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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
AEQUITRON MEDICAL, INC.
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(Name of Registrant as Specified in Its Charter)
AEQUITRON MEDICAL, INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
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/ / 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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[AEQUITRON LOGO]
14800 TWENTY-EIGHTH AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55447
(612) 557-9200
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 26, 1995
------------------------
To the Shareholders of Aequitron Medical, Inc.:
Notice is hereby given that the Annual Meeting of the Shareholders of
Aequitron Medical, Inc. (the "Company") will be held on Tuesday, September 26,
1995, at 4:00 p.m., local time, at the Radisson Plaza Hotel, 35 South Seventh
Street, Minneapolis, Minnesota, for the following purposes:
1. To elect two (2) directors each for a three-year term.
2. To approve the Aequitron Medical, Inc. 1995 Employee Stock Purchase
Plan.
3. To approve an amendment to the Company's 1988 Stock Option Plan to
increase the number of authorized shares from 1,100,000 to 1,600,000.
4. To approve an amendment to the Company's 1988 Stock Option Plan to
increase the number of nonqualified stock options granted to
non-employee directors under the formula plan.
5. To consider and take action on any other matters that may properly be
presented at the meeting.
The Board of Directors has fixed the close of business on August 4, 1995,
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
BE PERSONALLY PRESENT AT THE MEETING, HOWEVER, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU LATER
DECIDE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS EXERCISED.
By Order of the Board of Directors
[SIG]
GERALD E. RHODES, Secretary
Dated: August 16, 1995
3
AEQUITRON MEDICAL, INC.
14800 TWENTY-EIGHTH AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55447
(612) 557-9200
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 26, 1995
------------------------
GENERAL MATTERS
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Aequitron Medical, Inc. (the "Company") from holders
of Common Stock of proxies in the accompanying form to be voted at the Annual
Meeting of Shareholders on Tuesday, September 26, 1995 at 4:00 p.m. local time,
and at all adjournments thereof. This Proxy Statement is first being sent to
shareholders on or about August 16, 1995.
The cost of soliciting proxies, including the preparation, assembly, and
mailing of the proxies and soliciting material, as well as the cost of
forwarding such material to the beneficial owners of stock, will be borne by the
Company. Directors, officers and regular employees of the Company may, without
compensation other than their regular compensation, solicit proxies personally
or by telephone.
Any shareholder giving a proxy will have the right to revoke it by written
notice to the Secretary of the Company or by filing with the Secretary another
proxy bearing a later date at any time before it is voted at the meeting. A
shareholder wishing to vote in person after giving his or her proxy must first
give written notice of revocation to the Secretary. All shares represented by
valid, unrevoked proxies will be voted at the meeting and any adjournment
thereof.
The presence at the Annual Meeting in person or by proxy of the holders of
a majority of the outstanding shares of the Company's Common Stock entitled to
vote shall constitute a quorum for the transaction of business. If a broker
returns a "non-vote" proxy, indicating a lack of authority to vote on such
matter, then the shares covered by such non-vote shall be deemed present at the
meeting for purposes of determining a quorum but shall not be deemed to be
represented at the meeting for purposes of calculating the vote with respect to
such matter. If a shareholder abstains from voting as to any matter, then the
shares held by such shareholder shall be deemed present at the meeting for
purposes of determining a quorum and for purposes of calculating the vote with
respect to such matter, but shall not be deemed to have been voted in favor of
such matter. Proxies which are signed but which lack any such specification will
be voted in favor of the proposals set forth in the Notice of Meeting and in
favor of the slate of directors proposed by the Board of Directors and listed
herein.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed August 4, 1995 as the
record date for determining shareholders entitled to vote at the 1995 Annual
Meeting. Persons who were not shareholders on such date will not be allowed to
vote at the 1995 Annual Meeting. At the close of business on August 4, 1995,
4,859,376 shares of Common Stock, $.01 par value, were issued and outstanding.
As provided in the Articles of Incorporation of the Company, holders of Common
Stock have one vote for each share held and they are not entitled to cumulative
voting rights. The Company also has 4,000,000 shares of preferred stock
authorized. No shares of preferred stock are outstanding.
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ELECTION OF DIRECTORS
(PROPOSAL #1)
The Company's Restated Articles of Incorporation provide that the Board of
Directors be divided into three classes, each class to be as equal in number as
possible. There are currently five persons serving as directors. The Company is
proposing that two directors be elected at the Annual Meeting of Shareholders to
serve three-year terms expiring in 1998, or until each respective successor is
elected and qualified. The Board of Directors Nominating Committee has nominated
for election James B. Hickey, Jr. and Ervin F. Kamm, Jr. Both nominees are
currently directors of the Company and have consented to being named as
nominees. It is intended that proxies will be voted for such nominees. The
Company believes that Messrs. Hickey and Kamm will be able to serve, but should
either of them be unable to serve as a director, the persons named in the
proxies have advised the Company that they will vote for the election of such
substitute nominee as the Board of Directors may propose. Nominees to the Board
of Directors are elected by a majority of the votes cast in person or by proxy
at the Annual Meeting.
The names, ages and positions with the Company of the nominees and each
person continuing as a director are set forth below.
POSITION WITH DIRECTOR
NAME AGE THE COMPANY SINCE
---------------------------------------- --- ---------------------------- ---------
James B. Hickey, Jr. ................... 42 President, Chief Executive 1993
Officer and Director(1)
Ervin F. Kamm, Jr. ..................... 55 Director(1) 1991
Lawrence A. Lehmkuhl.................... 58 Director 1986
David B. Morse.......................... 52 Director 1983
Gerald E. Rhodes........................ 53 Director 1984
---------------
(1) Nominee.
BUSINESS EXPERIENCE
James B. Hickey, Jr. has been the President and Chief Executive Officer of
the Company since June 1993. From October 1989 to June 1993, Mr. Hickey served
as President of Baxter Healthcare, Inc's Respiratory/Anesthesia Systems
Division, and prior to October 1989, he was President of Baxter's Hospitex
Division for three years.
Mr. Kamm has been the President and Chief Executive Officer of Digi
International, a data communications company, since December 1994. Prior to
December 1994, Mr. Kamm was the President and a Director of Norstan, Inc., a
telecommunications company, since January of 1988. Prior to serving as the
President of Norstan, Inc., Mr. Kamm was President of Plato/Wicat Systems Co., a
developer of educational software, from August 1984 to December 1987.
Mr. Lehmkuhl is currently a director of St. Jude Medical, Inc., Fisher
Imaging Corp. and Kera Vision, Inc. From February 1985 until April 1993, Mr.
Lehmkuhl served as the President, Chief Executive Officer and Director of St.
Jude Medical, and from April 1993 to February 1995, he was the Chairman of the
Board of St. Jude Medical. From 1966 to February 1985, Mr. Lehmkuhl was employed
by American Hospital Supply Corporation in various capacities, most recently as
President of the American Converters Division.
