SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _____)
Filed by the Registrant [X]
Filed by Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
AETRIUM INCORPORATED
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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AETRIUM INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1997
The Annual Meeting of the Shareholders (the "Annual Meeting") of
Aetrium Incorporated, a Minnesota corporation (the "Company"), will be held at
the Company's corporate headquarters at 2350 Helen Street, North St. Paul,
Minnesota, beginning at 4:00 p.m. on Tuesday, May 20, 1997, for the following
purposes:
1. To elect six (6) persons to serve as directors until the next
Annual Meeting of the Shareholders or until their respective
successors shall be elected and qualified;
2. To consider and act upon a proposal to amend the Company's
1993 Stock Incentive Plan; and
3. To transact such other business as may properly come before
the meeting.
The record date for determination of the shareholders entitled to
notice of and to vote at the meeting and any adjournments thereof is the close
of business on April 4, 1997.
Whether or not you expect to attend the Annual Meeting in person,
please complete, sign, date and promptly return the enclosed proxy in the
envelope provided, which requires no postage if mailed in the United States.
By Order of the Board of Directors
Darnell L. Boehm
CHIEF FINANCIAL OFFICER AND SECRETARY
April 11, 1997
North St. Paul, Minnesota
AETRIUM INCORPORATED
2350 HELEN STREET
NORTH ST. PAUL, MINNESOTA 55109
(612) 770-2000
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1997
INTRODUCTION
The Annual Meeting of the Shareholders of Aetrium Incorporated, a
Minnesota corporation (the "Company"), will be held at the Company's corporate
headquarters at 2350 Helen Street, North St. Paul, Minnesota, beginning at 4:00
p.m. on Tuesday, May 20, 1997.
A proxy card is enclosed for your use. YOU ARE SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS TO SIGN AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE. No postage is required if mailed within the United States. The cost of
soliciting proxies, including the preparation, assembly and mailing of proxies
and soliciting material, as well as the cost of forwarding such material to the
beneficial owners of the Common Stock of the Company, will be borne by the
Company. Directors, officers and regular employees of the Company may, without
compensation other than their regular compensation, solicit proxies by
telephone, telegraph or personal conversation. The Company may reimburse
brokerage firms and others for expenses in forwarding proxy materials to the
beneficial owners of Common Stock.
Any shareholder giving a proxy may revoke it at any time prior to its
use at the Annual Meeting either by giving written notice of such revocation to
the Secretary of the Company, by filing a duly executed proxy bearing a later
date with the Secretary of the Company, or by appearing at the Annual Meeting
and filing written notice of revocation with the Secretary of the Company prior
to use of the proxy. Proxies will be voted as specified by shareholders. Proxies
that are signed by shareholders but that lack any such specification will be
voted in favor of the proposals set forth in the Notice of Meeting and in favor
of the election as directors of the nominees for directors listed in this Proxy
Statement. Abstentions from such proposals are treated as votes against such
proposals. Broker non-votes on such proposals (I.E., a card returned by a broker
because voting instructions have not been received and the broker has no
discretionary authority to vote) are treated as shares with respect to which
voting power has been withheld by the beneficial holders of those shares and,
therefore, as shares not entitled to vote on such proposals.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE
PROPOSALS SET FORTH IN THE NOTICE OF MEETING.
The Company expects that this proxy material will be first mailed to
shareholders on or about April 11, 1997.
OUTSTANDING SHARES
Only holders of Common Stock of record at the close of business on
April 4, 1997 will be entitled to vote at the Annual Meeting. On April 4, 1997
the Company had 8,471,904 outstanding shares of Common Stock, each such share
entitling the holder thereof to one vote on each matter to be voted on at the
Annual Meeting. The holders of a majority of the shares entitled to vote and
represented in person or by proxy at the Annual Meeting will constitute a quorum
for the transaction of business at the Annual Meeting. In general, shares of
Common Stock represented by a properly signed and returned proxy card will be
counted as shares present and entitled to vote at the meeting for the purposes
of determining a quorum, without regard to whether the card reflects an
abstention (or is left blank) or reflects a broker non-vote on a matter. Holders
of shares of Common Stock are not entitled to cumulate voting rights.
ELECTION OF DIRECTORS
NOMINATION
The Company's Bylaws provide that the number of directors that shall
constitute the Board of Directors (the "Board") shall be at least one or such
other number as may be determined by the Board or the Company's shareholders. At
the 1996 Annual Meeting of the Shareholders of the Company, five directors were
elected. In June 1996, Terrance J. Nagel was appointed to the Board. By written
action of the Board dated as of January 21, 1997, the Board resolved to nominate
six persons to stand for election at the 1997 Annual Meeting of Shareholders.
Directors elected at the Annual Meeting will hold office until the next regular
meeting of shareholders or until their successors are duly elected and
qualified.
All of the nominees are currently members of the Board. The election of
each Director requires the affirmative vote of a majority of the shares of
Common Stock represented in person or by proxy at the Annual Meeting, provided
that a quorum consisting of a majority of the voting power of the Company's
outstanding shares is represented either in person or by proxy at the Annual
Meeting. The Board recommends a vote FOR the election of each of the nominees
listed in this Proxy Statement. The Board intends to vote the proxies solicited
on its behalf (other than proxies in which the vote is withheld) for the
election of each of the nominees as directors. If prior to the Annual Meeting
the Board should learn that any of the nominees will be unable to serve by
reason of death, incapacity or other unexpected occurrence, the proxies will be
cast for another nominee to be designated by the Board to fill such vacancy,
unless a shareholder indicates to the contrary on his or her proxy.
Alternatively, the proxies may, at the Board's discretion, be voted for such
fewer nominees as results from such death, incapacity or other unexpected
occurrence. The Board has no reason to believe that any of the nominees will be
unable to serve.
INFORMATION ABOUT NOMINEES
The following table sets forth certain information as of February 21,
1997 which has been furnished to the Company by the persons who have been
nominated by the Board to serve as Directors for the ensuing year.
<TABLE>
<CAPTION>
NOMINEES DIRECTOR
FOR ELECTION AGE PRINCIPAL OCCUPATION SINCE
------------ --- -------------------- -----
<S> <C> <C> <C>
Joseph C. Levesque 52 Chairman of the Board, President and 1986
Chief Executive Officer of the Company
Darnell L. Boehm 48 Chief Financial Officer and Secretary of the Company 1986
Terrence W. Glarner 53 President of West Concord Ventures, Inc. 1990
Andrew J. Greenshields 59 President of Pathfinder Ventures, Inc. 1986
Douglas L. Hemer 50 President of the San Diego Division of the Company 1986
Terrance J. Nagel 42 Chairman of the Board and Chief Executive Officer 1996
of NOW Technologies, Inc.
</TABLE>
OTHER INFORMATION ABOUT NOMINEES
JOSEPH C. LEVESQUE has served as President, Chief Executive Officer and
Chairman of the Board of Directors of the Company since 1986. From 1973 to 1986,
Mr. Levesque served in various capacities and most recently as Executive Vice
President of Micro Component Technology, Inc., a manufacturer of integrated
circuit testers and test handlers. Mr. Levesque is also a director of Arden
Industrial Products, Inc., a public company, and served on its compensation
committee during 1996.
DARNELL L. BOEHM has served as Chief Financial Officer, Secretary and
as a director of the Company since 1986. From December 1994 until July 1995, Mr.
Boehm had also assumed executive management responsibilities for the Company's
San Diego Division. Mr. Boehm is also the principal of Darnell L. Boehm &
Associates, a management consulting firm. From October 1988 to March 1993, Mr.
Boehm served as the Acting President of Genesis Labs, Inc., a manufacturer of
medical diagnostic products. Mr. Boehm is also a director of Rochester Medical
Corporation, a public company, and serves on the audit and compensation
committees of such company.
TERRENCE W. GLARNER has served as a director of the Company since March
1990. Since February 1993, Mr. Glarner has been President of West Concord
Ventures, Inc. and has been a consultant to North Star Ventures, Inc. ("North
Star"), and Norwest Venture Capital. From 1988 to February 1993, Mr. Glarner was
President of North Star and North Star Ventures II, Inc. ("North Star II"), an
affiliate of North Star. Mr. Glarner is also a director of CIMA Labs, Inc., FSI
International, Inc. and Datakey, Inc., all of which are public companies. Mr.
Glarner also serves on the compensation committee of each of these three
companies.
ANDREW J. GREENSHIELDS served as a director of the Company from July
1984 to October 1985 and has served continuously as a director since October
1986. Mr. Greenshields has been President of Pathfinder Ventures, Inc.
("Pathfinder"), an investment company, since September 1980. Mr. Greenshields is
also a partner of Pathfinder Partners II, the general partner of Pathfinder
Venture Capital Fund II, a Minnesota Limited Partnership ("Pathfinder II").
Pathfinder is also the management company for Pathfinder II. Mr. Greenshields is
also a director and member of the compensation committee of CNS, Inc., a public
company.
DOUGLAS L. HEMER has served as a director of the Company since 1986 and
served as the Chief Administrative Officer of the Company from May 1, 1996 until
February 1, 1997, at which time he was named the President of the San Diego
Division. Mr. Hemer was a partner in the law firm of Oppenheimer Wolff &
Donnelly for over 15 years before joining the Company. Oppenheimer Wolff &
Donnelly has provided and is expected to continue to provide legal services to
the Company.
TERRANCE J. NAGEL has served as a director of the Company since June
1996. Mr. Nagel is also the Chairman of the Board, Chief Executive Officer and
co-founder of NOW Technologies, Inc., a privately held company, a position he
has held since 1988.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The business and affairs of the Company are managed by the Board, which
held five meetings during the fiscal year ended December 31, 1996. Committees
established and maintained by the Board include the Audit Committee and the
Compensation Committee.
The function of the Audit Committee is to review the Company's
financial statements, oversee the financial reporting and disclosures prepared
by management, make recommendations regarding the Company's financial controls,
and confer with the Company's outside auditors. The Audit Committee met once
during the fiscal year ended December 31, 1996. Messrs. Glarner and Greenshields
served as members of the Audit Committee in fiscal 1996. Mr. Hemer resigned from
the Audit Committee on March 27, 1996. Mr. Nagel was elected to serve on the
Audit Committee on December 17, 1996.
The responsibilities of the Compensation Committee include approving
the compensation for those officers who are also directors of the Company and
setting the terms of and grants of awards under the Company's 1993 Stock
Incentive Plan (the "Plan"). The Compensation Committee met two times during the
fiscal year ended December 31, 1996. Messrs. Glarner and Greenshields served as
members of the Compensation Committee in fiscal 1996. Mr. Hemer resigned from
the Compensation Committee on March 27, 1996. Mr. Nagel was elected to serve on
the Compensation Committee on December 17, 1996.
All of the Directors of the Company attended 75% or more of the
aggregate meetings of the Board and all such committees on which they served.
COMPENSATION OF DIRECTORS
DIRECTORS' FEES. Directors of the Company receive no cash compensation
for their services as members of the Board, although their out-of-pocket
expenses incurred on behalf of the Company are reimbursed.
AUTOMATIC OPTION GRANT. Prior to certain amendments to the Plan made by
the Board in September 1996 (see the section herein entitled "Proposal to Amend
the 1993 Stock Incentive Plan -- Plan Amendments"), the Plan provided for the
automatic grant of non-statutory stock options to purchase 30,000 shares of
Common Stock to non-employee directors at an exercise price equal to the fair
market value of the Common Stock on the date of grant upon the non-employee
director's initial election to the Board. Under these provisions, Messrs.
