in Utilized in December 31,
(In thousands) 1995 1995 1996 1996 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Facilities $ 25,642 $ 7,118 $13,863 $ 18,897
Workforce reductions 42,078 $10,215 3,655 9,621 25,897
Contractual commitments 63,832 12,911 1,940 44,705 8,156
Asset writedowns 19,315 11,774 4,497 5,790 6,248
Direct transaction and other costs 53,581 34,290 15,131 28,063 6,359
- ---------------------------------------------------------------------------------------------------------------
Total $204,448 $69,190 $32,341 $102,042 $65,557
===============================================================================================================
</TABLE>
The December 31, 1996 accrual for special charges is classified within the
balance sheet as follows:
<TABLE>
<CAPTION>
(In thousands)
- --------------------------------------------------------------------------------
<S> <C>
Accrual related to special charges $48,144
Property, plant, equipment and leaseholds, net 11,165
Inventories 4,378
Intangibles, net 1,870
- --------------------------------------------------------------------------------
$65,557
================================================================================
</TABLE>
The plans are expected to be substantially completed by the end of 1997. Cash
outlays to complete the balance of the Company's initiative to integrate the
businesses related to 1995 and 1996 business combinations are estimated to be
approximately $47 million for 1997.
NOTE N -- SUBSEQUENT EVENT
On January 20, 1997, the Company announced the signing of a definitive agreement
to merge in a tax-free stock-for-stock transaction with Target Therapeutics,
Inc. (Target) to be accounted for as a pooling-of-interests. Target designs,
develops, manufactures and markets catheter-based disposable and implantable
medical devices used in minimally invasive procedures to treat neurovascular
diseases and disorders. Under the merger agreement, Target shareholders would
receive 1.07 shares of Boston Scientific common stock in exchange for each share
of Target common stock. The merger is expected to close during the second
quarter of 1997 and is subject to the approval of the shareholders of Target.
F-23
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Note O)
NOTE O -- FINANCIAL INFORMATION BY GEOGRAPHIC AREA
Boston Scientific is a worldwide developer, manufacturer and marketer of medical
devices for less invasive procedures. The Company operates in one segment and
its products are sold principally by its direct sales force, although, in some
markets, the Company continues to sell its products through independent
distributors. Net sales, operating income and assets by major geographic area
are summarized below. Sales between geographic areas are made at prices which
would approximate transfers to unaffiliated distributors. In the presentation
below, the profit derived from such transfers is attributed to the area in which
the sale to the unaffiliated customer is eventually made. Because of the
interdependence of the geographic areas, the operating profit as presented may
not be representative of the geographic distribution which would occur if the
areas were not interdependent. In addition, comparison of operating results
between geographic areas and between years may be impacted by foreign currency
fluctuations.
<TABLE>
<CAPTION>
North Asia/ Consolidated
(In thousands) America Europe Pacific Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Net sales to unaffiliated customers $ 947,200 $300,361 $ 214,482 $ 1,462,043
Transfers between areas 224,315 116,970 $(341,285)
- ------------------------------------------------------------------------------------------------------------------------------
1,171,515 417,331 214,482 (341,285) 1,462,043
Operating income 151,786 39,727 117,985 309,498
Identifiable assets 1,367,836 410,331 209,977 (476,016) 1,512,128
- ------------------------------------------------------------------------------------------------------------------------------
1995
Net sales to unaffiliated customers $ 808,821 $209,098 $ 111,266 $ 1,129,185
Transfers between areas 148,852 112,620 $(261,472)
- ------------------------------------------------------------------------------------------------------------------------------
957,673 321,718 111,266 (261,472) 1,129,185
Operating income (loss) (4,808) 21,761 57,968 74,921
Identifiable assets 1,007,710 200,687 120,932 (219,395) 1,109,934
1994
Net sales to unaffiliated customers $ 675,804 $139,451 $ 73,317 $ 888,572
Transfers between areas 115,919 21,341 $(137,260)
- ------------------------------------------------------------------------------------------------------------------------------
791,723 160,792 73,317 (137,260) 888,572
Operating income 152,355 27,242 28,502 (965) 207,134
Identifiable assets 945,448 121,210 47,833 (64,942) 1,049,549
</TABLE>
Included in North America net sales are export sales of $50 million in 1996, $55
million in 1995, and $46 million in 1994.