Mr. Morse has been a partner with the law firm of Best & Flanagan in
Minneapolis, Minnesota since 1990. Mr. Morse has practiced law in private
practice since 1971. Since July 1989, Mr. Morse has served as the Chairman of
the Board of the Company.
Mr. Rhodes is currently the President of Ring Specialty Company, a jewelry
manufacturer located in Boulder, Colorado. He has been the President of Ring
Specialty Company since January 1981. Mr. Rhodes has served as the Secretary of
the Company since July 1989.
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5
BOARD AND COMMITTEE MEETINGS
During fiscal year 1995, the Board of Directors held 6 formal meetings.
Each director attended all of the meetings of the Board of Directors and
Committees of which he was a member.
The Board of Directors has established a Compensation Committee, Nominating
Committee and Stock Option Committee. The full Board of Directors meets as an
Audit Committee, as the Company does not have a separate Audit Committee.
The Compensation Committee of Messrs. Rhodes, Lehmkuhl and Kamm recommends
the compensation for the Company's management directors and reviews the
compensation of all Company officers. The Compensation Committee held 2 meetings
during fiscal 1995.
The Nominating Committee, which met once in fiscal 1995, recommends
qualified candidates for election as directors of the Company. Mr. Hickey and
Mr. Morse currently serve as the Nominating Committee members.
The Stock Option Committee of Messrs. Morse, Rhodes and Lehmkuhl met once
during fiscal year 1995. Such committee has responsibility for approval of all
material terms of options granted to employees and directors.
During fiscal year 1995, the full Board of Directors met once with the
Company's independent auditors to review the Company's financial statements,
accounting policies and practices.
PRINCIPAL SHAREHOLDERS
To the best of the Company's knowledge, the only beneficial owners of more
than five percent (5%) of the Company's outstanding shares of Common Stock as of
August 4, 1995 are listed below.
PERCENT
NAME AND ADDRESS NUMBER OF SHARES OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
----------------------------------------------------------- ------------------ -------
Heartland Advisors, 1,178,250 24.2%
Inc. ......................................................
790 North Milwaukee Street
Milwaukee, WI 53202
Dimensional Fund Advisors 252,300(1) 5.2
Inc. ......................................................
1299 Ocean Avenue
Santa Monica, CA 90401
---------------
(1) Includes 55,700 shares owned by DFA Investment Dimensions Group Inc. and
10,800 shares owned by The DFA Investment Trust Company, the officers of
which are the officers of Dimensional Fund Advisors Inc. and in such
capacity have shared voting and dispositive power over such shares.
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MANAGEMENT SHAREHOLDINGS
The following table provides information as of August 4, 1995 concerning
the beneficial ownership of the Company's Common Stock by (i) each director and
nominee for director of the Company, (ii) the executive officers named in the
Summary Compensation Table, and (iii) all directors and executive officers as a
group. Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock owned by
them.
NAME OF DIRECTOR, NAMED EXECUTIVE NUMBER OF SHARES PERCENT OF
OFFICER OR IDENTITY OF GROUP BENEFICIALLY OWNED(1) CLASS(1)
------------------------------------------------------- --------------------- ----------
James B. Hickey, Jr. .................................. 207,867(2) 4.1%
Ervin F. Kamm, Jr. .................................... 20,000(3) 0.4
Lawrence A. Lehmkuhl................................... 63,000(4) 1.3
David B. Morse......................................... 36,300(5) 0.7
Gerald E. Rhodes....................................... 55,000(6) 1.1
Jeffrey A. Blair....................................... 45,846(7) 0.9
William M. Milne....................................... 34,505(8) 0.7
Robert A. Samec........................................ 33,025(9) 0.7
Edson R. Weeks, III.................................... 42,440(10) 0.9
All Directors and Executive Officers as a Group (10
persons)............................................. 529,983(11) 10.1
---------------
(1) Under the rules of the SEC, shares not actually outstanding are deemed to
be beneficially owned by an individual if such individual has the right to
acquire the shares within 60 days. Pursuant to such SEC rules, shares
deemed beneficially owned by virtue of an individual's right to acquire
them are also treated as outstanding when calculating the percent of the
class owned by such individual and when determining the percent owned by
any group in which the individual is included.
(2) Includes 190,000 shares which may be purchased by Mr. Hickey upon exercise
of currently exercisable options.
(3) Includes 20,000 shares which may be purchased by Mr. Kamm upon exercise of
currently exercisable options. Does not include shares obtainable upon
exercise of an option to purchase 5,000 shares which is subject to
shareholder approval of an amendment to the formula plan (see proposal #4).
(4) Includes 23,000 shares which may be purchased by Mr. Lehmkuhl upon exercise
of currently exercisable options. Does not include shares obtainable upon
exercise of an option to purchase 5,000 shares which is subject to
shareholder approval of an amendment to the formula plan (see proposal #4).
(5) Includes 23,000 shares which may be purchased by Mr. Morse upon exercise of
a currently exercisable option. Includes 500 shares held by Mr. Morse's
spouse for which he disclaims having voting or investment power and 500
shares held in custody for his daughter for which he has voting and
investment power. Does not include shares obtainable upon exercise of an
option to purchase 5,000 shares which is subject to shareholder approval of
an amendment to the formula plan (see proposal #4).
(6) Includes 23,000 shares which may be purchased by Mr. Rhodes upon exercise
of currently exercisable options. Does not include shares obtainable upon
exercise of an option to purchase 5,000 shares which is subject to
shareholder approval of an amendment to the formula plan (see proposal #4).
(7) Includes 38,200 shares which may be purchased by Mr. Blair upon exercise of
currently exercisable options.
(8) Includes 23,625 shares which may be purchased by Mr. Milne upon exercise of
currently exercisable options.
(9) Includes 23,025 shares which may be purchased by Mr. Samec upon exercise of
currently exercisable options.
(10) Includes 23,025 shares which may be purchased by Mr. Weeks upon exercise of
currently exercisable options.
(11) Includes 376,875 shares which may be purchased by the directors and
executive officers of the Company upon exercise of currently exercisable
options.
4
7
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Since 1987, the Company has paid each non-employee director an annual fee
of $12,000, payable in twelve monthly installments. In addition, since April
1995 such directors also receive $1,000 for each Board meeting attended, or $500
for a meeting by telephone conference. Non-employee directors also receive an
automatic annual grant of a non-qualified stock option pursuant to the 1988
Stock Option Plan on the date of the Company's annual meeting each year. Subject
to shareholder approval as set forth in Proposal #4, each option granted enables
that director to purchase 10,000 shares of the Company's Common Stock at an
option exercise price equal to the fair market value of such shares on the date
the option is granted. Each option granted to a director is exercisable
beginning one year after the date of grant, and will generally expire at the
earlier of (i) twelve months after the optionee ceases to be a director and (ii)
five years after the date of grant. Options will be granted under the 1988 Stock
Option Plan to the Company's four non-employee directors on September 26, 1995,
the date of the Company's upcoming Annual Meeting of Shareholders.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for setting and administering policies for the annual compensation
and stock option programs for the Chief Executive Officer and executive officers
of the Company. The Committee is composed of independent outside directors who
make recommendations to the full Board of Directors on base salary, the annual
incentive compensation, long-term incentives in the form of stock options and
benefits for the executive officers.