Glarner and Greenshields each received options to purchase 30,000 shares of
Common Stock, vesting in 25% increments on January 1, 1996, and on each
anniversary thereafter, and Mr. Nagel received options to purchase 30,000 shares
of Common Stock, vesting in 20% increments on June 19, 1996, and on each
anniversary thereafter. In connection with the amendment and repricing of
certain options held by employees (see the section herein entitled "Executive
Compensation and Other Benefits -- Compensation Committee Report on Repricing of
Options"), Mr. Nagel's options were amended and repriced on September 18, 1996
at the fair market value on that date. Under the Plan as amended by the Board in
September 1996, there are no automatic option grants to non-employee directors,
although all directors are eligible for the grant of options under the Plan.
Although the Board is not obligated to do so, in the future the Board presently
intends to grant non-statutory stock options to purchase 30,000 shares of Common
Stock to non-employee directors at an exercise price equal to the fair market
value of the Common Stock on the date of grant upon such non-employee director's
initial election to the Board, with such options vesting in 20% increments over
five years.
PRINCIPAL SHAREHOLDERS AND
BENEFICIAL OWNERSHIP OF MANAGEMENT
The table below sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of February 21, 1997, unless
otherwise noted, (a) by each shareholder who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock, (b) by each director,
nominee and executive officer named in the Summary Compensation Table (set forth
herein), and (c) by all executive officers and directors of the Company as a
group. The address for all executive officers and directors of the Company is
2350 Helen Street, North St. Paul, Minnesota 55109.
SHARES OF COMMON STOCK BENEFICIALLY OWNED(1)
--------------------------------------------
NAME AMOUNT PERCENT OF CLASS
- ---- ------ ----------------
Joseph C. Levesque 189,356(2) 2.2%
Darnell L. Boehm 59,731(3) *
Lawrence J. Klassen 27,693 *
Daniel M. Koch 68,403(4) *
Gerald C. Clemens 35,596(5) *
Terrence W. Glarner 32,830(6) *
Andrew J. Greenshields 15,000(7) *
Douglas L. Hemer 41,551(8) *
Terrance J. Nagel 6,000(9) *
Investment Advisors, Inc. 864,000(10) 10.2%
3700 First Bank Place
Box 357
Minneapolis, MN 55440
First Bank System, Inc. 933,940(11) 11.0%
601 Second Avenue South
Minneapolis, MN 55402-4302
Kopp Investment Advisors, Inc. 1,195,464(12) 14.1%
6600 France Avenue South
Suite 672
Edina, MN 55435
All executive officers and directors 497,202(13) 5.7%
as a group (10 persons)
- ------------------------
*Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person or member of a group to acquire them within 60 days
are treated as outstanding only when determining the amount and percent
owned by such person or group. Unless otherwise noted, all of the
shares shown are held by individuals or entities possessing sole voting
and investment power with respect to such shares.
(2) Includes options to purchase 97,247 shares of Common Stock exercisable
within 60 days.
(3) Includes options to purchase 34,897 shares of Common Stock exercisable
within 60 days.
(4) Includes options to purchase 38,594 shares of Common Stock exercisable
within 60 days.
(5) Includes options to purchase 35,000 shares of Common Stock exercisable
within 60 days.
(6) Includes options to purchase 15,000 shares of Common Stock exercisable
within 60 days.
(7) Includes options to purchase 15,000 shares of Common Stock exercisable
within 60 days.
(8) Includes options to purchase 34,531 shares of Common Stock exercisable
within 60 days.
(9) Includes options to purchase 6,000 shares of Common Stock exercisable
within 60 days.
(10) Based solely on a Schedule 13G dated January 10, 1997, Investment
Advisers, Inc. has sole voting and dispositive power over 675,000
shares, and shared voting and dispositive power over 189,000 shares.
(11) Based solely on a Schedule 13G dated February 13, 1997, includes shares
of Common Stock held by The Regional Equity Fund, a mutual fund of
First American Investment Funds, Inc., an open-end investment company
which holds in excess of 5% of the Common Stock of the Company. First
Bank Systems, Inc. ("First Bank") has sole voting power over 895,350
shares and shared voting power over 38,190 shares. First Bank has sole
dispositive power over 820,600 shares and shared dispositive power over
23,590 shares.
(12) Based solely on a Schedule 13G dated January 28, 1997, includes
1,170,464 shares of Common Stock held of record by the clients of Kopp
Investment Advisers, Inc. ("KIA"), for which KIA has shared dispositive
power, 15,000 shares of Common Stock over which KIA has sole
dispositive power, 136,000 shares over which KIA has sole voting power
and 10,000 shares over which The Kopp Family Foundation (the
"Foundation") has sole voting and dispositive power. Mr. LeRoy C. Kopp
owns 100% of KIA and is the trustee of and controls the Foundation.
(13) Includes options to purchase 312,118 shares of Common Stock exercisable
within 60 days.
EXECUTIVE COMPENSATION AND OTHER BENEFITS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash and non-cash compensation for
each of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company whose salary and bonus exceeded $100,000 in the fiscal
year ended December 31, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------
NAME AND SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) COMPENSATION($)(2)
- ------------------ ---- --------- ----------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Joseph C. Levesque 1996 $187,385 $51,640 200,000 $4,750
PRESIDENT AND CHIEF 1995 174,769 86,975 --- (3) 5,680
EXECUTIVE OFFICER 1994 154,904 69,750 180,000 104,514(4)
Darnell L. Boehm 1996 $107,183 $30,069 44,687 $4,622
CHIEF FINANCIAL 1995 132,423 66,101 --- (3) 5,680
OFFICER AND 1994 94,788 44,650 150,000 103,659(4)
SECRETARY
Lawrence J. Klassen(5) 1996 $139,277 $39,679 --- $4,693
FORMER PRESIDENT-- 1995 115,889 54,198 --- 5,327
SAN DIEGO DIVISION 1994 95,501 34,860 45,000 3,316
Daniel M. Koch 1996 $122,431 $21,108 7,500 $4,413
VICE PRESIDENT-- 1995 114,769 63,105 --- (3) 5,463
WORLDWIDE SALES 1994 94,789 22,325 60,000 3,201
Gerald C. Clemens 1996 $111,669 $32,068 --- $4,178
VICE PRESIDENT-- 1995 103,000 44,033 --- 3,799
RELIABILITY TEST 1994 94,527 35,293 45,000 3,263
PRODUCTS
</TABLE>
- ----------------------
(1) Cash bonuses and sales commissions for services rendered have been
included as compensation for the year earned, even though a portion of
such bonuses and sales commissions were actually paid in the following
year. Such bonuses and sales commissions were payable pursuant to each
executive's individual bonus arrangement, which is based upon the
achievement of certain individual and Company goals.
(2) Represents amounts of matching contributions made by the Company to the
officers' respective 401(k) accounts.
(3) The options received in 1996 by each of Messrs. Levesque, Boehm and
Koch represent options originally granted to such individuals in 1995
that were repriced in September 1996. See "Compensation Committee
Report on Repricing of Options."
(4) Includes special bonuses of $100,000 each for Messrs. Levesque and
Boehm awarded by the Compensation Committee for their services related
to the acquisition of the business of SymTek Systems, Inc. in November
1994. Such bonuses were paid in January 1995.
(5) Mr. Klassen resigned from his position effective January 17, 1997 and
is no longer employed by the Company.
OPTION GRANTS
The following table summarizes option grants during fiscal 1996 to the
executive officers named in the Summary Compensation Table and the potential
realizable value of the options held by such persons at December 31, 1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1996
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#)(2) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ----- ------------- ----------- --------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Levesque 200,000 28.6% $10.25 12/19/00 $472,935 $1,026,440
Darnell L. Boehm 44,687 6.4 10.25 12/19/00 105,670 229,343
Daniel M. Koch 7,500 1.1 10.25 12/19/00 17,735 38,492
</TABLE>
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(1) These amounts represent certain assumed rates of appreciation only.
Actual gains, if any, on stock option exercises are dependent upon the
future performance of the Company's Common Stock, overall market
conditions and the executive's continued involvement with the Company.
The amounts represented in this table will not necessarily be achieved.
(2) All options shown reflect the amendment and repricing of existing
options. Such options were repriced on September 18, 1996 under the
Plan, with an exercise price equal to the fair market value of the
Common Stock on such date. The Plan is administered by the Compensation
Committee (the "Committee"). The options set forth above vest in 1/48th
increments on the 19th of each month commencing on January 19, 1996. In
the event a "change in control" of the Company occurs, then, if
approved by the Committee, all outstanding options will become
immediately exercisable in full and will remain exercisable for the
remainder of their terms, regardless of whether the participant remains
in the employ or service of the Company or any subsidiary. For purposes
of the Plan, a "change in control" of the Company will be deemed to
have occurred upon (i) a sale or other transfer of substantially all of
the assets of the Company to an entity that is not controlled by the
Company, (ii) a merger or consolidation to which the Company is a party
if, after such merger or consolidation, the Company's shareholders do
not beneficially own more than 80% of the combined voting power of the
surviving corporation's outstanding voting securities, (iii) any person
becoming the beneficial owner of 40% or more of the combined voting
power of the Company's outstanding securities, or (iv) a change in the
composition of the Board such that the individuals constituting the
Board on the effective date of the Plan cease for any reason to
constitute at least a majority of the Board (with exceptions for
individuals who are nominated or otherwise approved by the current
Board). The payment of an option exercise price may be made either in
cash or, subject to the discretion of the Committee, in shares of
Common Stock.
OPTION EXERCISES
The following table summarizes option exercises during fiscal 1996 and
the number and value of options held by the executive officers named in the
Summary Compensation Table as of December 31, 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1996 AND 1996 YEAR-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1996(#) AT DECEMBER 31, 1996($)(1)
ACQUIRED ON VALUE --------------------- --------------------------
NAME EXERCISE (#) REALIZED ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Levesque 103,048 $1,203,763 6,800 194,588 $278,913 $740,999
Darnell L. Boehm 65,000 757,917 37,501 72,186 188,254 338,723
Lawrence J. Klassen 70,079 464,186 1,406 11,953 8,788 74,706
Daniel M. Koch 9,375 158,093 34,688 21,562 214,534 119,215
Gerald C. Clemens 10,000 58,125 23,750 11,250 157,344 74,531
</TABLE>
- ----------------------
(1) Based on the December 31, 1996 closing price of the Common Stock of
$13.25.
(2) The "Value Realized" and the "Value of Unexercised In-the-Money
Options" amounts are calculated based on the excess of the market value
of the Common Stock on the date of exercise or December 31, 1996,
respectively, over the exercise price. The exercise price of options
may be paid in cash or in shares of the Company's Common Stock valued
at fair market value on the day prior to the date of exercise. In
addition, at the discretion of the Compensation Committee the exercise
price of options granted may be paid pursuant to a cashless exercise
procedure under which the executive provides irrevocable instructions
to a brokerage firm to sell the purchased shares and to remit to the
Company, out of the sale proceeds, an amount equal to the exercise
price plus all applicable withholding taxes.
COMPENSATION COMMITTEE REPORT ON REPRICING OF OPTIONS
In September 1996, in the belief that it was in the best interests of
the Company and its shareholders to ensure that the intended incentives for
employees were maintained in accordance with the compensation philosophy of the
Compensation Committee, the Compensation Committee amended and repriced (to a
lower exercise price) certain of the options then held by such employees that
had been granted pursuant to the Company's 1993 Stock Incentive Plan. These
options were amended and repriced to reflect the fact that the market price of
the Common Stock had been negatively impacted in 1996 because of the overall
downturn in the semiconductor industry. In the opinion of the Compensation
Committee, the Company's management and other personnel have dealt with the
industry downturn proactively and effectively to manage through the downturn in
a manner that has maximized the Company's revenues and operating results while
positioning the Company to take advantage of the next industry cycle.
