PROXY STATEMENT
PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to ss. 240.14a-11(c) or
ss. 240.14a-12
LASERMEDICS, INC.
(Name of Registrant as specified in its Charter)
LASERMEDICS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(I)(1) or
14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(I)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(4)
and 0-11.
(1) Title of each class of securities to which the
transaction applies: NOT APPLICABLE
(2) Aggregate number of securities to which the
transaction applies: NOT APPLICABLE
(3) Per unit price or other underlying value of the
transaction computed pursuant to Exchange Act Rule
0-11: NOT APPLICABLE (4) Proposed maximum aggregate
value of the transaction: NOT APPLICABLE
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing:
(1) Amount previously paid: NOT APPLICABLE
(2) Form, Schedule or Registration Statement Number: NOT
APPLICABLE
(3) Filing Party: NOT APPLICABLE
(4) Date Filed: NOT APPLICABLE
LASERMEDICS, INC.
120 INDUSTRIAL BOULEVARD
SUGARLAND, TX 77478
June 24, 1996
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders
(the "Annual Meeting") of Lasermedics, Inc. (the "Company") to be held on
Thursday, July 18, 1996 at 10:00 a.m., Houston, Texas time, at the Westin
Galleria Hotel, San Felipe Room, located at 5060 West Alabama, Houston, Texas
77056.
At the Annual Meeting you will be asked to (i) elect six new directors
of the Company, (ii) approve certain amendments to the Company's Articles of
Incorporation (the "Charter Amendments"), (iii) approve the Company's 1996
Incentive Stock Plan (the "Incentive Plan"); and (iv) approve the Company's 1996
Amended and Restated Non-Employee Director Stock Option Plan (the "Director
Plan").
In view of the importance of the actions to be taken at the Annual
Meeting, you are urged to read the accompanying Proxy Statement carefully, and
regardless of the number of shares you own, we request that you complete, sign,
date and return the enclosed Proxy Card promptly in the accompanying prepaid
envelope. You may, of course, attend the Annual Meeting and vote in person, even
if you have previously returned your Proxy Card. The Company's Board of
Directors believes that the election of each of the director-nominees and the
approval of the Charter Amendments, the Incentive Stock Plan and the Director
Plan are each in the best interest of the Company and its shareholders and
therefore strongly recommends that you vote FOR each of the directors nominated
by the Company and FOR approval of the Charter Amendments, the Incentive Plan
and the Director Plan.
/s/ MICHAEL M. BARBOUR,
President and Chief Executive Officer
LASERMEDICS, INC.
120 INDUSTRIAL BOULEVARD
SUGARLAND, TX 77478
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 18, 1996
Notice is hereby given that the annual meeting (the "Annual Meeting")
of the shareholders of Lasermedics, Inc., a Texas corporation (the "Company"),
will be held on Thursday, July 18, 1996 at 10:00 a.m., Houston, Texas time, at
the Westin Galleria Hotel, San Felipe Room, located at 5060 West Alabama,
Houston, Texas 77056 for the following purposes:
1. To elect a board of six directors;
2. To consider and to act on a proposal to amend the Company's
Articles of Incorporation to: (i) increase the authorized
number of shares of the Company's common stock, par value $.01
per share (the "Common Stock"), from ten million shares to
twenty million shares; (ii) increase the authorized number of
shares of the Company's preferred stock, par value $.10 per
share (the "Preferred Stock"), from one million shares to
two-and-one-half-million shares; (iii) grant specific
authority to the Company's Board of Directors to designate the
rights, preferences, terms and conditions of one or more
series of Preferred Stock without shareholder approval; (iv)
and eliminate cumulative voting of shares in the election of
directors.
3. To consider and act upon a proposal to approve the
Lasermedics, Inc. 1996 Incentive Stock Plan (the "Incentive
Plan");
4. To consider and act upon a proposal to approve the
Lasermedics, Inc. 1996 Amended and Restated Non- Employee
Director Stock Option Plan (the "Director Plan"); and
5. To transact such other business as may properly come before
the Annual Meeting.
A record of the shareholders was taken at the close of business on June
4, 1996, and only those shareholders of record on that date will be entitled to
notice of and to vote at the Annual Meeting. A list of shareholders will be
available commencing July 8, 1996 and may be inspected prior to the Annual
Meeting during normal business hours at the offices of the Company, 120
Industrial Boulevard, Sugarland, Texas 77478.
Your participation in the Company's affairs is important. To ensure
your representation, if you do not expect to be present at the Annual Meeting,
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT TO THE COMPANY PROMPTLY.
An addressed stamped envelope has been provided for your convenience.
By Order of the Board of Directors,
/s/ MICHAEL M. BARBOUR,
President and Chief Executive Officer
June 24, 1996
TABLE OF CONTENTS
PAGE
OUTSTANDING VOTING SECURITIES................................................ 2
ELECTION OF DIRECTORS........................................................ 2
Nominees..................................................................... 2
Activity, Structure and Compensation of the Board of
Directors and Certain Committees........................................... 3
Voting Agreements Regarding Election......................................... 5
Vote Required for Election................................................... 5
APPROVAL OF PROPOSED CHARTER AMENDMENTS...................................... 6
Vote Required for Approval................................................... 7
ADOPTION OF LASERMEDICS, INC. 1996 INCENTIVE STOCK PLAN...................... 8
Vote Required for Approval................................................... 13
ADOPTION OF LASERMEDICS, INC. 1996 AMENDED AND RESTATED NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN................................................... 14
Vote Required for Approval................................................... 16
OTHER INFORMATION............................................................ 17
Security Ownership of Certain Beneficial Owners and Management............... 17
Executive Officers........................................................... 18
Executive Compensation....................................................... 19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................... 20
Auditors..................................................................... 20
Compliance With section 16(a) of the Exchange Act ........................... 20
Miscellaneous Matters........................................................ 21
LASERMEDICS, INC.
120 INDUSTRIAL BOULEVARD
SUGARLAND, TEXAS 77478
PROXY STATEMENT
This Proxy Statement is being mailed to Shareholders on or about June
24, 1996 in connection with the solicitation by the Board of Directors of
Lasermedics, Inc., a Texas corporation (the "Company"), of proxies to be voted
at the annual meeting of the Company's shareholders (the "Annual Meeting") to be
held in Houston, Texas on July 18, 1996, and at any adjournment thereof, for the
purposes set forth in the accompanying notice.
Because many shareholders are unable to attend the Annual Meeting, the
Board of Directors solicits proxies to ensure that each shareholder has an
opportunity to vote on all matters scheduled to come before the Annual Meeting.
Shareholders are urged to carefully read the material in this Proxy Statement
and register their votes by marking the appropriate boxes on the enclosed proxy
card and to sign, date and return the proxy card in the enclosed addressed
stamped envelope. Proxies will be voted in accordance with the directions
specified thereon and otherwise in accordance with the judgment of the persons
designated as the holders of proxies. Abstentions and broker non-votes will be
treated as present at the meeting for purposes of determining the presence or
absence of a quorum and will have the same legal effect as votes against a
proposal. Any proxy on which no direction is specified will be voted: (1) FOR
election of all nominees for director named herein; (2) FOR approval of the
proposed amendments to the Company's Articles of Incorporation (the "Charter
Amendments") to (i) increase the number of authorized shares of the Company's
Common Stock, par value $.01 per share (the "Common Stock") from ten million
shares to twenty million shares; (ii) increase the number of authorized shares
of the Company's preferred stock, par value $.10 per share (the "Preferred
Stock") from one million shares to two-and-one-half-million shares; (iii) grant
specific authority to the Company's Board of Directors to designate the rights,
preferences, terms and conditions of one or more series of Preferred Stock
without shareholder approval; and (iv) change the Company's name to Medquest,
Inc. (3) FOR approval of the Company's 1996 Incentive Stock Plan (the "Incentive
Plan"); (4) FOR approval of the Company's 1996 Amended and Restated Non-Employee
Director Stock Option Plan (the "Director Plan"); and (5) in the discretion of
the persons named on the proxy cards, on any other matter which may properly
come before the Annual Meeting. A shareholder may revoke a proxy by delivering
to the Company written notice of revocation, delivering to the Company a signed
proxy signed on a later date or appearing at the Annual Meeting and voting in
person.
1
OUTSTANDING VOTING SECURITIES
The number of voting securities of the Company outstanding on June 4,
1996, the record date for the determination of shareholders entitled to vote at
the Annual Meeting (the "Record Date"), was 1,482,225 shares of Common Stock,
each of which share is entitled to one vote on all matters properly brought
before the Annual Meeting. Holders of a majority of the shares of Common Stock
entitled to vote must be present, in person or by proxy, to constitute a quorum
for the transaction of business.
ELECTION OF DIRECTORS
At the Annual Meeting, six directors are to be elected, each director
to hold office until the next annual meeting of shareholders or until his
successor is duly elected and qualified. The persons named in the accompanying
proxy have been designated by the Board of Directors, and unless authority is
withheld, they intend to vote for the election of the nominees named below to
the Board of Directors. If any nominee should become unavailable for election,
the proxy may be voted for a substitute nominee selected by the persons named in
the proxy or the Board of Directors may be reduced accordingly; however, the
Board of Directors is not aware of any circumstances likely to render any
nominee unavailable.
NOMINEES
Certain information regarding each of the nominees is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ---- --- -------- --------------
<S> <C> <C> <C>
Michael M. Barbour 51 Director, President and Chief 1991
Executive Officer
Dr. Chadwick F. Smith, M.D. 62 Chairman of the Board 1991
Dan D. Sudduth(1)(2) 54 Director 1996
Dr. Pedro A. Rubio, M.D., Ph.D.(1) 52 Director 1996
Kenneth W. Davidson(2) 49 Director 1996
Dr. Ernest J. Henley, Ph.D.(1) 69 Director 1996
</TABLE>
(1) Member, Compensation Committee of the Board of Directors (the
"Compensation Committee")
(2) Member, Audit Committee of the Board of Directors (the "Audit
Committee")
MICHAEL M. BARBOUR has served as President and Chief Executive Officer
of the Company since May 1991. Mr. Barbour has approximately 12 years experience
in the field of laser products. Prior to forming Lasermedics, Mr. Barbour served
as President of Surgimedics, a Houston, Texas, manufacturer and distributor of
laser accessory products from April 1984 to January 1987. From January 1987 to
April 1991, Mr. Barbour served as President of Medical Training Centers of
America (formerly The Houston Laser Institute), which provided training to
doctors in the medical and surgical uses of lasers. Mr. Barbour graduated from
the University of Houston in 1967 with a B.B.A. in marketing.
CHADWICK F. SMITH, M.D. has served as a director of the Company since
May 1991 and Chairman of the Board since June 1993. Dr. Smith is Clinical
Professor of Orthopedic Surgery at the School of Medicine of the University of
Southern California, a position he has held since 1981. Dr. Smith has been a
member of the Medical Staff of Orthopedic Hospital, Los Angeles, California
since 1966. Dr. Smith has co-developed several prosthetic devices and published
approximately 70 articles in medical publications, including approximately 30
since 1986, many of which have dealt with the application of lasers in
orthopedics. Dr. Smith has been engaged to lecture at medical conventions on the
subject of lasers in orthopedic surgery. Dr. Smith is a founder of the
Orthopedic Laser Society of North America and serves as
2
Chairman of the Board of Pitzer College and has been a diplomate of the American
Board of Orthopedic Surgery since 1968. Dr. Smith received a B.A. from Southern
Methodist University in 1954 and graduated from the University of Texas medical
school in 1958.
DAN D. SUDDUTH has served as a director of the Company since January
1996. Mr. Sudduth is also president and a director of AMC Home Healthcare, Inc.,
a respiratory therapy company in Houston, chairman of the board of Mezzanine
Financial Relations, Inc., a merchant banking firm in Houston and chief
financial officer and a director of Creative Communications International, Inc.,
a Houston telecommunications company. From 1992 to 1994 Mr. Sudduth served as
chairman and chief executive officer of Heart Labs of America, Inc., a provider
of continuous passive motion services. From 1988 to 1992 Mr. Sudduth served as
president, chief financial officer and director of American BioMed, Inc., a
publicly traded manufacturer and distributor of minimally invasive surgical
devices, and from 1982 to 1989 Mr. Sudduth served as president and chief
executive officer of First Stamford Group, Inc., a financial consulting firm
that specialized in mergers and acquisitions. Mr. Sudduth holds a B.A. from
Lamar University.
PEDRO A. RUBIO, M.D., PH.D., has served as a director of the Company
since January 1996. Dr. Rubio is also a clinical associate professor of surgery
at the University of Texas Health Science Center (Houston) and the director of
Education of the Laser Training Institute (Houston). Dr. Rubio served as world
president of the International College of Surgeons (Chicago) in 1995 and
currently serves as Chairman Emeritus of the Department of Surgery at the
Columbia/HCA Medical Center Hospital (Houston). Dr. Rubio has practiced in
cardiovascular, thoracic and general surgery and has published numerous papers
(including surgical atlases, monographs and dissertations) in national and
international journals. Dr. Rubio is a Diplomate of the American Boards of
Surgery, Laser Surgery, Abdominal Surgery, Forensic Medicine, Quality Assurance
and Pain Management. Dr. Rubio holds the following degrees: B.S. and M.S. in
Surgical Technology, a Ph.D in Biomedical Technology and an M.D.
KENNETH W. DAVIDSON has served as a director of the Company since April
1996. Mr. Davidson is currently the chairman of the board, chief executive
officer and president of Maxxim Medical, Inc. ("Maxxim"), positions which he has
held since November 1986. From 1982 to 1986, Mr. Davidson served as a director
of Maxxim. Prior to that time, Dr. Davidson was the corporate director of
business development at Intermedics Incorporated.
DR. ERNEST J. HENLEY has served as a director of the Company since
April 1996. Dr. Henley has served as a vice president of Maxxim since December
1990 and a consultant to Maxxim since 1976. In addition, Dr. Henley has been a
professor of Chemical Engineering at the University of Houston for the past five
years.
ACTIVITY, STRUCTURE AND COMPENSATION OF THE BOARD OF DIRECTORS AND CERTAIN
COMMITTEES
The Company's operations are managed under the broad supervision of the
Board of Directors, which has responsibility for the establishment and
implementation of the Company's general operating philosophy, objectives, goals
and policies. During 1995, the Board of Directors was comprised of Mr. Barbour
and Dr. Smith and convened on 12 regularly scheduled meetings and 12 specially
scheduled meetings. The Board of Directors took all other actions by unanimous
written consent.
AUDIT COMMITTEE. The Audit Committee was formed in May 1996. The
current members of the Audit Committee are Messrs. Sudduth and Davidson. The
Audit Committee assists the Board in fulfilling its responsibilities to
shareholders and other matters relating to the corporate accounting and
reporting practices of the Company and the quality and integrity of the
financial reports of the Company. The Audit Committee recommends the engagement
or discharge of the Company's independent auditors, reviews with the independent
auditors the plan, scope and timing of their audits, reviews the auditors' fees
and, after completion of the audit, reviews the auditors' report with management
and the independent auditors. The Audit Committee is charged with satisfying the
Board that the activities of the Company's independent auditors and the internal
control procedures are reasonably designed to assure sound accounting
procedures, adequate reserves, the safekeeping of the Company's assets and
properties and the proper control of income and expenditures. The Audit
Committee also reviews the Company's Annual Report to Shareholders before its
release, oversees the Company's policies on business integrity and ethics,
conflicts of interest and sensitive payments programs
3
and receives reports from the internal audit department, which reports directly
to it as well as to management. The Audit Committee also performs a number of
other review functions related to auditing the financial statements and internal
controls.
COMPENSATION COMMITTEE. The Compensation Committee was formed in May
1996. The current members of the Compensation Committee are Mr. Sudduth, Dr.
Rubio and Dr. Henley. The Compensation Committee reviews and determines the
salaries for senior executive officers and the key officers and employees who
participate in various incentive compensation plans. The Compensation Committee
approves the grant of stock options, including the number of shares subject to
and the exercise price of, each stock option granted, in accordance with the
Company's various stock option plans. The Compensation Committee is also
responsible for reviewing significant personnel compensation policies and
benefit programs and major changes thereto. The Compensation Committee reviews
and recommends to the Board the direct and indirect compensation and employee
benefits of the elected officers of the Company, administers any incentive plans
and bonus plans, and reviews the Company's policies relating to the compensation
of senior management and, generally, other employees. In addition, the
Compensation Committee reviews management's long-range planning for executive
development and succession, establishes and periodically reviews policies on
management perquisites, and performs certain other review functions relating to
management compensation and employee relations policies.
DIRECTOR COMPENSATION. During the year ended December 31, 1995, no
compensation was paid by the Company for service on the Board of Directors.