Philosophy
The Company's compensation programs seek to improve its financial
performance by rewarding efforts which enhance shareholder value through
achievement of corporate objectives, business strategies and performance goals
for the purpose of attracting and retaining key management talent for the
long-term growth of the Company.
Base Salary
Base salaries for executive officers are based on competitive practices of
companies in the same industry and of comparable size, taking into consideration
levels of responsibility, experience and individual performance. Officer salary
ranges are reviewed by the Committee annually in conjunction with the approval
of the Company's annual operating and total compensation plans.
Annual Incentive Compensation
Under the Company's Management Incentive Plan ("MIP"), executive officers
and certain other members of management participated in its annual incentive
bonus for fiscal 1995. The MIP is intended to tie cash compensation to corporate
performance and individual performance goals. The MIP has three levels of
participants, each with a different incentive amount as a percentage of their
base salary. Potential payouts are then based on the Company's financial plan
performance, and, for certain levels, the individual's performance versus a set
of personal, measurable objectives, approved by senior management. Total
incentive compensation is thus a combination of corporate and individual
objective attainment.
The fiscal 1995 MIP was amended to reflect a greater earnings opportunity
for participants if the Company exceeded its growth targets and a significantly
reduced earnings opportunity if financial and individual targets were not met.
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Long-Term Incentive Compensation
The Stock Option Committee of the Board of Directors is responsible for
developing and administering policies for granting stock options under the
Company's Stock Option Program. The Stock Option Committee is comprised of three
outside directors, two of whom are members of the Compensation Committee. The
objectives of the program are to create a direct link between compensation and
the long-term stock performance of the Company, and to enable executive officers
to acquire and maintain a long-term ownership position in the Company thus
retaining key management.
Stock options are granted either annually or bi-annually (typically in
August) depending on job level. Each job level has a corresponding range of
shares to be considered based on an individual's responsibilities, performance,
future potential and previous grants. The option price of each option granted is
the fair market value of the Company's Common Stock as determined by the closing
price on the day of grant. Options have ten-year terms and vest in installments,
generally over five years.
Benefits
The same health, life and disability insurance benefits are offered to
executive officers as are available to Company employees generally. Executive
officers also receive perquisites which did not exceed the levels set by the SEC
for disclosure for fiscal 1995.
Change in Control Compensation
The Committee believes the ability to recruit and maintain an outstanding
management team is essential to protect and enhance the best interests of the
Company and its shareholders. In recent years the medical products industry has
experienced a consolidation of products and services through mergers and
acquisitions. In order to assure the continued services and dedication of its
executive officers in the event of any threatened or actual change in control of
the Company, the Committee entered into change in control employment agreements
with its executive officers in December 1994. See "Employment Contracts and
Termination of Employment Arrangements."
Chief Executive Officer Compensation
The Compensation Committee annually reviews and approves the compensation
of James B. Hickey, Jr., the Chief Executive Officer, on the basis of the
Company's financial performance and the extent to which strategic and business
plan goals are met. The components of Mr. Hickey's compensation are the same as
described above for all executive officers. With a results-oriented philosophy,
Mr. Hickey's compensation is predominately geared toward increasing shareholder
value through the attainment of long-term and short-term corporate goals.
For fiscal 1995, Mr. Hickey earned a base salary of $190,000, an increase
from $170,000 in fiscal 1994. Mr. Hickey earned a bonus for fiscal 1995 of
$70,356, in accordance with the Company's MIP. Through Mr. Hickey's management
and leadership the Company achieved record revenue and income growth for fiscal
1995. A bonus of $30,000 was granted to Mr. Hickey at the time of his
performance review. In addition, stock options to purchase 125,000 shares were
granted to Mr. Hickey vesting over five years beginning in 1998.
In order to link compensation paid to Mr. Hickey to the Company's stock
performance and provide him with an incentive for further growth in the
Company's total return to shareholders, a nonqualified stock option to purchase
125,000 shares, providing accelerated vesting if certain earnings per share
targets were met, was granted to Mr. Hickey at the time of his hire in June
1993. Due to the Company's favorable financial performance, this nonqualified
option has vested and is currently fully exercisable. In addition, a stock
option
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9
to purchase 150,000 shares vesting over a five-year period was granted to Mr.
Hickey on his hire date. Accordingly, Mr. Hickey currently holds options to
purchase an aggregate of 425,000 shares.
Compensation Committee Stock Option Committee
Lawrence A. Lehmkuhl Lawrence A. Lehmkuhl
Ervin F. Kamm, Jr. David B. Morse
Gerald E. Rhodes Gerald E. Rhodes
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation paid or to be paid by
the Company, as well as certain other compensation paid or accrued, during
fiscal years 1993, 1994 and 1995 to the named executive officers as of April 30,
1995:
LONG TERM COMPENSATION
-----------------------------------
AWARDS
---------------------- PAYOUTS
ANNUAL COMPENSATION RESTRICTED SECURITIES ----------
NAME AND PRINCIPAL FISCAL ------------------------------- STOCK UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY($) BONUS($) OTHER($) AWARDS($) OPTIONS PAYOUTS($) COMPENSATION($)
--------------------- ------ --------- -------- -------- --------- ---------- ---------- ---------------
James B. Hickey, 1995 $187,615 $100,356 $ -- $-- 25,000 $-- $18,428(2)
Jr. ...............
President and Chief 1994 150,385 -- -- -- 275,000 -- 23,996
Executive Officer
Jeffrey A. Blair..... 1995 127,523 47,821 -- -- 16,000 -- 3,388(1)
Sr. Vice President 1994 76,154 9,375 20,000 -- 100,000 30,728
Sales & Marketing
William M. Milne..... 1995 108,436 40,663 -- -- 10,000 -- 3,493(1)
Chief Financial 1994 102,887 -- -- -- 10,000 -- 9,980
Officer 1993 91,606 15,500 -- -- 10,500 -- 7,726
Robert A. Samec...... 1995 94,282 35,356 -- -- 12,000 -- 1,568(1)
Vice President 1994 88,800 -- -- -- 10,000 -- --
Quality Assurance/ 1993 83,855 10,500 -- -- 9,500 -- --
Regulatory Affairs
Edson R. Weeks, 1995 86,961 32,611 -- -- 12,000 -- 3,017(1)
III................
Vice President 1994 79,700 -- -- -- 10,000 -- 2,949
Operations 1993 75,008 10,500 -- -- 9,500 -- 2,573
---------------
(1) Represents the amount paid by the Company pursuant to a Company match under
the 401(k) Plan.
(2) Represents forgiveness of a portion ($12,500) of a debt owed by Mr. Hickey
to the Company as a result of the Company's payment of the closing expenses
on his home, plus $5,928 paid by the Company pursuant to a Company match
under the 401(k) Plan.
