HOLOGIC, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 27, 1996
TO THE STOCKHOLDERS OF HOLOGIC, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
Hologic, Inc., a Delaware Corporation (the "Company"), will be held on
Tuesday, February 27, 1996 at 10:00 a.m., local time, at the offices of the
Company, 590 Lincoln Street, Waltham, Massachusetts 02154 for the following
purposes:
1. To elect six (6) directors to serve for the ensuing year and
until their successors are duly elected.
2. To consider and act upon a proposal to amend the Company's
Certificate of Incorporation to increase from 10,000,000 to
30,000,000 the number of the Company's authorized shares of
Common Stock.
3. To consider and act upon a proposal to adopt the Company's
1995 Combination Stock Option Plan.
4. To consider and act upon a proposal to amend the Company's
Amended and Restated 1990 Non-Employee Director Stock Option
Plan.
5. To ratify the appointment of Arthur Andersen LLP as
independent public accountants of the Company.
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 January 2, 1996
are entitled to notice of and to vote at the meeting and any continuation or
adjournment thereof. All stockholders are cordially invited to attend the
Annual Meeting. 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-paid envelope enclosed for that purpose. Any
stockholder attending the meeting may vote in person even if he or she
returned a proxy.
By order of the Board of Directors
Lawrence M. Levy, Secretary
Waltham, Massachusetts
January 16, 1996
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE
OF RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING AND SO DESIRE,
YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY.
HOLOGIC, INC.
______________
PROXY STATEMENT
1996 ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 27, 1996
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Hologic, Inc. (the "Company"), for use at the Annual Meeting of Stockholders
to be held on Tuesday, February 27, 1996, at 10:00 a.m., local time (the
"Annual Meeting"), or at any continuation or 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 offices of the Company,
590 Lincoln Street, Waltham, Massachusetts 02154. This proxy statement, the
accompanying proxy card and the annual report to stockholders are first being
mailed to stockholders on or about January 16, 1996.
Record Date and Stock Ownership
Only stockholders of record at the close of business on January 2, 1996,
are entitled to receive notice of and to vote at the Annual Meeting. At the
close of business on January 2, 1996 there were outstanding and entitled to
vote 4,188,563 shares of common stock of the Company, par value $.01 per
share ("Common Stock"). Each stockholder is entitled to one vote for each
share of Common Stock.
Revocability of Proxies
Any person giving a proxy in the form accompanying this statement has
the power to revoke it at any time before it is voted. It may be revoked by
filing with the Secretary of the Company at the Company's principal executive
office, 590 Lincoln Street, Waltham, Massachusetts 02154, written notice of
revocation or duly executed proxy bearing a later date, or it may be revoked
by attending the Annual Meeting and voting in person.
Voting and Solicitation
The affirmative vote of the holders of a plurality of the shares of
Common Stock present or represented by proxy at the Annual Meeting is required
for the election of directors. The affirmative vote of a majority of the
shares of Common Stock present or represented by proxy at the Annual Meeting
is required for the approval of each of the matters to be voted upon at the
Annual Meeting. A majority of the shares of Common Stock outstanding is
required to be present or represented by proxy at the Annual Meeting in order
to constitute the quorum necessary to take action at the Annual Meeting.
Votes cast by proxy or in person at the Annual Meeting will be tabulated
by the inspector of elections appointed for the Annual Meeting. The inspector
of elections will treat abstentions as Common Stock that is present and
entitled to vote for purposes of determining the presence of a quorum but as
not voted for purposes of determining the approval of any matter submitted to
stockholders for a vote. Abstentions, including broker non-votes, will have no
effect on the outcome of the vote for the election of directors, but will have
the effect of being cast against any of the other proposals, even though the
stockholder so abstaining intends a different interpretation.
All costs of this solicitation of proxies will be borne by the Company.
The Company has retained American Stock Transfer & Trust Company to aid in the
solicitation of proxies from stockholders, banks and other institutional
nominees. The Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their reasonable expenses
incurred in forwarding solicitation materials to such beneficial owners.
Original solicitation of proxies by mail may be supplemented by telephone,
telegram, or personal solicitations by directors, officers, or employees of
the Company. No additional compensation will be paid for any such services.
Deadline for Receipt of Stockholder Proposals
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 1997 Annual Meeting of
Stockholders must be received by the Company no later than September 18, 1996,
in order to be considered for inclusion in the proxy statement and form of
proxy relating to that meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
A board of six (6) directors is to be elected at the Annual Meeting.
Unless otherwise instructed, the proxy holders will vote the proxies received
by them for the Board of Directors' nominees named below. In the event that
any nominee is unable or declines to serve as a director at the time of the
Annual Meeting, the proxies will be voted for the nominee, if any, who shall
be designated by the present Board of Directors to fill the vacancy. It is
not expected that any nominee will be unable or will decline to serve as
director. The proposed nominees are not being nominated pursuant to any
arrangement or understanding with any person. The term of office of each
person elected as a director will continue until the next Annual Meeting of
Stockholders or until a successor has been elected and qualified.
Set forth below is certain biographical information regarding the
nominees, including information furnished by them as to their principal
occupation for the last five (5) years, certain other directorships held by
them and their ages as of January 2, 1996.
Director
Name Age Position Since
S. David Ellenbogen 57 Chairman of the Board and
Chief Executive Officer 1985
Jay A. Stein 53 Senior Vice President, Technical
Director and Director 1985
Irwin Jacobs 58 Director 1990
William A. Peck 62 Director 1990
Gerald Segel 74 Director 1990
Elaine Ullian 48 Director --
Mr. Ellenbogen, a co-founder of the Company, has served as its Chief
Executive Officer and a director since its organization in October 1985, as
its Chairman of the Board of Directors since May 1994, as its President from
October 1985 until May 1994 and as its Treasurer from October 1985 until
February 1992. Prior to founding the Company, Mr. Ellenbogen served as
President, Treasurer and a director of Diagnostic Technology, Inc. ("DTI"),
which he co-founded with Dr. Stein in 1981. DTI, which developed an x-ray
product for digital angiography, was acquired in 1982 by Advanced Technology
Laboratories, Inc. ("ATL"), a wholly-owned subsidiary of Squibb Corporation.
Mr. Ellenbogen was involved in the management of the digital angiography group
of ATL from 1982 to 1985. Since July 1989, Mr. Ellenbogen has also been the
President, Treasurer and a director of Vivid Technologies, Inc. ("Vivid") and
has been devoting approximately sixteen hours per week to Vivid pursuant to a
management agreement between the Company and Vivid. See "Certain
Transactions".
Dr. Stein, a co-founder of the Company, has served as its Senior Vice
President, Technical Director and a director since its organization. Dr. Stein
co-founded DTI with Mr. Ellenbogen in 1981, served as Vice President and
Technical Director of DTI and was Technical Director of the digital
angiography group of its successor, ATL, from 1982 to 1985. Dr. Stein received
a Ph.D. in Physics from The Massachusetts Institute of Technology. He is the
principal author of fifteen patents involving x-ray technology. Since July
1989, Dr. Stein has also been the Senior Vice President, Technical Director
and a director of Vivid and has been devoting approximately eight hours per
week to Vivid pursuant to a management agreement between the Company and
Vivid. See "Certain Transactions".
Mr. Jacobs has been a director of the Company since January 1990. Mr.
Jacobs has been the President of Dataviews, Inc., a company which manufactures
and distributes software products, since January 1992. Since December 1990,
Mr. Jacobs has also been the Chairman of the Board of Personal Protection
Consultants, Inc., a company which provides specialized training to hospitals
and law enforcement agencies. From May 1990 to December 1990, Mr. Jacobs was
a Vice President of Ask Computers, Inc., a computer system developer. From
1987 to May 1990, Mr. Jacobs was the President and Chairman of the Board of
Directors of Perception Technology Corp., a manufacturer of voice response
systems.
Dr. Peck has been a director of the Company since January 1990. In 1989,
Dr. Peck became the Vice Chancellor for Medical Affairs at Washington
University (Executive Vice Chancellor since 1993) and Dean of the Washington
University School of Medicine in St. Louis, Missouri. From 1976 until his
appointment as Vice Chancellor, Dr. Peck was a Professor of Medicine and the
Co-Chairman of the Department of Medicine at Washington University, and the
Physician-in-Chief at the Jewish Hospital of St. Louis. Dr. Peck is a member
of the Board of Trustees of the National Osteoporosis Foundation and served as
its President from 1985 to 1990. Dr. Peck also serves as a director of Allied
Healthcare Products, Inc., Reinsurance Group of America, Inc. and Boatman's
Trust Company.
Mr. Segel has been a director of the Company since March 1990. Mr.
Segel, currently retired, was Chairman of the Board of Tucker Anthony
Incorporated from January 1987 to May 1990. From 1983 through January 1987 he
served as President of Tucker Anthony Incorporated. Mr. Segel also serves as a
director of Litchfield Financial, Inc.
Ms. Ullian is a new nominee for the Board of Directors. Ms. Ullian is
currently President and Chief Executive Officer of Boston University Medical
Center Hospital, and has held this position since April 1994. Ms. Ullian has
considerable experience in financial management, strategic planning and
marketing, and in direct operations of clinical facilities. From January 1987
to March 1994, Ms. Ullian held the position of President and Chief Executive
Officer of Faulkner Corporation/Faulkner Hospital. From 1984 to 1987, she was
Vice President for Clinical Operations at New England Medical Center.
Ms. Ullian is currently a member of the Governor's Council on Economic Growth
and Technology.
Board of Directors' Meetings and Committees
The Board of Directors met five times during the year ended September
30, 1995. Each director attended at least 75% of the meetings of the Board of
Directors and each of its Committees on which they served.
Standing committees of the Board include an Executive Committee, an
Audit Committee and a Compensation Committee. The Board does not have a
nominating committee or a committee performing a similar function.
Messrs. Ellenbogen, Jacobs and Segel and Dr. Stein are currently the
members of the Executive Committee. The Executive Committee did not meet
formally during fiscal 1995. The Executive Committee has all the powers and
authority of the Board of Directors, except those powers that may not lawfully
be delegated by the Board of Directors and except those specific powers
delegated by the Board of Directors to any other committee appointed by it.
Messrs. Jacobs and Segel are currently the members of the Audit
Committee. During fiscal 1995, the Audit Committee met three times with the
Company's independent auditors. The Audit Committee reviews with the Company's
independent auditors the scope of the audit for the year, the results of the
audit when completed, the adequacy of the Company's internal control systems
and financial reporting procedures and the independent auditors' fee for
services performed.
Messrs. Jacobs and Segel and Dr. Peck are currently the members of the
Company's Compensation Committee. During fiscal 1995, the Compensation
Committee met four times. The Compensation Committee determines the
compensation to be paid to key officers of the Company and administers the
Company's 1986 Combination Stock Option Plan, Executive and Key Employee Bonus
Program, Performance-Bonus Plan, 1995 Employee Stock Purchase Plan, 1995
Combination Stock Option Plan, if approved, and 401(k) Plan.