However, effective January 15, 1996 and subject to shareholder approval, the
Board adopted the 1996 Lasermedics, Inc. Amended and Restated Non-Employee
Director Plan (the "Director Plan"). There are currently four existing directors
that are eligible to participate in the Director Plan. They are Mr. Sudduth, Mr.
Davidson, Dr. Rubio and Dr. Henley. The Director Plan entitles each
newly-elected director who is neither (i) an existing director of the Company
(an "Existing Director"), (ii) an employee of the Company nor (iii) appointed or
elected to the Board in connection with or as a result of the completion of a
financing or acquisition transaction in which the appointment or election of
such person is a condition to the obligation of any party to complete the
transaction (a "New Director"), to receive a one-time option to purchase up to
25,000 shares of Common Stock on the date of such election (the Existing
Directors and the New Directors are sometimes collectively referred to herein as
the "Eligible Directors"). Further, the Director Plan also entitles each
Eligible Director to receive an option to purchase 10,000 shares on each date he
or she is reelected to serve as a member of the Board (beginning with those
directors reelected at the Company's 1996 annual meeting of shareholders). All
options granted under the Director Plan will constitute non-qualified stock
options ("NQO"). See "Adoption of Lasermedics, Inc. 1996 Amended and Restated
Non-Employee Director Plan". If approved by the shareholders, the Director Plan
entitles each of Dr. Rubio, Mr. Sudduth and Dr. Henley to options to purchase
25,000 shares of Common Stock. In connection with their election to the
Company's Board of Directors in January 1996, Mr. Sudduth and Dr. Rubio were
each granted stock options under the Director Plan to purchase 25,000 shares of
Common Stock at an exercise price of $5.50 per share, subject to shareholder
approval of the Director Plan. In connection with his election to the Board of
Directors in April 1996 and subject to shareholder approval of the Director
Plan, Dr. Henley was granted options to purchase 25,000 shares of Common Stock
at an exercise price of $8.00 per share. In addition, upon reelection to the
Board at the Annual Meeting, each of the Non-Employee Director nominees is
entitled to receive options to purchase up to 10,000 shares of Common Stock.
The Director Plan also provides that at the discretion of the Board,
the Company may pay a cash fee to non-employee directors from time to time for
serving on the Board and for attendance at meetings of the Board or any
committee thereof (as such fees are set by the Board from time to time, the
"Cash Fee Awards"). The Company currently contemplates paying each of the
non-employee directors a Cash Fee Award of $500 for each meeting of the Board
attended by that director. For a more comprehensive discussion of the Director
Plan, see "Adoption of Lasermedics, Inc. 1996 Amended and Restated Non-Employee
Director Stock Option Plan."
4
VOTING AGREEMENTS REGARDING ELECTION
Under the terms of that certain purchase agreement between Maxxim and
the Company, dated April 30, 1996, whereby the Company acquired certain assets
(and assumed certain liabilities) of the Henley Healthcare Division of Maxxim,
Dr. Smith, Mr. Barbour, and Maxxim entered into a voting agreement (the "Voting
Agreement") by which Dr. Smith and Mr. Barbour agreed to vote their shares of
Common Stock for a nominee of Maxxim until certain conditions specified therein
are met. Pursuant to the Voting Agreement, Mr. Davidson was named as a director
of the Company effective May 10, 1996.
VOTE REQUIRED FOR ELECTION
The nominees for election as Directors at the Annual Meeting who
receive the greatest number of votes cast for election by the holders of Common
Stock entitled to vote and present, in person or by proxy, at the Annual Meeting
shall be the duly elected Directors of the Company. At present, the Company's
shareholders are permitted cumulative voting rights in the election of
directors. The term "cumulative voting" describes the right of a shareholder to
cumulate the number of votes to which such shareholder is entitled by
multiplying (i) the number of shares held by such shareholder and (ii) the
number of directors to be elected and casting the number of votes represented by
such product for a single candidate or distributing such cumulated votes among
two or more candidates.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL SIX NOMINEES TO THE
COMPANY'S BOARD OF DIRECTORS.
5
APPROVAL OF PROPOSED CHARTER AMENDMENTS
The Board of Directors has adopted, and proposes that the shareholders
of the Company approve, the Charter Amendments, which would:
(1) Increase the authorized number of shares of Common Stock from ten
million shares to twenty million shares and increase the authorized number of
shares of Preferred Stock from one million shares to two-and-one-half-million
shares. As of the Record Date, 1996, 1,482,225 shares of Common Stock were
issued and outstanding, and no shares of Preferred Stock were issued and
outstanding. In addition, the Company presently has an aggregate of 962,726
shares of Common Stock issuable under currently outstanding stock options and
stock warrants, a total of 1,450,000 shares are reserved for future issuance in
connection with proposed Incentive Stock Plan and Director Plan and 2,333,333
shares are issuable pursuant to that certain convertible subordinated promissory
note in the principal amount of $7,000,000 issued by the Company to Maxxim (the
"Maxxim Note") on April 30, 1996 in connection with the Company's purchase of
the assets of Henly Healthcare Division. The Maxxim Note is convertible into
Common Stock at an initial conversion price of $3 per share.
The Board of Directors believes there is an insufficient number of
shares of Common Stock and Preferred Stock available for effecting possible
future transactions, such as the conversion of other securities that may be
issued by the Company, financing arrangements, acquisitions by the Company of
other businesses if favorable acquisitions become available, or research and
development ventures using the Company's equity securities as consideration. All
unissued shares of Common Stock and Preferred Stock authorized by the Company's
Articles of Incorporation, including the additional shares of Common Stock and
Preferred Stock authorized by the Charter Amendments will be available for
issuance at any time in the future at the discretion of the Board of Directors.
Such future issuances will not require further shareholder approval, unless such
approval is required by law, as in the case of consolidations and certain
statutory mergers, or by the rules of any securities exchanges on which the
Common Stock is then listed. Except with respect to the shares of Common Stock
issuable on the exercise of outstanding options and warrants and those issuable
pursuant to the Incentive Plan, the Director Plan and the Maxxim Note, the
Company has no present plans for issuance of any of the additional shares of
Common Stock or Preferred Stock to be authorized by the Charter Amendments. If
additional shares of Common and Preferred Stock are not authorized for issuance
through adoption of the Charter Amendments, significant future issuances could
not be effected without the expense and delay associated with soliciting further
action by shareholders at a special meeting. Holders of the Common Stock and the
Preferred Stock have no preemptive right to purchase or otherwise acquire any
shares of the Stock that may be issued in the future.
(2) Grant specific authority to the Board of Directors to designate the
preferences, conversion rights, cumulative, relative, participating, optional or
other rights, including voting rights, qualifications, restrictions thereof
(collectively, the "Limitations and Restrictions") of one or more series of
Preferred Stock. As such, the Board of Directors of the Company will, in the
event of the approval of this proposal by the Company's shareholders, be
entitled to authorize the creation and issuance of shares of the Preferred Stock
in one or more series with such Limitations and Restrictions as may be
determined in the Board's sole discretion, with no further authorization by
shareholders required for the creation and issuance thereof. This authority will
enable the Board of Directors to vary the terms as to dividend rates and certain
other rights of new series or classes according to what the condition of the
financial market and that of the Company may seem to require for ready sale, and
thus will offer a degree of flexibility not provided by the Company's existing
Preferred Stock.
(3) Eliminate cumulative voting of shares in the election of directors.
The term "cumulative voting" describes the right of a shareholder to cumulate
the number of votes to which such shareholder is entitled by multiplying (i) the
number of shares held by such shareholder and (ii) the number of directors to be
elected and casting the number of votes represented by such product for a single
candidate or distributing such cumulated votes among two or more candidates.
Thus, by casting all their votes for one candidate, shareholders may succeed in
electing one or more candidates to the Board who would not otherwise have
received sufficient votes to be elected. This is in contrast to noncumulative
voting, which is the more typical manner of electing directors among public
companies. Under noncumulative voting, shareholders are entitled to cast that
number of votes for each candidate equal to the number of shares owned. The
Board of Directors
6
believes that eliminating cumulative voting will put the Company more in
conformity with the majority of publicly-owned companies.
If the Charter Amendments are approved by the requisite vote, the
Company will file Articles of Amendment to the Articles of Incorporation with
the Texas Secretary of State promptly following the conclusion of the Annual
Meeting. The proposed Charter Amendments will become effective on the date of
filing. A copy of the proposed Charter Amendments is attached as Exhibit A and
incorporated herein by reference.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of two-thirds of the outstanding
shares of Common Stock is required to approve the Charter Amendments.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF EACH OF THE
CHARTER AMENDMENTS.
7
ADOPTION OF LASERMEDICS, INC. 1996 INCENTIVE STOCK PLAN
Effective January 15, 1996, the Board of Directors of the Company
adopted the Lasermedics, Inc. 1996 Incentive Stock Plan (the "Incentive Plan").
The purpose of the Incentive Plan is to (i) align the personal financial
incentives of the employees and consultants of the Company and its subsidiaries
(collectively, the "Participants") with the long-term growth of the Company and
the interests of the Company's shareholders through the ownership and
performance of the Common Stock and (ii) enhance the ability of the Company and
its subsidiaries to attract and retain employees who share primary
responsibility for the Company's management and growth. All Participants,
including officers (whether or not directors) of the Company and its
subsidiaries are currently eligible to participate in the Incentive Plan.
Persons who are not in an employment or consulting relationship with the Company
or any of its subsidiaries, including non-employee directors, are not eligible
to participate in the Incentive Plan.
A summary of the most significant features of the Incentive Plan, together
with the general federal income tax consequences to recipients of awards under
the Incentive Plan is set forth below, which summary is qualified in its
entirety by reference to the full text of the Incentive Plan, a copy of which is
attached hereto as Exhibit B.
TYPES OF INCENTIVE AWARDS AND ANNUAL MAXIMUM LIMITATION. The Incentive
Plan provides for the grant of (i) stock options, including incentive stock
options and non-qualified stock options, (ii) shares of restricted stock, (iii)
performance awards payable in cash or Common Stock, (iv) shares of phantom
stock, (v) stock bonuses and (vi) cash bonuses (collectively, the "Incentive
Awards"). To date, no Incentive Awards have been granted under the Incentive
Plan. All options granted to consultants shall be non-qualified options.
The maximum number of shares of Common Stock subject to Incentive Awards
that may be granted under the Incentive Plan to any one individual during any
calendar year is 500,000. This provision is intended to qualify non-qualified
options granted to certain executives of the Company (or incentive stock options
granted to such individuals in certain situations) for favorable tax treatment
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). See "Administration" below for a more detailed description of the tax
advantages of complying with Section 162(m) of the Code.
SHARES SUBJECT TO THE INCENTIVE PLAN. Under the Incentive Plan, the
Company may grant Incentive Awards with respect to not more than 1,200,000
shares of Common Stock. Shares of Common Stock issued under the Incentive Plan
may be authorized and unissued shares or treasury shares. To the extent an
Incentive Award expires or is canceled, terminated or forfeited prior to the
issuance of shares of Common Stock subject to such awards, any shares subject to
such awards will again be available for grant under the Incentive Plan. The
Incentive Plan provides for proportionate adjustments to the number of shares of
Common Stock available for grants thereunder, and for proportionate adjustments
to the number of shares of Common Stock underlying outstanding options granted
under the Incentive Plan (and corresponding adjustments to this exercise price
thereof) upon the occurrence of certain events, including subdivisions or
consolidations of, or stock dividends on, Common Stock effected by the Company
without the receipt of consideration.
TERM. The effective date of the Incentive Plan shall be January 15, 1996,
and the Incentive Plan will terminate on June 30, 2006, unless earlier
terminated by the Board of Directors. Incentive Awards may be granted under the
Incentive Plan prior to receipt of shareholder approval, provided that each
grant is subject to such approval. Termination of the Incentive Plan will not
affect Incentive Awards made prior to termination (other than termination due to
failure to obtain shareholder approval).
ADMINISTRATION. The Incentive Plan is intended to comply with Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), so
that the grant of options is exempt from the short-swing profit liability
provisions of Section 16 of the Exchange Act. Accordingly, the Plan must be
administered by a committee of disinterested directors within the meaning of
Rule 16b-3. The Plan is also intended to comply with Section 162(m) of the Code
so that the Company can exclude from the $1,000,000 deduction limitation the
compensation income attributable to non-qualified stock options granted to its
chief executive officer and other four most highly compensated executives (or to
incentive
8
options granted to such individuals in the case of a disqualifying disposition).
Accordingly, the Incentive Plan also must be administered by outside directors
within the meaning of Section 162(m) of the Code.
The Incentive Plan will be administered by the Compensation Committee of
the Board of Directors, whose members currently are Mr. Sudduth, Dr. Rubio and
Dr. Henley. The Compensation Committee will determine which key employees
receive grants of Incentive Awards, the type of Incentive Awards granted and the
number of shares subject to each Incentive Award; provided, however, that the
maximum number of shares of Common Stock subject to Incentive Awards that can be
issued to any one individual during any calendar year is 500,000 shares.
Subject to the terms of the Incentive Plan, the Compensation Committee
will also determine the prices, expiration dates and other material features of
the Incentive Awards granted under the Incentive Plan. The Compensation
Committee may, in its absolute discretion, (i) accelerate the date on which an
option granted under the Incentive Plan becomes exercisable, (ii) accelerate the
date on which a share of restricted stock or phantom stock vests and waive any
conditions imposed by the Committee on the vesting of a share of restricted
stock and (iii) grant Incentive Awards to a participant on the condition that
the participant surrender to the Company for cancellation such other Incentive
Awards (including, without limitation, Incentive Awards with higher exercise
prices) as the Committee specifies.
The Compensation Committee will have the authority to interpret and
construe any provision of the Incentive Plan and to adopt such rules and
regulations for administering the Incentive Plan as it deems necessary. All
decisions and determinations of the Compensation Committee are final and binding
on all parties. The Company will indemnify each member of the Compensation
Committee against any cost, expenses or liability arising out of any action,
omission or determination relating to the Plan, unless such action, omission or
determination was taken or made in bad faith and without reasonable belief that
it was in the best interest of the Company.
NON-QUALIFIED AND INCENTIVE STOCK OPTIONS. The exercise price of each
stock option (singly, "Option" and collectively, "Options") granted under the
Incentive Plan is determined by the Committee, but such price may not be less
than the fair market value of a share of Common Stock on the date on which such
Option is granted. Each Option is exercisable for a period not to exceed ten
years and no Option is exercisable until six months after the date of grant. For
each Option, the Committee will establish (i) the term of each Option and (ii)
the time or period of time in which the Option will vest. The exercise price
will be paid in cash or, subject to the approval of the Committee, (i) in shares
of Common Stock valued at their fair market value on the date of exercise, (ii)
through a cashless exercise, or (iii) in a combination of the foregoing.
Except in the event of the death or permanent and total disability of an
optionee or the termination of the employment of an optionee for cause, Options
are exercisable only while an optionee is employed by the Company or within one
month after such employment has terminated, but only to the extent that such
Options were exercisable on the last day of employment and had not expired by
their terms. In the event of the death or disability of an optionee, Options are
exercisable within one year after such death or permanent and total disability
to the extent that such Options were exercisable on the last day of employment
and had not expired by its terms. In the event of the termination of the
employment of an optionee for cause, all Options held by such optionee terminate
as of the date of termination. Options are not transferable other than by will
or by the laws of descent and distribution.
Upon a change in control of the Company (a "Change in Control"), all
Options become immediately exercisable. The Plan defines Change in Control to
mean (i) a "change in control" as that term is defined in the federal securities
laws, (ii) the acquisition by any person, after the effective date of the
Incentive Plan, of 20% or more of the shares of voting securities of the
Company, EXCEPT to the extent the Board, as constituted immediately prior to
such acquisition, determines no Change in Control has occurred, (iii) certain
changes in the composition of the Board of Directors as a result of a contested
election for positions on the Board of Directors or (iv) any other event which
the Board of Directors determines to constitute a change in control of the
Company.
An optionee does not recognize any income for federal tax purposes at the
time a non-qualified option is granted, and the Company is not then entitled to
a deduction. When any part of a non-qualified option is exercised, the optionee
9
recognizes ordinary income in an amount equal to the difference between the fair
market value of the shares on the exercise date and the exercise price of the
non-qualified option, and the Company generally recognizes a tax deduction at
the same time and in the same amount. An optionee generally recognizes capital
gain or loss on disposition of shares acquired by exercising a non-qualified
option. The optionee's tax basis in such shares equals the fair market value of
the stock at exercise. If the stock is sold at a loss, an optionee may be
limited in the amount of loss that is currently deductible.
