SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential. For use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PDT, Inc.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
|_| 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.
<PAGE>
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PDT, INC.
7408 HOLLISTER AVENUE
SANTA BARBARA, CALIFORNIA 93117
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 21, 1997
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Notice is hereby given that the Annual Meeting of Stockholders of PDT, Inc.
(the "Company") will be held on Wednesday, May 21, 1997, at 9:00 a.m., at The
Four Seasons Biltmore, Loggia Room, 1260 Channel Drive, Santa Barbara,
California, 93108, (805) 969-2261, for the following purposes:
1. To elect six (6) Directors to serve until the 1998 Annual Meeting and
until their successors are elected and qualified;
2. To approve the amendment of the PDT, Inc. 1996 Stock Compensation Plan;
3. To ratify the appointment of Ernst & Young LLP, certified public
accountants, as the Company's independent auditors for the fiscal year ending
December 31, 1997; and
4. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
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These items are more fully described in the following pages. The Board of
Directors has fixed the close of business on MARCH 24, 1997, as the record date
for the determination of stockholders entitled to receive notice of and to vote
at the meeting. STOCKHOLDERS ARE REMINDED THAT SHARES CANNOT BE VOTED UNLESS THE
STOCKHOLDER IS PRESENT AT THE MEETING OR THE SIGNED PROXY IS RETURNED OR OTHER
ARRANGEMENTS ARE MADE TO HAVE THE SHARES REPRESENTED AT THE MEETING.
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WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
Joseph E. Nida, Esq.
Secretary
Santa Barbara, California
April 25, 1997
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PLEASE SIGN AND RETURN THE ENCLOSED PROXY
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<PAGE>
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PDT, INC.
7408 Hollister Avenue
Santa Barbara, California 93117
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PROXY STATEMENT
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This Proxy Statement and the accompanying proxy card are being mailed to
stockholders, beginning April 25, 1997, in connection with the solicitation of
proxies on behalf of the Board of Directors (the "Board") of PDT, Inc.
(collectively with its subsidiaries, the "Company") for the 1997 Annual Meeting
of Stockholders, to be held on Wednesday, May 21, 1997, at 9:00 a.m. local time,
at The Four Seasons Biltmore, Loggia Room, 1260 Channel Drive, Santa Barbara,
California, or at any adjournment thereof. Proxies are solicited to give all
stockholders of record at the close of business on March 24, 1997 an opportunity
to vote on matters to be presented at the Annual Meeting. Shares can be voted at
the meeting only if the stockholder is present or represented by proxy.
At the Annual Meeting, stockholders will be asked to consider and vote upon four
items as follows:
ITEM 1. To elect six (6) Directors to serve until the 1998 Annual
Meeting and until their successors are elected and qualified;
ITEM 2. To approve the amendment of the PDT, Inc. 1996 Stock
Compensation Plan;
ITEM 3. To ratify the appointment of Ernst & Young LLP, certified
public accountants, as the Company's independent auditors for the
fiscal year ending December 31, 1997; and
ITEM 4. To transact such other business as may properly come
before the meeting or any adjournments or postponements thereof.
Any stockholder giving a proxy may revoke it at any time prior to its exercise
at the Annual Meeting by giving notice of such revocation either personally or
in writing to the Secretary of the Company at the Company's executive offices,
by subsequently executing and delivering a later-dated proxy, or by voting in
person at the Annual Meeting.
A copy of the Annual Report to Stockholders is included herewith but shall not
constitute proxy solicitation materials.
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THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE ELECTION OF ITS
DIRECTOR NOMINEES IN ITEM 1 AND APPROVAL OF ITEMS 2 AND 3 ARE IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS VOTE TO ELECT EACH OF THE DIRECTOR NOMINEES IN ITEM 1 AND VOTE
FOR ITEMS 2 AND 3.
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<PAGE>
VOTING AND SOLICITATION OF PROXIES
Only holders of record at the close of business on March 24, 1997 (the "Record
Date") of the Company's common stock, $.01 par value (the "Common Stock"), which
is quoted on The Nasdaq National Market under the symbol "PDTI", will be
entitled to vote at the Annual Meeting. On March 24, 1997, there were 12,533,907
shares of Common Stock outstanding. The holders of a majority of the outstanding
shares of Common Stock present in person or by proxy and entitled to vote will
constitute a quorum at the meeting. Broker non-votes (see below) will be counted
toward the establishment of a quorum.
Please specify your choices on the items by marking the appropriate boxes on the
enclosed proxy card and signing it. Shares represented by duly executed and
unrevoked proxies in the enclosed form received by the Board will be voted at
the Annual Meeting in accordance with the specifications made therein by the
stockholders, unless authority to do so is withheld. If no specification is
made, shares represented by duly executed and unrevoked proxies will be voted
FOR the election as directors of the nominees listed in Item 1 herein, FOR Items
2 and 3 and, with respect to any other matter that may properly come before the
meeting, in the discretion of the proxy holder.
This proxy solicitation is being made by the Company. The Company intends to
solicit proxies by use of the mails. In addition, solicitation of proxies may be
made by personal and telephonic meetings with stockholders by directors,
officers and regular employees of the Company. The cost of preparing, assembling
and mailing the proxy materials will be borne by the Company.
VOTE REQUIRED
The election of the director nominees pursuant to Item 1 requires a plurality of
the votes cast in person or by proxy at the Annual Meeting. A plurality means
that the nominees with the largest number of votes are elected as directors up
to the maximum number of directors to be chosen at the meeting. Under Delaware
law, the Company's Certificate of Incorporation and the Company's ByLaws, shares
as to which a stockholder abstains or withholds from voting on the election of
Directors, and shares as to which a broker indicates that it does not have
discretionary authority to vote ("broker non-votes") on such nominees will not
affect the outcome of the election of directors.
Approval of the amendment of the PDT, Inc. 1996 Stock Compensation Plan pursuant
to Item 2 and ratification of the appointment of Ernst & Young LLP as the
independent auditors for the Company pursuant to Item 3 require the affirmative
vote of a majority of the shares present in person or represented by proxy at
the Annual Meeting and entitled to vote. Under Delaware law, the Company's
Certificate of Incorporation and the Company's ByLaws, abstentions on such
proposals have the same legal effect as a vote against such proposals. Broker
non-votes are not counted as shares represented and entitled to vote and
therefore will not affect the outcome of the vote on such proposals.
If any stockholder gives notice at the meeting of his or her intention to
cumulate votes in the election of directors, each stockholder will be entitled
to cumulate his or her votes and give one nominee a number of votes equal to the
number of directors to be elected, multiplied by the number of shares then held,
or distribute the votes on the same principle among as many nominees as the
stockholder deems fit. Stockholders voting by means of the accompanying proxy
will be granting the proxy holders discretionary authority to vote their shares
cumulatively, but such stockholders may not mark the proxy to cumulate their own
votes. The Board of Directors does not presently intend to give notice to
cumulate votes, but it may elect to do so in the event of a contested election
or other, presently unexpected, circumstances. In the event of cumulative
voting, the accompanying proxy authorizes the individuals named as proxy
holders, in their discretion, to vote cumulatively and to distribute, in any
manner, the votes to which each share is entitled in the election of directors,
among the nominees for whom the authority to vote has not been withheld in the
accompanying proxy.
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<PAGE>
On all other matters to come before the Annual Meeting, each holder of Common
Stock will be entitled to one vote for each share owned.
A list of the stockholders of record as of Record Date will be available for
examination during ordinary business hours at least ten days prior to the Annual
Meeting by any stockholder, for any purpose germane to the Annual Meeting at the
Company's offices at 7408 Hollister Avenue, Santa Barbara California 93117
(telephone (805) 685-9880).
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IF YOU PLAN TO ATTEND THE MEETING, PLEASE MARK THE APPROPRIATE BOX ON THE PROXY
CARD. STOCKHOLDERS WHOSE SHARES ARE HELD OF RECORD BY BROKERS OR OTHER
INSTITUTIONS, WILL BE ADMITTED UPON PRESENTATION OF PROPER IDENTIFICATION AND
PROOF OF OWNERSHIP (E.G., A BROKERS' STATEMENT) AT THE DOOR.
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3
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of May 1, 1997 by (i) each person known by the
Company to own beneficially five percent or more of the outstanding shares of
its Common Stock, (ii) each of the executive officers named in the Summary
Compensation Table included herein, (iii) each director and nominee for director
of the Company and (iv) all directors and executive officers of the Company as a
group.
Number of Shares Percentage of
Beneficially Outstanding
Name Owned (1)(2) Stock
- ----------------------------------------------- ---------------- -------------
Daniel R. Doiron, Ph.D. (3)(4) 1,641,336 13.1%
Gary S. Kledzik, Ph.D. (3) 1,388,813 10.7%
Donald K. McGhan (3)(5) 1,316,420 10.6%
Paul F. Glenn (6) 827,160 6.7%
Pharmacia & Upjohn, Inc. (7) 787,502 6.3%
Michael D. Farney 472,500 3.8%
David E. Mai 195,313 1.6%
Raul E. Perez, M.D. 37,500 *
Charles T. Foscue 36,390 *
All directors and executive officers as a group
(8 persons) 5,103,897 38.0%
- ---------------
* Less than one percent.
(1) Each person has sole voting and investment power over the Common Stock shown
as beneficially owned, subject to community property laws where applicable
and the information contained in the footnotes below.
(2) Includes the following shares of Common Stock issuable upon exercise of
options and/or warrants exercisable within 60 days of March 14, 1997: Dr.
Doiron--165,313 shares; Mr. McGhan--27,000 shares; Dr. Kledzik--560,313
shares; Mr. Glenn--0 shares; Mr. Farney--37,500 shares; Mr. Mai--195,313
shares; Dr. Perez--37,500 shares; Mr. Foscue--7,500 shares; and directors
and executive officers as a group--1,046,064 shares.
(3) Dr. Doiron's and Dr. Kledzik's address is 7408 Hollister Avenue, Santa
Barbara, California 93117; Mr. McGhan's address is 3800 Howard Hughes
Parkway, Las Vegas, Nevada 89109.
(4) Includes 50,000 shares held in a charitable remainder trust of which Mr.
Doiron is a trustee. Does not include 18,738 shares of Common Stock issued
to members of Dr. Doiron's immediate family as to which Dr. Doiron disclaims
beneficial ownership.
(5) Includes 539,420 shares of Common Stock issued to McGhan Management, a
Nevada Limited Partnership, of which Mr. McGhan is the General Partner and
all other Limited Partners are members of his immediate family.
(6) Mr. Glenn's address is P.O. Box 50310, Santa Barbara, California 93105.
(7) Includes warrants to purchase 62,501 shares of Common Stock. Pharmacia &
Upjohn is a Delaware corporation formed by the merger in November 1995 of
Pharmacia AB of Sweden and The Upjohn Company of the United States,
according to a press release issued by Pharmacia & Upjohn on November 2,
1995. Each of Pharmacia AB and Pharmacia S.p.A., an Italian corporation and
wholly-owned subsidiary of Pharmacia AB, has filed a Schedule 13D with the
Securities and Exchange Commission ("SEC") dated July 7, 1995. According to
the Schedule 13D filings, the principal business address of Pharmacia AB is
S-171 97 Stockholm Sweden, and the principal business address of Pharmacia
S.p.A. is via Robert Hoch 1.2, 75017 Milan, Italy. See "Certain
Relationships and Related Transactions."
4
<PAGE>
BOARD MEETINGS, REMUNERATION OF DIRECTORS AND COMMITTEES
During 1996, the Board of Directors met on three occasions. Each director
attended in person or by telephone one hundred percent (100%) of the meetings of
the Board of Directors and committees on which he served.
Employees of the Company do not receive any additional compensation for serving
the Company as members of the Board of Directors or any of its Committees.
Directors who are not employees of the Company do not receive fees for Board
Meetings attended, but do receive an annual stock option grant under the PDT,
Inc. 1996 Stock Compensation Plan, as amended and restated effective March 3,
1997, subject to stockholder approval of Item 2 in this Proxy Statement (the
"Stock Compensation Plan"). The Stock Compensation Plan provides for an
automatic grant of non-qualified stock options to purchase 7,500 shares of
Common Stock to non-employee directors on the first day of the fourth quarter of
each year that a non-employee director serves on the Board of Directors during
the term of the Plan. Each option vests upon the grant date and is granted at an
option price equal to the fair market value of the Common Stock on the grant
date. Each option is subject to a repurchase option in favor of the Company for
some or all of the underlying shares, and such repurchase option lapses at a
rate of 20% per year over five years subsequent to the grant date. The options
terminate on the earlier of 90 days from the date on which a director is no
longer a member of the Board of Directors for any reason other than death, ten
years from the date of grant, or six months from the director's death.
Non-employee directors are also eligible for discretionary awards under the
Stock Compensation Plan. During the year ended December 31, 1996, the following
non-employee directors were awarded stock options to purchase 7,500 shares each
under the PDT, Inc. Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"), which will be superseded and terminated by the Stock Compensation Plan
(subject to stockholder approval of Item 2): Michael D. Farney, Charles T.
Foscue, Donald K. McGhan and Raul E. Perez, M.D. In addition, the Company also
reimburses directors for out-of-pocket expenses incurred in connection with
attending Board and Committee Meetings.
The Board has standing Audit and Compensation Committees. The Board does not
have a standing nominating committee or a committee performing similar
functions. The current members of each of the Board's committees are listed
below.
THE AUDIT COMMITTEE
The Audit Committee, composed solely of outside directors, meets with the
Company's independent accountants and management to discuss, recommend and
review accounting principles, financial and accounting controls, the scope of
the annual audit and other matters; advises the Board on matters related to
accounting and auditing; and reviews management's selection of independent
accountants. The current members of the Audit Committee are Michael D. Farney,
Charles T. Foscue, Donald K. McGhan and Raul E. Perez, M.D. During 1996, the
Audit Committee met one time.
THE COMPENSATION COMMITTEE
The Compensation Committee, composed solely of outside directors, reviews and
takes action regarding terms of compensation, employment contracts and pension
matters that concern executive officers of the Company. The current members of
the Compensation Committee are Michael D. Farney, Charles T. Foscue, Donald K.
McGhan and Raul E. Perez, M.D. The Compensation Committee met three times during
1996.
5
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee for fiscal 1996 were Michael D.
Farney, Donald K. McGhan, Raul E. Perez, M.D., and Charles T. Foscue beginning
in July 1996. Mr. Farney was the Chief Financial Officer for the Company prior
to the appointment of John M. Philpott in 1995, and Mr. McGhan was Chairman of
the Board prior to Dr. Kledzik's appointment in 1991. Mr. Foscue is a founder,
Chairman, President and Chief Executive Officer of HAI Financial, Inc. ("HAI").
HAI and Mr. Foscue have been advisors to the Company since 1991 and have been
involved in the Company's private and public financings from 1991 to the
present. Additionally, HAI and Mr. Foscue acted as advisors to Ramus Medical
Technologies ("Ramus") in connection with the sale of Ramus stock to the
Company's subsidiary, PDT Cardiovascular, Inc. ("PDTC"). See "Certain
Relationships and Related Transactions."
EXECUTIVE OFFICERS
The names, ages and certain additional information (if not set out in Item 1) of
the current executive officers of the Company are as follows:
Name Age Position
- ---------------- --- ---------------------------------------------------------
Gary S. Kledzik 47 Chairman of the Board and Chief Executive Officer
Daniel R. Doiron 46 Vice President of Technology and President of PDT
Systems, Inc.
David E. Mai 52 President of PDT, Inc., PDT Cardiovascular, Inc. and
PDT Pharmaceuticals, Inc.
John M. Philpott 36 Chief Financial Officer, Controller, Treasurer and
Assistant Secretary
DANIEL R. DOIRON, PH.D. is a founder of the Company and has served as Vice
President of Technology or Chief Scientist and a director of the Company, and as
President of the PDT Systems, Inc. subsidiary, since the Company's inception in
June 1989. Dr. Doiron was the principal officer of Laserguide, Inc., the custom
laser, fiber optic and accessory firm which he founded in January 1984 and which
was acquired by the Company in August 1989. Dr. Doiron's prior experience
includes positions as Research Associate at the Institute of Physics and Imaging
Science at the University of Southern California, Director of Photophysics
Laboratory at Children's Hospital of Los Angeles and Assistant Professor of
Research at the USC School of Medicine. He holds B.S. and M.S. degrees in
Nuclear Engineering and a Ph.D. degree in Chemical Engineering from the
University of California at Santa Barbara.
JOHN M. PHILPOTT has served as Chief Financial Officer since December 1995.
Since March 1995, Mr. Philpott has served as controller. Prior to joining the
Company, Mr. Philpott was a Senior Manager with Ernst & Young LLP, which he
joined in 1986. Mr. Philpott was an Assistant Controller with Corporate Events,
Inc. from June 1985 until August 1986. Mr Philpott is a Certified Public
Accountant in the State of California. He holds a B.A. degree in Accounting and
in Management Information Systems from California State University of
Northridge.
Certain information about each of the other executive officers is set forth in
Item 1.
6
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee"), composed entirely of outside
directors, is responsible for oversight and administration of executive
compensation. The Committee also reviews the Company's overall compensation
program as reported to the Committee by management. In establishing the
Company's executive compensation program, the Committee takes into account
stockholder value, current market data and compensation trends for comparable
companies, compares corporate performance to that of other companies in the same
industry, gauges achievement of corporate and individual objectives and
considers the overall effectiveness of the program in measuring and rewarding
desired performance levels. These principles have been adhered to by developing
incentive pay programs which provide competitive compensation and reflect the
Company's performance. Both short-term and long-term incentive compensation are
based on Company performance, achievement of specific milestones and the value
received by stockholders.
COMPENSATION PHILOSOPHY
The Committee bases the executive compensation program on the following
principles which reflect the value created for stockholders while supporting the
Company's strategic business goals:
o Compensation should encourage increased stockholder value.
o Compensation levels for executive officers are benchmarked to the outside
market, utilizing information from general industry surveys.
o Total compensation opportunity is targeted to the mid-range from general
industry surveys with incremental amounts which may be earned above that level
depending upon corporate and individual performance. The Committee considers it
essential to the vitality of the Company that the total compensation opportunity
for executive officers remain competitive in order to attract and retain the
talent needed to manage and build the Company's business.
o Incentive compensation is designed to reinforce the achievement of both
short and long-term strategic business goals and objectives of the Company.
COMPENSATION MEASUREMENT
The Company's executive compensation is composed of three components, base
salary, short-term incentives and long-term incentives, each of which is
intended to serve the overall compensation philosophy.
BASE SALARY. The Company's salary levels are intended to be consistent with
competitive pay practices and level of responsibility, with salary increases
reflecting competitive trends, the overall financial performance of the Company,
general economic conditions as well as a number of factors relating to the
particular individual, including the performance of the individual executive,
and level of experience, ability and knowledge of the job.
SHORT-TERM INCENTIVES. The Compensation Committee has the ability to award
stock-based, short-term incentive compensation to executives under the Stock
Compensation Plan based on the executive's level of responsibility, potential
contribution, the success of the Company and competitive conditions. The
executive's actual award is generally determined following the end of the fiscal
year based on the Company's achievement of its goals and an assessment of the
executive's individual performance. Although generally, the Company currently
does not award short-term cash incentive compensation, the
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Committee may in the future award cash bonuses based on the achievement of
target levels of growth or other performance objectives established in
consultation with senior management.