Compensation of Directors
Each non-employee director received (i) an annual retainer of $3,000,
payable $750 per quarter, (ii) a director's meeting fee of $600 for each
meeting of the Board of Directors at which the director was physically present
and $300 for each meeting at which the director participated by telephone and
(iii) a committee meeting fee for each meeting of a committee of the Board of
Directors at which the director was physically present, in the amount of $600
if the meeting was held on a day other than the day of the meeting of the
Board of Directors and $300 if held on the same day as the meeting of the
Board of Directors, but no fee if the committee meeting was held at the same
time or immediately in conjunction with the meeting of the Board of Directors.
Non-employee directors are also eligible to receive stock options
pursuant to the Company's Amended and Restated 1990 Non-Employee Director
Stock Option Plan. See "Proposal 4."
PROPOSAL 2
APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors unanimously approved and recommends to the
Company's stockholders that they consider and approve the proposed amendment
of the Company's Certificate of Incorporation, as amended, to increase the
number of authorized shares of Common Stock, $.01 par value, from 10,000,000
to 30,000,000. The additional shares of Common Stock would be part of the
existing class of Common Stock and, if and when issued, would have the same
rights and privileges as the shares of Common Stock presently outstanding. If
the proposed amendment is approved by the Company's stockholders, the first
paragraph of Article Fourth of the Company's Certificate of Incorporation, as
amended, would read in its entirety as follows:
"(a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is (i) 30,000,000 shares of
Common Stock, $.01 par value per share (the "Common Stock"), and (ii)
1,622,685 shares of Preferred Stock, $.01 par value per share (the
"Preferred Stock")."
Pursuant to Delaware corporate law, the Board of Directors is authorized
to issue from time to time any and all authorized and unissued shares of
Common Stock for any proper corporate purposes without prior stockholder
approval, except as may be required for a particular transaction by the
Company's Certificate of Incorporation, or by the rules of the NASDAQ Stock
Market, or any other stock exchange on which the Company's securities may then
be listed.
The Board of Directors believes that the proposed increase in the number
of authorized shares of Common Stock is in the best interests of the Company
and its stockholders. As of January 2, 1996, there were 4,188,563 shares
of Common Stock issued and outstanding. On December 13, 1995, the Board of
Directors declared a two-for-one stock split with respect to the Common Stock,
which will be payable to stockholders in the form of a stock dividend, subject
to the approval by stockholders of the increase in the number of authorized
shares of Common Stock. The payment date and the record date for determining
stockholders entitled to receive stock dividend shares are to be determined by
the Board of Directors after the Annual Meeting. In connection with the stock
split, if the stockholders approve the increase in the number of authorized
shares of Common Stock, the Company will issue to stockholders of record on
the record date determined by the Board of Directors an aggregate of
approximately 5,500,000 shares of Common Stock (assuming completion of the
public offering discussed below). The stock split will result in one
additional share of Common Stock being issued for each share of Common Stock
issued and outstanding on the record date for the stock split. The Board of
Directors may, in its discretion, determine not to proceed with the two-for-
one stock split, depending upon the market price of the Company's Common Stock
and other factors. On December 14, 1995, the Company filed a Registration
Statement on Form S-3 with the Securities and Exchange Commission with respect
to the proposed public sale by the Company of up to 1,246,000 newly issued
shares of Common Stock (including up to 46,000 shares if the underwriters'
over-allotment option is exercised in full). In addition, an aggregate of
700,978 shares of Common Stock are currently reserved for issuance pursuant to
the Company's stock plans. Moreover, if Proposals 3 and 4, regarding adoption
of the Company's 1995 Combination Stock Option Plan and amendment of the
Company's Director Plan, respectively, are approved, an aggregate of 1,275,978
shares will be reserved for issuance pursuant to the Company's stock plans.
The proposed increase in the number of authorized shares of Common Stock will,
among other things, enable the Company to effect the stock split.
The proposed increase in the number of authorized shares of Common Stock
will also give the Company greater flexibility by allowing shares of Common
Stock to be issued by the Board of Directors without the delay and expense of
a special meeting of stockholders. For example, the Board of Directors may
deem it appropriate to make a private or public offering of the Common Stock
in order to raise funds for working capital or other purposes, or the Common
Stock may be issued to finance possible future acquisitions, or for
distribution to the Company's stockholders in the event of a stock dividend or
additional stock splits, or for distribution pursuant to employee benefit
plans.
Stockholders of the Company do not now have preemptive rights to
subscribe for or purchase additional shares of Common Stock, and the
stockholders will have no preemptive rights to subscribe for or purchase any
of the additional shares authorized by the proposed amendment.
Possible Effects of the Proposal - Anti-takeover Considerations
If the proposed amendment is adopted, the authority of the Board of
Directors to issue the newly-authorized but unissued shares of Common Stock
might be considered as having the effect of discouraging an attempt by another
person or entity to effect a takeover or otherwise gain control of the
Company, since the issuance of additional shares of Common Stock would dilute
the voting power of the Common Stock then outstanding.
The Company's Certificate of Incorporation currently includes several
provisions which may render more difficult an unfriendly tender offer, proxy
contest, merger or change in control of the Company.
The Certificate of Incorporation contains a so-called "anti-greenmail"
provision. The provision is intended to discourage speculators who accumulate
beneficial ownership of a significant block of stock and then, under the
threat of making a tender offer or proxy contest or instigating some other
corporate disruption, succeed in extracting from the corporation a premium
price to repurchase the shares acquired by the speculator. This tactic has
become known as greenmail. The anti-greenmail provision prohibits the Company
from purchasing any shares of Common Stock from a Related Person at a per
share price in excess of the fair market value at the time of such purchase,
unless the purchase is approved by two-thirds of the holders of the
outstanding shares of Common Stock, excluding any votes cast by the Related
Person. The term Related Person is defined in general to mean any person,
other than a founder of the Company (Mr. Ellenbogen and Dr. Stein), who
acquires more than 5% of the Company's voting stock. Stockholder approval is
not required for such purchases when the offer is made available on the same
terms to all holders of shares of Common Stock or when the purchases are
effected on the open market.
The Certificate of Incorporation also contains a provision that will
require the affirmative vote of the holders of 80% of the outstanding Common
Stock to approve amendments to the Certificate of Incorporation or to approve
extraordinary transactions that are required to be approved by stockholders
under the Delaware General Corporation Law, including mergers, sales of
substantially all of the Company's assets and dissolution, which actions are
not approved by a majority of the Continuing Directors (as defined below) of
the Company. The Certificate of Incorporation provides that the affirmative
vote of the holders of only a majority of the outstanding Common Stock is
required to approve such matters if they have been approved by the Continuing
Directors. The term Continuing Director is defined to mean (i) any member of
the Board of Directors who is unaffiliated with a Related Person and was a
member of the Board of Directors prior to the time any person became a Related
Person and (ii) any successor to such a Continuing Director who is not
affiliated with any Related Person and is recommended to succeed a Continuing
Director by a majority of the Continuing Directors then on the Board of
Directors. A majority of the Continuing Directors can designate a new director
to be a Continuing Director, even though such person is affiliated with a
Related Person.
The Continuing Directors are currently closely affiliated with
management and it is anticipated that they will continue to be so into the
foreseeable future. Accordingly, the effect of the provision of the Company's
Certificate of Incorporation described in the preceding paragraph would be to
make it unlikely that any transaction requiring a stockholder vote would
receive the requisite approval unless supported by management. The 80% voting
requirement would apply to recapitalizations, management-led buy-outs and
other management-led transactions requiring the vote of stockholders under the
Delaware General Corporation Law, if such transactions were not approved by
the Continuing Directors. However, because of the likelihood of the close
association of the Continuing Directors to management, it would be more likely
that such transactions would obtain the approval of the Continuing Directors
and require only majority stockholder approval.
Another provision included in the Certificate of Incorporation requires
the Board of Directors to consider social, economic and other factors in
evaluating whether certain types of corporate transactions proposed by another
party are in the best interests of the Company and its stockholders. These
transactions include (i) the purchase or acquisition through exchange or
otherwise of any of the Company's outstanding equity securities, (ii) the
merger or consolidation of the Company with another corporation and (iii) the
purchase or other acquisition of all or substantially all of the Company's
properties and assets.
Section 203 of the Delaware General Corporation Law prohibits a Delaware
corporation from engaging in a wide range of specified transactions with any
interested stockholder, defined to include, among others, any person or entity
who in the last three years obtained 15% or more of any class or series of
stock entitled to vote in the election of directors, unless, among other
exceptions, the transaction is approved by (i) the Board of Directors prior to
the date the interested stockholder obtained such status or (ii) the holders
of two-thirds of the outstanding shares of each class or series of stock
entitled to vote generally in the election of directors, not including those
shares owned by the interested stockholder. By virtue of the Company's
decision not to elect out of the statute's provisions, the statute applies to
the Company.
In 1992, the Board of Directors declared a dividend distribution of one
right (a "Right") for each outstanding share of Common Stock held of record on
December 22, 1992 or issued thereafter prior to the "Separation Time," as
defined below. After December 22, 1992 and for so long as the Rights are not
transferable separately from the Common Stock, one Right is deemed to be
delivered with each share of Common Stock issued or transferred by the
Company.
The "Separation Time" is the close of business on the earlier of (i) the
tenth business day (or such earlier or later date not beyond the thirtieth day
as the Board of Directors may decide) (a "Flip-in Date"), after the
announcement that a person has acquired 15% or more of the outstanding Common
Stock of the Company (or that a person already owning 15% has acquired any
more Common Stock) (an "Acquiring Person") or (ii) the tenth business day (or
such later date as the Board of Directors may decide) after any person
commences a tender or exchange offer to acquire beneficial ownership of 15% or
more of the outstanding shares of Common Stock. Until the Separation Time, the
Rights will be evidenced solely by the Common Stock certificates and may be
transferred only with the Common Stock.
After the Separation Time, the Rights become exercisable and may be
transferred independently of shares of Common Stock, and separate certificates
evidencing the Rights will be mailed to stockholders. The Rights will expire
on the earlier of (i) December 22, 2002, or (ii) the date on which the Rights
are redeemed.
Commencing after the Flip-in Date has occurred, the holders of Rights,
except the Acquiring Person, are entitled to purchase that number of shares of
the Company's Common Stock having a market value equal to twice the exercise
price of $30 per share (the "Exercise Price"). However, in lieu of the rights
to purchase shares of the Company's Common Stock at an effective 50% discount,
the Board of Directors of the Company may elect to issue one share of Common
Stock for each Right held by each holder other than the Acquiring Person.