If all or any part of the exercise of a non-qualified option is paid by an
optionee with shares of Common Stock (including shares previously acquired on
the exercise of any Options), no gain or loss will be recognized on the shares
surrendered on payment. The number of shares received on such exercise of the
non-qualified option equal to the number of shares surrendered will have the
same basis and holding period, for purposes of determining whether subsequent
dispositions result in long-term or short-term capital gain or loss, as the
basis and holding period of the shares surrendered. The balance of the shares
received on such exercise will be treated for federal income tax purposes as
described in the preceding paragraph as though issued on the exercise of the
non-qualified option for an exercise price equal to the consideration, if any,
paid by the optionee in cash. The optionee's compensation, which is taxable as
ordinary income on such exercise, and the Company's deduction will not be
affected by whether the exercise price is paid in cash or in shares of Common
Stock. However, gain on the stock transferred to exercise the non-qualified
option is deferred.
An optionee does not recognize any income for federal tax purposes when an
incentive stock option is granted or upon its qualified exercise. If an optionee
does not dispose of the shares acquired by exercising an incentive stock option
within two years after its grant and one year after its exercise, the exercise
is qualified and the gain or loss (if any) on a subsequent sale will be a
long-term capital gain or loss. Such gain or loss is the difference between the
sales proceeds and the exercise price of the Option covering the stock sold. The
Company is not entitled to a tax deduction as the result of the grant or
qualified exercise of an incentive stock option.
If an optionee disposes of shares acquired upon exercise of an incentive
stock option within either two years after the date of its grant or one year
after its exercise, the disposition is a disqualifying disposition and the
optionee will recognize ordinary income in the year of such disposition. The
amount of ordinary income recognized equals the excess of the fair market value
of shares at the time the incentive stock option was exercised over the exercise
price, and the balance of the gain (if any) will be long or short term capital
gain depending on whether the shares were disposed more than one year after
exercise. If the disqualifying disposition is at a price between the exercise
price and fair market value at exercise, the ordinary income is limited to the
excess of the amount realized on the disposition over the exercise price. If the
disqualifying disposition is at a price below the exercise price, the loss will
be long or short term capital loss depending on the optionee's holding period
with respect to the disposed shares. The Company generally is entitled to a
deduction in the year of the disqualifying disposition in an amount equal to the
ordinary income recognized by the optionee as a result of such disposition.
If all or any part of the exercise of an incentive stock option is paid by
an optionee with shares of Common Stock (including shares previously acquired on
the exercise of any Options), the optionee generally will not recognize any
income, gain or loss on the transfer of the surrendered shares. The tax basis
and the holding period for the acquired shares will be determined in the same
manner described above for non-qualified stock options exercised with shares of
Common Stock. However, if the shares of Common Stock used to exercise the
incentive stock options were acquired on the exercise of an incentive stock
option ("Tax Deferred Option Stock"), then such use is a disqualifying
disposition as to such stock if the applicable holding periods described in the
preceding paragraph are not met. In such event, the optionee would recognize
gain or loss on such disqualifying disposition of the Tax Deferred Option Stock
as described in the preceding paragraph.
The excess of the fair market value of the shares upon exercise of an
incentive stock option over the exercise price is a positive adjustment for
alternative minimum tax ("AMT") purposes. In addition, the basis of shares
acquired through the exercise of an incentive stock option for determining gain
or loss for AMT purposes is increased by the amount of the positive AMT
adjustment created due to the earlier exercise.
10
RESTRICTED STOCK. A grant of shares of restricted stock represents the
promise of the Company to issue shares of Common Stock on a predetermined date
(the "Issue Date") to a participant, provided the participant is continuously
employed by the Company until the Issue Date. Vesting of the shares occurs on a
second predetermined date (the "Vesting Date"), if the participant has been
continuously employed by the Company until that date. Prior to the Vesting Date,
the shares are not transferable by the participant and are subject to a
substantial risk of forfeiture. The Committee may, at the time shares of
restricted stock are granted, impose additional conditions to the vesting of the
shares, such as the achievement of specified performance goals. Vesting of all
or any portion of the shares of restricted stock may occur on the termination of
the employment of a participant, other than for cause, prior to the Vesting
Date. If vesting does not occur, shares of restricted stock are forfeited.
If the employment of a Participant is terminated by the Company for any
reason other than for cause, a portion of the unvested shares of restricted
stock (to the extent not forfeited or canceled) as determined by the Committee
at the date of grant will vest on the date of such termination. In the event the
participant's employment with the Company is terminated for cause, all unvested
shares of restricted stock will be forfeited as of the date of such termination.
On the occurrence of a Change in Control, all shares of restricted stock
which have not vested or been forfeited will vest automatically.
A participant will not recognize any income for federal tax purposes at
the time shares of restricted stock are granted or issued, nor will the Company
be entitled to a tax deduction at that time. However, when either the transfer
restriction or the forfeiture risk lapses, such as on the Vesting Date, the
participant will recognize ordinary income in an amount equal to the fair market
value of the shares of restricted stock on the date on which they vest. Unless
restricted by the agreement relating to such grant, a participant may file an
appropriate election under Section 83(b) of the Code with the Internal Revenue
Service within 30 days of the Issue Date of the restricted stock (the
"Election"), which results in the participant's receipt of deemed ordinary
income in an amount equal to the fair market value of the shares of restricted
stock on the date on which they are issued. However, if a participant files an
Election and the restricted stock is subsequently forfeited, such participant is
not allowed a tax deduction for the amount previously reported as ordinary
income due to the Election.
Gain or loss (if any) from a disposition of restricted stock after the
participant recognizes any ordinary income (whether by vesting or an Election)
will generally constitute short-term or long-term capital gain or loss. The
Company will generally be entitled to a tax deduction at the time the
participant recognizes ordinary income on the restricted stock, whether by
vesting or an Election.
PERFORMANCE AWARDS. A performance award is an award granted to an employee
contingent upon the future performance of the Company, or any subsidiary,
division or department thereof, over a specified performance period. The
Compensation Committee will establish the relevant performance criteria, subject
to adjustment to reflect unforeseen events or changes. Each performance award
will be subject to a maximum value at the time of grant of such award. In
determining the amount of a performance award to be granted to a particular
employee, the Compensation Committee will take into account such factors as the
employee's responsibility level and growth potential, the amount of other
Incentive Awards granted to or received by such employee, and such other
considerations as the Compensation Committee deems appropriate. Payment of an
Incentive Award may be in cash, Common Stock, or a combination thereof, as
determined by the Compensation Committee
A performance award will terminate if the employee does not remain
continuously employed by the Company at all times during the applicable
performance period, unless the Compensation Committee determines otherwise.
On the occurrence of a Change in Control, the Compensation Committee (as
constituted immediately before such Change in Control) will determine whether
performance awards which have not theretofore satisfied the requisite
performance measure or for which the performance period has not expired, will
immediately be paid or will remain outstanding according to their respective
terms.
11
A participant will recognize ordinary income for federal income tax
purposes in the amount equal to cash paid and/or the fair market value of the
Common Stock at the time it is received, with the Company generally being
entitled to a deduction in the same amount.
PHANTOM STOCK. A share of phantom stock represents the right to receive
the economic equivalent of a grant of restricted stock. Shares of phantom stock
are subject to the same vesting requirements as are shares of restricted stock.
On vesting of a share of phantom stock, the holder is entitled to receive cash
in an amount equal to the sum of (i) the fair market value of a share of Common
Stock as determined on the vesting date and (ii) the aggregate amount of cash
dividends paid in respect of a share of Common Stock during the period
commencing on the date of grant and ending on the vesting date. The cash payment
for phantom stock is treated the same as a cash bonus for federal income tax
purposes and generally creates a deduction to the Company when paid. In
addition, the value of a share of phantom stock (whether or not vested) is paid
immediately on the occurrence of a Change in Control of the Company. The
Compensation Committee may not grant any cash bonus in connection with the grant
of shares of phantom stock.
STOCK AND CASH BONUSES. Bonuses payable in stock may be granted by the
Compensation Committee and may be payable at such times and subject to such
conditions as the Compensation Committee determines. On the receipt of a stock
bonus, a participant will recognize ordinary income for federal tax purposes in
an amount equal to the fair market value of the Common Stock at the time it is
received. The Compensation Committee may grant, in connection with a grant of
shares of restricted stock or shares of Common Stock granted as a performance
award or a stock bonus, a cash "tax" bonus, payable when an employee is required
to recognize income for federal income tax purposes with respect to such shares
of Common Stock. This tax bonus may not be greater than the value of the shares
of restricted stock and/or Common Stock at the time the income is required to be
recognized. Any such bonus will result in ordinary income to the employee and
generally a deduction to the Company. The grant of a cash bonus will not reduce
the number of shares of Common Stock with respect to which Options, shares of
restricted stock, shares of phantom stock or stock bonuses may be granted
pursuant to the Plan.
MERGERS AND OTHER TRANSACTIONS. If the Company is the surviving
corporation in any merger or consolidation (except a merger or consolidation as
a result of which the holders of shares of Common Stock receive securities of
another corporation), each outstanding Option will entitle the optionee to
acquire on exercise the securities which a holder of the number of shares of
Common Stock subject to such Option would have received in such merger or
consolidation.
In the event of a dissolution or liquidation of the Company, a sale of all
or substantially all of the Company's assets, a merger or consolidation
involving the Company in which the Company is not the surviving corporation or a
merger or consolidation involving the Company in which the Company is the
surviving corporation but the holders of shares of Common Stock receive
securities of another corporation and/or other property, including cash, the
Compensation Committee, in its absolute discretion, has the power to either (i)
cancel, effective immediately prior to the occurrence of such event, each Option
outstanding immediately prior to such event (whether or not then exercisable),
and, in full consideration of such cancellation, pay to the optionee an amount
in cash, for each share of Common Stock subject to such Option, equal to the
excess of (A) the value of the property (including cash) received by the holder
of a share of Common Stock as a result of such event over (B) the exercise price
of such Option; or (ii) provide for the exchange of each outstanding Option
(whether or not then exercisable) for an Option on some or all of the property
for which such Option is exchanged and, incident thereto, make an equitable
adjustment in the exercise price of the Option, or the number of shares or
amount of property subject to the Option or, if appropriate, provide for a cash
payment to the optionee in partial consideration for the exchange of the Option.
AMENDMENT AND TERMINATION. The Incentive Plan generally terminates on the
tenth anniversary of its adoption by the Board of Directors. The Board may at
any time suspend or discontinue the Incentive Plan or revise or amend it in any
respect whatsoever, provided, however, that without approval of the holders of a
majority of the Company's outstanding securities present in person or by proxy
and entitled to vote at an annual or special meeting of shareholders (or such
greater percentage as may be required by applicable law or the Company's
articles of incorporation), no revision or amendment will (i) increase the
number of shares of Common Stock that may be issued under the Incentive Plan
(subject to adjustments for certain recapitalizations of the Company), (ii)
increase the maximum number of shares of Common Stock that may be
12
subject to an Incentive Award granted to any one employee for any calendar year
(subject to adjustment for certain recapitalizations of the Company), (iii)
materially increase the benefits accruing to optionees, (iv) materially modify
the requirements as to eligibility for participation in the Incentive Plan, (v)
extend the term of the Incentive Plan, or (vi) decrease any authority granted to
the Compensation Committee under the Incentive Plan in contravention of Rule
16b- 3.
CERTAIN SECURITIES LAW AND TAX MATTERS. The Incentive Plan is intended to
comply with all applicable conditions of Rule 16b-3 or any successor provision
under the Exchange Act. To the extent any provision of the Incentive Plan fails
to so comply, such provision will be construed and deemed amended to conform to
Rule 16b-3 to the extent permitted by applicable law and deemed advisable by the
Board. The Company intends to register the issuance of Common Stock pursuant to
the Incentive Plan under the Securities Act of 1993, as amended (the "Securities
Act"), on a registration statement on Form S-8. The Company intends to file such
Form S-8 with the Securities and Exchange Commission after the Company's
shareholders approve the Incentive Plan's adoption, and before any Option first
becomes exercisable.
The Incentive Plan is intended to comply with all applicable conditions of
Section 162(m) of the Code, so that stock options granted under the Incentive
Plan with an exercise price of not less than fair market value of a share of
Common Stock on the date of grant will qualify as "qualified performance-based
compensation" and the favorable tax treatment associated therewith. To the
extent any provision of the Incentive Plan would disqualify the Incentive Plan
or would not otherwise permit the Incentive Plan to comply with Section 162(m)
of the Code as so intended, such provision will be construed and amended to
conform to the requirements or provision of Section 162(m) of the Code to the
extent permitted by applicable law and deemed advisable by the Board of
Directors; provided, however, that no such construction or amendment will have
an adverse economic effect on any participant with respect to any Incentive
Award previously granted under the Incentive Plan.
The Incentive Plan provides that the Company may require the participant
to remit to the Company cash in an amount sufficient to satisfy certain federal,
state and local income tax withholding requirements by remitting cash to the
Company. In addition, the Company has the right to withhold from any cash
payment required to be made to a participant with respect to an Incentive Award
an amount sufficient to satisfy the federal, state and local withholding tax
requirements.
The Board of Directors believes that the availability of incentive awards
under the Incentive Plan is important to the ability of the Company to attract
and retain qualified management personnel. The Board of Directors also believes
that it is important that the Incentive Plan comply with the most current
requirements of federal tax laws such as Section 162(m) of the Code. Therefore,
the Board of Directors strongly believes that the adoption of the Incentive Plan
is in the best interests of the Company and its shareholders.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the shares of Common
Stock outstanding, entitled to vote and represented at the Annual Meeting, in
person or by proxy, is required to approve the adoption of the Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE INCENTIVE
PLAN.
13
ADOPTION OF LASERMEDICS, INC. 1996 AMENDED AND RESTATED NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN
Effective January 15, 1996, the Board of Directors adopted the
Lasermedics, Inc. 1996 Non-Employee Director Stock Option Plan (the "Director
Plan") and, pursuant thereto, granted options to purchase 25,000 shares of
Common Stock to each of Dr. Rubio and Mr. Sudduth subject to shareholder
approval of the Director Plan. The Board believes that the adoption and approval
of the Director Plan is necessary to attract and retain qualified non-employee
directors. The Board believes that the Director Plan will permit the Company to
offer attractive equity and cash compensation packages to non-employee directors
comparable to compensation packages offered by other competitive and growing
companies in the industry. The Board also believes that emphasizing equity-based
compensation for non-employee directors will serve the Company's interests by
increasing the proprietary interest of such non-employee directors in the
success of the Company.
A summary of the most significant features of the Director Plan, together
with general federal income tax consequences to the recipients of awards
thereunder is set forth below, which summary is qualified in its entirety by
reference to the full text of the Director Plan, a copy of which is attached
hereto as Exhibit C.
GRANT OF OPTIONS AND CASH AWARDS. There are currently four existing
directors that are eligible to participate in the Director Plan. For so long as
shares of Common Stock remain available under the Director Plan, the Director
Plan entitles each newly-elected director who is neither (i) an existing
director of the Company (an "Existing Director"), (ii) an employee of the
Company nor (iii) appointed or elected to the Board in connection with or as a
result of the completion of a financing or acquisition transaction in which the
appointment or election of such person is a condition to the obligation of any
party to complete the transaction (a "New Director"), to receive a one-time
option to purchase up to 25,000 shares of Common Stock on the date of such
election (the Existing Directors and the New Directors are sometimes
collectively referred to herein as the "Eligible Directors"). Further, for so
long as shares of Common Stock remain available under the Director Plan, the
Director Plan also entitles each Eligible Director to receive an option to
purchase 10,000 shares on each date he or she is reelected to serve as a member
of the Board (beginning with those directors reelected at the Company's 1996
annual meeting of shareholders). All options granted under the Director Plan
will constitute non-qualified stock options ("NQO").
The Director Plan also provides that at the discretion of the Board, the
Company may pay a cash fee to non-employee directors from time to time for
serving on the Board and for attendance at meetings of the Board or any
committee thereof (as such fees are set by the Board from time to time, the
"Cash Fee Awards"). Each such non-employee director may elect, on the date of
each annual meeting of the shareholders, to have his Cash Fee Awards for the
next succeeding year paid to him in shares of Common Stock in lieu of cash (the
"Conversion Election"). If an Eligible Director makes a Conversion Election for
a given year, he receives that number of shares of Common Stock equal to
dividing a Cash Fee Award by the fair market value of a share of Common Stock on
the last day of the calendar quarter in which the Cash Fee Award is paid.
TERM. The effective date of the Director Plan shall be January 15, 1996,
subject to shareholder approval, and unless earlier terminated by the Board, the
Director Plan will terminate when no shares of the Common Stock remain available
for issuance under the Director Plan. No option shall be granted pursuant to the
Director Plan on or after June 30, 2006.
SHARES SUBJECT TO DIRECTOR PLAN. Under the Director Plan, the Company may
grant options to purchase up to 250,000 shares of Common Stock. To the extent an
option expires or is canceled prior to its exercise, any shares subject to such
option may again be made subject to an option under the Director Plan. The
Director Plan provides for proportionate adjustments to the number of shares of
Common Stock available for the grant of options under the Director Plan, as well
as proportionate adjustments to the number of shares of Common Stock underlying
outstanding options as thereafter granted under the Director Plan (and
consequently adjustments to the exercise price thereof) upon the occurrence of
certain events, including subdivisions or consolidations of the Company's
outstanding capital stock.