F-24
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 25
FIVE-YEAR SELECTED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales $1,462,043 $1,129,185 $ 888,572 $746,983 $614,957
Gross profit 1,061,077 804,122 608,800 515,037 429,657
Selling, general and administrative expenses 491,813 373,390 299,292 257,391 198,530
Royalties 15,130 24,874 25,682 24,473 28,000
Research and development expenses 116,295 93,843 76,692 62,024 45,348
Purchased research and development 96,000 32,646
Special charges (1) 32,341 204,448 67,000 6,899
Total operating expenses 751,579 729,201 401,666 410,888 278,777
Operating income 309,498 74,921 207,134 104,149 150,880
Net income 167,106 6,440 135,307 69,466 89,031
Net income per common share $ 0.92 $ 0.04 $ 0.78 $ 0.40 $ 0.53
Dividend per common share (2) 0.212
Primary weighted average number of common shares 181,293 177,534 174,197 172,123 169,236
BALANCE SHEET DATA:
Working capital $ 285,055 $ 291,468 $ 432,201 $323,094 $383,941
Total assets 1,512,128 1,109,934 1,049,549 786,823 644,503
Commercial paper 212,500
Other current Bank obligations 28,056 57,520 88,948 57,141 27,390
Contingent stock repurchase obligation 24,855 10,938
Stockholders' equity (2) (3) 916,271 774,150 738,685 544,643 498,045
Book value per common share $ 5.05 $ 4.36 $ 4.24 $ 3.16 $ 2.94
</TABLE>
(1) The Company's 1993 results include an estimated loss from patent litigation
of approximately $67 million.
(2) The Company has never paid dividends, other than in March 1992 (which was
prior to the initial public offering of Boston Scientific common stock in
May of 1992) when the Company paid a one-time dividend of an aggregate of
$20 million, or $0.212 per share, to holders of common stock. The $0.212
per share is based on Boston Scientific's weighted average number of common
shares outstanding at the time the dividend was declared, rather than the
restated weighted average number of common shares outstanding. The Company
currently intends to retain all of its earnings to finance the continued
growth of its business. Boston Scientific may consider declaring and paying
a dividend in the future; however, there can be no assurance that it will
do so.
(3) During 1992, the Company sold 26.5 million shares of common stock in a
public offering at a price to the public of $17 per share. Concurrent with
the offering, 19 million shares of common stock were purchased from a
shareholder. The Company realized net proceeds of $122 million.
See notes to consolidated financial statements.
F-25
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 26
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS
BOSTON SCIENTIFIC CORPORATION
We have audited the accompanying consolidated balance sheets of Boston
Scientific Corporation and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the 1994 financial statements of SCIMED Life
Systems, Inc., Heart Technology, Inc. and Meadox Medicals, Inc., wholly-owned
subsidiaries, which statements reflect total revenues constituting 48% in 1994
of the related consolidated total. Those statements were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar as it
is related to data included for SCIMED Life Systems, Inc., Heart Technology,
Inc. and Meadox Medicals, Inc. for 1994 is based solely on the reports of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and, for 1994, the reports of other
auditors, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Boston Scientific
Corporation and subsidiaries at December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 14, 1997
F-26
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 27
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Three Months Ended March 31, June 30, September 30, December 31,
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Net sales $ 322,383 $357,188 $373,744 $ 408,728
Gross profit 236,749 262,304 269,290 292,734
Special charges 68,675 59,666
Operating income 34,399 51,622 105,175 118,302
Net income (loss) (991) 23,510 67,843 76,744
Net income (loss) per common share (0.01) 0.13 0.37 0.42
- -----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
Net sales $ 262,909 $277,952 $283,094 $ 305,230
Gross profit 184,127 195,875 200,619 223,501
Special charges 124,749 112,345
Operating income (loss) (50,781) 74,552 78,075 (26,925)
Net income (loss) (64,062) 49,029 49,356 (27,883)
Net income (loss) per common share (0.37) 0.27 0.27 (0.16)
</TABLE>
F-27
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 28
MARKET FOR THE COMPANY'S COMMON STOCK
AND RELATED MATTERS (UNAUDITED)
The following table shows the market range for the Company's common stock based
on reported sales prices on the New York Stock Exchange.