After an Acquiring Person has become such, and prior to the expiration
of the Rights, the Company may not (i) consolidate or merge with any other
person, (ii) sell or otherwise transfer to any other person more than 50% of
the Company's assets, or assets generating more than 50% of the Company's
operating income or cash flow, (iii) engage in certain self-dealing
transactions with Acquiring Persons, or (iv) permit certain events to occur
when there is an Acquiring Person, if at the time of such merger, sale or
self-dealing transaction the Acquiring Person controls the board of directors
and, in the case of merger, will receive different treatment than other
stockholders, unless in any such case provision is made so that each holder of
a Right will thereafter have the right to receive, at the then current
Exercise Price, a number of shares of common stock of the Acquiring Person
engaging in the transaction having a market value equal to two times the
Exercise Price of the Right.
The Rights may be terminated by the Company at any time prior to the
close of business on a Flip-in Date.
The Company is authorized to issue 1,622,685 shares of Preferred Stock,
$.01 par value per share. No shares of the Preferred Stock of the Company have
been issued, and the Company has no present plans to issue any such shares.
The Board of Directors has the authority, without action by the stockholders,
to create one or more series of Preferred Stock and determine the number of
shares, designation, price, sinking fund terms, conversion and voting rights
with respect to any such series. The issuance of any such series of Preferred
Stock could be used to render more difficult an unfriendly tender offer, proxy
contest, merger or other change in control of the Company.
The provisions in the Certificate of Incorporation and By-Laws referred
to above, as well as the authority of the Board of Directors to issue
additional shares of Common Stock and accelerate the exercisability of the
Rights could be used by the Board of Directors in a manner calculated to
prevent the removal of management and make more difficult or discourage a
change in control of the Company. The distribution of Rights and certain
aspects of the foregoing provisions in the Company's Certificate of
Incorporation and By-Laws were designed to afford the Board of Directors the
opportunity to evaluate the terms of a takeover attempt without haste or undue
pressure, advise stockholders of its findings, and to negotiate to protect the
interests of all stockholders.
The Company is not aware of any efforts to accumulate the Company's
securities or to obtain control of the Company, and the Company has no present
intention or agreement to issue any additional shares of Common Stock, other
than pursuant to the proposed public offering, the two-for-one stock split,
and outstanding options and existing employee benefit plans. Furthermore, the
proposal to increase the number of authorized shares of Common Stock is not
part of any plan by the Company to adopt a series of anti-takeover measures,
and the Company has no present intention of soliciting a stockholder vote on
any such measures or series of measures.
Vote Required to Amend the Certificate of Incorporation
An affirmative vote by the holders of a majority of the outstanding
Common Stock entitled to vote at the Annual Meeting is required to adopt the
proposal to increase the number of authorized shares of Common Stock.
The Board of Directors recommends that stockholders vote for the
proposed amendment to the Certificate of Incorporation.
PROPOSAL 3
PROPOSAL TO ADOPT THE COMPANY'S 1995 COMBINATION STOCK OPTION PLAN
In June 1995, the Board of Directors adopted, subject to stockholder
approval, the Company's 1995 Combination Stock Option Plan (the "1995 Plan").
The Board of Directors believes that the Company and its stockholders
have benefited substantially from the Company's policy of using stock options
to provide incentives to those officers, directors, employees and other
persons who are or will be responsible for the long-term growth of the
Company. Stock options facilitate the ownership of the Company by stock option
plan participants, and thereby increase the participants' identity of interest
in the Company with that of the stockholders at large. Accordingly, in June
1995, the Company's Board of Directors adopted, subject to stockholder
approval, the Company's 1995 Combination Stock Option Plan (the "1995 Plan").
The 1995 Plan is attached hereto as Exhibit A. The purposes of the 1995 Plan
are to provide long-term incentives and rewards to those key employees of the
Company and its subsidiaries, and any other persons who are in a position to
contribute to the long-term success and growth of the Company and its
subsidiaries, to assist the Company in retaining and attracting executives and
key employees with requisite experience and ability, and to associate more
closely the interests of such executives and key employees with those of the
Company's stockholders.
Summary of the 1995 Combination Stock Option Plan
Under the 1995 Plan, the Company may grant both incentive stock options
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
it may be amended from time to time ("incentive stock options"), and other
options which are not qualified as incentive stock options ("nonqualified
stock options"). Incentive stock options may only be granted to persons who
are employees of the Company at the time of grant, which may include officers
and directors who are also employees. Nonqualified stock options may be
granted to persons who are officers, directors or employees of or consultants
or advisors to the Company or persons who are in a position to contribute to
the long-term success and growth of the Company at the time of grant.
Directors who are not employees of the Company or who are members of the
Compensation Committee of the Board of Directors (the "Compensation
Committee") are not eligible to participate in the 1995 Plan.
The 1995 Plan is administered by the Compensation Committee. Subject to
the terms of the 1995 Plan, the Compensation Committee determines the persons
to whom options are granted, the number of shares covered by the option, the
term of any option and the time during which any option is exercisable.
Options under the 1995 Plan may not be granted after June 28, 2005. No
option under the 1995 Plan may be exercised subsequent to ten years from the
date of grant (five years after the date of grant for incentive stock options
granted to holders of more than 10% of the Company's Common Stock).
No incentive stock option granted pursuant to the 1995 Plan may be
exercised more than three months after the option holder ceases to be an
employee of the Company, except that the Compensation Committee may provide
that in the event of death or permanent and total disability of the option
holder, the option may be exercised by the holder (or his estate) for a period
of up to one year after the date of such death or permanent and total
disability.
Nonqualified stock options may be granted at an exercise price greater
or lesser than the fair market value of the Common Stock on the date of the
grant, at the discretion of the Compensation Committee. Incentive stock
options, however, may not be granted at less than the fair market value of the
Common Stock and may be granted to holders of more than 10% of the Common
Stock only at an exercise price of at least 110% of the fair market value of
the Common Stock on the date of grant.
In order to assist an optionee in the acquisition of shares of Common
Stock pursuant to the exercise of an option granted under the 1995 Plan, the
Compensation Committee may authorize payment in the following forms: (i) cash,
(ii) by delivery of shares of Common Stock having a fair market value equal to
the purchase price of the shares, (iii) by delivery of any other property
(valued at its fair market value on the date of such exercise), or (iv) any
combination of cash, stock and other property.
A total of 550,000 shares of Common Stock is available for issuance
under the 1995 Plan, subject to adjustment for any recapitalization,
reclassification, stock split, stock combination, stock dividend or certain
other corporate reorganizations. If Proposal 2 is approved by the stockholders
at the Annual Meeting and the Board of Directors proceeds with the two-for-one
stock split discussed under Proposal 2, the number of shares issuable pursuant
to the 1995 Plan will be adjusted, in accordance with the terms of the Plan,
to 1,100,000. The shares issued may include either authorized but unissued
shares of Common Stock or treasury shares. Shares subject to an option that
ceases to be exercisable for any reason will be available for subsequent
option grants under the 1995 Plan.
As of December 27, 1995, options to purchase an aggregate of 292,400
shares of Common Stock had been granted under the 1995 Plan, subject to
stockholder approval, including (1) options to the named executive officers as
follows: 60,000 shares to S. David Ellenbogen, Chairman and Chief Executive
Officer and 60,000 shares to Jay Stein, Senior Vice President, both of whom
are also nominees for directors, 40,000 shares to Steve L. Nakashige,
President and Chief Operating Officer, and 20,000 shares to Mark Duerst, Vice
President of Sales and Marketing, (2) options to purchase an aggregate of
265,000 shares to all current executive officers as a group, and (3) options
to purchase an aggregate of 27,400 shares to all employees as a group,
including current officers who are not executive officers. No options were
granted under the 1995 Plan to current directors who were not executive
officers. Options to purchase 275,000 and 17,400 shares of Common Stock were
granted at exercise prices of $16.50 and $25.75, respectively. On December 27,
1995, the market value of the Common Stock underlying the 292,400 options
granted was $11,769,100, based upon the last reported sale price per share of
the Common Stock ($40.25) on the NASDAQ Stock Market on December 27, 1995. If
the 1995 Plan is not approved by the stockholders, the above-described 292,400
options will be rescinded.
Options granted under the 1995 Plan may not be assigned or transferred
except by will or the laws of descent and distribution or pursuant to a
"qualified domestic relations order" as defined by the Internal Revenue Code
of 1986, as amended, or Title 1 of ERISA.
The Board of Directors may amend, suspend or terminate the 1995 Plan;
provided, however, that neither the Board of Directors nor the Compensation
Committee may materially increase the number of securities which may be issued
under the 1995 Plan, extend the term of the 1995 Plan, materially modify the
requirements to be a participant in the 1995 Plan, materially increase the
benefits accruing to participants in the 1995 Plan, or otherwise modify the
1995 Plan in any way or manner requiring the approval of the stockholders
without such approval and compliance with any applicable law, rules or
regulations.
NEW PLAN BENEFITS
1995 COMBINATION STOCK OPTION PLAN
Number of
Shares Subject
Name Dollar Value ($)(1) to Options (2)
S. David Ellenbogen, Chairman and Chief Executive Officer $0 60,000
Jay A. Stein, Senior Vice President $0 60,000
Steve L. Nakashige, President and Chief Operating Officer $0 40,000
Jean Chaintreuil, Vice President of European Operations $0 0
Mark A. Duerst, Vice President of Sales and Marketing $0 20,000
Executive Officer Group $0 265,000
Non-Executive Director Group $0 0
Non-Executive Officer Employee Group $0 27,400
<F1> Based upon the difference between the market value of the underlying
shares on the date of grant and the exercise price of currently
outstanding options. This valuation does not take into account any
appreciation in market value of the underlying shares which may occur over
the term of the options. The dollar value of options to be received in the
future is not presently determinable because such value depends upon the
future market price of the underlying shares.
<F2> Subject to stockholder approval of the proposed 1995 Combination Stock
Option Plan, the Company in June and October 1995 granted options to
purchase an aggregate of 275,000 shares at an exercise price of $16.50 per
share and 17,400 shares at an exercise price of $25.75 per share,
respectively. If the stockholders do not approve the adoption of the 1995
Plan, the options to purchase such 275,000 shares will be rescinded.
Federal Tax Consequences of 1995 Plan
For Federal tax consequences of the 1995 Plan, see "Federal Tax
Consequences of the Directors Plan and the 1995 Plan."
Vote Required to Adopt the 1995 Combination Stock Option Plan
The affirmative vote of the holders of a majority of shares of Common
Stock present, in person or by proxy, and entitled to vote at the meeting, is
required to approve the 1995 Combination Stock Option Plan.
The Board of Directors recommends a vote for the adoption of the 1995
Combination Stock Option Plan.
PROPOSAL 4
PROPOSAL TO AMEND THE AMENDED AND RESTATED 1990 NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN
In December 1995, the Board of Directors adopted, subject to stockholder
approval, an amendment to the Amended and Restated 1990 Non-Employee Director
Stock Option Plan (the "Directors Plan"). The Directors Plan was initially
adopted in January 1990 and amended previously in December 1993. As set forth
in further detail below, the proposed amendment to the Directors Plan
increases the number of shares reserved for issuance under the Directors Plan
from 75,000 to 100,000 shares and provides for the issuance of additional
options to the Company's independent directors. If proposal 2 is approved by
the stockholders at the Annual Meeting and the Board of Directors proceeds
with the two-for-one stock split discussed under Proposal 2, the total number
of shares issuable pursuant to the Plan will be adjusted, in accordance with
the terms of the Plan to 200,000.