LONG-TERM INCENTIVES. The Company continues to maintain plans pursuant to which
the Committee awards long-term incentive stock compensation based upon the
achievement of the Company's research and development program goals, strategic
alliance collaboration goals and the performance of the Company's Common Stock
on The Nasdaq National Market. Under the Company's employment agreements and the
Stock Compensation Plan, options and other stock awards are granted from time to
time to reward key employee's contributions and as an incentive to future
contributions. Such grants of awards are based primarily on a key employee's
past and potential contribution to the Company's growth and profitability.
Generally, the exercise price of incentive stock options must equal or exceed
the fair market value of the Common Stock on the date of grant. Although the
exercise price of certain non-statutory stock options may be less than the fair
market value of the Common Stock at the date of grant, no options granted to
executive officers in 1996 were granted with an exercise price below fair market
value. Generally, the options under the Stock Compensation Plan vest over four
years and employees must continue to be employed by the Company for such options
to vest.
1996 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER. In setting the 1996 salary
and incentive award levels for the Chief Executive Officer, the Committee
reviewed the Company's achievement in 1995 and 1996 of important strategic
alliances, and the completion of the Company's initial public offering in 1995
and secondary public offering in 1996. The Committee also considered the Chief
Executive Officer's leadership in continuing to strategically position the
Company for the development and commercialization of drugs and devices for use
in photodynamic therapy in the treatment of a number of indications.
During 1995, the Company completed an initial public offering, received a $12
million equity investment from Pharmacia & Upjohn and signed an exclusive
worldwide licensing agreement for its leading drug candidate, SnET2. In
consideration of the Company's outstanding performance, and in an effort to
maintain a base salary position within the range of the base salaries for chief
executive officers of comparable companies, the Committee increased the Chief
Executive Officer's base salary, which had not been increased since August 1993,
from $125,000 to $180,000, starting in October 1995.
During 1996, the Company completed a secondary public offering resulting in net
proceeds of $65.3 million. The Company also extended its strategic
collaborations for the development of applications for photodynamic therapy into
the fields of ophthalmology and the treatment of cardiovascular disease by
entering into (i) a new agreement with Pharmacia & Upjohn for the co-development
and distribution of SnET2 in the field of ophthalmology; (ii) an agreement with
Iridex Corporation providing for the co-development and distribution of light
producing devices for use in ophthalmology, and (iii) an agreement with Ramus
for the co-development of applications for photodynamic therapy in the area of
bypass grafts, along with a $2 million equity investment in Ramus and an option
to acquire the remaining shares in Ramus under specified terms and conditions.
Although the Committee believes that the Company's achievements in 1996 were
significant, consistent with the Company's current general policy of not
awarding short-term cash incentives, the Committee determined to forego any
short-term incentive award to the Chief Executive Officer for 1996. With respect
to long-term incentives, however, the Committee approved the grant to the Chief
Executive Officer of 5,000 non-statutory stock options priced at the fair market
value on the grant dates. Additionally, in 1996, 100,000 of the 200,000 "at
risk" non-statutory stock options previously granted to the Chief Executive
Officer in November 1995, vested upon the achievement of the specific milestones
identified as critical to the continued progress in meeting the Company's
objectives. Further, in order to reduce excessive deferred compensation expense
associated with such options in the future, in May 1996, the Board voted to fix
the vesting dates of the remaining 100,000 options, and the Compensation
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Committee fixed the vesting dates of such options at December 31, 1996, with
respect to 50,000 of such options, and at December 31, 1997 with respect to the
remaining 50,000 options.
SECTION 162(M) IMPLICATIONS FOR EXECUTIVE COMPENSATION. It is the responsibility
of the Committee to address the issues raised by Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), which makes certain
"non-performance-based" compensation to certain executives of the Company in
excess of $1,000,000 non-deductible to the Company. To qualify as
"performance-based" under Section 162(m), compensation payments must be made
pursuant to a plan, by a committee of at least two "outside" directors (as
defined in the regulations promulgated under the Code) and must be based on
achieving objective performance goals. In addition, the material terms of the
plan must be disclosed to and approved by stockholders, and the outside
directors or the Committee, as applicable, must certify that the performance
goals were achieved before payments can be awarded.
The Committee, in planning for the future of the Company, has considered the
impact of Section 162(m) and has taken several steps which are designed to
minimize its effect to the extent practicable while maintaining competitive
compensation practices. First, the Board of Directors adopted the provisions of
the Stock Compensation Plan, which was approved by the Company's stockholders at
the 1996 Annual Meeting, and the amendment of which is submitted for approval as
Item 2 in this Proxy Statement. The Stock Compensation Plan establishes
performance criteria which, if utilized, will qualify certain awards made under
the Plan as performance-based awards approved by the stockholders, and thus not
counted toward the $1,000,000 limitation. Secondly, the Committee continued to
tie a significant portion of the Company's compensation to executives to
achievement and increased stockholder value. The Committee expects to continue
to examine the effects of Section 162(m) and to monitor the level of
compensation paid to the Company's executive officers in order to take any steps
which may be appropriate in response to the provisions of Section 162(m) to the
extent practicable while maintaining competitive compensation practices.
OPTION REPRICING. In December 1996, the Compensation Committee repriced options
granted in February 1996 under one of the Company's employee stock option plans
to executive officers, including the Chief Executive Officer and the other
executive officers named in the Summary Compensation Table, to purchase an
aggregate of 10,000 shares of Common Stock, with exercise prices of $56.00 per
share, the closing price of the Common Stock on the Nasdaq National Market on
the grant date. The exercise prices of such options were amended to $28.00 per
share, which amended price equaled the closing price of the Common Stock on the
Nasdaq National Market on December 31, 1996. The Committee believed that the
decline of the market price of such stock options following their grant was
undermining the retentional and motivational value of the options. Accordingly,
the Committee approved the repricing solely to amend the exercise prices
thereof.
COMPENSATION COMMITTEE
Donald K. McGhan, Chairman
Michael D. Farney
Charles T. Foscue
Raul E. Perez, M.D.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table summarizes all compensation paid to the Company's Chief
Executive Officer and to the Company's other most highly compensated executive
officers, other than the Chief Executive Officer, whose total annual salary and
bonus exceeded $100,000 for services rendered in all capacities to the Company
during the fiscal years ended December 31, 1996, 1995 and 1994 (collectively,
the "named executive officers").
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
--------------------- --------------
Securities
Underlying
Options
Name and Principal Position Year Salary Bonus (# of Shares)
- ------------------------------------------------------- ---- -------- ----------- --------------
<C> <C> <C> <C> <C>
Gary S. Kledzik 1996 $180,000 $ ___ 5,000 (1)
Chairman of the Board and Chief Executive Officer 1995 135,000 55,000 (2) 200,000
1994 125,000 ___ 7,500
Daniel R. Doiron 1996 144,000 ___ 5,000 (1)
Vice President of Technology and President of PDT 1995 122,000 ___ 100,000
Systems, Inc. 1994 110,500 ___ 7,500
David E. Mai 1996 154,797 ___ 5,000 (1)
President of PDT, Inc., PDT Cardiovascular, Inc. 1995 118,000 ___ 100,000
and PDT Pharmaceuticals, Inc. 1994 104,000 ___ 7,500
- ---------------
<FN>
(1) Represents options for 2,500 shares which were originally granted on February 1, 1996 at an
exercise price of $56.00, the closing price of the Company's Common Stock on the Nasdaq National
Market on the date of grant, and subsequently repriced on December 31, 1996 to $28.00, the
closing price of the Common Stock on the Nasdaq National Market on such date. The net result of
this transaction was that a total of 2,500 options granted to each named executive officer in
1996 was held by each such officer at December 31, 1996. The options vest equally over a period
of four years and expire upon the earlier of (i) six months after termination of employment (or
upon termination if terminated for cause), or (ii) ten years from the date of grant.
(2) Dr. Kledzik was awarded a bonus of $55,000, with after tax net proceeds of $33,000. The bonus
was awarded with the explicit intent for the net proceeds to be used to pay off Dr. Kledzik's
outstanding note payable to the Company of $33,000 which includes outstanding interest.
</TABLE>
10
<PAGE>
OPTION GRANTS IN 1996
The following table sets forth certain information as of December 31, 1996 and
the year then ended concerning stock options granted to the named executive
officers.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of
Securities Options Stock Price
Underlying Granted to Appreciation
Options Employees Exercise for Option Term
Granted During Price Expiration --------------------
Name (# of shares) the Year ($/share)(*) Date 5% 10%
- ---------------- ------------- ---------- ------------ ---------- --------- ---------
<C> <C> <C> <C> <C> <C> <C>
Gary S. Kledzik 5,000 (*) 1.54% $28.00 2/01/06 $246,091 $516,248
Daniel R. Doiron 5,000 (*) 1.54% 28.00 2/01/06 246,091 516,248
David E. Mai 5,000 (*) 1.54% 28.00 2/01/06 246,091 516,248
- ---------------
<FN>
* See Note 1 to Summary Compensation Table above.
</TABLE>
STOCK OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
The following table sets forth information as to the stock options held by the
named executive officers at the end of 1996 and the value of the options at that
date based on the difference between the market price of the stock and the
exercise prices of the options. There were no exercises of stock options by the
named executive officers during 1996.
1996 YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options at
at December 31, 1996 December 31, 1996 (1)
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ------------- --------------- ------------- ---------------
Gary S. Kledzik 559,688 59,062 $10,780,886 $136,864
Daniel R. Doiron 164,688 84,062 3,590,636 136,864
David E. Mai 194,688 84,062 4,413,011 136,864
- ---------------
(1) Based on the difference between the closing price of the Common Stock as
reported on the Nasdaq National Market as of December 31, 1996 and the
exercise price of such options.
11
<PAGE>
REPRICING OF OPTIONS
On December 31, 1996, the Company amended options granted to executive officers
in February 1996 under one of the Company's employee stock option plans to
purchase an aggregate of 10,000 shares with an exercise price of $56.00 per
share, the closing price of the Common Stock on the Nasdaq National Market on
the grant date, solely to provide for a new exercise price equal to $28.00 per
share, which amended exercise price equaled the closing price of the Common
Stock on the Nasdaq National Market on December 31, 1996. See "Compensation
Committee Report on Executive Compensation."
The following table sets forth, for the period commencing April 11, 1995 (i.e.,
the date of the Company's initial public offering) and ending December 31, 1996,
certain information concerning the repricing of options held by the named
executive officers and any person who was an executive officer of the Company at
the time of such repricing:
<TABLE>
<CAPTION>
Length of
Original
Number of Option
Securities Market Price Term
Underlying of Stock at Exercise Price Remaining
Options Time of at Time of New Exercise at date of
Name Date Repriced (#) Repricing ($) Repricing($) Price($) Repricing
- -------------------------------- -------- ------------ ------------- -------------- ------------ ----------
<C> <C> <C> <C> <C> <C> <C>
Gary S. Kledzik 12/31/96 2,500 $28.00 $56.00 $28.00 110 months
Chairman of the Board and
Chief Executive Officer
Daniel R. Doiron 12/31/96 2,500 28.00 56.00 28.00 110 months
Vice President of Technology
and President of PDT Systems,
Inc.
David E. Mai 12/31/96 2,500 28.00 56.00 28.00 110 months
Director and President of PDT,
Inc., PDT Cardiovascular, Inc.
and PDT Pharmaceuticals, Inc.
John M. Philpott 12/31/96 2,500 28.00 56.00 28.00 110 months
Chief Financial Officer,
Controller, Treasurer and
Assistant Secretary
</TABLE>
12
<PAGE>
EMPLOYMENT AGREEMENTS
The Company and Dr. Kledzik are parties to an employment agreement effective
December 31, 1989, as amended (the "Employment Agreement"), pursuant to which
Dr. Kledzik serves as Chief Executive Officer for the Company and its
subsidiaries. The Employment Agreement provides for an initial employment term
of one year renewed for successive one-year terms, unless Dr. Kledzik notifies
the Company in writing at least 30 days in advance of, or the Company notifies
Dr. Kledzik in writing 30 days before or after the anniversary, of the effective
date. Under the terms of the Employment Agreement, Dr. Kledzik is entitled to an
annual salary as determined by the Compensation Committee from time to time. The
current annual salary is $200,000. As of December 31, 1996, in connection with
the Employment Agreement, Dr. Kledzik has received options to purchase a total
of 674,466 shares of Common Stock at exercise prices ranging from $0.03 to $2.00
per share with a weighted average price of $0.89 per share. Additionally, from
one of the Company's employee stock option plans, Dr. Kledzik has received
options to purchase 231,250 shares at exercise prices ranging from $6.00 to
$56.00 per share with a weighted average exercise price of $31.71 per share.
Options for 844,154 shares have vested, of which 284,466 have been exercised.
Options outstanding at December 31, 1996 vest ratably over four years from the
date of grant except for options covering 50,000 shares originally granted as
milestone options for which the vesting date was fixed as of December 31, 1997.
Vesting of all of the stock options under the Employment Agreement is contingent
upon Dr. Kledzik's continued employment with the Company and all of the
underlying Common Stock is covered by a repurchase option in favor of the
Company which expires four years after the grants of the respective stock
options. If the Employment Agreement is terminated other than at Dr. Kledzik's
option or by the Company for cause, then the Company shall pay Dr. Kledzik
severance compensation in an amount equal to the product of his monthly base
salary multiplied by the greater of: (i) the number of months remaining under
the term of the Employment Agreement; or (ii) six. If the Company terminates Dr.
Kledzik's employment for cause or Dr. Kledzik terminates his employment, he is
not entitled to severance pay. "Cause" is defined in the Employment Agreement to
be personal dishonesty, incompetence, willful misconduct, breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other than minor traffic
violations) or material breach of any provision of the Employment Agreement or
any other agreement between Dr. Kledzik and the Company. In addition, in
connection with the execution of the Employment Agreement, Dr. Kledzik executed
and delivered the Company's standard form Intellectual Property and
Confidentiality Agreement providing for the assignment to the Company of
inventions and intellectual property created or enhanced during Dr. Kledzik's
employment and for the protection of confidential information.
PDT Systems, Inc. and Dr. Doiron are parties to an employment agreement
effective August 1, 1992, as amended (the "Employment Agreement"), pursuant to
which Dr. Doiron serves as President of PDT Systems, Inc. and Chief Scientist of
PDT, Inc. The Employment Agreement provides for an initial employment term of
one year, renewed for successive one-year terms, unless Dr. Doiron notifies PDT
Systems, Inc. in writing at least 30 days in advance, or PDT Systems, Inc.
notifies Dr. Doiron in writing 30 days before or after the anniversary, of the
effective date. Under the terms of the Employment Agreement, Dr. Doiron is
entitled to an annual salary as determined by the Company from time to time. The
current annual salary is $158,000. As of December 31, 1996, in connection with
the Employment Agreement, Dr. Doiron has received options to purchase a total of
329,466 shares of Common Stock at exercise prices ranging from $0.03 to $2.00
per share with a weighted average price of $0.61 per share. Additionally, from
one of the Company's employee stock option plans, Dr. Doiron has received
options to purchase 131,250 shares at exercise prices ranging from $6.00 to
$56.00 per share with a weighted average exercise price of $29.39 per share.
Options for 374,154 shares have vested, of which 209,466 have been exercised.
The options generally vest ratably over four years from the date of grant. The
remaining terms and conditions of Dr. Doiron's Employment Agreement are
substantially identical to those between the Company and Dr. Kledzik.
13
<PAGE>
The Company and Mr. Mai are parties to an employment agreement effective
February 1, 1991, as amended (the "Employment Agreement"), pursuant to which Mr.
Mai serves as President of the Company, PDT Cardiovascular, Inc., and PDT
Pharmaceuticals, Inc. The Employment Agreement provides for an initial
employment term of one year, renewed for successive one-year terms, unless Mr.
Mai notifies the Company in writing at least 30 days in advance, or the Company
notifies Mr. Mai in writing 30 days before or after, January 1st of each year.
Under the terms of the Employment Agreement, Mr. Mai is entitled to an annual
salary as determined by the Company from time to time. The current annual salary
is $178,200. As of December 31, 1996, in connection with the Employment
Agreement, Mr. Mai has received options to purchase a total of 150,000 shares of
Common Stock at exercise prices ranging from $0.67 to $2.00 per share with a
weighted average price of $1.42 per share. Additionally, from one of the
Company's employee stock option plans, Mr. Mai has received options to purchase
131,250 shares at exercise prices ranging from $6.00 to $56.00 per share with a
weighted average exercise price of $29.39 per share. Options for 194,688 shares
have vested, of which none have been exercised. The options generally vest
ratably over four years from the date of grant. The remaining terms and
conditions of Mr. Mai's Employment Agreement are substantially identical to
those in Dr. Kledzik's agreement except that if Mr. Mai's Employment Agreement
is terminated other than at his option or by the Company for cause, then the
Company shall pay Mr. Mai severance compensation in an amount equal to one
week's salary for each six month employment period, beginning six months after
the effective date of the Employment Agreement.
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1995, the Company entered into a License Agreement, a Drug Supply
Agreement and a Device Supply Agreement with Pharmacia & Upjohn, the beneficial
owners of more that five percent of the Company's Common Stock, relating to the
development, distribution and sale of SnET2 and certain light devices for use in
photodynamic therapy in the fields of oncology, urology and dermatology. Under
the agreements, (i) the Company and Pharmacia & Upjohn agreed to co-develop
SnET2, (ii) the Company granted Pharmacia & Upjohn an exclusive, worldwide
license to use, distribute and sell SnET2, (iii) the Company agreed to
manufacture and supply to Pharmacia & Upjohn its requirements of SnET2 in
finished pharmaceutical form, and (iv) the Company appointed Pharmacia & Upjohn
as its non-exclusive worldwide distributor of certain light devices developed,
manufactured or licensed by the Company for use with SnET2. In August 1996, the
agreements were extended into the field of ophthalmology. The agreements
generally remain in effect for the longer of the duration of the SnET2 patents,
or for a period of ten years from the first commercial sale of SnET2 on a
country-by-country basis. After expiration, Pharmacia & Upjohn will have an
irrevocable, royalty-free, nonexclusive license to SnET2, and the Company agreed
to continue to provide it with SnET2 on terms to be negotiated. Concurrent with
entering into the License Agreement, Pharmacia & Upjohn entered into a Stock
Purchase Agreement pursuant to which Pharmacia & Upjohn purchased 600,000 shares
of Common Stock from the Company for $12 million. In August 1994, the Company
entered into a Formulation Agreement with Pharmacia & Upjohn to develop an
emulsion formulation suitable for intravenous administration of SnET2, and
pursuant to which Pharmacia & Upjohn agreed to be the Company's exclusive
supplier of such products and to manufacture and supply all of the Company's
worldwide requirements of certain emulsion formulations containing SnET2. For
the year ended December 31, 1996, the Company paid $2.6 million and recorded as
expense $2.5 million in connection with the Formulation Agreement. The
Formulation Agreement requires the Company to pay an additional $400,000 if
certain milestones are achieved as well as paying for the costs related to the
development program being performed.
