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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
CARDIAC PATHWAYS CORPORATION
- --------------------------------------------------------------------------------
(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.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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CARDIAC PATHWAYS CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 14, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CARDIAC
PATHWAYS CORPORATION, a Delaware corporation (the "Company"), will be held on
Tuesday, October 14, 1997 at 12:00 p.m. local time, at 995 Benecia Avenue,
Sunnyvale, California 94086 for the following purposes:
1. To elect two (2) Class II directors to serve for a three-year term.
2. To approve an amendment of the Company's 1996 Employee Stock Purchase
Plan to increase the number of shares of the Company's Common Stock
available for issuance thereunder by 70,000 shares.
3. To approve an amendment of the Company's 1996 Director Option Plan to
increase the number of shares of the Company's Common Stock available
for issuance thereunder by 20,000 shares.
4. To approve an amendment of the Company's 1991 Stock Plan (the "Stock
Plan") to increase the number of shares of the Company's Common Stock
available for issuance thereunder by 380,000 shares and to approve the
material terms of the Stock Plan, including, but not limited to, share
limitations for purposes of Section 162(m) of the Internal Revenue Code
of 1986, as amended.
5. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending June 30, 1998.
6. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close of
business on August 20, 1997 are entitled to notice of and to vote at the
meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a Proxy.
Sincerely,
William N. Starling
President and Chief Executive Officer
Sunnyvale, California
September 5, 1997
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE.
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CARDIAC PATHWAYS CORPORATION
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PROXY STATEMENT FOR 1997
ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
CARDIAC PATHWAYS CORPORATION, a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held Tuesday, October 14, 1997 at 12:00
p.m. local time, or at any adjournment thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at the Company's principal executive offices which
are located at 995 Benecia Avenue, Sunnyvale, California 94086. The Company's
telephone number at that location is (408) 737-0505.
These proxy solicitation materials and the Annual Report to Stockholders
for the year ended June 30, 1997, including financial statements, were first
mailed on or about September 5, 1997 to all stockholders entitled to vote at the
meeting.
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
Stockholders of record at the close of business on August 20, 1997 (the
"Record Date") are entitled to notice of and to vote at the meeting. The Company
has one series of common shares outstanding, designated Common Stock, $.001 par
value. At the record date, 9,529,718 shares of the Company's Common Stock were
issued and outstanding and held of record by 178 stockholders. No shares of the
Company's Preferred Stock were outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share held as of the
Record Date. Every stockholder voting for the election of directors (Proposal
One) may cumulate such stockholder's votes and give one candidate a number of
votes equal to the number of directors to be elected multiplied by the number of
shares that such stockholder is entitled to vote, or distribute such
stockholder's votes on the same principle among as many candidates as the
stockholder may select, provided that votes cannot be cast for more than two
candidates. However, no stockholder shall be entitled to cumulate votes unless
the candidate's name has been placed in nomination prior to the voting and the
stockholder, or any other stockholder, has given notice, prior to the voting, of
his or her intention to cumulate the stockholder's votes. On all other matters,
each share of Common Stock has one vote.
This solicitation of proxies is made by the Company, and all related costs
will be borne by the Company. The Company may reimburse brokerage firms and
other persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers and regular employees,
without additional compensation, personally or by telephone or telegram.
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QUORUM; ABSTENTIONS; BROKER NON-VOTES
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections (the "Inspector") with the assistance of the
Company's Transfer Agent. The Inspector will also determine whether or not a
quorum is present. Except in certain specific circumstances, the affirmative
vote of a majority of shares present in person or represented by proxy at a duly
held meeting at which a quorum is present is required under Delaware law for
approval of proposals presented to stockholders. In general, Delaware law also
provides that a quorum consists of a majority of shares entitled to vote and
present or represented by proxy at the meeting.
The Inspector will treat shares that are voted "WITHHELD" or "ABSTAIN" as
being present and entitled to vote for purposes of determining the presence of a
quorum but will not be treated as votes in favor of approving any matter
submitted to the stockholders for a vote. Any proxy which is returned using the
form of proxy enclosed and which is not marked as to a particular item will be
voted for the election of the two Class II directors, for the approval of the
amendment of the 1996 Employee Stock Purchase Plan, for the approval of the
amendment of the 1996 Director Option Plan, for the approval of the amendment to
and the material terms of the 1991 Stock Plan, for the ratification of the
appointment of the designated independent auditors and, as the proxy holders
deem advisable, on other matters that may come before the meeting, as the case
may be with respect to the items not marked.
If a broker indicates on the enclosed proxy or its substitute that it does
not have discretionary authority as to certain shares to vote on a particular
matter ("Broker Non-Votes"), those shares will not be considered as present with
respect to that matter. The Company believes that the tabulation procedures to
be followed by the Inspector are consistent with the general statutory
requirements in Delaware concerning voting of shares and determination of a
quorum.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1998 Annual Meeting of Stockholders must
be received by the Company no later than May 14, 1998 in order that they may be
considered for inclusion in the proxy statement and form of proxy relating to
that meeting.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of August 20, 1997 as to (i) each
person or entity who is known by the Company to own beneficially more than 5% of
the outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each of the Named Executive Officers (as defined below under "Executive
Compensation and Other Matters -- Executive Compensation -- Summary Compensation
Table") and (iv) all directors and executive officers of the Company as a group.
Except as otherwise noted, the stockholders named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to applicable community property laws.
APPROXIMATE
COMMON STOCK PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED OWNED(1)
---------------------------------------------------- ------------------ -----------
Entities affiliated with Institutional Venture
Partners(Samuel D. Colella)(2).................... 836,539 8.8%
3000 Sand Hill Road, 2-290
Menlo Park, CA 94025
Arrow International, Inc.(3)........................ 614,334 6.4%
P.O. Box 12888
3000 Bernville Road
Reading, PA 19612
Entities affiliated with Van Wagoner Capital
Management, Inc.(4)............................... 565,700 5.9%
One Bush Street, Suite 1150
San Francisco, CA 94104
State of Wisconsin Investment Board(5).............. 515,000 5.4%
P.O. Box 7842
Madison, WI 53707
Mir A. Imran........................................ 471,333 5.0%
c/o Cardiac Pathways Corporation
995 Benecia Avenue
Sunnyvale, CA 94086
William N. Starling(6).............................. 373,854 3.8%
Thomas J. Fogarty, M.D.(7).......................... 245,954 2.6%
Lawrence G. Mohr, Jr.(8)............................ 103,380 1.1%
Joseph P. Ilvento, M.D.(9).......................... 62,952 *
Annette J. Campbell-White(10)....................... 35,631 *
Michael L. Eagle(11)................................ 4,444 *
David W. Gryska(12)................................. 92,347 1.0%
Mark L. Pomeranz(13)................................ 71,530 *
Earle L. Canty(14).................................. 67,542 *
Debra S. Echt, M.D.(15)............................. 27,263 *
All directors and executive officers as a group
(12 persons)(16).................................. 1,256,696 12.6%
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* Less than 1%
(1) Applicable percentage ownership is based on 9,529,718 shares of Common
Stock outstanding as of August 20, 1997 together with applicable options or
warrants for such stockholder. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission, based
on factors including voting and investment power with respect to shares
subject to the applicable community property laws. Shares of Common Stock
subject to options or warrants currently exercisable or exercisable within
60 days after August 20, 1997 are deemed outstanding for computing the
percentage ownership of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person.
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(2) Reflects ownership as reported on Schedule 13G dated June 23, 1997 filed
with the Commission by Institutional Venture Partners V ("IVP V"), a
venture capital fund; Institutional Venture Management V ("IVPM V"); the
general partner of IVP V, Institutional Venture Partners VII ("IVP VII"), a
venture capital fund; Institutional Venture Management VII ("IVPM VII"),
the general partner of IVP VII; IVP Founders Fund I ("Founders"), a venture
capital fund; Institutional Venture Management VI ("IVPM VI"); Founders'
general partner, Samuel D. Colella; Reid W. Dennis; Mary Jane Elmore;
Norman A. Fogelsong; Ruthann Quindlen; L. James Strand; T. Peter Thomas and
Geoffrey Y. Yang. Mr. Strand and Ms. Quindlen are general partners of IVPM
VII. Messrs. Colella, Dennis, Fogelsong, Thomas and Yang and Ms. Elmore are
general partners of IVPM VII and IVPM V. Mr. Colella is also a general
partner of IVPM VI. IVP VII and IVPM VII have shared voting and dispositive
power over 400,000 shares of the Company's Common Stock. Founders also has
shared voting and dispositive power over 400,000 shares of the Company's
Common Stock. IVP V and IVPM V have shared voting and dispositive power
over 425,539 shares of the Company's Common Stock. Mr. Collella has shared
voting and dispositive power over 827,539 shares of the Company's Common
Stock. Each of Messrs. Dennis, Fogelsong, Thomas, and Mr. Yang and Ms.
Elmore has shared voting and dispositive power over 825,539 shares of the
Company's Common Stock. Each of Ms. Quindlen and Mr. Strand has shared
voting and dispositive power over 400,000 shares of the Company's Common
Stock.
(3) Reflects ownership as reported on Schedule 13G dated February 2, 1997 filed
with the Commission by Arrow International, Inc. ("Arrow"). Arrow is a
medical device manufacturer with whom the Company has a strategic
relationship. Arrow has sole dispositive and voting power over 614,334
shares of the Company's Common Stock.
(4) Reflects ownership as reported to the Company by Van Wagoner Capital
Management, Inc., a registered investment advisor ("Van Wagoner"). Van
Wagoner is the investment advisor to Van Wagoner Funds, Inc. an investment
company ("Funds"). Van Wagoner has sole dispositive power over 565,700
shares of the Company's Common Stock. Funds has sole voting power over
451,700 shares of the Company's Common Stock.
(5) Reflects ownership as reported on Schedule 13G dated January 28, 1997 filed
with the Commission by the State of Wisconsin Investment Board (the
"Board"). The Board is a government agency which manages public pension
funds and has sole dispositive and voting power over 515,000 shares of the
Company's Common Stock.
(6) Consists of 155,853 shares of Common Stock held by the Starling Family
Trust, 8,867 shares of Common Stock held by the Starling Irrevocable Trust
and 209,134 shares of Common Stock which may be acquired upon exercise of
stock options exercisable within 60 days of August 20, 1997. Mr. Starling
holds voting and dispositive control over all of such shares.
(7) Includes 245,112 shares of Common Stock and 667 shares of Common Stock
which may be acquired upon exercise of a warrant exercisable within 60 days
of August 20, 1997 held by the Fogarty Family Revocable Trust, over which
Dr. Fogarty holds voting and dispositive control. Also includes 175 shares
of Common Stock which may be acquired upon exercise of stock options
exercisable within 60 days of August 20, 1997.
(8) Includes 16,667 shares held by Lawrence G. Mohr, Jr. and 74,538 shares of
Common Stock held by the Mohr Family Trust over which Mr. Mohr has voting
and dispositive control. Also includes 175 shares of Common Stock which may
be acquired upon exercise of stock options exercisable within 60 days of
August 20, 1997. Also includes 12,000 shares of Common Stock which may be
acquired upon exercise of a warrant exercisable within 60 days of August
20, 1997 held by Mohr, Davidow Ventures II. Mr. Mohr is a general partner
of Mohr, Davidow Ventures II and disclaims beneficial ownership of the
shares held by such entity except to the extent of his proportionate
partnership interest therein.
(9) Includes 1,842 shares of Common Stock which may be acquired upon exercise
of stock options exercisable within 60 days of August 20, 1997.
(10) Consists of 27,456 shares of Common Stock held by Annette Campbell-White
and 175 shares of Common Stock which may be acquired upon exercise of stock
options exercisable within 60 days of August 20, 1997. Also includes 4,000
shares of Common Stock which may be acquired upon exercise of
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a warrant exercisable within 60 days of August 20, 1997 held by MedVenture
Associates. Ms. Campbell-White is a general partner of MedVenture
Associates and disclaims beneficial ownership of the shares held by such
entity except to the extent of her proportionate partnership interest
therein.
(11) Includes 4,444 shares of Common Stock which may be acquired upon exercise
of stock options exercisable within 60 days of August 20, 1997.
(12) Includes 58,293 shares of Common Stock which may be acquired upon exercise
of stock options exercisable within 60 days of August 20, 1997.
(13) Includes 45,201 shares of Common Stock which may be acquired upon exercise
of stock options exercisable within 60 days of August 20, 1997.
(14) Includes 875 shares of Common Stock which may be acquired upon exercise of
stock options exercisable within 60 days of August 20, 1997.
(15) Includes 27,083 shares of Common Stock which may be acquired upon exercise
of stock options exercisable within 60 days of August 20, 1997.
(16) Includes 429,933 and 16,667 shares of Common Stock which may be acquired
upon exercise of stock options and warrants, respectively, exercisable
within 60 days of August 20, 1997.
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PROPOSAL ONE
ELECTION OF DIRECTORS
Pursuant to the Company's Restated Certificate of Incorporation, the
Company's Board of Directors currently consists of six persons, divided into
three classes serving staggered terms of three years. Currently, there are two
directors in Class I, two directors in Class II and two directors in Class III.
Two Class II directors are to be elected at the Annual Meeting of Stockholders.
The Class III and Class I directors will be elected at the Company's 1998 and
1999 Annual Meetings of Stockholders, respectively. Each of the Class II
directors will hold office until the 2000 Annual Meeting of Stockholders or
until his or her successor has been duly elected and qualified.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's two nominees named below, both of whom are
presently directors of the Company. In the event that any nominee of the Company
is unable or declines to serve as a director at the time of the Annual Meeting
of Stockholders, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. The Company is
not aware of any nominee who will be unable or will decline to serve as a
director. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them in such
a manner (in accordance with cumulative voting) as will assure the election of
as many of the nominees listed below as possible, and, in such event, the
specific nominees to be voted for will be determined by the proxy holders.