Accordingly, the Compensation Committee determined that, in light of the reduced
market price of the Common Stock and the importance of equity based compensation
to the overall compensation philosophy of the Compensation Committee, it was
appropriate to reprice these options to provide the continuing incentives
intended under the Plan to the affected employees. These options were amended
and repriced on September 18, 1996 with an exercise price equal to the market
price on that date.
The following table sets forth certain additional information regarding
all repricings of options held by any executive officer that have occurred in
the last ten years.
<TABLE>
<CAPTION>
TEN-YEAR OPTION REPRICINGS
LENGTH OF
SECURITIES ORIGINAL
UNDERLYING MARKET PRICE OPTION TERM
NUMBER OF OF STOCK AT EXERCISE PRICE REMAINING
OPTIONS TIME OF AT TIME OF NEW AT DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME AND POSITION(1) DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) AMENDMENT
- --------------------- ---- ----------- ------------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Levesque 9/18/96 200,000 $10.25 $16.50 $10.25 51 months
Darnell L. Boehm 9/18/96 44,687 10.25 16.50 10.25 51 months
Daniel M. Koch 9/18/96 7,500 10.25 16.50 10.25 51 months
James E. Serley 9/18/96 15,000 10.25 16.50 10.25 51 months
James E. Serley 9/18/96 45,000 10.25 12.25 10.25 45 months
Douglas L. Hemer 9/18/96 52,500 10.25 14.88 10.25 54 months
Paul H. Askegaard 9/18/96 8,925(2) 10.25 16.50 10.25 48 months
Paul H. Askegaard 9/18/96 5,000 10.25 16.50 10.25 51 months
- --------------------------------
</TABLE>
(1) The positions of each of Messrs. Levesque, Boehm, Koch and Hemer are
set forth herein. Mr. Askegaard serves as the Company's Treasurer. Mr.
Serley serves as the Company's Vice President and General Manager - IC
Handling Products.
(2) These options were also amended and repriced on December 19, 1995 to an
exercise price equal to $16.50, the fair market value of the Common
Stock at that date, from an exercise price of $22.69.
COMPENSATION COMMITTEE
Terrence W. Glarner
Andrew J. Greenshields
EMPLOYMENT AGREEMENT
Pursuant to an employment agreement, effective April 1, 1986, between
the Company and Mr. Levesque, the President and Chief Executive Officer of the
Company, Mr. Levesque is entitled to receive six months salary as severance pay
in the event of an involuntary termination (including by reason of death or
disability but excluding termination for cause). In the event of voluntary
termination, the Company may elect to pay Mr. Levesque severance pay for any
portion of the employment period remaining after notice of termination in lieu
of continued employment.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors approves the
compensation for executive officers who are also directors of the Company and
acts on such other matters relating to their compensation as it deems
appropriate. During fiscal 1996, Mr. Levesque, the Company's Chairman of the
Board, President and Chief Executive Officer, Mr. Boehm, the Company's Chief
Financial Officer and Secretary, and Mr. Hemer, the Company's Chief
Administrative Officer during fiscal 1996 and currently the President of the San
Diego Division of the Company, were the only executive officers who were also
directors of the Company. The Compensation Committee consists of at least two
non-employee directors and meets at least once per year. The members of the
Compensation Committee during fiscal 1996 were Messrs. Glarner and Greenshields,
who served for all of fiscal 1996 and Mr. Hemer, who served until March 27,
1996, at which time he resigned from the Compensation Committee. Mr. Nagel was
elected to serve on the Compensation Committee on December 17, 1996. Mr.
Levesque, as the Company's President and Chief Executive Officer, establishes
the compensation of all executive officers who are not also directors of the
Company. The Compensation Committee also administers, with respect to all
eligible recipients, the Company's stock option plans and determines the
participants in such plans and the amount, timing and other terms and conditions
of awards under such plans.
COMPENSATION PHILOSOPHY AND OBJECTIVES. The Compensation Committee is
committed to the general principle that overall executive compensation should be
commensurate with performance by the Company and the individual executive
officers, and the attainment of predetermined corporate goals. The primary
objectives of the Company's executive compensation program are to:
* Reward the achievement of desired Company and individual
performance goals.
* Provide compensation that enables the Company to attract and
retain key executives.
* Provide compensation opportunities that are linked to the
performance of the Company and that directly link the
interests of executives with the interests of shareholders.
The Company's executive compensation program provides a level of
compensation opportunity that is competitive for companies in comparable
industries and of comparable development, complexity and size. In determining
compensation levels, the Compensation Committee considers a number of factors,
including Company performance, both separately and in relation to other
companies competing in the Company's markets, the individual performance of each
executive officer, comparative compensation surveys concerning compensation
levels and stock grants at other companies, historical compensation levels and
stock awards at the Company, and the overall competitive environment for
executives and the level of compensation necessary to attract and retain key
executives. Compensation levels may be greater or less than competitive levels
in comparable companies based upon factors such as annual and long-term Company
performance and individual performance.
EXECUTIVE COMPENSATION PROGRAM COMPONENTS. The Company's executive
compensation program consists of base salary, bonuses and long-term incentive
compensation in the form of stock options. The particular elements of the
compensation program are discussed more fully below.
BASE SALARY. Base pay levels of executives, including the Chief
Executive Officer, are determined by the potential impact of the individual on
the Company and its performance, the skills and experiences required by the
position, the individual performance and potential of the executive and the
Company's overall performance. Base salaries for executives are evaluated and
adjusted annually. A portion of each executive officer's base salary (including
the Chief Executive Officer) is determined based on a formula related to Company
revenue, and may be increased or decreased during the year based upon actual
Company revenue levels.
BONUSES. The Company also may pay bonuses to executive officers as part
of its executive compensation program. The purpose of the cash bonus component
of the executive compensation program is to provide a direct financial incentive
for executives who help the Company achieve certain Company financial objectives
and who meet individual performance goals. The Compensation Committee has
determined that potential bonuses in fiscal 1997 will range from 0% to 50% of
base salary (excluding sales commissions) for all executive officers, including
the Chief Executive Officer.
LONG-TERM INCENTIVE COMPENSATION. Stock options are used to enable key
executives to participate in a meaningful way in the success of the Company and
to link their interests directly with those of the shareholders. The number of
stock options granted to executives is based upon a number of factors, including
base salary level and how such base salary level relates to those of other
companies in the Company's industry, the number of options previously granted
and individual and Company performance during the year.
SECTION 162(m). The Omnibus Reconciliation Act of 1993 added Section
162(m) to the Internal Revenue Code of 1986, as amended (the "Code"), limiting
corporate deductions to $1,000,000 for certain compensation paid to the chief
executive officer and each of the four other most highly compensated executives
of publicly held companies. The Company does not believe it will pay
"compensation" within the meaning of Section 162(m) to such executive officers
in excess of $1,000,000 in the foreseeable future. Therefore, the Company does
not have a policy at this time regarding qualifying compensation paid to its
executive officers for deductibility under Section 162(m), but will formulate a
policy if compensation levels ever approach $1,000,000.
CHIEF EXECUTIVE OFFICER COMPENSATION COMMITTEE
Joseph C. Levesque Terrence W. Glarner
Andrew J. Greenshields
Terrance J. Nagel
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. Glarner,
Greenshields and Nagel. On May 1, 1996, Doug Hemer was named the Company's Chief
Administrative Officer, which position he held until February 1, 1997, when he
was named the President of the San Diego Division. Mr. Hemer had served as a
member of the Compensation Committee until he resigned from the Compensation
Committee on March 27, 1996.
STOCK PERFORMANCE GRAPH
In accordance with the rules of the Securities and Exchange Commission,
the following performance graph compares the yearly cumulative total shareholder
return on the Company's Common Stock on the Nasdaq National Market since the
date of the Company's initial public offering, completed in August 1993, with
the yearly cumulative total return over the same period of the Nasdaq Stock
Market (U.S. Companies) Index and of a self-determined group of peer companies
(the "Peer Group"). The Peer Group consists of Electroglas Inc., Aseco
Corporation, Teradyne Inc., Cohu, Inc. and Micro Component Technology, Inc. The
comparison assumes the investment of $100 in Common Stock, the Nasdaq Stock
Market (U.S. Companies) Index and the Peer Group at the beginning of the period
and assumes reinvestment of all dividends.
Aug-93 Dec-93 Dec-94 Dec-95 Dec-96
ATRM $100.00 $115.71 $131.43 $342.85 $227.15
Peers $100.00 $105.42 $113.26 $179.39 $160.63
Nasdaq $100.00 $108.64 $106.19 $150.18 $184.73
PROPOSAL TO AMEND THE 1993 STOCK INCENTIVE PLAN
INTRODUCTION
In June 1993, the Board approved the Company's 1993 Stock Incentive
Plan which was subsequently approved by the shareholders of the Company. The
purpose of the Plan is to advance the interests of the Company and its
shareholders by enabling the Company and its subsidiaries to attract and retain
persons of ability to perform services for the Company and its subsidiaries by
providing an incentive to such individuals through equity participation in the
Company and by rewarding such individuals who contribute to the achievement by
the Company of its economic objectives.
PLAN AMENDMENTS
On September 18, 1996, the Board amended the Plan to make certain
conforming changes to the Plan in light of certain amendments to Rule 16b-3 of
the Securities Exchange Act of 1934, as amended. In addition, as a result of
these Rule 16b-3 changes, the Board determined that the automatic option grant
to non-employee directors feature of the Plan was no longer necessary and
amended the Plan to remove this feature. The Board determined that removal of
this feature would provide the Board with greater flexibility to set the
equity-based portion of director compensation at levels deemed appropriate.
On March 24, 1997, the Board also amended the Plan, subject to
shareholder approval, to add a provision that will allow the Company a tax
deduction for options granted under the Plan to its chief executive officer and
the four other most highly compensated executive officers (the "covered
executives"). Under Section 162(m) of the Code, the amount of the Company's tax
deduction is limited to $1,000,000 per year for certain compensation paid to
each of the Company's covered executives. This limitation, however, does not
apply to "performance-based compensation." Options may qualify as
performance-based compensation if shareholders approve a maximum limit on the
number of shares underlying such awards that may be granted to any participant
over a specified period. Accordingly, the Plan has been amended to provide such
a limit, as described below. If the amendments made to the Plan in March 1997
are not approved by the shareholders, no further grants under the Plan to the
covered executives will be made. The major features of the Plan, as amended, are
summarized below, which summary is qualified in its entirety by reference to the
actual text of the Plan, a copy of which may be obtained from the Company.
SUMMARY OF THE PLAN
GENERAL. The Plan provides for the grant to participating eligible
recipients of the Company of (i) options to purchase Common Stock that qualify
as "incentive stock options" ("Incentive Options"), within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), (ii)
options to purchase Common Stock that do not qualify as Incentive Options
("Non-Statutory Options"), (iii) awards of shares of Common Stock that are
subject to certain forfeiture and transferability restrictions that lapse after
specified employment periods ("Restricted Stock Awards"), (iv) rights entitling
the recipient to receive a payment from the Company, in the form of shares of
Common Stock, cash, or a combination of both, upon the achievement of
established performance goals ("Performance Units"), (v) awards of shares of
Common Stock ("Stock Bonuses"), and (vi) rights entitling the recipient to
receive a payment from the Company, in the form of shares of Common Stock, cash,
or a combination of both, equal to the difference between the market value of
one or more shares of Common Stock and the exercise price of such shares under
the terms of such right ("Stock Appreciation Rights"). Incentive Options and
Non-Statutory Options are collectively referred to herein as "Options," and
Options, Restricted Stock Awards, Performance Units, Stock Bonuses and Stock
Appreciation Rights are collectively referred to herein as "Incentive Awards."