Mr. Foscue, a director of the Company, is a founder, Chairman, President and
Chief Executive Officer of HAI which provides corporate financial consulting
services in the areas of mergers and acquisitions, public and private
financings, strategic planning and financial analysis. Both HAI and Mr. Foscue
have been advisors to the Company since 1991, and have been involved in the
Company's private and public financings since that time. In April 1996, the
Company and HAI entered into an amended and restated financial services
agreement which superseded all previous agreements (the "Financial Services
Agreement"). For the year ended December 31, 1996, the Company paid HAI
$1,115,000 associated with the Company's secondary offering and paid HAI
$105,000 and recorded as expense $224,000 in connection with ongoing consulting
services. The Company expects to continue to utilize the services of HAI in
connection with public or private offerings of securities for which HAI will be
entitled to receive compensation on a monthly basis according to a specified
hourly fee schedule based on services provided, in addition to expense
reimbursements. Additionally, Mr. Foscue and HAI acted as an advisor to Ramus in
connection with the sale of Ramus stock to PDTC, and HAI is entitled to be paid
fees by Ramus' selling shareholders upon the exercise of PDTC's option to
purchase the remaining shares of Ramus. Ramus paid HAI $140,000 in 1996 as a fee
associated with PDTC's purchase of $2 million of Ramus stock.
15
<PAGE>
COMPARISON OF TOTAL STOCKHOLDER RETURN
The Company's Common Stock began trading on the Nasdaq SmallCap Market on April
11, 1995 and was designated as a National Market System security on The Nasdaq
National Market on August 30, 1995. The graph below compares the cumulative
total stockholder return on the Common Stock with the cumulative total return on
the Nasdaq Market Index and a peer group made up of the companies included in
the Nasdaq Pharmaceutical Index over the period indicated (assuming the
investment of $100 in the Company's Common Stock on April 11, 1995, the date of
the Company's initial public offering, and reinvestment of any dividends). In
accordance with SEC regulations, the stockholder return for each entity in the
peer group index has been weighted on the basis of market capitalization as of
each monthly measurement date set forth on the graph. Stockholders are cautioned
against drawing any conclusions from the data contained therein, as past results
are not necessarily indicative of future performance. The other indices are
included for comparative purposes only and do not necessarily reflect
management's opinion that such indices are an appropriate measure of the
relative performance of the Common Stock.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
CRSP Total Returns Index for: 04/11/95 06/30/95 12/29/95 06/28/96 12/31/96
- ---------------------------------- -------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C>
PDT, Inc. 100.0 229.4 443.4 291.2 247.1
Nasdaq Stock Market (US Companies) 100.0 113.4 128.6 145.6 158.1
Nasdaq Pharmaceuticals Stocks 100.0 116.5 169.7 171.6 170.2
SIC 2830-2839 US & Foreign
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 04/11/95.
</TABLE>
16
<PAGE>
================================================================================
ITEM NO. 1
ELECTION OF DIRECTORS
================================================================================
The ByLaws of the Company authorize not more than nine (9) nor less than five
(5) members of the Board of Directors and, effective May 21, 1997, fix the
number of members at six (6) until changed. Unless otherwise instructed, proxy
holders will vote the proxies received by them for the election of the Company's
six (6) nominees named below, each to serve until the next Annual Meeting of
Stockholders and until the director's successor is elected and qualified. If any
stockholder gives notice in accordance with the Company's Certificate of
Incorporation and applicable law of his or her intention to cumulate votes, then
all stockholders may cumulate votes. If such notice is given, the proxy holders
will vote the proxies received by them cumulatively in their discretion.
Six (6) Directors are being nominated to be elected until the 1998 Annual
Meeting of Stockholders and until their successors are elected and qualified:
MICHAEL D. FARNEY; CHARLES T. FOSCUE; GARY S. KLEDZIK, PH.D.; DONALD K. MCGHAN;
DAVID E. MAI; AND RAUL E. PEREZ, M.D.
If any nominee is unable to or declines to serve as a director at the time of
the Annual Meeting, the proxy holders will vote the shares which they represent
for a nominee designated by the present Board of Directors to fill the vacancy,
unless the Board, to the extent permitted, reduces the number of directors. It
is not presently expected that any nominee will be unable or will decline to
serve as a director.
Names of the nominees and certain information about each of them are set forth
below.
MICHAEL D. FARNEY, AGE 53
Mr. Farney is a founder of the Company and has served as a director since its
inception in June 1989. He served as Chief Financial Officer of the Company from
inception until December 1995. Mr. Farney served as a director, Chief Executive
Officer, Chief Financial Officer, Secretary and Treasurer of INAMED Corporation,
Las Vegas, Nevada ("INAMED"), which develops, manufactures and markets medical
devices, and as Chief Financial Officer, Secretary and Treasurer of INAMED's
wholly-owned subsidiaries (including, BioEnterics Corporation, BioDermis
Corporation, Flowmatrix Corporation, McGhan Medical Corporation and Medisyn
Technologies Corporation) from April 1987 until his resignation in April 1997.
Mr. Farney is currently a consultant to INAMED.
CHARLES T. FOSCUE, AGE 48
Mr. Foscue has served as director of the Company since July 1996. Mr. Foscue is
a founder, Chairman, President and Chief Executive Officer of HAI and has held
those positions since the inception of HAI in 1979. HAI serves as a corporate
financial consultant in the areas of mergers and acquisitions, public and
private financings, strategic planning and financial analysis. HAI and Mr.
Foscue have been advisors to the Company since 1991 and have been involved in
the Company's private and public financings from 1991 to the present. Prior to
founding HAI, Mr. Foscue was Vice President of Marketing for Tri-Chem, Inc. Mr.
Foscue holds a B.A. degree in Economics from the University of North Carolina
and an M.B.A. degree from Harvard University, Graduate School of Business.
GARY S. KLEDZIK, PH.D., AGE 47
Dr. Kledzik is a founder of the Company and has served as a director since its
inception in June 1989. He served as President of the Company from June 1989 to
May of 1996. He has been Chairman of the
17
<PAGE>
Board of Directors since July 1991 and Chief Executive Officer since September
1992. Dr. Kledzik has held the office of President of PDT Pharmaceuticals, Inc.
since its formation until July 1996. Prior to joining the Company, Dr. Kledzik
was Vice President of the Glenn Foundation for Medical Research. His previous
experience includes serving as General and Research Manager for an Ortho
Diagnostic Systems, Inc. division of Johnson & Johnson, Vice President of
Immulok, Inc. a cancer and infectious disease biotechnology company which he
co-founded and which was acquired by Johnson & Johnson in 1983, Laboratory
Director for Endocrine Sciences in Los Angeles and Adjunct Research Scientist at
the University of California at Los Angeles. Dr. Kledzik holds a B.S. in Biology
and a Ph.D. in Physiology from Michigan State University.
DONALD K. MCGHAN, AGE 63
Mr. McGhan is a founder of the Company and has served as a director since its
inception in June 1989. He served as Chairman of the Board prior to Dr.
Kledzik's appointment in 1991. Mr. McGhan concurrently serves as Chairman of the
Board and President of INAMED. Previously, Mr. McGhan was Founder, Chairman of
the Board and Chief Executive Officer of McGhan NuSil Corporation, acquired by
Union Carbide Corporation in 1990. Mr. McGhan has also served as Director of
Operations for an Ortho Diagnostic Systems, Inc. subsidiary of Johnson & Johnson
and as a Founder, President and Chairman of the Board of Immulok, Inc., which
was acquired by Johnson & Johnson in 1983.
DAVID E. MAI, AGE 52
Mr. Mai has served as President of the Company since May 1996, and as President
of PDT Cardiovascular, Inc. since September 1992 and President of PDT
Pharmaceuticals, Inc. since July 1996. Mr. Mai served as Vice President of
Corporate Development for the Company from March 1994 to May 1996. Mr. Mai
became associated with PDT, Inc. in July 1990 as a consultant assisting with
technology and business development. He joined the Company in 1991, serving as
New Product Program Manager from February 1991 to July 1992 and as Clinical
Research Manager from July 1992 to September 1992. Prior to joining the Company,
Mr. Mai was Director of the Intravascular Ultrasound Division of Diasonics
Corporation from 1988 to 1989. Previously, Mr. Mai served as Director of
Strategic Marketing for Boston Scientific Corporation's Advanced Technologies
Division, Vice President of Stanco Medical and Sales Engineer with
Hewlett-Packard Medical Electronics. Mr. Mai's early career in the
hospital/clinical field included positions as Manager of Cardiology Department
and Clinical and Research Associate in Cardiology at Fresno Community Hospital.
Mr. Mai received his cardiopulmonary training in the U.S. Navy and holds a B.S.
degree in Biology from the University of Hawaii.
RAUL E. PEREZ, M.D., AGE 47
Dr. Perez has served as a director of the Company since September 1992. Dr.
Perez is a board certified obstetrician/gynecologist. He has been in practice
for thirteen years and currently practices at St. John's Mercy Medical Center in
St. Louis, Missouri, where he is a member of the Quality Assurance Committee.
Dr. Perez is also a fellow of the Academy of Obstetricians and Gynecologists.
Dr. Perez completed his medical education at the University of Baltimore and
completed his internship and residency in obstetrics and gynecology at St.
John's Mercy Medical Center.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE SIX (6) NOMINEES FOR DIRECTOR NAMED IN THIS PROXY STATEMENT.
18
<PAGE>
================================================================================
ITEM NO. 2
PROPOSAL TO APPROVE THE AMENDMENT OF THE PDT, INC.
1996 STOCK COMPENSATION PLAN
================================================================================
The Board of Directors unanimously recommends approval of the following
amendments to the PDT, Inc. 1996 Stock Compensation Plan (the "Plan") adopted by
the Board of Directors at its regular meeting on March 3, 1997, subject to
stockholder approval of this Item 2 at the Annual Meeting, to: (i) provide that
non-employee directors may receive discretionary grants of Awards under the Plan
upon the approval of the Board of Directors of the Company, excluding the
non-employee directors; (ii) supersede and replace the Company's existing
Directors' Plan, which currently provides for mandatory annual grants of 7,500
NQSOs to non-employee directors, by incorporating such provisions into the Plan;
(iii) increase the maximum number of shares of Common Stock reserved for
issuance under the Plan by 500,000, from 3,500,000 to 4,000,000; (iv) delete the
annual limitations on the number of shares of Common Stock as to which the grant
of Awards as Performance Shares and Restricted Shares (50,000 shares), as Stock
Payments (50,000 shares), under the Purchase Program (100,000 shares), and under
all other Plan Programs (200,000 shares) may be made; (v) replace the 20,000
limitation on the number of shares of Common Stock as to which the grant of
Awards other than Stock Payments may be made to any one Participant in any one
year, and the 10,000 annual limitation on Stock Payments, with a 500,000 share
limitation on all Awards per Participant over the life of the Plan; (vi)
increase from 200,000 to 500,000 the limitation on the number of ISOs which may
be granted over the life of the Plan; and (vii) give the Plan Administrators the
discretionary authority to allow stock options to be exercised after an optionee
ceases to be employed by the Company for reason other than death or disability
beyond the current three (3) month period, but in no event after the expiration
of the term of the option. All other terms of the Plan as originally approved by
the Company's stockholders at the 1996 Annual Meeting will remain unchanged.
The Board of Directors and management continue to believe that the Plan assists
the Company in attracting and retaining superior employees and promotes
long-term growth and profitability by further aligning employee and stockholder
interests. With the amendments submitted for approval at the 1997 Annual
Meeting, the Company will have greater flexibility to determine the amount of
awards to be granted to eligible Participants in any one year. Additionally, the
Board of Directors believes that, by providing the Company with the ability to
make discretionary grants of Awards to non-employee directors, the Company's
ability to attract and retain the services of highly qualified non-employee
directors will be enhanced. Finally, the Board believes that incorporating the
provisions of the Directors' Plan into the Plan will further simplify the
administration of the Company's long-term incentive compensation programs. As
described below, if the amendments are approved by stockholders, the Plan will
supersede and replace the existing Directors' Plan, and no further awards will
be made under the Directors' Plan.
A summary of the principal features of the Plan, as amended by the Board in
March 1997, is provided below, but is qualified in its entirety by reference to
the full text of the Plan, which is attached to this Proxy Statement as Exhibit
A. All defined terms used herein have the meaning set forth in the Plan, unless
otherwise indicated.
PURPOSE, STRUCTURE, AWARDS AND ELIGIBILITY
The Plan is intended to secure for the Company and its stockholders the benefits
arising from ownership of the Company's Common Stock by those selected key
individuals of the Company who will be responsible for the Company's future
growth. The Plan is designed to help attract and retain superior
19
<PAGE>
personnel for positions of substantial responsibility with the Company, and to
provide key individuals with an additional incentive to contribute to the
success of the Company.
The Plan is composed of seven parts (individually, "Programs") and the Plan
Administrators (as defined below) may make the following types of grants under
the Plan, each of which will be an "Award": (i) Incentive Stock Options ("ISOs")
under the Incentive Stock Option Program (the "Incentive Program"); (ii)
Nonqualified Stock Options ("NQSOs") under the Nonqualified Stock Option Program
(the "Nonqualified Program"); (iii) Restricted Shares ("Restricted Shares")
under the Restricted Shares Program (the "Restricted Program"); (iv) Stock
Appreciation Rights ("SARs") under the Stock Appreciation Rights Program (the
"SAR Program"); and (v) Other Stock Rights under the Stock Rights Program (the
"Stock Rights Program"), which may include the issuance of Performance Shares,
Stock Payments and Dividend Equivalent Rights, all as defined in Article V of
the Plan. The sixth part of the Plan is the Stock Purchase Program (the
"Purchase Program") under which employees of the Company may purchase shares of
Common Stock. The seventh part of the Plan is the Non-Employee Directors' Option
Program (the "Directors' Option Program") under which non-employee directors of
the Company receive annual mandatory grants of 7,500 NQSOs.
Officers, key employees, directors, and independent contractors or agents of the
Company who are responsible for or contribute to the management, growth, or
profitability of the business of the Company will be eligible for selection by
the Plan Administrators to participate in the Plan, provided that ISOs may be
granted only to employees of the Company. An employee may be granted NQSOs under
the Plan, provided that the grant of NQSOs and ISOs to an employee will be the
grant of separate options and each NQSO and ISO will be specifically designated
as such in accordance with applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code"). As of the date hereof, the approximate number of
persons eligible to participate in the Plan is 140.
SHARES SUBJECT TO PLAN
The aggregate number of shares of Common Stock with respect to which the grant
of Awards may be made under the Plan during the term thereof may not exceed Four
Million (4,000,000) shares. Within such total, in no event will ISOs with
respect to more than Five Hundred Thousand (500,000) shares of Common Stock be
granted under the Plan during its term. The shares of Common Stock issuable
under the Plan may be authorized but unissued shares, shares issued and
reacquired by the Company or shares purchased by the Company on the open market.
If any of the Awards granted under the Plan expire, terminate or are forfeited
for any reason before they have been exercised, vested or been issued in full,
the unused shares subject to those expired, terminated or forfeited Awards will
again be available for issuance under the Plan. The number of shares of Common
Stock with respect to which the grant of Awards may be made to any one
participant under the Plan during the term thereof may not exceed Five Hundred
Thousand (500,000) shares. The maximum number of shares subject to the Plan and
the individual limits are subject to adjustment as defined in Article I, Section
7 of the Plan and as described below.
EFFECTIVE DATE AND DURATION
The Plan became effective upon its adoption by the Board of Directors of the
Company, and will continue in effect until July 17, 2006 unless sooner
terminated under the general provisions of the Plan. No Award will be granted
after the date on which the Plan terminates.
ADMINISTRATION
The Plan will be administered by the Board of Directors or by a committee
appointed by the Board, consisting of not less than two directors of the Company
who are "non-employee" directors within the
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meaning of Rule 16b-3 promulgated pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), so long as disinterested administration
is required under Rule 16b-3, and who are "outside" directors as defined in
Section 162(m) of the Code, so long as "outside" directors are needed to meet
the requirements of Section 162(m); provided, however, that as long as
disinterested administration or "outside" directors are so required, if not all
members of the Board are "non-employee" directors and "outside" directors, then
the Plan will be administered solely by "non-employee" and "outside" directors,
except that discretionary grants of Awards to directors who are not also
employees of the Company shall be made upon the approval of the Board of
Directors, excluding such non-employee directors. Subject to the foregoing
limitations, as applicable, the Board may from time to time remove members from
the committee, fill all vacancies on the committee, however caused, and may
select one of the members of the committee as its Chairman. The members of the
Board or committee, when acting to administer the Plan, are referred to as the
"Plan Administrators." The Plan Administrators will hold meetings at such times
and places as they may determine, will keep minutes of their meetings, and may
adopt, amend, and revoke such rules and procedures as they may deem proper with
respect to the Plan. Any action of the Plan Administrators will be taken by
majority vote or the unanimous written consent of the Plan Administrators.
Subject to certain specific provisions of the Plan, and with a view to effecting
its purpose, the Plan Administrators will have sole authority, in their absolute
discretion: (a) to construe and interpret the Plan; (b) to define the terms used
therein; (c) to determine the individuals to whom Awards will be granted under
the Plan; (d) to determine the time or times at which Awards will be granted
under the Plan; (e) to determine the number of shares subject to each Award, the
price or exercise price of any Award, the duration of each Award granted under
the Plan; (f) to determine all of the other terms and conditions of Awards
granted under the Plan; and (g) to make all other determinations necessary or
advisable for the administration of the Plan and to do everything necessary or
appropriate to administer the Plan. All decisions, determinations, and
interpretations made by the Plan Administrators will be binding and conclusive
on all participants in the Plan and on their legal representatives, heirs, and
beneficiaries.
TYPES OF AWARDS AVAILABLE UNDER PLAN
STOCK OPTIONS. The Plan Administrators may grant to participants
options to purchase shares of Common Stock. The purchase price for shares
acquired pursuant to the exercise, in whole or in part, of any option will not
be less than the greater of: (i) the par value of a share of Common Stock; or
(ii) the Fair Market Value (as defined in Article I, Section 22 of the Plan
attached hereto) of the shares at the time of the grant of the option.
Notwithstanding the foregoing, if at the time an ISO is granted the optionee
owns or would be considered to own by reason of Code Section 424(d) more than
10% of the total combined voting power of all classes of stock of the Company or
its subsidiaries (a "10% Stockholder"), the purchase price of the shares covered
by such ISO will not be less than 110% of the Fair Market Value of a share of
Common Stock on the date the ISO is granted. Each option granted will expire on
the date determined by the Plan Administrators, but in no event later than ten
(10) years from the date of grant, except in the case of ISOs awarded to a 10%
Stockholder, in which case the expiration date will not be later than five (5)
years from the date of grant. Each grant of a stock option will be evidenced by
an agreement or other written document which will incorporate such terms and
conditions as the Plan Administrators, in their sole discretion, deem are not
inconsistent with the terms of the Plan and other legal requirements (the "Award
Agreement"). The Plan Administrators may prescribe the method of exercise and
payment of such stock options; provided that the aggregate Fair Market Value
(determined at the time any ISO is granted) of the Common Stock with respect to
which any ISOs become exercisable during any calendar year under all plans of
the Company may not exceed $100,000. The purchase price for shares may be paid
in cash, certified and cashier's check, or, if permitted by the Plan
Administrators, by shares of Common Stock, or by the surrender of all or part of
an Award (including the Award being exercised), or in other property, rights and
credits deemed acceptable by the Plan Administrators, or, if permitted, by any
combination of the foregoing.