ADMINISTRATION. The Director Plan will be administered by the Compensation
Committee, provided, however, that the Compensation Committee will have no
discretion as to the selection of the non-employee directors to whom NQOs are to
be granted or Cash Fee Awards paid, the number of shares subject to any NQO
granted, the exercise price of any NQO
14
granted or the ten-year maximum term of any NQO granted thereunder. The
Compensation Committee will have the authority to interpret and construe any
provision of the Director Plan and to adopt such rules and regulations for
administering the Director Plan as it deems necessary. All decisions and
determinations of the Compensation Committee are final and binding on all
parties. The Company will indemnify each member of the Compensation Committee
against any cost, expenses or liability arising out of any action, omission or
determination relating to the Director Plan, unless such action, omission or
determination was taken or made in bad faith and without reasonable belief that
it was in the best interest of the Company.
VESTING, TERMS OF OPTIONS AND CASH AWARDS. Each NQO shall be evidenced by
an option agreement. The exercise price of each NQO will be the fair market
value of a share of Common Stock on the date of grant, payable in cash,
certified check, bank draft or postal or express money order upon notice given
to the Company as provided for in Section 8 of the Director Plan. Each NQO will
vest in full at the time of grant. Each NQO may be exercised during an Eligible
Director's lifetime only by the Eligible Director, and are not transferable
except by will or by the laws of descent and distribution. NQOs are not
exercisable prior to the expiration of six months from the date of grant or
after ten years from the date of grant.
Except in the event of the death of an Eligible Director, NQOs are
exercisable only while an Eligible Director is a member of the Board or within
three months after he has ceased to be a director (to the extent that the NQOs
were exercisable on the date he ceased to be a director). In the event of the
death of an Eligible Director, NQOs are exercisable within six months after such
death, but only to the extent that such NQOs were exercisable on the date of
death.
An Eligible Director will not recognize any income for federal tax
purposes at the time an NQO is granted, nor will the Company be entitled to a
deduction at that time. However, when any part of an NQO is exercised, the
Eligible Director will recognize ordinary income in an amount equal to the
difference between the exercise price of the NQO and the fair market value of
the shares received, and the Company will recognize a tax deduction in the same
amount.
Cash Fee Awards for serving on the Board and for attendance at any
meetings of the Board or committee thereof, if any, will be set by the Board
from time to time. The Company currently contemplates paying each of the
Eligible Directors a Cash Fee Award of $500 for each meeting of the Board
attended by that Director.
An Eligible Director will recognize ordinary income for federal income tax
purposes at the time of receipt of such Cash Fee Award, and the Company will
generally be entitled to a deduction in the same amount.
EXTRAORDINARY CORPORATE TRANSACTIONS. In the event the Company effects a
merger, consolidation, acquisition, separation, reorganization, liquidation or
similar transaction, the Company may either (i) substitute new options for the
NQOs outstanding under the Director Plan or (ii) cancel the NQOs and pay to such
Eligible Director an amount of cash equal to the excess of the value (determined
by the Compensation Committee in its absolute discretion) received by a holder
of a share of Common Stock over the exercise price of the outstanding NQO.
AMENDMENT OR TERMINATION. The Director Plan provides that the Board may
amend or terminate the Director Plan at any time; provided, however, that
without the approval of at least a majority of the outstanding shares of stock
entitled to vote (or such greater percentage as set forth by applicable law or
the Company's charter documents), the Board may not (i) except as provided in
Section 15 of the Director Plan, materially increase the number of shares of
Common Stock that may be issued under the Director Plan, (ii) materially
increase the benefits accruing to Eligible Directors under the Director Plan or
(iii) materially modify the requirements as to eligibility for participation in
the Director Plan. Additionally, the Director Plan may not be amended more than
once every six (6) months in accordance with the provisions referred to under
Rule 16b-3(c)(2)(ii)(A) of the Exchange Act, other than to comport with changes
under the Code or the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations thereunder. In connection with their
election to the Company's Board of Directors in January 1996, Mr. Sudduth and
Dr. Rubio were each granted stock options under the Director Plan to purchase
25,000 shares of the Company's Common Stock at a price of $5.50 per share,
subject to shareholder approval of the Director Plan.
15
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the shares of Common
Stock outstanding, entitled to vote and represented at the Annual Meeting, in
person or by proxy, is required to approve the adoption of the Director Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE DIRECTOR
PLAN.
16
OTHER INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information regarding the beneficial
ownership of Common Stock at the Record Date by (a) each shareholder known by
the Company to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock, (b) each director and nominee, (c) each
executive officer named in the Summary Compensation Table (see "Executive
Compensation" below) and (d) all directors and executive officers as a group:
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- ------------------- -------------------- ----------------
Maxxim Medical, Inc. 2,333,333(2) 61.16%
104 Industrial Boulevard
Sugarland, Texas 77478
Michael M. Barbour 411,748(3) 24.12%
c/o Lasermedics, Inc.
120 Industrial Boulevard
Sugarland, Texas 77478
Dr. Chadwick F. Smith, M.D. 420,666(3) 24.64%
1127 Wilshire Blvd.
Los Angeles, CA 90017
J.W. Cabott Holding Corp. 125,000(4) 8.43%
40 Wall Street
New York, NY 10005
William D. Long 75,000 5.06%
2052 Dry Creek Way
San Jose, CA 95124
Peter P. Green, III 75,000(4) 5.06%
53 Lloyd Road
Montclair, NJ 07042
Dr. Ernest J. Henley, Ph.D. 25,000(5) 1.69%
c/o Lasermedics, Inc.
120 Industrial Boulevard
Sugarland, Texas 77478
Dan D. Sudduth 25,000(5) 1.69%
c/o Lasermedics, Inc.
120 Industrial Boulevard
Sugarland, Texas 77478
17
Dr. Pedro A. Rubio, M.D., Ph.D. 25,000(5) 1.69%
c/o Lasermedics, Inc.
120 Industrial Boulevard
Sugarland, Texas 77478
All Executive Officers
and Directors as a
Group (8) Persons 3,218,409(6) 74.58%
(1) Except as otherwise indicated, all shares are beneficially owned, and
the sole investment and voting power is held, by the person named. This
table is based on information supplied by officers, directors and
principal shareholders and reporting forms, if any, filed with the
Securities and Exchange Commission on behalf of such persons.
(2) Kenneth W. Davidson, a Director of the Company since April 1996, is
currently the President and Chief Executive Officer of Maxxim and the
holder of the Maxxim Note, which Note is convertible into 2,333,333
shares of Common Stock.
(3) Includes 225,000 shares issuable upon exercise of options granted,
which options are currently exercisable.
(4) Consists of options or warrants currently exercisable as of the date
hereof.
(5) Options granted under the Director Plan, which options are either
currently exercisable or exercisable within sixty (60) days from the
date hereof, subject to shareholder approval of the Director Plan.
(6) Includes 2,333,333 shares issuable upon the conversion of the Maxxim
Note, and as to which Mr. Davidson may be deemed the beneficial owner
by virtue of his affiliation with Maxxim.
EXECUTIVE OFFICERS
The executive officers of the Company serve at the pleasure of the Board
of Directors and are subject to annual appointment by the Board at its first
meeting following the annual meeting of shareholders. The Company presently has
no written employment agreements with any of its executive officers. All of the
Company's executive officers are listed in the following table, and certain
information concerning those officers who are not also members of the Board of
Directors follows the table:
NAME AGE POSITION
Michael M. Barbour 51 President and Chief Executive
Officer
Chadwick F. Smith, M.D. 62 Chairman of the Board
Chike J. Ogboenyiya 44 Vice President - Finance and
Secretary
Michael J. Houska 36 Vice President - Sales
CHIKE J. OGBOENYIYA has been Vice President - Finance of the Company
since January 1994 and Secretary since August 1994. Mr. Ogobenyiya has over
fifteen years of industry experience in accounting, corporate finance and
business management. From 1984 to 1989 he was consulting chief financial officer
for Kaulimax International Corporation, a Houston, Texas privately-held exporter
of apparel. From September 1990 through April 1993, Mr. Ogobenyiya served as
18
president of a small accounting firm which offered business consulting and
financial services to various clients. From 1979 to 1992, Mr. Ogboenyiya worked
in various lower and middle management positions in the accounting and financial
areas for Houston Industries, Inc., a large industrial corporation. Mr.
Ogboenyiya is a certified public accountant and received an M.S. from the
University of Houston in 1979, and a B.B.A. (cum laude) from Texas Southern
University in 1977.
MICHAEL J. HOUSKA has been Vice President - Sales of the Company since
May 1996. Mr. Houska has thirteen years of experience in the medical devices
industry, working first for AM Orthopedics and then for Medical Supplies
Diversified as a sales representative. In 1987, Mr. Houska became vice president
of Henley Healthcare, which at the time was a division of Maxxim. He is
currently a member of the board of directors for Love Inc./Love for Children, an
affiliate of World Vision. Mr. Houska holds a B.A. in business management from
Hiram College in Ohio.
EXECUTIVE COMPENSATION
The following table provides information concerning compensation paid or
accrued during the fiscal years ended December 31, 1995, 1994 and 1993 to the
Company's Chief Executive Officer, Michael M. Barbour. During 1995, 1994 and
1993, no other executive officers received compensation which exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
Annual Compensation Awards Payouts
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
NAME AND YEAR SALARY BONUS OTHER RESTRICTED OPTIONS/ LTIP ALL OTHER
PRINCIPAL ANNUAL STOCK SARS PAYOUTS COMPENSA-
POSITION COMPENSA- AWARDS TION
TION
Michael 1995 $110,000 _ $9,000 _ _ _
Barbour,
CEO
1994 $110,000 _ $9,000 _ 225,000 _ _
1993 $100,000 _ $9,000 _ _ _
OPTIONS/SAR GRANTS IN YEARS PRIOR TO LAST FISCAL YEAR
INDIVIDUAL GRANTS
(a) (b) (c) (d) (e) (f)
NAME NUMBER OF % OF TOTAL EXERCISE OR MARKET EXPIRATION
SECURITIES OPTIONS/SARS BASE PRICE AT DATE DATE
UNDERLYING GRANTED TO PRICE/SHR. OF GRANT
OPTIONS/SARS EMPLOYEES IN
GRANTED FISCAL YEAR
Michael 100,000 40% $3.00 $7.25 04/01/2000
Barbour, CEO
125,000 50% $4.50 $4.50 04/01/2000
</TABLE>
19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During January 1992, the Company entered into a five-year consulting
agreement with Dr. Smith, one of its directors. The agreement provided for a
monthly fee of $1,500 commencing in July 1992. During 1993, the agreement was
amended to provide a monthly fee of $5,000 commencing in June 1993. The
agreement terminated in 1996. For each of the years ended December 31, 1995 and
1994, $60,000 of such fees were expensed, and of these amounts $40,000 and
$15,000 respectively, were included in accounts payable.
During 1993, the Company entered into an employment agreement with Stephen
Barbour, who is the brother of the President of the Company, whereby Mr. Stephen
Barbour would receive, as part of his employment contract, a salary of $60,000
per year, 15,000 shares of the Common Stock and commissions of 15% on the
monthly gross profit of the Company's training division. The agreement
terminated in 1996. At December 31, 1995 and 1994, commissions of $1,030 and
$3,711, respectively, were recorded and included in accrued liabilities.
In August 1995, the Company entered into an agreement with Mezzanine
Financial Relations, Inc., a financial relations company ("Mezzanine"), to
assist the Company in the evaluation of, and formulation of terms for certain
companies identified in the Company's strategic acquisition plan. Mr. Sudduth, a
director of the Company, is the Chairman of the Board and a shareholder of
Mezzanine. Pursuant to the agreement, the Company paid Mezzanine a cash fee of
$115,000 concurrent with the closing of the Henley Healthcare Division
acquisition, which acquisition is discussed below. Additionally, pursuant to the
agreement, the Company issued to Mezzanine a four-year warrant to purchase
25,000 shares of the Company's common stock at a price of $6.75 per share, which
was the market price of the Company's Common Stock on the date of the grant.
This warrant is exercisable from February 16, 1996 through August 16, 1999.
On April 30, 1996, the Company entered into an agreement with Maxxim,
whereby the Company purchased certain assets (and assumed certain liabilities)
associated with the Henley Healthcare Division ("Henley") of Maxxim for an
estimated purchase price of approximately $13 million. The purchase price was
paid by the issuance of the Company's convertible subordinated promissory note
in the principal amount of $7 million, with the balance of the purchase price
paid in cash. Mr. Davidson and Dr. Henley are currently employed by Maxxim, with
Mr. Davidson serving in the capacities of chairman of the board, chief executive
officer and president and Dr. Henley serving as a director and consultant.
In May 1996, the Company entered into an additional agreement with
Mezzanine pursuant to which Mezzanine agreed to provide financial consulting
services with regard to potential mergers and acquisitions in consideration for
a monthly fee of $10,000, such agreement to terminate after three months.
In May 1996, the Company paid Dr. Rubio a fee of $12,500 for Dr. Rubio's
services in connection with the Company's Food and Drug Administration ("FDA")
application submission.
AUDITORS
Goldstein Golub Kessler & Company, P.C., certified public accountants
("GGK"), have served as the independent auditors of the Company since October
1994. It is not proposed that any formal action to be taken at the Annual
Meeting with respect to the continued employment of GGK, inasmuch as no such
action is legally required. Representatives of GGK plan to attend the Annual
Meeting and will be available to answer appropriate questions.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires a company's directors and
executive officers, and persons who own more than 10% of the equity securities
of the company to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of the Common
Stock.
20
During the fiscal year ended December 31, 1995, the Company's directors,
executive officers and greater than 10% shareholders were not subject to the
reporting requirements of Section 16(a) of the Exchange Act, as the Company's
securities were not then registered under Section 12 of the Exchange Act.
MISCELLANEOUS MATTERS
The annual report on Form 10-KSB covering the fiscal year ended December
31, 1995 accompanies this Proxy Statement. Any shareholder proposals to be
included in the Board of Directors' solicitation of proxies for the 1997 annual
meeting of Shareholders must be received by the Company at its principal
executive offices, located at 120 Industrial Boulevard, Sugarland, Texas 77478,
no later than February 25, 1997. The cost of soliciting proxies in the
accompanying form will be borne by the Company. In addition to solicitations by
mail, a number of regular employees of the Company may, if necessary to assure
the presence of a quorum, solicit proxies in person or by telephone. The persons
designated to vote shares covered by the Board of Directors' proxies intend to
exercise their judgment in voting such shares on other matters that may properly
come before the Annual Meeting. Management of the Company does not expect that
any matters other than those referred to in this proxy statement will be
presented for action at the Annual Meeting.
By Order of the Board of Directors,
/s/ MICHAEL M. BARBOUR,
President and Chief Executive Officer
21
EXHIBIT A
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
LASERMEDICS, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, Lasermedics, Inc. hereby adopts these Articles of Amendment to
its Articles of Incorporation:
ARTICLE ONE
The name of the corporation is Lasermedics, Inc. (the
"Corporation").
ARTICLE TWO
The following amendments to the Articles of Incorporation of the
Corporation were adopted by the shareholders of the Corporation on July 18, 1996
at the Corporation's Annual Meeting of Shareholders. The amendments affect
Article One (concerning the name of the Corporation), Article Four (concerning
the Corporation's authorized capital stock) and Article Six (concerning
cumulative voting in the election of directors) of the Articles of
Incorporation.
Article Four is amended and restated in its entirety as follows:
"ARTICLE FOUR
The Corporation shall have the authority to issue two classes of
shares, to be designated respectively, "Preferred Stock" and "Common Stock". The
total number of shares which the Corporation is authorized to issue is
22,500,000. The number of Preferred shares authorized is 2,500,000 and the par
value of each such share is Ten Cents ($.10). The number of Common shares
authorized is 20,000,000, and the par value of each such share is One Cent
($.01).
The Preferred Stock may be issued in one or more series. The
Board of Directors is hereby authorized to fix or alter by resolution or
resolutions, the designations, preferences, and relative participating, optional
or other special rights of the shares of each such series and the
qualifications, limitations or restrictions thereon, including, but not limited
to, determination of the dividend rights, dividend rates, conversion rights,
voting rights and rights in terms of redemption."
1
Article Six is amended by deleting the last sentence of the
second paragraph thereof and replacing such deleted sentence with the following:
"Cumulative voting of shares in the election of directors is expressly
denied."
The number of shares of the Corporation outstanding at the time
of such adoption was 1,482,225 and the number of shares entitled to vote thereon
was 1,482,225.
ARTICLE FOUR
The number of shares of the Corporation voted for the amendment
was__________ and the number of shares of the Corporation voted against the
amendment was __________.
Dated July , 1996. LASERMEDICS, INC.
By:_________________________________
Michael M. Barbour, President and
Chief Executive Officer
2
EXHIBIT B
LASERMEDICS, INC.
1996 INCENTIVE STOCK PLAN
1. Purpose of the Plan
This Lasermedics, Inc. 1996 Incentive Stock Plan is intended to
provide a means through which the Company and its Subsidiaries may attract able
persons to enter into the employ of the Company or its Subsidiaries, and to
promote the interests of the Company by providing the employees and consultants
and consultants of the Company or any Subsidiary corporation, who are largely
responsible for the management, growth and protection of the business of the
Company, with a proprietary interest in the Company, thereby strengthening their
concern for the welfare of the Company and their desire to remain in its employ.
A further purpose of the Plan is to provide such persons with additional
incentive and reward opportunities to enhance the profitable growth of the
Company.
2. DEFINITIONS
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "Board of Directors" shall mean the Board of Directors of
Lasermedics, Inc.
(b) "Cause," when used in connection with the termination of a
Participant's employment with the Company, shall mean the termination of the
Participant's employment by the Company by reason of (i) the conviction of the
Participant by a court of competent jurisdiction as to which no further appeal
can be taken of a crime involving moral turpitude; (ii) the proven commission by
the Participant of an act of fraud upon the Company; (iii) the willful and
proven misappropriation of any funds or property of the Company by the
Participant; (iv) the willful, continued and unreasonable failure by the
Participant to perform duties assigned to him and agreed to by him; (v) the
knowing engagement by the Participant in any direct, material conflict of
interest with the Company without compliance with the Company's conflict of
interest policy, if any, then in effect; (vi) the knowing engagement by the
Participant, without the written approval of the Board of Directors of the
Company, in any activity which competes with the business of the Company or
which would result in a material injury to the Company; or (vii) the knowing
engagement in any activity which would constitute a material violation of the
provisions of the Company's Policies and Procedures Manual, if any, then in
effect.
(c) "Cash Bonus" shall mean an award of a bonus payable in cash
pursuant to Section 11 hereof.
(d) "Change in Control" shall mean:
(i) a "change in control" of the Company, as that term is
contemplated in the federal securities laws; or
(ii) the occurrence of any of the following events:
(1) any Person becomes, after the effective date of
this Plan, the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly,
of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding
securities; provided, that the Board of Directors (as
constituted immediately prior to such person becoming such a
beneficial owner) may determine, in its sole discretion, that
a Change in Control has not occurred; and provided further,
that the acquisition of additional voting securities, after
the effective date of this Plan, by any Person who is, as of
the effective date of this Plan, the beneficial owner,
directly or indirectly, of 30% or more of the combined voting
power of the Company's then outstanding securities, shall not
constitute a "Change in Control" of the Company for purposes
of this Section 2(d).
(2) a majority of individuals who are nominated by
the Board of Directors for election to the Board of Directors
on any date, fail to be elected to the Board of Directors as a
direct or indirect result of any proxy fight or contested
election for positions on the Board of Directors; or
(3) the Board of Directors determines in its sole and
absolute discretion that there has been a change in control of
the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time. Reference in the Plan to any Section of the Code
shall be deemed to include any amendments or successor provisions to any Section
and any treasury regulations thereunder.
(e) "Committee" shall mean the Compensation Committee of the
Board of Directors or such other committee as the Board of Directors shall
appoint from time to time to administer the Plan.
(f) "Common Stock" shall mean the Company's common stock, par
value $.01 per share.
(g) "Company" shall mean Lasermedics, Inc., a Texas corporation,
and each of its Subsidiaries, and its successors.
(h) "Consultant" shall mean any person who is engaged by the
Company or any Subsidiary to render consulting services and is compensated for
such services.
(i) "Employee" shall mean any person who is an employee of the
Company or any Subsidiary within the meaning of Section 3401(c) of the Code and
the applicable interpretive authority thereunder.
(j) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(k) the "Fair Market Value" of a share of Common Stock on any
date shall be (i) the closing sales price on the immediately preceding business
day of a share of Common Stock as reported on the principal securities exchange
on which shares of Common Stock are then listed or admitted to trading or (ii)
if not so reported, the average of the closing bid and asked prices for a share
of Common Stock on the immediately preceding business day as quoted on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
or (iii) if not quoted on NASDAQ, the average of the closing bid and asked
prices for a share of Common Stock as quoted by the National Quotation Bureau's
"Pink Sheets" or the National Association of Securities Dealers' OTC Bulletin
Board System. If the price of a share of Common Stock shall not be so reported,
the Fair Market Value of a share of Common Stock shall be determined by the
Committee in its absolute discretion.
(l) "Incentive Award" shall mean an Option, a share of Restricted
Stock, a Performance Award, a share of Phantom Stock, a Stock Bonus or Cash
Bonus granted pursuant to the terms of the Plan.
(m) "Incentive Stock Option" shall mean an Option which is an
"incentive stock option" within the meaning of Section 422 of the Code and which
is identified as an Incentive Stock Option in the agreement by which it is
evidenced.
(n) "Issue Date" shall mean the date established by the Committee
on which certificates representing shares of Restricted Stock shall be issued by
the Company pursuant to the terms of Section 7(d) hereof.
(o) "Non-Qualified Stock Option" shall mean an Option which is
not an Incentive Stock Option and which is identified as a Non-Qualified Stock
Option in the agreement by which it is evidenced.
(p) "Option" shall mean an option to purchase shares of Common
Stock of the Company granted pursuant to Section 6 hereof. Each Option shall be
identified as either an Incentive Stock Option or a Non-Qualified Stock Option
in the agreement by which it is evidenced.
(q) "Parent" shall mean a "parent corporation" of the Company,
whether now or hereafter existing, as defined in Section 424(e) of the Code.
(r) "Participant" shall mean an Employee or Consultant who is
eligible to participate in the Plan and to whom an Incentive Award is granted
pursuant to the Plan, and, upon his death, his successors, heirs, executors and
administrators, as the case may be, to the extent permitted hereby.
(s) "Performance Award" shall mean an award payable in cash or
Common Stock, which award is granted pursuant to Section 8 hereof and subject to
the terms and conditions contained therein.
(t) "Person" shall mean a "person," as such term is used in
Sections 13(d) and 14(d) of the Exchange Act, and the rules and regulations in
effect from time to time thereunder.
(u) a share of "Phantom Stock" shall represent the right to
receive in cash the Fair Market Value of a share of Common Stock of the Company,
which right is granted pursuant to Section 9 hereof and subject to the terms and
conditions contained therein.
(v) "Plan" shall mean the Lasermedics, Inc. 1996 Incentive Stock
Plan, as it may be amended from time to time.
(w) a share of "Restricted Stock" shall mean a share of Common
Stock which is granted pursuant to the terms of Section 7 hereof and which is
subject to the restrictions set forth in Section 7(c) hereof for so long as such
restrictions continue to apply to such share.
(x) "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
(y) "Stock Bonus" shall mean a grant of a bonus payable in shares
of Common Stock pursuant to Section 10 hereof.
(z) "Subsidiary" or "Subsidiaries" shall mean any and all
corporations in which at the pertinent time the Company owns, directly or
indirectly, stock vested with more than 50% of the total combined voting power
of all classes of stock of such corporations within the meaning of Section
424(f) of the Code.
(aa) "Vesting Date" shall mean the date established by the
Committee on which a share of Restricted Stock or Phantom Stock may vest.
3. STOCK SUBJECT TO THE PLAN
Under the Plan, the Committee may grant to Participants: (i)
Options; (ii) shares of Restricted Stock; (iii) Performance Awards; (iv) shares
of Phantom Stock; (v) Stock Bonuses; and (vi) Cash Bonuses.
The Committee may grant Options, shares of Restricted Stock,
Performance Awards, shares of Phantom Stock and Stock Bonuses under the Plan
with respect to a number of shares of Common Stock that in the aggregate at any
time does not exceed 1,200,000 shares of Common Stock, subject to adjustment
pursuant to Section 12 hereof. The grant of a Cash Bonus shall not reduce the
number of shares of Common Stock with respect to which Options, shares of
Restricted Stock, Performance Awards, shares of Phantom Stock or Stock Bonuses
may be granted pursuant to the Plan. Notwithstanding any provision in the Plan
to the contrary, the maximum number of shares of Common Stock that may be
subject to Incentive Awards granted to any one individual during any calendar
year shall be 500,000 shares of Common Stock, subject to adjustment under
Section 12 hereof. The limitation set forth in the preceding sentence shall be
applied in a manner which will permit compensation generated in connection with
the exercise of Options and the payment of Performance Awards to constitute
"qualified performance-based compensation" for purposes of Section 162(m) of the
Code, including, without limitation, counting against such maximum number of
shares, to the extent required under Section 162(m) of the Code and applicable
interpretive authority thereunder, any shares subject to Options that are
canceled or repriced.
If any outstanding Option expires, terminates or is canceled for
any reason, the shares of Common Stock subject to the unexercised portion of
such Option shall again be available for grant under the Plan. If any shares of
Restricted Stock or Phantom Stock, or any shares of Common Stock granted as a
Performance Award or a Stock Bonus are forfeited or canceled for any reason,
such shares shall again be available for grant under the Plan.
Shares of Common Stock issued under the Plan may be either newly
issued or treasury shares, at the discretion of the Committee.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a Committee of the Board of
Directors consisting of two or more persons, each of whom shall be both (i) a
"disinterested person" within the meaning of Rule 16b-3(c)(2)(i) promulgated
under Section 16 of the Exchange Act and (ii) an "outside director" within the
meaning of Section 162(m) of the Code and applicable interpretive authority
thereunder. The Committee shall from time to time designate the key Employees
and Consultants of the Company who shall be granted Incentive Awards and the
amount and type of such Incentive Awards.
The Committee shall have full authority to administer the Plan,
including authority to interpret and construe any provision of the Plan and the
terms of any Incentive Award issued under it and to adopt such rules and
regulations for administering the Plan as it may deem necessary.
Decisions of the Committee shall be final and binding on all parties.
The Committee may, in its absolute discretion (i) accelerate the
date on which any Option granted under the Plan becomes exercisable, (ii) extend
the date on which any Option granted under the Plan ceases to be exercisable,
(iii) accelerate the Vesting Date or Issue Date, or waive any condition imposed
pursuant to Section 7(b) hereof, with respect to any share of Restricted Stock
granted under the Plan and (iv) accelerate the Vesting Date or waive any
condition imposed pursuant to Section 9 hereof, with respect to any share of
Phantom Stock granted under the Plan.
In addition, the Committee may, in its absolute discretion, grant
Incentive Awards to Participants on the condition that such Participants
surrender to the Committee for cancellation such other Incentive Awards
(including, without limitation, Incentive Awards with higher exercise prices) as
the Committee specifies. Notwithstanding Section 3 hereof, Incentive Awards
granted on the condition of surrender of outstanding Incentive Awards shall not
count against the limits set forth in such Section 3 until such time as such
Incentive Awards are surrendered.
Except as provided in Section 6(e)(4) hereof, whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Committee in its
absolute discretion.
No member of the Committee shall be liable for any action,
omission, or determination relating to the Plan, and the Company shall indemnify
and hold harmless each member of the Committee and each other director or
employee of the Company to whom any duty or power relating to the administration
or interpretation of the Plan has been delegated from and against any cost or
expense (including attorneys' fees) or liability (including any sum paid in
settlement of a claim with the approval of the Committee) arising out of any
action, omission or determination relating to the Plan, unless, in either case,
such action, omission or determination was taken or made by such member,
director or employee in bad faith and without reasonable belief that it was in
the best interests of the Company.
5. ELIGIBILITY
The persons who shall be eligible to receive Incentive Awards
pursuant to the Plan shall be those Employees who are largely responsible for
the management, growth and protection of the business of the Company or any
Subsidiary (including officers of the Company, whether or not they are directors
of the Company) or (ii) any Consultant, as the Committee, in its absolute
discretion, shall select from time to time; PROVIDED, HOWEVER, Incentive Stock
Options may only be granted to Employees.
6. OPTIONS
The Committee may grant Options pursuant to the Plan, which
Options shall be evidenced by agreements in such form as the Committee shall
from time to time approve. Options shall comply with and be subject to the
following terms and conditions:
(a) IDENTIFICATION OF OPTIONS
All Options granted under the Plan shall be clearly identified in
the agreement evidencing such Options as either Incentive Stock Options or as
Non-Qualified Stock Options.
(b) EXERCISE PRICE
The exercise price of any Option granted under the Plan shall be
such price as the Committee shall determine on the date on which such Option is
granted; PROVIDED, that such price shall be not less than 100% of the Fair
Market Value of a share of Common Stock on the date on which such Option is
granted, subject to (i) the restrictions provided in Section 6(d) hereof and
(ii) the adjustments provided in Section 12 hereof.
(c) TERM AND EXERCISE OF OPTIONS
(1) Each Option shall be exercisable on such date or
dates, during such period and for such number of shares of
Common Stock as shall be determined by the Committee on the
day on which such Option is granted and set forth in the
agreement evidencing the Option; PROVIDED, HOWEVER, that (A)
subject to the restrictions provided in Section 6(d) hereof,
no Option shall be exercisable after the expiration of ten
years from the date such Option was granted and (B) no Option
shall be exercisable until six months after the date of grant;
and, PROVIDED, FURTHER, that each Option shall be subject to
earlier termination, expiration or cancellation as provided in
the Plan.
(2) Each Option shall be exercisable in whole or in
part with respect to whole shares of Common Stock. The partial
exercise of an Option shall not cause the expiration,
termination or cancellation of the remaining portion thereof.
Upon the partial exercise of an Option, the agreement
evidencing such Option shall be returned to the Participant
exercising such Option together with the delivery of the
certificates described in Section 6(c)(5) hereof.
(3) An Option shall be exercised by delivering notice
to the Company's principal office, to the attention of its
Secretary, no fewer than five business days in advance of the
effective date of the proposed exercise. Such notice shall be
accompanied by the agreement evidencing the Option, shall
specify the number of shares of Common Stock with respect to
which the Option is being exercised and the effective date of
the proposed exercise, and shall be signed by the Participant.
The Participant may withdraw such notice at any time prior to
the close of business on the business day immediately
preceding the effective date of the proposed exercise, in
which case such agreement shall be returned to the
Participant. Payment for shares of Common Stock purchased upon
the exercise of an Option shall be made on the effective date
of such exercise either (i) in cash, by certified check, bank
cashier's check or wire transfer, (ii) subject to the approval
of the Committee, in shares of Common Stock owned by the
Participant and valued at their Fair Market Value on the
effective date of such exercise, (iii) subject to the approval
of the Committee, in the form of a "cashless exercise" (as
described below) or (iv) subject to the approval of the
Committee, in any combination of the foregoing. Any payment in
shares of Common Stock shall be effected by the delivery of
such shares to the Secretary of the Company, duly endorsed in
blank or accompanied by stock powers duly executed in blank,
together with any other documents and evidences as the
Secretary of the Company shall require from time to time.
The cashless exercise of an Option shall be pursuant
to procedures whereby the Participant by written notice,
directs (i) an immediate market sale or margin loan respecting
all or a part of the shares of Common Stock to which he is
entitled upon exercise pursuant to an extension of credit by
the Company to the Participant of the exercise price, (ii) the
delivery of the shares of Common Stock directly from the
Company to a brokerage firm and (iii) delivery of the exercise
price from the sale or the margin loan proceeds from the
brokerage firm directly to the Company.
(4) Any Option granted under the Plan may be
exercised by a broker-dealer acting on behalf of a Participant
if (i) the broker-dealer has received from the Participant or
the Company a duly endorsed agreement evidencing such Option
and instructions signed by the Participant requesting the
Company to deliver the shares of Common Stock subject to such
Option to the broker-dealer on behalf of the Participant and
specifying the account into which such shares should be
deposited, (ii) adequate provision has been made with respect
to the payment of any withholding taxes due upon such exercise
and (iii) the broker-dealer and the Participant have otherwise
complied with Section 220.3(e)(4) of Regulation T, 12 CFR Part
220.
(5) Certificates for shares of Common Stock purchased
upon the exercise of an Option shall be issued in the name of
the Participant and delivered to the Participant as soon as
practicable following the effective date on which the Option
is exercised; PROVIDED, HOWEVER, that such delivery shall be
effected for all purposes when a stock transfer agent of the
Company shall have deposited such certificates in the United
States mail, addressed to the Participant.
(6) During the lifetime of a Participant each Option
granted to him shall be exercisable only by him or a
broker-dealer acting on behalf of such Participant pursuant to
Section 6(c)(4) hereof. No Option shall be assignable or
transferable otherwise than by will or by the laws of descent
and distribution.
(d) LIMITATIONS ON GRANT OF INCENTIVE STOCK OPTIONS
(1) The aggregate Fair Market Value of shares of
Common Stock with respect to which "incentive stock options"
(within the meaning of Section 422 without regard to Section
422(d) of the Code) are exercisable for the first time by a
Participant during any calendar year under the Plan (and any
other stock option plan of the Company, or of its Parent or
any Subsidiary) shall not exceed $100,000. Such Fair Market
Value shall be determined as of the date on which each such
Incentive Stock Option is granted. If such aggregate Fair
Market Value of shares of Common Stock underlying such
Incentive Stock Options exceeds $100,000, then Incentive Stock
Options granted hereunder to such Participant shall, to the
extent and in the order required by regulations promulgated
under the Code (or any other authority having the force of
such regulations), automatically be deemed to be Non-Qualified
Stock Options, but all other terms and provisions of such
Incentive Stock Options shall remain unchanged. In the absence
of such regulations promulgated under the Code (and
authority), or if such regulations (or authority) require or
permit a designation of the options which shall cease to
constitute Incentive Stock Options, Incentive Stock Options
shall, to the extent of such excess and in the order in which
they were granted, automatically be deemed to be Non-Qualified
Stock Options, but all other terms and provisions of such
Incentive Stock Options shall remain unchanged.
(2) No Incentive Stock Option may be granted to an
individual if, at the time of the proposed grant, such
individual owns stock possessing more than ten percent of the
total combined voting power of all classes of stock of the
Company or of its Parent or any Subsidiary, unless (i) the
exercise price of such Incentive Stock Option is at least 110%
of the Fair Market Value of a share of Common Stock at the
time such Incentive Stock Option is granted and (ii) such
Incentive Stock Option is not exercisable after the expiration
of five years from the date such Incentive Stock Option is
granted.
(e) EFFECT OF TERMINATION OF EMPLOYMENT
(1) If the employment of a Participant with the
Company shall terminate for any reason other than Cause,
"permanent and total disability" (within the meaning of
Section 22(e)(3) of the Code) or the death of the Participant
(i) Options granted to such Participant, to the extent that
they were exercisable at the time of such termination, shall
remain exercisable until the expiration of one month after
such termination, on which date they shall expire, and (ii)
Options granted to such Participant, to the extent that they
were not exercisable at the time of such termination, shall
expire at the close of business on the date of such
termination; PROVIDED, HOWEVER, that no Option shall be
exercisable after the expiration of its term.
(2) If the employment of a Participant with the
Company shall terminate as a result of the "permanent and
total disability" (within the meaning of Section 22(e)(3) of
the Code) or the death of the Participant (i) Options granted
to such Participant, to the extent that they were exercisable
at the time of such termination, shall remain exercisable
until the expiration of one year after such termination, on
which date they shall expire, and (ii) Options granted to such
Participant, to the extent that they were not exercisable at
the time of such termination, shall expire at the close of
business on the date of such termination; PROVIDED, HOWEVER,
that no Option shall be exercisable after the expiration of
its term.
(3) In the event of the termination of a
Participant's employment for Cause, all outstanding Options
granted to such Participant shall expire at the commencement
of business on the date of such termination.
(4) A Participant's employment with the Company shall
be deemed terminated if the Participant's leave of absence
(including military or such leave or other bona fide leave of
absence) extends for more than 90 days and the Participant's
continued employment with the Company is not guaranteed by
contract or statute.
(f) ACCELERATION OF EXERCISE DATE UPON CHANGE IN CONTROL
Upon the occurrence of a Change in Control, each Option granted
under the Plan and outstanding at such time shall become fully and immediately
exercisable and shall remain exercisable until its expiration, termination or
cancellation pursuant to the terms of the Plan.
7. RESTRICTED STOCK
The Committee may grant shares of Restricted Stock pursuant to
the Plan. Each grant of shares of Restricted Stock shall be evidenced by an
agreement in such form as the Committee shall from time to time approve. Each
grant of shares of Restricted Stock shall comply with and be subject to the
following terms and conditions:
(a) ISSUE DATE AND VESTING DATE
At the time of the grant of shares of Restricted Stock, the
Committee shall establish an Issue Date or Issue Dates and a Vesting Date or
Vesting Dates with respect to such shares. The Committee may divide such shares
into classes and assign a different Issue Date and/or Vesting Date for each
class. Except as provided in Sections 7(c) and 7(f) hereof, upon the occurrence
of the Issue Date with respect to a share of Restricted Stock, a share of
Restricted Stock shall be issued in accordance with the provisions of Section
7(d) hereof. Provided that all conditions to the vesting of a share of
Restricted Stock imposed pursuant to Section 7(b) hereof are satisfied, and
except as provided in Sections 7(c) and 7(f) hereof, upon the occurrence of the
Vesting Date with respect to a share of Restricted Stock, such share shall vest
and the restrictions of Section 7(c) hereof shall cease to apply to such share.
(b) CONDITIONS TO VESTING
At the time of the grant of shares of Restricted Stock, the
Committee may impose such restrictions or conditions, not inconsistent with the
provisions hereof, to the vesting of such shares as it in its absolute
discretion deems appropriate. By way of example and not by way of limitation,
the Committee may require, as a condition to the vesting of any class or classes
of shares of Restricted Stock, that (i) the Participant or the Company achieve
certain performance criteria, such criteria to be specified by the Committee at
the time of the grant of such shares and (ii) prohibiting an election by the
Participant under Section 83(b) of the Code.
(c) RESTRICTIONS ON TRANSFER PRIOR TO VESTING
Prior to the vesting of a share of Restricted Stock, no transfer
of a Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall vest the transferee with
any interest or right in or with respect to such share, but immediately upon any
attempt to transfer such rights, such share, and all of the rights related
thereto, shall be forfeited by the Participant and the transfer shall be of no
force or effect.
(d) ISSUANCE OF CERTIFICATES
(1) Except as provided in Sections 7(c) or 7(f) hereof,
reasonably promptly after the Issue Date with respect to shares of
Restricted Stock, the Company shall cause to be issued a stock
certificate, registered in the name of the Participant to whom such
shares were granted, evidencing such shares; PROVIDED, that the Company
shall not cause to be issued such a stock certificates unless it has
received a stock power duly endorsed in blank with respect to such
shares. Each such stock certificate shall bear the following legend:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF
STOCK REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS,
TERMS AND CONDITIONS (INCLUDING FORFEITURE AND RESTRICTIONS
AGAINST TRANSFER) CONTAINED IN THE LASERMEDICS, INC. 1996
INCENTIVE STOCK PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE
REGISTERED OWNER OF SUCH SHARES AND LASERMEDICS, INC. A COPY
OF THE PLAN AND AGREEMENT IS ON FILE IN THE OFFICE OF THE
SECRETARY OF LASERMEDICS, INC., 120 INDUSTRIAL BOULEVARD,
SUGARLAND, TEXAS 77478.
Such legend shall not be removed from the certificate evidencing
such shares until such shares vest pursuant to the terms hereof.
(2) Each certificate issued pursuant to Paragraph
7(d)(1) hereof, together with the stock powers relating to the
shares of Restricted Stock evidenced by such certificate, shall
be held by the Company. The Company shall issue to the
Participant a receipt evidencing the certificates held by it
which are registered in the name of the Participant.
(e) CONSEQUENCES UPON VESTING
Upon the vesting of a share of Restricted Stock pursuant to the
terms hereof, the restrictions of Section 7(c) hereof shall cease to apply to
such share. Reasonably promptly after a share of Restricted Stock vests pursuant
to the terms hereof, the Company shall cause to be issued and delivered to the
Participant to whom such shares were granted, a certificate evidencing such
share, free of the legend set forth in Paragraph 7(d)(1) hereof, together with
any other property of the Participant held by Company pursuant to Section 12(a)
hereof; PROVIDED, HOWEVER, that such delivery shall be effected for all purposes
when the Company shall have deposited such certificate and other property in the
United States mail, addressed to the Participant.
(f) EFFECT OF TERMINATION OF EMPLOYMENT
(1) If the employment of a Participant with the
Company shall terminate for any reason other than Cause prior
to the vesting of shares of Restricted Stock granted to such
Participant, a portion of such shares, to the extent not
forfeited or canceled on or prior to such termination pursuant
to any provision hereof, shall vest on the date of such
termination. The portion referred to in the preceding sentence
shall be determined by the Committee at the time of the grant
of such shares of Restricted Stock and may be based on the
achievement of any conditions imposed by the Committee with
respect to such shares pursuant to Section 7(b) hereof. Such
portion may equal zero.
(2) In the event of the termination of a
Participant's employment for Cause, all shares of Restricted
Stock granted to such Participant which have not vested as of
the commencement of business on the date of such termination
shall immediately be forfeited.
(g) EFFECT OF CHANGE IN CONTROL
Upon the occurrence of a Change in Control, all shares of
Restricted Stock which have not theretofore vested (including those with respect
to which the Issue Date has not yet occurred) shall immediately vest.
8. PERFORMANCE AWARDS
The Committee may grant Performance Awards pursuant to the Plan.
Each grant of Performance Awards shall be evidenced by an agreement in such form
as the Committee shall from time to time approve. Each grant of Performance
Awards shall comply with and be subject to the following terms and conditions:
(a) PERFORMANCE PERIOD AND PERFORMANCE AWARD
(1) With respect to each grant of a Performance
Award, the Committee shall establish a performance period over
which the performance of the applicable Participant shall be
measured.
(2) In determining the amount of the Performance
Award to be granted to a particular Participant, the Committee
may take into account such factors as the Participant's
responsibility level and growth potential, the amount of other
Incentive Awards granted or received by such Participant, and
such other considerations as the Committee deems appropriate.
Each Performance Award shall be subject to a maximum value as
established by the Committee at the time of grant of such
award; PROVIDED, HOWEVER, the maximum value that can be
granted as a Performance Award to any one individual during
any calendar year is $1,000,000.
(b) PERFORMANCE MEASURES
A Performance Award shall be awarded to a Participant contingent
upon future performance of the Company (or any Subsidiary, division or
department thereof) by or in which the Participant is employed or responsible
during the performance period. The Committee shall establish, in writing, the
performance measures applicable to such performance within 90 days after the
commencement of the performance period, to which such measures relate, and at a
time when the outcome of such performance measures are substantially uncertain
within the meaning of Section 162(m) of the Code, subject to such later
revisions as the Committee shall deem appropriate to reflect significant
unforeseen events or changes.
(c) PAYMENT
Upon the expiration of the performance period relating to a
Performance Award granted to a Participant, such Participant shall be entitled
to receive payment of an amount not exceeding the maximum value of the
Performance Award, based on the achievement of the performance measures for such
performance period, as determined by the Committee. The Committee shall certify
in writing prior to the payment of a Performance Award that the applicable
performance measures and any other material terms of the grant have been
satisfied. Subject to Section 3 hereof, payment of a Performance Award may be
made in cash, Common Stock or a combination thereof, as determined by the
Committee. Payment shall be made in a lump sum or in installments as prescribed
by the Committee. Any payment to be made in Common Stock shall be based on the
Fair Market Value of the Common Stock on the payment date.
(d) EFFECT OF TERMINATION OF EMPLOYMENT
If the employment of a Participant shall terminate for any reason
prior to the expiration of the applicable performance period, the Performance
Awards relating to such performance period, shall immediately be forfeited as of
the commencement of business on the date of such termination, except as may be
determined by the Committee in its sole and absolute discretion, or as may be
otherwise provided in the agreement evidencing such Performance Award.
(e) EFFECT OF CHANGE IN CONTROL
Upon the occurrence of a Change in Control, the Committee (as
constituted immediately prior to such Change in Control) shall determine, in its
sole discretion, whether Performance Awards, which have not theretofore
satisfied the requisite performance measure or for which the performance period
has not expired, shall immediately be paid or whether such Performance Awards
shall remain outstanding according to its respective terms.
9. PHANTOM STOCK
The Committee may grant shares of Phantom Stock pursuant to the
Plan. Each grant of shares of Phantom Stock shall be evidenced by an agreement
in such form as the Committee shall from time to time approve. Each grant of
shares of Phantom Stock shall comply with and be subject to the following terms
and conditions:
(a) VESTING DATE
At the time of the grant of shares of Phantom Stock, the
Committee shall establish a Vesting Date or Vesting Dates with respect to such
shares. The Committee may divide such shares into classes and assign a different
Vesting Date for each class. Provided that all conditions to the vesting of a
share of Phantom Stock imposed pursuant to Section 9(c) hereof are satisfied,
and except as provided in Section 9(d) hereof, upon the occurrence of the
Vesting Date with respect to a share of Phantom Stock, such share shall vest.
(b) BENEFIT UPON VESTING
Upon the vesting of a share of Phantom Stock, a Participant shall
be entitled to receive in cash, within 90 days of the date on which such share
vests, an amount in cash in a lump sum equal to the sum of (i) the Fair Market
Value of a share of Common Stock of the Company on the date on which such share
of Phantom Stock vests and (ii) the aggregate amount of cash dividends paid with
respect to a share of Common Stock of the Company during the period commencing
on the date on which the share of Phantom Stock was granted and terminating on
the date on which such share vests.
(c) CONDITIONS TO VESTING
At the time of the grant of shares of Phantom Stock, the
Committee may impose such restrictions or conditions, not inconsistent with the
provisions hereof, to the vesting of such shares as it, in its absolute
discretion deems appropriate. By way of example and not by way of limitation,
the Committee may require, as a condition to the vesting of any class or classes
of shares of Phantom Stock, that the Participant or the Company achieve certain
performance criteria, such criteria to be specified by the Committee at the time
of the grant of such shares.
(d) EFFECT OF TERMINATION OF EMPLOYMENT
(1) If the employment of a Participant with the
Company shall terminate for any reason other than Cause prior
to the vesting of shares of Phantom Stock granted to such
Participant a portion of such shares, to the extent not
forfeited or canceled on or prior to such termination pursuant
to any provision hereof, shall vest on the date of such
termination. The portion referred to in the preceding sentence
shall be determined by the Committee at the time of the grant
of such shares of Phantom Stock and may be based on the
achievement of any conditions imposed by the Committee with
respect to such shares pursuant to Section 9(c) hereof. Such
portion may equal zero.
(2) In the event of the termination of a
Participant's employment for Cause, all shares of Phantom
Stock granted to such Participant which have not vested as of
the date of such termination shall immediately be forfeited.
(e) EFFECT OF CHANGE IN CONTROL
Upon the occurrence of a Change in Control, all shares of Phantom
Stock which have not theretofore vested shall immediately vest.
10. STOCK BONUSES
The Committee may, in its absolute discretion, grant Stock
Bonuses in such amounts as it shall determine from time to time. A Stock Bonus
shall be paid at such time and subject to such conditions as the Committee shall
determine at the time of the grant of such Stock Bonus. Certificates for shares
of Common Stock granted as a Stock Bonus shall be issued in the name of the
Participant to whom such grant was made and delivered to such Participant as
soon as practicable after the date on which such Stock Bonus is required to be
paid.
11. CASH BONUSES
The Committee may, in its absolute discretion, grant in
connection with any grant of Restricted Stock or shares of Common Stock granted
as a Performance Award or Stock Bonus or at any time thereafter, a cash bonus,
payable promptly after the date on which the Participant is required to
recognize income for federal income tax purposes in connection with such
Restricted Stock, Performance Award or Stock Bonus, in such amounts as the
Committee shall determine from time to time; PROVIDED, HOWEVER, that in no event
shall the amount of a Cash Bonus exceed the Fair Market Value of the related
shares of Restricted Stock or shares of Common Stock granted pursuant to a
Performance Award or Stock Bonus on such date. A Cash Bonus shall be subject to
such conditions as the Committee shall determine at the time of the grant of
such Cash Bonus.
12. ADJUSTMENT UPON CHANGES IN COMMON STOCK
(a) OUTSTANDING RESTRICTED STOCK, PERFORMANCE AWARDS, AND
PHANTOM STOCK
Unless the Committee in its absolute discretion otherwise
determines, if a Participant receives any securities or other property
(including dividends paid in cash) with respect to a share of Restricted Stock,
the Issue Date with respect to which occurs prior to such event, but which has
not vested as of the date of such event, as a result of any dividend, stock
split recapitalization, merger, consolidation, combination, exchange of shares
or otherwise, such securities or other property will not vest until such share
of Restricted Stock vests, and shall be held by the Company pursuant to
Paragraph 7(d)(2) hereof as if such securities or other property were unvested
shares of Restricted Stock.
The Committee may, in its absolute discretion, adjust any grant
of shares of Restricted Stock, the Issue Date with respect to which has not
occurred as of the date of the occurrence of any of the following events, any
shares of Common Stock upon the grant of a Performance Award or any grant of
shares of Phantom Stock, to reflect any dividend, stock split, recapitalization,
merger, consolidation, combination, exchange of shares or similar corporate
change as the Committee may deem appropriate to prevent the enlargement or
dilution of rights of Participants under the grant.
(b) STOCK SUBJECT TO PLAN, OUTSTANDING OPTIONS, INCREASE OR
DECREASE IN ISSUED SHARES WITHOUT CONSIDERATION
Subject to any required action by the stockholders of the
Company, in the event of any increase or decrease in the number of issued shares
of Common Stock resulting from a subdivision or consolidation of shares of
Common Stock or the payment of a stock dividend (but only on the shares of
Common Stock), or any other increase or decrease in the number of such shares
effected without receipt of consideration by the Company, the Committee shall
proportionally adjust (i) the number of shares of Common Stock for which
Incentive Awards may be granted under the Plan and (ii) the number of shares and
the exercise price per share of Common Stock subject to each outstanding Option.
(c) OUTSTANDING OPTIONS, CERTAIN MERGERS
Subject to any required action by the stockholders of the
Company, if the Company shall be the surviving corporation in any merger or
consolidation (except a merger or consolidation as a result of which the holders
of shares of Common Stock receive securities of another corporation), each
Option outstanding on the date of such merger or consolidation shall entitle the
Participant to acquire upon exercise the securities which a holder of the number
of shares of Common Stock subject to such Option would have received in such
merger or consolidation.
(d) OUTSTANDING OPTIONS, CERTAIN OTHER TRANSACTIONS
In the event of a dissolution or liquidation of the Company, a
sale of all or substantially all of the Company's assets, a merger or
consolidation involving the Company in which the Company is not the surviving
corporation or a merger or consolidation involving the Company in which the
Company is the surviving corporation but the holders of shares of Common Stock
receive securities of another corporation and/or other property, including cash,
the Committee shall, in its absolute discretion, have the power to:
(i) cancel, effective immediately prior to the occurrence of
such event, each Option outstanding immediately prior to such event
(whether or not then exercisable), and, in full consideration of such
cancellation, pay to the Participant to whom such Option was granted an
amount in cash, for each share of Common Stock subject to such Option
equal to the excess of (A) the value, as determined by the Committee in
its absolute discretion, of the property (including cash) received by
the holder of a share of Common Stock as a result of such event over
(B) the exercise price of such Option; or
(ii) provide for the exchange of each Option outstanding
immediately prior to such event (whether or not then exercisable) for
an option on some or all of the property for which such Option is
exchanged and, incident thereto, make an equitable adjustment as
determined by the Committee in its absolute discretion in the exercise
price of the option, or the number of shares or amount of property
subject to the option or, if appropriate, provide for a cash payment to
the Participant to whom such Option was granted in partial
consideration for the exchange of the Option.
(e) OUTSTANDING OPTIONS, OTHER CHANGES
In the event of any change in the capitalization of the Company
or corporate change other than those specifically referred to in Sections 12(b),
(c) or (d) hereof, the Committee may, in its absolute discretion, make such
adjustments in the number and class of shares subject to Options outstanding on
the date on which such change occurs and in the per share exercise price of each
such Option as the Committee may consider appropriate to prevent dilution or
enlargement of rights.
(f) NO OTHER RIGHTS
Except as expressly provided in the Plan, no Participant shall
have any rights by reason of any subdivision or consolidation of shares of stock
of any class, the payment of any dividend, any increase or decrease in the
number of shares of stock of any class or any dissolution, liquidation, merger
or consolidation of the Company or any other corporation. Except as expressly
provided in the Plan, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Common Stock subject to an Incentive Award or the exercise
price of any Option.
13. RIGHTS AS A STOCKHOLDER
No person shall have any rights as a stockholder with respect to
any shares of Common Stock covered by or relating to any Incentive Award granted
pursuant to this Plan until the date of the issuance of a stock certificate with
respect to such shares. Except as otherwise expressly provided in Section 12
hereof, no adjustment to any Incentive Award shall be made for dividends or
other rights for which the record date occurs prior to the date such stock
certificate is issued.
14. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD
Nothing contained in the Plan or any Incentive Award shall confer
upon any Participant any right with respect to the continuation of his
employment by the Company or interfere in any way with the right of the Company,
subject to the terms of any separate employment agreement to the contrary, at
any time to terminate such employment or to increase or decrease the
compensation of the Participant from the rate in existence at the time of the
grant of an Incentive Award.
No person shall have any claim or right to receive an Incentive
Award hereunder. The Committee's granting of an Incentive Award to a Participant
at any time shall neither require the Committee to grant an Incentive Award to
such Participant or any other Participant or other person at any time nor
preclude the Committee from making subsequent grants to such Participant or any
other Participant or other person.
15. SECURITIES MATTERS
(a) The Company shall be under no obligation to effect the
registration pursuant to the Securities Act of any shares of Common Stock to be
issued hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to be issued or delivered any certificates evidencing shares
of Common Stock pursuant to the Plan unless and until the Company is advised by
its counsel that the issuance and delivery of such certificates is in compliance
with all applicable laws, regulations of governmental authority and the
requirements of any securities exchange on which shares of Common Stock are
traded. The Committee may require, as a condition of the issuance and delivery
of certificates evidencing shares of Common Stock pursuant to the terms hereof,
that the recipient of such shares make such covenants, agreements and
representations, and that such certificates bear such legends, as the Committee,
in its sole discretion, deems necessary or desirable.
(b) The exercise of any Option granted hereunder shall only be
effective at such time as counsel to the Company shall have determined that the
issuance and delivery of shares of Common Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authorities and
the requirements of any securities exchange on which shares of Common Stock are
traded. The Company may, in its sole discretion, defer the effectiveness of any
exercise of an Option granted hereunder in order to allow the issuance of shares
of Common Stock pursuant thereto to be made pursuant to registration or an
exemption from registration or other methods for compliance available under
federal or state securities laws. The Company shall inform the Participant in
writing of its decision to defer the effectiveness of the exercise of an Option
granted hereunder. During the period that the effectiveness of the exercise of
an Option has been deferred, the Participant may, by written notice, withdraw
such exercise and obtain the refund of any amount paid with respect thereto.
(c) It is intended that the Plan and any grant of an Incentive
Award made to a person subject to Section 16 of the Exchange Act meet all of the
requirements of Rule 16b-3 promulgated thereunder. If any provision of the Plan
or any such Incentive Award would disqualify the Plan or such Incentive Award
under, or would otherwise not comply with, Rule 16b-3, such provision or
Incentive Award shall be construed or deemed amended to conform to Rule 16b-3 to
the extent permitted by applicable law and deemed advisable by the Board of
Directors.
16. QUALIFIED PERFORMANCE-BASED COMPENSATION
It is intended that the Plan comply fully with and meet all the
requirements of Section 162(m) of the Code so that Options granted hereunder
with an exercise price not less than Fair Market Value of a share of Common
Stock on the date of grant and (ii) the payment of a Performance Award granted
hereunder, shall constitute "qualified performance based compensation" within
the meaning of such Section and the interpretive authority thereunder. If any
provision of the Plan would disqualify the Plan or would not otherwise permit
the Plan to comply with Section 162(m) as so intended, such provision shall be
construed or deemed amended to conform to the requirements or provisions of
Section 162(m) to the extent permitted by applicable law and deemed advisable by
the Board of Directors; provided that no such construction or amendment shall
have an adverse effect on the economic value to a Participant of any Incentive
Award previously granted hereunder.
17. WITHHOLDING TAXES
Whenever shares of Common Stock are to be issued upon the
exercise of an Option, the occurrence of the Issue Date or Vesting Date with
respect to a share of Restricted Stock, the payment of a Performance Award in
shares of Common Stock or the payment of a Stock Bonus, the Company shall have
the right to require the Participant to remit to the Company in cash an amount
sufficient to satisfy federal, state and local withholding tax requirements, if
any, attributable to such exercise, occurrence or payment prior to the delivery
of any certificate or certificates for such shares. In addition, upon the grant
of a Cash Bonus, the payment of a Performance Award or the making of a payment
with respect to a share of Phantom Stock, the Company shall have the right to
withhold from any cash payment required to be made pursuant thereto an amount
sufficient to satisfy the federal, state and local withholding tax requirements,
if any, attributable to such exercise or grant.
18. AMENDMENT OF THE PLAN
The Board of Directors may at any time suspend or discontinue the
Plan or revise or amend it in any respect whatsoever, PROVIDED, HOWEVER, that
without approval of the stockholders no revision or amendment shall (i) except
as provided in Section 12 hereof, increase the number of shares of Common Stock
that may be issued under the Plan, (ii) except as provided in Section 12 hereof,
increase the maximum number of shares of Common Stock that may be subject to an
Incentive Award granted to any one individual for any calendar year, (iii)
increase the maximum value that can be awarded as a Performance Award, (iv)
materially increase the benefits accruing to individuals holding Incentive
Awards granted pursuant to the Plan, (v) materially modify the requirements as
to eligibility for participation in the Plan, (vi) extend the term of the Plan
or (vii) decrease any authority granted to the Committee under the Plan in
contravention of Rule 16b-3 under the Exchange Act.
19. NO OBLIGATION TO EXERCISE
The grant to a Participant of an Option shall impose no
obligation upon such Participant to exercise such Option.
20. TRANSFERS UPON DEATH
Upon the death of a Participant, outstanding Incentive Awards
granted to such Participant may be exercised only by the executors or
administrators of the Participant's estate or by any person or persons who shall
have acquired such right to exercise by will or by the laws of descent and
distribution. No transfer by will or the laws of descent and distribution of any
Incentive Award, or the right to exercise any Incentive Award, shall be
effective to bind the Company unless the Committee shall have been furnished
with (a) written notice thereof and with a copy of the will and/or such evidence
as the Committee may deem necessary to establish the validity of the transfer
and (b) an agreement by the transferee to comply with all the terms and
conditions of the Incentive Award that are or would have been applicable to the
Participant and to be bound by the acknowledgments made by the Participant in
connection with the grant of the Incentive Award.
21. EXPENSES AND RECEIPTS
The expenses of the Plan shall be paid by the Company. Any
proceeds received by the Company in connection with any Incentive Award will be
used for general corporate purposes.
22. FAILURE TO COMPLY
In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant to comply with any of the terms and conditions
of the Plan or the agreement executed by such Participant evidencing an
Incentive Award, unless such failure is remedied by such Participant within ten
days after having been notified of such failure by the Committee, shall be
grounds for the cancellation and forfeiture of such Incentive Award, in whole or
in part as the Committee, in its absolute discretion, may determine.
23. EFFECTIVE DATE AND TERM OF PLAN
The Plan was adopted by the Board of Directors on January 15,
1996, subject to approval by the stockholders of the Company in accordance with
applicable law, the requirements of Sections 422 and 162(m) of the Code and the
requirements of Rule 16b-3 under Section 16(b) of the Exchange Act. No Incentive
Award may be granted under the Plan after June 30, 2006. Incentive Awards may be
granted under the Plan at any time prior to the receipt of such stockholder
approval; PROVIDED, HOWEVER, that each such grant shall be subject to such
approval. Without limitation on the foregoing, no Option may be exercised prior
to the receipt of such approval, no share certificate shall be issued pursuant
to a grant of Restricted Stock, Performance Award or Stock Bonus prior to the
receipt of such approval and no Cash Bonus or payment with respect to a
Performance Award or a share of Phantom Stock shall be paid prior to the receipt
of such approval. If the Plan is not so approved prior to September 30, 1996,
then the Plan and all Incentive Awards then outstanding hereunder shall
forthwith automatically terminate and be of no force and effect.
EXHIBIT C
LASERMEDICS, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
I. PURPOSE OF THE PLAN. This Lasermedics, Inc. 1996 Non-Employee
Director Stock Option Plan (the "PLAN") is adopted, subject to stockholder
approval, for the benefit of the directors of the Lasermedics, Inc. (the
"COMPANY") who, at the time of their service, are not employees of the Company
or any of its subsidiaries (the "NON-EMPLOYEE DIRECTORS"), and is intended to
advance the interests of the Company by providing the Non-Employee Directors
with additional incentive to serve the Company by increasing their proprietary
interest in the success of the Company.
II. ADMINISTRATION OF THE PLAN.
A. The Plan shall be administered by the Board of Directors of
the Company (the "BOARD") or the Compensation Committee, which Compensation
Committee shall consist of not less than two members of the Board. For the
purposes of this Plan, a majority of the members of the Compensation Committee
shall constitute a quorum for the transaction of business, and the vote of a
majority of those members present at any meeting shall decide any question
brought before that meeting. No member of the Compensation Committee shall be
liable for any act or omission of any other member of the Compensation Committee
or for any act or omission on his own part, including (without limitation) the
exercise of any power or discretion given to him under this Plan, except those
resulting from his own gross negligence or willful misconduct.
B. The Compensation Committee shall have full authority to
administer the Plan, including authority to interpret and construe any provision
of the Plan and the terms of any option ("OPTION") or cash fee award ("CASH FEE
AWARD") granted under it and to adopt such rules and regulations for
administering the Plan as it may deem necessary. Decisions of the Compensation
Committee shall be final and binding on all parties. Notwithstanding the above,
the selection of Non-Employee Directors to whom Options are to be granted, the
number of shares subject to any Option, the exercise price of any Option and the
ten-year maximum term of any Option shall be as hereinafter provided, and the
Compensation Committee shall have no discretion as to such matters.
III. STOCK RESERVED FOR THE PLAN. The total number of shares of
the Company's common stock, par value $.01 per share (the "COMMON STOCK") with
respect to which Options may be granted under the Plan, shall not exceed the
aggregate of 250,000 shares; PROVIDED, that the class and aggregate number of
shares which may be subject to the Options granted hereunder shall be subject to
adjustment in accordance with the provisions of Section 15 of this Plan. Such
shares may be treasury shares or authorized but unissued shares. The Company
shall reserve for issuance pursuant to this Plan such number of shares of Common
Stock as may from time to time be subject to Options granted hereunder. If any
Option expires or is canceled prior to its exercise in full, the shares
theretofore subject to such Option may again be made subject to an Option under
the Plan. All Options granted under the Plan will constitute non-qualified
options ("NQO").
IV. GRANT OF OPTIONS.
A. NON-EMPLOYEE DIRECTORS ON THE EFFECTIVE DATE OF THIS PLAN:
INITIAL GRANT. Subject to the provisions of Section 18 hereof, there shall be
granted to each person who is a Non-Employee Director on the effective date of
this Plan (an "EXISTING DIRECTOR") a one-time NQO to purchase 25,000 shares of
Common Stock at a per share exercise price equal to the Fair Market Value
(defined below) of a share of Common Stock on such date.
B. NON-EMPLOYEE DIRECTORS ELECTED AFTER THE EFFECTIVE DATE OF
THIS PLAN: INITIAL GRANT. Subject to the provisions of Section 18 hereof, for so
long as this Plan is in effect and shares are available for the grant of NQOs
hereunder, each person who is elected as a Non-Employee Director of the Company
after the effective date of this Plan and who is (A) not an Existing Director,
(B) not appointed or elected to the Board in connection with or as a result of
the completion of a financing or acquisition transaction in which the
appointment or election of such person, or the execution of an agreement
obligating the parties thereto to vote in favor of the appointment or election
of such person, is a condition to the obligation of any party to the transaction
to complete the transaction and (C) not otherwise an employee of the Company or
any of the Company's subsidiaries (as defined in Section 424(f) of the Internal
Revenue Code of 1986, as amended (the "CODE") (a "NEW DIRECTOR") (Existing
Directors and New Directors are hereinafter sometimes referred to herein as
"ELIGIBLE DIRECTORS") shall be granted a one-time NQO to purchase 25,000 shares
of Common Stock at a per share exercise price equal to the Fair Market Value
(defined below) of a share of Common Stock on such date (subject to the
adjustments provided in Section 15 hereof). This Section 4(b) shall only apply
to a Non-Employee Director the first time he or she is elected a director of the
Company. Persons elected to be a director for a second or any subsequent term
shall be granted NQOs in accordance with Section 4(c) below.
C. ANNUAL OPTION GRANT TO NON-EMPLOYEE DIRECTORS: SUBSEQUENT
GRANT. Subject to the provisions of Section 18 hereof, for so long as this Plan
is in effect and there are shares available for the grant of NQOs hereunder
(beginning with those Eligible Directors reelected at the Company's 1997 annual
meeting of stockholders), each Eligible Director who shall be reelected a
Non-Employee Director for his or her second or any subsequent term after the
effective date of this Plan, shall be granted an NQO to purchase 10,000 shares
of Common Stock at a per share exercise price equal to the Fair Market Value
(defined below) of a share of Common Stock on such date (subject to the
adjustments provided in Section 15 hereof). This Section 4(c) shall only apply
to an Eligible Director on his or her second or any subsequent election to the
Company's Board of Directors.