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10
OPTION GRANTS DURING 1995 FISCAL YEAR
The following table provides information regarding stock options granted
during fiscal 1995 to the named executive officers in the Summary Compensation
Table. The Company has not granted any stock appreciation rights.
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
----------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE
UNDERLYING OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION TERM(1)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION -------------------
NAME #(2) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---------------------------- ---------- ------------ ----------- ---------- ------- --------
James B. Hickey, Jr......... 25,000 21.6% $3.25 08/22/04 $51,098 $129,492
Jeffrey A. Blair............ 16,000 13.8% $3.25 08/22/04 $32,703 $ 82,875
William M. Milne............ 10,000 8.6% $3.25 08/22/04 $20,439 $ 51,797
Robert C. Samec............. 12,000 10.3% $3.25 08/22/04 $24,527 $ 62,156
Edson R. Weeks, III......... 12,000 10.3% $3.25 08/22/04 $24,527 $ 62,156
---------------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their term, assuming the specified compounded rates of
appreciation on the Company's Common Stock over the term of the options.
These numbers do not take into account provisions of certain options
providing for termination of the option following termination of employment,
nontransferability or vesting over periods of up to three years.
(2) Options become exercisable with respect to 20% of the shares covered thereby
on August 22 of each of 1995, 1996, 1997, 1998 and 1999. The exercise price
was equal to 100% of the fair market value of the Common Stock on the date
of grant.
AGGREGATED OPTION EXERCISES DURING 1995 FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information related to options and warrants
exercised by the named executive officers during fiscal 1995 and the number and
value of options held at fiscal year-end. The Company does not have any
outstanding stock appreciation rights.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE OPTIONS AT APRIL 30, 1995 APRIL 30, 1995
NAME ON EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
------------------------- ----------- ----------- ------------------------- ----------------------------
James B. Hickey, Jr...... -- -- 80,000 exercisable $230,000 exercisable
220,000 unexercisable $607,500 unexercisable
Jeffrey A. Blair......... -- -- 40,000 exercisable $107,500 exercisable
76,000 unexercisable $191,250 unexercisable
William M. Milne......... 9,000 $ 4,500 29,750 exercisable $ 79,500 exercisable
21,750 unexercisable $ 53,500 unexercisable
Robert A. Samec.......... 10,000 $23,750 16,750 exercisable $ 41,375 exercisable
23,750 unexercisable $ 57,250 unexercisable
Edson R. Weeks, III...... 8,000 $ 1,000 26,750 exercisable $ 71,375 exercisable
23,750 unexercisable $ 57,250 unexercisable
---------------
(1) Value is calculated based on the amount, if any, by which the closing price
for the Common Stock as quoted on the Nasdaq National Market on the date of
exercise exceeds the option exercise price, multiplied by the number of
shares to which the exercise relates.
(2) Value is calculated on the basis of the difference between the option
exercise price and the closing sale price for the Company's Common Stock at
April 28, 1995 as quoted on the Nasdaq National Market, multiplied by the
number of shares of Common Stock underlying the option.
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11
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the S&P Midcap 400 Index and an index of peer companies selected
by the Company. The peer group includes Healthdyne, Inc., Infrasonics, Inc.,
Medical Graphics Corp., Puritan-Bennett Corp., and Respironics, Inc.
Measurement Period Aequitron S&P Midcap
(Fiscal Year Covered) Medical Inc. 400 Index Peer Group
Apr 90 100 100 100
Apr 91 144.87 125.25 135.66
Apr 92 131.07 150.35 161.07
Apr 93 124.17 172.15 97.17
Apr 94 172.46 189.04 104.63
Apr 95 282.84 207.53 133.32
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Company has entered into an employment agreement with James B. Hickey,
Jr., which in addition to the compensation shown in the Summary Compensation
Table provides for compensation in the event Mr. Hickey's employment with the
Company is terminated under certain circumstances. Upon termination of
employment initiated by the Company's Board of Directors other than for cause,
Mr. Hickey will receive salary and medical insurance for twelve (12) months.
Upon termination for cause, payment of severance shall be at the discretion of
the Board.
The Company also entered into an employment agreement with Jeffrey A.
Blair. In addition to the compensation shown in the Summary Compensation Table,
Mr. Blair has the right to six months of severance pay if the Board terminates
his employment without cause.
As described in the Compensation and Stock Option Committee Report, the
Company entered into Change In Control Employment Agreements with each of James
B. Hickey, Jr., William M. Milne, Jeffrey A. Blair, Robert C. Samec, Edson R.
Weeks, III, and Patricia A. Hamm. Each such Agreement provides that following a
change of control of the Company, if the executive officer is subsequently
terminated without cause, or voluntarily resigns within 12 months of such change
of control, he or she will receive a lump sum amount equal to two times his or
her current base compensation plus two times his or her target bonus under the
Company's Management Incentive Plan. In addition, all options will become fully
vested upon such termination or resignation and will be exercisable for three
months.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers,
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directors and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it, the
Company believes that, during the period from May 1, 1994 through April 30,
1995, all filing requirements applicable to its officers, directors and greater
than ten-percent beneficial owners were complied with.
CERTAIN TRANSACTIONS
David B. Morse, Chairman and a director of the Company, also serves as
general counsel to the Company. Mr. Morse has been a partner with the law firm
of Best & Flanagan in Minneapolis, Minnesota since 1990. During the fiscal year
ended April 30, 1995, Best & Flanagan billed the Company $246,400 for legal
services performed for the Company.
APPROVAL OF 1995 EMPLOYEE STOCK PURCHASE PLAN
(PROPOSAL #2)
GENERAL
On June 19, 1995, the Board of Directors adopted, subject to shareholder
approval, the Company's 1995 Employee Stock Purchase Plan (the "Stock Purchase
Plan"). A general description of the basic features of the Stock Purchase Plan
is presented below, but such description is qualified in its entirety by
reference to the full text of the Stock Purchase Plan, a copy of which may be
obtained without charge upon written request to James B. Hickey, Jr., the
Company's President. Following shareholder approval of the Stock Purchase Plan,
the Company's 1986 Employee Stock Purchase Plan will be terminated as of
November 1, 1995 and no additional options will be granted thereunder.
DESCRIPTION OF THE STOCK PURCHASE PLAN
Purpose. The purpose of the Stock Purchase Plan is to encourage stock
ownership by the Company's employees and in so doing to provide an incentive for
the Company's employees to remain in the Company's employ, to improve
operations, to increase profits and to contribute more significantly to the
Company's success.
Eligibility; Term. The Stock Purchase Plan permits employees to purchase
stock of the Company at a favorable price and possibly with favorable tax
consequences to the employees. All regular part-time or full-time employees
(including officers) of the Company or of its subsidiaries authorized by the
Board from time to time who have been employed at least six months immediately
prior to the commencement of a phase are eligible to participate in any of the
twenty phases of the Stock Purchase Plan. However, any employee who would own
(as determined under the Internal Revenue Code), immediately after the grant of
an option, stock possessing 5% or more of the total combined voting power or
value of all classes of the stock of the Company will not be granted an option
under the Stock Purchase Plan. As of July 10, 1995, the Company had
approximately 268 employees.