VOTE REQUIRED
If a quorum is present and voting, the two nominees receiving the highest
number of votes will be elected to the Board of Directors. Abstentions and
"broker non-votes" are not counted in the election of directors.
INFORMATION CONCERNING THE NOMINEES AND INCUMBENT DIRECTORS
The following table sets forth the name and age of each nominee and each
director of the Company whose term of office continues after the Annual Meeting,
the principal occupation of each during the past five years, and the period
during which each has served as a director of the Company.
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PRINCIPAL OCCUPATION DIRECTOR
NAME DURING THE PAST FIVE YEARS AGE SINCE
- ----------------------------------- -------------------------------------------- --- --------
NOMINEES FOR CLASS II DIRECTORS:
Dr. Thomas J. Fogarty.............. Dr. Thomas J. Fogarty has been a member of 63 1991
the Board of Directors of the Company since
May 1991. Dr. Fogarty has been a
cardiovascular surgeon and Professor of
Surgery at Stanford University Medical
Center since July 1993. Dr. Fogarty was a
co-founder of Imagyn Medical, Incorporated,
Cardiovascular Imaging Systems, Inc.,
AneuRx, Inc., Raytel Medical Corporation,
and Ventritex, Inc., all medical device
companies. Dr. Fogarty serves as director of
Raytel Medical Corporation, CardioThoracic
Systems, Inc., General Surgical Innovations,
Inc. and several privately-held companies.
Dr. Joseph P. Ilvento.............. Dr. Joseph P. Ilvento has been a member of 43 1995
the Board of Directors of the Company since
September 1995. Dr. Ilvento is also a
Cardiac Electrophysiologist, Medical
Director of Cardiac Electrophysiology at
Santa Barbara Cottage Hospital, and Director
of Electrophysiology at Community Memorial
Hospital in Ventura, California. Dr. Ilvento
serves as a director of a privately-held
company.
CONTINUING CLASS I DIRECTORS:
Annette J. Campbell-White.......... Annette J. Campbell-White has been a member 50 1991
of the Board of Directors of the Company
since May 1991. Since 1986, Ms.
Campbell-White has been the Founder and
Manager of MedVenture Associates I and II,
which are venture partnerships, investing
primarily in early stage businesses in the
medical device area. Ms. Campbell-White has
been associated with other venture
partnerships, notably InterWest Partners IV
as Special Limited Partner and US Venture
Partners as Venture Partner. She currently
serves as director of Arthrocare Corporation
as well as several privately-held companies.
Michael L. Eagle................... Michael L. Eagle has been a member of the 50 1996
Board of Directors of the Company since July
1996. Mr. Eagle has held various management
positions in the pharmaceutical and medical
device units of Eli Lilly and Company
("Lilly"), a diversified pharmaceutical and
medical products company, since 1983, and
currently serves as Vice President,
Manufacturing. From June 1993 until January
1994, he served as Vice President of
pharmaceutical manufacturing for Lilly, and
from January 1991 until June 1993, he served
as Vice President of the vascular
intervention component of the Medical
Devices and Diagnostics Division of Lilly.
From 1988 to 1991, Mr. Eagle was President
and Chief Executive Officer of IVAC
Corporation, a Lilly subsidiary.
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PRINCIPAL OCCUPATION DIRECTOR
NAME DURING THE PAST FIVE YEARS AGE SINCE
- ----------------------------------- -------------------------------------------- --- --------
CONTINUING CLASS III DIRECTORS:
Lawrence G. Mohr, Jr............... Lawrence G. Mohr, Jr. has been a Director of 52 1991
the Company since May 1991. Mr. Mohr has
been a general partner of Mohr, Davidow
Ventures, a venture capital investment firm,
since its formation in 1983. Prior to that
Mr. Mohr was a venture capitalist with
Hambrecht & Quist Venture Partners. Mr. Mohr
is also a member of the Board of Directors
of Fusion Medical Technology, Inc.
William N. Starling................ William N. Starling has been a Director of 44 1991
the Company since April 1991. Mr. Starling
became President and Chief Executive Officer
of the Company in January 1992 and Chairman
of the Board of Directors in January 1996.
Prior to joining the Company, Mr. Starling
co-founded and was a director and a vice
president of Ventritex, Inc., a medical
device company, from 1985 to 1991. From 1982
to 1985, Mr. Starling was the Director of
Marketing of Advanced Cardiovascular
Systems, a division of Guidant, Inc. Mr.
Starling serves as director of several
privately-held companies and serves on the
Board of Visitors of the University of North
Carolina at Chapel Hill.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings during
fiscal 1997. Except for Dr. Fogarty, no director attended fewer than 75% of the
meetings of the Board of Directors. The Board of Directors has an Audit
Committee and a Compensation Committee. The Board of Directors has no nominating
committee or any committee performing such functions.
The Audit Committee, which consisted of directors Campbell-White, Ilvento
and Mohr during fiscal 1997, is responsible for overseeing actions taken by the
Company's independent auditors and reviewing the Company's internal financial
controls. The Audit Committee met twice during fiscal 1997 and except for Ms.
Campbell-White, no director attended fewer than 75% of the meetings of the Audit
Committee.
The Compensation Committee, which consisted of directors Eagle, Fogarty and
Mohr during fiscal 1997, is responsible for determining salaries, incentives and
other forms of compensation for directors, officers and other employees of the
Company and administering various incentive compensation and benefit plans. Mr.
Eagle replaced Ms. Campbell-White on the Compensation Committee in July 1996.
The Compensation Committee met seven times during fiscal 1997 and except for Mr.
Eagle and Dr. Fogarty, no director attended fewer than 75% of the meetings of
the Compensation Committee.
COMPENSATION OF DIRECTORS
Members of the Company's Board of Directors do not receive compensation for
their services as directors. The Company's 1996 Director Option Plan (the
"Director Plan") provides that options may be granted to non-employee directors
of the Company pursuant to an automatic nondiscretionary grant mechanism. The
exercise price of the options is 100% of the fair market value of the Common
Stock on the grant date. The Director Plan provides for an initial grant of
options to purchase 13,000 shares of Common Stock to each new non-employee
director of the Company who is neither affiliated with nor nominated by a
stockholder that owns one percent or more of the outstanding capital stock of
the Company on the date he or she first becomes a director. In addition, each
non-employee director is automatically granted an option to purchase 700 shares
of Common Stock at the next meeting of the Board of Directors following each
Annual Meeting of Stockholders, if on such date, such director has served on the
Board of Directors for at least the preceding six months. The term of such
options is ten years, provided that such options shall terminate three
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months following the termination of the optionee's status as a director (or
twelve months if the termination is due to death or disability). The 13,000
share options granted to a director vest at a rate of 25% on the first
anniversary of the date of grant and at a rate of 1/48th of the shares per month
thereafter. The 700 share options granted to a director vest at a rate of 1/8th
of the shares subject to the option six months after the date of grant and at a
rate of 1/48 of the shares per month thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consisted of directors Eagle, Fogarty and Mohr
during fiscal 1997. Mr. Eagle replaced Ms. Campbell-White in July 1996. There
were no reportable transactions with any members of the Compensation Committee
in fiscal 1997.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
NOMINEES SET FORTH HEREIN.
PROPOSAL TWO
AMENDMENT OF 1996 EMPLOYEE STOCK PURCHASE PLAN
At the Annual Meeting, the stockholders are being asked to approve an
amendment of the Company's 1996 Employee Stock Purchase Plan (the "Purchase
Plan") to increase the number of shares reserved for issuance thereunder by
70,000 shares. The adoption of the Purchase Plan was approved by the Board of
Directors in March 1996 and by the stockholders in April 1996. Exclusive of the
70,000 shares for which approval is sought hereunder, a total of 53,000 shares
of Common Stock have been reserved for issuance under the Purchase Plan. As of
the Record Date, a total of 37,566 shares had been issued to employees at an
average purchase price of $6.75 per share pursuant to two offerings under the
Purchase Plan and, exclusive of the 70,000 shares for which approval is sought
hereunder, 15,434 shares remain available for future issuance.
The fair market value of the Common Stock of the Company on the first day
of the most recent offering period was $6.25 per share. See "Purchase Price."
The essential terms of the Purchase Plan, as amended, are summarized as
follows:
PURPOSE
The purpose of the Purchase Plan is to provide employees of the Company and
of any subsidiary which is designated by the Board of Directors to participate
in the Purchase Plan with an opportunity to purchase Common Stock of the Company
through accumulated payroll deductions. The Purchase Plan is intended to qualify
under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
ADMINISTRATION
The Purchase Plan provides for administration by the Board of Directors of
the Company or a committee appointed by the Board. The Purchase Plan is
currently administered by the Board. All questions, of interpretation or
application of the Purchase Plan are determined by the Board of Directors or its
appointed committee, and its decisions are final and binding upon all
participants. No charge for administrative or other costs may be made against
the payroll deductions of a participant in the Purchase Plan. Members of the
Board receive no additional compensation for their services in connection with
the administration of the Purchase Plan.
OFFERING PERIODS
The Purchase Plan has offering periods of approximately twenty-four months,
each divided into four six-month purchase periods. The offering periods commence
on or after May 1 and November 1 of each year. The Board of Directors has the
power to alter the duration of the offering periods without stockholder
approval.
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ELIGIBILITY
Any person who (i) is a regular employee scheduled to work at least twenty
hours per week and at least five months per calendar year and (ii) was employed
by the Company on the first day of the offering period (or by any subsidiary
designated from time to time by the Board of Directors) is eligible to
participate in the Purchase Plan.
Eligible employees become participants in the Purchase Plan by delivering
to the Company's payroll office a subscription agreement authorizing payroll
deductions. An employee who becomes eligible to participate in the Purchase Plan
after the commencement of an offering may not participate in the Purchase Plan
until the commencement of the next offering period.
PURCHASE PRICE
The price at which shares are sold to participating employees is equal to
eighty-five percent (85%) of the lower of the fair market value per share of the
Common Stock on (i) the first day of the offering period or (ii) the last day of
the purchase period. For purposes of the Purchase Plan, fair market value is
defined as the closing price per share of the Company's Common Stock on the last
market trading day prior to (i) or (ii) above as reported on The Nasdaq National
Market. The closing sale price per share of the Company's Common Stock on The
Nasdaq National Market on the Record Date was $8.75.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the duration of the offering period. The deductions may not exceed 15% of a
participant's compensation. A participant may discontinue his or her
participation in the Purchase Plan and may decrease the rate of his or her
payroll deductions at any time during the offering period. Payroll deductions
commence on the first payday following the beginning of the offering period and
will continue at the same rate until the end of the offering period until
terminated or changed as provided in the Purchase Plan.
PURCHASE OF STOCK; EXERCISE OF OPTION
By executing a subscription agreement to participate in the Purchase Plan,
an employee is granted an option to purchase shares of Common Stock. The maximum
number of shares which a participant has an option to purchase in a particular
purchase period is that number arrived at by dividing the amount of his or her
compensation which he or she has elected to have withheld for the purchase
period by the lower of (i) 85% of the fair market value of a share of Common
Stock on the first day of the offering period, or (ii) 85% of the fair market
value of a share of Common Stock on the last day of the purchase period as long
as the total number of shares issued to a participant for any purchase period
does not exceed a number determined by dividing $12,500 by the market value of a
share of Common Stock at the beginning of the offering period. Unless the
employee's participation is discontinued, the option for the purchase of shares
will be exercised automatically at the end of the purchase period at the
applicable price.
Notwithstanding the forgoing, no employee is permitted to subscribe for
shares under the Purchase Plan (a) if, immediately after the grant of the
option, the employee would own, and/or hold outstanding options to purchase, 5%
or more of the combined voting power or value of all classes of the capital
stock of the Company or (b) which permits his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries to
accrue at a rate which 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) for each calendar year in which such option is outstanding at any
time. Furthermore, if the number of shares which would otherwise be placed under
option at the beginning of an offering period exceeds the number of shares then
available under the Purchase Plan, a pro rata allocation of the shares remaining
will be made in as equitable a manner as is practicable.
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WITHDRAWAL
A participant's interest in a given offering may be terminated in whole,
but not in part, by signing and delivering to the Company a notice of withdrawal
from the Purchase Plan. Such withdrawal may be elected at any time prior to the
end of the applicable offering period. Any withdrawal by the employee during a
given offering automatically terminates the employee's interest in that
offering. If a participant withdraws from an offering period, payroll deductions
will not resume at the beginning of the next offering period (as they otherwise
would) unless the participant delivers a new subscription agreement to the
Company.
TERMINATION OF EMPLOYMENT
Termination of a participant's employment for any reason, including
retirement or death, cancels his or her participation in the Purchase Plan
immediately. In such event, the payroll deductions credited to the participant's
account will be returned without interest to such participant, or, in the case
of death, to the person or persons entitled thereto as specified by the employee
in the subscription agreement.
CAPITAL CHANGES
In the event of any changes in the capitalization of the Company, such as
stock splits or stock dividends, resulting in an increase or decrease in the
number of shares of Common Stock, effected without receipt of consideration by
the Company, appropriate adjustments will be made by the Company in the number
of shares subject to purchase and in the purchase price per share.
DISSOLUTION, LIQUIDATION, MERGER OR ASSET SALE
In the event of the proposed dissolution or liquidation of the Company, the
current offering periods will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board of Directors. In
the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
purchase period then in progress will be shortened by setting a new exercise
date and the offering period then in progress will end on such new exercise
date, which date will be before the date of the Company's proposed sale or
merger.