<TABLE>
<CAPTION>
High Low
- ---------------------------------------------------------------------------
<S> <C> <C>
1996
First Quarter $ 51.625 $ 39.875
Second Quarter 47.375 37.750
Third Quarter 57.625 39.625
Fourth Quarter 61.500 52.875
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
High Low
- ---------------------------------------------------------------------------
<S> <C> <C>
1995
First Quarter $ 26.375 $ 16.625
Second Quarter 33.250 24.625
Third Quarter 42.625 30.500
Fourth Quarter 49.375 37.375
</TABLE>
The Company has never paid dividends, other than in March 1992, when the Company
paid a one-time dividend of an aggregate of $20 million, or $0.212 per share, to
holders of common stock. The $0.212 per share is based on Boston Scientific's
weighted average number of the common shares outstanding at the time the
dividend was declared rather than the restated weighted average number of the
common shares outstanding. The Company currently intends to retain all of its
earnings to finance the continued growth of its business. Boston Scientific may
consider declaring and paying a dividend in the future; however, there can be no
assurance that it will do so.
At December 31, 1996, there were approximately 7,200 record holders of the
Company's common stock.
F-28
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
<PAGE> 29
<TABLE>
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS CORPORATE HEADQUARTERS STOCKHOLDER INFORMATION
JOHN E. ABELE BOSTON SCIENTIFIC CORPORATION STOCK LISTING
Director, Founder Chairman One Boston Scientific Place Boston Scientific Corporation
Natick, MA 01760-1537 common stock is traded on the
+*CHARLES J. ASCHAUER, JR. 508-650-8000 NYSE under the symbol "BSX".
Director, Retired Executive Vice 508-650-8923 (Investor Relations Fax)
President and Director of www.bsci.com TRANSFER AGENT
Abbott Laboratories Inquiries concerning the transfer
REGIONAL HEADQUARTERS or exchange of shares, lost stock
+ RANDALL F. BELLOWS BOSTON SCIENTIFIC LATIN AMERICA certificates, duplicate mailings or
Director, Retired Executive Vice Buenos Aires, Argentina changes of address should be
President of Cobe Laboratories, Inc. directed to the Company's
BOSTON SCIENTIFIC INTERNATIONAL B.V. Transfer Agent at:
MICHAEL BERMAN Paris, France
President - Scimed Life Systems, Inc. THE FIRST NATIONAL BANK OF BOSTON
and Group President - BOSTON SCIENTIFIC ASIA c/o BostonEquiServe, L.P.
Cardiology Businesses PACIFIC PTE, LTD. Shareholder Services
Singapore Mail Stop: 45-02-64
LAWRENCE C. BEST Post Office Box 644
Senior Vice President - BOSTON SCIENTIFIC JAPAN K.K. Boston, MA 02102
Finance & Administration and Toyko, Japan 617-575-3100
Chief Financial Officer www.EquiServe.com
TECHNOLOGY CENTERS
JOSEPH A. CIFFOLILLO San Jose, CA, USA INDEPENDENT AUDITORS
Director, Retired Executive Vice Miami, FL, USA Ernst & Young LLP
President and Spencer, IN, USA Boston, Massachusetts
Chief Operating Officer of Mansfield, MA, USA
Boston Scientific Corporation Milford, MA, USA ANNUAL MEETING
Natick, MA, USA The annual meeting for shareholders
J. DANIEL COLE Watertown, MA, USA will take place on Tuesday, May 6,
Senior Vice President and Group Maple Grove, MN, USA 1997, beginning at 10:00 a.m. at the
President - Vascular Businesses Oakland, NJ, USA Copley Plaza Hotel, Boston.
Redmond, WA, USA
JAMES M. CORBETT Freeport, Bahamas INVESTOR INFORMATION REQUESTS
President, Stenlose, Denmark Investors, shareholders and security
Boston Scientific International Jaunay Clan, France analysts seeking information about
Galway, Ireland the Company should call Investor
+*JOEL L. FLEISHMAN Tel-Aviv, Israel Relations at (508)650-8555.
Director, President of The Atlantic
Philanthropic Service Company, Inc. INTERNATIONAL SALES SUBSIDIARIES A copy of Form 10-K filed with the
and Professor of Law and Public BOSTON SCIENTIFIC PTY. Securities and Exchange Commission
Policy, Duke University Australia may be obtained upon written
request to the Company.