The Plan will be administered by the Board or by a committee of the
Board (as used herein, "Committee" will refer to the Board or to such a
committee if established), which selects the participants to be granted
Incentive Awards under the Plan, determines the amount of the grants to the
participants, and prescribes discretionary terms and conditions of each grant
not otherwise fixed under the Plan. All employees, officers and directors of the
Company, as well as consultants and independent contractors of the Company or
any subsidiary of the Company, who, in the judgment of the Committee, have
significantly contributed, are contributing or are expected to significantly
contribute to the achievement of corporate economic objectives will be eligible
to participate in the Plan.
Unless terminated earlier, the Plan will terminate at midnight on June
8, 2003. No Incentive Award will be granted after termination of the Plan.
Currently, a maximum of an amount equal to 17.5% of the aggregate number of
shares of Common Stock outstanding on any date of grant less the total number of
shares of Common Stock issuable upon the exercise or conversion of any
securities of the Company then outstanding, whether granted under the Plan or
otherwise, is reserved for issuance. In addition, as amended, no more than
1,050,000 shares of Common Stock may be cumulatively issued under the Plan
pursuant to the exercise of Incentive Options. In the event of any
reorganization, merger, recapitalization, stock dividend, stock split or similar
change in the corporate structure or shares of the Company, appropriate
adjustments will be made to the number and kind of shares reserved under the
Plan and under outstanding Incentive Awards and to the exercise price of
outstanding Options. The Board of Directors may amend the Plan in any respect
without shareholder approval, unless shareholder approval is then required by
federal tax laws or the rules of the Nasdaq National Market. Unless approved by
the Committee in its sole discretion, no right or interest in any Incentive
Award may be assigned or transferred by a participant, except by will or the
laws of descent and distribution, or subjected to any lien or otherwise
encumbered.
OPTIONS. The exercise price for Non-Statutory Options must be not less
than 85% of the fair market value of the Common Stock on the day preceding the
date the Non-Statutory Options are granted. Incentive Options must be granted
with an exercise price equal to the fair market value of the Common Stock on the
day preceding the date the Incentive Options are granted, except that Incentive
Options granted to persons owning stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any subsidiary
may not be granted at less than 110% of the fair market value on the day
preceding the date of grant. In determining the fair market value of the
Company's Common Stock, the Committee will use the average of the high and low
sale prices of the Common Stock as reported by the Nasdaq National Market System
as of the relevant date.
If approved by the Company's shareholders at the Annual Meeting,
notwithstanding any other provisions of the Plan to the contrary, no participant
in the Plan may be granted any Options with a value based solely on an increase
in the value of the Common Stock after the date of grant, relating to more than
200,000 shares of Common Stock in the aggregate in any fiscal year of the
Company (subject to adjustment as provided in the Plan); provided, however, that
a participant who is first appointed or elected as an officer, hired as an
employee or retained as a consultant by the Company or who receives a promotion
that results in an increase in responsibilities or duties may be granted, during
the fiscal year of such appointment, election, hiring, retention or promotion,
Options relating to up to 400,000 shares of Common Stock (subject to adjustment
as provided in the Plan).
Payment of an Option exercise price may be made either in cash or,
subject to the discretion of the Committee, by transfer from the participant to
the Company of a broker exercise notice or previously acquired shares of Common
Stock having an aggregate fair market value on the date of exercise equal to the
payment required. Options may not be transferred other than by will or the laws
of descent and distribution, and during the lifetime of an option may be
exercised only by the option. Options may be exercised in whole or in
installments, as determined by the Committee. Options will have a maximum term
fixed by the Committee, not to exceed 10 years from the date of grant or, in the
case of Incentive Options granted to persons owning stock representing more than
10% of the total combined voting power of all classes of stock of the Company or
any subsidiary, five years from the date of grant. For Incentive Options, the
aggregate fair market value (determined as of the time the Incentive Option is
granted) of shares of Common Stock with respect to which Incentive Options
become exercisable for the first time by the participant under the Stock
Incentive Plan during any calendar year may not exceed $100,000.
RESTRICTED STOCK AWARDS. Restricted Stock Awards are grants to
participants of shares of Common Stock that are subject to restrictions as
determined by the Committee. The Committee may impose such restrictions or
conditions to the vesting of Restricted Stock Awards as it deems appropriate,
including that the participant remain continuously employed by the Company for a
certain period of time or that the participant or the Company satisfy certain
performance goals or criteria.
PERFORMANCE UNITS. Performance Units may be awarded on such terms and
conditions as the Committee may specify. Such conditions may include payment or
vesting restrictions which involve continued employment with the Company and
satisfaction by the Company or a specified business unit or subsidiary of
predetermined performance goals approved by the Committee at the time the
Performance Units are awarded. Upon satisfaction of applicable terms and
conditions, Performance Units will be payable in cash, shares of Common Stock or
some combination thereof in the Committee's sole discretion.
STOCK BONUSES. Stock Bonuses under the Plan are awards of Common Stock
that are not subject to any restrictions other than, if imposed by the
Committee, restrictions on transferability. A Participant may be granted one or
more Stock Bonuses under the Plan, and such Stock Bonuses will be subject to
such terms and conditions, consistent with other provisions of the Plan, as may
be determined by the Committee in its sole discretion. Other than transfer
restrictions, if any, imposed by the Committee, the Participant will have all
voting, dividend, liquidation and other rights with respect to the shares of
Common Stock issued to a Participant as a Stock Bonus under the Plan upon the
Participant becoming the holder of record of such shares.
STOCK APPRECIATION RIGHTS. The terms of a Stock Appreciation Right
award under the Plan shall be determined by the Committee, subject to certain
requirements contained in the Plan. The exercise price per share may not be less
than the fair market value of a share of the underlying Common Stock on the day
preceding the date the Stock Appreciation Right is granted. A Stock Appreciation
Right will become exercisable at such time and in such installments as
determined by the Committee and will expire at the time fixed in the applicable
award agreement, which shall not be more than ten (10) years after the date of
grant.
EFFECT OF TERMINATION OF EMPLOYMENT. If a participant's employment or
other service with the Company is terminated by reason of death, disability or
retirement, (i) each Option and Stock Appreciation Right then held by the
participant will remain exercisable to the extent exercisable as of such
termination for a period of one year (three months in the case of retirement)
after such termination, (ii) Restricted Stock Awards then held by the
participant that have not vested will be terminated and forfeited, and (iii) all
outstanding Performance Units and Stock Bonuses then held by the participant
will vest and/or continue to vest as determined by the Committee and reflected
in the applicable award agreement. If a participant's employment terminates for
any other reason (other than for cause), (a) Options and Stock Appreciation
Rights then held by the participant that are then exercisable will continue to
be exercisable for 90 days after such termination; (b) Restricted Stock Awards
then held by the participant which are not yet vested are terminated and
forfeited; and (c) all outstanding Performance Units and Stock Bonuses then held
by the participant will vest and/or continue to vest as determined by the
Committee and reflected in the award agreement.
CHANGE IN CONTROL OF THE COMPANY. In the event a "change in control" of
the Company occurs, then, if approved by the Committee, (i) all outstanding
Options and Stock Appreciation Rights will become immediately exercisable in
full and will remain exercisable for the remainder of their terms, regardless of
whether the participant remains in the employ or service of the Company or any
subsidiary, (ii) all outstanding Restricted Stock Awards will become immediately
fully vested, and (iii) all outstanding Performance Units and Stock Bonuses will
vest and/or continue to vest in the manner determined by the Committee and
reflected in the award agreement. In addition, the Committee, without the
consent of any affected participant, may determine that some or all participants
holding outstanding Options will receive cash in an amount equal to the excess
of the fair market value immediately prior to the effective date of such change
in control over the exercise price per share of the Options.
To the extent that such acceleration of the vesting of Incentive Awards
would constitute a "parachute payment" (as defined in the Code), then, pursuant
to the Plan, such acceleration will be modified to such extent that the
Participant will not be subject to the excise tax imposed by Section 4999 of the
Code.
For purposes of the Plan, a "change in control" of the Company will be
deemed to have occurred, among other things, upon (i) a sale or other transfer
of substantially all of the assets of the Company to an entity that is not
controlled by the Company, (ii) a merger or consolidation to which the Company
is a party if, after such merger or consolidation, the Company's shareholders do
not beneficially own more than 80% of the combined voting power of the surviving
corporation's outstanding voting securities, (iii) any person becoming the
beneficial owner of 40% or more of the combined voting power of the Company's
outstanding securities, or (iv) a change in the composition of the Board such
that the individuals who constitute the Board on the effective date of the Plan
cease for any reason to constitute at least a majority of the Board (with
exceptions for individuals who are nominated or otherwise approved by the
current Board).
FEDERAL INCOME TAX CONSEQUENCES
The following description of federal income tax consequences is based
on current schedules, regulations and interpretations. The description does not
include state, local or foreign income tax consequences. In addition, the
description is not intended to address specific tax consequences applicable to
an individual participant who receives an Incentive Award.
INCENTIVE OPTIONS. As a general rule, there will be no federal income
tax consequences to either the participant or the Company as a result of the
grant or exercise of an Incentive Option. For certain exceptions to the general
rule, see the discussions below of the alternative minimum tax and "Excise Tax
on Parachute Payments."
When a participant disposes of the stock acquired upon exercise of an
Incentive Option, the federal income tax consequences will depend on how long
the participant has held the shares. If the participant does not dispose of the
shares within two years after the Incentive Option was granted, nor within one
year after exercise of the Incentive Option, the participant will only recognize
a long-term capital gain (or loss). The amount of the long-term capital gain (or
loss) will be equal to the difference between (i) the amount realized on
disposition of the shares and (ii) the exercise price at which the option
acquired the shares. The Company is not entitled to any compensation expense
deduction under these circumstances.
If the participant does not satisfy both of the above special Incentive
Option holding period requirements, the participant will generally be required
to report as ordinary income, in the year in which the participant disposes of
the shares (a "disqualifying disposition"), the amount by which the lesser of
(i) the fair market value of the acquired shares at the time of exercise of the
Incentive Option or (ii) the amount realized on the disposition of the shares
(if the disposition is the result of a sale or exchange to one other than a
related taxpayer) exceeds the exercise price for the shares. The Company will be
entitled to a compensation expense deduction in an amount equal to the ordinary
income recognized by the participant, provided that the Company complies with
the applicable income tax withholding provisions. The remainder of the gain, if
any, recognized on the disposition, or any loss recognized on the disposition,
will be treated as capital gain or loss to the participant and will be eligible
for long-term capital gain or loss treatment if the disposition occurs more than
one year after the participant acquired the shares and short-term capital gain
or loss treatment if the disposition occurs one year or less after the
participant acquired the shares.
If the participant elects (and is permitted) to use previously acquired
shares to exercise an Incentive Option, no gain or loss attributable to the
shares exchanged by the participant will be recognized for tax purposes.
However, if the participant pays the Option exercise price with shares that were
originally acquired pursuant to the exercise of an Incentive Option before the
expiration of the special Incentive Option holding periods discussed above, the
use of those shares to exercise an Option will be treated as a modified form of
disqualifying disposition of the shares, subject to the ordinary income (but not
capital gain) tax consequences discussed above for disqualifying dispositions.