The purposes of the Directors Plan are to attract and retain the
services of experienced and knowledgeable independent directors and to provide
such persons with increased incentives to continue to work for the best
interests of the Company and its stockholders.
Each director who is not an employee of the Company or affiliated with a
5% stockholder is eligible to receive options under the Directors Plan. Of the
current directors, Messrs. Jacobs and Segel, and Dr. Peck are eligible
directors.
Under the Directors Plan, as originally adopted and as previously
amended and restated, each eligible director receives an option to purchase
5,000 shares of Common Stock at the time the director is first elected to the
Board of Directors. These options become exercisable in increments of 1,000
shares over a five year period for each year that the director remains
affiliated with the Company. In addition to the initial 5,000 share option,
each eligible director, who has served as a director for a full fiscal year,
is entitled to receive options to purchase an additional 2,000 shares of
Common Stock on December 15 of each year, provided he continues to be an
eligible director, until the director has received options to purchase 10,000
additional shares. These options become exercisable in full six months after
the date of grant.
Under the proposed amendment to the Directors Plan adopted on December
4, 1995, subject to stockholder approval, each eligible director who has
served as a director for a full fiscal year will be entitled to receive
options to purchase an additional 4,000 shares of Common Stock on December 15
of each year, provided he continues to be an eligible director, until the
director has received options to purchase 22,000 additional shares. If
Proposal 2 is approved by the stockholders at the Annual Meeting and the Board
of Directors proceeds with the two-for-one stock split, the number of shares
for which each eligible director will receive options on December 15 of each
year will increase from 4,000 (assuming the stockholders approved the
amendment to the Director's Plan) to 8,000 and the maximum number of shares
for which options may be granted to each eligible director will increase from
22,000 to 44,000. These options become exercisable in full six months after
the date of grant. This annual option to purchase 4,000 shares of Common Stock
replaces the prior provision to the Directors Plan which granted an annual
option to purchase 2,000 shares of Common Stock.
The exercise price for all options granted under the Directors Plan is
the fair market value of the Common Stock at the time the option is granted.
The exercise price may be paid in cash, with Common Stock (valued at fair
market value on the date of purchase), or by a combination of cash and Common
Stock.
Shares issued under the Directors Plan may include treasury shares,
authorized but unissued shares and shares previously reserved for issuance
upon exercise of options which have expired or terminated. Shares subject to
an option that ceases to be exercisable for any reason will be available for
subsequent option grants. The Directors Plan terminates and no further options
may be issued under the Plan after January 3, 2000.
No option under the Directors Plan may be exercised subsequent to ten
years from the date of grant. If an eligible director ceases to be a director
of the Company for any reason, all options held by that director that are not
then exercisable terminate. Options that are exercisable at the time of
termination will remain exercisable for a period of thirty days following such
termination, unless such termination is a result of death or permanent
disability, in which case such options will be exercisable for a period of one
year. Options granted under the Directors Plan may not be assigned or
transferred except by will or the laws of descent and distribution.
The Directors Plan is administered by the Board of Directors whose
authority is limited to construing the Directors Plan, determining all
questions as to participant eligibility and adopting and amending such rules
and regulations for the administration of the Directors Plan as it may deem
desirable.
The Directors Plan may be amended by the Board of Directors or any
committee to which such authority has been delegated by the Board of
Directors, subject to certain limitations (i) with respect to certain matters
for which stockholder approval may be required, and (ii) regarding the number
of such amendments which may be made in any six month period. No amendment,
suspension or termination of the Directors Plan, except as described in the
Directors Plan, may adversely affect the rights of an option holder under the
Directors Plan without the holder's consent.
In fiscal 1990, Messrs. Jacobs and Segel, Dr. Peck and Mr. Dennis C.
Fill, a former director of the Company, each received options to purchase
5,000 shares under the Directors Plan with an exercise price of $8.50, $8.50,
$17.75 and $8.50 per share, respectively. On December 15, 1992 and December
15, 1991, the Company granted an option to purchase 1,000 shares to each of
Messrs. Jacobs and Segel and Dr. Peck at an exercise price of $5.375 and
$7.875 per share, respectively. On December 15, 1994 and December 15, 1993,
the Company granted an option to purchase 2,000 shares to each of Messrs.
Jacobs and Segel and Dr. Peck at an exercise price of $14.00 and $3.625 per
share, respectively. In addition, subject to stockholder approval of the
amendment to the Directors Plan, on December 15, 1995 the Company granted an
option to purchase 4,000 shares to each of these directors, each a nominee for
election as a director, at an exercise price of $37.50 per share.
If the stockholders do not approve the amendment to the Directors Plan,
2,000 of the 4,000 options granted to each of Messrs. Jacobs, Segel and Peck
on December 15, 1995 will be rescinded. No options have or will be granted
under the Directors Plan to any of the named executive officers. No options
have been granted under the Directors Plan to all current executive officers
as a group. Options to purchase an aggregate of 45,000 shares have been
granted under the Directors Plan to all current directors who were not
executive officers as a group, including options to purchase 12,000 shares
granted December 15, 1995, subject to stockholder approval of the proposed
amendment to the Directors Plan. No options were granted under the Directors
Plan to employees (including current officers who are not executive officers)
as a group. At December 27, 1995, the market value of the Common Stock
underlying the outstanding options under the Directors Plan was $1,811,250,
based upon the last reported sale price per share of the Common Stock ($40.25)
on the NASDAQ Stock Market on December 27, 1995.
NEW PLAN BENEFITS
1990 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Number of
Shares Subject
Name Dollar Value ($)(1) to Options (2)(3)
S. David Ellenbogen, Chairman and Chief Executive Officer Not eligible --
Jay A. Stein, Senior Vice President Not eligible --
Steve L. Nakashige, President and Chief Operating Officer Not eligible --
Jean Chaintreuil, Vice President of European Operations Not eligible --
Executive Officer Group Not eligible --
Non-Executive Director Group 0 12,000
Non-Executive Officer Employee Group Not eligible --
<F1> Based upon the difference between the market value of the underlying
shares on the date of grant and the exercise price of currently
outstanding options. This valuation does not take into account any
appreciation in market value of the underlying shares which may occur over
the term of the options. The dollar value of options to be received in the
future is not presently determinable because such value depends upon the
future market price of the underlying shares.
<F2> Options may be granted under the Directors Plan only to nonemployee
directors.
<F3> Subject to stockholder approval of the proposed amendment to the
Directors Plan, on December 15, 1995, the Company granted an option to
purchase 4,000 shares to each of Messrs. Jacobs, Segel and Peck at an
exercise price of $37.50 per share. If the proposal to amend the Directors
Plan is not approved by the stockholders, options to purchase 2,000 of the
4,000 shares granted to each of Messrs. Jacobs, Segel and Peck will be
rescinded.
Federal Tax Consequences of Directors Plan
For the Federal tax consequences of the Directors Plan, see "Federal Tax
Consequences of the Directors Plan and the 1995 Plan."
Vote Required to Adopt the Amended and Restated 1990 Non-Employee Director
Stock Option Plan
The affirmative vote of the holders of a majority of shares of Common
Stock present, in person or by proxy, and entitled to vote at the meeting, is
required to approve the Directors Plan.
The Board of Directors recommends a vote for the adoption of the Amended
and Restated 1990 Non-Employee Director Stock Option Plan.
FEDERAL TAX CONSEQUENCES OF THE DIRECTORS PLAN AND THE 1995 PLAN
The following general discussion of the Federal income tax consequences
of options granted under the Directors Plan and the 1995 Plan is based upon
the provisions of the Internal Revenue Code as in effect on the date hereof,
current regulations thereunder, and existing public and private administrative
rulings of the Internal Revenue Service. This discussion is not intended to be
a complete discussion of all of the Federal income tax consequences of the
Directors Plan or the 1995 Plan or of all of the requirements that must be met
in order to qualify for the tax treatment described herein. Changes in the law
and regulations may modify the discussion, and in some cases the changes may
be retroactive. No information is provided as to state tax laws. None of the
Plans are qualified under Section 401 of the Code, nor are they subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
Federal Tax Consequences of the Directors Plan
A non-employee director will not recognize any taxable income upon the
grant of an option under the Directors Plan. Generally, an option holder
recognizes ordinary taxable income at the time an option is exercised in an
amount equal to the excess of the fair market value of the shares of Common
Stock on the date of exercise over the exercise price. However, officers and
directors, including non-employee directors eligible to participate in the
Directors Plan, generally will be subject to Section 16(b) of the Securities
Exchange Act of 1934 ("Section 16(b)") upon their sale of shares of Common
Stock and this may affect their tax liability. In the case of exercise of an
option by someone whose sale of shares of Common Stock would subject him or
her to liability under Section 16(b), recognition of income by the option
holder will be postponed. The IRS regulations have not yet been amended to
conform with the recently revised rules under Section 16(b). However, it is
generally anticipated that the date of recognition (the "Recognition Date")
will be the earlier of (i) six months after the date the option was granted,
or (ii) the first day on which the sale of the shares would not subject the
individual to liability under Section 16(b). It is possible that the six month
period will instead run from the option holder's most recent grant or purchase
of Common Stock prior to his or her exercise of the option. The option holder
will generally recognize ordinary taxable income on the Recognition Date in an
amount equal to the excess of the fair market value of the shares at that time
over the exercise price. Despite this general rule, if the Recognition Date is
after the date of exercise, then the option holder may make an election
pursuant to Section 83(b) of the Code. In this case, the option holder will
recognize ordinary taxable income at the time the option is exercised and not
on the later date. In order to be effective, the 83(b) election must be filed
with the Company and the Internal Revenue Service within 30 days of exercise.
The Company will generally be entitled to a compensation deduction for
Federal income tax purposes in an amount equal to the taxable income
recognized by the option holder, provided the Company reports the income on a
form W-2, W-2c, or 1099, whichever is applicable, that is timely provided to
the option holder and filed with the IRS.
When an option holder subsequently disposes of the shares of Common
Stock received upon exercise of an option, he or she will recognize long-term
or short-term capital gain or loss (depending upon the holding period), in an
amount equal to the difference between the sale price and the fair market
value on the date on which the option holder recognized ordinary taxable
income as a result of the exercise of the option.
An option holder who pays the exercise price, in whole or in part, by
delivering shares of Common Stock already owned by him or her will recognize
no gain or loss for Federal income tax purposes on the shares surrendered, but
otherwise will be taxed according to the rules described above. To the extent
the shares acquired upon exercise are equal in number to the shares
surrendered, the basis of the shares received will be equal to the basis of
the shares surrendered. The basis of shares received in excess of the shares
surrendered upon exercise will be equal to the fair market value of the shares
on the date of exercise, and the holding period for the shares received will
commence on that date.