*LAWRENCE L. HORSCH BOSTON SCIENTIFIC Ges.m.b.H. LTD
Director, Chairman of Austria Address requests to:
Eagle Management & Financial Corp. Investor Relations
BOSTON SCIENTIFIC BENELUX SA Boston Scientific Corporation
PAUL A. LAVIOLETTE Belgium One Boston Scientific Place
Senior Vice President and Group Natick, MA 01760-1537
President - Nonvascular Businesses BOSTON SCIENTIFIC LTD. (BSL) (508)650-8555
Canada (508)650-8923 (Fax)
C. MICHAEL MABREY
Senior Vice President - Operations BOSTON SCIENTIFIC S.A. [logo]
France www.bsci.com
ROBERT G. MACLEAN
Senior Vice President - BOSTON SCIENTIFIC
Human Resources MEDIZINTECHNIK GmbH
Germany
* N.J. NICHOLAS, JR.
Director, Private Investor BOSTON SCIENTIFIC S.p.A.
Italy
PETER M. NICHOLAS
Director, Founder, Chief Executive BOSTON SCIENTIFIC KOREA CO., LTD.
Officer and Chairman of the Board Korea
ARTHUR L. ROSENTHAL BOSTON SCIENTIFIC JAPAN K.K.
Senior Vice President and Japan
Chief Development Officer
BOSTON SCIENTIFIC INTERNATIONAL B.V.
PAUL W. SANDMAN The Netherlands
Senior Vice President, Secretary and
General Counsel BOSTON SCIENTIFIC S.A.
Spain
DALE A. SPENCER
Director, Former Executive Vice BOSTON SCIENTIFIC NORDIC A/B
President of Sweden
Boston Scientific Corporation
BOSTON SCIENTIFIC AG
*Member of the Audit Committee Switzerland
+Member of the Compensation Committee
BOSTON SCIENTIFIC LIMITED
United Kingdom
</TABLE>
<PAGE> 1
Exhibit 13.3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors of
Meadox Medicals, Inc.:
We have audited the accompanying consolidated statements of income and retained
earnings and cash flows of Meadox Medicals, Inc. (a New Jersey corporation) and
subsidiaries for the year ended December 31, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Meadox
Medicals, Inc. and subsidiaries for the year ended December 31, 1994, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
May 15, 1995
<PAGE> 1
Exhibit 13.4
INDEPENDENT AUDITORS' REPORT
Board of Directors
SCIMED Life Systems, Inc.
Minneapolis, Minnesota
We have audited the consolidated statements of earnings and cash flows of SCIMED
Life Systems, Inc. and subsidiaries (a wholly owned subsidiary of Boston
Scientific Corporation as of February 24, 1995 - see Note M) (SCIMED) for the
year ended February 28, 1995 (not presented separately herein). These
consolidated financial statements are the responsibility of SCIMED's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
accounting statements made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
SCIMED Life Systems, Inc. for the year ended February 28, 1995, in conformity
with generally accepted accounting principles.
As discussed in Note A to the consolidated financial statements, SCIMED changed
its method for accounting for marketable debt and equity securities during the
year ended February 28, 1995.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
April 13, 1995
(August 24, 1995 as to Note G)
<PAGE> 1
Exhibit 13.5
Report of Independent Accountants
To the Board of Directors
and Shareholders of
Heart Technology, Inc.
In our opinion, Heart Technology, Inc.'s statements of operations, of cash flows
and of stockholders' equity present fairly, in all material respects, the
results of its operations and its cash flows for the year ended December 31,
1994 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Seattle, Washington
January 25, 1995
<PAGE> 1
Exhibit 21
SUBSIDIARIES
AS OF MARCH 20, 1997
NAME PLACE OF INCORPORATION
Cardiovascular Imaging Systems, Inc. California
BSC International Corporation Delaware
Boston Scientific Corporation Delaware
Boston Scientific Sales, Inc. Delaware
EP Technologies, Inc. Delaware
EP Technologies Sales, Inc. Delaware
Meadox Medicals Sales, Inc. Delaware
Symbiosis Corporation Florida
Boston Scientific Finance Corporation Indiana
Boston Scientific Finance Trust Massachusetts
Boston Scientific Securities Corporation Massachusetts
BSC Technology, Inc. Minnesota
Boston Scientific Technology, Inc. Minnesota
Meadox Technology, Inc. Minnesota
SCIMED Life Systems, Inc. Minnesota
SciMed, Inc. Minnesota
SCIMED Foundation Minnesota
SCIMED Technology, Inc. Minnesota
Celltechnix Corporation New Jersey
<PAGE> 2
Meadox Distribution Company New Jersey
Meadox Instruments, Inc. New Jersey
Meadox Medicals, Inc. New Jersey
Boston Scientific Corporation