Administration. The Stock Purchase Plan is administered by the
Compensation Committee (the "Committee") appointed by the Board consisting of
persons who are "disinterested" persons under Rule 16b-3 under the Securities
Exchange Act of 1934. The Stock Purchase Plan gives broad powers to the
Committee to administer and interpret the Stock Purchase Plan, including the
authority to limit the number of shares that may be optioned under the Stock
Purchase Plan during a phase.
Options. Unless otherwise determined by the Committee, phases of the Stock
Purchase Plan will commence on May 1 and November 1 of each fiscal year, with
the first phase commencing November 1, 1995. Before the commencement date of the
phase, each participating employee must elect to have from 1% to 10% of his or
her compensation withheld over the pay periods in such phase. The percentage
designated may not be increased or decreased during a phase, but a participant
can discontinue payroll deductions for the remainder
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of a phase, or withdraw his or her funds entirely. As of the first day of the
phase, a participant is granted an option to purchase that number of shares
determined by dividing the total amount to be withheld by the option or purchase
price described below. Based on the amount of salary withheld at the end of the
phase, shares will be purchased for the account of each employee at the
termination date of such phase. In no event, however, may a participant receive
an option for shares which would cause the employee to own 5% or more of the
Common Stock of the Company. The purchase price to be paid by the employees will
be the lower of the amount determined under Paragraphs A and B below:
A. 85% of the closing price of the Company's Common Stock as reported
on NASDAQ National Market System as of the commencement date of the phase;
or
B. 85% of the closing price of the Company's Common Stock as reported
on NASDAQ National Market System as of the termination date of the phase.
The closing sale price of one share of the Company's Common Stock on July 10,
1995 was $6.00 per share.
As required by tax law, no employee may receive an option under the Stock
Purchase Plan for shares which have a fair market value in excess of $25,000
determined at the time such option is granted. Any funds not used to purchase
shares will remain credited to the participant's bookkeeping account and applied
to the purchase of shares of Common Stock in the next succeeding phase. No
interest is paid by the Company on funds withheld, and such funds are used by
the Company for general operating purposes. No options or shares of Common Stock
have been granted or issued to date under the Stock Purchase Plan.
Amendment. The Board of Directors may, from time to time, revise or amend
the Stock Purchase Plan as the Board may deem proper and in the best interest of
the Company or as may be necessary to comply with Section 423 of the Internal
Revenue Code; provided, that no such revision or amendment may, without prior
approval of the Company's shareholders, (i) increase the total number of shares
for which options may be granted under the Stock Purchase Plan except as
provided in the case of stock splits, consolidations, stock dividends or similar
events, (ii) modify requirements as to eligibility for participation in the
Stock Purchase Plan, or (iii) materially increase the benefits accruing to
participants under the Stock Purchase Plan.
Under the Stock Purchase Plan, 250,000 shares of the Company's Common Stock
are reserved for issuance during the ten-year duration of the Stock Purchase
Plan.
The Board of Directors shall equitably adjust the number of shares
remaining reserved for issuance, the number of shares of stock subject to
outstanding options and the price per share of stock subject to an option in the
event of certain increases or decreases in the number of outstanding shares of
Common Stock of the Company effected as a result of stock splits or
consolidations, stock dividends or other transactions in which the Company
receives no consideration.
Federal Income Tax Consequences of the Stock Purchase Plan. Options
granted under the Stock Purchase Plan are intended to qualify for favorable tax
treatment to the employees under Sections 421 and 423 of the Internal Revenue
Code. Employee contributions are made on an after-tax basis. Under existing
federal income tax provisions, no income is taxable to the optionee upon the
grant or exercise of an option if the optionee remains an employee of the
Company or one of its subsidiaries at all times from the date of grant until
three months before the date of exercise. In addition, certain favorable tax
consequences may be available to the optionee if shares purchased pursuant to
the Stock Purchase Plan are not disposed of by the optionee within the two-year
period after the date the option was granted nor within the one-year period
after the date of transfer of the shares to the optionee. The Company generally
will not receive an income tax deduction upon either the grant or exercise of
the option.
PLAN BENEFITS
Because participation in the Stock Purchase Plan is voluntary, the future
benefits that may be received by participating individuals or groups under the
Stock Purchase Plan cannot be determined at this time.
VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE 1995
EMPLOYEE STOCK PURCHASE PLAN. Approval of the Stock Purchase Plan requires the
affirmative vote of a majority of the shares represented in person or by proxy
on this item of business at the
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1995 Annual Meeting with authority to vote on such matter, but not less than a
majority of the minimum number of shares that would constitute a quorum for the
transaction of business at the meeting.
AMENDMENT TO THE COMPANY'S 1988 STOCK OPTION PLAN
TO INCREASE NUMBER OF AUTHORIZED SHARES
(PROPOSAL #3)
At the Company's 1988 Annual Meeting, the shareholders approved the 1988
Stock Option Plan. At the 1991 and 1993 Annual Meetings, the shareholders
increased to 600,000 and 1,100,000, respectively, the number of shares of Common
Stock reserved for issuance upon the exercise of options granted pursuant to the
1988 Stock Option Plan (the "Plan"), substantially all of which reserved shares
have been granted as of the date of this Proxy Statement.
DESCRIPTION OF THE STOCK OPTION PLAN
A general description of the features of the Plan is set forth below. Such
description, however, is qualified in its entirety by reference to the full text
of the 1988 Stock Option Plan, a copy of which may be obtained without charge
upon written request to James B. Hickey, Jr., the Company's President.
Purpose. The purpose of the Plan is to provide a means of rewarding
outstanding performance and enabling the Company to maintain a competitive
position to attract and retain key personnel necessary for continued growth and
profitability. The Plan permits the granting of both "qualified" and
"non-qualified" options.
Administration. The Plan is administered by the Stock Option Committee.
The Plan gives broad powers to the Stock Option Committee to administer and
interpret the Plan, including the authority to select the key employees to be
granted options and to prescribe the form and conditions of the options (which
may vary from optionee to optionee).
Eligibility. Participation in the Plan is limited to officers and regular
full-time executive, administrative, professional, production and technical
employees of the Company or of a subsidiary, and to all directors of the
Company. Non-employee directors have limited participation in the 1988 Stock
Option Plan. See Proposal #4.
Options. When an option is granted under the Plan, the Stock Option
Committee in its discretion specifies the number of shares of Common Stock which
may be purchased upon exercise of the option and the option price. The option
price set by the Stock Option Committee may not be less than 100% of the fair
market value of the Company's Common Stock on the date of the grant unless the
option is "non-qualified". The term during which the option may be exercised and
whether said option will be exercisable immediately, in stages, or otherwise are
set by the Stock Option Committee, but in no event may the option be exercisable
more than ten years from the date of the grant. Each option granted under the
Plan is nontransferable and may only be exercised by the optionee.