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If an optionee ceases to be employed by the Company for any reason
other than death or disability, the option will terminate immediately; provided
that the Plan Administrators may, in their discretion, allow the option to be
exercised (to the extent exercisable at termination) at any time within three
(3) months after termination or such longer period as the Plan Administrators
may determine, but in no event after the expiration of the term of such option.
If an optionee becomes disabled, the Plan Administrators may, in their
discretion, allow the option to be exercised (to the extent exercisable at
termination) up to one (1) year after termination of employment, and if an
optionee dies while an employee or within three (3) months thereafter, the
optionee may exercise the option (to the extent exercisable at termination) up
to one (1) year after the date of death, unless, in either case, the Award
Agreement provides otherwise.
STOCK APPRECIATION RIGHTS. The Plan Administrators may grant SARs in
tandem with the grant of stock options or as an independent grant. Each SAR will
expire on the date determined by the Plan Administrators, but in no event later
than ten (10) years from the date of grant. Upon settlement of a SAR, the
participant will receive a payment equal to the excess, if any, of the SAR
Exercise Price (Fair Market Value of a share of Common Stock on the date of
exercise) for the number of shares being exercised over the SAR Grant Price (the
option price for the related option, if any, or similarly calculated grant
price) for such shares. Such payment may be made in whole shares or in cash or a
combination of shares and cash, as determined under the SAR agreement. Each SAR
grant will be evidenced by an agreement which will incorporate such terms and
conditions as the Plan Administrators, in their sole discretion, deem are not
inconsistent with the Plan and the related option agreement, if any.
RESTRICTED SHARES. The Plan Administrators may grant Restricted Shares
to participants, which shares become nonforfeitable upon the achievement of
specified service or performance conditions within a specified time period.
During such period, subject to the terms of the related agreement, the
participant may not sell, pledge, assign or transfer such shares, other than by
will or the laws of descent and distribution. At the discretion of the Plan
Administrators, the participant who is granted Restricted Shares will have all
of the rights of a stockholder, including, without limitation, the right to vote
Restricted Shares and the right to receive dividends on such Restricted Shares.
The Plan Administrators may (but are not obligated to) require that any
dividends on such shares will be automatically deferred and reinvested in
additional restricted shares subject to the same restrictions as the underlying
restricted shares. If a participant fails to meet the terms and conditions set
forth in the related agreement during the period of the restrictions, the
Restricted Shares will be forfeited, and all rights of the participant to such
shares will terminate without further obligation on the part of the Company. If
a participant terminates employment with the Company prior to expiration of the
restriction period, the Restricted Shares will be forfeited; provided that the
Plan Administrators may, in their discretion, accelerate the lapsing of or waive
such restrictions based on such factors as they may determine, including, but
not limited to, the participant's retirement, death or disability.
OTHER STOCK RIGHTS. The Plan Administrators may also grant to
participants Performance Shares, Stock Payments or Dividend Equivalent Rights.
Each such Award will expire on the date determined by the Plan Administrators,
but in no event later than ten (10) years from the date of grant.
Performance Shares will become payable to a participant based upon the
achievement of specified performance objectives, as described below, and upon
other terms and conditions established by the Plan Administrators. Each grant is
required to satisfy the conditions for performance-based awards, as summarized
below. A grant may provide for forfeiture of Performance Shares in the event of
termination of employment or other events, subject to exceptions for death,
disability, retirement or other events, as the Plan Administrators may
determine. Payment of Performance Shares may be made in such form and at such
time as the Plan Administrators may determine. Payment, if any, upon exercise or
settlement may be made as provided above with respect to stock options.
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Stock Payments may be made to participants as a bonus or additional
compensation or in lieu of the obligation of the Company or a subsidiary to pay
cash compensation, as determined by the Plan Administrators. Once a participant
receiving Stock Payments becomes holder of record of such shares, the
participant will have all voting, dividend, liquidation and other rights with
respect to shares issued as Stock Payments; provided, that the Plan
Administrators may impose such restrictions on transfer as they deem
appropriate.
Dividend Equivalent Rights may be granted in tandem with the grant of
stock options, SARs, Restricted Shares or Performance Shares that otherwise do
not provide for the payment of dividends on the shares subject to the grant, or
Dividend Equivalent Rights may be granted as independent rights. Payment may be
made in cash, shares of Common Stock, or a combination thereof, may be immediate
or deferred, and may be subject to meeting employment requirements, Performance
Objectives or such other conditions as the Plan Administrators may determine.
The total payment attributable to a share subject to a Dividend Equivalent Right
will not exceed one hundred percent (100%) of the equivalent dividends payable
with respect to a share of Common Stock, taking into account any assumed
reinvestment (including assumed reinvestment in shares of Common Stock) or
interest earnings on such equivalent dividends in the case of a deferred
payment. However, such percentage may increase to a maximum of two hundred
percent (200%) if the Dividend Equivalent Right is subject to a Performance
Objective, as described below.
PERFORMANCE-BASED AWARDS. Each grant of Performance Shares will be
subject to achievement of a performance objective. The agreement relating to
such grant will specify the performance objective, performance period, and the
applicable number of Performance Shares. Other grants may be subject to
achievement of a performance objective, as determined by the Plan
Administrators. The maximum award percentage will not exceed one hundred percent
(100%) in the case of performance-based Restricted Shares and two hundred
percent (200%) in the case of Performance Shares or performance-based Dividend
Equivalent Rights.
The Plan Administrators will determine and specify the performance
objective (the "Performance Objective") in the related agreement. The
Performance Objective will consist of (i) one or more business criteria,
including financial, service level and individual performance criteria, and (ii)
a target level or levels of performance with respect to such criteria. The
Performance Objective for Performance Shares and any other performance-based
award granted to an employee that the Committee deems may be or become a covered
employee, as defined in Section 162(m)(3) of the Code (generally, the chief
executive officer and up to four other most highly compensated executive
officers at the end of the then current fiscal year), will be objective and will
otherwise meet the requirements of Section 162(m)(4)(C) of the Code. Such
Performance Objective will be based upon one or more of the following
performance-based business criteria, either on a business unit or
Company-specific basis or in comparison with peer group performance: return on
net assets; return on assets; return on equity; return on capital; return on
revenues; cash flow; book value; share price performance (including Options and
SARs tied solely to appreciation in the Fair Market Value of the shares);
earnings per share; stock price earnings ratio; earnings before interest, taxes,
depreciation and amortization expenses ("EBITDA"); earnings before interest and
taxes ("EBIT"); or EBITDA, EBIT or earnings before taxes and unusual or
nonrecurring items as measured either against the annual budget or as a ratio to
revenue. Achievement of any such Performance Objective will be measured over a
period of years not to exceed ten, as specified by the Plan Administrators. The
Plan Administrators will establish the targeted level or levels of performance
for each such business criterion.
STOCK PURCHASE PROGRAM. Under the Purchase Program, eligible employees
may acquire Common Stock from the Company at a price equal to the lesser of: (i)
eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on
the enrollment date; or (ii) eighty-five percent (85%) of the Fair Market Value
of a share of Common Stock on the exercise date. Under the Purchase Program
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there are a series of consecutive one-year offering periods, provided the Plan
Administrators may change the duration of an offering period. An eligible
employee may enroll in an offering period by delivering an agreement in a form
prescribed by the Plan Administrators to the Company designating payroll
deductions not exceeding fifteen percent (15%) of compensation. An agreement in
effect for one offering period will continue in effect until withdrawn by the
employee. On the enrollment date for each offering period, each eligible
employee participating in such offering period will be granted an option to
purchase on each exercise date during such offering period up to the lesser of:
(i) One Thousand Five Hundred (1,500) shares or (ii) that number of shares of
Common Stock determined by dividing Twenty Five Thousand ($25,000.00) by the
Fair Market Value of a share of Common Stock on the enrollment date. The option
will expire immediately after the last exercise date of the offering period. No
participant will be granted an option under the Purchase Program if, immediately
after the grant, such participant would own stock possessing five percent (5%)
or more of the total combined voting power or value of all classes of stock of
the Company or of any subsidiary (applying the constructive ownership rules of
Section 424(d) of the Code and treating stock that a participant may acquire
under outstanding options as stock owned by the participant); or that permits
such participant's rights to purchase stock under all employee stock purchase
plans of the Company and its subsidiaries to accrue at a rate that exceeds
Twenty Five Thousand Dollars ($25,000) worth of stock (determined at the Fair
Market Value of the shares at the time such option is granted) in any calendar
year (computed utilizing the rules of Section 423(b)(8) of the Code). The
participant will have no interest or voting right in shares covered by an option
until such option has been exercised.
Shares purchased under the Purchase Program will be held in an account
maintained by an agent selected by the Company. Subject to limitations under the
Code, any cash dividends will be automatically invested in shares of Common
Stock purchased at 100% of Fair Market Value on the next exercise date. All
non-cash distributions will be paid to participants as soon as practicable.
Prior to termination of employment, a participant may withdraw some or all
shares of Common Stock, subject to certain notice requirements, provided that,
unless the Plan Administrators otherwise permit in their sole discretion, at
least twelve (12) months have expired following the exercise date on which such
shares were purchased. After ceasing to be an employee for any reason, all
shares of Common Stock held in the account and unused payroll deductions will be
returned to the participant.
A participant may withdraw from an offering period, or increase or
decrease the rate of his or her payroll deductions (subject to such limitations
as the Plan Administrators may impose), by written notice at least five (5)
business days prior to the next exercise date or payroll date, as the case may
be. To the extent necessary to comply with Section 423 of the Code, such
deductions will be decreased to zero during a purchase period scheduled to end
during a calendar year when the aggregate of all payroll deductions previously
used to purchase stock during such year, plus accrued payroll deductions, equals
$21,250 (based on the 85% discount).
DIRECTORS' PROGRAM. The Director' Program provides for an automatic
grant of NQSOs to purchase 7,500 shares of Common Stock to each director who is
not an employee of the Company, on the first day of the fourth quarter of each
year during the term of the Plan that such director serves on the Board. Each
NQSO vests upon the grant date and is granted at an option price equal to the
Fair Market Value of the Common Stock on the grant date. The options terminate
on the earlier of 90 days from the date on which a director is no longer a
member of the Board for any reason other than death, ten years from the date of
grant, or six months from the director's death. Unless otherwise specifically
provided in the Plan, all provisions regarding the grant of NQSOs under the
Nonqualified Program are applicable to the NQSOs granted to directors under the
Directors' Program.
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CHANGE OF CONTROL
Unless otherwise provided in an Award Agreement, if a Change of Control (as
defined in Article I, Section 8 of the Plan attached hereto) occurs prior to
vesting or settlement of any outstanding Award, then from and after the
Acceleration Date, all outstanding and unexercised options, SARs and Dividend
Equivalent Rights shall be exercisable in full, whether or not otherwise
exercisable, all restrictions and Restriction Periods applicable to all
outstanding Restricted Shares, Stock Payments and Dividend Equivalent Rights
shall lapse and certificates representing such shares shall be delivered to the
Plan Participant no later than the fifth day following the Acceleration Date,
all Performance Objectives and other terms and conditions applicable to any
Performance Shares, Stock Payments and Dividend Equivalent Rights shall be
deemed to have been met and the full value of such Shares, Payments or Rights
shall be paid or issued to the Plan Participant no later than the fifth day
following the Acceleration Date. The Plan Administrators may, in their
discretion, include in the agreement evidencing any such Award, a provision or
provisions to avoid or ameliorate the federal income tax impact of excess
parachute payments as defined in Section 280G(b) of the Code, including, without
limitation, provisions reducing the benefits or payments realizable by the Plan
Participant under such Awards or providing for additional payments to such Plan
Participant as a result of excise tax payment obligations related thereto. Under
the Purchase Program, all funds in the Plan Participants' accounts which have
not been used to purchase Common Stock will be refunded to the Plan Participant
no later than the fifth day following the Acceleration Date and all Common Stock
held in the Plan Participants' accounts will be released as a withdrawal under
the terms and conditions of the Purchase Program.
EMPLOYMENT AND OTHER TERMS AND CONDITIONS
Each participant may be required to agree in writing, as a condition of
receiving an Award under the Plan, that he or she will remain in the employment
of, or service to, the Company or its subsidiaries following the date of the
granting of that Award for a period specified by the Plan Administrators in
their discretion. In the discretion of the Plan Administrators, a Plan
Participant may also be required to agree to non-competition, non-disclosure,
non-solicitation or any other terms or provisions not inconsistent with the Plan
in consideration of the grant of an Award. The grant of an Award will not confer
any right to continued employment or alter the terms of any employment
agreement.
Except as may be provided in an Award Agreement, the Plan Administrators may, in
their discretion, waive any restrictions or conditions applicable to, or
accelerate the vesting of, any Award (other than the right to purchase shares
pursuant to the Purchase Program). The Plan Administrators, in their sole
discretion, may cancel any unexpired, unpaid or deferred Award (other than a
right to purchase shares pursuant to the Purchase Program) at any time if the
Plan Participant is not in compliance with all applicable provisions of the Plan
or any Award Agreement or if the Plan Participant, whether or not he or she is
currently employed by the Company or one of its subsidiaries, acts in a manner
contrary to the best interests of the Company and its subsidiaries. The right to
receive any Award under the Plan (other than the right to purchase shares
pursuant to the Purchase Program) may, at the request of the Plan Participant,
be deferred to such period and upon such terms and conditions as the Plan
Administrators shall, in their discretion, determine, which may include
crediting of interest on deferrals of cash and crediting of dividends on
deferrals denominated in shares of Common Stock.
TRANSFERABILITY
During the lifetime of a participant to whom an Award is granted, only the
participant, or participant's legal representative, may exercise or receive
payment of an Award; provided, however, that the Plan Administrators may, in
their sole discretion, permit transfers of NQSOs and SARs, for estate planning
purposes, if and to the extent such transfers do not cause a participant subject
to Section 16 of the Exchange Act to lose the benefit of the exemptions under
Rule 16b-3 for such transactions or violate other
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rules or regulations of the SEC or the Internal Revenue Service or materially
increase the cost of the Company's compliance with such rules or regulations. In
the event of a Plan Participant's death, all of such person's outstanding
Awards, including his or her rights to receive any accrued but unpaid Stock
Payments, will transfer to the maximum extent permitted by law to such person's
beneficiary (except to the extent a permitted transfer of a NQSO or SAR was
previously made). No Award (other than unrestricted Stock Payments upon receipt)
may be sold, pledged, assigned, transferred in any manner (except as provided in
the Plan), exchanged or otherwise encumbered or made subject to any creditor's
process, whether voluntarily, involuntarily or by operation of law, and any
attempt to do so shall be of no effect.
ADJUSTMENTS
In the event that there is any change in the Company's Common Stock by reason of
any merger, consolidation, combination, exchange of shares, other
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other similar corporate transaction or event, the number
and kind of shares which may be delivered, the exercise price, grant price, or
purchase price relating to any Award will be proportionately and equitably
adjusted by the Plan Administrators at the time of such event.
TAX WITHHOLDING
The grant or exercise of any Award or the sale and issuance of any shares to be
purchased under the Plan are subject to the condition that if, at any time, the
Company determines, the satisfaction of withholding tax or other withholding
liabilities under any state or federal law is necessary or desirable, then the
grant or exercise of any Award or the sale and issuance of any shares to be
purchased under the Plan will not be effective unless such withholding has been
obtained in a manner acceptable to the Company.
AMENDMENTS
Subject to limitations as described in Article I, Section 10 of the Plan, the
Plan Administrators may amend or revise the terms of the Plan; provided that,
without the approval of the stockholders of the Company representing a majority
of the stockholders voting in person or by proxy, no amendment or revision will:
(a) increase the maximum aggregate number of shares that may be sold or
distributed; (b) change the minimum purchase price for shares; (c) increase the
maximum term established for Awards; (d) permit the granting of an Award or
right to purchase shares to anyone other than those provided for in the Plan;
(e) change the term of the Plan; or (f) materially increase the benefits to
participants under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax rules governing the tax treatment of stock options, SARs,
Restricted Shares, Dividend Equivalent Rights, Stock Payments, Performance
Shares and the Purchase Program are quite technical. Therefore, the description
set forth below is necessarily general in nature and does not purport to be
complete. Moreover, statutory provisions are subject to change, as are their
interpretations, and their applications may vary in individual circumstances.
Finally, the tax consequences under applicable state and local income tax laws
may not be the same as under the federal income tax laws.
Incentive Stock Options. The participant recognizes no taxable gain or
loss when an ISO is granted or exercised, although upon exercise the spread
between the fair market value and the exercise price generally is an item of tax
preference for purposes of the participant's alternative minimum tax. If the
shares acquired upon the exercise of an ISO are held for at least one year after
exercise and two years after grant (the "Holding Periods"), the participant
recognizes any gain or loss realized upon such
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sale as long-term capital gain or loss and the Company is not entitled to a
deduction. If the shares are not held for the Holding Periods, the gain is
ordinary income to the participant to the extent of the difference between the
exercise price and the fair market value of Common Stock on the date the option
is exercised and any excess is capital gain. Also, in such circumstances, the
Company receives a deduction equal to the amount of any ordinary income
recognized by the participant.
Nonqualified Stock Options. The participant recognizes no taxable
income and the Company receives no deduction when a NQSO is granted. Upon
exercise of a NQSO, the participant recognizes ordinary income and the Company
receives a deduction equal to the difference between the exercise price and the
fair market value of the Common Stock on the date of exercise. The participant
recognizes as a capital gain or loss any subsequent profit or loss realized on
the sale or exchange of any shares disposed of or sold.
Stock Appreciation Rights. Upon the grant of a SAR, the participant
recognizes no taxable income and the Company receives no deduction. The
participant recognizes ordinary income and the Company receives a deduction at
the time of exercise equal to the cash and fair market value of shares payable
upon such exercise.
Restricted Shares. A participant granted Restricted Shares is not
required to include the value of such shares in income until the first time such
participant's rights in the shares are transferable or are not subject to
substantial risk of forfeiture, whichever occurs earlier, unless such
participant timely files an election under Code Section 83(b) to be taxed on the
receipt of the shares. In either case, the amount of such ordinary income will
be equal to the excess of the fair market value of the shares at the time the
income is recognized over the amount (if any) paid for the shares. The Company
receives a deduction, in the amount of the ordinary income recognized by the
participant, for the Company's taxable year in which the participant recognizes
such income.
Dividend Equivalent Rights. A participant granted Dividend Equivalent
Rights recognizes ordinary income equal to the cash (or fair market value of
shares if payment is made in such form) as and when such become payable to the
participant in accordance with the terms of the Dividend Equivalent Rights
Award. The Company receives a deduction for the same amount in the year that
income is recognized by the participant.
Performance Shares. Upon the grant of Performance Shares, the
participant recognizes no taxable income and the Company receives no deduction.