NONASSIGNABILITY
No rights or accumulated payroll deductions of an employee under the
Purchase Plan may be pledged, assigned, transferred or otherwise disposed of in
any way by the participant and any such attempt may be treated by the Company as
an election to withdraw funds from the current offering period.
AMENDMENT AND TERMINATION OF THE PURCHASE PLAN
The Board of Directors may at any time and for any reason amend or
terminate the Purchase Plan, except that such termination will not affect
options previously granted nor may any amendment make any changes in an option
granted prior thereto which adversely affects the rights of any participant. No
amendment may be made to the Purchase Plan without prior approval of the
stockholders of the Company if such amendment would increase the number of
shares reserved under the Purchase Plan, materially modify the eligibility
requirements, or materially increase the benefits which may accrue to
participants under the Purchase Plan. In any event, the Purchase Plan will
terminate in March 2006.
USE OF FUNDS
All payroll deductions received or held by the Company under the Purchase
Plan may be used by the Company for any corporate purpose. No interest will
accrue on the payroll deductions of a participant in the Purchase Plan.
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AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD
To the extent permitted by federal securities law, if the fair market value
of a share of Common Stock of the Company on the last day of a purchase period
is lower than the fair market value of a share of Common Stock of the Company on
the first day of an offering period, then all participants in such offering
period will immediately be automatically withdrawn after the exercise of their
option and automatically re-enrolled in the next offering period.
CERTAIN UNITED STATES FEDERAL INCOME TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Section 423 of the
Code. Under these provisions, no income will be taxable to a participant until
the shares purchased under the Purchase Plan are sold or otherwise disposed of.
Upon sale or other disposition of the shares, the participant will generally be
subject to tax and the amount of the tax will depend upon the holding period. If
the shares are sold or otherwise disposed of more than two years from the first
day of the offering period and more than one year from the date the shares are
purchased, the participant will recognize ordinary income measured as the lesser
of (a) the excess of the fair market value of the shares at the time of such
sale or disposition over the purchase price, or (b) an amount equal to 15% of
the fair market value of the shares as of the first day of the offering period.
Any additional gain will be treated as long-term capital gain. If the shares are
sold or otherwise disposed of before the expiration of these holding periods,
the participant will recognize ordinary income generally measured as the excess
of the fair market value of the shares on the date the shares are purchased over
the purchase price. Any additional gain or loss of such sale or disposition will
be long-term or short-term capital gain or loss, depending on the holding
period. Generally, the Company is entitled to a deduction for ordinary income
recognized by participants upon a sale or disposition of shares prior to the
expiration of the holding period(s) described above.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the shares purchased under
the Purchase Plan. Reference should be made to the applicable provisions of the
Code. In addition, the summary does not discuss the tax consequences of a
participant's death or the income tax laws of any state or foreign country in
which the participant may reside.
PARTICIPATION IN THE PURCHASE PLAN
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her determination as to
the level of payroll deductions. Accordingly, future purchases under the
Purchase Plan are not determinable. Non-employee directors are not eligible to
participate in the Purchase Plan.
VOTE REQUIRED
The affirmative vote of a majority of the shares of the Company's Common
Stock present and voting at the Annual Meeting will be required by law to
approve the amendment of the Purchase Plan.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
APPROVAL OF THE AMENDMENT OF THE PURCHASE PLAN.
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The following table sets forth certain information regarding shares
purchased during the fiscal year ended June 30, 1997 by each of the executive
officers named in the Summary Compensation Table who participated in the
Purchase Plan, all current executive officers as a group, all current
non-employee directors as a group and all other employees who participated in
the Purchase Plan as a group:
NUMBER OF DOLLAR
SHARES VALUE
NAME OF INDIVIDUAL OR IDENTITY OF GROUP AND POSITION PURCHASED ($)(1)
- ---------------------------------------------------------------------- ------------ -------
William N. Starling, President, Chief Executive Officer and Chairman
of the Board........................................................ 2,242 2,890
Debra S. Echt, M.D., Vice President and Chief Medical Officer......... 180 175
David W. Gryska, Vice President Finance and Chief Financial Officer... 404 476
Earle L. Canty, Vice President, Regulatory Affairs and Quality
Assurance........................................................... -- --
Mark L. Pomeranz, Executive Vice President, Research and
Development......................................................... -- --
All current executive officers as a group (7 Persons)................. 5,423 6,577
All current non-employee directors.................................... * *
All other employees as a group........................................ 32,143 38,027
- ---------------
* Not eligible to participate in the Purchase Plan.
(1) Market value of shares on date of purchase minus the purchase price under
the Purchase Plan.
PROPOSAL THREE
AMENDMENT OF 1996 DIRECTOR OPTION PLAN
At the Annual Meeting, the stockholders are being asked to approve an
amendment of the Company's 1996 Director Option Plan (the "Director Plan") to
increase the number of shares of Common Stock reserved for issuance thereunder
by 20,000 shares. The adoption of the Director Plan was approved by the Board of
Directors in March 1996 and subsequently by the stockholders in April 1996. As
of the Record Date, options to purchase an aggregate of 2,800 shares of the
Company's Common Stock were outstanding, with a weighted average exercise price
of $12.50 per share, and 17,200 shares were available for future grant,
exclusive of the 20,000 shares for which approval is sought hereunder. No shares
have been purchased pursuant to exercise of stock options under the Director
Plan.
The Director Plan provides for the grant of nonqualified stock options to
non-employee directors of the Company ("Outside Directors") pursuant to an
automatic, non-discretionary grant mechanism. The Company believes that the
grant of options to the Outside Directors has enabled the Company to attract and
retain directors with the talent that it continues to require.
The essential terms of the Director Plan are summarized as follows:
PURPOSE
The purposes of the Director Plan are to attract and retain the best
available Outside Directors, to provide additional incentive to the Outside
Directors to serve as directors and to encourage their continued service on the
Board of Directors.
AUTOMATIC, NON-DISCRETIONARY GRANTS AND ELIGIBILITY
The Director Plan provides that each future Outside Director, who does not
represent stockholders holding 1% or more of the Company's outstanding capital
stock, is automatically granted an option to purchase up to 13,000 shares of
Common Stock of the Company on the date upon which such person becomes an
Outside Director (the "First Option"). Each Outside Director regardless of
whether he or she represents stockholders holding 1% or more of the Company's
outstanding capital stock is automatically granted an option purchase up to 700
shares of Common Stock (the "Subsequent Option") each year on the date of the
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Company's annual meeting of stockholders (if, on such date, he or she has served
as a director for at least the preceding six months), so long as he or she
remains an Outside Director.
TERMS OF OPTIONS
Each option is evidenced by a stock option agreement between the Company
and the optionee to whom such option is granted and is subject to the following
additional terms and conditions:
(1) EXERCISE OF THE OPTION: The options granted under the Director
Plan may be exercised after the shares subject to the option become vested.
The Director Plan provides for vesting of 25% of the shares subject to the
First Option one year after the date of grant, with an additional one
forty-eighth ( 1/48) of such shares vesting at the end of each month
thereafter. The shares subject to the Subsequent Option vest as to
one-eighth ( 1/8) of such shares six months after the date of grant, with
an additional one forty-eighth ( 1/48) of such shares vesting at the end of
each month thereafter. An option is exercised by giving written notice of
exercise to the Company, specifying the number of shares of Common Stock to
be purchased and tendering payment to the Company of the purchase price.
Payment for shares issued upon exercise of an option may consist of cash,
check, promissory note, delivery of already-owned shares of the Company's
Common Stock (subject to certain conditions), or any combination of the
foregoing methods of payment. Payment may also be made by a cashless
exercise procedure under which the optionee provides irrevocable
instructions to a brokerage firm to sell the purchased shares and to remit
to the Company, out of the sale proceeds, an amount equal to the exercise
price plus all applicable withholding taxes or such other consideration as
determined by the Administrator and as permitted by the Delaware General
Corporation Law.
Options may be exercised at any time on or following the date the
options are first exercisable. An Option may not be exercised for a
fraction of a share.
(2) OPTION PRICE: The option price of nonqualified stock options
granted under the Director Plan is equal to 100% of the fair market value
of the Company's Common Stock on the date the option is granted. For
purposes of the Director Plan, fair market value is defined as the closing
price per share of the Company's Common Stock on the last market trading
day prior to the date of grant as reported on The Nasdaq National Market.
(3) TERMINATION OF EMPLOYMENT: The Director Plan provides that if the
optionee's status as an Outside Director of the Company is terminated for
any reason, other than death or disability, options may be exercised within
three months after such termination and may be exercised only to the extent
the options were exercisable on the date of termination.
(4) DEATH: If an optionee should die while he or she is an Outside
Director of the Company, options may be exercised at any time within twelve
months after the date of death but only to the extent that such options
were exercisable on the date of death and in no event later than the
expiration of the term of such option.
(5) DISABILITY: If an optionee's status as an Outside Director is
terminated due to a disability, such options may be exercised at any time
within twelve months from the date of such termination, but only to the
extent that such options were exercisable on the date of termination of the
individual's status as an Outside Director and in no event later than the
expiration of the term of such option.
(6) TERMINATION OF OPTIONS: Options granted under the Director Plan
expire ten years from the date of grant. No option may be exercised by any
person after such expiration.
(7) NONTRANSFERABILITY OF OPTIONS: An option is nontransferable by the
optionee, other than by will or the laws of descent and distribution or a
qualified domestic relations order, and is exercisable only by the optionee
during his or her lifetime or, in the event of death, by a person who
acquires the right to exercise the option by bequest or inheritance or by
reason of the death of the optionee.
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ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change, such as a stock split or dividend, is made in the
Company's capitalization which results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, an appropriate adjustment will be made in the option price and in the
number of shares subject to each option. In the event of the proposed
dissolution or liquidation of the Company, all outstanding options, which have
not been previously exercised, automatically terminate. In the event of a merger
of the Company with or into another corporation or sale of substantially all of
the assets of the Company, all outstanding options will be assumed or an
equivalent option substituted by the successor corporation. If an option is
assumed or substituted by the successor corporation, such option will continue
to be exercisable pursuant to its own terms for so long as the optionee serves
as a director of the Company or of the successor corporation. Following such
assumption or substitution, if the optionee's status as a director of the
Company or of the successor corporation is terminated other than upon a
voluntary resignation by the optionee, his or her option will immediately become
fully exercisable. If the options are not assumed or substituted by the
successor corporation, such options will immediately become fully exercisable
but terminate 30 days from the date notice is given to the optionee of the fully
vested status of his or her option.
AMENDMENT AND TERMINATION
With the exception of the administration of the Director Plan, including
the number, frequency and price of grants and the eligibility and vesting of
options, the Board of Directors may amend the Directors Plan at any time or from
time to time or may terminate it without approval of the stockholders, provided,
however, that stockholder approval is required for any amendment which increases
the number of shares which may be issued under the Director Plan or for any
amendment that would be required to enable the Director Plan to comply with Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). However, no action by the Board of Directors or stockholders
may alter or impair any option previously granted under the Director Plan
without the consent of the optionee. In any event, the Director Plan will
terminate in March 2006.
TAX INFORMATION
Options granted under the Director Plan are nonqualified options.
An optionee will not recognize any taxable income at the time he or she is
granted a nonqualified option. However, upon its exercise, the optionee will
recognize ordinary income generally measured as the excess of the then fair
market value of the shares purchased over the purchase price. Any taxable income
recognized in connection with an option exercise by an optionee who is also an
employee of the Company will be subject to tax withholding by the Company. Upon
resale of such shares by the optionee, any difference between the sales price
and the optionee's purchase price, to the extent not recognized as taxable
income as described above, will be treated as long-term or short-term capital
gain or loss, depending on the holding period. Generally, the Company will be
entitled to a tax deduction in the same amount as the ordinary income recognized
by the optionee with respect to shares acquired upon exercise of a nonqualified
option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Director Plan, does not purport to be complete, and does not
discuss the tax consequences of the optionee's death or the income tax laws of
any municipality, state or foreign country in which an optionee may reside.
PARTICIPATION IN THE PLAN
The grant of options under the Director Plan to Outside Directors is
automatic and non-discretionary. Information regarding options granted to
Outside Directors pursuant to the 1996 Director Option Plan during fiscal 1997
is set forth under the heading "Executive Compensation and Other Matters and
Compensation of Directors." During fiscal 1997, all current Outside Directors as
a group received options to purchase 2,800 shares pursuant to the Director Plan.
No other employee or director of the Company received any shares pursuant to the
Director Plan.
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VOTE REQUIRED
The affirmative vote of a majority of the shares of the Company's Common
Stock present and voting at the Annual Meeting will be required to approve the
amendment of the Director Plan.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
APPROVAL OF THE AMENDMENT OF THE DIRECTOR PLAN.
PROPOSAL FOUR
AMENDMENT OF 1991 STOCK PLAN
At the Annual Meeting, the stockholders are being asked to approve an
amendment of the Company's 1991 Stock Plan (the "Stock Plan") to increase the
number of shares of Common Stock reserved for issuance thereunder by 380,000
shares and to approve the material terms of the Stock Plan, including, but not
limited to, share limitations for purposes of Section 162(m) of the Code. The
adoption of the Stock Plan was approved by the Board of Directors in June 1991
and subsequently by the stockholders in January 1992. As of the Record Date,
options to purchase an aggregate of 1,045,745 shares of the Company's Common
Stock were outstanding, with a weighted average exercise price of $3.66 per
share, and 80,627 shares were available for future grant, exclusive of the
380,000 shares for which approval is sought hereunder. In addition, 760,658
shares have been purchased pursuant to exercise of stock options under the Stock
Plan.