If the optionee's employment with the Company is terminated for any reason
other than death or disability, any outstanding option of the optionee may be
exercised within three months after termination of the optionee's employment
only to the extent the option was exercisable at the date of termination.
However, if the employment is terminated by willful, deliberate or gross
misconduct as determined by the Board, all rights under the option shall
terminate and expire upon such termination. If the optionee's employment with
the Company is terminated because of death or disability, the option is
exercisable at any time within one year of the date of death or disability which
caused termination of employment only to the extent the option was exercisable
at the time of death or disability.
The Stock Option Committee may impose additional or alternative conditions
and restrictions on the options granted under the plan.
Amendment. The Board of Directors may from time to time suspend or
discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment may, without the approval of the
shareholders, (i) increase the maximum number of shares as to which options may
be granted under the Plan, (ii) permit the granting of incentive stock options
at less than 100% of fair market value at the time of
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the grant, (iii) change the class of employees eligible to receive options under
the Plan, or (iv) permit directors to receive options under the Plan other than
as currently described in the Plan. In addition, the provisions relating to the
formula plan for non-employee directors may not be amended more than once every
six months, other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules thereunder.
Federal Income Tax Consequences. Optionees who receive options under the
Plan generally are deemed to have received compensation taxable as ordinary
income in the year in which the option is exercised. The amount includable in
the optionee's income is the difference between the fair market value of the
shares on the date of exercise and the option price of the shares. Upon exercise
by the optionee the Company is entitled to a deduction in an amount equal to
that recognized as income by the optionee assuming compliance with applicable
withholding requirements. Upon the sale of shares acquired upon exercise of an
option granted pursuant to the Plan, any resulting gain or loss is treated as
capital gain or loss. However, if the option is a "qualified" option, there is
generally no tax on exercise, and no deduction for the Company. The employee is
generally taxed at capital gains rates when the stock is sold.
The Board of Directors seeks the approval of the shareholders to amend the
1988 Stock Option Plan to increase the number of shares reserved and issuable
under such Plan from 1,100,000 to 1,600,000. The Board believes the increase in
the number of reserved and issuable shares is an appropriate measure to increase
the employees' proprietary interest in the Company's success and enables the
Company to attract and retain qualified personnel. A greater reserve of
optionable shares of Common Stock will demonstrate the Company's ongoing ability
to recognize the efforts of employees and will strengthen future recruiting
efforts.
VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES UNDER THE 1988 STOCK
OPTION PLAN. The affirmative vote of a majority of the shares represented in
person or by proxy on this item of business at the 1995 Annual Meeting, but not
less than a majority of the minimum number of shares required for a quorum, is
required for approval of the amendment.
AMENDMENT TO THE COMPANY'S 1988 STOCK OPTION PLAN
TO INCREASE THE NUMBER OF OPTIONS
GRANTED TO NON-EMPLOYEE DIRECTORS UNDER THE FORMULA PLAN
(PROPOSAL #4)
PROPOSED AMENDMENT
Under the Company's 1988 Stock Option Plan, as described under Proposal #3,
each director who is not an employee of the Company automatically receives an
option to purchase 5,000 shares of Company Common Stock on the date that such
director is first elected to the Board. In addition, under such formula plan,
such director receives an additional option to purchase 5,000 shares at each
Annual Meeting thereafter, so long as the incumbent director continues to serve
on the Board. The options are exercisable beginning one year from the date of
grant and expire on the earlier of (i) twelve months after the director ceases
to be a director (except by death) and (ii) five years after the date of grant.
On August 22, 1994, subject to approval by the Company's shareholders at
the 1995 Annual Meeting, the Board approved an amendment to the 1988 Stock
Option Plan to increase the number of shares underlying the options granted
annually to non-employee directors from 5,000 to 10,000 shares effective on the
date of the Company's 1994 Annual Meeting.
The option price per share for all nonqualified stock options granted to
non-employee directors equals the fair market value of a share of the Company's
Common Stock as of the date such option is granted.
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PLAN BENEFITS
Because future grants of stock options are subject to the discretion of the
Stock Option Committee, the future benefits under the 1988 Stock Option Plan
cannot be determined at this time, except for the automatic grants to
non-employee directors as set forth above. The table below shows the total
number of shares underlying stock options that have been granted under the 1988
Stock Option Plan as of July 10, 1995 to the named executive officers and the
groups set forth.
SHARES OF COMMON STOCK
NAME AND POSITION/GROUP UNDERLYING OPTIONS RECEIVED
-------------------------------------------------------------- ---------------------------
James B. Hickey, Jr. ......................................... 425,000
Jeffrey A. Blair.............................................. 141,000
William M. Milne.............................................. 73,500
Robert C. Samec............................................... 65,500
Edson R. Weeks, III........................................... 73,500
Current Executive Officers as a Group (6 persons)............. 803,500(1)
Current Directors who are not Executive Officers as a Group (5
persons).................................................... 50,000
Current Employees who are not Executive Officers or Directors
as a Group (9 persons)...................................... 56,000(2)
---------------
(1) Includes options granted to the named executive officers.
(2) Includes 36,200 options which have been exercised.
VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL
OF THE AMENDMENT TO THE FORMULA PLAN OF THE COMPANY'S 1988 STOCK OPTION PLAN.
The affirmative vote of a majority of the shares represented in person or by
proxy on this item of business at the 1995 Annual Meeting, but not less than a
majority of the minimum number of shares required for a quorum, is required for
approval of the amendment.
ANNUAL REPORT
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended April 30, 1995, containing financial statements of the Company for the
fiscal year then ended, accompanies this Notice of Annual Meeting and proxy
solicitation material.
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
The proxy rules of the SEC permit shareholders, after timely notice to
issuers, to present proposals for shareholder action in issuer proxy statements
where such proposals are consistent with applicable law, pertain to matters
appropriate for shareholder action and are not properly omitted by issuer action
in accordance with the proxy rules. The Company's annual meeting for fiscal year
ended April 30, 1996 is expected to be held on or about September 26, 1996 and
proxy materials in connection with that meeting are expected to be mailed on or
about August 14, 1996. Except as indicated below, shareholder proposals prepared
in accordance with the proxy rules must be received by the Company on or before
April 5, 1996.
The Bylaws of the Company establish an advance notice procedure with regard
to (i) certain business to be brought before an annual meeting of shareholders
of the Company and (ii) the nomination by shareholders of candidates for
election as directors.
PROPERLY BROUGHT BUSINESS. The Bylaws provide that at the annual meeting
only such business may be conducted as is of a nature that is appropriate for
consideration at an annual meeting and has been either specified in the notice
of the meeting, otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or otherwise properly brought before the
meeting by a shareholder who has given timely written notice to the Secretary of
the Company of such shareholder's intention to bring such business
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before the meeting. To be timely, the notice must be given by such shareholder
to the Secretary of the Company not less than 50 days and no more than 75 days
prior to a meeting date corresponding to the previous year's annual meeting.