The participant recognizes ordinary income equal to the fair market value of
such shares as and when such become payable to the participant in accordance
with the terms of the Performance Shares Award. The Company receives a deduction
for the same amount in the year that income is recognized by the participant.
Stock Payments. A participant granted Stock Payments recognizes income
in an amount equal to the fair market value of such shares as and when such
becomes payable to the participant. The Company receives a deduction for the
same amount in the year that income is recognized by the participant.
Stock Purchase Program. A participant in the Purchase Program does not
realize income at the time of entry into the Program or at the time of purchase
of shares of the Common Stock. If no disposition of the Common Stock is made
within two (2) years from the enrollment date, as defined in the Purchase
Program, for the applicable offering period, nor within one (1) year of the
exercise date, upon subsequent disposition of the Common Stock, ordinary income
will be realized to the extent of the lesser of: (a) 15% of the fair market
value on the enrollment date for the applicable offering; or (b) the amount by
which the net proceeds of the sale exceed the price paid. Any further gain is
treated as capital gain. No income tax deduction will be allowed to the Company
for shares transferred to an employee,
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provided such shares are held for the periods described above. If the shares are
disposed of within the periods described above, the employee will recognize
ordinary income for the taxable year of the disposition equal to the excess of
the fair market value of the shares on the date of purchase over the price paid.
Generally, the Company will be entitled to a deduction equal to the amount of
ordinary income recognized by the employee.
Parachute Payments. Under certain circumstances, an accelerated vesting
or the cash out of stock options, or an accelerated lapse of restrictions on
other Awards, in connection with a Change of Control of the Company might be
deemed an "excess parachute payment" for purposes of the golden parachute tax
provisions of Section 280G of the Code. To the extent it is so considered, the
participant may be subject to a 20% excise tax and the Company may be denied a
tax deduction.
Section 162(m). Section 162(m) of the Code limits to $1 million per
year the federal income tax deduction available to a public company for
compensation paid to any of its chief executive officer and up to four of its
other highest paid executive officers. However, Section 162(m) provides an
exception from this limitation for certain "performance-based" compensation if
various requirements are satisfied. The Plan is designed to satisfy this
exception for stock options, SARs and Performance Shares issued thereunder. In
addition, the Plan is structured in a manner so that if the Plan Administrators
elects to issue Restricted Shares, Dividend Equivalent Rights or Stock Payments
thereunder, it also can satisfy the exception for such grants by utilizing the
"performance-based" award criteria identified under the subheading
"Performance-based Awards" above, if desired.
The foregoing description of the federal income tax consequences of the Plan and
Programs is only a summary and is based on the Company's understanding of
present federal tax laws and regulations.
NEW PLAN BENEFITS; OPTIONS GRANTED AND MARKET VALUE OF COMMON STOCK
As described above, Participants who will receive Awards under the Plan and the
size of the Awards are generally to be determined by the Plan Administrators in
their discretion. Thus, other than the mandatory grants under the Directors'
Program, it is not possible to predict the benefits or amounts that will be
received by or allocated to particular individuals or groups in the future.
Since its adoption in 1996, 178,500 stock options have been granted under the
Plan to employees, including officers other than the current named executive
officers, 25,000 of which were granted subject to stockholder approval of Item
2; 175,000 have been granted to the named executive officers, consisting of
100,000 to Dr. Kledzik, 50,000 to Mr. Mai and 25,000 to Dr. Doiron, subject to
stockholder approval of Item 2; and none have been granted to outside directors.
Assuming stockholder approval of Item 2 and no change in the number of outside
directors, an annual aggregate mandatory grant of NQSOs to purchase 30,000
shares of Common Stock will be made to such directors each year during the term
of the Plan. Any future outside directors will also receive annual mandatory
grants of NQSOs to purchase 7,500 shares of Common Stock.
The closing price of the Company's Common Stock on April 17, 1997 was $27.25 per
share.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR
OF THE AMENDMENTS TO THE PDT, INC. 1996
STOCK COMPENSATION PLAN.
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ITEM NO. 3
PROPOSAL TO RATIFY APPOINTMENT OF
THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
================================================================================
The Board of Directors has appointed, subject to ratification by the
stockholders, Ernst & Young LLP as the Company's independent public accountants
for the fiscal year ending December 31, 1997. Ernst & Young LLP has been the
Company's independent auditors since 1992. The Board of Directors believes that
the continuation of Ernst & Young LLP as the Company's independent public
accountants is beneficial to the Company and its stockholders.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting and will have the opportunity to address the meeting, if they so desire,
and respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS ITEM.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and executive
officers, and any persons who own more than ten percent of the Company's Common
Stock, to file with the SEC initial reports of ownership and reports of changes
in ownership of Common Stock. Such persons are required by the SEC regulations
to furnish the Company with copies of all Section 16(a) forms filed.
To the Company's knowledge, based solely on 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, all such Section 16(a) filing
requirements were complied with except Gerald W. Yankie failed to file a timely
Form 4 with respect to the transfer of 2,500 shares to a family trust, and the
trust failed to file a timely Form 3 with respect to the same transfer.
OTHER MATTERS
The Company is unaware of any other matters to be presented at the Annual
Meeting, but if any other matters should properly come before the Meeting, it is
intended that the persons named in the accompanying proxy will vote the proxy in
accordance with their judgment.
29
<PAGE>
STOCKHOLDER PROPOSALS FOR THE 1998 PROXY STATEMENT
Any stockholder satisfying the SEC requirements and wishing to submit a proposal
to be included in the Proxy Statement for the Company's 1998 Annual Meeting of
Stockholders should submit the proposal in writing to Secretary, PDT, Inc., 7408
Hollister Avenue, Santa Barbara, California 93117 no later than December 31,
1997, in order for such proposal to be considered for inclusion in the Proxy
Statement and all other conditions for such inclusion must be satisfied.
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE SIGN THE PROXY AND RETURN IT IN
THE ENCLOSED STAMPED ENVELOPE
- --------------------------------------------------------------------------------
SANTA BARBARA, CALIFORNIA
APRIL 25, 1997
By Order of the Board of Directors
Joseph E. Nida, Esq.
Secretary
30
<PAGE>
EXHIBIT A
PDT, INC.
1996 STOCK COMPENSATION PLAN
1. PURPOSE. This PDT, Inc. 1996 Stock Compensation Plan, as amended and
restated effective March 3, 1997 (the "Plan"), is intended to secure for PDT,
Inc. (the "Company") and its subsidiaries and stockholders the benefits arising
from ownership of the Company's common stock (the "Common Stock") by those
selected key individuals of the Company and its subsidiaries who will be
responsible for the future growth of such corporations. The Plan is designed to
help attract and retain superior directors, officers and other personnel for
positions of substantial responsibility with the Company and its subsidiaries,
and to provide key individuals with an additional incentive to contribute to the
success of the corporations. The Plan is intended to supersede and replace all
existing Company stock option plans (the "Existing Plans") except to the extent
of options outstanding under the Existing Plans. Nothing contained herein shall
be construed to amend or terminate any existing options, whether pursuant to the
Existing Plans or otherwise granted by the Company.
Part of the Plan includes a Stock Purchase Program which is intended to
promote the growth and general prosperity of the Company by permitting the
Company to sell to employees of the Company and its subsidiaries shares of the
Common Stock in accordance with Section 423 of the Internal Revenue Tax Code of
1986, as amended ("Section 423") and it is the intention of the Company to have
the Stock Purchase Program portion of the Plan to qualify as an Employee Stock
Purchase Plan in accordance with Section 423. Accordingly, the Stock Purchase
Program shall be construed to extend and limit participation consistent with the
requirements of Section 423.
2. ELEMENTS OF THE PROGRAM. In order to maintain flexibility in the
award of stock benefits, the Plan is composed of seven parts. The first part is
the Incentive Stock Option Program (the "Incentive Program") under which
incentive stock options ("ISOs") are granted. The second part is the
Nonqualified Stock Option Program (the "Nonqualified Program") under which
nonqualified stock options ("NQSOs") are granted. The third part is the
Restricted Shares Program (the "Restricted Program") under which restricted
shares of Common Stock (the "Restricted Shares") are granted. The fourth part is
the Stock Appreciation Rights Program (the "SAR Program") under which SARs (as
defined therein) are granted. The fifth part is the Other Stock Rights Program
(the "Stock Rights Program") under which: (i) units representing the equivalent
of shares of Common Stock awarded pursuant to Section 4 of the Stock Rights
Program (the "Performance Shares") are granted; (ii) payments of compensation in
the form of shares of Common Stock pursuant to Section 5 of the Stock Rights
Program (the "Stock Payments") are granted; and (iii) rights pursuant to Section
6 of the Stock Rights Program to receive cash or shares of Common Stock based on
the value of dividends paid with respect to a share of Common Stock (the
"Dividend Equivalent Rights") are granted. The sixth part is the Stock Purchase
Program (the "Purchase Program"). The seventh part is the Non-Employee
Directors' Option Program (the "Directors' Program"). The Incentive Program, the
Nonqualified Program, the Restricted Program, the SAR Program, the Stock Rights
Program, the Purchase Program and the Directors' Program are collectively
referred to herein as the "Programs." The grant of an option, SAR, right to
purchase shares (under the Purchase Program) or other right or award
(collectively, an "Award") under one of the Programs shall not be construed to
prohibit the grant of an Award under any of the other Programs.
PDT, INC.
Stock Compensation Plan
Page -1-
<PAGE>
3. APPLICABILITY OF GENERAL PROVISIONS. Unless any Program specifically
indicated to the contrary, all Programs shall be subject to the General
Provisions of the PDT, Inc., Stock Compensation Plan set forth below.
4. ADMINISTRATION OF THE PROGRAMS. The Programs shall be administered,
construed, governed and amended in accordance with their respective terms.
ARTICLE I
GENERAL PROVISIONS
SECTION 1. Administration. The Plan shall be administered by the Board
of Directors of the Company or by a committee appointed by the Board, consisting
of not less than two (2) directors of the Company who are "non-employee"
directors within the meaning of Rule 16b-3 promulgated pursuant to the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") so long as
such Rule shall require disinterested administration of the Plan, and who are
"outside directors" as defined in Section 162(m) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder (the "Code"), so long as
outside directors as so required by the Code; provided, however, that if not all
members of the Board are non-employee directors and outside directors (if so
required), then the Board shall appoint such a committee; provided, further,
however, that all decisions made with respect to Awards made to the members of
such committee shall be made by the Board of Directors. Subject to the foregoing
limitations, as applicable, the Board may from time to time remove members from
the committee, fill all vacancies on the committee, however caused, and may
select one of the members of the committee as its Chairman. The members of the
Board or committee, when acting to administer the Plan, are herein collectively
referred to as the "Plan Administrators."
The Plan Administrators shall hold meetings at such times and places as
they may determine, shall keep minutes of their meetings and may adopt, amend or
revoke such rules and procedures as they may deem proper with respect to the
Plan. Any action of the Plan Administrators shall be taken by majority vote or
unanimous written consent without meeting of the Plan Administrators.
SECTION 2. Authority of Plan Administrators. Subject to the other
provisions of this Plan, and with a view to effecting its purpose, the Plan
Administrators shall have sole authority, in their absolute discretion: (a) to
construe and interpret the Plan; (b) to define the terms used herein; (c) to
determine the individuals to whom Awards shall be granted under the Plan; (d) to
determine the time or times at which Awards shall be granted under the Plan; (e)
to determine the number of shares subject to each Award, the price or exercise
price of any Award and the duration of each Award granted under the Plan; (f) to
determine all of the other terms and conditions of Awards granted under the
Plan; and (g) to make all other determinations necessary or advisable for the
administration of the Plan and to do everything necessary or appropriate to
administer the Plan. All decisions, determinations and interpretations made by
the Plan Administrators shall be binding and conclusive on all participants in
the Plan (the "Plan Participants") and on their legal representations, heirs and
beneficiaries.
PDT, INC.
Stock Compensation Plan
Page -2-
<PAGE>
SECTION 3. Maximum Number of Shares Subject to the Program. The
aggregate number of shares of Common Stock with respect to which the grant of
Awards may be made under this Plan shall not exceed Four Million (4,000,000)
shares of Common Stock; provided, however, that within such total, in no event
shall ISOs with respect to more than Five Hundred Thousand (500,000) shares of
Common Stock be granted under the Plan during the term hereof. All such
limitations on numbers of shares issuable under the Plan shall be adjusted, if
applicable, pursuant to Section 7 of the General Provisions.
The shares of Common Stock to be issued pursuant to this Plan may be
authorized but unissued shares, shares issued and reacquired by the Company or
shares purchased by the Company on the open market. If any of the options
granted under the Plan expire or terminate or are forfeited for any reason
before they have been exercised in full, or if Restricted Shares, Performance
Shares, Stock Payments or Dividend Equivalent Rights are forfeited, or if any
other Award results in shares of Common Stock not being issued, the unused
shares subject to those expired, terminated or forfeited Awards shall again be
available for purposes of the Plan.
The proceeds received by the Company from the sale of its Common Stock
pursuant to the terms of any Award under the Plan, if in the form of cash, shall
be added to the Company's general funds and may be used for general corporate
purposes.
SECTION 4. Individual Limits. The number of shares of Common Stock with
respect to which the grant of Awards may be made to any Plan Participant under
the Plan shall not exceed Five Hundred Thousand (500,000) shares. Such
limitation on numbers of shares shall be adjusted, if applicable, under Section
7 of the General Provisions.
SECTION 5. Eligibility and Participation. Officers, directors, key
employees and independent contractors or agents of the Company or its
subsidiaries who are responsible for or contribute to the management, growth or
profitability of the business of the Company or its subsidiaries shall be
eligible for selection by the Plan Administrators to participate in the Plan;
provided, however, that ISOs may be granted under the Incentive Program only to
persons who are employees of the Company or its subsidiaries. An employee may be
granted NQSOs under the Plan; provided, however, that the grant of each NQSO and
ISO to an employee shall be the grant of separate options and each NQSO and each
ISO shall be specifically designated as such in accordance with applicable
provisions of the Code.
The term "subsidiary" as used herein means any company, other than the
Company, in an unbroken chain of companies beginning with the Company if, at the
time of grant of an Award, each of the companies, other than the last company in
the unbroken chain, owns stock possessing more than 50% of the total combined
voting power of all classes of stock in one of the other companies in such
chain.
SECTION 6. Effective Date. The Plan became effective on May 17, 1996.
This amended and restated Plan became effective on March 3, 1997, upon its
adoption by the Board of Directors of the Company subject to approval of the
Plan, as amended and restated, by a majority of the stockholders of the Company
voting in person or by proxy at a meeting of stockholders following
adoption of the Plan by the Board of Directors, which vote shall be taken within
twelve (12) months of such date.
PDT, INC.
Stock Compensation Plan
Page -3-
<PAGE>
SECTION 7. Adjustments. If the outstanding shares of the Company's
Common Stock are increased, decreased, changed into, or exchanged for a
different number or kind of shares or securities through merger, consolidation,
combination, exchange of shares, other reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split or other
similar corporate transaction or event, then: (i) the number and kind of shares
which may thereafter be delivered in connection with Awards; (ii) the number and
kind of shares that may be delivered or deliverable in respect of outstanding
Awards; (iii) the number and kind of shares with respect to which Awards may be
granted as set forth in Sections 3 and 4 hereof; and (iv) the exercise price,
grant price or purchase price relating to any Award shall be proportionately and
equitably adjusted by the Plan Administrators. Any such adjustment made by the
Plan Administrators will be final and binding.
SECTION 8. Change of Control. Unless otherwise provided in an Award
Agreement, , if a Change of Control (as defined below) occurs prior to vesting
or settlement of any outstanding Award, then from and after the Acceleration
Date, all outstanding and unexercised options, SARs and Dividend Equivalent
Rights shall be exercisable in full, whether or not otherwise exercisable, all
restrictions and Restriction Periods applicable to all outstanding Restricted
Shares, Stock Payments and Dividend Equivalent Rights shall lapse and
certificates representing such shares shall be delivered to the Plan Participant
no later than the fifth day following the Acceleration Date (as defined below),
all Performance Objectives and other terms and conditions applicable to any
Performance Shares, Stock Payments and Dividend Equivalent Rights shall be
deemed to have been met and the full value of such Shares, Payments or Rights
shall be paid or issued to the Plan Participant no later than the fifth day
following the Acceleration Date. The Plan Administrators may, in their
discretion, include in the agreement evidencing any such Award, a provision or
provisions to avoid or ameliorate the federal income tax impact of excess
parachute payments as defined in Section 280G(b) of the Code, including, without
limitation, provisions reducing the benefits or payments realizable by the Plan
Participant under such Awards or providing for additional payments to such Plan
Participant as a result of excise tax payment obligations related thereto. Under
the Purchase Program, all funds in the Plan Participants' accounts which have
not been used to purchase Common Stock will be refunded to the Plan Participant
no later than the fifth day following the Acceleration Date and all Common Stock
held in the Plan Participants' accounts will be released as a withdrawal under
the terms and conditions of the Purchase Program.
As defined herein, "Change of Control" shall mean the occurrence of any
of the following: (i) any "person" or "group" (as such term is used in Sections
13(d) and 14(d)(2) of the Exchange Act), other than the Company, a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or a company owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the total combined voting power represented by the
Company's then outstanding voting securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in clause (i), (iii) or (iv) of this definition) whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors who either were directors at the
beginning of the two-year period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a majority
thereof; (iii) any Reorganization as defined below; or (iv) the stockholders of
the Company adopt a plan of complete liquidation of the Company.
PDT, INC.
Stock Compensation Plan
Page -4-
<PAGE>
The term "Reorganization" as used in this Section 8 shall mean: (i) the
approval by the stockholders of the Company of any statutory merger,
consolidation or share exchange to which the Company is a party as a result of
which the persons who were stockholders of the Company immediately prior to the
effective date of such Reorganization shall have beneficial ownership of less
than fifty percent (50%) of the total combined voting power in the election of
directors of the surviving corporation following the effective date of such
Reorganization; or (ii) the approval by stockholders of an agreement for the
sale or disposition by the Company of all or substantially all of the assets of
the Company.
For purposes of this definition of Reorganization, the term "sale or
disposition by the Company of all or substantially all of the assets of the
Company" shall mean a sale or other disposition transaction or series of related
transactions involving assets of the Company or any subsidiary thereof
(including the stock of any direct or indirect subsidiary of the Company) in
which the value of the assets or stock being sold or otherwise disposed of (as
measured by the purchase price being paid therefor or by such other method as
the Board of Directors of the Company determines is appropriate in a case where
there is no readily ascertainable purchase price) constitutes more than
two-thirds of the fair market value of the Company (as hereinafter defined). For
purposes of the preceding sentence, the "fair market value of the Company" shall
be the aggregate market value of the outstanding shares of Common Stock of the
Company (on a fully diluted basis) plus the aggregate market value of the
Company's other outstanding equity securities. The aggregate market value of the
shares of Common Stock of the Company shall be determined by multiplying the
number of shares of the Company's Common Stock (on a fully diluted basis)
outstanding on the date of the execution and delivery of a definitive agreement
with respect to the transaction or series of related transactions (the
"Transaction Date") by the average closing price of the shares of Common Stock
of the Company for the ten trading days immediately preceding the Transaction
Date. The aggregate market value of any other equity securities of the Company
shall be determined in a manner similar to that prescribed in the immediately
preceding sentence for determining the aggregate market value of the shares of
Common Stock of the Company or by such other method as the Board shall determine
is appropriate.