The basis of the shares tendered to the Company upon exercise of the Option,
plus any disqualifying disposition income recognized on the exercise, will be
attributed to and become the basis of an equal number of shares received in the
exchange. The basis of any additional shares received will be zero. The
additional Incentive Option shares received in the exchange will have new
capital gain and special Incentive Option holding periods. The capital gain
holding period of the shares received in exchange for the tendered shares will
carry over.
As mentioned above, the exercise of an Incentive Option is generally
not a taxable event for the participant. The exercise of an Incentive Option
may, however, affect a participant's liability under the federal alternative
minimum tax. The alternative minimum tax is computed by adding specific
preference items and making special modifications to a participant's adjusted
gross income. One such modification is to treat Incentive Options effectively as
though they were Non-Statutory Options (i.e., include in the participant's
alternative minimum taxable income on the date of exercise the difference
between the then fair market value of the shares and the amount paid for the
shares). The alternative minimum tax is payable to the extent that it exceeds
the participant's regular tax for the year. The amount of the participant's
alternative minimum tax liability attributable to the Incentive Option
modification may, however, be available as a credit against a portion of the
participant's regular tax liability in future years. The Company recommends that
participants holding Incentive Options (especially persons subject to the
short-swing profit provisions) consult their personal tax advisors to determine
the applicability and effect of the alternative minimum tax.
NON-STATUTORY OPTIONS. There will generally be no federal income tax
consequences to either the Company or the participant as a result of the grant
of a Non-Statutory Option. Upon exercise of a Non-Statutory Option, the
participant will generally recognize ordinary income in an amount equal to the
difference between (i) the fair market value of the shares purchased, determined
on the date of exercise, and (ii) the amount paid for the shares. Amounts
taxable to the participant as ordinary income are deductible in the same year by
the Company, provided that the Company complies with the applicable income tax
withholding provisions. When a participant disposes of shares acquired by the
exercise of a Non-Statutory Option, the difference between the amount received
and the fair market value of the shares on the date of exercise will be treated
as long-term or short-term capital gain or loss depending on the length of time
the shares were held. Gains and losses from the sale or exchange of shares will
be long-term capital gain or loss if the shares were held more than one year and
short-term capital gain or loss if the shares were held one year or less. For
purposes of determining the holding period for the shares, the shares are
treated as acquired on the date of exercise. For exceptions to these general
rules, see the discussion below under "Excise Tax on Parachute Payments."
A participant may, at the discretion of the Committee, be permitted to
pay the Non-Statutory Option price or a portion thereof by transferring to the
Company shares of Common Stock previously acquired by the participant. The
exchange of previously acquired shares by the participant for shares received as
a result of the exercise of a Non-Statutory Option will not result in the
recognition of any gain or loss with respect to the previously acquired shares
transferred to the Company in exercising the Option. The transfer of previously
acquired shares will not reduce the amount of ordinary income otherwise required
to be reported upon such exercise as described above. The basis of the shares
tendered to the Company upon exercise of the Non-Statutory Option will be
attributed to and become the basis of an equal number of shares received in the
exchange. The basis of any additional shares received by the participant in the
exchange will be equal to the amount recognized as compensation income plus the
amount of any cash paid on the exchange. The capital gain holding period of the
tendered shares will carry over and the additional shares received in the
exchange will have a new capital gain holding period.
In general, the Company will be entitled to a compensation expense
deduction in connection with the exercise of a Non-Statutory Option for any
amounts includable in the taxable income of a participant as ordinary
compensation income, provided the Company complies with any applicable
withholding requirements. The Company will be entitled to a deduction in the
Company's tax year in which the participant is taxed.
RESTRICTED STOCK AWARDS AND STOCK BONUSES. With respect to shares
issued pursuant to a Restricted Award that is not subject to a risk of
forfeiture or with respect to Stock Bonuses, a participant will include as
ordinary income in the year of receipt an amount equal to the fair market value
of the shares received on the date of receipt. With respect to shares that are
subject to a risk of forfeiture, a participant may file an election under
Section 83(b) of the Code within thirty (30) days after receipt to include as
ordinary income in the year of receipt an amount equal to the fair market value
of the shares received on the date of receipt (determined as if the shares were
not subject to any risk of forfeiture). If a Section 83(b) election is made, the
participant will not recognize any additional income when the restrictions on
the shares issued in connection with the Restricted Stock Award lapse. The
Company will receive a corresponding tax deduction for any amounts includable in
the taxable income of the participant as ordinary income.
A participant who does not make a Section 83(b) election within thirty
(30) days of the receipt of a Restricted Stock Award that is subject to a risk
of forfeiture will recognize ordinary income at the time of the lapse of the
restrictions in an amount equal to the then fair market value of the shares free
of restrictions. The Company will receive a corresponding tax deduction for any
amounts includable in the taxable income of a participant as ordinary income.
PERFORMANCE UNITS. A participant who receives a Performance Unit will
not recognize any taxable income at the time of the grant. Upon settlement of
the Performance Unit, the participant will realize ordinary income in an amount
equal to the cash and fair market value of any shares of Common Stock received
by the participant. Provided that proper withholding is made, the Company would
be entitled to a compensation expense deduction for any amounts includable by
the participant as ordinary income.
STOCK APPRECIATION RIGHTS. A participant who receives a Stock
Appreciation Right will not recognize any taxable income at the time of the
grant. Upon the exercise of a Stock Appreciation Right, the participant will
realize ordinary income in an amount equal to the cash in the fair market value
of any shares of Common Stock received by the participant. Provided that proper
withholding is made, the Company will be entitled to a compensation expense
deduction for any amounts includable by the participant as ordinary income.
EXCISE TAX ON PARACHUTE PAYMENTS. Section 4999 of the Code imposes an
excise tax on "excess parachute payments," as defined in Section 280G of the
Code. Generally, parachute payments are payments in the nature of compensation
to certain employees or independent contractors who are also officers,
shareholders or highly-compensated individuals, where such payments are
contingent on a change in ownership or control of the stock or assets of the
paying corporation. In addition, the payments must be substantially greater in
amount than the recipient's regular compensation. Under Proposed Treasury
Regulations issued by the Internal Revenue Service, in certain circumstances the
grant, vesting, acceleration or exercise of Options pursuant to the Plan could
be treated as contingent on a change in ownership or control for purposes of
determining the amount of a participant's parachute payments.
In general, the amount of a parachute payment (some portion of which
may be deemed to be an "excess parachute payment") would be the cash or the fair
market value of the property received (or to be received) less the amount paid
for such property. If a participant were found to have received an excess
parachute payment, he or she would be subject to a special nondeductible twenty
percent (20%) excise tax on the amount of the excess parachute payments, and the
Company would not be allowed to claim any deduction with respect to such
payments.
AWARDS UNDER THE PLAN
Neither the number nor types of future Plan awards to be received by or
allocated to particular participants or groups of participants is presently
determinable.
BOARD OF DIRECTORS' RECOMMENDATION
The Board of Directors recommends that the shareholders vote FOR
approval and ratification of the Plan Amendments. The affirmative vote of the
holders of a majority of shares of Common Stock of the Company present in person
or by proxy at the Annual Meeting, assuming a quorum is present, is necessary
for approval. Unless a contrary choice is specified, proxies solicited by the
Board of Directors will be voted FOR approval of the Plan Amendments.
SELECTION OF AUDITORS
The Company does not intend to request that the shareholders approve
the selection of Price Waterhouse LLP, independent public accountants, for
fiscal 1997. The Company has requested and expects, however, a representative of
Price Waterhouse LLP to be present at the Annual Meeting. Such representatives
will have an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and all persons who
beneficially own more than 10% of the outstanding shares of the Company's Common
Stock to file with the Securities and Exchange Commission (the "SEC") initial
reports of ownership and reports of changes in ownership of the Company's Common
Stock. Executive officers, directors and greater than 10% beneficial owners are
also required to furnish the Company with copies of all Section 16(a) forms they
file. Other than with respect to one report on Form 3 (an initial statement of
beneficial ownership) which the Company failed to prepare in a timely manner for
Mr. Nagel upon Mr. Nagel's appointment to the Board, to the Company's knowledge,
based upon a review of the copies of such reports furnished to the Company and
written representations that no other reports were required, during the year
ended December 31, 1996, none of the directors, officers or beneficial owners of
greater than 10% of the Company's Common Stock failed to file on a timely basis
the form required by Section 16 of the Exchange Act.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of shareholders intended to be presented in the proxy
materials relating to the next Annual Meeting must be received by the Company at
its principal executive offices on or about December 11, 1997.
OTHER BUSINESS
The Company knows of no business that will be presented for
consideration at the Annual Meeting other than that described in this Proxy
Statement. As to other business, if any, that may properly come before the
Annual Meeting, it is intended that proxies solicited by the Board will be voted
in accordance with the judgment of the person or persons voting the proxies.
MISCELLANEOUS
THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT
ON FORM 10-K (EXCLUSIVE OF EXHIBITS) FOR THE FISCAL YEAR ENDED DECEMBER 31,
1996, TO EACH PERSON WHO WAS A SHAREHOLDER OF THE COMPANY AS OF APRIL 4, 1997,
UPON RECEIPT FROM ANY SUCH PERSON OF A WRITTEN REQUEST FOR SUCH AN ANNUAL
REPORT. SUCH REQUEST SHOULD BE SENT TO: AETRIUM INCORPORATED, 2350 HELEN STREET,
NORTH ST. PAUL, MINNESOTA 55109; ATTN.: SHAREHOLDER INFORMATION.
By Order of the Board of Directors
Joseph C. Levesque
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dated: April 11, 1997
North St. Paul, Minnesota
Appendix A
AETRIUM INCORPORATED
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints JOSEPH C. LEVESQUE and DARNELL L.
BOEHM, and each of them, as Proxies, each with full power of substitution, and
hereby authorizes each of them to represent and to vote, as designated below,
all the shares of Common Stock of Aetrium Incorporated held of record by the
undersigned on April 4, 1997, at the Annual Meeting of Shareholders to be held
on May 20, 1997, or any adjournment thereof.
(INSTRUCTION: TO VOTE AGAINST ANY INDIVIDUAL NOMINEE, MARK YOUR VOTE IN THE "FOR
ALL -(EXCEPT NOMINEE(S) WRITTEN BELOW)" OVAL AND WRITE THE NOMINEE'S NAME IN THE
BLANK BELOW.)
1. ELECTION OF DIRECTORS.
<TABLE>
<CAPTION>
<S> <C> <C>
|_| FOR all |_| WITHHOLD ALL |_| FOR ALL (Except nominee(s)
(except as marked to the contrary below) written below)
--------------------------------
</TABLE>
JOSEPH C. LEVESQUE ANDREW J. GREENSHIELDS
DARNELL L. BOEHM DOUGLAS L. HEMER
TERRENCE W. GLARNER TERRANCE J. NAGEL
2. PROPOSAL TO AMEND THE COMPANY'S 1993 STOCK INCENTIVE PLAN.
|_| FOR |_| AGAINST |_| ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
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 PROPOSAL 2 AND FOR ALL NOMINEES NAMED IN PROPOSAL 1 ABOVE. Please sign
exactly as name appears below. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Dated:_________________, 1997
______________________________________
Signature
______________________________________
Signature if held jointly
- -------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
- -------------------------------------------------------------------------------
Appendix B
AETRIUM INCORPORATED
1993 STOCK INCENTIVE PLAN
(AS AMENDED EFFECTIVE MARCH 24, 1997)
1. PURPOSE OF PLAN.
The purpose of the Aetrium Incorporated 1993 Stock Incentive Plan (the
"Plan") is to advance the interests of Aetrium Incorporated (the "Company") and
its shareholders by enabling the Company and its Subsidiaries (as defined
herein) to attract and retain persons of ability to perform services for the
Company and its Subsidiaries by providing an incentive to such individuals
through equity participation in the Company and by rewarding such individuals
who contribute to the achievement by the Company of its economic objectives.