The Stock Plan authorizes the Board of Directors to grant stock options to
eligible employees and consultants of the Company. The Stock Plan is structured
to allow the Board of Directors broad discretion in creating equity incentives
in order to assist the Company in attracting, retaining and motivating the best
available personnel for the successful conduct of the Company's business. The
Company has had a longstanding practice of linking key employee compensation to
corporate performance because it believes that this increases employee
motivation to improve stockholder value. The Company has, therefore,
consistently included equity incentives as a significant component of
compensation for a broad range of the Company's employees. This practice has
enabled the Company to attract and retain the talent that it continues to
require.
The Board of Directors believes that the remaining shares available for
grant under the Stock Plan are insufficient to accomplish the purposes of the
Stock Plan described above. The Company anticipates there will be a need to hire
additional technical or management employees during fiscal 1998 and it will be
necessary to offer equity incentives to attract and motivate these individuals,
particularly in the extremely competitive job market in Silicon Valley. In
addition, in order to retain the services of valuable employees as the Company
matures and its employee base grows larger, it will be necessary to grant
additional options to current employees as older options become fully vested.
The essential terms of the Stock Plan are summarized as follows:
PURPOSE
The purposes of the Stock Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees and consultants of the Company and to promote the success
of the Company's business.
ADMINISTRATION
The Stock Plan provides for administration by the Board of Directors of the
Company or by a committee of the Board. The Stock Plan is currently being
administered by the Compensation Committee of the Board of Directors. The Board
or the committee appointed to administer the Stock Plan are referred to in this
description as the "Administrator." The Administrator determines the terms of
options granted, including, but not limited to, the exercise price, number of
shares subject to the option and the exercisability thereof. All questions of
interpretation are determined by the Administrator and its decisions are final
and binding upon all participants. Members of the Board receive no additional
compensation for their services in connection with the administration of the
Stock Plan.
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ELIGIBILITY
The Stock Plan provides that either incentive or nonqualified stock options
may be granted to employees (including officers and employee directors) of the
Company or any of its designated subsidiaries. In addition, the Stock Plan
provides that nonqualified stock options may be granted to consultants of the
Company or any of its designated subsidiaries. The Administrator elects the
optionees and determines the number of shares to be subject to each option. In
making such determination, there are taken into account the duties and
responsibilities of the optionee, the value of the optionee's services, the
optionee's present and potential contribution to the success of the Company and
other relevant factors. The Stock Plan provides a limit of $100,000 on the
aggregate fair market value of shares subject to all incentive options which
become exercisable for the first time in any one calendar year.
TERMS OF OPTIONS
Each option is evidenced by a stock option agreement between the Company
and the optionee to whom such option is granted and is subject to the following
additional terms and conditions:
(1) EXERCISE OF THE OPTION: The Administrator determines when options
granted under the Stock Plan may be exercised. An option is exercised by
giving written notice of exercise to the Company, specifying the number of
shares of Common Stock to be purchased and tendering payment to the Company
of the purchase price. Payment for shares issued upon exercise of an option
may consist of cash, check, promissory note, delivery of already-owned
shares of the Company's Common Stock (subject to certain conditions), a
reduction in the amount of any liability the Company may have to the
optionee or any combination of the foregoing methods. Payment may also be
made by a cashless exercise procedure under which the optionee provides
irrevocable instructions to a brokerage firm to sell the purchased shares
and to remit to the Company, out of the sale proceeds, an amount equal to
the exercise price plus all applicable withholding taxes or such other
consideration as determined by the Administrator and as permitted by the
Delaware General Corporation Law.
Options may be exercised at any time on or following the date the
options are first exercisable. An Option may not be exercised for a
fraction of a share.
(2) OPTION PRICE: The option price of all incentive stock options and
nonqualified stock options under the Stock Plan is determined by the
Administrator, but, in the case of incentive stock options, in no event
will it be less than the fair market value of the Company's Common Stock on
the date the option is granted. For purposes of the Stock Plan, fair market
value is defined as the closing price per share of the Company's Common
Stock on the last market trading day prior to the date of grant as reported
on The Nasdaq National Market. In the case of an option granted to an
optionee who at the time of grant owns stock representing more than 10% of
the voting power of all classes of stock of the Company, the option price
must be not less than 110% of the fair market value on the date of grant.
(3) TERMINATION OF EMPLOYMENT: The Stock Plan provides that if the
optionee's employment by the Company is terminated for any reason, other
than death or disability, options may be exercised within three months (or
such other period of time not exceeding three months as determined by the
Administrator) after such termination and may be exercised only to the
extent the options were exercisable on the date of termination.
(4) DEATH: If an optionee should die while an employee or a consultant
of the Company, options may be exercised at any time within twelve months
after the date of death but only to the extent that the options were
exercisable on the date of death and in no event later than the expiration
of the term of such option.
(5) DISABILITY: If an optionee's employment is terminated due to a
disability, options may be exercised at any time within twelve months from
the date of such termination, but only to the extent that the options were
exercisable on the date of termination of employment and in no event later
than the expiration of the term of such option.
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(6) TERMINATION OF OPTIONS: Options granted under the Stock Plan have
a term as is determined by the Administrator, with incentive stock options
expiring no later than ten years from the date of grant. However, incentive
stock options granted to an optionee who, immediately before the grant of
such option, owns more than 10% of the voting power of all classes of stock
of the Company or a parent or subsidiary corporation, may not have a term
of more than five years. No option may be exercised by any person after
such expiration.
(7) NONTRANSFERABILITY OF OPTIONS: An option is nontransferable by the
optionee, other than by will or the laws of descent and distribution or a
qualified domestic relations order, and is exercisable only by the optionee
during his or her lifetime or, in the event of death, by a person who
acquires the right to exercise the option by bequest or inheritance or by
reason of the death of the optionee.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change, such as a stock split or dividend, is made in the
Company's capitalization which results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, an appropriate adjustment will be made in the option price and in the
number of shares subject to each option. In the event of the proposed
dissolution or liquidation of the Company, the Administrator may in its
discretion provide for an optionee to have the right to exercise his or her
option until ten (10) days prior to such transaction, including shares as to
which the option would not otherwise be exercisable. To the extent it has not
been previously exercised, an option will terminate immediately prior to the
consummation of such proposed action. In the event of a merger of the Company
with or into another corporation or sale of substantially all of the assets of
the Company, all outstanding options will be assumed or an equivalent option
substituted by the successor corporation. The Administrator may in its
discretion make provision for accelerating the exercisability of shares subject
to options under the Stock Plan in such event.
STOCK PURCHASE RIGHTS
The Board of Directors may also grant stock purchase rights to employees
and consultants under the Stock Plan. Such grants are made pursuant to a
restricted stock purchase agreement with the purchase price per share not being
less than 50% of the fair market value per share (as defined above) of the
Company's Common Stock. The Company is generally granted a repurchase option
exercisable on the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or disability). Such
repurchase option will lapse at a rate determined by the Board of Directors.
Once the stock purchase right has been exercised, the purchaser will have the
rights equivalent to those of a stockholder.
PERFORMANCE-BASED COMPENSATION LIMITATIONS
No employee will be granted, in any fiscal year of the Company, options to
purchase more than 200,000 shares of Common Stock, except that in connection
with an employee's initial employment, he or she may be granted options to
purchase up to an additional 100,000 shares. The foregoing limitation, which
will be adjusted proportionately in connection with any change in the Company's
capitalization, is intended to satisfy the requirements applicable to options
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code. In the event that the Administrator determines that
such limitation is not required to qualify options as performance-based
compensation, the Administrator may modify or eliminate such limitation.
AMENDMENT AND TERMINATION
The Board of Directors may amend the Stock Plan at any time or from time to
time or may terminate it without approval of the stockholders, provided,
however, that stockholder approval is required for any amendment which increases
the number of shares which may be issued under the Stock Plan or as necessary to
remain in compliance with Rule 16b-3 of the Exchange Act or Section 422 of the
Code. However, no action by the Board of Directors or stockholders may alter or
impair any option previously granted under the Stock Plan without the consent of
the optionee. In any event, the Stock Plan will terminate in June 2001.
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TAX INFORMATION
Options granted under the Stock Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or nonqualified options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares at the date of the option exercise or (ii)
the sale price of the shares. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% stockholder of the Company. Generally, the Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain or loss recognized on such a premature disposition of the
shares in excess of the amount treated as ordinary income will be characterized
as long-term or short-term capital gain or loss, depending on the holding
period.
All other options which do not qualify as incentive stock options are
referred to as nonqualified options. An optionee will not recognize any taxable
income at the time he or she is granted a nonqualified option. However, upon its
exercise, the optionee will recognize ordinary income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the optionee's purchase price, to the
extent not recognized as taxable income as described above, will be treated as
long-term or short-term capital gain or loss, depending on the holding period.
Generally, the Company will be entitled to a tax deduction in the same
amount as the ordinary income recognized by the optionee with respect to shares
acquired upon exercise of a nonqualified option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Stock Plan, does not purport to be complete, and does not
discuss the tax consequences of the optionee's death or the income tax laws of
any municipality, state or foreign country in which an optionee may reside.
PARTICIPATION IN THE STOCK PLAN
The grant of options under the Stock Plan to executive officers, including
the officers named in the Summary Compensation Table below, is subject to the
discretion of the Administrator. As of the date of this proxy statement, there
has been no determination by the Administrator with respect to future awards
under the Stock Plan. Accordingly, future awards are not determinable. The table
of option grants under "Executive Compensation and Other Matters -- Option
Grants in Last Fiscal Year" provides information with respect to the grant of
options to the Named Executive Officers during fiscal 1997. Information
regarding options granted to Outside Directors pursuant to the 1996 Director
Option Plan during fiscal 1997 is set forth under the heading "Executive
Compensation and Other Matters -- Compensation of Directors." During fiscal
1997, all current executive officers as a group and all other individuals as a
group received options to purchase (net of options subsequently canceled and
repriced) 180,067 shares and 277,612 shares, respectively, pursuant to the Stock
Plan. As of the Record Date, approximately 114 employees were eligible to
participate in the Stock Plan.
VOTE REQUIRED
The affirmative vote of a majority of the shares of the Company's Common
Stock present and voting at the Annual Meeting will be required to approve the
amendment of the Stock Plan.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
APPROVAL OF THE AMENDMENT OF THE STOCK PLAN.
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PROPOSAL FIVE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending June 30, 1998. Although action by stockholders is not
required by law, the Board of Directors has determined that it is desirable to
request approval of this selection by the stockholders. Notwithstanding the
selection, the Board of Directors, in its discretion, may direct the appointment
of new independent auditors at any time during the year, if the Board of
Directors feels that such a change would be in the best interest of the Company
and its stockholders. In the event of a negative vote on ratification, the Board
of Directors will reconsider its selection.
Ernst & Young LLP has audited the Company's financial statements annually
since 1991. Representatives of Ernst & Young LLP are expected to be present at
the meeting with the opportunity to make a statement if they desire to do so and
are expected to be available to respond to appropriate questions.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
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EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth certain information
regarding the compensation of the Chief Executive Officer of the Company and the
four next most highly compensated executive officers in fiscal 1997 (the "Named
Executive Officers") of the Company for services rendered in all capacities to
the Company for the fiscal years indicated.
LONG-TERM
COMPENSATION
AWARDS
------------
NUMBER
OF
ANNUAL COMPENSATION SECURITIES
FISCAL ---------------------- OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION OPTIONS(#)(1)
- ------------------------------------ ------ --------- -------- ------------ ------------
William N. Starling................. 1997 $ 213,590 $ -- $ -- --
President, Chief Executive 1996 175,000 -- -- --
Officer and Director 1995 158,269 -- -- 116,667
Debra S. Echt, M.D.................. 1997 165,257 -- 79,203(2) 100,000
Vice President and Chief 1996 -- -- -- --
Medical Officer 1995 -- -- -- --
David W. Gryska..................... 1997 155,000 -- -- --
Vice President, Finance and 1996 133,750 -- -- 16,667
Chief Financial Officer 1995 129,231 -- -- 21,667
Earle L. Canty...................... 1997 152,500 -- 57,392(3) 7,000
Vice President, Regulatory 1996 37,500 -- -- 66,667
Affairs and Quality Assurance 1995 -- -- -- --
Mark L. Pomeranz.................... 1997 151,865 -- 17,105(4) 55,000(5)
Executive Vice President, 1996 120,812 10,600 -- 67
Research and Development 1995 98,628 -- -- 35,000
- ---------------
(1) These shares are subject to exercise under stock options granted under the
Company's stock option plans.
(2) Consists of moving and relocation expenses and temporary housing allowance.
(3) Represents payment for certain federal and state income tax obligations in
connection with stock option exercise.
(4) Represents forgiveness of loan and related accrued interest, and payment for
certain federal and state income tax obligations in connection therewith.
(5) Includes an option for 33,000 shares of Common Stock repriced during fiscal
1997 at an exercise price of $6.63 per share. See "-- Option Repricing
Report" below.
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STOCK OPTIONS
The following table provides information relating to stock options awarded
to each of the Named Executive Officers during fiscal 1997. All such options
were awarded under the Company's 1991 Stock Plan.
OPTIONS GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
------------------------------------------------------- ASSUMED RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTIONS TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME GRANTED(1) FISCAL 1997 SHARE(2)(3) DATE(4) 5%($) 10%($)
- ------------------------- ----------- ------------- ----------- ---------- ---------- ----------
William N. Starling...... -- -- -- -- $ -- $ --
Debra S. Echt, M.D....... 100,000 16.3% 6.25 9/20/2006 1,329,674 2,487,491
David W. Gryska.......... -- -- -- -- -- --
Earle L. Canty........... 7,000 1.1% 7.75 6/12/2007 34,118 86,461
Mark L. Pomeranz......... 33,000 5.4% 8.50(5) 7/03/2006 633,310 1,174,590
22,000 3.6% 6.63 4/16/2007 91,661 232,288
- ---------------
(1) Potential realizable value is based on the assumption that the Common Stock
of the Company appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the ten year option term.
These numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's estimate
of future stock price growth.
(2) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant, except for the 100,000
share grant for Dr. Echt and the 33,000 share grant for Mr. Pomeranz which
were granted at an exercise price equal to 50% of the fair market value of
the Company's Common Stock on the date of grant.
(3) Exercise price may be paid in cash, check, promissory note, by delivery of
already-owned shares of the Company's Common Stock subject to certain
conditions, delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to deliver promptly to the Company
amount of sale or loan proceeds required to pay the exercise price, a
reduction in the amount of any Company liability to an optionee, or any
combination of the foregoing methods of payment or such other consideration
or method of payment to the extent permitted under applicable law.
(4) Options become exercisable as to 25% of the option shares on the first
anniversary of the date of grant and as to 1/48th of the option shares each
month thereafter, with full vesting occurring on the fourth anniversary of
the date of grant.
(5) Option repriced during fiscal 1997 at an exercise price of $6.63 per share.
See "-- Option Repricing Report" below.
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AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding the exercise
of stock options by the Named Executive Officers during fiscal 1997 and the
value of stock options held as of June 30, 1997 by the Named Executive Officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS AT JUNE 30, 1997(#) OPTIONS AT JUNE 30, 1997(2)
ACQUIRED ON REALIZED ----------------------------- -----------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- --------- ----------- ------------- ----------- -------------
William N. Starling...... -- $ -- 196,453 51,347 $ 1,610,687 $ 396,752
Debra S. Echt, M.D....... -- -- -- 100,000 -- 275,000
David W. Gryska.......... 20,000 211,069 49,889 21,112 403,066 162,953
Earle L. Canty........... -- -- 292 6,708 365 8,385
Mark L. Pomeranz......... -- -- 38,411 56,994 244,769 196,328
- ---------------
(1) Fair market value of the Company's Common Stock on the date of exercise
minus the exercise price.
(2) Fair market value of the Company's Common Stock at fiscal year-end ($9.00
based on the last reported sale price of the Company's Common Stock on June
30, 1997) minus the exercise price.
OPTION REPRICING REPORT
In September 1996 and April 1997, the Board of Directors authorized the
exchange of certain stock option grants at the then fair market values of the
Company's Common Stock. The Company and the Board of Directors took this action
to retain employees due to intense competition for experienced personnel and to
maintain momentum on key development and other projects. These exchanges were
voluntary and open to all employees, including officers of the Company, holding
options subsequent to certain dates. In September 1996, options to purchase
28,651 shares of Common Stock at prices ranging $12.75 to $15.00 per share were
exchanged for options to purchase a like number of shares at $12.00 per share.
Under the September 1996 exchange, all previous vesting of the related options
was forfeited. In April 1997, options to purchase 154,628 shares of Common Stock
at prices ranging from $8.50 to $17.00 per share were exchanged for options to
purchase a like number of shares at $6.63 per share. Vesting terms were not
modified under the April 1997 exchange, however, no vested options exchanged in
the April 1997 repricing are exercisable for a period of 180 days following the
exchange. A total of 69 employees participated in the repricing including one
Named Executive Officer and two other officers.
The following table sets forth certain information regarding the
participation of the Named Executive Officer and other officers in the Company's
repricing of options described above.
TEN-YEAR OPTION REPRICING
NUMBER OF MARKET PRICE EXERCISE LENGTH OF
SECURITIES OF STOCK AT PRICE AT NEW ORIGINAL
UNDERLYING TIME OF TIME OF EXERCISE OPTION TERM
OPTIONS REPRICING REPRICING PRICE AT TIME OF
NAME DATE REPRICED ($/SHARE) ($/SHARE) ($/SHARE) REPRICING
- ---------------------------------- -------- ---------- ------------ --------- --------- -----------
Mark L. Pomeranz.................. 4/16/97 67 $ 6.63 $ 12.38 $6.63 8.9 years
4/16/97 33,000 6.63 8.50 6.63 9.2 years
All other officers (2 persons).... 4/16/97 11,000 6.63 12.50 6.63 9.5 years
4/16/97 7,000 6.63 10.75 6.63 9.7 years
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
Ms. Echt and Messrs. Starling, Gryska, Canty and Pomeranz have entered into
employment agreements with the Company pursuant to which the Company may
terminate the employee's employment at any time
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with or without cause; provided, however, that if employment is terminated with
cause, the Company will pay the employee a severance payment in an amount equal
to one month of the employee's then-current monthly base salary and if the
employee's employment is terminated without cause, the Company will pay the
employee a severance payment of an amount equal to six months of the employee's
then-current monthly base salary. The agreements, other than Mr. Starling's
agreement, also provide that all outstanding stock options held by the employees
become immediately exercisable in the event that the employee's employment is
terminated without cause or is constructively terminated in connection with a
merger, reorganization or sale of substantially all of the assets of the Company
in which stockholders of the Company immediately prior to the transaction
possess less than fifty percent (50%) of the voting power of the surviving
entity (or its parent) immediately after the transaction.
CERTAIN TRANSACTIONS
Transactions with Directors, Executive Officers and Others
The Company entered into a Consulting Agreement dated June 1, 1995 with Mir
A. Imran, the holder of 5.0% of the Company's outstanding capital stock as of
the Record Date, pursuant to which Mr. Imran provides consulting services to the
Company for which he is paid a monthly fee of $4,167. Under the terms of the
Consulting Agreement, Mr. Imran has assigned to the Company his right, title,
and interest in and to any discoveries for the application area of cardiac
electrophysiology (excluding cardiac pacemakers, defibrillators and leads that
are used with these devices). Mr. Imran retains the rights to such discoveries
outside the area of cardiac electrophysiology. The Company also held Mr. Imran's
promissory note in the principal amount of $200,000 which was given to the
Company in connection with a loan advanced in December 1992. The promissory note
bore interest at the rate of 5.68% per annum. All principal and accrued interest
under the note became due and payable upon the effectiveness of the initial
public offering of the Company's Common Stock in June 1996 and was repaid in
August 1996.
As part of the Company's employment agreement with Earle L. Canty, Vice
President, Regulatory Affairs and Quality Assurance, the Company loaned Mr.
Canty $385,000 at an annual interest rate of 5.88%. The proceeds of the loan
were used to exercise a stock option granted to Mr. Canty in January 1996. The
loan is due upon the sale of the shares, or any portion thereof, underlying the
option and up to an amount equal to fifty percent (50%) of the proceeds from
such sale. The entire outstanding balance of the note is due and payable on the
earlier of the termination or cessation of Mr. Canty's employment, or January
2001. In December 1996, the Company loaned $197,450 to Mr. Canty at an annual
interest rate of 6.40% pursuant to the same employment agreement. The proceeds
of the loan were used to pay certain federal and state income taxes related to
the above stock option exercise. The loan is due upon the sale of the shares, or
any portion thereof, underlying the option up to an amount equal to fifty
percent (50%) of the proceeds from such sale. The outstanding balance of the
note and accrued interest is due and payable on the earlier of the termination
or cessation of the officer's employment, or December 2001.
Arrow International, Inc. Relationship
In June 1995 and December 1995, the Company sold an aggregate of 606,667
shares of its Series F Preferred Stock to Arrow International, Inc. ("Arrow") at
a price of $15.00 per share for an aggregate purchase price of approximately
$9.1 million. In the transaction Arrow also acquired warrants to purchase 7,667
shares of Series F Preferred Stock at an exercise price of $13.125, which expire
on the earlier of June 2000 or the closing date of a transaction involving a
change of control of the Company. Each share of Series F Preferred Stock was
converted automatically into one share of Common Stock of the Company upon the
closing of the initial public offering of the Company's Common Stock in June
1996. As of August 20, 1997, Arrow beneficially owned 6.4% of the Company's
outstanding Common Stock. Arrow has the same right as other preferred
stockholders to require the Company to file a registration statement under the
Securities Act of 1933, as amended, with respect to any shares of the Company's
Common Stock held by Arrow, subject to certain conditions and limitations.
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Arrow also has the exclusive right to distribute the Company's
Trio/Ensemble diagnostic catheters in all territories of the world except
southern Europe and Japan. Sales to Arrow under its distributorship accounted
for approximately $409,000 for the fiscal year ended June 30, 1997, representing
17% of the Company's net sales.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors, principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including a
majority of the independent and disinterested outside directors, and will
continue to be on terms no less favorable to the Company than could be obtained
from unaffiliated third parties.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
During the fiscal year ended June 30, 1997 the Company's executive
compensation program was approved by the Board's Compensation Committee and the
Board of Directors. The following is the report of the Compensation Committee
with respect to the compensation paid to the Company's executive officers during
fiscal 1997. Actual compensation earned during the fiscal year by the Named
Executive Officers is shown in the Summary Compensation Table above.
COMPENSATION PHILOSOPHY
The Company's philosophy in setting its compensation policies for executive
officers is to maximize stockholder value over time. The primary goal of the
Company's executive compensation program is therefore to closely align the
interests of the executive officers with those of the Company's stockholders. To
achieve this goal the Company attempts to (i) offer compensation opportunities
that attract and retain executives whose abilities are critical to the long-term
success of the Company, motivate individuals to perform at their highest level
and reward outstanding achievement, (ii) maintain a significant portion of the
executive's total compensation at risk, tied to achievement of financial,
organizational and management performance goals, and (iii) encourage executives
to manage from the perspective of owners with an equity stake in the Company.
The compensation program for the Company's executive officers consists of
the following components:
- Base Salary
- Long-Term Stock Option Incentives
Base Salary
The Compensation Committee and the Board of Directors reviewed and approved
fiscal 1997 base salaries for the Chief Executive Officer and other executive
officers at the beginning of the fiscal year. Base salaries were established by
the Compensation Committee based upon competitive compensation data, an
executive's job responsibilities, level of experience, individual performance
and contribution to the business. Executive officer salaries have been targeted
at or above the average rates paid by competitors to enable the Company to
attract, motivate, reward and retain highly skilled executives. In order to
evaluate the Company's competitive posture in the industry, the Compensation
Committee reviewed and analyzed the compensation packages, including base salary
levels, offered by other medical device companies. The competitive information
was obtained from surveys prepared by national consulting companies or industry
associations. The surveys include, but are not limited to, data from all
industries represented in Hambrecht & Quist Healthcare, Excluding Biotechnology
index, the "line of business index" used in the stock performance graph set
forth below. See "-- Performance Graph." In making base salary decisions, the
Board exercised its discretion and judgment based upon these factors. No
specific formula was applied to determine the weight of each factor.
Long-Term Stock Option Incentives
The Company provides its executive officers with long-term incentive
compensation through grants of stock options under the Company's 1991 Stock
Plan. The Compensation Committee believes that stock
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options provide the Company's executive officers with the opportunity to
purchase and maintain an equity interest in the Company and to share in the
appreciation of the value of the Company's Common Stock. The Compensation
Committee believes that stock options directly motivate an executive to maximize
long-term stockholder value. The options also utilize vesting periods that
encourage key executives to continue in the employ of the Company. All options
granted to executive officers to date have been granted at the fair market value
of the Company's Common Stock on the date of grant. The Compensation Committee
considers the grant of each option subjectively, considering factors such as the
individual performance of the executive officer and the anticipated contribution
of the executive officer to the attainment of the Company's long-term strategic
performance goals. Long-term incentives granted in prior years are also taken
into consideration.
SECTION 162(M)
The Board has considered the potential future effects of Section 162(m) of
the Internal Revenue Code on the compensation paid to the Company's executive
officers. Section 162(m) disallows a tax deduction for any publicly-held
corporation for individual compensation exceeding $1.0 million in any taxable
year for any of the executive officers named in the proxy statement, unless
compensation is performance-based. The Company has adopted a policy that, where
reasonably practicable, the Company will seek to qualify the variable
compensation paid to its executive officers for an exemption from the
deductibility limitations of Section 162(m). As a result, in April 1996, the
stockholders approved certain amendments to the Company's 1991 Stock Plan
intended to preserve the Company's ability to deduct the compensation expense
relating to stock options granted under the 1991 Stock Plan. In approving the
amount and form of compensation for the Company's executive officers, the
Compensation Committee will continue to consider all elements of the cost to the
Company of providing such compensation, including the potential impact of
Section 162(m).
Respectfully submitted by:
Michael L. Eagle
Thomas J. Fogarty, M.D.
Lawrence G. Mohr, Jr.
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative return to the stockholders of the Company's Common Stock with the
cumulative return of the Nasdaq National Market, U.S. index and of the Hambrecht
& Quist Healthcare, Excluding Biotechnology index for the period commencing June
13, 1996 (the date the Company's Common Stock commenced trading publicly) and
ending on June 30, 1997. Returns for the indices are weighted based on market
capitalization at the beginning of each fiscal year.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG CARDIAC PATHWAYS CORPORATION,
THE NASDAQ NATIONAL MARKET, U.S. INDEX AND
THE HAMBRECHT & QUIST HEALTHCARE, EXCLUDING BIOTECHNOLOGY INDEX
Hambrecht & Quist
Healthcare,
Measurement Period Cardiac Pathways NASDAQ National Excluding
(Fiscal Year Covered) Corporation Market, U.S. Biotechnology
6/13/96 100 100 100
6/30/96 76 97 97
6/30/97 47 118 122
- ---------------
* The graph assumes that $100 was invested on June 13, 1996 in the Company's
Common Stock and in the Nasdaq National Market, U.S. index and in the
Hambrecht & Quist Healthcare, Excluding Biotechnology index and that all
dividends were reinvested. No dividends have been declared or paid on the
Company's Common Stock. Stockholder returns over the indicated period should
not be considered indicative of future stockholder returns.