As defined herein, "Acceleration Date" shall mean the earliest date on
which any of the following events shall have first occurred: (i) the acquisition
described in clause (i) of the definition of Change of Control contained in this
Section 8; (ii) the change in the composition of the Board of Directors of the
Company described in clause (ii) of such definition; or (iii) the stockholder
approval or adoption described in clauses (iii) and (iv) of such definition.
SECTION 9. Termination and Amendment of the Plan. The Plan shall
terminate on July 17, 2006 or shall terminate at such earlier time as the Board
of Directors may so determine. No Awards shall be granted and no stock shall be
sold and purchased under the Plan after that date, subject to Article I, Section
10 hereof. Subject to the limitation contained in the following Section 10, the
Plan Administrators may at any time amend or revise the terms of the Plan,
including the form and substance of the Award or stock purchase agreements to be
used hereunder; provided, however, that without approval by the stockholders of
the Company representing a majority of the voting power (as provided in Section
6 above) no amendment or revision shall: (a) increase the maximum aggregate
number of shares that may be sold or distributed pursuant to Awards under the
Plan, except as permitted under Sections 3 and 7 of Article I; (b) change the
minimum purchase price for shares under Section 3 of Articles II and III or the
Purchase Price for shares under Article VI; (c) increase the maximum term
established under the Programs for Awards; (d) permit the granting of an Award
or
PDT, INC.
Stock Compensation Plan
Page -5-
<PAGE>
right to purchase shares to anyone other than as provided in Section 5 of
Article I; (e) change the term of the Plan as provided in this Section 9; or
(f) materially increase the benefits accruing to Plan Participants under the
Plan.
SECTION 10. Prior Rights and Obligations. No amendment, suspension or
termination of the Plan shall, without the written consent of the individual who
has received an Award or who has purchased a specified share or shares under the
Purchase Program, adversely affect any of the person's rights or obligations
under any award granted or shares sold and purchased under the Plan prior to
that amendment, suspension or termination.
SECTION 11. Privileges of Stock Ownership. Notwithstanding the exercise
of any Award granted pursuant to the terms of the Plan, the achievement of any
conditions specified in any Restricted Share or Performance Share granted
pursuant to the terms of this Plan or the election to purchase any shares
pursuant to the terms of this Plan, no individual shall have any of the rights
or privileges of a stockholder of the Company in respect of any Award or any
shares of stock issuable pursuant to an Award or the sale, purchase and issuance
of such purchased shares until certificates representing the shares have been
issued and delivered. No shares shall be required to be issued and delivered
upon any Award or a purchase under the Purchase Program unless and until all of
the requirements of law and of all regulatory agencies having jurisdiction over
the issuance and delivery of the securities shall have been fully complied with.
SECTION 12. Reservation of Shares of Common Stock. The Company, during
the term of the Plan, will at all times reserve and keep available such number
of shares of its Common Stock as shall be sufficient to satisfy the requirements
of the Plan. In addition, the Company will from time to time, as is necessary to
accomplish the purposes of the Plan, seek to obtain in good faith from any
regulatory agency having jurisdiction any requisite authority in order to issue
and sell shares of Common Stock hereunder. The inability of the Company to
obtain from any regulatory agency having jurisdiction that authority deemed by
the Company's counsel to be necessary to the lawful issuance and sale of any
shares of its stock hereunder shall relieve the Company of any liability in
respect to the nonissuance or sale of the stock as to which the requisite
authority shall have not been obtained.
SECTION 13. Tax Withholding. The grant or exercise of any Award or the
sale and issuance of any shares to be purchased under this Plan are subject to
the condition that if, at any time, the Company shall determine in its sole
discretion, that the satisfaction of withholding tax or other withholding
liabilities under any state or federal law is necessary or desirable as a
condition of, or in connection with, such grant or exercise or the delivery or
purchase of shares pursuant thereto, then in such event, the grant or exercise
of the Award or the sale and issuance of any shares to be purchased shall not be
effective unless such withholding shall have been effected or obtained in a
manner acceptable to the Company. At the Company's sole and complete discretion,
the Company may, from time to time unilaterally withhold or voluntarily accept
shares of the Company's Common Stock already issued to a Plan Participant and/or
stock subject to an Award as the source of payment for such liabilities.
SECTION 14. Compliance with Securities Laws. Shares of Common Stock
shall not be issued with respect to any Award granted under the Plan, unless the
issuance and delivery of the shares pursuant to such grant or the exercise of
that Award and the issuance and delivery of those shares pursuant to that
exercise shall comply with all applicable provisions of foreign, state and
federal law including, without limitation, the Securities Act of 1933, as
amended, and the Exchange Act, and the
PDT, INC.
Stock Compensation Plan
Page -6-
<PAGE>
rules and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares of Common Stock may then be listed. The Plan
Administrators may also require a Plan Participant to furnish evidence
satisfactory to the Company, including a written and signed representation
letter and consent to be bound by any transfer restriction imposed by law,
legend, condition or otherwise, that the shares are being purchased only for
investment and without any present intention to sell or distribute the shares in
violation of any state or federal law, rule or regulation, if required by the
Company. Further, each Plan Participant shall consent to the imposition of a
legend on the shares of Common Stock issued under the Plan and the imposition of
stop-transfer instructions restricting their transferability as may be required
by the Plan Administrators in their discretion to ensure compliance with such
laws.
SECTION 15. Award Agreements and Employment. Each person granted an
Award (other than an unrestricted Stock Payment) may be required to sign an
Award agreement which signifies the offer of the Award by the Company and the
acceptance of the Award by the person in accordance with the terms of the Award
and the provisions of the Plan, or alternatively will be provided with a written
document setting forth the terms and conditions of the Award. Each Award
agreement shall reflect the terms and conditions of the Award. Except as
otherwise provided in an Award agreement, all capitalized terms used in the
Agreement shall have the same meaning as in the Plan, and the Award agreement
shall be subject to all of the terms of the Plan. Each Plan Participant may be
required to agree in writing, as a condition of receiving an Award under the
Plan, that he or she will remain in the employment or, or service to, the
Company or its subsidiaries following the date of the granting of that Award for
a period specified by the Plan Administrators, in their discretion. Nothing in
the Plan or in any Award granted hereunder shall confer upon any Plan
Participant any right to continued employment by, or service to, the Company or
its subsidiaries or limit in any way the right of the Company or its
subsidiaries at any time to terminate or alter the terms of that employment or
service agreement. In the discretion of the Plan Administrators, a Plan
Participant may also be required to agree to non-competition, non-disclosure,
non-solicitation or any other terms or provisions not inconsistent with the Plan
in consideration of the grant of an Award.
SECTION 16. Rule 16b-3 Compliance. It is the express intent of the
Company that this Plan comply in all respects with applicable provisions of Rule
16b-3 or Rule 16a-1(c)(3) under the Exchange Act in connection with any grant of
awards to, or other transaction by, a Plan Participant who is subject to Section
16 of the Exchange Act (except for transactions exempted under alternative
Exchange Act Rules). Accordingly, if any provision of the Plan or any agreement
relating to an Award does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Plan Participant
shall avoid liability under Section 16(b).
SECTION 17. Performance-Based Awards.
(a) General. Each agreement for the grant of Performance Shares shall
specify the number of Performance Shares subject to such agreement, the
Performance Period and the Performance Objective (each as defined below), and
each agreement for the grant of any other award that the Plan Administrators
determine to make subject to a Performance Objective similarly shall specify the
applicable number of Shares, the period for measuring performance and the
Performance Objective. As used herein, "Performance Objective" means a
performance objective specified in the agreement for a Performance Share, or for
any other Award which the Plan Administrators determine to make subject to a
performance objective, upon which the vesting or settlement of such Award is
conditioned and "Performance Period" means the period of time specified in an
agreement over which Performance Shares, or another Award which the Plan
Administrators determine to make
PDT, INC.
Stock Compensation Plan
Page -7-
<PAGE>
subject to a Performance Objective, are to be earned. Each agreement for a
performance-based grant shall specify in respect of a Performance Objective the
minimum level of performance below which no payment will be made, shall describe
the method for determining the amount of any payment to be made if performance
is at or above the minimum acceptable level, but falls short of full achievement
of the Performance Objective, and shall specify the maximum percentage payout
under the agreement. Such maximum percentage in no event shall exceed one
hundred percent (100%) in the case of performance-based Restricted Shares and
two hundred percent (200%) in the case of Performance Shares or
performance-based Dividend Equivalent Rights.
(b) Performance Objective. The Plan Administrators shall determine and
specify, in their discretion, the Performance Objective in the agreement for a
Performance Share or for any other performance-based Award, which Performance
Objective shall consist of: (i) one or more business criteria, including (except
as limited under subparagraph (c) below for Awards to Covered Employees (as
defined below)) financial, service level and individual performance criteria;
and (ii) a targeted level or levels of performance with respect to such
criteria. Performance Objectives may differ between Plan Participants and
between types of Awards from year to year.
PDT, INC.
Stock Compensation Plan
Page -8-
<PAGE>
(c) Additional Rules Applicable to Covered Employees. The Performance
Objective for Performance Shares and any other performance-based award granted
to a Covered Employee, if deemed appropriate by the Plan Administrators, shall
be objective and shall otherwise meet the requirements of Section 162(m)(4)(C)
of the Code and shall be based upon one or more of the following
performance-based business criteria, either on a business unit or
Company-specific basis or in comparison with peer group performance: return on
net assets; return on assets; return on equity; return on capital; return on
revenues; cash flow; book value; share price performance (including Options and
SARs tied solely to appreciation in the Fair Market Value of the shares);
earnings per share; stock price earnings ratio; earnings before interest, taxes,
depreciation and amortization expenses ("EBITDA"); earnings before interest and
taxes ("EBIT"); or EBITDA, EBIT or earnings before taxes and unusual or
nonrecurring items as measured either against the annual budget or as a ratio to
revenue. Achievement of any such Performance Objective shall be measured over a
period of years not to exceed ten as specified by the Plan Administrators in the
agreement for the performance-based Award. No business criterion other than
those named above in this Section 17(c) may be used in establishing the
Performance Objective for an Award to a Covered Employee under this Section 17.
For each such Award relating to a Covered Employee, the Plan Administrators
shall establish the targeted level or levels of performance for each such
business criterion. The Plan Administrators may, in their discretion, reduce the
amount of a payout otherwise to be made in connection with an Award under this
Section 17(c), but may not exercise discretion to increase such amount, and the
Plan Administrators may consider other performance criteria in exercising such
discretion. All determinations by the Plan Administrators as to the achievement
of Performance Objectives under this Section 17(c) shall be made in writing. The
Plan Administrators may not delegate any responsibility under this Section
17(c). As used herein, "Covered Employee" shall mean, with respect to any grant
of an Award, an executive of the Company or any subsidiary who is a member of
the executive compensation group under the Company's compensation practices (not
necessarily an executive officer) whom the Plan Administrators deem may be or
become a covered employee as defined in Section 162(m)(3) of the Code for any
year that such award may result in remuneration to the Plan Participant and for
which year such Plan Participant may receive remuneration over $1 million which
would not be deductible under Section 162(m) of the Code but for the provisions
of the Plan and any other "qualified performance-based compensation" plan (as
defined under Section 162(m) of the Code) of the Company; provided, however,
that the Plan Administrators may determine that a Plan Participant has ceased to
be a Covered Employee prior to the settlement of any Award.
(d) Code Section 162(m). The Plan Administrators, in their sole
discretion, may require that one or more Award agreements contain provisions
which provide that, in the event Section 162(m) of the Code, or any successor
provision relating to excessive employee remuneration, would operate to disallow
a deduction by the Company with respect to all or part of any Award under the
Plan, a Plan Participant's receipt of the benefit relating to such Award that
would not be deductible by the Company shall be deferred until the next
succeeding year or years in which the Plan Participant's remuneration does not
exceed the limit set forth in such provisions of the Code.
SECTION 18. Transferability of Awards. During the lifetime of a Plan
Participant to whom an Award is granted, only the Plan Participant (or such Plan
Participant's legal representative) may exercise or receive payment of an Award;
provided, however, that the Plan Administrators may, in their sole discretion,
permit transfers of NQSOs and SARs for estate planning purposes if and to the
extent such transfers do not cause a Plan Participant subject to Section 16 of
the Exchange Act who then or thereafter has transactions with respect to such
NQSO or SAR to lose the benefit of
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the exemption under Rule 16b-3 relating to such Awards or violate other rules or
regulations of the Securities and Exchange Commission (the "SEC") or the
Internal Revenue Service or materially increase the cost of the Company's
compliance with such rules or regulations, including but not limited to, any
additional registration statements that the Company would be required to file
with the SEC if such transfer were allowed. No Award (other than unrestricted
Stock Payments upon receipt) may be sold, pledged, assigned, transferred in any
manner (except as provided above or elsewhere herein), exchanged or otherwise
encumbered or made subject to any creditor's process, whether voluntarily,
involuntarily or by operation of law, and any attempt to do so shall be of no
effect.
SECTION 19. Death Beneficiaries. In the event of a Plan Participant's
death, all of such person's outstanding Awards, including his or her rights to
receive any accrued but unpaid Stock Payments, will transfer to the maximum
extent permitted by law to such person's beneficiary (except to the extent a
permitted transfer of a NQSO or SAR was previously made pursuant to Section 18
of the General Provisions). Each Plan Participant may name, from time to time,
any beneficiary or beneficiaries (which may be named contingently or
successively) as his or her beneficiary for purposes of this Plan. Each
designation shall be on a form prescribed by the Plan Administrators, will be
effective only when delivered to the Company, and when effective will revoke all
prior designations by the Plan Participant. If a Plan Participant dies with no
such beneficiary designation in effect, such person's beneficiary shall be his
or her estate and such person's Awards will be transferable by will or pursuant
to laws of descent and distribution applicable to such person.
SECTION 20. Unfunded Plan. The Plan shall be unfunded and the Company
shall not be required to segregate any assets that may at any time be
represented by Awards under the Plan. Neither the Company, its affiliates, the
Plan Administrators, nor the Board shall be deemed to be a trustee of any
amounts to be paid under the Plan nor shall anything contained in the Plan or
any action taken pursuant to its provisions create or be construed to create a
fiduciary relationship between any such party and a Plan Participant or anyone
claiming on his or her behalf, subject to the duties and obligations of the
Custodian of the Common Stock Account under Article VI hereof. To the extent a
Plan Participant or any other person acquires a right to receive payment
pursuant to an Award under the Plan, such right shall be no greater than the
right of an unsecured general creditor of the Company.
SECTION 21. Choice of Law and Venue. The Plan and all related documents
shall be governed by, and construed in accordance with, the laws of the State of
California (except to the extent the provisions of Delaware corporate law may be
applicable). Acceptance of an Award shall be deemed to constitute consent to the
jurisdiction and venue of the Superior Court of Santa Barbara County, California
and the United States District Court of the Central District of California for
all purposes in connection with any suit, action or other proceeding relating to
such Award, including the enforcement of any rights under the Plan or any
agreement or other document, and shall be deemed to constitute consent to any
process or notice of motion in connection with such proceeding being served by
certified or registered mail or personal service within or without the State of
California, provided a reasonable time for appearance is allowed.
SECTION 22. Fair Market Value. As used in the Plan, "Fair Market Value" shall be
determined by the Plan Administrators on the basis of such factors as they deem
appropriate; provided, however, that Fair Market Value on any day shall be
deemed to be, if the Common Stock is traded on a national securities exchange or
the Nasdaq National Market, the closing price (or, if no reported sale takes
place on such day, the arithmetic mean of the reported bid and asked prices) of
the Common Stock on such day on the principal such exchange or market, or, if
the stock is reported on the
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composite tape, the closing price as reported on the composite tape. In
each case, the Plan Administrators' determination of Fair Market Value in
accordance with the Code shall be conclusive.
SECTION 23 Committee's Right. Except as may be provided in an Award
agreement, the Plan Administrators may, in their discretion, waive any
restrictions or conditions applicable to, or accelerate the vesting of, any
Award (other than the right to purchase shares pursuant to the Purchase
Program).
SECTION 24. Termination of Benefits Under Certain Conditions. The Plan
Administrators, in their sole discretion, may cancel any unexpired, unpaid or
deferred Award (other than a right to purchase shares pursuant to the Purchase
Program) at any time if the Plan Participant is not in compliance with all
applicable provisions of the Plan or any Award agreement or if the Plan
Participant, whether or not he or she is currently employed by the Company or
one of its subsidiaries, acts in a manner contrary to the best interests of the
Company and its subsidiaries.
SECTION 25. Conflicts in Plan. In case of any conflict in the terms of
the Plan, or between the Plan and an Award agreement, the provisions in the
Article of the Plan which specifically grants such Award shall control those in
a different Article and the provisions of the Plan shall control those in such
Award agreement.
SECTION 26. Optional Deferral. The right to receive any Award under the
Plan (other than the right to purchase shares pursuant to the Purchase Program)
may, at the request of the Plan Participant, be deferred to such period and upon
such terms and conditions as the Plan Administrators shall, in their discretion,
determine, which may include crediting of interest on deferrals of cash and
crediting of dividends on deferrals denominated in shares of Common Stock.
ARTICLE II
INCENTIVE STOCK OPTION PROGRAM
SECTION 1. Option Terms and Conditions. The terms and conditions of
options granted under the Incentive Stock Option Program (the "Incentive
Program") may differ from one another as the Plan Administrators shall, in their
discretion, determine in each ISO Award agreement (the "ISO Agreement"), as long
as all ISOs granted under the Incentive Program satisfy the requirements of
Section 422 of the Code for the granting of incentive stock options and are
clearly and specifically designated as such. Unless any provision of this
Article II indicates to the contrary, this Incentive Program shall be subject to
the General Provisions of the Plan.
SECTION 2. Duration of Options. Each ISO and all rights thereunder
granted pursuant to the terms of the Incentive Program shall expire on the date
determined by the Plan Administrators as evidenced by the ISO Agreement, but in
no event shall any ISO expire later than ten (10) years from the date on which
the ISO is granted. However, notwithstanding the above portion of this Section
2, if at the time the ISO is granted, the grantee (the "Optionee") owns or would
be considered to own by reason of Code Section 424(d) more than 10% of the total
combined voting power of all classes of stock of the Company or its
subsidiaries, such ISO shall expire not more than five (5) years from the date
the ISO is granted. In addition, each ISO shall be subject to early termination
as provided in the Incentive Program.
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SECTION 3. Purchase Price. The purchase price for shares acquired
pursuant to the exercise, in whole or in part, of any ISO shall not be less than
the greater of: (i) the par value of a share of Common Stock; or (ii) the Fair
Market Value of the shares at the time of the grant of the ISO. Notwithstanding
the foregoing, if at the time an ISO is granted the Optionee owns or would be
considered to own by reason of Code Section 424(d) more than 10% of the total
combined voting power of all classes of stock of the Company or its
subsidiaries, the purchase price of the shares covered by such ISO shall not be
less than 110% of the Fair Market Value of a share of Common Stock on the date
the ISO is granted.
SECTION 4. Maximum Amount of Options Exercisable in Any Calendar Year.
Notwithstanding any other provision of the Incentive Program, the aggregate Fair
Market Value (determined at the time any ISO is granted) of the Common Stock
with respect to which ISOs or any other incentive stock options (as described in
Section 422 of the Code) become exercisable for the first time by any employee
during any calendar year under all stock option plans of the Company and its
subsidiaries shall not exceed $100,000.
SECTION 5. Exercise of Options. Each ISO shall be exercisable in one or
more installments during its term, and the right to exercise may be cumulative
as determined by the Plan Administrators and the ISO Agreement. An ISO may be
exercised by properly completing and delivering to the Company at its principal
office an exercise form prescribed by the Plan Administrators and attached to
the ISO Agreement for this purpose, together with payment in full of the ISO
exercise price for the shares of Common Stock the Plan Participant desires to
purchase through such exercise in the manner specified in the exercise form and
ISO Agreement. No ISO may be exercised for a fraction of a share of Common
Stock. The purchase price of any shares purchased shall be paid in full in cash
or by certified cashier's check payable to the order of the Company or, if
permitted by the Plan Administrators, by shares of the Company's Common Stock or
by the surrender of all or part of an Award (including the ISO being exercised),
or in other property, rights or credits deemed acceptable by the Plan
Administrators or, if permitted by the Plan Administrators, by a combination of
the foregoing, at the time of exercise of the ISO. If any portion of the
purchase price is paid in shares of the Company's Common Stock, those shares
shall be tendered at their then Fair Market Value as determined by the Plan
Administrators in accordance with Section 22 of Article I. Payment in shares of
Common Stock includes the automatic application of shares of Common Stock
received upon the exercise of an ISO or other option or Award to satisfy the
exercise price for additional ISOs.
SECTION 6. Option Rights Upon Termination of Employment. If an
Optionee, under this Incentive Program, ceases to be employed by the Company or
any subsidiary for any reason other than death or disability, his or her ISO
shall immediately terminate; provided, however, that the Plan Administrators
may, in their discretion, allow the ISO to be exercised (to the extent
exercisable on the date of termination) at any time within three (3) months
after the date of termination of employment, or such longer period as the Plan
Administrators may determine, but in no event after the expiration of the term
of the ISO.
SECTION 7. Option Rights Upon Disability. If an Optionee becomes
disabled within the meaning of Code Section 422(e)(3) while employed by the
Company or any subsidiary, the Plan Administrators, in their discretion, may
allow the ISO to be exercised, to the extent exercisable on the date of
termination of employment, at any time within one (1) year after the date of the
termination of employment due to disability, unless either the ISO Agreement or
the Incentive Program otherwise provides for earlier termination.
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SECTION 8. Option Rights Upon Death of Optionee. Except as otherwise
limited by the Plan Administrators at the time of the grant of an ISO, if an
Optionee dies while employed by the Company or any subsidiary, or within three
(3) months after ceasing to be an employee thereof, his or her ISO shall expire
one (1) year after the date of death unless the ISO Agreement otherwise provides
for earlier termination. During this one (1) year or shorter period, the ISO may
be exercised, to the extent that it remains unexercised and to the extent
exercisable on the date of death, by the person or persons to whom the
Optionee's rights under the ISO shall pass by will or by laws of descent and
distribution and pursuant to Section 19 of Article I, but only to the extent
that the Optionee is entitled to exercise the ISO at the time of death.
ARTICLE III
NONQUALIFIED STOCK OPTION PROGRAM
SECTION 1. Option Terms and Conditions. The terms and conditions of
options granted under the Nonqualified Stock Option Program (the "Nonqualified
Program") may differ from one another as the Plan Administrators shall, in their
discretion, determine in each NQSO Award agreement (the "NQSO Agreement"), as
long as all NQSOs granted under the Nonqualified Program shall clearly and
specifically be designated as not being an incentive stock option within the
meaning of Section 422 of the Code. Unless any provision herein indicates to the
contrary, this Nonqualified Program shall be subject to the General Provisions
of the Plan.
SECTION 2. Duration of Options. Each NQSO and all rights thereunder
granted pursuant to the terms of the Nonqualified Program shall expire on the
date determined by the Plan Administrators as evidenced by the NQSO Agreement,
but in no event shall any NQSO expire later than ten (10) years from the date on
which the NQSO is granted. In addition, each NQSO shall be subject to early
termination as provided in the Nonqualified Program.
SECTION 3. Purchase Price. The purchase price for shares acquired
pursuant to the exercise, in whole or in part, of any NQSO shall not be less
than the greater of: (i) the par value of a share of Common Stock; or (ii) the
Fair Market Value of the shares at the time of the grant of the NQSO.
SECTION 4. Exercise of Options. Each NQSO shall be exercisable in one
or more installments during its term, and the right to exercise may be
cumulative as determined by the Plan Administrators and the NQSO Agreement. An
NQSO may be exercised by properly completing and delivering to the Company at
its principal office an exercise form prescribed by the Plan Administrators and
attached to the NQSO Agreement for this purpose, together with payment in full
of the NQSO exercise price for the shares of Common Stock the Plan Participant
desires to purchase through such exercise in the manner specified in the
exercise form and NQSO Agreement. No NQSO may be exercised for a fraction of a
share of Common Stock. The purchase price of any shares purchased shall be paid
in full in cash or by certified cashier's check payable to the order of the
Company or, if permitted by the Plan Administrators, by shares of the Company's
Common Stock or by the surrender of all or part of an Award (including the NQSO
being exercised), or in other property, rights or credits deemed acceptable by
the Plan Administrators or, if permitted by the Plan Administrators, by a
combination of the foregoing, at the time of exercise of the NQSO. If any
portion of the purchase price is paid in shares of the Company's Common Stock,
those shares shall be tendered at their then Fair Market Value as determined by
the Plan Administrators in accordance with Section
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22 of Article I. Payment in shares of Common Stock includes the automatic
application of shares of Common Stock received upon the exercise of an NQSO or
other option or Award to satisfy the exercise price for additional NQSOs.
SECTION 5. Option Rights Upon Termination of Employment or Service. If
an Optionee under this Nonqualified Program ceases to be employed by, or provide
services to, the Company or any subsidiary for any reason other than death or
disability, his or her NQSO shall immediately terminate; provided, however, that
the Plan Administrators may, in their discretion, allow the NQSO to be exercised
(to the extent exercisable on the date of termination) at any time within three
(3) months after the date of termination of employment, or such longer period as
the Plan Administrators may determine, but in no event after the expiration of
the term of the NQSO.
SECTION 6. Option Rights Upon Disability. If an Optionee becomes
disabled within the meaning of Code Section 422(e)(3) while employed by the
Company or any subsidiary, the Plan Administrators, in their discretion, may
allow the NQSO to be exercised, to the extent exercisable on the date of
termination of employment, at any time within one (1) year after the date of the
termination of employment due to disability, unless either the NQSO Agreement or
the Nonqualified Program otherwise provides for earlier termination.
SECTION 7. Option Rights Upon Death of Optionee. Except as otherwise
limited by the Plan Administrators at the time of the grant of a NQSO, if an
Optionee dies while employed by the Company or any subsidiary, or within three
(3) months after ceasing to be an employee thereof, his or her NQSO shall expire
one (1) year after the date of death unless the NQSO Agreement otherwise
provides for earlier termination. During this one (1) year or shorter period,
the NQSO may be exercised, to the extent that it remains unexercised on the date
of death, by the person or persons to whom the Optionee's rights under the NQSO
shall pass by will or by laws of descent and distribution and pursuant to
Section 19 of Article I, but only to the extent that the Optionee is entitled to
exercise the NQSO at the time of death.
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ARTICLE IV
RESTRICTED SHARE PROGRAM
SECTION 1. Terms and Conditions. The terms and conditions of restricted
shares granted under the Restricted Share Program (the "Restricted Program") may
differ from one another as the Plan Administrators shall, in their discretion,
determine in each Restricted Share Award agreement (the "Restricted Share
Agreement"), as long as all restricted shares granted under the Restricted
Program satisfy the requirements of the Restricted Program. Unless any provision
herein indicates to the contrary, this Restricted Program shall be subject to
the General Provisions of the Plan.
Each restricted share grant shall provide to the recipient (the
"Holder") the transfer of a specified number of shares of the Company's Common
Stock that shall become nonforfeitable upon the achievement of specified service
or performance conditions within a specified period (the "Restriction Period")
as determined by the Plan Administrators and the Restricted Share Agreement. At
the time that the restricted share is granted, the Plan Administrators shall
specify the service or performance conditions and the period of duration over
which the conditions apply as evidenced by the Restricted Share Agreement.
Additionally, the Holder will be required to pay an amount equal to the
aggregate par value of any newly issued restricted shares, which amount will be
returned to the Holder in the event the restricted shares are forfeited.
The Holder of restricted shares shall not have any rights with respect
to such award, unless and until such Holder has executed the Restricted Share
Agreement. Each individual who is awarded restricted shares shall be issued a
stock certificate in respect of such shares and such certificate shall be
registered in the name of the Holder and shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such
restricted shares, substantially in the following form:
The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the PDT, Inc. Restricted Share Agreement entered into
between the registered owner hereof and PDT, Inc., a copy of which is
on file at the offices of PDT, Inc.
The Plan Administrators shall require that the stock certificates
evidencing such shares be held in the custody of the Company until the
restrictions thereon shall have lapsed and that, as a condition of any
restricted share award, the Holder shall have delivered a stock power, endorsed
in blank, relating to the stock covered by such restricted shares. At the
expiration of each Restriction Period, the Company shall deliver to the Holder
any certificates held by the Company representing shares with respect to which
the applicable conditions have been satisfied and destroy said stock power.
SECTION 2. Nontransferability. Subject to the provisions of the
Restricted Plan and the Restricted Share Agreement, during the Restriction
Period as may be set forth by the Plan Administrators commencing on the grant
date, the Holder shall not be permitted to sell, pledge, assign, transfer in any
manner, exchange or otherwise encumber or make subject to any creditor's
process, whether voluntarily, involuntarily or by operation of law, such
restricted shares, other than by will or the laws of descent and distribution
pursuant to Section 19 of Article I and any attempt to do so shall be of no
effect.
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SECTION 4. Restricted Share Rights Upon Termination of Employment or
Service. If a Holder terminates employment with or service to the Company prior
to the expiration of the Restriction Period, any restricted shares granted to
him or her subject to such Restriction Period shall be forfeited by Holder and
shall be transferred to the Company. The Plan Administrators may, in their sole
discretion, accelerate the lapsing of or waive such restrictions in whole or in
part based upon such factors and such circumstances as the Plan Administrators
may determine, in their sole discretion, including, but not limited to, the Plan
Participant's retirement, death or disability, all changes in the terms of the
Restriction Period to be evidenced in the Restricted Share Agreement or an
amendment thereto in writing.
SECTION 5. Stockholder Rights. At the discretion of the Plan
Administrators, the Holder may have, with respect to the restricted shares
granted, all of the rights of a stockholder of the Company, including the right
to vote the shares, and the right to receive any dividends thereon. The Plan
Administrators may (but are not obligated to) require that any dividends on such
shares shall be automatically deferred and reinvested in additional restricted
shares subject to the same restrictions as the underlying restricted shares.
Certificates for shares of unrestricted stock shall be delivered to the Holder
promptly after, and only after, the Restriction Period shall expire without
forfeiture in respect of such restricted shares, all in accordance to the terms
of the Restricted Share Agreement.
ARTICLE IV
STOCK APPRECIATION RIGHTS PROGRAM
SECTION 1. SAR Terms and Conditions. The terms and conditions of SARs
granted under the Stock Appreciation Rights Program (the "SAR Program") may
differ from one another as the Plan Administrators shall, in their discretion,
determine in each SAR agreement (the "SAR Agreement") Unless any provision
herein indicates to the contrary, this SAR Program shall be subject to the
General Provisions of the Plan.
SECTION 2. Duration of Options. Each SAR and all rights thereunder
granted pursuant to the terms of the SAR Program shall expire on the date
determined by the Plan Administrators as evidenced by the SAR Agreement, but in
no event shall any SAR expire later than ten (10) years from the date on which
the SAR is granted. In addition, each SAR shall be subject to early termination
as provided in the SAR Program.
SECTION 3. Grant. Subject to the terms and conditions of the SAR
Agreement, the Plan Administrators may grant the right to receive a payment upon
the exercise of an SAR which reflects the appreciation in the Fair Market Value
of the number of shares of Common Stock for which such SAR was granted to any
person who is eligible to receive Awards either: (i) in tandem with the grant of
an ISO; (ii) in tandem with the grant of a NQSO; or (iii) independent of the
grant of an ISO or NQSO. Each grant of an SAR which is in tandem with the grant
of an ISO or NQSO shall be evidenced by the same agreement as the ISO or NQSO
which is granted in tandem with such SAR and such SAR shall relate to the same
number of shares of Common Stock as such option. Each SAR which is granted
independent of an ISO or NQSO shall be evidenced by a separate SAR Agreement
which shall state the number of shares of Common Stock to which such SAR shall
relate and such other terms and conditions as the Plan Administrators, in their
sole discretion, deem are not inconsistent with the terms of the SAR Program,
including conditions on the exercise of such SAR which relate to the employment
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of the Plan Participant or requirement that the Plan Participant exchange a
prior outstanding option and/or SAR.
SECTION 4. Payment at Exercise. Upon the settlement of an SAR in
accordance with the terms of the SAR Agreement, the Plan Participant shall
(subject to the terms and conditions of the SAR Program and SAR Agreement)
receive a payment equal to the excess, if any, of the SAR Exercise Price (as
defined below) for the number of shares of the SAR being exercised at that time
over the SAR Grant Price (as defined below) for such shares. Such payment may be
paid in cash or in shares of the Company's Common Stock or by a combination of
the foregoing, at the time of exercise of the SAR, as specified by the Plan
Administrators in the SAR Agreement. If any portion of the payment is paid in
shares of the Company's Common Stock, such shares shall be valued for this
purpose at the SAR Exercise Price on the date the SAR is exercised and any
payment in shares which calls for a payment in a fractional share shall
automatically be paid in cash based on such valuation. As used herein, "SAR
Exercise Date" shall mean the date on which the exercise of an SAR occurs under
the SAR Agreement, "SAR Exercise Price" shall mean the Fair Market Value of a
shares of Common Stock on the SAR Exercise Date and "SAR Grant Price" shall mean
the price which would have been the option exercise price for one share of
Common Stock if the SAR had been granted as an option, or if the SAR is granted
in tandem with an option, the option exercise price per share for the related
option.
SECTION 5. Special Terms and Conditions. Each SAR Agreement which
evidences the grant of an SAR shall incorporate such terms and conditions as the
Plan Administrators in their absolute discretion deem are not inconsistent with
the terms of the SAR Program and the agreement for the ISOs and NQSOs, if any,
granted in tandem with such SAR except that: (i) if an SAR is granted in tandem
with an ISO or NQSO, the SAR shall be exercisable only when the related ISO or
NQSO is exercisable; and (ii) the Plan Participant's right to exercise an SAR
granted in tandem with an ISO or NQSO shall be forfeited to the extent that he
or she exercises the related ISO or NQSO and his or her right to exercise the
ISO or NQSO shall be forfeited to the extent he or she exercises the related
SAR, but any such forfeiture shall not count as a forfeiture for purposes of
making the shares subject to such option or SAR again available for use under
the General Provisions of the Plan.
ARTICLE V
OTHER STOCK RIGHTS PROGRAM
SECTION 1. Terms and Conditions. The terms and conditions of
Performance Shares, Stock Payments or Dividend Equivalent Rights granted under
the Other Stock Rights Program (the "Stock Rights Program") may differ from one
another as the Plan Administrators shall, in their discretion, determine in each
stock rights agreement (the "Stock Rights Agreement"). Unless any provision
herein indicates to the contrary, this Stock Rights Program shall be subject to
the General Provisions of the Plan.
SECTION 2. Duration. Each Performance Share or Dividend Equivalent
Right and all rights thereunder granted pursuant to the terms of the Stock
Rights Program shall expire on the date determined by the Plan Administrators as
evidenced by the Stock Rights Agreement, but in no event shall any Performance
Shares or Dividend Equivalent Rights expire later than ten (10) years from the
date on which the Performance Shares or Dividend Equivalent Rights are granted.
In addition, each Performance Share, Stock Payment or Dividend Equivalent Right
shall be subject to early termination as provided in the Stock Rights Program.
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SECTION 3. Grant. Subject to the terms and conditions of the Stock
Rights Agreement, the Plan Administrators may grant Performance Shares, Stock
Payments or Dividend Equivalent Rights as provided under the Stock Rights
Program. Each grant of Performance Shares, Dividend Equivalent Rights and Stock
Payments shall be evidenced by a Stock Rights Agreement, which shall state the
terms and conditions of each as the Plan Administrators, in their sole
discretion, deem are not inconsistent with the terms of the Stock Rights
Program.
SECTION 4. Performance Shares. Performance Shares shall become payable
to a Plan Participant based upon the achievement of specified Performance
Objectives and upon such other terms and conditions as the Plan Administrators
may determine and specify in the Stock Rights Agreement evidencing such
Performance Shares. Each grant shall satisfy the conditions for
performance-based awards under Section 17 of Article I. A grant may provide for
the forfeiture of Performance Shares in the event of termination of employment
or other events, subject to exceptions for death, disability, retirement or
other events, all as the Plan Administrators may determine and specify in the
Stock Rights Agreement for such grant. Payment may be made for the Performance
Shares at such time and in such form as the Plan Administrators shall determine
and specify in the Stock Rights Agreement and payment for any Performance Shares
may be made in full in cash or by certified cashier's check payable to the order
of the Company or, if permitted by the Plan Administrators, by shares of the
Company's Common Stock or by the surrender of all or part of an Award, or in
other property, rights or credits deemed acceptable by the Plan Administrators
or, if permitted by the Plan Administrators, by a combination of the foregoing.
If any portion of the purchase price is paid in shares of the Company's Common
Stock, those shares shall be tendered at their then Fair Market Value as
determined by the Plan Administrators in accordance with Section 22 of Article
I. Payment in shares of Common Stock includes the automatic application of
shares of Common Stock received upon the exercise or settlement of Performance
Shares or other option or Award to satisfy the exercise or settlement price.
SECTION 5. Stock Payments. The Plan Administrators may grant Stock
Payments to a person eligible to receive Awards as a bonus or additional
compensation or in lieu of the obligation of the Company or a subsidiary to pay
cash compensation under other compensatory arrangements, with or without the
election of the eligible person, provided that the Plan Participant will be
required to pay an amount equal to the aggregate par value of any newly issued
Stock Payments. A Plan Participant shall have all the voting, dividend,
liquidation and other rights with respect to shares of Common Stock issued to
the Plan Participant as a Stock Payment upon the Plan Participant becoming
holder of record of such shares of Common Stock; provided, however, the Plan
Administrators may impose such restrictions on the assignment or transfer of
such shares of Common Stock as they deem appropriate and as are evidenced in the
Stock Rights Agreement for such Stock Payment.