Notice relating to the conduct of such business at an annual meeting must
contain certain information as described in Section 12.2 of the Company's
Bylaws, which are available for inspection by shareholders at the Company's
principal executive offices pursuant to Section 302A.461, subd. 4 of the
Minnesota Statutes. Nothing in the Bylaws precludes discussion by any
shareholder of any business properly brought before the annual meeting in
accordance with the Company's Bylaws.
SHAREHOLDER NOMINATIONS. The Bylaws provide that a notice of proposed
shareholder nominations for the election of directors must be timely given in
writing to the Secretary of the Company prior to the meeting at which directors
are to be elected. To be timely, the notice must be given by such shareholder to
the Secretary of the Company not less than 50 days nor more than 75 days prior
to a meeting date corresponding to the previous year's annual meeting. The
notice to the Company from a shareholder who intends to nominate a person at the
meeting for election as a director must contain certain information as described
in Section 12.3 of the Company's Bylaws, which are available for inspection by
shareholders at the Company's principal executive offices pursuant to Section
302A.461, subd. 4 of the Minnesota Statutes. If the presiding officer of a
meeting of shareholders determines that a person was not nominated in accordance
with the foregoing procedure, such person will not be eligible for election as a
director.
FORM 10-K
A copy of the Company's Form 10-K for the fiscal year ended April 30, 1995
is available without charge to all shareholders of the Company. To request a
copy, please write: Secretary, Aequitron Medical, Inc., 14800 Twenty-Eighth
Avenue North, Minneapolis, Minnesota 55447.
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP has been the independent auditors of the
Company since 1983. A representative of Ernst & Young LLP is expected to be
present at this year's annual meeting, will have an opportunity to make a
statement, if desired, and will be available to answer appropriate questions.
OTHER BUSINESS
The management of the Company does not know of any other business to be
presented at the Annual Meeting of Shareholders. If any matter properly comes
before the meeting, however, it is intended that the persons named in the
enclosed form of proxy will vote said proxy in accordance with their best
judgment.
ALL PROXIES PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
SHAREHOLDERS. IF NO DIRECTION IS MADE, PROXIES WILL BE VOTED "FOR" THE ELECTION
OF MANAGEMENT'S NOMINEES FOR DIRECTORS, FOR THE APPROVAL OF THE 1995 EMPLOYEE
STOCK PURCHASE PLAN AND FOR THE AMENDMENTS TO THE 1988 STOCK OPTION PLAN.
BY ORDER OF THE BOARD OF DIRECTORS
[sig]
--------------------------------------
Gerald E. Rhodes, Secretary
Dated: August 16, 1995
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AEQUITRON MEDICAL, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I - ESTABLISHMENT OF PLAN
1.01 ADOPTION BY BOARD OF DIRECTORS. By action of the Board of Directors of
Aequitron Medical, Inc. (the "Corporation") on June 19, 1995, subject to
approval by its shareholders, the Corporation has adopted an employee
stock purchase plan pursuant to which eligible employees of the
Corporation and certain of its Subsidiaries may be offered the
opportunity to purchase shares of Stock of the Corporation. The terms
and conditions of this Plan are set forth in this plan document, as
amended from time to time as provided herein. The Corporation intends
that the Plan shall qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended from time
to time, (the "Code") and shall be construed in a manner consistent with
the requirements of Code Section 423 and the regulations thereunder.
1.02 SHAREHOLDER APPROVAL AND TERM. This Plan shall become effective
November 1, 1995, and shall terminate October 31, 2005; provided,
however, that the Plan shall be subject to approval by the shareholders
of the Corporation within twelve (12) months after the Plan is adopted
by the Board or, if earlier, at the next annual meeting of the
shareholders, in the manner provided under Code Section 423 and the
regulations thereunder; and provided, further that the Board of
Directors may extend the term of the Plan for such period as the Board,
in its sole discretion, deems advisable. In the event that the
shareholders fail to approve the Plan at such annual shareholders'
meeting, this Plan shall not become effective and shall have no force or
effect.
ARTICLE II - PURPOSE
2.01 PURPOSE. The primary purpose of the Plan is to provide an opportunity
for Eligible Employees of the Corporation to become shareholders of the
Corporation, thereby providing them with an incentive to remain in the
Corporation's employ, to improve operations, to increase profits and to
contribute more significantly to the Corporation's success.
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ARTICLE III - DEFINITIONS
3.01 "ADMINISTRATOR" means the Compensation Committee appointed by the Board
of Directors. The Compensation Committee may, in its sole discretion,
authorize the officers of the Corporation to carry out the day-to-day
operation of the Plan. In its sole discretion, the Board may take such
actions as may be taken by the Administrator, in addition to those
powers expressly reserved to the Board under this Plan.
3.02 "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of
Aequitron Medical, Inc.
3.03 "COMPENSATION" means the Participant's regular compensation excluding
overtime and all bonuses, including but not limited to bonuses payable
under the Employee Profit Sharing Plan.
3.04 "CORPORATION" means Aequitron Medical, Inc., a Minnesota corporation.
3.05 "ELIGIBLE EMPLOYEE" means any employee who, as determined on or
immediately prior to an Enrollment Period, is a United States full-time
or part-time employee of the Corporation or one of its Subsidiaries and
who has been employed by the Corporation or the Subsidiary at least six
(6) consecutive months prior to the commencement date of a phase.
3.06 "ENROLLMENT PERIOD" means the period determined by the Administrator for
purposes of accepting elections to participate during a Phase from
Eligible Employees.
3.07 "FISCAL YEAR" means the fiscal year of the Corporation, which is the
twelve-month period beginning May 1 and ending April 30 each year.
3.08 "PARTICIPANT" means an Eligible Employee who has been granted an option
and is participating during a Phase through payroll deductions, but
shall exclude those employees subject to the limitations described in
Section 9.03 below.
3.09 "PHASE" means the period beginning on the date that the option was
granted, otherwise referred to as the commencement date of the Phase,
and ending on the date that the option was exercised, otherwise referred
to as the termination date of the Phase.
3.10 "PLAN" means the Aequitron Medical, Inc. 1995 Employee Stock Purchase
Plan.
3.11 "STOCK" means the voting common stock of the Corporation.
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3.12 "SUBSIDIARY" means any corporation defined as a subsidiary of the
Corporation in Code Section 424(f) as of the effective date of the Plan,
and such other corporations that qualify as subsidiaries of the
Corporation under Code Section 424(f) as the Board approves to
participate in this Plan from time to time.