The information contained above under the captions "Report of the Board of
Directors on Executive Compensation" and "Performance Graph" shall not be deemed
to be "soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act or Exchange Act, except to the extent
that the Company specifically incorporates it by reference into such filing.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity securities
to file reports of ownership and changes in ownership with the Securities and
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Exchange Commission ("SEC") and the National Association of Securities Dealers,
Inc. Executive officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it, or written representations from reporting persons, the Company
believes that, during the fiscal year ended June 30, 1997, all such forms were
filed on a timely basis except for the Form 3 for Dr. Echt.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: September 5, 1997
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CARDIAC PATHWAYS CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee Stock
Purchase Plan of Cardiac Pathways Corporation.
1. Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended. The provisions of the Plan, accordingly, shall be construed so as to
extend and limit participation in a manner consistent with the requirements of
that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "Common Stock" shall mean the Common Stock of the
Company.
(d) "Company" shall mean Cardiac Pathways Corporation and
any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all W-2 compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole
discretion as eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an
Employee of the Company for tax purposes whose customary employment with the
Company is at least twenty (20) hours per week and more than five (5) months in
any calendar year. For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each
Offering Period.
(i) "Exercise Date" shall mean the last day of each
Purchase Period.
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(j) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:
(1) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable, or;
(2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) For the purposes of the Enrollment Date under
the first Offering Period under the Plan, the Fair Market Value of the Common
Stock shall be the price to public as set forth in the final prospectus
included within the Registration Statement on Form S-1 filed with the
Securities and Exchange Commission for the initial public offering of the
Common Stock.
(4) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.
(k) "Offering Periods" shall mean the periods of
approximately twenty-four (24) months during which an option granted pursuant
to the Plan may be exercised, commencing on the first Trading Day on or after
May 1 and November 1 of each year and terminating on the last Trading Day in
the periods ending twenty-four months later. The first Offering Period shall
be the period commencing with the first Trading Day on or after the date on
which the Company's registration statement on Form S-1 is declared effective by
the Securities and Exchange Commission and terminating on the last Trading Day
on or before April 30, 1998. The duration and timing of Offering Periods may
be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of
the Fair Market Value of a share of Common Stock on the Enrollment Date or on
the Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately
six-month period commencing after one Exercise Date and ending with the next
Exercise Date, except that the first Purchase Period of any Offering Period
shall commence on the Enrollment Date and end with the next Exercise Date.
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(o) "Reserves" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for
issuance under the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the
Company or a Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national
stock exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall
be employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other
person whose stock would be attributed to such Employee pursuant to Section
424(d) of the Code) would own capital stock of the Company and/or hold
outstanding options to purchase such stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of the capital stock
of the Company or of any Subsidiary, or (ii) to the extent that his or her
rights to purchase stock under all employee stock purchase plans of the Company
and its subsidiaries accrues at a rate which 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) for each calendar year in which such
option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by
consecutive, overlapping Offering Periods with a new Offering Period commencing
on the first Trading Day on or after May 1 and November 1 each year, or on such
other date as the Board shall determine, and continuing thereafter until
terminated in accordance with Section 19 hereof. The first Offering Period
shall begin on the effective date of the initial public offering of the
Company's Common Stock that is filed with the Securities and Exchange
Commission and Exchange Commission and shall end on the last Trading Day on or
before April 30, 1998. The Board shall have the power to change the duration
of Offering Periods (including the commencement dates thereof) with respect to
future offerings without stockholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be effected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's payroll
office prior to the applicable Enrollment Date.
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34
(b) Payroll deductions for a participant shall commence
on the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable,
unless sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her
subscription agreement, he or she shall elect to have payroll deductions made
on each pay day during the Offering Period in an amount not exceeding fifteen
percent (15%) of the Compensation which he or she receives on each pay day
during the Offering Period.
(b) All payroll deductions made for a participant shall
be credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her
participation in the Plan as provided in Section 10 hereof, or may increase or
decrease the rate of his or her payroll deductions during the Offering Period
by completing or filing with the Company a new subscription agreement
authorizing a change in payroll deduction rate. The Board may, in its
discretion, limit the number of participation rate changes during any Offering
Period. 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. A participant's subscription agreement shall
remain in effect for successive Offering Periods unless terminated as provided
in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof,
a participant's payroll deductions may be decreased to zero percent (0%) at
such time during any Purchase Period which is scheduled to end during the
current calendar year (the "Current Purchase Period") that the aggregate of all
payroll deductions which were previously used to purchase stock under the 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. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first
Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock.
At any time, the Company may, but shall not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding
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35
required to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of 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 applicable Purchase Price) up to a number of shares of the Company's
Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price; provided that
in no event shall an Employee be permitted to purchase during each Purchase
Period more than a number of shares determined by dividing $12,500 by the Fair
Market Value of a share of the Company's Common Stock on the Enrollment Date,
and provided further that such purchase shall be subject to the limitations set
forth in Sections 3(b) and 12 hereof. Exercise of the option shall occur as
provided in Section 8 hereof, unless the participant has withdrawn pursuant to
Section 10 hereof. The option shall expire on the last day of the Offering
Period.
8. Exercise of Option. Unless a participant withdraws from the
Plan as provided in Section 10 hereof, his or her option for the purchase of
shares shall be exercised automatically on the Exercise Date, and the maximum
number of full shares subject to option shall be purchased for such participant
at the applicable Purchase Price with the accumulated payroll deductions in his
or her account. No fractional shares shall be purchased; any payroll
deductions accumulated in a participant's account which are not sufficient to
purchase a full share shall be retained in the participant's account for the
subsequent Purchase Period or Offering Period, subject to earlier withdrawal by
the participant as provided in Section 10 hereof. Any other monies left over
in a participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date
on which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all
the payroll deductions credited to his or her account and not yet used to
exercise his or her option under the Plan at any time by giving written notice
to the Company in the form of Exhibit B to this Plan. All of the participant's
payroll deductions credited to his or her account shall be paid to such
participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period shall be automatically terminated,
and no further payroll deductions for the purchase of shares shall be made for
such Offering Period. If a participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of the succeeding Offering
Period unless the participant delivers to the Company a new subscription
agreement.
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36
(b) Upon a participant's ceasing to be an Employee (as
defined in Section 2(g) hereof), for any reason, he or she shall be deemed to
have elected to withdraw from the Plan and the payroll deductions credited to
such participant's account during the Offering Period but not yet used to
exercise the option shall be returned to such participant or, in the case of
his or her death, to the person or persons entitled thereto under Section 14
hereof, and such participant's option shall be automatically terminated. The
preceding sentence notwithstanding, a participant who receives payment in lieu
of notice of termination of employment shall be treated as continuing to be an
Employee for the participant's customary number of hours per week of employment
during the period in which the participant is subject to such payment in lieu
of notice.
(c) A participant's withdrawal from an Offering Period
shall not have any effect upon his or her eligibility to participate in any
similar plan which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering Period
from which the participant withdraws.
11. Interest. No interest shall accrue on the payroll deductions
of a participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be one
hundred twenty-three thousand (123,000) shares, subject to adjustment upon
changes in capitalization of the Company as provided in Section 18 hereof. If,
on a given Exercise Date, the number of shares with respect to which options
are to be exercised exceeds the number of shares then available under the Plan,
the Company shall make a pro rata allocation of the shares remaining available
for purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(b) The participant shall have no interest or voting
right in shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the
Plan shall be registered in the name of the participant or in the name of the
participant and his or her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by
the Board or a committee of members of the Board appointed by the Board. The
Board or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the
full extent permitted by law, be final and binding upon all parties.
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37
(b) Rule 16b-3 Limitations. Notwithstanding the
provisions of Subsection (a) of this Section 13, in the event that Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any successor provision ("Rule 16b-3") provides specific
requirements for the administrators of plans of this type, the Plan shall be
administered only by such a body and in such a manner as shall comply with the
applicable requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no
discretion concerning decisions regarding the Plan shall be afforded to any
committee or person that is not "disinterested" as that term is used in Rule
16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to receive
any cash from the participant's account under the Plan in the event of such
participant's death prior to exercise of the option. If a participant is
married and the designated beneficiary is not the spouse, spousal consent shall
be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
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18. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the Reserves, as well as the price
per share and the number of shares of Common Stock covered by each option under
the Plan which has not yet been exercised, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of shares of Common Stock effected without receipt of consideration
by the Company; provided, however, that conversion of any convertible
securities of the Company shall not be deemed to have been "effected without
receipt of consideration". Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Offering Periods shall
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, the Purchase Period then in
progress shall be shortened by setting a new Exercise Date (the "New Exercise
Date") and the Offering Period then in progress shall end on the New Exercise
Date. The New Exercise Date shall be before the date of the Company's proposed
sale or merger. The Board shall notify each participant in writing, at least
ten (10) business days prior to the New Exercise Date, that the Exercise Date
for the participant's option has been changed to the New Exercise Date and that
the participant's option shall be exercised automatically on the New Exercise
Date, unless prior to such date the participant has withdrawn from the Offering
Period as provided in Section 10 hereof.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section
18 hereof, no such termination can affect options previously granted, provided
that an Offering Period may be terminated by the Board of Directors on any
Exercise Date if the Board determines that the termination of the Plan is in
the best interests of the Company and its stockholders. Except as provided in
Section 18 hereof, no amendment may make any change in any option theretofore
granted which adversely affects the rights of any participant. To the extent
necessary to comply with Rule 16b-3 or under Section 423 of the Code (or any
successor rule or provision or any other applicable law or regulation), the
Company shall obtain stockholder approval in such a manner and to such a degree
as required.
-8-
39
(b) Without stockholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the
Offering Periods, limit the frequency and/or number of changes in the amount
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied
toward the purchase of Common Stock for each participant properly correspond
with amounts withheld from the participant's Compensation, and establish such
other limitations or procedures as the Board (or its committee) determines in
its sole discretion advisable which are consistent with the Plan.
20. Notices. All notices or other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be
issued with respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment
and without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the stockholders of the Company. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 19 hereof.
23. Automatic Transfer to Low Price Offering Period. To the
extent permitted by Rule 16b-3 of the Exchange Act, if the Fair Market Value of
the Common Stock on any Exercise Date in an Offering Period is lower than the
Fair Market Value of the Common Stock on the Enrollment Date of such Offering
Period, then all participants in such Offering Period shall be automatically
withdrawn from such Offering Period immediately after the exercise of their
option on such Exercise Date and automatically re-enrolled in the immediately
following Offering Period as of the first day thereof.
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EXHIBIT A
CARDIAC PATHWAYS CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________________________ hereby elects to
participate in the Cardiac Pathways Corporation 1996 Employee Stock
Purchase Plan (the "Employee Stock Purchase Plan") and subscribes to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 1 to 15%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete Employee Stock Purchase Plan.
I understand that my participation in the Employee Stock Purchase Plan
is in all respects subject to the terms of the Plan. I understand
that my ability to exercise the option under this Subscription
Agreement is subject to stockholder approval of the Employee Stock
Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse only):
_______________________________________________________________________
________________.
6. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Enrollment Date (the first day of
the Offering Period during which I purchased such shares) or one year
after the Exercise Date, I will be treated for federal income tax
purposes as having received ordinary income at the time of such
disposition in an amount equal to the excess of the fair market value
of the shares at the time such shares were purchased by me over the
price which I paid for the shares. I hereby agree to notify the
Company in writing
41
within 30 days after the date of any disposition of my shares and I
will make adequate provision for Federal, state or other tax
withholding obligations, if any, which arise upon the disposition of
the Common Stock. The Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any
applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for
federal income tax purposes as having received income only at the time
of such disposition, and that such income will be taxed as ordinary
income only to the extent of an amount equal to the lesser of (1) the
excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or
(2) 15% of the fair market value of the shares on the first day of the
Offering Period. The remainder of the gain, if any, recognized on
such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase
Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)______________________________________________
(First) (Middle) (Last)
_______________________________ _____________________________________________
Relationship
_____________________________________________
(Address)
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Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ________________________________________
Signature of Employee
________________________________________
Spouse's Signature (If beneficiary
other than spouse)
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43
EXHIBIT B
CARDIAC PATHWAYS CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Cardiac
Pathways Corporation 1996 Employee Stock Purchase Plan which began on
____________, 19____ (the "Enrollment Date") hereby notifies the Company that
he or she hereby withdraws from the Offering Period. He or she hereby directs
the Company to pay to the undersigned as promptly as practicable all the
payroll deductions credited to his or her account with respect to such Offering
Period. The undersigned understands and agrees that his or her option for such
Offering Period will be automatically terminated. The undersigned understands
further that no further payroll deductions will be made for the purchase of
shares in the current Offering Period and the undersigned shall be eligible to
participate in succeeding Offering Periods only by delivering to the Company a
new Subscription Agreement.
Name and Address of Participant:
-----------------------------
_____________________________
Signature:
_____________________________
Date:________________________
44
CARDIAC PATHWAYS CORPORATION
1996 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1996 Director
Option Plan are to attract and retain the best available personnel for service
as Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock
options.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means Cardiac Pathways Corporation, a
California corporation.
(e) "Director" means a member of the Board.
(f) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and
of itself to constitute "employment" by the Company.
(g) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(h) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the date of determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable, or;
45
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.
(i) "Inside Director" means a Director who is an
Employee.
(j) "Option" means a stock option granted pursuant to the
Plan.
(k) "Optioned Stock" means the Common Stock subject to an
Option.