Incentive Stock Options Under the 1995 Plan
An option holder generally will not recognize taxable income upon either
the grant or the exercise of an incentive stock option. However, under
certain circumstances, there may be alternative minimum tax or other tax
consequences, as discussed below.
An option holder will recognize taxable income upon the disposition of
the shares received upon exercise of an incentive stock option. Any gain
recognized upon a disposition that is not a "disqualifying disposition" (as
defined below) will be taxable as long-term capital gain.
A "disqualifying disposition" means any disposition of shares acquired
on the exercise of an incentive stock option within two years of the date the
option was granted or within one year of the date the shares were issued to
the option holder. The use of shares acquired pursuant to the exercise of an
incentive stock option to pay the option price under another incentive stock
option is treated as a disposition for this purpose. In general, if an
optionee makes a disqualifying disposition, an amount equal to the excess of
(a) the lesser of (i) the fair market value of the shares on the date of
exercise or (ii) the amount actually realized over (b) the option exercise
price will be taxable as ordinary income and the balance of the gain
recognized, if any, will be taxable as either long-term or short-term capital
gain, depending on the optionee's holding period for the shares. In the case
of a gift or certain other transfers, the amount of ordinary income taxable to
the optionee is not limited to the amount of gain which would be recognized in
the case of a sale. Instead, it is equal to the excess of fair market value of
the shares on the date of exercise over the option exercise price.
As noted previously, officers and directors of the Company generally
will be subject to Section 16(b) upon the sale of shares of Common Stock. In
the case of a disqualifying disposition of shares acquired pursuant to the
exercise of an incentive stock option, the date on which the fair market value
of the shares is determined will be postponed, and the tax consequences will
be similar to the treatment that applies to shares purchased pursuant to
options granted under the Directors Plan, including the ability to make a
Section 83(b) election.
In general, in the year an incentive stock option is exercised, the
holder must include the excess of the fair market value of the shares issued
upon exercise over the exercise price in the calculation of alternative
minimum taxable income. The application of the alternative minimum tax rules
for an option holder subject to Section 16(b) or who receives shares that are
not "substantially vested" are more complex and may depend upon whether the
holder makes a Section 83(b) election, as described above.
The Company will not be entitled to any deduction with respect to the
grant or exercise of an incentive stock option provided the option holder does
not make a disqualifying disposition. If the option holder does make a
disqualifying disposition, the Company will generally be entitled to a
deduction for Federal income tax purposes in an amount equal to the taxable
income recognized by the optionee, provided the Company reports the income on
a form W-2 or W-2c, whichever is applicable, that is timely provided to the
option holder and filed with the IRS.
Non-Qualified Stock Options Under the 1995 Plan
The recipient of a non-qualified stock option under the 1995 Plan will
not recognize any taxable income at the time the option is granted.
Upon exercise, the optionee will generally recognize ordinary taxable
income in an amount equal to the excess of the fair market value of the shares
on the date of exercise over the option exercise price. Upon a subsequent sale
of the shares, long-term or short-term gain or loss (depending upon the
holding period) will generally be recognized equal to the difference between
the amount realized and the fair market value of the shares on the date of
exercise.
The Company will generally be entitled to a compensation deduction for
Federal income tax purposes in an amount equal to the taxable income
recognized by the option holder, provided the Company reports the income on a
form W-2, W-2c or 1099, whichever is applicable, that is timely provided to
the option holder and filed with the IRS.
If shares of Common Stock are used to pay all or a portion of the
exercise price, the same rules described above concerning the Directors Plan
will apply.
PROPOSAL 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors recommends that the stockholders ratify the
selection of Arthur Andersen LLP as independent public accountants to examine
the consolidated financial statements of the Company and its subsidiaries for
the fiscal year ending September 28, 1996. Arthur Andersen LLP has audited the
Company's financial statements annually since 1986.
A representative of Arthur Andersen LLP will be present at the meeting
to make a statement if such representative desires to do so and to respond to
appropriate questions.
OTHER INFORMATION
SHARE OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of January 2, 1996
with respect to the beneficial ownership of the Company's Common Stock of each
director, each nominee for director, each named executive officer in the
Summary Compensation Table under "Executive Compensation", below, all
executive officers and directors as a group, and each person known by the
Company to be the beneficial owner of 5% or more of the Company's Common
Stock. This information is based upon information received from or on behalf
of the named individuals.
Beneficial Ownership (1)
Name of Number Percent of
Beneficial Owner of Shares Common Shares
S. David Ellenbogen (2) 313,130 7.4 %
590 Lincoln Street
Waltham, Massachusetts 02154
Jay A. Stein (3) 274,190 6.5 %
590 Lincoln Street
Waltham, Massachusetts 02154
Steve L. Nakashige (4) 52,960 1.3 %
Jean Chaintreuil (4) 5,490 *
Mark A. Duerst (4) 17,580 *
Irwin Jacobs (4) 11,000 *
William A. Peck (4) 3,000 *
Gerald Segel (4) 11,000 *
All directors and officers as a group
(11 persons)(4) 771,785 17.99%
____________________
<F*> Less than one percent.
<F1> Unless otherwise noted, each person identified possesses sole voting and
investment power with respect to the shares listed.
<F2> Includes (i) 27,150 shares held by, or in trust for, Mr. Ellenbogen's
children and grandchildren and (ii) 7,190 shares held by Mr. Ellenbogen as
trustee, all of which shares Mr. Ellenbogen disclaims beneficial
ownership. Also includes options to purchase 28,440 shares of Common Stock
which are exercisable within 60 days after January 2, 1996. Certain of
these options are subject to stockholder approval.
<F3> Includes (i) 7,190 shares held by, or in trust, for Dr. Stein's children
and (ii) 18,250 shares held by Dr. Stein as trustee or custodian, all of
which shares Dr. Stein disclaims beneficial ownership. Also includes
options to purchase 28,440 shares of Common Stock which are exercisable
within 60 days after January 2, 1996. Certain of these options are subject
to stockholder approval.
<F4> Includes the following shares subject to options which are exercisable
within 60 days after January 2, 1996: Mr. Nakashige - 52,960; Mr.
Chaintreuil - 5,490; Mr. Duerst - 17,580; Mr. Jacobs - 11,000; Dr. Peck -
3,000; Mr. Segel - 11,000; and all officers as a group - 237,450. Certain
of these options are subject to stockholder approval.
EXECUTIVE OFFICERS
The names of the executive officers of the Company who are not directors
of the Company, and certain biographical information furnished by them, are
set forth below:
Name Age Title
Steve L. Nakashige 46 President and Chief Operating
Officer
Jean Chaintreuil 40 Vice President of European Operations
Mark A. Duerst 39 Vice President of Sales & Marketing
Glenn P. Muir 36 Vice President of Finance and
Treasurer
Theodore H. Vrountas 61 Vice President of Operations
Joel B. Weinstein 45 Vice President of New Business
Development
Executive officers are chosen by and serve at the discretion of the
Board of Directors of the Company.
Mr. Nakashige has served as President and Chief Operating Officer of the
Company since May 1994. From 1988 to 1994, Mr. Nakashige was with General
Electric Medical Systems where he held the position of Senior Manager,
Ultrasound Business from 1990 to 1994 and Manager, Ultrasound Marketing
Operations from 1988 to 1990. From 1986 to 1988, Mr. Nakashige was Vice
President of Operations of Biosound Inc., a medical equipment manufacturer.
Mr. Chaintreuil has served as Vice President of European Operations of
the Company since February 1993. Mr. Chaintreuil has held the position of
President, Hologic Europe since joining the Company in October 1991. From 1986
to 1991, Mr. Chaintreuil held a variety of positions with General
Electric/C.G.R., including International Marketing Manager for mammography and
stand-alone products and Regional Sales and Service Manager for the Paris and
west France territory.
Mr. Duerst has served as Vice President of Sales & Marketing since
September 1994. Prior to that, Mr. Duerst held the position of Director of
North American Sales since 1990 and the position of Central Regional Sales
Manager since joining the Company in 1989. From 1988 to 1989, Mr. Duerst was
an independent marketing and sales consultant and from 1983 to 1987 he was
Director of Sales & Marketing of Lunar Corporation.
Mr. Muir, a Certified Public Accountant, has served as Vice President of
Finance and Treasurer of the Company since February 1992. Prior to that, Mr.
Muir held the position of Controller since joining the Company in October
1988. From 1986 to 1988, Mr. Muir was Vice President of Finance and
Administration and Chief Financial Officer of Metallon Engineered Materials
Corp., a manufacturer of composite materials. Mr. Muir received an MBA from
the Harvard Graduate School of Business Administration in 1986.
Mr. Vrountas has served as Vice President of Operations since March 1994
and as an executive officer of the Company since December 1994. Prior to
joining the Company, Mr. Vrountas was employed with GTE Government Systems for
twenty-five years. His most recent position with GTE was Director of
Operations for the Communications Systems Division from 1987 to 1993.
Mr. Weinstein has served as Vice President of New Business Development
since August 1993. Prior to that, Mr. Weinstein held the position of Vice
President of Marketing since joining the Company in 1987. From 1980 to 1987,
Mr. Weinstein held a variety of positions with Advanced Technology
Laboratories, Inc., including Marketing Director from 1982 to 1984 and Vice
President, Business Development from 1984 to 1987.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth information concerning the compensation
during the last three fiscal years of the Company's Chief Executive Officer
and the four other most highly compensated executive officers whose annual
salary and bonus, if any, exceeded $100,000 for services in all capacities to
the Company during the last fiscal year (the "named executive officers").
Long-Term
Compensation
Name and Fiscal Annual Compensation Securities Underlying All Other
Principal Position Year Salary ($) Bonus ($) Options (#) Compensation ($)(2)
S. David Ellenbogen 1995 $167,775 $42,500 65,000 $2,310
Chairman and CEO 1994 $176,858 $60,000 25,000 $2,310
1993 $154,869 --- --- $2,774
Jay A. Stein 1995 $167,495 $42,500 65,000 $2,310
Senior Vice President 1994 $176,672 $60,000 25,000 $2,310
1993 $154,869 --- --- $2,947
Steve L. Nakashige 1995 $133,909 $40,000 40,000 $3,954
President and COO 1994(1) $ 58,289 $15,000 100,000 ---
Jean Chaintreuil 1995 $218,406 $ 5,000 --- ---
Vice President 1994 $174,616 --- --- ---
European Operations 1993 $165,037 --- 10,000 ---
Mark A. Duerst 1995 $169,592 $ 5,000 20,000 $2,310
Vice President 1994 $142,112 $10,000 50,000 $3,041
Sales and Marketing 1993 $109,651 --- 12,000 $1,817
____________________
<F1> Mr. Nakashige joined the Company in fiscal 1994.
<F2> The amounts reported in this column consist of the Company's matching
contribution under the Company's 401(k) Profit-Sharing Plan.