2. DEFINITIONS.
The following terms will have the meanings set forth below, unless the
context clearly otherwise requires:
2.1. "Board" means the Board of Directors of the Company.
2.2. "Broker Exercise Notice" means a written notice pursuant to
which a Participant, upon exercise of an Option, irrevocably
instructs a broker or dealer to sell a sufficient number of
shares or loan a sufficient amount of money to pay all or a
portion of the exercise price of the Option and/or any related
withholding tax obligations and remit such sums to the Company
and directs the Company to deliver stock certificates to be
issued upon such exercise directly to such broker or dealer.
2.3. "Change in Control" means an event described in Section 13.1
of the Plan.
2.4. "Code" means the Internal Revenue Code of 1986, as amended.
2.5. "Committee" means the group of individuals administering the
Plan, as provided in Section 3 of the Plan.
2.6. "Committee Member" means any member of a committee of the
Board delegated responsibility for administration of the Plan
as provided in Section 3.1 of the Plan.
2.7. "Common Stock" means the common stock of the Company, par
value $.001 per share, or the number and kind of shares of
stock or other securities into which such Common Stock may be
changed in accordance with Section 4.3 of the Plan.
2.8. "Disability" means the disability of the Participant such as
would entitle the Participant to receive disability income
benefits pursuant to the long-term disability plan of the
Company or Subsidiary then covering the Participant or, if no
such plan exists or is applicable to the Participant, the
permanent and total disability of the Participant within the
meaning of Section 22(e)(3) of the Code.
2.9. "Eligible Recipients" means all employees, officers and
directors of the Company or any Subsidiary and any
non-employee consultants and independent contractors of the
Company or any Subsidiary.
2.10. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.11. "Fair Market Value" means, with respect to the Common Stock,
as of any date (or, if no shares were traded or quoted on such
date, as of the next preceding date on which there was such a
trade or quote), the following:
(a) If the Common Stock is listed or admitted to unlisted
trading privileges on any national securities
exchange or is not so listed or admitted but
transactions in the Common Stock are reported on the
Nasdaq National Market, the mean between the reported
high and low sale prices of the Common Stock on such
exchange or by the Nasdaq National Market.
(b) If the Common Stock is not so listed or admitted to
unlisted trading privileges or reported on the Nasdaq
National Market, but bid and asked prices in the
over-the-counter market are reported by the Nasdaq
System or the National Quotation Bureau, Inc. (or any
comparable reporting service), the mean of the
closing bid and asked prices.
(c) If the Common Stock is not so listed or admitted to
unlisted trading privileges or reported on the Nasdaq
National Market, and such bid and asked prices are
not so reported by a reporting service, such price as
the Committee determines in good faith in the
exercise of its reasonable discretion.
2.12. "Incentive Award" means an Option, Stock Appreciation Right,
Restricted Stock Award, Performance Unit or Stock Bonus
granted to an Eligible Recipient pursuant to the Plan.
2.13. "Incentive Stock Option" means a right to purchase Common
Stock granted to an Eligible Recipient pursuant to Section 6
of the Plan that qualifies as an "incentive stock option"
within the meaning of Section 422 of the Code.
2.14. "Non-Statutory Stock Option" means a right to purchase Common
Stock granted to an Eligible Recipient pursuant to Section 6
of the Plan that does not qualify as an Incentive Stock
Option.
2.15. "Option" means an Incentive Stock Option or a Non-Statutory
Stock Option.
2.16. "Participant" means an Eligible Recipient who receives one or
more Incentive Awards under the Plan.
2.17. "Performance Unit" means a right granted to an Eligible
Recipient pursuant to Section 9 of the Plan to receive a
payment from the Company, in the form of stock, cash or a
combination of both, upon the achievement of established
performance goals.
2.18. "Previously Acquired Shares" means shares of Common Stock that
are already owned by the Participant or, with respect to any
Incentive Award, that are to be issued upon the grant,
exercise or vesting of such Incentive Award.
2.19. "Restricted Stock Award" means an award of Common Stock
granted to an Eligible Recipient pursuant to Section 8 of the
Plan that is subject to the restrictions on transferability
and the risk of forfeiture imposed by the provisions of such
Section 8.
2.20. "Retirement" means termination of employment or service
pursuant to and in accordance with the regular (or, if
approved by the Board for purposes of the Plan, early)
retirement/pension plan or practice of the Company or
Subsidiary then covering the Participant, provided that if the
Participant is not covered by any such plan or practice, the
Participant will be deemed to be covered by the Company's plan
or practice for purposes of this determination.
2.21. "Securities Act" means the Securities Act of 1933, as amended.
2.22. "Stock Appreciation Right" means a right granted to an
Eligible Recipient pursuant to Section 7 of the Plan to
receive a payment from the Company, in the form of stock, cash
or a combination of both, equal to the difference between the
Fair Market Value of one or more shares of Common Stock and
the exercise price of such shares under the terms of such
Stock Appreciation Right.
2.23. "Stock Bonus" means an award of Common Stock granted to an
Eligible Recipient pursuant to Section 10 of the Plan.
2.24. "Subsidiary" means any entity that is directly or indirectly
controlled by the Company or any entity in which the Company
has a significant equity interest, as determined by the
Committee.
2.25. "Tax Date" means the date any withholding tax obligation
arises under the Code for a Participant with respect to an
Incentive Award.
3. PLAN ADMINISTRATION.
3.1. The Committee. The Plan will be administered by the Board or
by a committee of the Board. So long as the Company has a
class of its equity securities registered under Section 12 of
the Exchange Act, any committee administering the Plan will
consist solely of two or more members of the Board who are
"non-employee directors" within the meaning of Rule 16b-3
under the Exchange Act and, if the Board so determines in its
sole discretion, who are "outside directors" within the
meaning of Section 162(m) of the Code. As used in this Plan,
the term "Committee" will refer to the Board or to such a
committee, if established; provided, however, that with
respect to the grant of any Incentive Award to a Participant
who is then a Committee Member, and to any action that may be
taken hereunder by the Committee regarding any such Incentive
Award for so long as such Participant is a Committee Member,
such action may be taken only by the Board. To the extent
consistent with corporate law, the Committee may delegate to
any officers of the Company the duties, power and authority of
the Committee under the Plan pursuant to such conditions or
limitations as the Committee may establish; provided, however,
that only the Committee may exercise such duties, power and
authority with respect to Eligible Recipients who are subject
to Section 16 of the Exchange Act. Each determination,
interpretation or other action made or taken by the Committee
pursuant to the provisions of the Plan will be conclusive and
binding for all purposes and on all persons, and no member of
the Committee will be liable for any action or determination
made in good faith with respect to the Plan or any Incentive
Award granted under the Plan.
3.2. Authority of the Committee.
(a) In accordance with and subject to the provisions of
the Plan, the Committee will have the authority to
determine all provisions of Incentive Awards as the
Committee may deem necessary or desirable and as
consistent with the terms of the Plan, including,
without limitation, the following: (i) the Eligible
Recipients to be selected as Participants; (ii) the
nature and extent of the Incentive Awards to be made
to each Participant (including the number of shares
of Common Stock to be subject to each Incentive
Award, any exercise price, the manner in which
Incentive Awards will vest or become exercisable and
whether Incentive Awards will be granted in tandem
with other Incentive Awards) and the form of written
agreement, if any, evidencing such Incentive Award;
(iii) the time or times when Incentive Awards will be
granted; (iv) the duration of each Incentive Award;
and (v) the restrictions and other conditions to
which the payment, vesting or transfer of Incentive
Awards may be subject. In addition, the Committee
will have the authority under the Plan in its sole
discretion to pay the economic value of any Incentive
Award in the form of cash, Common Stock or any
combination of both.
(b) The Committee will have the authority under the Plan
to amend or modify the terms of any outstanding
Incentive Award in any manner, including, without
limitation, the authority to modify the number of
shares or other terms and conditions of an Incentive
Award, extend the term of an Incentive Award,
accelerate the exercisability or vesting or otherwise
terminate any restrictions relating to an Incentive
Award, accept the surrender of any outstanding
Incentive Award or, to the extent not previously
exercised or vested, authorize the grant of new
Incentive Awards in substitution for surrendered
Incentive Awards; provided, however that the amended
or modified terms are permitted by the Plan as then
in effect and that any Participant adversely affected
by such amended or modified terms has consented to
such amendment or modification. No amendment or
modification to an Incentive Award, however, whether
pursuant to this Section 3.2 or any other provisions
of the Plan, will be deemed to be a regrant of such
Incentive Award for purposes of this Plan.
(c) In the event of (i) any reorganization, merger,
consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split,
combination of shares, rights offering, extraordinary
dividend or divestiture (including a spin-off) or any
other change in corporate structure or shares, (ii)
any purchase, acquisition, sale or disposition of a
significant amount of assets or a significant
business, (iii) any change in accounting principles
or practices, or (iv) any other similar change, in
each case with respect to the Company or any other
entity whose performance is relevant to the grant or
vesting of an Incentive Award, the Committee (or, if
the Company is not the surviving corporation in any
such transaction, the board of directors of the
surviving corporation) may, without the consent of
any affected Participant, amend or modify the vesting
criteria of any outstanding Incentive Award that is
based in whole or in part on the financial
performance of the Company (or any Subsidiary or
division thereof) or such other entity so as
equitably to reflect such event, with the desired
result that the criteria for evaluating such
financial performance of the Company or such other
entity will be substantially the same (in the sole
discretion of the Committee or the board of directors
of the surviving corporation) following such event as
prior to such event; provided, however, that the
amended or modified terms are permitted by the Plan
as then in effect.
4. SHARES AVAILABLE FOR ISSUANCE.
4.1. Maximum Number of Shares Available. The maximum number of
shares of Common Stock for which Options may be granted on any
date in the aggregate is equal to seventeen and one-half
percent (17.5%) of the aggregate number of shares of Common
Stock outstanding on such date less the aggregate number of
shares of Common Stock then issuable (as if all vesting and
other conditions to issuance were then met) either (a) upon
conversion of convertible securities of the Company
outstanding on such date, or (b) upon exercise of Options and
other rights to purchase Common Stock outstanding on such date
(exclusive of Options to be granted on such date); provided,
that without limiting the foregoing but subject to adjustment
as provided in Section 4.3 of the Plan, the maximum number of
shares of Common Stock that will be available for issuance
upon exercise of Incentive Stock Options is 700,000.
Notwithstanding any other provisions of the Plan to the
contrary, no Participant in the Plan may be granted any
Options with a value based solely on an increase in the value
of the Common Stock after the date of grant, relating to more
than 200,000 shares of Common Stock in the aggregate in any
fiscal year of the Company (subject to adjustment as provided
in Section 4.3 of the Plan); provided, however, that a
Participant who is first appointed or elected as an officer,
hired as an employee or retained as a consultant by the
Company or who receives a promotion that results in an
increase in responsibilities or duties may be granted, during
the fiscal year of such appointment, election, hiring,
retention or promotion, Options relating to up to 400,000
shares of Common Stock (subject to adjustment as provided in
Section 4.3 of the Plan).