SECTION 6. Dividend Equivalent Rights. The Plan Administrators may
grant Dividend Equivalent Rights in tandem with the grant of ISOs, NQSOs, SARs,
Restricted Shares or Performance Shares that otherwise do not provide for the
payment of dividends on the shares of Common Stock subject to such Awards for
the period of time to which such Dividend Equivalent Rights apply, or may grant
Dividend Equivalent Rights that are independent of any other such Award. A
Dividend Equivalent Right granted in tandem with another Award may be evidenced
by the agreement for such other Award; otherwise, a Dividend Equivalent Right
shall be evidenced by a separate Stock Rights Agreement. Payment may be made by
the Company in cash or by shares of the Company's Common Stock or by a
combination of the foregoing, may be immediate or deferred and may be subject to
such
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employment, Performance Objectives or other conditions as the Plan
Administrators may determine and specify in the Stock Rights Agreement for such
Dividend Equivalent Rights. The total payment attributable to a share of Common
Stock subject to a Dividend Equivalent Right shall not exceed one hundred
percent (100%) of the equivalent dividends payable with respect to an
outstanding share of Common Stock during the term of such Dividend Equivalent
Right, taking into account any assumed reinvestment (including assumed
reinvestment in shares of Common Stock) or interest earnings on such equivalent
dividends as determined under the Stock Rights Agreement in the case of a
deferred payment, provided that such percentage may increase to a maximum of two
hundred percent (200%) if the Dividend Equivalent Right is subject to a
Performance Objective as described in Section 17 of Article I.
ARTICLE VI
STOCK PURCHASE PROGRAM
SECTION 1. Terms and Conditions. The terms and conditions of shares to
be offered to be sold to employees of the Company and its subsidiaries under the
Stock Purchase Program (the "Purchase Program") shall comply with Section 423 of
the Code.
SECTION 2. Offering Periods and Participation. The Purchase Program
shall be implemented through a series of consecutive offering periods (the
"Offering Periods"). An Eligible Employee may enroll in an Offering Period by
delivering an agreement evidencing the terms and conditions of the stock
subscription in a form prescribed by the Plan Administrator (the "Subscription
Agreement") to the Company's payroll department at least five (5) business days
prior to the Enrollment Date for that Offering Period (or such lesser number of
business days as the Plan Administrators, in their sole discretion, may permit).
A Subscription Agreement in effect for a Plan Participant for a particular
Offering Period shall continue in effect for subsequent Offering Periods if the
Plan Participant remains an Eligible Employee and has not withdrawn the
Subscription Agreement pursuant to Section 6 of the Purchase Program.
SECTION 3. Options.
(a) Grants. On the Enrollment Date for each Offering Period, each
Eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
Purchase Price) up to the lesser of: (i) ONE THOUSAND FIVE HUNDRED (1,500)
SHARES; or (ii) that number of shares of Common Stock determined by dividing
TWENTY FIVE THOUSAND DOLLARS ($25,000.00) by the Fair Market Value of a share of
Common Stock on the Enrollment Date (such number of shares under clause (i) or
(ii) being the "Periodic Exercise Limit"). The option shall expire immediately
after the last Exercise Date of the Offering Period.
(b) Grant Limitations. Any provisions of the Purchase Program to the
contrary notwithstanding, no Plan Participant shall be granted an option under
the Purchase Program:
(i) if, immediately after the grant, such Plan Participant would
own stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of the Company's stock or of any subsidiary
(applying the constructive ownership rules of Section 424(d) of the Code
PDT, INC.
Stock Compensation Plan
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<PAGE>
and treating stock that a Plan Participant may acquire under outstanding options
as stock owned by the Plan Participant); or
(ii) that permits such Plan Participant's rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries to
accrue at a rate that exceeds Twenty Five Thousand Dollars ($25,000.00) worth of
stock (determined at the Fair Market Value of the shares at the Enrollment Date)
in any calendar year (computed utilizing the rules of Section 423(b)(8) of the
Code).
(c) No Rights in Respect of Underlying Stock. The Plan Participant will
have no interest or voting right in shares covered by an option until such
option has been exercised.
(d) Common Stock Account. As a condition of participation in the
Purchase Program, each Plan Participant shall be required to receive shares
purchased under the Purchase Program in a common stock account (the "Common
Stock Account") maintained by an agent selected by the Company to hold the
Common Stock purchased under the Purchase Program (the "Custodian") and such
Plan Participant's decision to participate in the Purchase Program shall
constitute the appointment of the Custodian as custodial agent for purpose of
holding such shares. The Common Stock Account will be governed by, and subject
to, the terms and conditions of a written agreement with the Custodian in a form
approved by the Plan Administrators.
(e) Dividends on Shares. Subject to limitations of Section 3(a) hereof
and Section 423(b)(8) of the Code, all cash dividends, if any, paid with respect
to shares of Common Stock purchased under the Purchase Program and held in a
Plan Participant's Common Stock Account shall be automatically invested in
shares of Common Stock purchased at One Hundred Percent (100%) of Fair Market
Value on the next Exercise Date. All non-cash distributions on Common Stock
purchased under the Purchase Program and held in a Plan Participant's Common
Stock Account shall be paid to the Plan Participant as soon as practical.
(f) Withdrawal of Shares From Common Stock Account. Prior to the Plan
Participant's termination of employment with the Company and/or its
subsidiaries, a Plan Participant may withdraw some or all of the whole shares
held in the Plan Participant's Common Stock Account, provided that, unless the
Plan Administrators otherwise permit in their sole discretion, at least twelve
(12) months have expired following the Exercise Date on which such shares of
Common Stock were purchased under the Purchase Program, and provided, further,
that the Plan Participant provides prior written notice to the Company of such
withdrawal if such withdrawal is prior to the expiration of twenty four
(24) months following the Enrollment Date for the Offering Period in which
shares of Common Stock were purchased under the Purchase Program.
SECTION 4. Payroll Deductions.
(a) Plan Participant Designations. The Subscription Agreement
applicable to an Offering Period shall designate payroll deductions to be made
on each payday during the Offering Period as a whole number percentage not
exceeding fifteen percent (15%) of such Eligible Employee's compensation for the
pay period preceding such payday, provided that the aggregate of such payroll
deductions during the Offering Period shall not exceed fifteen percent (15%) of
the Plan Participant's compensation during said Offering Period.
PDT, INC.
Stock Compensation Plan
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(b) Plan Account Balances. The Company shall make payroll deductions as
specified in each Plan Participant's Subscription Agreement on each payday
during the Offering Period and credit such payroll deductions to such Plan
Participant's Plan Account. A Plan Participant may not make any additional
payments into such Plan Account. No interest will accrue on any payroll
deductions. All payroll deductions received or held by the Company under the
Purchase Program may be used by the Company for corporate purposes and the
Company shall not be obligated to segregate such payroll deductions.
(c) Plan Participant Changes. A Plan Participant may discontinue his or
her participation in the Purchase Program as provided in Section 6 of the
Purchase Program, or may increase or decrease (subject to such limits as the
Plan Administrators may impose) the rate of his or her payroll deductions during
any Purchase Period by filing with the Company a new Subscription Agreement
authorizing such a change in the payroll deduction rate. The change in rate
shall be effective with the first full payroll period following five (5)
business days after the Company's receipt of the new Subscription Agreement,
unless the Company elects to process a given change in participation more
quickly.
(d) Decreases. Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code and Section 4(b) herein, a Plan
Participant's payroll deductions shall be decreased to zero percent at such time
during any Purchase Period that is scheduled to end during the calendar year
(the "Current Purchase Period") when the aggregate of all payroll deductions
previously used to purchase stock under the Purchase Plan in a prior Purchase
Period which ended during that calendar year, plus all payroll deductions
accumulated with respect to the Current Purchase Period, equal $21,250 (based on
the 85% discount). Payroll deductions shall recommence at the rate provided in
such Plan Participant's Subscription Agreement at the beginning of the first
Purchase Period that is scheduled to end in the following calendar year, unless
terminated by the Plan Participant as provided in Section 6 hereof.
(e) Tax Obligations. At the time of each exercise of a Plan
Participant's option, and at the time any Common Stock issued under the Purchase
Program to a Plan Participant is disposed of, the Plan Participant must
adequately provide for the Company's federal, state or other tax withholding
obligations, if any, that arise upon the exercise of the option or the
disposition of the Common Stock. At any time, the Company may, but will not be
obligated to, withhold from the Plan Participant's compensation the amount
necessary for the Company to meet applicable withholding obligations, including
but not limited to, any withholding required to make available to the Company
any tax deductions or benefit attributable to sale or early disposition of
Common Stock by the Eligible Employee.
(f) Statements of Account. The Company shall maintain each Plan
Participant's Plan Account and shall give each Plan Participant a statement of
account at least annually. Such statements will set forth the amounts of payroll
deductions, the Purchase Price applicable to the Common Stock purchased, the
number of shares purchased, the remaining cash balance and the dividends
received, if any, for the period covered.
SECTION 5. Exercise of Options.
(a) Automatic Exercise on Exercise Dates. Unless a Plan Participant
withdraws as provided in Section 6 below, his or her option for the purchase of
shares will be exercised
PDT, INC.
Stock Compensation Plan
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<PAGE>
automatically on each Exercise Date within the Offering Period in which such
Plan Participant is enrolled for the maximum whole number of shares of Common
Stock as can then be purchased at the applicable Purchase Price with the payroll
deductions accumulated in such Plan Participant's Plan Account and not yet
applied to the purchase of shares under the Purchase Program, subject to Section
4(d) hereof and the Periodic Exercise Limit. All such shares purchased under the
Purchase Program shall be credited to the Plan Participant's Common Stock
Account. During a Plan Participant's lifetime, a Plan Participant's options to
purchase shares under the Purchase Program shall be exercisable only by the Plan
Participant.
(b) Excess Plan Account Balances. If, due to application of the
Periodic Exercise Limit or otherwise, there remains in a Plan Participant's Plan
Account immediately following exercise of such Plan Participant's option on an
Exercise Date any cash accumulated during the Purchase Period immediately
preceding such Exercise Date and not applied to the purchase of shares under the
Purchase Program, such cash shall be promptly returned to the Plan Participant;
provided, however, that if the Plan Participant shall enroll in the next
Purchase Period (including, without limitation, by not withdrawing pursuant to
Section 6), such cash shall be contributed to the Plan Participant's Plan
Account for such next Purchase Period.
SECTION 6. Withdrawal; Termination of Employment.
(a) Voluntary Withdrawal. A Plan Participant may withdraw from an
Offering Period by giving written notice to the Company's payroll office at
least five (5) business days prior to the next Exercise Date. Such withdrawal
shall be effective beginning five (5) business days after receipt by the
Company's payroll office of notice thereof. On or promptly following the
effective date of any withdrawal, all (but not less than all) of the withdrawing
Plan Participant's payroll deductions credited to his or her Plan Account and
not yet applied to the purchase of shares under the Purchase Program will be
paid to such Plan Participant, and on the effective date of such withdrawal such
Plan Participant's option for the Offering Period will be automatically
terminated and no further payroll deductions for the purchase of shares will be
made during the Offering Period. If a Plan Participant withdraws from an
Offering Period, payroll deductions will not resume at the beginning of any
succeeding Offering Period, unless the Plan Participant delivers to the Company
a new Subscription Agreement with respect thereto.
(b) Termination of Employment. Promptly after a Plan Participant's
ceasing to be an employee for any reason, all shares of Common Stock held in a
Plan Participant's Common Stock Account and the payroll deductions credited to
such Plan Participant's Plan Account and not yet applied to the purchase of
shares under the Purchase Program will be returned to such Plan Participant, or,
in the case of his or her death, to the person or persons entitled thereto, and
such Plan Participant's option will be automatically terminated, provided that,
if the Company does not learn of such death more than five (5) business days
prior to an Exercise Date, payroll deductions credited to such Plan
Participant's Account may be applied to the purchase of shares under the Stock
Purchase Plan on such Exercise Date.
SECTION 7. Transferability. Neither payroll deductions credited to a
Plan Participant's Plan Account nor any rights with regard to the exercise of an
option or to receive shares under the Purchase Plan may be assigned,
transferred, pledged or otherwise disposed of by the Plan Participant in any way
other than by will or the laws of descent and distribution, and any option
granted to a Plan Participant shall, during such Plan Participant's lifetime, be
exercisable only by such Plan Participant. Any such
PDT, INC.
Stock Compensation Plan
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<PAGE>
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Plan Administrator may treat such act as an election to
withdraw from an Offering Period in accordance with Section 6 of the Purchase
Program.
SECTION 8. Definitions. Capitalized terms used in the Purchase Program
and not otherwise defined in the Program shall have the meanings set forth
below:
"Compensation" means the gross base salary or hourly compensation and
the gross amount of any cash bonus paid to a Plan Participant, without reduction
for contributions to any 401(k) plan sponsored by the Company.
"Eligible Employee" means an Employee who has been an Employee of the
Company and/or its subsidiaries for a least one (1) year.
"Employee" means any individual who is an employee of the Company for
purposes of tax withholding under the Code other than any employee of the
Company who is not a regular full-time employee customarily employed for more
than twenty hours per week or more than five (5) months in any calendar year by
the Company. For purposes of the Purchase Program, the employment relationship
shall be treated as continuing while the individual is on sick leave or other
leave of absence approved by the Company, except that when the period of sick
leave exceeds 90 days and the individual's right to re-employment is not
guaranteed either by statute or by contract, the employment relationship will be
deemed to have terminated on the 91st day of such leave.
"Enrollment Date" means the five (5) business days prior to the
beginning of an Offering Period as defined below
"Exercise Date" means the last business day of December or June, as the
case may be, of each Purchase Period commencing with the last business day of
June, 1997, for the Purchase Period commencing with the 1st of January, 1997,
and the last business day of December, 1997 for the Purchase Period commencing
with the 1st day of July, 1997.
"Offering Period" means each period of twelve (12) months commencing on
the first day of each January (commencing with January 1, 1997) and terminating
on the last day of December twelve (12) months later. The Plan Administrators
shall have the power to change the duration of Offering Periods without
stockholder approval in connection with any adjustment required under Section 7
of Article I, or if such change is announced at least fifteen (15) days prior to
the scheduled beginning of the first Offering Period to be affected.
"Plan Account" means the account maintained by the Company for the Plan
Participants in the Purchase Program, to which are credited the payroll
deductions made for such Plan Participant pursuant to Section 4 of the Purchase
Program and from which are debited amounts paid for the purchase of shares upon
exercise of such Plan Participant's option pursuant to Section 4 of the Purchase
Program.
"Purchase Period" means each six-month period within an Offering
Period, commencing on the first business day of each January (commencing with
January 1, 1997) and July (commencing with July 1, 1997).
PDT, INC.
Stock Compensation Plan
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<PAGE>
"Purchase Price" as of any Exercise Date means an amount equal to the
lower of: (a) eighty-five percent (85%) of the Fair Market Value of the Common
Stock on the Enrollment Date for the applicable Offering Period; or (b)
eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on
such Exercise Date.
ARTICLE VII
NON-EMPLOYEE DIRECTORS' OPTION PROGRAM
SECTION 1. Mandatory Grants. Notwithstanding any other provision of the
Plan, mandatory grants of NQSO's to directors who are not also employees of the
Company will be made under this Directors' Program in accordance with and be
subject to the following limitations of this Article VII:
a) Effective on the first day of the fourth quarter of each
fiscal year of the Company during the term of the Plan, each director of the
Company who is not also an employee of the Company will automatically be granted
a NQSO under this Plan to purchase Seven Thousand Five Hundred (7,500) shares of
Common Stock.
b) The purchase price for all NQSO's granted to directors
under this Article VII shall be the Fair Market Value of the shares on the date
of grant. For the purposes of this Article VII, the date of grant of each such
NQSO will be the date upon which such NQSO is required to be automatically
granted pursuant to the Section 1 (a).
(c) All NQSO's granted to directors under this Article VII
will become 100% exercisable on the date of grant.
(d) To the extent not exercised, any NQSO granted to directors
under this Article VII will terminate on the earlier of 90 days from the date on
which a director is no longer a member of the Board for any reason other than
death, ten years from the date of grant, or six months from the director's
death.
SECTION 2. Applicability of Remaining Provisions. Unless otherwise
provided in the Plan, all provisions of the Plan regarding the terms of NQSO's
granted under the Nonqualified Stock Option Program will be applicable to NQSO's
granted to directors under this Article VII.
PDT, INC.
Stock Compensation Plan
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<PAGE>
ANNEX A
FORM OF PROXY
[FRONT]
PDT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS-MAY 21, 1997
PDT, INC., 7408 HOLLISTER AVENUE, SANTA BARBARA, CALIFORNIA 93117
The undersigned hereby appoints Gary S. Kledzik, Ph.D. and John M.
Philpott, and each of them the true and lawful attorneys in fact, agents and
proxies, each with full power of substitution, to attend the annual meeting of
stockholders of PDT, Inc. (the "Company") to be held May 21, 1997 at 9:00 a.m.
at the Four Seasons Biltmore, Santa Barbara, California, and/or at any
adjournment of the annual meeting, and to vote in the manner indicated below all
shares of Common Stock which the undersigned would be entitled to vote if
personally present, all in accordance with and as more fully described in the
Notice of Annual Meeting and accompanying Proxy Statement, receipt of which is
hereby acknowledged.
THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED AS INDICATED BELOW:
PLEASE MARK YOUR VOTES LIKE THIS: |X|.
1. To elect the following as directors.
FOR ALL NOMINEES LISTED BELOW WITHHOLD AUTHORITY TO VOTE FOR ALL
(except as marked below) NOMINEES LISTED BELOW
|_| |_|
Michael D. Farney, Charles T. Foscue, Gary S. Kledzik, Ph.D.,
Donald K. McGhan, David E. Mai and Raul E. Perez, M.D.
To withhold authority to vote for any nominee, strike out the name
of any such nominee(s) and mark the following box: |_|
2. To approve the amendment of the PDT, Inc. 1996 Stock Compensation Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
<PAGE>
[BACK]
3. To ratify the appointment of Ernst & Young LLP as the Company's auditors for
the 1997 fiscal year.
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, on such other business as may properly come before the
annual meeting or any adjournment thereof.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED
IN ITEM 1, FOR ITEMS 2 AND 3 AND, WITH RESPECT TO ANY OTHER MATTERS THAT
PROPERLY COME BEFORE THE MEETING, IN THE DISCRETION OF THE PROXY HOLDERS.
Please mark, date and sign as your name appears below and return in the
enclosed envelope. If acting as executor, administrator, trustee or guardian,
state your full title and authority when signing. If the signer is a
corporation, please sign the full corporation name, by a duly authorized
officer. If shares are held jointly, each stockholder named should sign.
Dated , 1997
----------------------------
----------------------------------------
----------------------------------------
Signature, if held jointly
PLEASE SIGN, DATE AND RETURN THIS PROXY
IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE
|_| I/WE PLAN TO ATTEND THE MEETING. IF YOU PLAN TO ATTEND THE MEETING,
PLEASE MARK THE BOX.