Employment Contract
The Company's European subsidiaries have entered into an Employment
Agreement (the "Employment Agreement") with Jean Chaintreuil, the Company's
Vice President of European Operations, dated October 1, 1991, whereby Mr.
Chaintreuil serves as an executive to Hologic Europe N.V. ("Hologic Belgium")
and Hologic France S.A. ("Hologic France") and as a Director of Hologic
Belgium, Hologic France and Hologic Espana, S.A. for a total annual base
compensation not to exceed 660,000 French Francs. Mr. Chaintreuil is also
eligible under the Employment Agreement to receive certain performance bonuses
and to be recommended for certain performance-based stock options to be
granted by the Company. The Employment Agreement is for an indeterminate
period.
Stock Option Grants in Last Fiscal Year
The following table sets forth the stock options granted to the
Company's named executive officers during the fiscal year ended September 30,
1995.
Potential Realizable Value
Individual Grants at Assumed Annual Rates
Number of % of Total Of Stock Price Appreciation
Securities Options Granted Exercise for Option Term (4)
Underlying Options to Employees Price Expiration
Name Granted (#) in Fiscal Year ($/share)(3) Date 5% ($) 10% ($)
S.D. Ellenbogen 5,000 (1) 1% $12.375 4/4/05 $ 38,913 $ 98,613
60,000 (2) 16% $16.50 6/28/05 $622,606 $1,577,805
J. Stein 5,000 (1) 1% $12.375 4/4/05 $ 38,913 $ 98,613
60,000 (2) 16% $16.50 6/28/05 $622,606 $1,577,805
S. Nakashige 40,000 (2) 11% $16.50 6/28/05 $415,070 $1,051,870
J. Chaintreuil --- --- --- --- --- ---
M. Duerst 20,000 (2) 5% $16.50 6/28/05 $207,535 $ 525,935
_____________
<F1> Options vest at the rate of 10% per year, beginning on January 1, 1996,
and provide for accelerated vesting of an additional 10% to 20% of the
shares for any fiscal year in which the Company achieves pre-tax operating
earnings of 5% or 10% of sales, respectively.
<F2> Options vest at the rate of 20% per year, plus the pre-tax operating
earnings percentage of the most recently ended fiscal year, beginning on
January 1, 1996, and capped at 33 1/3% per year.
<F3> The exercise price is equal to the fair market value of the stock on the
date of grant.
<F4> The 5% and 10% assumed rates of annual compounded stock price
appreciation are mandated by the rules of the SEC and do not represent the
Company's estimate or projection of future Common Stock prices.
Aggregated 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 during the fiscal year ended September 30, 1995 and
the fiscal year-end value of unexercised options for the Company's named
executive officers.
Number of
Securities Underlying Value of Unexercised
Unexercised Options in-the-Money Options at
Shares Acquired Value at Fiscal Year End (#) Fiscal Year End ($)(2)
Name on Exercise (#) Realized ($)(1) Exercisable / Unexercisable Exercisable/Unexercisable
S. D. Ellenbogen --- --- 7,500 / 82,500 $144,375 / $ 780,000
J. Stein --- --- 7,500 / 82,500 $144,375 / $ 780,000
S. Nakashige 2,500 $25,313 27,500 / 110,000 $429,688 / $1,353,750
J. Chaintreuil --- --- 5,000 / 5,000 $ 88,625 / $ 89,500
M. Duerst 7,250 $84,731 --- / 75,400 --- / $ 917,875
____________________
<F1> The amount "realized" reflects the appreciation on the date of exercise
(based on the excess of the fair market value of the shares on the date of
exercise over the exercise price). However, because the executive officers
may keep the shares they acquired upon the exercise of the options (or
sell them at a different price), these amounts do not necessarily reflect
cash realized upon the sale of those shares.
<F2> Based upon the $23 closing market price of the Company's Common Stock
as reported on the NASDAQ National Market System on September 30, 1995
minus the respective option exercise price.
Executive Bonus Program
The Compensation Committee of the Board of Directors approved an
Executive and Key Employee Bonus Program for fiscal 1996 under which executive
officers, senior management and key contributors selected by the Compensation
Committee may be eligible for cash bonuses, awarded at the discretion of the
Compensation Committee, to be paid in the first quarter of fiscal 1997. Under
this program, if pre-tax profits exceed $2,000,000, a bonus pool is expected
to be created equal to up to 8% of the Company's pre-tax profits. If pre-tax
profits exceed $1,000,000 and are $2,000,000 or less, a bonus pool is expected
to be created equal to up to 8% of the Company's pre-tax profits which exceed
a base amount of $1,000,000. No bonus pool is expected to be created if the
Company's pre-tax profits do not exceed $1,000,000. For fiscal 1995, bonuses
of $225,000 were granted under an identical program approved for that year.
Compensation Committee Interlocks and Insider Participation
Decisions regarding executive compensation are made by the Company's
Compensation Committee of the Board of Directors, which is composed of Irwin
Jacobs, William A. Peck and Gerald Segel. The Compensation Committee also
administers the Company's 1986 Combination Stock Option Plan, the Employee
Stock Purchase Plan, will administer the Company's Executive and Key Employee
Bonus Program for fiscal 1996 and will administer the Company's 1995
Combination Stock Option Plan, if approved. None of the members of the
Compensation Committee has ever been an officer or employee of the Company or
any of its subsidiaries.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, consisting
entirely of independent non-management directors, approves all policies under
which compensation is paid or awarded to the Company's executive officers. The
Committee is comprised of Messrs. Jacobs, Peck and Segel.
Hologic's Compensation Philosophy and Plan
The Company's executive compensation program is designed to attract and
retain superior executive talent, to provide incentives and rewards to
executive officers who will contribute to the long-term success of Hologic and
to closely align the interests of executives with those of Hologic's
stockholders.
The Committee reviews the Company's executive compensation program
through the application of the subjective business judgment of each of its
members and through an informal survey of executive compensation programs of
peer companies. The Compensation Committee does not use a quantitative method
or use a mathematical formula to set any element of compensation for a
particular executive officer. The Compensation Committee uses discretion and
considers all elements of an executive's compensation package when setting
each portion of compensation which is based upon corporate performance and
individual initiatives and performance. The principle elements of the
Company's executive compensation program consist of: (i) base annual salary,
(ii) executive bonus program and (iii) stock options.
Base Annual Salaries. Base annual salaries for executive officers are
initially determined by evaluating the responsibilities of the position and
the experience and knowledge of the individual. Also taken into consideration
is the competitiveness of the marketplace for executive talent, including a
comparison of base annual salaries for comparable positions at peer companies.
Individual adjustments are made at the discretion of the Compensation
Committee, taking into consideration factors such as the Company's
performance and the individual's performance.
Executive Bonus Program. The Company maintains an Executive Bonus Program
which provides for a bonus pool to be established for executive officers,
senior management and key contributors of the Company based upon the amount by
which the Company's pre-tax profits exceed certain specified targets for a
fiscal year. Bonuses from this pool are allocated among the executive officers
and other eligible employees at the discretion of the Compensation Committee,
based upon the Compensation Committee's subjective determination of the
participant's performance during the year. For Fiscal 1995, bonuses
aggregating $225,000 were granted under an identical program. See
"Compensation of Executive Officers -- Summary Compensation Table" and "--
Executive Bonus Program".
Stock Options. The third component of executive officers' compensation is the
Company's 1986 and 1995 Combination Stock Option Plans pursuant to which the
Company has granted to non-director executive officers options to purchase
shares of Common Stock.
Stock options are designed to align the interests of the executive with
those of the stockholders. Stock options are granted at an exercise price
equal to the fair market value of the Common Stock on the date of grant. These
options generally vest at the rate of 20% or 25% per year, with the first
installment vesting either at the end of one or two years, respectively, from
the date of employment (for options granted upon initial employment) or the
date of grant and are exercisable within ten years from the date of grant.
This plan is designed to provide incentives for the creation of long-term
value for the Company's stockholders as the full benefit of the compensation
package cannot be realized unless stock price appreciation occurs over a
number of years. The size of individual stock grants are based upon the
Committee's subjective review of the job responsibility and individual
contribution to the Company's success. Previous stock option grants are
considered when awards are determined.
The Committee incorporated additional performance incentives in new
awards granted to executive officers from December 1993 through April 1995
under the 1986 Plan by providing for vesting over a longer period, ten years,
with accelerated vesting if the Company meets certain profitability criteria
as measured by pre-tax earnings. These new options vest at the rate of 10% per
year and provide for accelerated vesting of an additional 10% to 20% of the
shares for any fiscal year in which the Company achieves pre-tax operating
earnings of 5% or 10% of sales, respectively. The Company has granted options
to purchase 20,000 shares under this new arrangement in fiscal 1995, of which
options to purchase 5,000 shares were granted to each of Messrs. Ellenbogen
and Stein at a purchase price of $12.375 per share.
The Board of Directors approved the 1995 Combination Stock Option Plan,
which incorporated additional performance incentives in new awards granted to
executive officers in June 1995. These new options vest at the rate of 20% per
year, plus the pre-tax operating earnings percentage of the most recently
ended fiscal year, beginning January 1, 1996, and capped at 33 1/3% per year.
The Company has granted options, subject to shareholder approval of the Plan,
to purchase 275,000 shares under this new arrangement, of which options to
purchase 60,000, 60,000, 40,000 and 20,000 shares were granted to Messrs.
Ellenbogen, Stein, Nakashige and Duerst, respectively, at a purchase price of
$16.50 per share.
Compensation of the Chief Executive Officer
In January 1995, Mr. Ellenbogen's base salary was increased to $170,000
from $165,000, which the Committee considers to be comparable to the salaries
of chief executive officers of peer companies. In fiscal 1995, Mr. Ellenbogen
also received a bonus of $42,500 and stock options to purchase 65,000 shares
of Common Stock. The bonus represented the amount of the fiscal 1995 bonus
pool under the Company's Executive Bonus Program allocated to Mr. Ellenbogen
by the Compensation Committee. This allocation reflects the Compensation
Committee's judgment that Mr. Ellenbogen's efforts contributed significantly
to the Company's success during fiscal 1995. The stock option grant was based
upon the Compensation Committee's subjective assessment of Mr. Ellenbogen's
contributions and continuing importance to the Company, and the Committee's
desire to provide Mr. Ellenbogen with a long-term performance incentive
similar to incentives granted to other executive officers of the Company.
Conclusion
Through these programs, a significant portion of the Company's executive
compensation is linked directly to individual and Company performance in
pursuance of strategic goals as well as stock price appreciation. The
Compensation Committee intends to continue the policy of linking executive
compensation to Company performance and stockholder return, recognizing
however, that fluctuations in the operating results of the business may
result over time.
The Compensation Committee
Irwin Jacobs
William A. Peck
Gerald Segel
PERFORMANCE GRAPH
The following Performance Graph compares the yearly percentage change in
the Company's cumulative total shareholder return on the Company's Common
Stock for the period from September 30, 1990 through September 30, 1995,
based upon the market price of the Company's Common Stock, with the cumulative
total return on the Standard and Poor's 500 Stock Index (the "S&P 500") and
the Standard and Poor's Medical Products and Supplies Index (the "S&P Medical
Products") for that period. The Performance Graph assumes the investment of
$100 on September 30, 1990 in the Company's Common Stock, the S&P 500 and the
S&P Medical Products, and the reinvestment of any and all dividends.
Cumulative Total Return
September September September September September September
1990 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------------
Hologic, Inc. $100 $ 39 $ 35 $ 28 $ 88 $130
S&P 500 $100 $131 $146 $165 $171 $221
S&P Medical Products $100 $157 $153 $116 $148 $239
CERTAIN TRANSACTIONS
For the fiscal year ended September 30, 1995, the following transactions
occurred which involved more than $60,000 between the Company and any
director, executive officer, five percent (5%) beneficial owner of the
Company's Common Stock or any member of the immediate family of any of the
foregoing persons.
Vivid Technologies, Inc.
In June 1989, the Company granted an exclusive worldwide license of
certain of its QDR technology to Vivid Technologies, Inc. ("Vivid") for the
sole purpose of developing a baggage inspection and security system. Mr.
Ellenbogen and Dr. Stein are directors of Vivid and hold similar offices in
Vivid as they do in the Company. Mr. Ellenbogen and Dr. Stein collectively own
approximately 23% of the outstanding voting stock of Vivid.
In return for its license of the QDR technology, Vivid is required to
pay the Company royalties of 5% of the first $50 million of net sales of
products using the Company's technology, and 3% of net sales in excess of $50
million, up to a maximum of $200 million of net sales. The maximum aggregate
royalties payable by Vivid to the Company under this arrangement are $7
million. In fiscal 1995, Vivid paid the Company royalties of approximately
$719,000 under the License Agreement.
Under a management agreement, the Company has agreed to provide Vivid
with management, engineering and administrative support, and space at the
Company's facilities. The Company and Vivid have agreed that Vivid will vacate
this space by the end of the second quarter of fiscal 1996. The support
services provided by the Company under this arrangement include the part-time
management services of Mr. Ellenbogen and Dr. Stein and other managerial
personnel, and secretarial, telephone and similar services. Vivid is required
to pay the Company its proportionate share of the Company's overhead,
including rent and the salary of the Company's employees rendering services to
Vivid. Under this arrangement, no compensation is paid by Vivid to any of the
Company's employees. The management agreement may be terminated by either
party on six month's written notice. For the fiscal year ended September 30,
1995, Vivid was charged approximately $740,000 by the Company for services
rendered under the agreement, manufactured sub-assemblies, spare parts and
space at the Company's facilities. In December 1995, Vivid paid the Company a
$40,000 bonus for the management services provided in fiscal 1995. The Company
estimates that Mr. Ellenbogen and Dr. Stein have each been spending
approximately sixteen and eight hours per week, respectively, on matters
involving Vivid.
Indebtedness
In fiscal 1995, Steve L. Nakashige, the President and Chief Operating
Officer of the Company, borrowed an aggregate of $161,000 from the Company
pursuant to a bridge loan to assist Mr. Nakashige in the purchase of a local
primary residence in connection with his relocation to Massachusetts. The loan
has no stated annual interest rate. As of the date of this proxy statement,
$20,517 of principal on the loan is outstanding.
In fiscal 1995, Mark A. Duerst, the Vice President of Sales and
Marketing of the Company, borrowed an aggregate of $155,000 from the Company
pursuant to a bridge loan to assist Mr. Duerst in the purchase of a local
primary residence in connection with his relocation to Massachusetts. The loan
has no stated interest rate. As of the date of this proxy statement, $155,000
of principal on the loan is outstanding.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission ("SEC"). Specific filing deadlines of these
reports have been established and the Company is required to disclose in this
Proxy Statement any failure to file by these dates during the fiscal year
ended September 30, 1995. To the best of the Company's knowledge, all of these
filing requirements have been satisfied. In making this statement, the Company
has relied solely on written representations of its directors and executive
officers and any ten percent holders and copies of the reports that they filed
with the SEC.
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 accompanying proxy to vote the shares represented thereby
on such matters in accordance with their best judgment.
Incorporation by Reference
To the extent that this Proxy Statement has been or will be specifically
incorporated by reference into any filing by the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
the sections of the Proxy Statement entitled "Report of the Compensation
Committee on Executive Compensation" and "Performance Graph" shall not be
deemed to be so incorporated, unless specifically otherwise provided in any
such filing.
FINANCIAL MATTERS AND FORM 10-K REPORT
The Company's annual report for the fiscal year ended September 30,
1995, is being mailed with this proxy statement to stockholders entitled to
notice of the meeting. The consolidated financial statements, unaudited
selected quarterly data and management's discussion and analysis of financial
condition and results of operations included in the annual report are
incorporated by reference herein.
THE COMPANY WILL PROVIDE EACH BENEFICIAL OWNER OF ITS SECURITIES WITH A
COPY OF AN ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE COMPANY'S MOST RECENT FISCAL YEAR, WITHOUT CHARGE, UPON
RECEIPT OF A WRITTEN REQUEST FROM SUCH PERSON. SUCH REQUEST SHOULD BE SENT TO
INVESTOR RELATIONS, HOLOGIC, INC., 590 LINCOLN STREET, WALTHAM, MASSACHUSETTS,
02154.
VOTING PROXIES
The Board of Directors recommends an affirmative vote on all proposals
specified. Proxies will be voted as specified. If signed proxies are returned
without specifying an affirmative or negative vote on any proposal, the shares
represented by such proxies will be voted in favor of the Board of Directors'
recommendations.
By order of the Board of Directors
Lawrence M. Levy, Secretary
Waltham, Massachusetts
January 16, 1996
Exhibit A
HOLOGIC, INC.
1995 COMBINATION STOCK OPTION PLAN
Section I. Purpose of the Plan.
The purposes of this Hologic, Inc. 1995 Combination Stock Option Plan
(the "1995 Plan") are (i) to provide long-term incentives and rewards to those
key employees (the "Employee Participants") of Hologic, Inc. (the
"Corporation") and its subsidiaries (if any), and any other persons (the "Non-
employee Participants") who are in a position to contribute to the long-term
success and growth of the Corporation and its subsidiaries, (ii) to assist the
Corporation in retaining and attracting executives and key employees with
requisite experience and ability, and (iii) to associate more closely the
interests of such executives and key employees with those of the Corporation's
stockholders. Notwithstanding the foregoing, if Section 16, as defined in
Section II, is applicable to the Corporation, then any director of the
Corporation who is a member of the Committee, as defined in paragraph (a) of
Section III, shall not be eligible to receive any Stock Options.
Section II. Definitions.
"Code" is the Internal Revenue Code of 1986, as it may be amended
from time to time.
"Common Stock" is the $.01 par value common stock of the
Corporation.
"Committee" is defined in Section III, paragraph (a).
"Corporation" is defined in Section I.
"Corporation ISOs" are all stock options (including 1995 Plan
ISOs) which (i) are Incentive Stock Options and (ii) are granted under
any plans (including this 1995 Plan) of the Corporation, a Parent
Corporation and/or a Subsidiary Corporation.
"Employee Participants" is defined in Section I.
"Fair Market Value" of any property is the value of the property
as reasonably determined by the Committee.
"Incentive Stock Option" is a stock option which is treated as an
incentive stock option under Section 422 of the Code.
"1995 Plan" is defined in Section I.
"1995 Plan ISOs" are Stock Options which are Incentive Stock
Options.
"Non-employee Participants" is defined in Section I.
"Non-qualified Option" is a Stock Option which does not qualify as
an Incentive Stock Option or for which the Committee provides, in the
terms of such option and at the time such option is granted, that the
option shall not be treated as an Incentive Stock Option.
"Parent Corporation" has the meaning provided in Section 424(e) of
the Code.
"Participants" are all persons who are either Employee
Participants or Non-employee Participants.
"Permanent and Total Disability" has the meaning provided in
Section 22(e)(3) of the Code.
"Section 16" means Section 16 of the Securities Exchange Act of
1934, as amended, or any similar or successor statute, and any rules,
regulations, or policies adopted or applied thereunder.
"Stockholder Approval" means the affirmative vote of at least a
majority of the shares of Common Stock present and entitled to vote at a
duly held meeting of the stockholders of the Corporation, unless a
greater vote is required by state law or Section 16, if applicable to
the Corporation, in which case such greater requirement shall apply.
Stockholder approval may be obtained by written consent or other means,
to the extent permitted by applicable state law.
"Stock Options" are rights granted pursuant to this 1995 Plan to
purchase shares of Common Stock at a fixed price.
"Subsidiary Corporation" has the meaning provided in Section
424(f) of the Code.
"Ten Percent Stockholder" means, with respect to a 1995 Plan ISO,
any individual who directly or indirectly owns stock possessing more
than 10% of the total combined voting power of all classes of stock of
the Corporation or any Parent Corporation or any Subsidiary Corporation
at the time such 1995 Plan ISO is granted.
Section III. Administration.
(a) The Committee. This 1995 Plan shall be administered by a
compensation committee designated by the Board of Directors of the
Corporation, which may include any persons (including any or all of the
directors) designated by the Board of Directors (the administering body is
hereafter referred to as the "Committee"). The Committee shall serve at the
pleasure of the Board of Directors, which may from time to time, and in its
sole discretion, discharge any member, appoint additional new members in
substitution for those previously appointed and/or fill vacancies however
caused. A majority of the Committee shall constitute a quorum and the acts of
a majority of the members present at any meeting at which a quorum is present
shall be deemed the action of the Committee. No person shall be eligible to be
a member of the Committee if that person's membership would prevent the plan
from complying with Section 16, if applicable to the Corporation. At such time
as any class of equity security of the Corporation is registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the "Act"), (i)
the Committee shall consist of at least two members of the Board of Directors
and (ii) no member of the Committee while a member thereof shall be granted
Stock Options under this Plan, nor may any person be appointed to the
Committee unless he was not granted or awarded stock options or shares of
Common Stock under this 1995 Plan or any other plan of the Corporation at any
time within the one-year period immediately prior to such appointment as
provided in Rule 16b-3 promulgated under the Act.
(b) Authority and Discretion of the Committee. Subject to the express
provisions of this 1995 Plan and provided that all actions taken shall be
consistent with the purposes of this 1995 Plan, and subject to ratification by
the Board of Directors only if required by applicable law, the Committee shall
have full and complete authority and the sole discretion to: (i) determine
those persons who shall constitute key employees eligible to be Employee
Participants; (ii) select the Participants to whom Stock Options shall be
granted under this 1995 Plan; (iii) determine the size and the form of the
Stock Options, if any, to be granted to any Participant; (iv) determine the
time or times such Stock Options shall be granted including the grant of Stock
Options in connection with other awards made, or compensation paid, to the
Participant; (v) establish the terms and conditions upon which such Stock
Options may be exercised and/or transferred, including the exercise of Stock
Options in connection with other awards made, or compensation paid, to the
Participant; (vi) make or alter any restrictions and conditions upon such
Stock Options and the Stock received on exercise thereof, including, but not
limited to, providing for limitations on the Participant's right to keep any
Stock received on termination of employment; (vii) determine whether the
Participant or the Corporation has achieved any goals or otherwise satisfied
any conditions or requirements that may be imposed on or related to the
exercise of Stock Options; and (viii) adopt such rules and regulations,
establish, define and/or interpret these and any other terms and conditions,
and make all determinations (which may be on a case-by-case basis) deemed
necessary or desirable for the administration of this 1995 Plan.
Notwithstanding any provision of this 1995 Plan to the contrary, only Employee
Participants shall be eligible to receive 1995 Plan ISOs. If the Common Stock
is registered pursuant to Section 12 of the 1934 Act, then notwithstanding any
provision of this 1995 Plan to the contrary, grants of Stock Options to non-
employee directors must be uniformly offered to all such non-employee
directors.
(c) Applicable Law. This 1995 Plan, and all Stock Options shall be
governed by the law of the state in which the Corporation is incorporated.
Section IV. Terms of Stock Options.
(a) Agreements. Stock Options shall be evidenced by a written agreement
between the Corporation and the Participant awarded the Stock Option. This
agreement shall be in such form, and contain such terms and conditions (not
inconsistent with this 1995 Plan) as the Committee may determine. If the Stock
Option described therein is not intended to be an Incentive Stock Option, but
otherwise qualifies as an Incentive Stock Option, the agreement shall include
the following, or a similar, statement: "This stock option is not intended to
be an Incentive Stock Option, as that term is described in Section 422 of the
Internal Revenue Code of 1986, as amended."
(b) Term. Stock Options shall be for such periods as may be determined
by the Committee, provided that in the case of 1995 Plan ISOs, the term of any
such 1995 Plan ISO shall not extend beyond three months after the time the
Participant ceases to be an employee of the Corporation. Notwithstanding the
foregoing, the Committee may provide in a 1995 Plan ISO that in the event of
the Permanent and Total Disability or death of the Participant, the 1995 Plan
ISO may be exercised by the Participant or his estate (if applicable) for a
period of up to one year after the date of such Permanent and Total Disability
or Death. In no event may a 1995 Plan ISO be exercisable (including
provisions, if any, for exercise in installments) subsequent to ten years
after the date of grant, or, in the case of 1995 Plan ISOs granted to Ten
Percent Stockholders, more than five years after the date of grant.
(c) Purchase Price. The purchase price of shares purchased pursuant to
any Stock Option shall be determined by the Committee, and shall be paid by
the Participant or other person permitted to exercise the Stock Option in full
upon exercise, (i) in cash, (ii) by delivery of shares of Common Stock (valued
at their Fair Market Value on the date of such exercise), (iii) any other
property (valued at its Fair Market Value on the date of such exercise), or
(iv) any combination of cash, stock and other property, with any payment made
pursuant to subparagraphs (ii), (iii) or (iv) only as permitted by the
Committee, in its sole discretion. In no event will the purchase price of
Common Stock be less than the par value of the Common Stock. Furthermore, the
purchase price of Common Stock subject to a 1995 Plan ISO shall not be less
than the Fair Market Value of the Common Stock on the date of the issuance of
the 1995 Plan ISO, provided that in the case of 1995 Plan ISOs granted to Ten
Percent Stockholders, the purchase price shall not be less than 110% of the
Fair Market Value of the Common Stock on the date of issuance of the 1995 Plan
ISO.
(d) Further Restrictions as to Incentive Stock Options. To the extent
that the aggregate Fair Market Value of Common Stock with respect to which
Corporation ISOs (determined without regard to this section) are exercisable
for the first time by any Employee Participant during any calendar year
exceeds $100,000, such Corporation ISOs shall be treated as options which are
not Incentive Stock Options. For the purpose of this limitation, options shall
be taken into account in the order granted, and the Committee may designate
that portion of any Corporation ISO that shall be treated as not an Incentive
Stock Option in the event that the provisions of this paragraph apply to a
portion of any option, unless otherwise required by the Code or regulations of
the Internal Revenue Service. The designation described in the preceding
sentence may be made at such time as the Committee considers appropriate,
including after the issuance of the option or at the time of its exercise. For
the purpose of this section, Fair Market Value shall be determined as of the
time the option with respect to such stock is granted.
(e) Restrictions. At the discretion of the Committee, the Stock
Options, as well as the Common Stock issued pursuant to the Stock Options, may
be subject to restrictions on vesting or transferability. For the purposes of
this limitation, options shall be taken into account in the order granted.
(f) Withholding of Taxes. Pursuant to applicable federal, state, local
or foreign laws, the Corporation may be required to collect income or other
taxes upon the grant of a Stock Option to, or exercise of a Stock Option by, a
holder. The Corporation may require, as a condition to the exercise of a Stock
Option, or demand, at such other time as it may consider appropriate, that the
Participant pay the Corporation the amount of any taxes which the Corporation
may determine is required to be withheld or collected, and the Participant
shall comply with the requirement or demand of the Corporation. In its
discretion, the Corporation may withhold shares to be received upon exercise
of a Stock Option if it deems this an appropriate method for withholding or
collecting taxes.
(g) Securities Law Compliance. Upon exercise (or partial exercise) of a
Stock Option, the Participant or other holder of the Stock Option shall make
such representations and furnish such information as may, in the opinion of
counsel for the Corporation, be appropriate to permit the Corporation to issue
or transfer Stock in compliance with the provisions of applicable federal or
state securities laws. The Corporation, in its discretion, may postpone the
issuance and delivery of Stock upon any exercise of this Option until
completion of such registration or other qualification of such shares under
any federal or state laws, or stock exchange listing, as the Corporation may
consider appropriate. Furthermore, the Corporation is not obligated to
register or qualify the shares of Common Stock to be issued upon exercise of a
Stock Option under federal or state securities laws (or to register or qualify
them at any time thereafter), and it may refuse to issue such shares if, in
its sole discretion, registration or exemption from registration is not
practical or available. The Corporation may require that prior to the issuance
or transfer of Stock upon exercise of a Stock Option, the Participant enter
into a written agreement to comply with any restrictions on subsequent
disposition that the Corporation deems necessary or advisable under any
applicable federal and state securities laws. Certificates of Stock issued
hereunder may bear a legend reflecting such restrictions.
(h) Right to Stock Option. No employee of the Corporation or any other
person shall have any claim or right to be a participant in this 1995 Plan or
to be granted a Stock Option hereunder. Neither this 1995 Plan nor any action
taken hereunder shall be construed as giving any person any right to be
retained in the employ of the Corporation. Nothing contained hereunder shall
be construed as giving any person any equity or interest of any kind in any
assets of the Corporation or creating a trust of any kind or a fiduciary
relationship of any kind between the Corporation and any such person. As to
any claim for any unpaid amounts under this 1995 Plan, any person having a
claim for payments shall be an unsecured creditor.
(i) Indemnity. Neither the Board of Directors nor the Committee, nor
any members of either, nor any employees of the Corporation or any parent,
subsidiary, or other affiliate, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection
with their responsibilities with respect to this 1995 Plan, and the
Corporation hereby agrees to indemnify the members of the Board of Directors,
the members of the Committee, and the employees of the Corporation and its
parent or subsidiaries in respect of any claim, loss, damage, or expense
(including reasonable counsel fees) arising from any such act, omission,
interpretation, construction or determination to the full extent permitted by
law.
(j) Participation by Foreigners. Without amending this 1995 Plan,
except to the extent required by the Code in the case of Incentive Stock
Options, the Committee may modify grants made to participants who are foreign
nationals or employed outside the United States so as to recognize differences
in local law, tax policy, or custom.
Section V. Amendment and Termination; Adjustments Upon Changes in Stock.
The Board of Directors of the Corporation may at any time, and from time
to time, amend, suspend or terminate this 1995 Plan in whole or in part;
provided, however, that neither the Board of Directors nor the Committee may
materially amend or modify the definition of Employee Participants,
materially increase the benefits accruing to Participants, increase the number
of shares of Common Stock reserved for purposes of this 1995 Plan, extend the
term of this 1995 Plan, materially modify the requirements to be a Participant
in this 1995 Plan, or otherwise modify this 1995 Plan in any way or manner
requiring the approval of the Stockholders under the Code, or rules and
regulations thereunder, or Section 16, if applicable to the Corporation,
without Stockholder Approval and compliance with any applicable law, rules, or
regulations. Except as provided herein, no amendment, suspension or
termination of this 1995 Plan may affect the rights of a Participant to whom a
Stock Option has been granted without such Participant's consent. The
Committee is specifically authorized to convert, in its discretion, the
unexercised portion of any 1995 Plan ISO granted to an Employee Participant to
a Non-qualified Option at any time prior to the exercise, in full, of such
1995 Plan ISO. If there shall be any change in the Common Stock or to any
Stock Option granted under this 1995 Plan through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or other change
in the corporate structure of the Corporation, appropriate adjustments may be
made by the Committee (or if the Corporation is not the surviving corporation
in any such transaction, the Board of Directors of the surviving corporation,
or its designee) in the aggregate number and kind of shares subject to this
1995 Plan, and the number and kind of shares and the price per share subject
to outstanding options, provided that such adjustment does not affect the
qualification of any 1995 Plan ISO as an Incentive Stock Option. In connection
with the foregoing, the Committee may issue new Stock Options in exchange for
outstanding Stock Options.
Section VI. Shares of Stock Subject to the Plan.
The number of shares of Common Stock that may be the subject of awards
under this 1995 Plan shall not exceed an aggregate of 550,000 shares. Shares
to be delivered under this 1995 Plan may be either authorized but unissued
shares of Common Stock or treasury shares. Any shares subject to an option
hereunder which for any reason terminates, is canceled or otherwise expires
unexercised, and any shares reacquired by the Corporation due to restrictions
imposed on the shares, shares returned because payment is made hereunder in
stock of equivalent value rather than in cash, and/or shares reacquired from a
recipient for any other reason shall, at such time, no longer count towards
the aggregate number of shares which have been the subject of Stock Options
issued hereunder, and such number of shares shall be subject to further awards
under this 1995 Plan, provided, first, that the total number of shares then
eligible for award under this 1995 Plan may not exceed the total specified in
the first sentence of this Section VI, and second, that the number of shares
subject to further awards shall not be increased in any way that would cause
this 1995 Plan or any Stock Option to not comply with Section 16, if
applicable to the Corporation.
Section VII. Effective Date and Term of this Plan.
Provided there is Stockholder Approval on or before June 28, 1996, the
effective date of this 1995 Plan is June 28, 1995 (the "Effective Date") and
awards under this 1995 Plan may be made for a period of ten years commencing
on the Effective Date. The period during which a Stock Option may be exercised
may extend beyond that time as provided herein.
Date of Approval by Board of Directors: June 28, 1995