(l) "Optionee" means a Director who holds an Option.
(m) "Outside Director" means a Director who is not an
Employee.
(n) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1996 Director Option Plan.
(p) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Internal
Revenue Code of 1986.
3. Stock Subject to the Plan. Subject to the provisions of
Section 10 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 40,000 Shares of Common Stock (the "Pool").
The Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having
been exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. The provisions set forth in
this Section 4(a) shall not be amended more than once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder. All grants of
Options to Outside Directors under this Plan shall be automatic and
nondiscretionary and shall be made strictly in accordance with the following
provisions:
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46
(i) No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine the number of
Shares to be covered by Options granted to Outside Directors.
(ii) Each Outside Director who is neither
affiliated with or nominated by a stockholder that owns one percent (1%) or
more of the outstanding capital stock of the Company (an "Unaffiliated Outside
Director") shall automatically be granted an Option to purchase 13,000 Shares
(the "First Option") on the date on which the later of the following events
occurs: (A) the effective date of this Plan, as determined in accordance with
Section 6 hereof, or (B) the date on which such person first becomes an Outside
Director, whether through election by the stockholders of the Company or
appointment by the Board to fill a vacancy. No Inside Director who ceases to
be an Inside Director but who remains a Director shall receive a First Option.
No Outside Director who upon first becoming an Outside Director is not an
Unaffiliated Outside Director but who subsequently becomes an Unaffiliated
Outside Director shall thereby become eligible to receive a First Option.
(iii) Each Outside Director, whether or not an
Unaffiliated Outside Director, shall be automatically granted an Option to
purchase 700 Shares (a "Subsequent Option") each year on the date of the annual
meeting of the stockholders of the Company, provided he or she is then an
Outside Director and if as of such date, he or she shall have served on the
Board for at least the preceding six (6) months.
(iv) Notwithstanding the provisions of subsections
(ii) and (iii) hereof, any exercise of an Option granted before the Company has
obtained stockholder approval of the Plan in accordance with Section 16 hereof
shall be conditioned upon obtaining such stockholder approval of the Plan in
accordance with Section 16 hereof.
(v) The terms of a First Option granted hereunder
shall be as follows:
(A) the term of the First Option shall
be ten (10) years.
(B) the First Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall
be 100% of the Fair Market Value per Share on the date of grant of the First
Option. In the event that the date of grant of the First Option is not a
trading day, the exercise price per Share shall be the Fair Market Value on the
next trading day immediately following the date of grant of the First Option.
(D) subject to Section 10 hereof, the
First Option shall become exercisable as to twenty-five percent (25%) of the
Shares subject to the First Option one (1) year after its date of grant, and as
to an additional one forty-eighth (1/48th) of the shares at the end of each
month thereafter, provided that the Optionee continues to serve as a Director
on such dates.
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47
(vi) The terms of a Subsequent Option granted
hereunder shall be as follows:
(A) the term of the Subsequent Option
shall be ten (10) years.
(B) the Subsequent Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall
be 100% of the Fair Market Value per Share on the date of grant of the
Subsequent Option. In the event that the date of grant of the Subsequent
Option is not a trading day, the exercise price per Share shall be the Fair
Market Value on the next trading day immediately following the date of grant of
the Subsequent Option.
(D) subject to Section 10 hereof, the
Subsequent Option shall become exercisable as to one-eighth (1/8th) of the
Shares subject to the Subsequent Option six (6) months after its date of grant,
and as to an additional one forty-eighth (1/48th) at the end of each month
thereafter, provided that the Optionee continues to serve as a Director on such
dates.
(vii) In the event that any Option granted under
the Plan would cause the number of Shares subject to outstanding Options plus
the number of Shares previously purchased under Options to exceed the Pool,
then the remaining Shares available for Option grant shall be granted under
Options to the Outside Directors on a pro rata basis. No further grants shall
be made until such time, if any, as additional Shares become available for
grant under the Plan through action of the Board or the stockholders to
increase the number of Shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside
Directors. All Options shall be automatically granted in accordance with the
terms set forth in Section 4 hereof.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.
6. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company as described in Section 16 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of
payment, shall consist of (i) cash, (ii) check, (iii) other shares which (x) in
the case of Shares acquired upon exercise of an Option, have been owned by the
Optionee for more than six (6) months on the date of surrender, and (y) have a
Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option shall
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48
be exercised, (iv) delivery of a properly executed exercise notice together
with such other documentation as the Company and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company
of the sale or loan proceeds required to pay the exercise price, or (v) any
combination of the foregoing methods of payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable until
stockholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of
payment allowable under Section 7 of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. A share certificate for the number of Shares so
acquired shall be issued to the Optionee as soon as practicable after exercise
of the Option. No adjustment shall be made for a dividend or other right for
which the record date is prior to the date the stock certificate is issued,
except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Rule 16b-3. Options granted to Outside Directors
must comply with the applicable provisions of Rule 16b-3 promulgated under the
Exchange Act or any successor thereto and shall contain such additional
conditions or restrictions as may be required thereunder to qualify Plan
transactions, and other transactions by Outside Directors that otherwise could
be matched with Plan transactions, for the maximum exemption from Section 16 of
the Exchange Act.
(c) Termination of Continuous Status as a Director.
Subject to Section 10 hereof, in the event an Optionee's status as a Director
terminates (other than upon the Optionee's death or total and permanent
disability (as defined in Section 22(e)(3) of the Code)), the Optionee may
exercise his or her Option, but only within three (3) months following the date
of such termination, and only to the extent that the Optionee was entitled to
exercise it on the date of such termination (but in no event later than the
expiration of its ten (10) year term). To the extent that the
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49
Optionee was not entitled to exercise an Option on the date of such
termination, and to the extent that the Optionee does not exercise such Option
(to the extent otherwise so entitled) within the time specified herein, the
Option shall terminate.
(d) Disability of Optionee. In the event Optionee's
status as a Director terminates as a result of total and permanent disability
(as defined in Section 22(e)(3) of the Code), the Optionee may exercise his or
her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration
of its ten (10) year term). To the extent that the Optionee was not entitled
to exercise an Option on the date of termination, or if he or she does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
(e) Death of Optionee. In the event of an Optionee's
death, the Optionee's estate or a person who acquired the right to exercise the
Option by bequest or inheritance may exercise the Option, but only within
twelve (12) months following the date of death, and only to the extent that the
Optionee was entitled to exercise it on the date of death (but in no event
later than the expiration of its ten (10) year term). To the extent that the
Optionee was not entitled to exercise an Option on the date of death, and to
the extent that the Optionee's estate or a person who acquired the right to
exercise such Option does not exercise such Option (to the extent otherwise so
entitled) within the time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding Option,
and the number of Shares issuable pursuant to the automatic grant provisions of
Section 4 hereof shall be proportionately adjusted for any increase or decrease
in the number of issued Shares resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock, or
any other increase or decrease in the number of issued Shares effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an Option.
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50
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, to the extent that an
Option has not been previously exercised, it shall terminate immediately prior
to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of
the Company with or into another corporation or the sale of substantially all
of the assets of the Company, outstanding Options may be assumed or equivalent
options may be substituted by the successor corporation or a Parent or
Subsidiary thereof (the "Successor Corporation"). If an Option is assumed or
substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee serves
as a Director or a director of the Successor Corporation. Following such
assumption or substitution, if the Optionee's status as a Director or director
of the Successor Corporation, as applicable, is terminated other than upon a
voluntary resignation by the Optionee, the Option or option shall become fully
exercisable, including as to Shares for which it would not otherwise be
exercisable. Thereafter, the Option or option shall remain exercisable in
accordance with Sections 8(c) through (e) above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested
and exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger
or sale of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares).
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. Except as set forth in
Section 4, the Board may at any time amend, alter, suspend, or discontinue the
Plan, but no amendment, alteration, suspension, or discontinuation shall be
made which would impair the rights of any Optionee under any grant theretofore
made, without his or her consent. In addition, to the extent necessary and
desirable to comply with Rule 16b-3 under the Exchange Act (or any other
applicable law or regulation), the Company shall obtain stockholder approval of
any Plan amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if this Plan had not
been amended or terminated.
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12. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date determined in accordance with Section 4
hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, state securities laws, and the requirements of any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment
and without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not
have been obtained.
14. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written
option agreements in such form as the Board shall approve.
16. Stockholder Approval. Continuance of the Plan shall be
subject to approval by the stockholders of the Company at or prior to the first
annual meeting of stockholders held subsequent to the granting of an Option
hereunder. Such stockholder approval shall be obtained in the degree and
manner required under applicable state and federal law.
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52
CARDIAC PATHWAYS CORPORATION
1991 STOCK PLAN
(AS AMENDED APRIL 1996)
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject
to the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. CERTAIN DEFINITIONS. As used herein, the following
definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its
Committees appointed pursuant to Section 4 of the Plan.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as
amended.
(d) "COMMITTEE" means the Committee appointed by the
Board of Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "COMMON STOCK" means the Common Stock of the company.
(f) "COMPANY" means Cardiac Pathways Corporation, a
California corporation.
(g) "CONSULTANT" means any person, including an advisor,
who is engaged by the Company or any Parent or Subsidiary to render services
and is compensated for such services. The term Consultant shall not include
directors who are not compensated for their services or are paid only a
director's fee by the Company.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT"
means that the employment or consulting relationship with the Company, any
Parent, or Subsidiary, is not interrupted or terminated. Continuous Status as
an Employee or Consultant shall not be considered interrupted in the case of
(i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary, or
any successor. A leave of absence approved by the Company shall include sick
leave, military leave, or any other personal leave approved by an authorized
representative of the Company. For purposes of Incentive
53
Stock Options, no such leave may exceed ninety days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract. If reemployment
upon expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option and shall
be treated for tax purposes as a Nonstatutory Stock Option.
(i) "EMPLOYEE" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(k) "FAIR MARKET VALUE" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value shall be determined in good faith by
the Administrator.
(l) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(m) "NONSTATUTORY STOCK OPTION" means an Option not
intended to qualify as an Incentive Stock Option.
(n) "OPTION" means a stock option granted pursuant to the
Plan.
(o) "OPTIONED STOCK" means the Common Stock subject to an
Option.
(p) "OPTIONEE" means an Employee or Consultant who
receives an Option.
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54
(q) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(r) "PLAN" means this 1991 Stock Plan.
(s) "RESTRICTED STOCK" means shares of Common Stock
acquired pursuant to a grant of a Stock Purchase Right under Section 11 below.
(t) "SHARE" means a share of the Common Stock, as
adjusted in accordance with Section 13 of the Plan.
(u) "SUBSIDIARY" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 14 of the Plan, the maximum aggregate number of shares which may be
optioned and sold under the Plan is 2,267,030 shares of Common Stock. The
shares may be authorized, but unissued, or re-acquired Common Stock.
If an Option or Stock Purchase Right should expire or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares which were subject thereto shall, unless the Plan shall have
been terminated, become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted
by Rule 16b-3, the Plan may be administered by different bodies with respect to
directors, officers who are not directors, and Employees who are neither
directors nor officers.
(ii) ADMINISTRATION WITH RESPECT TO DIRECTORS AND
OFFICERS SUBJECT TO SECTION 16(B). With respect to Option or Stock Purchase
Right grants made to Employees who are also officers or directors subject to
Section 16 of the Exchange Act, the Plan shall be administered by (A) the
Board, if the Board may administer the Plan in a manner complying with the
rules under Rule 16b-3 relating to the disinterested administration of employee
benefit plans under which Section 16(b) exempt discretionary grants and awards
of equity securities are to be made, or (B) a Committee designated by the Board
to administer the Plan, which Committee shall be constituted to comply with the
rules under Rule 16b-3 relating to the disinterested administration of employee
benefit plans under which Section 16(b) exempt discretionary grants and awards
of equity securities are to be made. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members, remove members (with or without cause) and
substitute new members, fill vacancies (however caused), and remove all members
of the Committee and thereafter directly
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administer the Plan, all to the extent permitted by the rules under Rule 16b-3
relating to the disinterested administration of employee benefit plans under
which Section 16(b) exempt discretionary grants and awards of equity securities
are to be made.
(iii) ADMINISTRATION WITH RESPECT TO OTHER PERSONS.
With respect to Option or Stock Purchase Right grants made to Employees or
Consultants who are neither directors nor officers of the Company, the Plan
shall be administered by (A) the Board or (B) a Committee designated by the
Board, which committee shall be constituted to satisfy the legal requirements
relating to the administration of incentive stock plans of California corporate
and securities laws and the Code (the "Applicable Laws"). Once appointed, such
Committee shall serve in its designated capacity until otherwise directed by
the Board. The Board may increase the size of the Committee and appoint
additional members, remove members (with or without cause) and substitute new
members, fill vacancies (however caused), and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to
whom Options and Stock Purchase Rights may from time to time be granted
hereunder;
(iii) to determine whether and to what extent
Options and Stock Purchase Rights or any combination thereof, are granted
hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any restriction or
limitation or waiver of forfeiture restrictions regarding any Option or other
award and/or the shares of Common Stock relating thereto, based in each case on
such factors as the Administrator shall determine, in its sole discretion;
(vii) to determine whether and under what
circumstances an Option may be settled in cash under subsection 10(f) instead
of Common Stock;
(viii) to determine whether, to what extent and
under what circumstances Common Stock and other amounts payable with respect to
an award under this Plan shall be deferred
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56
either automatically or at the election of the participant (including providing
for and determining the amount, if any, of any deemed earnings on any deferred
amount during any deferral period);
(ix) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted; and
(x) to determine the terms and restrictions
applicable to Stock Purchase Rights and the Restricted Stock purchased by
exercising such Stock Purchase Rights.