4.2. Accounting for Incentive Awards. Shares of Common Stock that
are issued under the Plan or that are subject to outstanding
Incentive Awards will be applied to reduce the maximum number
of shares of Common Stock remaining available for issuance
under the Plan. Any shares of Common Stock that are subject to
an Incentive Award that lapses, expires, is forfeited or for
any reason is terminated unexercised or unvested and any
shares of Common Stock that are subject to an Incentive Award
that is settled or paid in cash or any form other than shares
of Common Stock will automatically again become available for
issuance under the Plan. Any shares of Common Stock that
constitute the forfeited portion of a Restricted Stock Award,
however, will not become available for further issuance under
the Plan.
4.3. Adjustments to Shares and Incentive Awards. In the event of
any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, divestiture or
extraordinary dividend (including a spin-off) or any other
change in the corporate structure or shares of the Company,
the Committee (or, if the Company is not the surviving
corporation in any such transaction, the board of directors of
the surviving corporation) will make appropriate adjustment
(which determination will be conclusive) as to the number and
kind of securities available for issuance under the Plan and,
in order to prevent dilution or enlargement of the rights of
Participants, the number, kind and, where applicable, exercise
price of securities subject to outstanding Incentive Awards.
5. PARTICIPATION.
Participants in the Plan will be those Eligible Recipients who, in the
judgment of the Committee, have contributed, are contributing or are expected to
contribute to the achievement of economic objectives of the Company or its
Subsidiaries. Eligible Recipients may be granted from time to time one or more
Incentive Awards, singly or in combination or in tandem with other Incentive
Awards, as may be determined by the Committee in its sole discretion. Incentive
Awards will be deemed to be granted as of the date specified in the grant
resolution of the Committee, which date will be the date of any related
agreement with the Participant.
6. OPTIONS.
6.1. Grant. An Eligible Recipient may be granted one or more
Options under the Plan, and such Options will be subject to
such terms and conditions, consistent with the other
provisions of the Plan, as may be determined by the Committee
in its sole discretion. The Committee may designate whether an
Option is to be considered an Incentive Stock Option or a
Non-Statutory Stock Option.
6.2. Exercise Price. The per share price to be paid by a
Participant upon exercise of an Option will be determined by
the Committee in its discretion at the time of the Option
grant, provided that (a) such price will not be less than 100%
of the Fair Market Value of one share of Common Stock on the
day preceding the date of grant with respect to an Incentive
Stock Option (110% of the Fair Market Value if, at the time
the Incentive Stock Option is granted, the Participant owns,
directly or indirectly, more than 10% of the total combined
voting power of all classes of stock of the Company or any
parent or subsidiary corporation of the Company), and (b) such
price will not be less than 85% of the Fair Market Value of
one share of Common Stock on the day preceding the date of
grant with respect to a Non-Statutory Stock Option.
6.3. Exercisability and Duration. An Option will become exercisable
at such times and in such installments as may be determined by
the Committee in its sole discretion at the time of grant;
provided, however, that no Option may be exercisable after 10
years from its date of grant.
6.4. Payment of Exercise Price. The total purchase price of the
shares to be purchased upon exercise of an Option will be paid
entirely in cash (including check, bank draft or money order);
provided, however, (a) that the Committee, in its sole
discretion and upon terms and conditions established by the
Committee, may allow such payments to be made, in whole or in
part, by tender of a Broker Exercise Notice or Previously
Acquired Shares, or by a combination of such methods; and (b)
that if such payments are made by tender of a Broker Exercise
Notice or Previously Acquired Shares, or by a combination of
such methods, the Fair Market Value on the day preceding the
date of exercise will be used for the purpose of valuing the
tendered shares of Common Stock.
6.5. Manner of Exercise. An Option may be exercised by a
Participant in whole or in part from time to time, subject to
the conditions contained in the Plan and in the agreement
evidencing such Option, by delivery in person, by facsimile or
electronic transmission or through the mail of written notice
of exercise to the Company (Attention: Chief Financial
Officer) at its principal executive office in North St. Paul,
Minnesota and by paying in full the total exercise price for
the shares of Common Stock to be purchased in accordance with
Section 6.4 of the Plan.
6.6. Aggregate Limitation of Stock Subject to Incentive Stock
Options. To the extent that the aggregate Fair Market Value
(determined as of the day preceding the date an Incentive
Stock Option is granted) of the shares of Common Stock with
respect to which incentive stock options (within the meaning
of Section 422 of the Code) are exercisable for the first time
by a Participant during any calendar year (under the Plan and
any other incentive stock option plans of the Company or any
subsidiary or parent corporation of the Company (within the
meaning of the Code)) exceeds $100,000 (or such other amount
as may be prescribed by the Code from time to time), such
excess Options will be treated as Non-Statutory Stock Options.
The determination will be made by taking incentive stock
options into account in the order in which they were granted.
If such excess only applies to a portion of an incentive stock
option, the Committee, in its discretion, will designate which
shares will be treated as shares to be acquired upon exercise
of an incentive stock option.
7. STOCK APPRECIATION RIGHTS.
7.1. Grant. An Eligible Recipient may be granted one or more Stock
Appreciation Rights under the Plan, and such Stock
Appreciation Rights will be subject to such terms and
conditions, consistent with the other provisions of the Plan,
as may be determined by the Committee in its sole discretion.
7.2. Exercise Price. The exercise price of a Stock Appreciation
Right will be determined by the Committee, in its discretion,
at the date of grant but will not be less than 100% of the
Fair Market Value of one share of Common Stock on the day
preceding the date of grant.
7.3. Exercisability and Duration. A Stock Appreciation Right will
become exercisable at such time and in such installments as
may be determined by the Committee in its sole discretion at
the time of grant; provided, however, that no Stock
Appreciation Right may be exercisable after 10 years from its
date of grant. A Stock Appreciation Right will be exercised by
giving notice in the same manner as for Options, as set forth
in Sections 6.4 and 6.5 of the Plan.
8. RESTRICTED STOCK AWARDS.
8.1. Grant. An Eligible Recipient may be granted one or more
Restricted Stock Awards under the Plan, and such Restricted
Stock Awards will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion. The
Committee may impose such restrictions or conditions, not
inconsistent with the provisions of the Plan, to the vesting
of such Restricted Stock Awards as it deems appropriate,
including, without limitation, that the Participant remain in
the continuous employ or service of the Company or a
Subsidiary for a certain period or that the Participant or the
Company (or any Subsidiary or division thereof) satisfy
certain performance goals or criteria.
8.2. Rights as a Shareholder; Transferability. Except as provided
in Sections 8.1, 8.3 and 14.3 of the Plan, a Participant will
have all voting, dividend, liquidation and other rights with
respect to shares of Common Stock issued to the Participant as
a Restricted Stock Award under this Section 8 upon the
Participant becoming the holder of record of such shares as if
such Participant were a holder of record of shares of
unrestricted Common Stock.
8.3. Dividends and Distributions. Unless the Committee determines
otherwise in its sole discretion (either in the agreement
evidencing the Restricted Stock Award at the time of grant or
at any time after the grant of the Restricted Stock Award),
any dividends or distributions (including regular quarterly
cash dividends) paid with respect to shares of Common Stock
subject to the unvested portion of a Restricted Stock Award
will be subject to the same restrictions as the shares to
which such dividends or distributions relate. In the event the
Committee determines not to pay such dividends or
distributions currently, the Committee will determine in its
sole discretion whether any interest will be paid on such
dividends or distributions. In addition, the Committee in its
sole discretion may require such dividends and distributions
to be reinvested (and in such case the Participants consent to
such reinvestment) in shares of Common Stock that will be
subject to the same restrictions as the shares to which such
dividends or distributions relate.
8.4. Enforcement of Restrictions. To enforce the restrictions
referred to in this Section 8, the Committee may place a
legend on the stock certificates referring to such
restrictions and may require the Participant, until the
restrictions have lapsed, to keep the stock certificates,
together with duly endorsed stock powers, in the custody of
the Company or its transfer agent or to maintain evidence of
stock ownership, together with duly endorsed stock powers, in
a certificateless book-entry stock account with the Company's
transfer agent.
9. PERFORMANCE UNITS.
An Eligible Recipient may be granted one or more Performance Units
under the Plan, and such Performance Units will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion. The Committee may impose
such restrictions or conditions, not inconsistent with the provisions of the
Plan, to the vesting of such Performance Units as it deems appropriate,
including, without limitation, that the Participant remain in the continuous
employ or service of the Company or any Subsidiary for a certain period or that
the Participant or the Company (or any Subsidiary or division thereof) satisfy
certain performance goals or criteria. The Committee will have the sole
discretion either to determine the form in which payment of the economic value
of vested Performance Units will be made to the Participant (i.e., cash, Common
Stock or any combination thereof) or to consent to or disapprove the election by
the Participant of the form of such payment.
10. STOCK BONUSES.
An Eligible Recipient may be granted one or more Stock Bonuses under
the Plan, and such Stock Bonuses will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the
Committee in its sole discretion. The Participant will have all voting,
dividend, liquidation and other rights with respect to the shares of Common
Stock issued to a Participant as a Stock Bonus under this Section 10 upon the
Participant becoming the holder of record of such shares; provided, however,
that the Committee may impose such restrictions on the assignment or transfer of
a Stock Bonus as it deems appropriate.
11. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE.
11.1. Termination Due to Death, Disability or Retirement. In the
event a Participant's employment or other service with the
Company and all Subsidiaries is terminated by reason of death,
Disability or Retirement:
(a) All outstanding Options and Stock Appreciation Rights
then held by the Participant will remain exercisable
to the extent exercisable as of such termination for
a period of one year (three months in the case of
Retirement) after such termination (but in no event
after the expiration date of any such Option or Stock
Appreciation Right);
(b) All Restricted Stock Awards then held by the
Participant that have not vested will be terminated
and forfeited; and
(c) All Performance Units and Stock Bonuses then held by
the Participant will vest and/or continue to vest in
the manner determined by the Committee and set forth
in the agreement evidencing such Performance Units or
Stock Bonuses.
11.2. Termination for Reasons Other than Death, Disability or
Retirement.
(a) In the event a Participant's employment or other
service is terminated with the Company and all
Subsidiaries for any reason other than death,
Disability or Retirement, or a Participant is in the
employ or service of a Subsidiary and the Subsidiary
ceases to be a Subsidiary of the Company (unless the
Participant continues in the employ or service of the
Company or another Subsidiary), all rights of the
Participant under the Plan and any agreements
evidencing an Incentive Award will immediately
terminate without notice of any kind, and no Options
or Stock Appreciation Rights then held by the
Participant will thereafter be exercisable, all
Restricted Stock Awards then held by the Participant
that have not vested will be terminated and
forfeited, and all Performance Units and Stock
Bonuses then held by the Participant will vest and/or
continue to vest in the manner determined by the
Committee and set forth in the agreement evidencing
such Performance Units or Stock Bonuses; provided,
however, that if such termination is due to any
reason other than termination by the Company or any
Subsidiary for "cause," all outstanding Options and
Stock Appreciation Rights then held by such
Participant will remain exercisable to the extent
exercisable as of such termination for a period of
three months after such termination (but in no event
after the expiration date of any such Option or Stock
Appreciation Right).
(b) For purposes of this Section 11.2, "cause" (as
determined by the Committee) will be as defined in
any employment or other agreement or policy
applicable to the Participant or, if no such
agreement or policy exists, will mean (i) dishonesty,
fraud, misrepresentation, embezzlement or deliberate
injury or attempted injury, in each case related to
the Company or any Subsidiary, (ii) any unlawful or
criminal activity of a serious nature, (iii) any
intentional and deliberate breach of a duty or duties
that, individually or in the aggregate, are material
in relation to the Participant's overall duties, or
(iv) any material breach of any employment, service,
confidentiality or noncompete agreement entered into
with the Company or any Subsidiary.
11.3. Modification of Rights Upon Termination. Notwithstanding the
other provisions of this Section 11, upon a Participant's
termination of employment or other service with the Company
and all Subsidiaries, the Committee may, in its sole
discretion (which may be exercised at any time on or after the
date of grant, including following such termination), cause
Options and Stock Appreciation Rights (or any part thereof)
then held by such Participant to become or continue to become
exercisable and/or remain exercisable following such
termination of employment or service and Restricted Stock
Awards, Performance Units and Stock Bonuses then held by such
Participant to vest and/or continue to vest or become free of
transfer restrictions, as the case may be, following such
termination of employment or service, in each case in the
manner determined by the Committee; provided, however, that no
Option may remain exercisable beyond its expiration date.
11.4. Breach of Confidentiality or Noncompete Agreements.
Notwithstanding anything in this Plan to the contrary, in the
event that a Participant materially breaches the terms of any
confidentiality or noncompete agreement entered into with the
Company or any Subsidiary, whether such breach occurs before
or after termination of such Participant's employment or other
service with the Company or any Subsidiary, the Committee in
its sole discretion may immediately terminate all rights of
the Participant under the Plan and any agreements evidencing
an Incentive Award then held by the Participant without notice
of any kind.
11.5. Date of Termination of Employment or Other Service. Unless the
Committee otherwise determines in its sole discretion, a
Participant's employment or other service will, for purposes
of the Plan, be deemed to have terminated on the date recorded
on the personnel or other records of the Company or the
Subsidiary for which the Participant provides employment or
other service, as determined by the Committee in its sole
discretion based upon such records.
12. PAYMENT OF WITHHOLDING TAXES.
12.1. General Rules. The Company is entitled to (a) withhold and
deduct from future wages of the Participant (or from other
amounts that may be due and owing to the Participant from the
Company or a Subsidiary), or make other arrangements for the
collection of, all legally required amounts necessary to
satisfy any and all federal, state and local withholding and
employment-related tax requirements attributable to an
Incentive Award, including, without limitation, the grant,
exercise or vesting of, or payment of dividends with respect
to, an Incentive Award or a disqualifying disposition of stock
received upon exercise of an Incentive Stock Option, or (b)
require the Participant promptly to remit the amount of such
withholding to the Company before taking any action, including
issuing any shares of Common Stock, with respect to an
Incentive Award.
12.2. Special Rules. The Committee may, in its sole discretion and
upon terms and conditions established by the Committee, permit
or require a Participant to satisfy, in whole or in part, any
withholding or employment-related tax obligation described in
Section 12.1 of the Plan by electing to tender Previously
Acquired Shares or a Broker Exercise Notice, or by a
combination of such methods; provided that if such payments
are made by tender of a Broker Exercise Notice or Previously
Acquired Shares, or by a combination of such methods, the Fair
Market Value on the day preceding the date of exercise will be
used for the purpose of valuing the tendered shares of Common
Stock.
13. CHANGE IN CONTROL.
13.1. Change in Control. For purposes of this Section 13.1, a
"Change in Control" of the Company will mean (a) the sale,
lease, exchange or other transfer of substantially all of the
assets of the Company (in one transaction or in a series of
related transaction) to a person or entity that is not
controlled, directly or indirectly, by the Company, (b) a
merger or consolidation to which the Company is a party if the
shareholders of the Company immediately prior to effective
date of such merger or consolidation do not have "beneficial
ownership" (as defined in Rule 13d-3 under the Exchange Act)
immediately following the effective date of such merger or
consolidation of more than 80% of the combined voting power of
the surviving corporation's outstanding securities ordinarily
having the right to vote at elections of directors, or (c) a
change in control of the Company of a nature that would be
required to be reported pursuant to Section 13 or 15(d) of the
Exchange Act, whether or not the Company is then subject to
such reporting requirements, including, without limitation,
such time as (i) any person becomes, after the effective date
of the Plan, the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of 40% or
more of the combined voting power of the Company's outstanding
securities ordinarily having the right to vote at elections of
directors, or (ii) individuals who constitute the Board on the
effective date of the Plan cease for any reason to constitute
at least a majority of the Board, provided that any person
becoming a director subsequent to the effective date of the
Plan whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors comprising the Board on the
effective date of the Plan will, for purposes of this clause
(ii), be considered as though such persons were a member of
the Board on the effective date of the Plan.
13.2. Acceleration of Vesting. Without limiting the authority of the
Committee under Section 3.2 of the Plan, if a Change in
Control of the Company occurs, then, if approved by the
Committee in its sole discretion either in an agreement
evidencing an Incentive Award at the time of grant or at any
time after the grant of an Incentive Award, (a) all Options
and Stock Appreciation Rights will become immediately
exercisable in full and will remain exercisable for the
remainder of their terms, regardless of whether the
Participants to whom such Options or Stock Appreciation Rights
have been granted remain in the employ or service of the
Company or any Subsidiary; (b) all outstanding Restricted
Stock Awards will become immediately fully vested; and (c) all
Performance Units and Stock Bonuses then held by the
Participant will vest and/or continue to vest in the manner
determined by the Committee and set forth in the agreement
evidencing such Performance Units or Stock Bonuses.
13.3. Cash Payment for Options. If a Change in Control of the
Company occurs, then the Committee, if approved by the
Committee in its sole discretion either in an agreement
evidencing an Incentive Award at the time of grant or at any
time after the grant of an Incentive Award, and without the
consent of any Participant effected thereby, may determine
that some or all Participants holding outstanding Options will
receive, with respect to and in lieu of some or all of the
shares of Common Stock subject to such Options, as of the
effective date of any such Change in Control of the Company,
cash in an amount equal to the excess of the Fair Market Value
of such shares immediately prior to the effective date of such
Change in Control of the Company over the exercise price per
share of such Options.
13.4. Limitation on Change in Control Payments. Notwithstanding
anything in Section 13.2 or 13.3 of the Plan to the contrary,
if, with respect to a Participant, the acceleration of the
vesting of an Incentive Award as provided in Section 13.2 or
the payment of cash in exchange for all or part of an
Incentive Award as provided in Section 13.3 (which
acceleration or payment could be deemed a "payment" within the
meaning of Section 280G(b)(2) of the Code), together with any
other payments which such Participant has the right to receive
from the Company or any corporation that is a member of an
"affiliated group" (as defined in Section 1504(a) of the Code
without regard to Section 1504(b) of the Code) of which the
Company is a member, would constitute a "parachute payment"
(as defined in Section 280G(b)(2) of the Code), then the
payments to such Participant pursuant to Section 13.2 or 13.3
will be reduced to the largest amount as will result in no
portion of such payments being subject to the excise tax
imposed by Section 4999 of the Code; provided, however, that
if such Participant is subject to a separate agreement with
the Company or a Subsidiary that expressly addresses the
potential application of Sections 280G or 4999 of the Code
(including, without limitation, that "payments" under such
agreement or otherwise will be reduced, that such payments
will not be reduced or that the Participant will have the
discretion to determine which "payments" will be reduced),
then this Section 13.4 will not apply, and any "payments" to a
Participant pursuant to Section 13.2 or 13.3 of the Plan will
be treated as "payments" arising under such separate
agreement.
14. RIGHTS OF ELIGIBLE RECIPIENTS AND PARTICIPANTS; TRANSFERABILITY.
14.1. Employment or Service. Nothing in the Plan will interfere with
or limit in any way the right of the Company or any Subsidiary
to terminate the employment or service of any Eligible
Recipient or Participant at any time, nor confer upon any
Eligible Recipient or Participant any right to continue in the
employ or service of the Company or any Subsidiary.
14.2. Rights as a Shareholder. As a holder of Incentive Awards
(other than Restricted Stock Awards), a Participant will have
no rights as a shareholder unless and until such Incentive
Awards are exercised for, or paid in the form of, shares of
Common Stock and the Participant becomes the holder of record
of such shares. Except as otherwise provided in the Plan, no
adjustment will be made for dividends or distributions with
respect to such Incentive Awards as to which there is a record
date preceding the date the Participant becomes the holder of
record of such shares, except as the Committee may determine
in its discretion.
14.3. Restrictions on Transfer. Except pursuant to testamentary will
or the laws of descent and distribution or as otherwise
expressly permitted by the Plan, unless approved by the
Committee in its sole discretion, no right or interest of any
Participant in an Incentive Award prior to the exercise or
vesting of such Incentive Award will be assignable or
transferable, or subjected to any lien, during the lifetime of
the Participant, either voluntarily or involuntarily, directly
or indirectly, by operation of law or otherwise. A Participant
will, however, be entitled to designate a beneficiary to
receive an Incentive Award upon such Participant's death, and
in the event of a Participant's death, payment of any amounts
due under the Plan will be made to, and exercise of any
Options (to the extent permitted pursuant to Section 11 of the
Plan) may be made by, the Participant's legal representatives,
heirs and legatees.
14.4. Non-Exclusivity of the Plan. Nothing contained in the Plan is
intended to modify or rescind any previously approved
compensation plans or programs of the Company or create any
limitations on the power or authority of the Board to adopt
such additional or other compensation arrangements as the
Board may deem necessary or desirable.
15. SECURITIES LAW AND OTHER RESTRICTIONS.
Notwithstanding any other provision of the Plan or any agreements
entered into pursuant to the Plan, the Company will not be required to issue any
shares of Common Stock under this Plan, and a Participant may not sell, assign,
transfer or otherwise dispose of shares of Common Stock issued pursuant to
Incentive Awards granted under the Plan, unless (a) there is in effect with
respect to such shares a registration statement under the Securities Act and any
applicable state securities laws or an exemption from such registration under
the Securities Act and applicable state securities laws, and (b) there has been
obtained any other consent, approval or permit from any other regulatory body
which the Committee, in its sole discretion, deems necessary or advisable. The
Company may condition such issuance, sale or transfer upon the receipt of any
representations or agreements from the parties involved, and the placement of
any legends on certificates representing shares of Common Stock, as may be
deemed necessary or advisable by the Company in order to comply with such
securities law or other restrictions.
16. PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may suspend or terminate the Plan or any portion thereof at
any time, and may amend the Plan from time to time in such respects as the Board
may deem advisable in order that Incentive Awards under the Plan will conform to
any change in applicable laws or regulations or in any other respect the Board
may deem to be in the best interests of the Company; provided, however, that no
amendments to the Plan will be effective without approval of the stockholders of
the Company if stockholder approval of the amendment is then required pursuant
to Section 422 of the Code or the rules of the National Association of
Securities Dealers, Inc. No termination, suspension or amendment of the Plan may
adversely affect any outstanding Incentive Award without the consent of the
affected Participant; provided, however, that this sentence will not impair the
right of the Committee to take whatever action it deems appropriate under
Sections 4.3 and 13 of the Plan.
17. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan is effective as of June 9, 1993, the date it was adopted by
the Board. The Plan will terminate at midnight on June 8, 2003, and may be
terminated prior to such time to by Board action, and no Incentive Award will be
granted after such termination. Incentive Awards outstanding upon termination of
the Plan may continue to be exercised, or become free of restrictions, in
accordance with their terms.
18. MISCELLANEOUS
18.1. Governing Law. The validity, construction, interpretation,
administration and effect of the Plan and any rules,
regulations and actions relating to the Plan will be governed
by and construed exclusively in accordance with the laws of
the State of Minnesota.
18.2. Successors and Assigns. The Plan will be binding upon and
inure to the benefit of the successors and permitted assigns
of the Company and the Participants.