Northwest Technology Center, Inc. Washington
Heart Technology Manufacturing, Inc. Washington
Boston Scientific Argentina S.A. Argentina
Boston Scientific Pty. Ltd. Australia
Boston Scientific Ges.m.b.H. Austria
BSC FSC, INC. Barbados
Boston Scientific FSC Corporation Barbados
Heart Technology FSC, Inc. Barbados
Boston Scientific Benelux SA Belgium
Boston Scientific Europe S.P.R.L. Belgium
Boston Scientific do Brasil Ltda. Brazil
Boston Scientific Ltd. Canada
Boston Scientific Latin America B.V. (Chile) Ltda. Chile
Boston Scientific A/S Denmark
Boston Scientific Denmark A/S Denmark
Boston Scientific Limited England
Meadox (U.K.) Limited England
SCIMED Life Systems Limited England
<PAGE> 3
Antheor SNC France
Boston Scientific S.A. France
Boston Scientific Medizintechnik GmbH Germany
Boston Scientific Hong Kong Limited Hong Kong
BSC International Holding Limited Ireland
Boston Scientific Ireland Limited Ireland
Boston Scientific Distribution Company Ireland
Boston Scientific S.p.A. Italy
Boston Scientific Japan K.K. Japan
Boston Scientific Korea Co. Ltd. Korea
Boston Scientific (Malaysia) Sdn Bhd Malaysia
Boston Scientific de Mexico, S.A. de C.V. Mexico
Boston Scientific B.V. Netherlands
Boston Scientific Eastern Europe B.V. Netherlands
Boston Scientific Far East B.V. Netherlands
Boston Scientific International B.V. Netherlands
Boston Scientific Latin America B.V. Netherlands
Boston Scientific New Zealand Limited New Zealand
Boston Scientific Norway AS Norway
Boston Scientific Polska sp.zo. o. Poland
Boston Scientific Puerto Rico, Inc. Puerto Rico
Boston Scientific Asia Pacific Pte. Ltd. Singapore
Boston Scientific, S.A. Spain
<PAGE> 4
Boston Scientific Iberica, S.A. Spain
Boston Scientific Nordic AB Sweden
Boston Scientific AG Switzerland
Blenir S.A. Uruguay
Boston Scientific International Corporation Virgin Islands
MM Foreign Sales Corporation Virgin Islands
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Boston Scientific Corporation of our report dated February 14, 1997, included
in the 1996 Annual Report to Shareholders of Boston Scientific Corporation.
Our audits also included the financial statement schedule of Boston Scientific
Corporation listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
(Forms S-8 Nos. 33-57242, 33-89772, 33-99766, 33-93790, 33-80265, 333-02256) and
in the Registration Statements (Form S-3 No. 333-03022) of our report dated
February 14, 1997, with respect to the consolidated financial statements
incorporated herein by reference, and our report included in the preceding
paragraph with respect to the financial statement schedule included in this
Annual Report (Form 10-K) of the Boston Scientific Corporation.
ERNST & YOUNG LLP
Boston, Massachusetts
March 26, 1997
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report, dated May 15, 1995, on the December 31, 1994 consolidated statements of
income and retained earnings and cash flows of Meadox Medicals, Inc., included
in Boston Scientific Corporation's 1996 Form 10-K into the Company's previously
filed Registration Statements on Form S-8 File No.'s 33-57242, 33-89772,
33-93790, 33-99766, 33-80265, and 333-02256 and Form S-3 File No. 333-3022.
ARTHUR ANDERSEN LLP
New York, New York
March 26, 1997
<PAGE> 1
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-57242, 33-89772, 33-99766, 33-93790, 33-80265, and 333-02256 of Boston
Scientific Corporation on Form S-8 and Registration Statement No. 333-03022 of
Boston Scientific Corporation on Form S-3 of our report dated April 13, 1995
(August 24, 1995 as to Note G) (relating to the consolidated financial
statements of SCIMED Life Systems, Inc., not presented separately herein)
included in and incorporated by reference in this Annual Report on Form 10-K of
Boston Scientific Corporation for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
March 26, 1997
<PAGE> 1
Exhibit 23.4
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-57242, 33-89772, 33-99766, 33-93790, 33-80265
and 333-02256) and Form S-3 (No. 333-3022) of Boston Scientific Corporation, of
our report dated January 25, 1995 appearing on Exhibit 13.5 of this Form 10-K.
PRICE WATERHOUSE LLP
Seattle, Washington
March 26, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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