(c) EFFECT OF COMMITTEE'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase
Rights may be granted to Employees and Consultants. Incentive Stock Options
may be granted only to Employees. An Employee or Consultant who has been
granted an Option or Stock Purchase Right may, if he is otherwise eligible, be
granted additional Options or Stock Purchase Rights.
6. LIMITATIONS.
(a) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,
such Options shall be treated as Nonstatutory Stock Options. For purposes of
this Section 6(a), Incentive Stock Options shall be taken into account in the
order in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
If an Option is granted hereunder that is part Incentive Stock Option and part
Nonstatutory Stock Option due to becoming first exercisable in any calendar
year in excess of $100,000, the Incentive Stock Option portion of such Option
shall become exercisable first in such calendar year, and the Nonstatutory
Stock Option portion shall commence becoming exercisable once the $100,000
limit has been reached.
(b) Neither the Plan nor any Option or Stock Purchase
Right shall confer upon an Optionee any right with respect to continuing the
Optionee's employment or consulting relationship with the Company, nor shall
they interfere in any way with the Optionee's right or the Company's right to
terminate such employment or consulting relationship at any time, with or
without cause.
(c) The following limitations shall apply to grants of
Options and Stock Purchase Rights to Employees:
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57
(i) No Employee shall be granted, in any fiscal
year of the Company, Options to purchase more than 200,000 Shares.
(ii) In connection with his or her initial
employment, an Employee may be granted Options to purchase up to an additional
100,000 Shares which shall not count against the limit set forth in subsection
(i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization
as described in Section 14.
(iv) If an Option or Stock Purchase Right is
cancelled in the same fiscal year of the Company in which it was granted (other
than in connection with a transaction described in Section 14), the cancelled
Option or Stock Purchase Right will be counted against the limits set forth in
subsections (i) and (ii) above. For this purpose, if the exercise price of an
Option or Stock Purchase Right is reduced, the transaction will be treated as a
cancellation of the Option or Stock Purchase Right and the grant of a new
Option or Stock Purchase Right.
7. TERM OF PLAN. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the stockholders of the Company as described in Section 20 of the Plan. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 16 of the Plan.
8. TERM OF OPTION. The term of each Option shall be the term
stated in the Option Agreement; provided, however, that in the case of an
Incentive Stock Option, the term shall be no more than ten (10) years from the
date of grant thereof or such shorter term as may be provided in the Option
Agreement. However, in the case of an Option granted to an Optionee who, at
the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is determined
by the Administrator, but shall be subject to the following:
(i) In the case of an INCENTIVE STOCK OPTION
(A) granted to an Employee who, at the
time of the grant of such Incentive Stock Option, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
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58
(B) granted to any other Employee, the
per Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant.
(ii) In the case of a NONSTATUTORY STOCK OPTION,
the per Share exercise price shall be determined by the Administrator.
(b) FORM OF CONSIDERATION. The Administrator shall
determine the acceptable form of consideration for exercising an Option,
including the method of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at the time
of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) delivery of a properly executed exercise
notice together with such other documentation as the Administrator and the
broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price;
(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to the
Optionee's participation in any Company-sponsored deferred compensation program
or arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
An Option may not be exercised for a fraction of a
Share.
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An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the Option, and
full payment for the Shares with respect to which the Option is exercised has
been received by the Company. Full payment may, as authorized by the
Administrator, consist of any consideration and method of payment allowable
under Section 9(b) of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Option. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 14 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP.
Upon termination of an Optionee's Continuous Status as an Employee, other than
upon the Optionee's death or Disability, the Optionee may exercise his or her
Option within such period of time as is specified in the option agreement to
the extent that he or she is entitled to exercise it on the date of termination
(but in no event later than the expiration of the term of such Option). In the
absence of a specified time in the option agreement, the Option shall remain
exercisable for three (3) months following the Optionee's termination. In the
case of an Incentive Stock Option, such period of time for exercise shall not
exceed three (3) months from the date of termination. If, on the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the Shares covered by the unexercisable portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
Notwithstanding the above, in the event of an Optionee's
change in status from Consultant to Employee or Employee to Consultant, the
Optionee's Continuous Status as an Employee or Consultant shall not
automatically terminate solely as a result of such change in status. In such
event, an Incentive Stock Option held by the Optionee shall cease to be treated
as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option beginning three months and one day following such
change of status.
(c) DISABILITY OF OPTIONEE. Upon termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of the
Optionee's total and permanent disability (as defined in Section 22(e)(3) of
the Code), the Optionee may exercise his or her Option at any time within
twelve (12) months from the date of termination, but only to the extent that
the Optionee is entitled to exercise it on the date of termination (and in no
event later than the expiration of the term of the Option). If, on the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the Shares covered by the unexercisable portion of the Option shall revert to
the Plan. If,
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after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. Upon the death of an Optionee,
the Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of such
Option), by the Optionee's estate or by a person who acquires the right to
exercise the Option by bequest or inheritance, but only to the extent that the
Optionee would have been entitled to exercise the Option on the date of death.
If, at the time of death, the Optionee is not entitled to exercise his or her
entire Option, the Shares covered by the unexercisable portion of the Option
shall immediately revert to the Plan. If the Optionee's estate or the person
who acquires the right to exercise the Option by bequest or inheritance does
not exercise the Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) RULE 16B-3. Options granted to persons subject to
Section 16 of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
(f) BUYOUT PROVISIONS. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be
issued either alone, in addition to, or in tandem with other awards granted
under the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid (which price shall
not be less than 50% of the Fair Market Value of the Shares as of the date of
the offer), and the time within which such person must accept such offer, which
shall in no event exceed thirty (30) days from the date upon which the
Administrator made the determination to grant the Stock Purchase Right. The
offer shall be accepted by execution of a Restricted Stock purchase agreement
in the form determined by the Administrator. Shares purchased pursuant to the
grant of a Stock Purchase Right shall be referred to herein as "Restricted
Stock."
(b) REPURCHASE OPTION. Unless the Administrator
determines otherwise, the Restricted Stock purchase agreement shall grant the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser's employment with the Company for any reason
(including death or Disability). The purchase price for Shares repurchased
pursuant to the Restricted Stock purchase agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of
the purchaser to the Company. The repurchase option shall lapse at such rate
as the Committee may determine.
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(c) RULE 16B-3. Stock Purchase Rights granted to persons
subject to Section 16 of the Exchange Act, and Shares purchased by such persons
in connection with Stock Purchase Rights, shall be subject to any restrictions
applicable thereto in compliance with Rule 16b- 3. Such persons may only
purchase Shares pursuant to the grant of a Stock Purchase Right, and may only
sell Shares purchased pursuant to the grant of a Stock Purchase Right, during
such time or times as are permitted by Rule 16b-3.
(d) OTHER PROVISIONS. The Restricted Stock purchase
agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its
sole discretion. In addition, the provisions of Restricted Stock purchase
agreements need not be the same with respect to each purchaser.
(e) RIGHTS AS A STOCKHOLDER. Once the Stock Purchase
Right is exercised, the purchaser shall have the rights equivalent to those of
a stockholder, and shall be a stockholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Stock Purchase Right is exercised, except as provided
in Section 14 of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. An
Option or Stock Purchase Right may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or
by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
13. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At
the discretion of the Administrator, Optionees may satisfy withholding
obligations as provided in this paragraph. When an Optionee incurs tax
liability in connection with an Option or Stock Purchase Right, which tax
liability is subject to tax withholding under applicable tax laws, and the
Optionee is obligated to pay the Company an amount required to be withheld
under applicable tax laws, the Optionee may satisfy the withholding tax
obligation by electing to have the Company withhold from the Shares to be
issued upon exercise of the Option, or the Shares to be issued in connection
with the Stock Purchase Right, if any, that number of Shares having a Fair
Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the
applicable Tax Date;
(b) once made, the election shall be irrevocable as to
the particular Shares of the Option or Right as to which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
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(d) if the Optionee is subject to Section 16 of the
Exchange Act, the election must comply with the applicable provisions of Rule
16b-3 and shall be subject to such additional conditions or restrictions as may
be required thereunder to qualify for the maximum exemption from Section 16 of
the Exchange Act with respect to Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised, but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required
action by the stockholders of the Company, the number of shares of Common Stock
covered by each outstanding Option and Stock Purchase Right, and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but as to which no Options or Stock Purchase Rights have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an Option or Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall
notify each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable. In
addition, the Administrator may provide that any Company repurchase option
applicable to any Shares purchased upon exercise of an Option shall lapse as to
all such Shares, provided the proposed dissolution or liquidation takes place
at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option will terminate immediately prior to the
consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of
the Company with or into another corporation, or the sale of substantially all
of the assets of the Company, each outstanding
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Option and Stock Purchase Right shall be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option or Stock Purchase Right, the Optionee shall
have the right to exercise the Option or Stock Purchase Right as to all of the
Optioned Stock, including Shares as to which it would not otherwise be
exercisable. If an Option or Stock Purchase Right is exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee that the Option or Stock Purchase Right
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the Option or Stock Purchase Right shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or
Stock Purchase Right shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger
or sale of assets was not solely common stock of the successor corporation or
its Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise of
the Option or Stock Purchase Right, for each Share of Optioned Stock subject to
the Option or Stock Purchase Right, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
15. TIME OF GRANTING OPTIONS. The date of grant of an Option or
Stock Purchase Right shall, for all purposes, be the date on which the
Administrator makes the determination granting such Option or Stock Purchase
Right, or such other date as is determined by the Board. Notice of the
determination shall be given to each Employee or Consultant to whom an Option
or Stock Purchase Right is so granted within a reasonable time after the date
of such grant.
16. AMENDMENT AND TERMINATION OF THE PLAN. The Board may at any
time amend, alter, suspend or discontinue the Plan, but no amendment,
alteration, suspension or discontinuation shall be made which would impair the
rights of any Optionee under any grant theretofore made, without his or her
consent. In addition, to the extent necessary and desirable to comply with
Rule 16b-3 under the Exchange Act or with Section 422 of the Code (or any other
applicable law or regulation, including the requirements of the NASD of an
established stock exchange), the Company shall obtain stockholder approval of
any Plan amendment in such a manner and to such a degree as required.
17. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed,
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and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
18. RESERVATION OF SHARES. The Company, during the term of this
Plan, shall at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not
have been obtained.
19. AGREEMENTS. Options and Stock Purchase Rights shall be
evidenced by written agreements in such form as the Board shall approve from
time to time.
20. STOCKHOLDER APPROVAL. Continuance of the Plan shall be
subject to approval by the stockholder of the Company within twelve (12) months
before or after the date the Plan is adopted. Such stockholder approval shall
be obtained in the degree and manner required under applicable state and
federal law.
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65
CARDIAC PATHWAYS CORPORATION
1997 ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 14, 1997
The undersigned stockholder of CARDIAC PATHWAYS CORPORATION, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and Proxy Statement, each dated September 5, 1997, and
hereby appoints William N. Starling and David W. Gryska and each of
them, proxies and attorneys-in-fact, with full power to each of
substitution, on behalf and in the name of the undersigned to represent
the undersigned at the 1997 Annual Meeting of Stockholders of CARDIAC
PATHWAYS CORPORATION to be held on October 14, 1997 at 12:00 p.m. local
time, at 995 Benecia Avenue, Sunnyvale, California 94086 and at any
adjournment or adjournments thereof, and to vote all shares of Common
Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below:
1. ELECTION OF DIRECTORS [ ] FOR all nominees listed below (except as
indicated) [ ] WITHHOLD
If you wish to withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list below:
Thomas J. Fogarty, M.D., Joseph P. Ilvento, M.D.
2. AMENDMENT OF 1996 EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE NUMBER
OF SHARES OF THE COMPANY'S COMMON STOCK AVAILABLE FOR ISSUANCE
THEREUNDER BY 70,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. AMENDMENT OF 1996 DIRECTOR OPTION PLAN TO INCREASE THE NUMBER OF
SHARES OF THE COMPANY'S COMMON STOCK AVAILABLE FOR ISSUANCE
THEREUNDER BY 20,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. AMENDMENT OF 1991 STOCK PLAN TO INCREASE THE NUMBER OF SHARES OF THE
COMPANY'S COMMON STOCK AVAILABLE FOR ISSUANCE THEREUNDER BY 380,000
SHARES AND TO APPROVE THE MATERIAL TERMS OF SUCH PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE
30, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and, in their discretion, upon such other matter or matters which may
properly come before the meeting or any adjournment or adjournments
thereof. (Continued and to be executed on reverse side)
P
R
O
X
Y
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66
(Continued from other side)
THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION, THIS
PROXY WILL BE VOTED FOR THE TWO NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
AND FOR PROPOSALS 2 THROUGH 5. In their discretion, the proxy holders are
authorized to vote upon such other business as may properly come before the
meeting or any adjournment thereof to the extent authorized by Rule 14a-4(c)
promulgated by the Securities and Exchange Commission. THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED RETURN ENVELOPE SO THAT YOUR
SHARES MAY BE REPRESENTED AT THE MEETING.
The undersigned hereby acknowledges receipt of (a) the Notice of 1997 Annual
Meeting of Stockholders of the Company; (b) the accompanying Proxy Statement;
and (c) the Annual Report to Stockholders for the fiscal year ended June 30,
1997.
Please sign exactly as your name(s)
appears on your stock
certificate(s). If shares are held
in the names of two or more persons
(including husband and wife, as
joint tenants or otherwise) all
persons must sign. If shares are
held by a corporation, the proxy
should be signed by the president or
vice president and the secretary or
assistant secretary. Fiduciaries who
execute the proxy should give their
full title.
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Signature
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Signature
Dated: