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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
INAMED CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[INAMED LOGO]
INAMED CORPORATION
5540 EKWILL STREET, SUITE D
SANTA BARBARA, CALIFORNIA 93111
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, JUNE 19, 2001
To the Stockholders of Inamed:
We invite you to attend our annual stockholders' meeting on Tuesday, June
19, 2001 at 460 Ward Drive, Santa Barbara, California 93111 at 10:30 a.m. At the
meeting, you will have a chance to hear an update on our operations, have a
chance to meet some of our directors and executives and act on the following
matters:
1) To elect six (6) directors to a one year term;
2) To approve an amendment to the Company's 2000 Employee Stock Option
Plan to increase the number of shares of Common Stock authorized for
issuance thereunder from 550,000 to 775,000;
3) To ratify the appointment of Arthur Andersen LLP as the Company's
independent accountants for fiscal 2001; and
4) Any other matters that properly come before the meeting.
This booklet includes a formal notice of the meeting and the proxy
statement. The proxy statement tells you more about the agenda and procedures
for the meeting. It also describes how our Board of Directors operates and gives
personal information about our director nominees.
April 24, 2001 has been set as the record date for the meeting. Only
stockholders of record at the close of business on that date will be entitled to
notice of and to vote at the annual meeting. Even if you only own a few shares,
we want your shares to be represented at the annual meeting. I urge you to
complete, sign, date and return your proxy card promptly in the enclosed
envelope.
We have also provided you with the exact place and time of the meeting if
you wish to attend in person.
By Order of the Board of Directors
INAMED CORPORATION
/s/ David E. Bamberger
DAVID E. BAMBERGER
Secretary
Dated: May 15, 2001
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INAMED CORPORATION
5540 EKWILL STREET, SUITE D
SANTA BARBARA, CALIFORNIA 93111
ANNUAL MEETING OF STOCKHOLDERS
2001 PROXY STATEMENT
This proxy statement contains information related to the annual meeting of
stockholders of Inamed Corporation to be held on Tuesday, June 19, 2001,
beginning at 10:30 a.m., at 460 Ward Drive, Santa Barbara, California 93111, and
at any postponements or adjournments thereof. The enclosed proxy is solicited by
the Board of Directors of Inamed Corporation for use at the annual meeting.
This proxy statement and the accompanying proxy are first being mailed to
the stockholders of Inamed on or about May 15, 2001.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Company's annual meeting (the "Meeting"), stockholders will hear an
update on the Company's operations, have a chance to meet some of its directors
and executives and will act on the following matters:
1) To elect six (6) directors to a one year term;
2) To approve an amendment to the Company's 2000 Employee Stock Option
Plan to increase the number of shares of Common Stock authorized for
issuance thereunder from 550,000 to 775,000;
3) To ratify the appointment of Arthur Andersen LLP as the Company's
independent accountants for fiscal 2001; and
4) Any other matters that properly come before the Meeting.
WHO MAY VOTE
Stockholders of Inamed Corporation, as recorded in our stock register on
April 24, 2001 (the "Record Date"), may vote at the Meeting. As of the Record
Date, we had 21,018,822 shares of Common Stock eligible to vote. We have only
one class of voting shares. All shares in this class have equal voting rights of
one vote per share.
HOW TO VOTE
You may vote in person at the Meeting or by proxy. We recommend that you
vote by proxy even if you plan to attend the Meeting. You can always change your
vote in the Meeting.
HOW PROXIES WORK
Our Board of Directors is asking for your proxy. Giving us your proxy means
you authorize us to vote your shares at the Meeting in the manner you direct.
You may vote for all, some, or none of our director nominees. You may also vote
for or against the ratification of the appointment of Arthur Andersen LLP to act
as the Company's independent accountants for fiscal 2001 and for or against the
amendment to the Company's 2000 Employee Stock Option Plan to increase the
number of shares of Common Stock authorized for issuance thereunder from 550,000
to 775,000. You may also abstain from voting on any of these matters.
If you sign and return the enclosed proxy card but do not specify how to
vote, we will vote your shares in favor of all our director nominees, in favor
of the amendment to the 2000 Employee Stock Option Plan to increase the number
of shares of Common Stock authorized for issuance thereunder from 550,000 to
775,000,
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and in favor of the ratification of Arthur Andersen LLP to act as the Company's
independent accountants for fiscal 2001.
You may receive more than one proxy or voting card depending on how you
hold your shares. If you hold shares through someone else, such as a
stockbroker, you may get materials from them asking how you want to vote. The
latest proxy card we receive from you will determine how we will vote your
shares.
REVOKING A PROXY
There are three ways to revoke your proxy. First, you may submit a new
proxy with a later date up until the existing proxy is voted. Second, you may
vote in person at the Meeting. Third, you may notify our corporate secretary in
writing of your desire to revoke your proxy at 5540 Ekwill Street, Suite D,
Santa Barbara, California 93111, so long as such revocation is received by the
corporate secretary on or before Monday, June 18, 2001.
QUORUM
In order to carry on the business of the Meeting, we must have a quorum.
This means at least a majority of the outstanding shares eligible to vote must
be represented at the Meeting, either by proxy or in person. Shares that we own
are not voted and do not count for this purpose.
VOTES NEEDED
The six nominees for the Board of Directors who receive the greatest number
of votes cast for the election of directors by the shares present in person or
represented by proxy at the Meeting and entitled to vote shall be elected
directors. The approval of the amendment to the 2000 Employee Stock Option Plan
and the ratification of the appointment of Arthur Andersen to act as the
Company's independent accountants for fiscal 2001 requires approval by the
holders of a majority of shares of Common Stock present in person or by proxy at
the Meeting. In the election of directors, broker non-votes, if any, will be
disregarded and have no effect on the outcome of the vote. With respect to the
approval of the amendment to the 2000 Employee Stock Option Plan and the
ratification of Arthur Andersen, abstentions from voting and broker non-votes
will have the same effect as voting against the amendment to the 2000 Employee
Stock Option Plan and against the ratification of Arthur Andersen.
If your shares are held in "street name," only your broker or bank can vote
your shares and, for certain of the proposals, only upon receipt of your
specific instructions. Please return the enclosed proxy card to your broker or
bank and contact the person responsible for your account to ensure that your
shares are voted.
ATTENDING IN PERSON
Only stockholders, their proxy holders, and our invited guests may attend
the Meeting. If you wish to attend the Meeting in person but you hold your
shares through someone else, such as a stockbroker, you must bring proof of your
ownership to the Meeting. For example, you could bring an account statement
showing that you owned Inamed Corporation shares as of April 24, 2001 as
acceptable proof of ownership.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the shares of Common Stock
owned as of April 24, 2001, by (i) each person known by the Company to be the
beneficial owner of more than five percent of the outstanding Common Stock of
the Company, (ii) each person who is presently a director of the Company, (iii)
each of the officers named in the summary compensation table and (iv) all the
directors and officers of the Company as a group. Unless otherwise indicated in
the footnotes following the table and subject to
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community property laws where applicable, the person(s) as to whom the
information is given had sole voting and investment power over the shares of
Common Stock shown as beneficially owned.
PERCENT OF
CLASS (BASED
PERCENT OF ON SHARES
CLASS (BASED ON ACTUALLY
SHARES OWNED AND
NAME AND ADDRESS OF NUMBER OF BENEFICIALLY CURRENTLY
BENEFICIAL OWNER SHARES OWNED(1)) OUTSTANDING(2))
- ------------------- --------- --------------- ---------------
Entities affiliated with
Appaloosa Management L.P. ....................... 6,496,788(3) 28.2% 26.4%
26 Main Street
Chatham, New Jersey 07928
Entities affiliated with
Boston Partners Asset Management, L.P. .......... 1,810,400(4) 7.9% 8.6%
28 State Street, 20th Floor
Boston, Massachusetts 02109
Entities affiliated with
A I M Management Group Inc. ..................... 1,299,000(5) 5.6% 6.2%
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Lazard Freres & Co. LLC. .......................... 1,232,900(6) 5.3% 5.9%
30 Rockefeller Plaza
New York, New York 10020
PERCENT OF
CLASS (BASED
PERCENT OF ON SHARES
NUMBER OF CLASS (BASED ACTUALLY
SHARES ON SHARES OWNED AND
BENEFICIALLY BENEFICIALLY CURRENTLY
OFFICERS AND DIRECTORS OWNED OWNED(1)) OUTSTANDING(2))
- ---------------------- ------------ ------------ ----------------
Richard G. Babbitt(7)............................... 496,667(9) 2.2% *
Michael J. Doty(8).................................. 40,978(10) * *
David E. Bamberger(8)............................... 47,001(11) * *
James E. Bolin(7)................................... 0(12) -- --
Malcolm R. Currie, Ph.D.(7)......................... 45,025(13) * *
John F. Doyle(7).................................... 65,000(14) * *
Mitchell S. Rosenthal, M.D.(7)...................... 10,000(15) * *
David A. Tepper(7).................................. 6,496,788(16) 28.2% 26.4%
All officers and directors as a group (12
persons).......................................... 7,260,709(17) 31.5% 27.0%
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* Less than 1%
(1) The percentages are calculated on the basis of the number of outstanding
shares of Common Stock as of April 24, 2001, which is 21,018,822, plus the
2,010,764 shares of Common Stock underlying all options and warrants that
are exercisable either currently or within 60 days of April 24, 2001.
(2) The percentages are calculated on the basis of the number of outstanding
shares of Common Stock as of April 24, 2001, which is 21,018,822.
(3) Based on the Schedule 13D/A (Amendment No. 17) filed jointly on October 2,
2000 by Appaloosa Management L.P. ("AMLP") and David A. Tepper, a Form 5,
filed jointly by Mr. Tepper, AMLP and Mr. Bolin on February 12, 2001 and a
subsequent grant of options to purchase 10,000 shares of Common Stock under
the Company's 1993 Nonemployee Directors Stock Option Plan. Mr. Tepper is
the President of Appaloosa Partners Inc., the general partner of AMLP.
Includes (i) 362,286 shares of Common Stock issuable upon the exercise of
warrants to purchase shares of Common Stock at $7.50 per share, (ii)
579,510 shares of Common Stock issuable upon the exercise of warrants to
purchase shares of Common Stock at $6.50 per share and (iii) 30,000 shares
of Common Stock issuable upon the
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exercise of options to purchase shares of Common Stock under the 1993
Nonemployee Directors Stock Option Plan.
(4) Based upon a Schedule 13G filed jointly on February 9, 2001, by Boston
Partners Asset Management, L.P. ("BPAM"), Boston Partners, Inc. and Mr.
Desmond John Heathwood, the principal stockholder of Boston Partners, Inc.
The Schedule 13G states that BPAM, a registered investment advisor, holds
all of such shares under management for its clients, who have the right to
direct the receipt of dividends and to receive the proceeds from the sale
of such shares.
(5) Based upon a Schedule 13G filed on February 9, 2001, by A I M Management
Group Inc., on behalf of A I M Advisors, Inc., a registered investment
advisor.
(6) Based upon a Schedule 13G/A filed on February 13, 2001, by Lazard Freres &
Co. LLC, a registered investment adviser. Includes sole voting power with
respect to 1,087,500 shares and sole investment power with respect to
1,232,900 shares. The Schedule 13G/A states that clients of Lazard Freres
have the right to receive dividends and proceeds of the sale of such
shares.
(7) The named person is an officer and/or director of Inamed and his address is
5540 Ekwill Street, Suite D, Santa Barbara, California 93111.
(8) The named person is an officer of Inamed and his address is 11 Penn Plaza,
Suite 946, New York, New York 10001.
(9) Includes 466,667 shares of Common Stock issuable upon the exercise of
options and/or warrants either currently exercisable or exercisable within
60 days of April 24, 2001, and excludes 133,333 shares of Common Stock
issuable upon exercise of certain options which do not vest within 60 days.
(10) Includes 36,667 shares of Common Stock issuable upon the exercise of
options and/or warrants either currently exercisable or exercisable within
60 days of April 24, 2001, and excludes 23,333 shares of Common Stock
issuable upon exercise of certain options which do not vest within 60 days.
Also excludes 10,000 shares of Common Stock issuable upon the exercise of
options either currently exercisable or exercisable within 60 days of April
24, 2001, and 20,000 shares of Common Stock issuable upon the exercise of
options which do not vest within 60 days, beneficial ownership of which Mr.
Doty disclaims.
(11) Includes 45,001 shares of Common Stock issuable upon the exercise of
warrants exercisable within 60 days of April 24, 2001, and excludes 45,001
shares of Common Stock issuable upon exercise of certain options and/or
warrants which do not vest within 60 days.
(12) Mr. Bolin is the Vice President of Appaloosa Partners Inc., the general
partner of AMLP. Mr. Bolin disclaims beneficial ownership of all shares
beneficially owned by AMLP.
(13) Includes 10,000 shares of Common Stock currently issuable upon the exercise
of options.
(14) Includes 15,000 shares of Common Stock currently issuable upon the exercise
of options. Excludes 1,273 shares of Common Stock as to which Mr. Doyle
disclaims beneficial ownership.
(15) Consists of shares of Common Stock currently issuable upon the exercise of
options.
(16) Based on the Schedule 13D/A (Amendment No. 17) filed jointly on October 2,
2000 by AMLP and David A. Tepper, a Form 5, filed jointly by Mr. Tepper,
AMLP and Mr. Bolin on February 12, 2001 and a subsequent grant of options
to purchase 10,000 shares of Common Stock under the Company's 1993
Nonemployee Directors Stock Option Plan. Mr. Tepper is the President of
Appaloosa Partners Inc., the general partner of AMLP. Includes (i) 362,286
shares of Common Stock issuable upon the exercise of warrants to purchase
shares of Common Stock at $7.50 per share, (ii) 579,510 shares of Common
Stock issuable upon the exercise of warrants to purchase shares of Common
Stock at $6.50 per share, and (iii) 30,000 shares of Common Stock issuable
upon the exercise of options to purchase shares of Common Stock under the
1993 Nonemployee Directors Stock Option Plan. Except to the extent of
pecuniary interest in investment funds controlled by AMLP, Mr. Tepper
disclaims beneficial ownership of the foregoing securities.
(17) Includes an aggregate of 1,582,131 shares of Common Stock issuable upon the
exercise of options and warrants currently exercisable or exercisable
within 60 days of April 24, 2001.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
Unless otherwise specified, all proxies received will be voted in favor of
the election of the persons named below as directors of the Company, to serve
until the next annual meeting of stockholders of the Company and until their
successors shall be duly elected and shall have qualified. Directors shall be
elected by a plurality of the votes cast, in person or by proxy, at the Meeting.
The enclosed proxy is solicited by the Board of Directors of Inamed Corporation
for use at the annual meeting.
The terms of the current directors expire at the next annual meeting of
stockholders and when their successors are duly elected and shall have
qualified. Management has no reason to believe that any of the nominees will be
unable or unwilling to serve as a director, if elected. Should any of the
nominees not remain a candidate for election at the date of the Meeting, the
proxies will be voted in favor of those nominees who remain candidates and may
be voted for substitute nominees selected by the Board of Directors.
The names of the nominees are set forth below, as well as certain
information concerning the nominees and the executive officers of the Company,
together with their ages and positions. There are no family relationships among
any of the Company's directors and executive officers.
NAME AGE POSITION
- ---- --- --------
NOMINEES FOR DIRECTOR
Richard G. Babbitt................... 75 Chairman of the Board and Chief Executive
Officer
James E. Bolin....................... 42 Director
Malcolm R. Currie, Ph.D. ............ 74 Director
John F. Doyle........................ 71 Director
Mitchell S. Rosenthal, M.D. ......... 65 Director
David A. Tepper...................... 43 Director
EXECUTIVE OFFICERS WHO ARE NOT
DIRECTORS
Michael J. Doty...................... 54 Senior Vice President and Chief Financial
Officer
David E. Bamberger................... 44 Senior Vice President, General Counsel and
Secretary
RICHARD G. BABBITT
Mr. Babbitt has served as Chairman of Inamed since February 6, 1998, as
Chief Executive Officer since January 22, 1998 and as President since January 4,
2001 and between January 22, 1998 and December 22, 1998. Prior to 1998, for more
than five years, he was associated with DNA Technologies, Inc., Ben Hogan
Company, B.I. Industries, American Safety Equipment Corporation, Welsh
Manufacturing and Medical Supply Company in C.E.O. and Board positions. Mr.
Babbitt is a graduate of Purdue University and holds Bachelor of Science and
Bachelor of Naval Science and Tactics degrees. He also served as an officer in
the United States Marine Corps.
JAMES E. BOLIN
Mr. Bolin has served as a director of Inamed since March 18, 1999. Mr.
Bolin has been a Vice President and Secretary of Appaloosa Partners Inc. since
1995. He was previously a Vice President and Director of Corporate Bond Research
at Goldman, Sachs & Co. He also worked at Smith Barney, Harris Upham in the
Fixed Income Research Department. Mr. Bolin holds a Bachelor of Arts degree from
Washington University in St. Louis and an M.B.A in accounting and finance from
the University of Missouri -- St. Louis. Mr. Bolin serves on the Board of
Directors of Kindred Healthcare, Inc. and Coho Energy, Inc.
MALCOLM R. CURRIE, PH.D.
Dr. Currie has served as a director of Inamed since June 3, 1999. Dr.
Currie has served as the President and CEO of Currie Technologies Incorporated,
an electric transportation company, since 1997. He has been
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the Chairman Emeritus of Hughes Aircraft Company since his retirement in 1992 as
Chairman and CEO. He has had an extensive career in high technology research,
engineering and management. Dr. Currie currently serves on the Boards of
Directors of the following publicly traded companies: Investment Company of
America, LSI Logic Corporation, Enova Systems Inc., Regal One Corp. and
GreyStone Technologies Corp. Dr. Currie is also a member and past chairman of
the University of Southern California Board of Trustees. He has previously
served as President and CEO of Delco Electronics Corporation and Chairman and
CEO of GM Hughes Electronics Corporation. From June 1994 to August 1997, Dr.
Currie was a manager of Electric Bicycle Co., LLC, a limited liability company
that filed for Chapter 7 bankruptcy protection in August 1997. Dr. Currie holds
a Bachelor of Arts degree in Physics and a Ph.D. in Engineering Physics from the
University of California at Berkeley.
JOHN F. DOYLE
Mr. Doyle has served as a director of Inamed since March 18, 1999. Since
1994, he has performed marketing and management consulting, primarily for
start-up companies. Prior to 1994, Mr. Doyle worked with IBM and Craig
Corporation in executive and sales and marketing positions. He served as the
Chairman and Chief Executive Officer of Pioneer Electronics (USA) Inc. from 1971
to 1986. Mr. Doyle currently serves on the Board of Directors of the Pomona
Valley Hospital Foundation, and has served on the Boards of various consumer
groups as well as business and philanthropic organizations. Mr. Doyle holds a
Bachelor of Arts degree from Miami University of Ohio.
MITCHELL S. ROSENTHAL, M.D.
Dr. Rosenthal has served as a director of Inamed Corporation since June 3,
1999. Dr. Rosenthal is a psychiatrist and since 1970 has served as the president
of Phoenix House Foundation, which he founded over 30 years ago and which is the
nation's largest non-profit substance abuse services system, with nearly 80
programs in eight states: New York, California, Texas, Florida, Massachusetts,
New Hampshire, Rhode Island and Vermont. Dr. Rosenthal has been a White House
advisor on drug policy, a special consultant to the Office of National Drug
Control Policy and chaired the New York State Advisory Council on Alcoholism and
Substance Abuse Services from 1985 to 1997. Dr. Rosenthal is a lecturer in
psychiatry at Columbia University College of Physicians and Surgeons and a
former president of the American Association of Psychoanalytic Physicians. He is
a graduate of Lafayette College and earned his M.D. from the Downstate Medical
Center of State University of New York. Dr. Rosenthal is a member of the Council
on Foreign Relations.
DAVID A. TEPPER
Mr. Tepper has served as a director of Inamed since March 18, 1999. Mr.
Tepper has been President of Appaloosa Partners Inc. since its formation in
1993. He was previously head trader in the High Yield Department of Goldman,
Sachs & Co. He also has been employed by Keystone Funds and Republic Steel. Mr.
Tepper holds a Bachelor of Arts degree with honors in Economics from the
University of Pittsburgh and an M.B.A. from Carnegie Mellon University. Mr.
Tepper is a director of Kindred Healthcare, Inc.
MICHAEL J. DOTY
Mr. Doty has served as Senior Vice President and Chief Financial Officer of
Inamed since May 3, 1999. He is a certified public accountant with more than 25
years of experience in a wide range of financial, administrative and planning
positions at companies such as 3M, Honeywell, Inc. and Reckitt & Colman, PLC.
Prior to his employment with Inamed, Mr. Doty was the Vice President and Chief
Financial Officer of O-Cedar Brands, Inc., a private consumer product company
based in Cincinnati. From 1994 to 1997, Mr. Doty was the Vice President and
Chief Financial Officer of White Systems, Inc., a manufacturer and software
developer. Mr. Doty holds a Bachelor of Chemistry and Bachelor of Science in
Business Administration -- Accounting from the University of Minnesota and an
M.B.A. from the University of St. Thomas.
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DAVID E. BAMBERGER
Mr. Bamberger has served as Senior Vice President and General Counsel of
Inamed since June 1, 1999, and Secretary since July 21, 1999. Prior to joining
Inamed, for approximately five years, Mr. Bamberger was a partner at Olshan
Grundman Frome & Rosenzweig LLP in New York, specializing in corporate and
general litigation. Prior to 1994, he was vice president and general counsel of
TPI Enterprises, Inc., a publicly-traded company, and before that, Senior
Counsel with MacAndrews & Forbes Holdings, Inc. He was also an attorney at
Simpson Thacher & Bartlett and Skadden, Arps, Slate, Meagher & Flom. Mr.
Bamberger holds a Bachelor of Arts degree from Brandeis University and a J.D.
from Harvard Law School.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended, executive officers, directors and holders of more than 10% of Inamed's
Common Stock are required to file reports of their trading in Inamed equity
securities with the Securities and Exchange Commission.
Based solely on its review of the copies of such reports received by
Inamed, or written representations from certain reporting persons that no
reports on Form 5 were required for these persons, Inamed believes that during
the last fiscal year all Section 16 filing requirements applicable to its
reporting persons were complied with.
RECOMMENDATION OF THE BOARD OF DIRECTORS:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES FOR DIRECTOR.
MEETINGS OF THE BOARD OF DIRECTORS
For the fiscal year ended December 31, 2000, there were six meetings of the
Board of Directors. Each of the directors attended at least 75% of the meetings
of the Board of Directors and the total number of meetings held by all
committees of the Board of Directors on which he served. From time to time, the
members of the Board of Directors act by unanimous written consent pursuant to
the laws of the State of Delaware.
COMMITTEES OF THE BOARD OF DIRECTORS
Inamed has established standing committees of its Board of Directors,
including a Compensation Committee, an Executive Committee, an Audit Committee,
and a Nominating Committee. Each of these Committees is responsible to the full
Board of Directors, and its activities are therefore subject to Board approval.
The functions performed by these Committees are summarized below:
Compensation Committee. The members of the Compensation Committee are
Messrs. Bolin and Doyle and Dr. Rosenthal. The Compensation Committee determines
all aspects of compensation arrangements for the executive officers of the
Company, approves recommendations as to compensation for certain of the
Company's other senior employees, and administers the Company's employee stock
option and stock purchase plans and the Company's senior management bonus plan.
The Compensation Committee met three times in 2000.
Executive Committee. The members of the Executive Committee are Messrs.
Babbitt and Bolin and Dr. Currie. The Executive Committee considers issues and
makes recommendations on various matters to the full Board of Directors as
required. The Executive Committee met four times in 2000.
Audit Committee. The members of the Audit Committee are Messrs. Bolin and
Doyle and Dr. Currie. The Audit Committee is charged with reviewing the
Company's annual audit and meeting with the Company's independent auditors to
review the Company's internal controls and financial management practices. The
Audit Committee met five times in 2000. All members of the Audit Committee are
independent (as independence is defined in Rule 4200(a)(15) of the National
Association of Securities
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Dealers' listing standards). The Board of Directors has adopted a written
charter for the Audit Committee. A copy of the written charter is attached as
Appendix A of this Proxy Statement.
Nominating Committee. The members of the Nominating Committee are Mr.
Babbitt and Mr. Tepper. The Nominating Committee recommends nominees to the
Board of Directors of the Company. The Nominating Committee will consider, as
potential nominees, persons recommended by stockholders in accordance with the
procedures set forth in the Company's By-laws. The Company's By-laws provide
that a stockholder nominating persons for election to the Board of Directors, in
general, must give notice thereof in writing to the secretary of the Company not
less than 90 nor more than 120 days prior to the anniversary date of the
immediately preceding annual meeting.
REPORT OF THE AUDIT COMMITTEE
To the Board of Directors of Inamed Corporation:
We have reviewed and discussed with management the Company's audited
financial statements as of and for the year ended December 31, 2000.
We have discussed with Arthur Andersen LLP, the Company's independent
auditors, the matters required to be discussed by Statement on Auditing
Standards No. 61, Communications with Audit Committees, as amended, by the
Auditing Standards Board of the American Institute of Certified Public
Accountants.
We have received and reviewed the written disclosures and the letter from
Arthur Andersen required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as amended, and have discussed
with Arthur Andersen its independence.
Based upon the reviews and discussions referred to above, we recommend to
the Board of Directors that the financial statements referred to above be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2000 for filing with the Securities and Exchange Commission.
Respectfully submitted,
James E. Bolin
John F. Doyle
Malcolm R. Currie, Ph.D., Chairman
Audit Committee of the Board of
Directors
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive an annual fee of
$25,000 and a fee of $1,000 for each Board of Directors meeting attended, and
are reimbursed for their expenses. In addition, upon their initial election,
Directors receive an option to purchase 5,000 shares of Common Stock, and
thereafter receive an option to purchase 5,000 shares of Common Stock on each
subsequent anniversary of their election to the Board of Directors for so long
as they remain Directors. Directors who are employees of the Company are not
entitled to any compensation for their service as a director. Pursuant to a plan
adopted in 1999, directors may elect to receive their compensation in Common
Stock in lieu of cash. Three directors have elected this option.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, paid to or earned by the following type of executive
officers for the fiscal years ended 1998, 1999 and 2000: (i) individuals who
served as, or acted in the capacity of, the Company's Chief Executive Officer
for the fiscal year ended December 31, 2000; (ii) the Company's other most
highly compensated executive officers, whose salary and bonus exceeded $100,000
with respect to the fiscal year ended December 31, 2000 and who were employed at
the end of fiscal year 2000; and (iii) individuals for whom disclosure would
have been provided but for the fact that the individual was not serving as an
executive officer of the Company at the end of fiscal year 2000.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION --------------------------
--------------------------------------- STOCK
OTHER OPTIONS ALL
ANNUAL GRANTED OTHER
NAME AND SALARY BONUS COMPENSATION (IN SHARES) COMPENSATION
PRINCIPAL POSITIONS YEAR $ $ $(1) (#) ($)(2)
- ------------------- ---- ------- ------- ------------ ----------- ------------
CURRENT OFFICERS
Richard G. Babbitt(3)............ 2000 400,000 125,000 17,431 0 5,190
Chairman and Chief Executive 1999 400,000 225,000 16,079 200,000 6,205(4)
Officer 1998 356,923 100,000 15,837 400,000 141,163(5)
Michael J. Doty(6)............... 2000 235,000 45,000 6,000 0 5,190
Senior Vice President and Chief 1999 126,923 100,000 4,000 90,000 28,884(7)
Financial Officer
David E. Bamberger(8)............ 2000 200,000 0 6,000 0 4,989
Senior Vice President, General 1999 96,923 100,000 4,000 90,002 25
Counsel and Secretary
PERSONS NO LONGER AFFILIATED WITH
THE COMPANY
Ilan K. Reich(9)................. 2000 400,000 0 14,400 0 5,190
Former President and Co- 1999 400,000 225,000 4,431 200,000 63
Chief Executive Officer 1998 363,077 100,000 0 400,000 714
Dominique Touzet(10)............. 2000 76,154 30,000 2,308 15,000 990
Former Senior Vice President,
Business Development
- ---------------
(1) Amounts shown consist of an automobile allowance.
(2) Amounts shown, unless otherwise noted, reflect employer contributions to
group term life insurance premium and matching contributions made by the
Company under its 401(k) plan.
(3) Mr. Babbitt has served as Chief Executive Officer of the Company since
January 22, 1998, as Chairman since February 6, 1998, and as President
since January 4, 2001. Mr. Babbitt also served as President of the Company
between January 22, 1998 and December 22, 1998.
(4) Consists of moving expenses.
(5) Includes a relocation allowance of $100,000 and temporary living expenses
of $32,344.
(6) Mr. Doty has served as Senior Vice President and Chief Financial Officer of
the Company since May 3, 1999.
(7) Includes a relocation allowance of $19,320 and temporary living expenses of
$9,000.
(8) Mr. Bamberger has served as Senior Vice President and General Counsel of
the Company since June 1, 1999 and Secretary since July 21, 1999.
(9) Mr. Reich served as a director of Inamed from January 22, 1998 until
January 4, 2001, served as Executive Vice President between January 22,
1998 and December 22, 1998, and served as President from December 22, 1998
and as Co-Chief Executive Officer from March 8, 2000 until January 4, 2001,
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respectively. Effective January 4, 2001, pursuant to a separation agreement
and general release (the "Reich Separation Agreement"), Mr. Reich resigned
from all his positions with the Company. Pursuant to the Reich Separation
Agreement, in full and complete settlement of any and all potential claims
by Mr. Reich under any agreements with the Company, the Company will pay
Mr. Reich, over a period of time terminating March 5, 2003, an amount equal
to his annual base salary for three years and two months from the effective
date of his resignation ($400,000 per annum), certain accrued but unused
vacation time, and continued participation in the Company's group medical,
dental, flexible spending and life insurance plans, until such time as Mr.
Reich becomes eligible for similar benefits with a new employer. In
addition, under the Reich Separation Agreement, in the first quarter of
2001, in consideration for its canceling options and warrants exercisable
for an aggregate of 400,000 shares of Common Stock originally issued to Mr.
Reich in 1998 and 1999 and without regard for whether all such options and
warrants were fully vested, the Company paid Mr. Reich an amount equal to
the difference between the market price of the Common Stock on January 4,
2001 ($20.625 per share) and the exercise price, for all such warrants and
options, summing to approximately $4.1 million. In the first quarter of
2001, Mr. Reich or a Reich family partnership also exercised options and
warrants and simultaneously sold the remaining 275,000 shares that were
issued pursuant to executive officer and consulting agreements between the
Company and Mr. Reich dating from 1997 and 1998.
(10) Mr. Touzet served as Senior Vice President, Business Development, between
August 7, 2000 and February 13, 2001.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding grants of
stock options or warrants made to each of the executive officers named in the
Summary Compensation Table during the fiscal year ended December 31, 2000.
INDIVIDUAL GRANTS
--------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OPTION TERM
UNDERLYING OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($)
- ---- ------------------ ------------ -------- ---------- -------- -------- --------
CURRENT OFFICERS
Richard G. Babbitt.......... 0 0 N/A N/A N/A N/A N/A
Michael J. Doty............. 0 0 N/A N/A N/A N/A N/A
David E. Bamberger.......... 0 0 N/A N/A N/A N/A N/A
PERSONS NO LONGER AFFILIATED
WITH THE COMPANY
Ilan K. Reich............... 0 0 N/A N/A N/A N/A N/A
Dominique Touzet............ 15,000 2.8 33.1875 8/7/2010 (2) (2) (2)
- ---------------
(1) Unless otherwise noted, amounts represent shares of Common Stock underlying
warrants and/or options to purchase shares of Common Stock.
(2) Mr. Touzet's employment with the Company terminated prior to the vesting of
any of these options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning exercises of
stock options and warrants by the executive officers named in the Summary
Compensation Table in fiscal 2000 and unexercised stock
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options and warrants held by the executive officers named in the Summary
Compensation Table as of December 31, 2000.
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS AT 2000 OPTIONS AT 2000
SHARES FISCAL YEAR-END(#) FISCAL YEAR-END ($)(1)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ---------------------- ------------------------
CURRENT OFFICERS
Richard G. Babbitt........... 0 0 466,667/133,333 7,011,436/493,264
Michael J. Doty.............. 0 0 34,167/ 55,833 120,373/147,780
David E. Bamberger........... 0 0 33,751/ 56,251 111,615/133,929
PERSONS NO LONGER AFFILIATED
WITH THE COMPANY
Ilan K. Reich................ 0 0 541,667/133,333 7,960,961/493,264
Dominique Touzet............. 0 0 (2) (2)
- ---------------
(1) On December 29, 2000 (the last trading day of 2000), the last reported sales
price of the Common Stock as reported on the NASDAQ National Market was
$20.437.
(2) Mr. Touzet's employment with the Company terminated prior to the vesting of
any of these options.
STOCK OPTION PLANS
In 1993, the Company adopted a Non-Employee Director Stock Option Plan
which authorized the Company to issue up to 150,000 shares of Common Stock to
directors who are not employees of or consultants to the Company and who are
thus not eligible to receive stock option grants under the Company's stock
option plans. Pursuant to this plan, each non-employee director is automatically
granted an option to purchase 5,000 shares of Common Stock on the date of his or
her initial appointment or election as a director, and an option to purchase an
additional 5,000 shares of Common Stock on each anniversary of his or her
initial grant date providing he or she is still serving as a director. The
exercise price per share is the fair market value per share on the date of
grant. In 2000, options to purchase 25,000 shares were granted under this plan.
EMPLOYMENT, SEVERANCE, AND CHANGE OF CONTROL AGREEMENTS
On January 22, 1998, the Company entered into an Employment Agreement with
Richard G. Babbitt (the "Babbitt Agreement"), whereby the Company engaged Mr.
Babbitt to act as Chief Executive Officer and President for a term of three
years (subject to an automatic extension of one month for each month served).
Under the terms of the Babbitt Agreement, Mr. Babbitt is to be paid $400,000 per
year and is eligible for a bonus. In addition, Mr. Babbitt received an Executive
Officer Warrant granting him the right to purchase 400,000 shares of the
Company's Common Stock at an exercise price of $3.525 per share. In 1999, the
Company issued Mr. Babbitt a further option to purchase 200,000 shares of the
Company's Common Stock, at exercise prices of $15.50 and $20.00 per share. Both
the 1998 warrant and the 1999 options are subject to certain anti-dilution
protections.
On January 22, 1998, the Company entered into an Employment Agreement with
Ilan K. Reich (the "Reich Agreement"), whereby the Company engaged Mr. Reich to
act as Executive Vice President for a term of three years (subject to an
automatic extension of one month for each month served). Under the terms of the
Reich Agreement, Mr. Reich was to be paid, and was paid, $400,000 per year and
was eligible for a bonus. In addition, Mr. Reich received an Executive Officer
Warrant granting him the right to purchase 400,000 shares of the Company's
Common Stock at an exercise price of $3.95 per share. In 1999, the Company
issued Mr. Reich a further option to purchase 200,000 shares of the Company's
Common Stock, at exercise prices of $15.50 and $20.00 per share. Both the 1998
warrant and the 1999 options were subject to certain anti-dilution protections.
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Effective January 4, 2001, pursuant to a separation agreement and general
release (the "Reich Separation Agreement"), Mr. Reich resigned from all his
positions with the Company. Pursuant to the Reich Separation Agreement, in full
and complete settlement of any and all potential claims by Mr. Reich under any
agreements with the Company, the Company will pay Mr. Reich, over a period of
time terminating March 5, 2003, an amount equal to his annual base salary for
three years and two months from the effective date of his resignation ($400,000
per annum), certain accrued but unused vacation time, and continued
participation in the Company's group medical, dental, flexible spending and life
insurance plans, until such time as Mr. Reich becomes eligible for similar
benefits with a new employer. In addition, under the Reich Separation Agreement,
in the first quarter of 2001, in consideration for its canceling options and
warrants exercisable for an aggregate of 400,000 shares of Common Stock
originally issued to Mr. Reich in 1998 and 1999 and without regard for whether
all such options and warrants were fully vested, the Company paid Mr. Reich an
amount equal to the difference between the market price of the Common Stock on
January 4, 2001 ($20.625 per share) and the exercise price, for all such
warrants or options, summing to approximately $4.1 million. In the first quarter
of 2001, Mr. Reich or a Reich family partnership also exercised options and
warrants and simultaneously sold the remaining 275,000 shares that were issued
pursuant to executive officer and consulting agreements between the Company and
Mr. Reich dating from 1997 and 1998.
Effective May 3, 1999, the Company entered into an Employment Agreement
with Michael J. Doty (the "Doty Agreement"), whereby the Company engaged Mr.
Doty to act as Senior Vice President and Chief Financial Officer for a term of
three years (subject to an automatic extension of one month for each month
served). Under the terms of the Doty Agreement, as amended, Mr. Doty is to be
paid $235,000 per year, subject to annual review, and is eligible for a bonus.
In addition, Mr. Doty has received options or warrants to purchase 90,000 shares
of the Company's common stock, exercisable at the following prices: $13.00
(25,000 shares), $15.50 (14,000 shares), $20.00 (30,000 shares) and $24.75
(21,000 shares). Effective January 1, 2000, Mr. Doty's annual base salary under
this agreement was increased to $235,000.
Effective June 1, 1999, the Company entered into an Employment Agreement
with David E. Bamberger (the "Bamberger Agreement"), whereby the Company engaged
Mr. Bamberger to act as Senior Vice President and General Counsel for a term of
three years (subject to an automatic extension of one month for each month
served). Under the terms of the Bamberger Agreement, as amended, Mr. Bamberger
is to be paid $200,000 per year, subject to annual review, and is eligible for a
bonus. In addition, Mr. Bamberger has received options or warrants to purchase
90,002 shares of the Company's common stock, exercisable at the following
prices: $12.50 (22,500 shares), $15.50 (10,834 shares), $20.00 (30,834 shares)
and $24.75 (25,834 shares).
Mr. Babbitt, Mr. Doty and Mr. Bamberger (each, a "Covered Employee") have
each entered into an Employee Severance Agreement (a "Severance Agreement') with
the Company. Under the terms of the Severance Agreement, and for a term of three
years, upon a change in control of the Company (as defined in the Severance
Agreement), and the subsequent termination of the Covered Employee, such Covered
Employee will be entitled to certain benefits, including, among other things, a
lump sum severance payment equal to 300% of the sum of such employee's annual
base salary and the highest bonus paid in the preceding three years, and a cash
payment in lieu of shares of Common Stock issuable to the Covered Employee upon
severance of certain outstanding options. The payments under the Severance
Agreement are subject to a "gross-up" provision whereby the Company will pay an
additional amount to the Covered Employee to counteract the effect of any excise
tax under Section 4999 of the Internal Revenue Code.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee served as an officer or employee of
the Company or any of its subsidiaries during 2000 or was previously an officer
of the Company or any of its subsidiaries. During 2000, no executive officer of
the Company served as a director or member of the compensation committee of
another entity, one of whose executive officers served as a director or member
of the Compensation Committee of the Company.
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2000 COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report on the compensation policies, components and decisions of the
Company for 2000 with respect to the Company's executive officers is presented
by the Compensation Committee of the Company, consisting of John F. Doyle,
Chairman, James E. Bolin and Mitchell S. Rosenthal, M.D. All such members of the
Compensation Committee are outside Directors as defined by section 162(m)
("Section 162(m)") of the Internal Revenue Code of 1986, as amended (the
"Code"). The Compensation Committee determines all aspects of compensation
arrangements for the executive officers of the Company, approves recommendations
as to compensation for certain of the Company's other senior employees and
administers the Company's employee stock option and stock purchase plans and the
Company's senior management bonus plan. The Compensation Committee was
established by the Board of Directors in March 1997.
COMPENSATION POLICIES AND GOALS
The Company's goal is to retain, motivate and reward management of the
Company through its compensation policies and awards, while aligning their
interests more closely with those of the Company and its shareholders. Indeed,
the Company believes that executive compensation should be closely related to
the value delivered to stockholders. This belief has been adhered to by
developing incentive pay programs which provide competitive compensation and
reflect Company performance. Both short-term and long-term incentive
compensation are based on Company performance and the value received and to be
received by stockholders.
COMPENSATION MAKE-UP AND MEASUREMENT
At present, the Company's executive compensation is based on three
components: base salary, short-term incentives and long-term incentives, each of
which is intended to serve the overall compensation philosophy.
BASE SALARY
The Company's salary levels are intended to be consistent with competitive
pay practices and level of responsibility, with salary increases reflecting
competitive trends, the overall financial performance of the Company, general
economic conditions as well as a number of factors relating to the particular
individual, including the performance of the individual executive, level of
experience, ability and knowledge of the job.
SHORT-TERM INCENTIVES
In 1999, senior management of the Company, with the assistance of the
Compensation Committee, established certain procedures for the determination of
short-term incentives. Each year, if warranted, management will make a proposal
on this subject during the year-end budgeting process and such proposal will be
reviewed by the Board of Directors. An incentive award opportunity will be
established for each employee based on the employee's level of responsibility,
potential contribution, the success of the Company and competitive conditions.
In 2000, by action of the Compensation Committee, the full Board of
Directors and the shareholders, the Company adopted a senior management bonus
plan. The plan provided for a system for rewarding senior managers of the
Company and its business units for attaining financial goals tied to profit
before interest and taxes (PBIT), and improvements in manufacturing cycle times.
Under the 2000 plan, no vesting occurred because the Company failed to achieve
its minimum 2000 EPS goal. However, in the discretion of the Compensation
Committee, the Company paid small bonuses to certain senior managers to ensure
their continued affiliation with the Company. Accordingly, for 2000,
approximately 20 key employees shared in a total bonus pool of approximately
$600,000. This bonus pool was approximately 17% of the approximately $3.5
million maximum bonus pool contemplated by the 2000 plan.
For 2001, the Board of Directors will not adopt a system that ties
short-term incentives to a specific minimum earnings target, in part owing to
the current uncertain market environment and the difficulty in predicting
full-year earnings. However, the Board has determined that, following the close
of the 2001 fiscal
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year, it will utilize the following factors in determining whether to pay
short-term incentives to its executive officers and other key employees:
competitive trends, the overall financial performance of the Company; general
economic conditions; the performance of the individual executive in relation to
expectations; the employee's level of experience, ability and knowledge of the
job; teamwork; and related factors.
LONG-TERM INCENTIVES
Stock options are granted from time to time to reward key employees for
their contributions. The grant of options is based primarily on the key
employee's potential contribution to the company's growth and profitability. In
view of the options and warrants granted to the executive officers in 1998 and
1999, the Compensation Committee decided that no further grants were required
for such individuals in 2000.
COMPENSATION OF EXECUTIVE OFFICERS
In January, 1998, a new senior management team, led by Richard Babbitt and
Ilan Reich, was installed by the Board of Directors. This management team
replaced the former Chief Executive Officer, Donald McGhan, and his son, Jim
McGhan, whose employment was terminated later in the year. In 1998, the Company
entered into three-year employment agreements with Messrs. Babbitt and Reich in
order to assure their long-term commitment to the restructuring of the Company
throughout the period of its transition. The base compensation level in these
employment agreements, and other terms, were determined based upon the
anticipated responsibilities to be performed by these officers, their expected
performance in managing and directing the Company's operations, and their
efforts in assisting the Company to improve its capital base.
Mr. Babbitt has served as the Company's Chief Executive Officer
continuously since January 22, 1998. The factors and criteria upon which his
compensation are based include his long record of service as CEO of other
corporations, his willingness to lead a restructuring of the Company, the rapid
attainment of the Company's turnaround in 1998-99, the continuation of the
Company's profitability in 2000 despite new challenges and Mr. Babbitt's
willingness to remain with the Company as it continues to evolve. In 1999, the
Compensation Committee retained the services of an outside compensation
consultant to assist it on several compensation related issues, particularly as
regards the fairness and reasonableness of the compensation paid to the Chief
Executive Officer. Based in part on the consultant's analyses and the
aforementioned factors, the Committee concluded that such compensation was fair
and reasonable.
Over the two fiscal years 1998-1999, based on the significant turnaround of
the Company's financial performance, the Company paid an aggregate of $650,000
in bonuses to Messrs. Babbitt and Reich.
In 2000, owing to slowing growth in the market for the several of the
Company's chief products, the Company failed to meet its minimum EPS goal per
fully-diluted share. With respect to bonuses for 2000, the Compensation
Committee therefore determined that the bonus to be paid to the Chief Executive
Officer for 2000 ($145,000) should be smaller than the bonus paid to him for
1999 ($200,000).
Effective as of January 4, 2001, Mr. Reich resigned from all of his
positions with the Company. While the Company was contractually obligated to
honor the severance provisions of Mr. Reich's contract, the Company was not
obligated to pay and did not pay Mr. Reich a bonus for 2000.
COMPENSATION COMMITTEE: John F. Doyle, James E. Bolin and Mitchell S.
Rosenthal, M.D.
COMMON STOCK PERFORMANCE
The following graph sets forth the Company's total stockholder return as
compared to the NASDAQ Market Index and the Standard & Poor's Medical Products
and Supplies Index over the period from December 31, 1995 until December 31,
2000. The total stockholder return assumes $100 invested at December 31, 1995 in
the Company's Common Stock, the NASDAQ Market Index and the Standard & Poor's
Medical Products and Supplies Index. It assumes reinvestment of all dividends.
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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG INAMED CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S & P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) INDEX
[INAMED LINE GRAPH]
There can be no assurance that the Company's stock performance will
continue with the same or similar trends depicted in the graph above.
INDEXED RETURNS
12/1995 12/1996 12/1997 12/1998 12/1999 12/2000
------- ------- ------- ------- ------- -------
Inamed Corporation.................. 100 95.77 61.97 114.79 494.37 230.29
NASDAQ Stock Market (U.S.).......... 100 123.04 150.69 212.51 394.92 237.62
S&P Health Care (Medical Products &
Supplies)......................... 100 114.77 143.09 206.25 191.03 275.56
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO
THE 2000 EMPLOYEE STOCK OPTION PLAN
INTRODUCTION
The Company's 2000 Employee Stock Option Plan (the "2000 Option Plan") was
adopted by the Board of Directors in January of 2000 and approved by the
stockholders of the Company on May 17, 2000. The number of shares of Common
Stock authorized for issuance under the 2000 Option Plan is 550,000. Subject to
the approval of the stockholders, the Board of Directors is proposing to amend
the 2000 Option Plan to increase the number of shares authorized for issuance
under the 2000 Option Plan to 775,000, an increase of 225,000 shares (the "Plan
Amendment"). The complete text of the 2000 Option Plan, as amended by the Plan
Amendment, is attached hereto as Appendix B.
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If the Plan Amendment is not approved by the holders of record of the
majority of shares of Common Stock present in person or represented by proxy at
the Meeting, such amendment will be given no force or effect and the 2000 Option
Plan will continue to remain effective absent the Plan Amendment.
REASON FOR THE PLAN AMENDMENT
The Board of Directors believes that the continued availability of stock
options under the 2000 Option Plan is important to the Company's ability to
attract and retain key employees by allowing them to participate in the
ownership and growth of the Company through the grant of stock options
("Options"). The granting of such Options serves as partial consideration and
gives key employees an additional inducement to remain in the service of the
Company and its subsidiaries and provides them with an increased incentive to
work toward the Company's success. Rather than adopt a new stock option plan at
this time, the Board of Directors has adopted the Plan Amendment and is
recommending that the Company's stockholders approve the Plan Amendment.
The Board of Directors believes it is in the Company's and its
stockholders' best interests to approve the Plan Amendment because it would (i)
allow the Company to grant additional Options which facilitate the benefits of
the additional incentive inherent in the ownership of Common Stock by key
employees and (ii) help the Company retain the services of key employees.
The 2000 Option Plan currently authorizes the issuance of a maximum of
550,000 shares of the Company's Common Stock pursuant to the exercise of Options
granted thereunder. In January, 2000, 517,000 Options to purchase Common Stock
were granted to 103 employees pursuant to the 2000 Option Plan. Since January,
2000, there has been a small net decrease in the number of Options issued under
the Plan because a number of participants in the 2000 Option Plan have
terminated employment with the Company since January, 2000. Total options under
the 2000 Option Plan held by current employees is approximately 490,000.
All options issued under the 2000 Option Plan vest ratably, one-third per
year on the first, second and third anniversaries of their issuance. All 517,000
Options issued in January, 2000 are exercisable at a price of $40.94 per share,
the closing price of the Common Stock as quoted on the NASDAQ National Market on
January 3, 2000. Such exercise price was substantially higher than the
prevailing market price for the Common Stock throughout much of 2000 and to date
in 2001. Hence, such options may afford little or no near-term incentive to
their holders. The Board of Directors of the Company is proposing to amend the
2000 Option Plan to increase the number of shares authorized for issuance under
the 2000 Option Plan so that the Company may grant a number of additional
options to certain participants in the 2000 Stock Option Plans at an exercise
price which may create a greater near-term incentive to their holders. It is
expected that such employees would receive approximately one new option for
every three options that they now hold.
None of the Chief Executive Officer, the executive officers of the Company
named in the Summary Compensation Table set forth above or directors of the
Company participate in the 2000 Option Plan. The number of Options that will be
granted to individual participants under the 2000 Option Plan, as amended by the
Plan Amendment, is not currently determinable, as the Compensation Committee and
the Board of Directors will make such determinations in their discretion. The
following is a summary of the material features of the 2000 Option Plan, as
amended by the Plan Amendment. This summary is qualified in its entirety by the
full text of the 2000 Option Plan, as amended by the Plan Amendment, which is
set forth in Appendix B of this Proxy Statement.
ADMINISTRATION
The 2000 Option Plan is administered by a Compensation Committee (the
"Committee"), consisting of not less than three members of the Board of
Directors appointed by the Board of Directors. The Committee will select the key
employees who will be granted Options to purchase shares of Common Stock under
the Plan and, subject to the provisions of the 2000 Option Plan, will determine
the terms and conditions and number of shares of Common Stock subject to each
such Option. The Committee will also make any other determinations necessary or
advisable for the administration of the 2000 Option Plan. The determinations by
the Committee will be final and conclusive; however, the grant of Options to
purchase shares of the Common
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Stock to a full-time employee who is an executive officer of the Company, as
well as the terms and provisions of such Options, requires the prior approval of
a majority of the members of the Board of Directors who are "disinterested
persons." Generally, Options granted under the plan vest and become exercisable
ratably over three years. The 2000 Option Plan will terminate in January, 2010,
but may be terminated by the Board of Directors at any time before that date.
OPTIONS
Upon the grant of an Option to purchase shares of Common Stock to a key
employee, the Compensation Committee will fix the number of shares of the
Company's Common Stock that the optionee may purchase upon exercise of such
Option and the price at which the shares may be purchased. The option price for
Options shall not be less than 100% of the "fair market value" of the shares of
Common Stock at the time such option is granted. "Fair market value" is deemed
to be the closing price of shares of Common Stock on such date, on the NASDAQ
National Market System or otherwise in the principal market in which such shares
of Common Stock are traded. Payment of the exercise price for shares of Common
Stock subject to Options may be made with cash, check or such other instrument
as may be acceptable to the Company, including receipt of a reduced number of
shares of Common Stock in lieu of cash. Full payment for shares of Common Stock
exercised must be made at the time of exercise.
FEDERAL INCOME TAX CONSEQUENCES
Upon exercise of a non-qualified stock option granted under the 2000 Option
Plan, the grantee will recognize ordinary income in an amount equal to the
excess of the fair market value of the shares received over the exercise price
of such shares. The amount increases the grantee's basis in the stock acquired
pursuant to the exercise of the non-qualified option. Upon a subsequent sale of
the stock, the grantee will incur short-term or long-term gain or loss depending
upon his holding period for the shares and upon the shares' subsequent
appreciation or depreciation in the value. The Company will be allowed a federal
income tax deduction for the amount recognized as ordinary income by the grantee
upon the grantee's exercise of the option.
The foregoing outline is no more than a summary of the federal income tax
provisions relating to the grant and exercise of options and stock appreciation
rights under the 2000 Option Plan and the sale of shares acquired under the 2000
Option Plan. Individual circumstances may vary these results. The federal income
tax laws and regulations are constantly being amended, and each participant
should rely upon his own tax counsel for advice concerning the federal income
tax provisions applicable to the 2000 Option Plan.
The Board of Directors believes it is in the Company's best interests to
approve the Plan Amendment which would allow the Company to grant additional
options under the 2000 Option Plan to secure for the Company the benefits of the
additional incentive inherent in the ownership of shares of the Company's Common
Stock by key employees and to help the Company secure and retain the services of
key employees. The affirmative vote of the holders of record of a majority of
the shares of Common Stock present in person or by proxy at the Meeting is
required for approval of this Proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE 2000
EMPLOYEE STOCK OPTION PLAN.
PROPOSAL NO. 3
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Andersen LLP ("Arthur Andersen") has been
selected as the independent public accountants for the Company for the fiscal
year ending December 31, 2001. Although the selection of accountants does not
require ratification, the Board of Directors has directed that the appointment
of Arthur Andersen be submitted to the stockholders for ratification due to the
significance of their
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appointment by the Company. If the stockholders do not ratify the appointment of
Arthur Andersen, the Board of Directors will consider the appointment of other
certified public accountants. A representative of Arthur Andersen, which also
served as the Company's independent public accountants for the fiscal year ended
December 31, 2000, is expected to be present at the Meeting. Such representative
will have the opportunity to make a statement and will be able to respond to
appropriate questions.
AUDIT FEES
The total aggregate fees billed for professional services rendered by
Arthur Andersen for the audit of the Company's annual financial statements for
the fiscal year ended December 31, 2000 and for review of the financial
statements included in the Company's Forms 10-Q for such year were $550,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees for professional services rendered by Arthur Andersen as
described in paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X.
ALL OTHER FEES
The total aggregate fees billed for professional services rendered by
Arthur Andersen for services not included under the heading "Audit Fees" or
"Financial Information Systems Design and Implementation Fees" for the fiscal
year ended December 31, 2000 were $822,000. There were no other fees billed for
professional services rendered by Arthur Andersen for the fiscal year ended
December 31, 2000.
AUDITOR INDEPENDENCE
The Audit Committee of the Board of Directors has considered whether the
other professional services provided by Arthur Andersen are compatible with
maintaining the independence of Arthur Andersen.
RECOMMENDATION OF THE BOARD OF DIRECTORS:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF ARTHUR
ANDERSEN AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR 2001.
SOLICITATION STATEMENT
The Company will bear all expenses in connection with the solicitation of
proxies. In addition to the use of the mails, solicitations may be made by the
Company's regular employees, by telephone, facsimile or personal contact,
without additional compensation. The Company has retained Innisfree M&A,
Incorporated to assist the Company in the solicitation of proxies for a fee of
$7,500.00 plus expenses. The Company will, upon their request, reimburse
brokerage houses and persons holding shares of Common Stock in the names of the
Company's nominees for their reasonable expenses in sending soliciting material
to their principals.
STOCKHOLDER PROPOSALS
Pursuant to the General Rules under the Securities Exchange Act of 1934,
proposals of stockholders intended to be presented at the 2002 Annual Meeting of
stockholders of the Company pursuant to SEC Rule 14a-8 must be received by the
Secretary of the Company on or before January 15, 2001 to be considered for
inclusion in the proxy materials for that meeting. In addition, the By-laws of
the Company contain requirements relating to the timing and content of the
notice which stockholders must provide to the Secretary of the Company for any
matter or any director nomination to be properly presented at a stockholders
meeting. Specifically, proposals of stockholders or director nominations
intended to presented at the 2002 Annual Meeting must be received by the
Secretary of the Company no earlier than February 19, 2002 and no later than
March 21, 2002.
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OTHER MATTERS
On April 13, 2000, BDO Seidman LLP, which served as the Company's
independent public accountant for the fiscal year ended December 31, 1999,
informed the Company that it had resigned. Effective April 17, 2000, the Company
engaged Arthur Andersen as its independent public accountant. The Company has
not consulted with Arthur Andersen regarding any of the matters or events set
forth in Item 304(a)(2) of Regulation S-K.
In a May 3, 2000 letter to the Securities and Exchange Commission, BDO
stated that it had had a disagreement with the Company on an accounting matter,
but that the matter had been "resolved . . . to BDO's satisfaction." As regards
such disagreement, BDO's letter stated in full: "During its review of the
Company's interim statements for the quarter ended June 30, 1999, BDO questioned
the impact of the 'anti-dilution' provisions in certain officer warrant
agreements on the number of shares issuable upon exercise of the warrants. When
BDO and the Company's management were unable to agree as to the intent of the
officer warrant agreements, the matter was brought to the attention of the
Company's Board of Directors. The Board of Directors resolved the matter to
BDO's satisfaction."
The Company authorized BDO to respond fully to the inquiries of Arthur
Andersen concerning the subject matter of the disagreement and did not put any
limitations on BDO in connection with any such inquiries or responses. In April
2000, Arthur Andersen advised the Company that it had no further inquiries with
respect to this matter.
So far as now known, there is no business other than that described above
to be presented for action by the stockholders at the Meeting, but it is
intended that the proxies will be voted upon any other matters and proposals
that may legally come before the Meeting or any adjournment thereof, in
accordance with the discretion of the persons named therein.
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ANNUAL REPORT
The Company has sent, or is concurrently sending, all of its stockholders
of record as of April 24, 2001 a true copy of its Annual Report for the fiscal
year ended December 31, 2000. Such report contains the Company's certified
consolidated financial statements for the fiscal years ended December 31, 2000
and 1999.
By Order of the Company,
/s/ David E. Bamberger
Secretary
Dated: May 15, 2001
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APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF INAMED CORPORATION
AS ADOPTED BY THE BOARD ON MAY 17, 2000
I. AUTHORITY
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of Inamed Corporation (the "Corporation") is established pursuant to
Article III, Section 3.12 of the Corporation's Bylaws and Section 141(c) of the
Delaware General Corporation Law. The Committee shall be comprised of three
directors as determined from time to time by resolution of the Board. Consistent
with the appointment of other Board committees, the members of the Committee
shall be elected by the Board at the annual organizational meeting of the Board
or at such other time as may be determined by the Board. The Chairman of the
Committee shall be designated by the Board, provided that if the Board does not
so designate a Chairman, the members of the Committee, by majority vote, may
designate a Chairman. The presence in person or by telephone of a majority of
the Committee's members shall constitute a quorum for any meeting of the
Committee. All actions of the Committee will require the vote of a majority of
its members present at a meeting of the Committee at which a quorum is present.
II. PURPOSE OF THE COMMITTEE
The Committee's purpose is to provide assistance to the Board in fulfilling
its legal and fiduciary obligations with respect to matters involving the
accounting, auditing, financial reporting, internal control and legal compliance
functions of the Corporation and its subsidiaries.
The Committee shall oversee the audit efforts of the Corporation's
independent accountants and internal auditors and, in that regard, shall take
such actions as it may deem necessary to satisfy itself that the Corporation's
auditors are independent of management. It is the objective of the Committee to
maintain free and open means of communications among the Board, the independent
accountants, the internal auditors and the financial and senior management of
the Corporation.
III. COMPOSITION OF THE COMMITTEE
(a) Each member of the Committee shall be an "independent" director within
the meaning of the Nasdaq rules and, as such, shall be free from any
relationship that may interfere with the exercise of his or her independent
judgment as a member of the Committee. Notwithstanding the foregoing, as
permitted by the rules of the NASDAQ, under exceptional and limited
circumstances, one director who does not meet certain of the criteria for
"independence" may be appointed to the Committee if the Board determines in its
business judgment that membership on the Committee by such person is required by
the best interests of the Corporation and its stockholders and the Corporation
discloses in the annual proxy statement the nature of such person's relationship
and the reasons for the Board's determination. All members of the Committee
shall be financially literate at the time of their election to the Committee or
shall become financially literate within a reasonable period of time after their
appointment to the Committee. "Financial literacy" shall be determined by the
Board in the exercise of its business judgment, and shall include a working
familiarity with basic finance and accounting practices and an ability to read
and understand fundamental financial statements. At least one member of the
Committee shall have accounting or related financial management expertise, as
such qualification may be determined in the business judgment of the Board.
Committee members, if they or the Board deem it appropriate, may enhance their
understanding of finance and accounting by participating in educational programs
conducted by the Corporation or an outside consultant or firm.
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(b) If required, upon any changes in the composition of the Committee and
otherwise approximately once each year, the Committee shall ensure that the
Corporation provides the Nasdaq with written confirmation regarding:
(i) Any determination that the Board has made regarding the
independence of the Committee members;
(ii) The financial literacy of the Committee members;
(iii) The determination that at least one of the Committee members has
accounting or related financial management expertise; and
(iv) The annual review and reassessment of the adequacy of the
Committee's charter.
IV. MEETINGS OF THE COMMITTEE
The Committee shall meet with such frequency and at such intervals as it
shall determine is necessary to carry out its duties and responsibilities. As
part of its purpose to foster open communications, the Committee shall meet at
least annually with management, the head of the internal auditing department and
the Corporation's independent accountants in separate executive sessions to
discuss any matters that the Committee or each of these groups or persons
believe should be discussed privately. In addition, the Committee (or the
Chairman) should meet or confer with the independent accountants and management
quarterly to review the Corporation's periodic financial statements prior to
their filing with the Securities and Exchange Commission ("SEC"). The Chairman
should work with the Chief Financial Officer and management to establish the
agendas for Committee meetings. The Committee, in its discretion, may ask
members of management or others to attend its meetings (or portions thereof) and
to provide pertinent information as necessary. The Committee shall maintain
minutes of its meetings and records relating to those meetings and the
Committee's activities and provide copies of such minutes to the Board.
V. DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
In carrying out its duties and responsibilities, the Committee's policies
and procedures should remain flexible, so that it may be in a position to best
react or respond to changing circumstances or conditions. The Committee should
review and reassess annually the adequacy of the Committee's charter. The
charter must specify: (1) the scope of the Committee's responsibilities and how
it carries out those responsibilities, (2) the ultimate accountability of the
Corporation's independent auditors to the Board and the Committee, (3) the
responsibility of the Committee and the Board for the selection, evaluation and
replacement of the Corporation's independent auditors, and (4) that the
Committee is responsible for ensuring that the Corporation's independent
auditors submit on a periodic basis to the Committee a formal written statement
delineating all relationships between the independent auditors and the
Corporation and that the Committee is responsible for actively engaging in a
dialogue with the independent auditors with respect to any disclosed
relationships or services that may impact the objectivity and independence of
the independent auditors and for recommending that the Board take appropriate
action to ensure the independence of the independent auditors.
While there is no "blueprint" to be followed by the Committee in carrying
out its duties and responsibilities, the following should be considered within
the authority of the Committee:
Selection and Evaluation of Auditors
(a) Make recommendations to the Board as to the selection of the firm of
independent public accountants to audit the books and accounts of the
Corporation and its subsidiaries for each fiscal year;
(b) Review and approve the Corporation's independent auditors' annual
engagement letter, including the proposed fees contained therein;
(c) Review the performance of the Corporation's independent auditors and
make recommendations to the Board regarding the replacement or termination of
the independent auditors when circumstances warrant;
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(d) Oversee the independence of the Corporation's independent auditors by,
among other things:
(i) requiring the independent auditors to deliver to the Committee on
a periodic basis a formal written statement delineating all relationships
between the independent auditors and the Corporation; and
(ii) actively engaging in a dialogue with the independent auditors
with respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent auditors and recommending
that the Board take appropriate action to satisfy itself of the auditors'
independence;
(e) Instruct the Corporation's independent auditors that they are
ultimately accountable to the Committee and the Board, and that the Committee
and the Board are responsible for the selection (subject to shareholder approval
if determined by the Board), evaluation and termination of the Corporation's
independent auditors;
Oversight of Annual Audit and Quarterly Reviews
(f) Review and accept, if appropriate, the annual audit plan of the
Corporation's independent auditors, including the scope of audit activities, and
monitor such plan's progress and results during the year;
(g) Confirm through private discussions with the Corporation's independent
auditors and the Corporation's management that no management restrictions are
being placed on the scope of the independent auditors' work;
(h) Review the results of the year-end audit of the Corporation, including
(as applicable):
(i) the audit report, the published financial statements, the
management representation letter, the "Memorandum Regarding Accounting
Procedures and Internal Control" or similar memorandum prepared by the
Corporation's independent auditors, any other pertinent reports and
management's responses concerning such memorandum;
(ii) the qualitative judgments of the independent auditors about the
appropriateness, not just the acceptability, of accounting principle and
financial disclosure practices used or proposed to be adopted by the
Corporation and, particularly, about the degree of aggressiveness or
conservatism of its accounting principles and underlying estimates;
(iii) the methods used to account for significant unusual
transactions;
(iv) the effect of significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative guidance or
consensus;
(v) management's process for formulating sensitive accounting
estimates and the reasonableness of these estimates;
(vi) significant recorded and unrecorded audit adjustments;
(vii) any material accounting issues among management, the
Corporation's internal auditing department and the independent auditors;
and
(viii) other matters required to be communicated to the Committee
under generally accepted auditing standards, as amended, by the independent
auditors;
(i) Review with management and the Corporation's independent auditors such
accounting policies (and changes therein) of the Corporation, including any
financial reporting issues which could have a material impact on the
Corporation's financial statements, as are deemed appropriate for review by the
Committee prior to any interim or year-end filings with the SEC or other
regulatory body;
(j) Confirm that the Corporation's interim financial statements included in
Quarterly Reports on Form 10-Q have been reviewed by the Corporation's
independent auditors;
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Oversight of Financial Reporting Process and Internal Controls
(k) Review the adequacy and effectiveness of the Corporation's accounting
and internal control policies and procedures through inquiry and discussions
with the Corporation's independent auditors and management of the Corporation;
(l) Review with management the Corporation's administrative, operational
and accounting internal controls, including controls and security of the
computerized information systems, and evaluate whether the Corporation is
operating in accordance with its prescribed policies, procedures and codes of
conduct;
(m) Review with management and the independent auditors any reportable
conditions and material weaknesses, as defined by the American Institute of
Certified Public Accountants, affecting internal control;
(n) Receive periodic reports from the Corporation's independent auditors
and management of the Corporation to assess the impact on the Corporation of
significant accounting or financial reporting developments proposed by the
Financial Accounting Standards Board or the SEC or other regulatory body, or any
other significant accounting or financial reporting related matters that may
have a bearing on the Corporation;
(o) Establish and maintain free and open means of communication between and
among the Board, the Committee, the Corporation's independent auditors, the
Corporation's internal auditing department and management;
Other Matters
(p) Meet annually with the general counsel, and outside counsel when
appropriate, to review legal and regulatory matters, including any matters that
may have a material impact on the financial statements of the Corporation;
(q) Prepare a report to be included in each annual proxy statement (or, if
not previously provided during the fiscal year, any other proxy statement or
consent statement relating to the election of directors) of the Corporation
commencing after December 15, 2000 which states, among other things, whether:
(i) the Committee has reviewed and discussed with management the
audited financial statements to be included in the Corporation's Annual
Report on Form 10-K;
(ii) the Committee has discussed with the Corporation's independent
auditors the matters that the auditors are required to discuss with the
Committee by Statements on Auditing Standard No. 61 (as it may be modified
or supplemented);
(iii) the Committee has received the written disclosures and the
letter from the Corporation's independent auditors required by Independence
Standards Board Standard No. 1, as may be modified or supplemented, and has
discussed with the independent auditors their independence; and
(iv) based on the review and discussions described in subsections (i),
(ii) and (iii) above, the Committee has recommended to the Board that the
audited financial statements be included in the Corporation's Annual Report
on Form 10-K for the last fiscal year for filing with the SEC;
(r) Review the Corporation's policies relating to the avoidance of
conflicts of interest and review past or proposed transactions between the
Corporation and members of management as well as policies and procedures with
respect to officers' expense accounts and perquisites, including the use of
corporate assets. The Committee shall consider the results of any review of
these policies and procedures by the Corporation's independent auditors;
(s) Review the Corporation's program to monitor compliance with the
Corporation's Code of Conduct, and meet periodically with the Corporation's
Compliance Officer to discuss compliance with the Code of Conduct;
(t) Obtain from the independent auditors any information pursuant to
Section 10A of the Securities Exchange Act of 1934;
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(u) Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities, including retaining outside counsel or
other consultants or experts for this purpose; and
(v) Perform such additional activities, and consider such other matters,
within the scope of its responsibilities, as the Committee or the Board deems
necessary or appropriate.
WITH RESPECT TO THE DUTIES AND RESPONSIBILITIES LISTED ABOVE, THE COMMITTEE
SHOULD:
(1) Report regularly to the Board on its activities, as appropriate;
(2) Exercise reasonable diligence in gathering and considering all material
information;
(3) Understand and weigh alternative courses of conduct that may be
available;
(4) Focus on weighing the benefit versus harm to the Corporation and its
shareholders when considering alternative recommendations or courses of action;
(5) If the Committee deems it appropriate, secure independent expert advice
and understand the expert's findings and the basis for such findings, including
retaining independent counsel, accountants or others to assist the Committee in
fulfilling its duties and responsibilities; and
(6) Provide management, the Corporation's independent auditors and internal
auditors with appropriate opportunities to meet privately with the Committee.
While the Committee has the duties and responsibilities set forth in this
charter, the Committee is not responsible for planning or conducting the audit
or for determining whether the Corporation's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. Similarly, it is not the responsibility of the Committee to resolve
disagreements, if any, between management and the independent auditors or to
ensure that the Corporation complies with all laws and regulations and its Code
of Conduct.
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APPENDIX B
INAMED CORPORATION
2000 STOCK OPTION PLAN(1)
1. Purpose. The purpose of the Plan is to provide additional incentive to
those officers, key employees, nonemployee directors and consultants of the
Company and its Subsidiaries whose substantial contributions are essential to
the continued growth and success of the Company's business in order to
strengthen their commitment to the Company and its Subsidiaries, to motivate
such officers and employees to faithfully and diligently perform their assigned
responsibilities and to attract and retain competent and dedicated individuals
whose efforts will result in the long-term growth and profitability of the
Company. To accomplish such purposes, the Plan provides that the Company may
grant Nonqualified Stock Options. The Plan is intended, to the extent
applicable, to satisfy the requirements of Section 162(m) of the Code and shall
be interpreted in a manner consistent with the requirements thereof.
2. Definitions. For purposes of the Plan:
(a) "Affiliates" shall have the meaning set forth in Rule 12b-2 under
the Exchange Act.
(b) "Agreement" shall mean the written agreement evidencing the grant
of an Option, and setting forth the terms and conditions thereof. Each
Agreement shall be approved by the Board or the Committee.
(c) "Associates" shall have the meaning set forth in Rule 12b-2 under
the Exchange Act.
(d) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Change in Capitalization" shall mean any increase, reduction, or
change or exchange of Shares for a different number or kind of shares or
other securities of the Company by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, issuance of
warrants or rights, stock dividend, stock split or reverse stock split,
combination or exchange of shares, repurchase of shares, change in
corporate structure or otherwise.
(g) "Change of Control" of the Company shall be deemed to occur on the
first to occur of the following: (i) any Person (other than the Company,
any trustee or other fiduciary holding securities under an employee benefit
plan of the Company, or any corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company's then outstanding
securities; (ii) during any period of two consecutive years (not including
any period prior to the adoption of the Plan), individuals who at the
beginning of such period constitute the Board, and any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (i), (iii) or
(iv) of this definition) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
at least a majority thereof; (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation, other
than (a) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than
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(1)Matter that is underlined is the language that is proposed to be added by the
Plan Amendment adopted by the Board of Directors; matter in [brackets] is
language that is proposed to be deleted by the Plan Amendment adopted by the
Board of Directors.
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50% of the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (b) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or (iv) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(i) "Committee" shall mean a committee appointed by the Board to
administer the Plan and to perform the functions set forth herein. The
composition of the Committee shall at all times consist solely of persons
who are (i) "Nonemployee Directors" as defined in Rule 16b-3 issued under
the Exchange Act, and (ii) "outside directors" as defined in Section 162(m)
of the Code.
(j) "Company" shall mean Inamed Corporation, a Delaware corporation.
(k) "Eligible Employee" shall mean any officer or other key employee
of the Company or a Subsidiary designated by the Board or Committee as
eligible to receive Options subject to the conditions set forth herein.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" shall mean the fair market value of the Shares
as determined by the Committee in its sole discretion; provided, however,
that (A) if the Shares are admitted to trading on a national securities
exchange, Fair Market Value on any date shall be the last sale price
reported for the Shares on such exchange on such date or on the last date
preceding such date on which a sale was reported, (B) if the Shares are
admitted to quotation on the NASDAQ stock market ("NASDAQ") or other
comparable quotation system and have been designated as a National Market
System ("NMS") security, Fair Market Value on any date shall be the last
sale price reported for the Shares on such system on such date or on the
last day preceding such date on which a sale was reported, or (C) if the
Shares are admitted to quotation on NASDAQ and have not been designated a
NMS security, Fair Market Value on any date shall be the average of the
highest bid and lowest asked prices of the Shares on such system on such
date.
(n) "Incentive Stock Option" shall mean an "Incentive Stock Option"
within the meaning of Section 422 of the Code.
(o) "Nonqualified Stock Option" shall mean an option that is not an
Incentive Stock Option.
(p) "Option" shall mean a Nonqualified Stock Option.
(q) "Optionee" shall mean an Eligible Employee, nonemployee director
or consultant of the Company or a Subsidiary who has been granted an Option
under the Plan.
(r) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof.
(s) "Plan" shall mean the Inamed Corporation 2000 Stock Option Plan,
as amended from time to time.
(t) "Shares" shall mean shares of the common stock, $.01 par value, of
the Company (including any new, additional or different stock or securities
resulting from a Change in Capitalization).
(u) "Subsidiary" shall mean any corporation in an unbroken chain of
corporations, beginning with the Company, if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
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3. Administration.
(a) The Plan shall be administered by the Committee, which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. A majority of the
Committee shall constitute a quorum and a majority of a quorum may authorize any
action. Any decision reduced to writing and signed by a majority of the members
of the Committee shall be fully effective as if it had been made at a meeting
duly held. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan and
all members of the Committee shall be fully indemnified by the Company with
respect to any such action, determination or interpretation. The Company shall
pay all expenses incurred in the administration of the Plan.
(b) Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time:
(i) to determine those Eligible Employees, nonemployee directors and
consultants to whom Options shall be granted under the Plan and the number
of Options, to be granted to each Eligible Employee, nonemployee directors
or consultants and to prescribe the terms and conditions (which need not be
identical) of each Option, including the purchase price per Share of each
Option;
(ii) to construe and interpret the Plan and the Options granted
hereunder and to establish, amend and revoke rules and regulations for the
administration of the Plan, including, but not limited to, correcting any
defect or supplying any omission, or reconciling any inconsistency in the
Plan or in any Agreement, in the manner and to the extent it shall deem
necessary or advisable to make the Plan fully effective, and all decisions
and determinations by the Committee in the exercise of this power shall be
final and binding upon the Company or a Subsidiary, and the Optionees, as
the case may be;
(iii) generally, to exercise such powers and to perform such acts as
are deemed necessary or advisable to promote the best interests of the
Company with respect to the Plan.
4. Shares Subject to Plan; Limitation on Grants.
(a) The maximum number of Shares that may be issued pursuant to Options
shall be [550,000] 775,000 Shares (or the number and kind of shares of stock or
other securities that are substituted for those Shares or to which those Shares
are adjusted upon a Change in Capitalization), and the Company shall reserve for
the purposes of the Plan, out of its authorized but unissued Shares or out of
Shares held in the Company's treasury, or partly out of each, such number of
Shares.
(b) Whenever any outstanding Option or portion thereof expires, is
cancelled or is otherwise terminated (other than by exercise of an Option), the
Shares allocable to the unexercised portion of such Option may again be the
subject of grants of Options hereunder.
(c) The aggregate number of Shares with respect to which an Option or
Options may be granted to any individual Optionee during any fiscal year shall
not exceed 18,000.
5. Eligibility. Subject to the provisions of the Plan, the Committee
shall have full and final authority to select those Eligible Employees,
nonemployee directors and consultants who will receive Options hereunder.
6. Options. The Committee may grant Options in accordance with the Plan,
the terms and conditions of which shall be set forth in an Agreement. Each
Option and Agreement shall be subject to the following conditions:
(a) Purchase Price. The purchase price or the manner in which the
purchase price is to be determined for Shares under each Option shall be
set forth in the Agreement; provided, however, that the Board may, in its
sole discretion, at any time prior to the expiration of an Option, provide
that the purchase price per Share of an Option may be lowered if the Board
determines that such an adjustment is necessary to preserve the incentive
purpose of such Option.
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(b) Duration. Options granted hereunder shall be for such term as the
Committee shall determine, provided that no Option shall be exercisable
after the expiration of ten (10) years from the date it is granted. The
Committee may, subsequent to the granting of any Option, extend the term
thereof but in no event shall the term as so extended exceed the maximum
term provided for in the preceding sentence.
(c) Nontransferability. Unless otherwise set forth in the Agreement,
no Option granted hereunder shall be transferable by an Optionee otherwise
than by will or the laws of descent and distribution, and an Option may be
exercised during the lifetime of such Optionee only by the Optionee or such
Optionee's guardian or legal representative. The terms of such Option shall
be binding upon the beneficiaries, executors, administrators, heirs and
successors of the Optionee.
(d) Vesting. Each Option shall become exercisable as determined by
the Board or Committee as set forth in the Agreement.
(e) Termination of Employment or Service. Unless otherwise set forth
in the Agreement, any outstanding Options held by an Optionee on the date
that an Optionee ceases to be employed by the Company or any Subsidiary (or
ceases to serve as a nonemployee director of, or a consultant to the
Company or any Subsidiary) shall terminate as of such date. Notwithstanding
the foregoing, the Committee may provide, either at the time an Option is
granted or thereafter, that the Option may be exercised beyond such date,
but in no event beyond the term of the Option. Without limiting the
generality of the foregoing, unless determined otherwise by the Committee
and reflected in the applicable Agreement, service by an Optionee as a
consultant to the Company which commences immediately upon the termination
of such Optionee's employment by the Company (or, if applicable,
termination of such Optionee's service as a nonemployee director) shall be
treated as continuous service by such Optionee with the Company for
purposes of this Plan, and Options held by such Optionee shall remain
outstanding during such service as a consultant, subject to the terms of
the Agreement and the Plan.
(f) Method of Exercise. The exercise of an Option shall be made only
by a written notice delivered to the Secretary of the Company at the
Company's principal executive office, specifying the number of Shares to be
purchased and accompanied by payment therefor and otherwise in accordance
with the Agreement pursuant to which the Option was granted. The purchase
price for any Shares purchased pursuant to the exercise of an Option shall
be paid in full upon such exercise either (i) in cash, by certified check
or by cashier's check or (ii) through the delivery of Shares owned by the
Optionee for at least six months prior to the date of exercise having a
Fair Market Value equal to the Option purchase price. If requested by the
Committee, the Optionee shall deliver the Agreement evidencing the Option
to the Secretary of the Company who shall endorse thereon a notation of
such exercise and return such Agreement to the Optionee. Not less than 50
Shares may be purchased at any time upon the exercise of an Option unless
the number of Shares so purchased constitutes the total number of Shares
then purchasable under the Option.
(i) Rights of Optionees. No Optionee shall be deemed for any purpose
to be the owner of any Shares subject to any Option unless and until (i)
the Option shall have been exercised pursuant to the terms thereof, (ii)
the Company shall have issued and delivered the Shares to the Optionee, and
(iii) the Optionee's name shall have been entered as a stockholder of
record on the books of the Company. Thereupon, the Optionee shall have full
voting, dividend and other ownership rights with respect to such Shares.
7. Adjustment Upon Changes in Capitalization.
(a) In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to the maximum
number and class of shares of stock with respect to which Options may be granted
under the Plan, the number and class of shares of stock as to which Options have
been granted under the Plan, and the purchase price therefor, if applicable.
(b) In the event the outstanding Shares shall be changed into or exchanged
for any other class or series of capital stock or cash, securities or other
property pursuant to a recapitalization, reclassification, merger,
consolidation, combination or similar transaction, then each Option shall
thereafter become exercisable for the
B-4
32
number and/or kind of capital stock, and/or the amount of cash, securities or
other property so distributed, into which the Shares subject to the Option would
have been changed or exchanged had the Option been exercised in full prior to
such transaction, provided that, if the kind or amount of capital stock or cash,
securities or other property received in such transaction is not the same for
each outstanding Share, then the kind or amount of capital stock or cash,
securities or other property for which the Option shall thereafter become
exercisable shall be the kind and amount so receivable per Share by a plurality
of the Shares, and provided further that, if necessary, the provisions of the
Option shall be appropriately adjusted so as to be applicable, as nearly as may
reasonably be, to any shares of capital stock, cash, securities or other
property thereafter issuable or deliverable upon exercise of the Option.
8. Termination and Amendment of the Plan. The Plan shall terminate on the
day preceding the tenth anniversary of its effective date, except with respect
to Options outstanding on such date, and no Options may be granted thereafter,
but then-outstanding Options shall be unaffected. The Board may sooner terminate
or amend the Plan at any time, and from time to time; provided, however, that,
except as provided in Section 7 hereof, no amendment shall be effective unless
approved by the stockholders of the Company if and to the extent that the Board
determines such approval is appropriate for purposes of satisfying Section
162(m) of the Code or any other law, regulation or stock exchange rule. Except
as provided in Section 7 hereof, rights and obligations under any Option granted
before any amendment of the Plan shall not be adversely altered or impaired by
such amendment, except with the consent of the Optionee.
9. Nonexclusivity of the Plan. The adoption of the Plan by the Board
shall not be construed as amending, modifying or rescinding any previously
approved incentive arrangement or as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan, and such arrangements may be either applicable generally or only
in specific cases.
10. Limitation of Liability. As illustrative of the limitations of
liability of the Company, but not intended to be exhaustive thereof, nothing in
the Plan shall be construed to:
(a) give any person any right to be granted an Option other than at
the sole discretion of the Board or the Committee;
(b) give any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan;
(c) limit in any way the right of the Company or its Subsidiaries to
terminate the employment of any person at any time; or
(d) be evidence of any agreement or understanding, expressed or
implied, that the Company or its Subsidiaries will employ any person in any
particular position, at any particular rate of compensation or for any
particular period of time.
11. Regulations and Other Approvals; Governing Law.
(a) The Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of Delaware
without giving effect to the choice of law principles thereof.
(b) The obligation of the Company to sell or deliver Shares with respect to
Options granted under the Plan shall be subject to all applicable laws, rules
and regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Committee.
(c) Except as otherwise provided in Section 8, the Board may make such
changes as may be necessary or appropriate to comply with the rules and
regulations of any government authority.
(d) Each Option is subject to the requirement that, if at any time the
Committee determines, in its absolute discretion, that the listing, registration
or qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an
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33
Option, or the issuance of Shares, no Options, shall be granted or payment made
or Shares issued, in whole or in part, unless listing, registration,
qualification, consent or approval has been effected or obtained free of any
conditions as acceptable to the Committee.
12. Multiple Agreements. The terms of each Option may differ from other
Options granted under the Plan at the same time, or at any other time. The
Committee may also grant more than one Option, to a given Optionee during the
term of the Plan, either in addition to, or in substitution for, one or more
Options previously granted to that Optionee. The grant of multiple Options may
be evidenced by a single Agreement or multiple Agreements, as determined by the
Committee.
13. Withholding of Taxes. Whenever Shares are to be delivered pursuant to
an Option, the Company shall have the right to require the Optionee to remit to
the Company in cash an amount equal to the amount of any federal, state and
local tax required to be withheld. With the approval of the Committee, an
Optionee may satisfy the foregoing requirement by electing to have the Company
withhold from delivery Shares having a value equal to the amount of tax required
to be withheld. Such Shares shall be valued at their Fair Market Value on the
date of which the amount of tax required to be withheld is determined (the "Tax
Date"). Fractional share amounts shall be settled in cash. Such a withholding
election may be made with respect to all or any portion of the shares to be
delivered pursuant to an Option.
14. Notification of Election Under Section 83(b) of the Code. If any
Optionee shall, in connection with the acquisition of Shares under the Plan,
make the election permitted under Section 83(b) of the Code, such Optionee shall
notify the Company of such election within 10 days of filing notice of the
election with the Internal Revenue Service.
15. No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan. The Board shall determine whether cash, other
Options, or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
16. Beneficiary. An Optionee may file with the Committee a written
designation of a beneficiary on such form as may be prescribed by the Committee
and may, from time to time, amend or revoke such designation. If no designated
beneficiary survives the Optionee, the executor or administrator of the
Optionee's estate shall be deemed to be the Optionee's beneficiary.
17. Effective Date. The effective date of the Plan is January 4, 2000
(the date on which the Board adopted the Plan), subject to the approval of the
Company's shareholders, which must occur within twelve months of the date the
Plan is adopted by the Board.
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34
PROXY INAMED PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INAMED
CORPORATION
PROXY -- ANNUAL MEETING OF STOCKHOLDERS JUNE 19, 2001
The undersigned, a stockholder of Inamed Corporation, a Delaware corporation
(the "Company"), does hereby appoint Richard G. Babbitt and Michael J. Doty, and
each of them, the true and lawful attorneys and proxies with full power of
substitution, for and in the name, place and stead of the undersigned, to vote
all of the shares of Common Stock of the Company which the undersigned would be
entitled to vote if personally present at the 2001 Annual Meeting of
Stockholders of the Company to be held at 460 Ward Drive, Santa Barbara,
California 93111, on June 19, 2001, at 10:30 a.m., local time, or at any
adjournment or adjournments thereof.
1. To elect the following directors to serve as directors until the 2002 annual
meeting of stockholders of the Company and in each case until their
successors have been duly elected and qualified: Richard G. Babbitt, James E.
Bolin, Malcolm R. Currie, John F. Doyle, Mitchell S. Rosenthal and David A.
Tepper.
[ ] FOR ALL NOMINEES [ ] WITHHELD FROM ALL NOMINEES
WITHHELD
---------------------------------------------------------------------
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), PRINT NAME(S) ABOVE
2. To approve the amendment to the Company's 2000 Employee Stock Option Plan to
increase the number of shares of Common Stock authorized for issuance
thereunder from 550,000 to 775,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of Arthur Andersen LLP as the Company's independent
accountants for fiscal 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. DISCRETIONARY AUTHORITY: To vote with discretionary authority with respect to
all other matters which may come before the Meeting.
(CONTINUED, AND TO BE SIGNED, ON OTHER SIDE)
35
The undersigned hereby revokes any proxy or proxies heretofore given and
acknowledges receipt of a copy of the Notice of Annual Meeting and Proxy
Statement, both dated MAY 15, 2001, and a copy of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2000.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREIN GIVEN.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO ELECT EACH OF THE BOARD
OF DIRECTORS' NOMINEES FOR DIRECTORS, IN FAVOR OF THE AMENDMENT TO THE
COMPANY'S 2000 EMPLOYEE STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK AUTHORIZED FOR ISSUANCE THEREUNDER FROM 550,000 TO 775,000 AND IN
FAVOR OF THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR FISCAL 2001.
MARK HERE FOR ADDRESS CHANGE AND NOTE NEW ADDRESS BELOW [ ]
Date:
---------------------------------
----------------------------------------
(Signature)
----------------------------------------
(Signature)
NOTE: Your signature should appear the
same as your name appears hereon. In
signing as attorney, executor,
administrator, trustee or guardian,
please indicate the capacity in which
signing. When signing as joint tenants,
all parties in the joint tenancy must
sign. When a proxy is given by a
corporation, it should be signed by an
authorized officer and the corporate
seal affixed. No postage is required if
mailed in the United States.