D.For the purposes of this Section 4, the "FAIR MARKET VALUE" as
of any particular date shall mean (i) the closing sales price on the immediately
preceding business day of a share of Common Stock as reported on the principal
securities exchange on which shares of Common Stock are then listed or admitted
to trading or (ii) if not so reported, the average of the closing bid and asked
prices for a share of Common Stock on the immediately preceding business day as
quoted on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or (iii) if not quoted on NASDAQ, the average of the closing
bid and asked prices for a share of Common Stock as quoted by the National
Quotation Bureau's "Pink Sheets" or the National Association of Securities
Dealers' OTC Bulletin Board System. If the price of a share of Common Stock
shall not be so reported, the Fair Market Value of a share of Common Stock shall
be determined by the Compensation Committee in its absolute discretion.
V. CASH FEE AWARDS.
At the direction of the Board, the Company may pay cash fees to
Eligible Directors from time to time for serving on the Board and for attendance
at meetings of the Board or committees thereof (the "CASH FEE AWARDS"). Each
Eligible Director may elect on the date of each annual meeting of stockholders,
in a writing delivered to the Company's principal executive offices at 120
Industrial Boulevard, Sugarland, Texas 77478, to have his Cash Fee Awards paid
to him in shares of Common Stock, such number of shares of Common Stock to be
determined by dividing the amount of each Cash Fee Award by the Fair Market
Value (as defined in Section 4(d)) of a share of Common Stock on the last day of
the calendar month in which the Cash Fee Award is awarded. Such election by an
Eligible Director to have his Cash Fee Awards paid to him in shares of Common
Stock shall remain valid until the date of the next annual meeting of
stockholders, and if the Eligible Director does not make another written
election of conversion of Cash Fee Awards at that time, his Cash Fee Awards for
the next year shall be paid in cash.
VI. OPTION AGREEMENT. Each NQO granted under the Plan shall be
evidenced by an agreement, in a form approved by the Compensation Committee,
which shall be subject to the terms and conditions of the Plan. Any agreement
may contain such other terms, provisions and conditions as may be determined by
the Compensation Committee and that are not inconsistent with the Plan.
VII. VESTING AND TERM OF OPTIONS. Each NQO granted under this
Plan shall vest in full on the date of grant; PROVIDED, HOWEVER, that no NQO
shall be exercisable until the expiration of six (6) months after the date of
grant, and PROVIDED, FURTHER, that such NQO shall be subject to termination as
provided in Section 9 hereof. Each option agreement shall provide that the NQO
shall expire ten years from the date of grant, unless sooner terminated pursuant
to Section 9 hereof.
VIII. EXERCISE OF OPTIONS. NQOs shall be exercisable at any time
after the expiration of six (6) months from the date of grant, subject to
termination as provided in Section 9 hereof. NQOs shall be exercised by written
notice to the Company setting forth the number of shares with respect to which
the NQO is being exercised and specifying the address to which the certificates
representing such shares are to be mailed. Such notice shall be accompanied by
cash or certified check, bank draft, or postal or express money order payable to
the order of the Company, for an amount equal to the product obtained by
multiplying the exercise price of the NQO by the number of shares of Common
Stock with respect to which the NQO is then being exercised. As promptly as
practicable after receipt of such written notification and payment, the Company
shall deliver to the Eligible Director a certificate or certificates
representing the number of shares of Common Stock with respect to which such NQO
has been so exercised, issued in the Eligible Director's name; PROVIDED,
HOWEVER, that such delivery shall be deemed effected for all purposes when the
Company's transfer agent shall have deposited such certificates in the United
States mail, addressed to the Eligible Director, at the address specified
pursuant to this Section 8.
Any NQO granted under the Plan may be exercised by a
broker-dealer acting on behalf of an Eligible Director if (i) the broker-dealer
has received from the Eligible Director or the Company a duly endorsed agreement
evidencing such NQO and instructions signed by the Eligible Director requesting
the Company to deliver the shares of Common Stock subject to such NQO to the
broker-dealer on behalf of the Eligible Director and specifying the account into
which such shares should be deposited and (ii) the broker-dealer and the
Eligible Director have otherwise complied with Section 220.3(e)(4) of Regulation
T, 12 CFR Part 220.
IX. TERMINATION OF OPTIONS.
Except as may be otherwise expressly provided in this Plan or
otherwise determined by the Compensation Committee, each NQO, to the extent it
shall not have been exercised previously, shall terminate on the earliest of the
following:
A.On the last day of the three-month period commencing on the
date on which the Eligible Director ceases to be a member of the Board for any
reason other than the death of the Eligible Director, during which period the
Eligible Director shall be entitled to exercise all NQOs held by the Eligible
Director on the date on which the Eligible Director ceased to be a member of the
Board that could have been exercised on such date;
B.On the last day of the six-month period commencing on the date
of the Eligible Director's death while serving as a member of the Board, during
which period the executor or administrator of the Eligible Director's estate or
the person or persons to whom the Eligible Director's NQO shall have been
transferred by will or the laws of descent or distribution, shall be entitled to
exercise all NQOs in respect of the number of shares that the Eligible Director
would have been entitled to purchase had the Eligible Director exercised such
NQOs on the date of his death;
C.Ten years after the date of grant of such NQO; or
d. The point in time when no shares of Common Stock reserved for
issuance pursuant to NQOs granted under the Plan are available.
X. ASSIGNABILITY OF OPTIONS. During the term of an NQO, the NQO
shall not be assignable or otherwise transferable except by will or by the laws
of descent and distribution. Each NQO shall be exercised during the Eligible
Director's lifetime only by the Eligible Director.
XI. NO RIGHTS AS STOCKHOLDER. No Eligible Director shall have any
rights as a stockholder with respect to shares covered by an NQO until the date
of issuance of a stock certificate or certificates representing such shares.
Except as provided in Section 15 hereof, no adjustment for dividends or
otherwise shall be made if the record date therefor is prior to the date of
issuance of certificates representing shares of Common Stock purchased pursuant
to exercise of this NQO.
XII. EXTRAORDINARY CORPORATE TRANSACTIONS. If the Company effects
a merger, consolidation, acquisition, separation, reorganization, liquidation or
similar transaction, the Company may substitute new options for the NQOs
outstanding under the Plan or a corporation other than the Company, including
(without limitation) a parent or subsidiary of the Company, may assume the
Company's duties as to NQOs outstanding under the Plan. Notwithstanding the
foregoing or the provisions of Section 14 hereof, in the event such corporation
or parent or subsidiary of the Company does not substitute new and substantially
equivalent option rights for, or assume, the NQOs then outstanding under the
Plan, all such outstanding NQOs shall be canceled, immediately prior to the
effective date of such extraordinary corporate transaction, and in full
consideration of such cancellation, the Eligible Director to whom the NQO was
granted shall be paid an amount in cash equal to the excess of (i) the value, as
determined by the Compensation Committee in its absolute discretion, of the
property (including cash) received by the holder of a share of Common Stock as a
result of such event less (ii) the exercise price of the NQO.
Except as otherwise expressly provided in this Plan, the issue by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property, or for labor or services
either on direct sale or on the exercise of rights or warrants to subscribe
therefor, or on conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Common Stock then subject to outstanding NQOs.
XIII. INVESTMENT REPRESENTATIONS. If the shares issuable on
exercise of an NQO are not registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), the Company may imprint on the certificate
representing such shares the following legend or any other legend that counsel
for the Company considers necessary or advisable to comply with the Securities
Act:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT
UPON SUCH REGISTRATION OR UPON RECEIPT BY THE CORPORATION OF AN OPINION
OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION, THAT
REGISTRATION IS NOT REQUIRED FOR SUCH SALE OR TRANSFER.
The Company may, but shall in no event be obligated to, register any securities
covered under this Plan pursuant to the Securities Act and, if any shares are so
registered, the Company may remove any legend on certificates representing such
shares. The Company shall not be obligated to take any other affirmative action
to cause the exercise of an NQO or the issuance of shares pursuant thereto to
comply with any law or regulation of any governmental authority.
XIV. AMENDMENT OR TERMINATION. The Board may amend, modify,
revise or terminate this Plan at any time and from time to time; PROVIDED,
HOWEVER, that without the further approval of the holders of a majority of the
Company's outstanding securities present and in person or by proxy and entitled
to vote at an annual or special meeting of the stockholders, or if the
provisions of the Company's charter or bylaws or applicable state law prescribes
a greater degree of stockholder approval for this action, without the degree of
stockholder approval so required, the Board may not (a) materially increase the
benefits accruing to Eligible Directors under this Plan; (b) except as provided
in Section 15 hereof, materially increase the number of shares of Common Stock
that may be issued under this Plan; or (c) materially modify the requirements as
to eligibility for participation in this Plan. In addition, this Plan may not be
amended more than once every six months with respect to the Plan provisions
referred to in Rule 16b-3(c)(2)(ii)(A) under the Securities Exchange Act of
1934, as amended, other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder. All
NQOs granted under this Plan shall be subject to the terms and provisions of
this Plan and any amendment, modification or revision of this Plan shall be
deemed to amend, modify or revise all NQOs outstanding under this Plan at the
time of such amendment, modification or revision. If this Plan is terminated by
action of the Board, all outstanding NQOs may be terminated.
XV. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding NQOs shall not affect in any way the right or power of the Company
or its stockholders to make or authorize the dissolution or liquidation of the
Company, any sale or transfer of all or any part of the Company's assets or
business, any reorganization or other corporate act or proceeding, whether of a
similar character or otherwise, any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, any merger or consolidation of the Company, or any issuance of bonds,
debentures, preferred or prior preference stock senior to or affecting the
Common Stock or the rights thereof; PROVIDED, HOWEVER, that if (a) the
outstanding shares of Common Stock of the Company shall be subdivided into a
greater number of shares or (b) the outstanding shares of Common Stock shall be
combined a smaller number of shares thereof, then (x) the number of shares of
Common Stock available for the grant of NQOs under the Plan shall be
proportionally adjusted to equal the product obtained by multiplying such number
of available shares remaining by a fraction, the numerator of which is the
number of outstanding shares of Common Stock after giving effect to such
combination or subdivision and the denominator of which is that number of
outstanding shares of Common Stock prior to such combination or subdivision, (y)
the exercise price of any NQO then outstanding under the Plan shall be
proportionately adjusted to equal the product obtained by multiplying such
exercise price by a fraction, the numerator of which is the number of
outstanding shares of Common Stock prior to such combination or subdivision and
the denominator of which is that number of outstanding shares of Common Stock
after giving effect to such combination or subdivision, and (z) the number of
shares of Common Stock issuable on the exercise of any NQO then outstanding
under the Plan or thereafter granted under the Plan shall be proportionately
adjusted to equal the product obtained by multiplying such number of shares of
Common Stock by a fraction, the numerator of which is the number of outstanding
shares of Common Stock after giving effect to such combination or subdivision
and the denominator of which is that number of outstanding shares of Common
Stock prior to such combination or subdivision.
XVI. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the
grant and exercise of NQOs thereunder, and the obligation of the Company to sell
and deliver shares acquirable on exercise of such NQOs, shall be subject to all
applicable federal and state laws, rules and regulations and to such approvals
by any governmental or regulatory agency or national securities exchange as may
be required. The Company shall not be required to sell or issue any shares on
exercise of any NQO if the issuance of such shares shall constitute a violation
by the Eligible Director or the Company of any provisions of any law or
regulation of any governmental authority. Each NQO granted under this Plan shall
be subject to the requirement that, if at any time the Board or the Compensation
Committee shall determine that (i) the listing, registration or qualification of
the shares subject thereto on any securities exchange or under any state or
federal law of the United States or of any other country or governmental
subdivision thereof, (ii) the consent or approval of any governmental regulatory
body, or (iii) the making of investment or other representations, are necessary
or desirable in connection with the issue or purchase of shares subject thereto,
no such NQO may be exercised in whole or in part unless such listing,
registration, qualification, consent, approval or representation shall have been
effected or obtained, free of any conditions not acceptable to the Compensation
Committee. Any determination in this connection by the Compensation Committee
shall be final, binding and conclusive.
XVII. INDEMNIFICATION OF COMPENSATION COMMITTEE AND BOARD OF
DIRECTORS. The Company shall, to the fullest extent permitted by law, indemnify,
defend and hold harmless any person who at any time is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding (whether civil, criminal, administrative or investigative) in any way
relating to or arising out of this Plan or any NQOs granted hereunder by reason
of the fact that such person is or was at any time a director of the Company or
a member of the Compensation Committee against judgments, fines, penalties,
settlements and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such action, suit or proceeding. This
right of indemnification shall inure to the benefit of the heirs, executors and
administrators of each such person and is in addition to all other rights to
which such person may be entitled by virtue of the bylaws of the Company or as a
matter of law, contract or otherwise.
XVIII. EFFECTIVE DATE OF THE PLAN. This Plan shall become
effective, subject to stockholder approval, on January 15, 1996. This Plan, and
all NQOs granted under this Plan prior to stockholder approval, shall be void
and of no further force and effect unless this Plan shall have been approved by
the requisite vote of the stockholders entitled to vote at a meeting of the
stockholders of the Company called for such purpose prior to September 30, 1996.
No NQO shall be granted pursuant to this Plan on or after June 30, 2006.
LASERMEDICS, INC.
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE
ANNUAL MEETING OF JULY 18, 1996
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS JULY 18, 1996
The undersigned stockholder of Lasermedics, Inc. (the "Company") hereby
appoints Michael M. Barbour and Dan D. Sudduth, or either of them, the true and
lawful attorneys, agents and proxies of the undersigned, each with full power of
substitution, to vote on behalf of the undersigned at the Annual Meeting of
Stockholders of the Company to be held at the Westin Galleria Hotel, San Felipe
Room, located at 5060 West Alabama, Houston, Texas 77056, on Thursday, July 18,
1996, at 10:00 a.m., Houston Time, and at any adjournments of said meeting, all
of the shares of the Company's common stock in the name of the undersigned or
which the undersigned may be entitled to vote.
1. THE ELECTION OF DIRECTORS
Nominees are Michael M. Barbour, Dr. Chadwick F. Smith, Dan D. Sudduth, Dr.
Pedro A. Rubio, Kenneth W. Davidson and Dr. Ernest J. Henley. Cumulative voting
rights are permitted. This means that you are entitled to the number of votes
equal to six times the number of shares you own. For example, if you own 100
shares, you are entitled to 600 votes for the election of the directors. You may
divide these votes anyway you wish among the six candidates. If you want to
distribute your votes evenly among the six nominees, place an "x" in the box
next to each of their names and do nothing further. If you wish to distribute
your votes between the nominees any other way, please place an "x" in each box
and the number of votes selected next to each nominee's name.
[ ] Michael M. Barbour __________ [ ] Dr. Chadwick F. Smith__________
[ ] Dan D. Sudduth __________ [ ] Dr. Pedro A. Rubio __________
[ ] Kenneth W. Davidson__________ [ ] Dr. Ernest J. Henley __________
Instruction: If you wish to withhold authority to vote for any individual
nominee or nominees, write the name or names of the nominee(s) on the line
provided below:
[ ] To withhold authority to vote on all nominees for directors listed.
PLEASE NOTE THAT IF YOU FAIL TO DISTRIBUTE ALL OF THE VOTES TO WHICH YOU ARE
ENTITLED AMONG THE NOMINEES, ANY VOTES REMAINING WILL BE ALLOCATED EVENLY AMONG
THE NOMINEES, EXCEPT THOSE NOMINEES FOR WHOM YOU HAVE SPECIFICALLY INDICATED
YOUR INTENT TO WITHHOLD AUTHORITY TO VOTE.
2. APPROVAL OF THE CHARTER AMENDMENTS
[ ] For [ ] Against [ ] Abstain
3. APPROVAL OF THE LASERMEDICS, INC. 1996 INCENTIVE STOCK PLAN
[ ] For [ ] Against [ ] Abstain
4. APPROVAL OF THE LASERMEDICS, INC. 1996 NON-EMPLOYEE DIRECTOR STOCK
OPTION PLAN
[ ] For [ ] Against [ ] Abstain
5. [ ] In their discretion, upon such other matters as may properly come
before the meeting; hereby revoking any proxy or proxies heretofore
given by the undersigned.
(This Proxy must be dated and signed on the reverse side.)
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made, this
Proxy will be voted FOR the election of the nominees above, FOR approval of the
Charter Amendments, FOR the approval of the 1996 Lasermedics, Inc. Incentive
Stock Plan, FOR the approval of the Lasermedics, Inc. 1996 Amended and Restated
Non-Employee Director Stock Option Plan and in accordance with the discretion of
the persons designated above with respect to any other business properly before
the meeting. Proxy for Annual Meeting of Stockholders
July 18, 1996
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and the Proxy Statement furnished herewith.
Dated , 1996
PLEASE MARK, SIGN, DATE AND RETURN IN THE ENVELOPE ENCLOSED