ARTICLE IV - ADMINISTRATION
4.01 ADMINISTRATION. Except for those matters expressly reserved to the
Board pursuant to any provisions of the Plan, the Administrator shall
have full responsibility for administration of the Plan, which
responsibility shall include, but shall not be limited to, the
following:
(a) The Administrator shall, subject to the provisions of
the Plan, establish, adopt and revise such rules and
procedures for administering the Plan, and shall make all
other determinations as it may deem necessary or
advisable for the administration of the Plan;
(b) The Administrator shall, subject to the provisions of
the Plan, determine all terms and conditions that shall
apply to the grant and exercise of options under this
Plan, including, but not limited to, the number of shares
of Stock that may be granted, the date of grant, the
exercise price and the manner of exercise of an option.
The Administrator may, in its discretion, consider the
recommendations of the management of the Corporation when
determining such terms and conditions;
(c) The Administrator shall have the exclusive authority to
interpret the provisions of the Plan, and each such
interpretation or determination shall be conclusive and
binding for all purposes and on all persons, including,
but not limited to, the Corporation and its Subsidiaries,
the shareholders of the Corporation and its Subsidiaries,
the Administrator, the directors, officers and employees
of the Corporation and its Subsidiaries, and the
Participants and the respective successors-in-interest of
all of the foregoing; and
(d) The Administrator shall keep minutes of its meetings or
other written records of its decisions regarding the Plan
and shall, upon requests, provide copies to the Board.
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ARTICLE V - PHASES OF THE PLAN
5.01 PHASES. The Plan shall be carried out in one or more Phases of six (6)
months each. Unless otherwise determined by the Administrator, in its
discretion, Phases shall commence on May 1 and November 1 of each fiscal
year during the term of the Plan; provided, however, that there shall be
only one phase for the 1996 fiscal year commencing on November 1, 1995.
No two Phases shall run concurrently.
5.02 LIMITATIONS. The Administrator may, in its discretion, limit the number
of shares available for option grants during any Phase as it deems
appropriate. Without limiting the foregoing, in the event all of the
shares of Stock reserved for the grant of options under Section 12.01 is
issued pursuant to the terms hereof prior to the commencement of one or
more Phases or the number of shares of Stock remaining is so small, in
the opinion of the Administrator, as to render administration of any
succeeding Phase impracticable, such Phase or Phases may be cancelled or
the number of shares of Stock limited as provided herein. In addition,
if, based on the payroll deductions authorized by Participants at the
beginning of a Phase, the Administrator determines that the number of
shares of Stock which would be purchased at the end of a Phase exceeds
the number of shares of Stock remaining reserved under Section 12.01
hereof for issuance under the Plan, or if the number of shares of Stock
for which options are to be granted exceeds the number of shares
designated for option grants by the Administrator for such Phase, then
the Administrator shall make a pro rata allocation of the shares of
Stock remaining available in as nearly uniform and equitable a manner as
the Administrator shall consider practicable as of the commencement date
of the Phase or, if the Administrator so elects, as of the termination
date of the Phase. In the event such allocation is made as of the
commencement date of a Phase, the payroll deductions which otherwise
would have been made on behalf of Participants shall be reduced
accordingly.
ARTICLE VI - ELIGIBILITY
6.01 ELIGIBILITY. Each employee who is an Eligible Employee on or
immediately prior to the commencement of a Phase shall be eligible to
participate in such Phase.
ARTICLE VII - PARTICIPATION
7.01 PARTICIPATION. Participation in the Plan is voluntary. An Eligible
Employee who desires to participate in any Phase of the Plan must
complete the Plan enrollment form provided by the Administrator and
deliver such form to the Administrator
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or its designated representative during the Enrollment Period
established by the Administrator prior to the commencement date of the
Phase.
7.02 SUBSEQUENT PHASES. An Eligible Employee who elects to participate in a
Phase of a fiscal year shall be deemed to have elected to participate in
each subsequent Phase during that fiscal year and all subsequent fiscal
years unless such Participant elects to discontinue payroll deductions
during a Phase or exercises his or her right to withdraw amounts
previously withheld, as provided under Article 10 hereof. In such
event, such Participant must complete a change of election form or a new
Plan enrollment form and file such form with the Administrator during
the Enrollment Period prior to the next Phase with respect to which the
Eligible Employee wishes to participate.
ARTICLE VIII - PAYMENT: PAYROLL DEDUCTIONS
8.01 ENROLLMENT. Each Eligible Employee electing to participate shall
indicate such election on the Plan enrollment form and designate therein
a percentage of such Participant's Compensation to be paid during the
Phase. Such percentage shall be at least one percent (1%) but not more
than ten percent (10%) of such Participant's Compensation to be paid
during such Phase, or such other maximum percentage as the Administrator
may establish from time to time; provided, however, that the payroll
deduction authorized by the Participant must equal or exceed $10. In
order to be effective, such Plan enrollment form must be properly
completed and received by the Administrator by the due date indicated on
such form, or by such other date established by the Administrator.
8.02 PAYROLL DEDUCTIONS. Payroll deductions for a Participant shall commence
on the first paycheck issued for the payroll period which begins on or
immediately after the commencement date of the Phase and shall terminate
on the last paycheck issued for the payroll period which begins on or
immediately prior to the termination date of that Phase, unless the
Participant elects to discontinue payroll deductions or exercises his or
her right to withdraw all accumulated payroll deductions previously
withheld during the Phase as provided in Article 10 hereof. The
authorized payroll deductions shall be made over the pay periods of such
Phase by deducting from the Participant's Compensation for each such pay
period that percentage specified by the Participant in the Plan
enrollment form.
Unless the Participant elected to discontinue payroll deductions or
exercised his or her right to withdraw all accumulated payroll
deductions previously withheld during the preceding Phase (in which
event the Participant must complete a change of election form or a new
Plan enrollment form, as the case may be, to continue participation for
any subsequent Phase), the Corporation shall continue to withhold from
such Participant's Compensation the same designated percentage
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specified by the Participant in the most recent Plan enrollment form
previously completed by the Participant for all subsequent Phases;
provided, however, that the Participant may, if he or she so chooses,
increase, decrease or discontinue payroll deductions for any or all such
subsequent Phases by properly completing a new enrollment form during
the Enrollment Period for such subsequent Phase and delivering such form
to the Administrator by the due date for receipt of such forms for that
Phase.
8.03 CHANGE IN COMPENSATION DURING A PHASE. In the event that the
Participant's Compensation is discontinued or reduced during a Phase for
any reason so that the amount actually withheld on behalf of the
Participant as of the termination date of the Phase is less than the
amount anticipated to be withheld as determined on the commencement date
of the Phase, then the extent to which the Participant may exercise his
or her option shall be based on the amounts actually withheld on his or
her behalf. In the event of a change in the pay period of any
Participant, such as from biweekly to monthly, an appropriate adjustment
shall be made to the deduction in each new pay period so as to insure
the deduction of the proper amount authorized by the Participant.
ARTICLE IX - OPTIONS
9.01 GRANT OF OPTION. Subject to Article 10, a Participant who has elected
to participate in the manner described in Article VIII and who is
employed by the Corporation or a Subsidiary as of the commencement date
of a Phase shall be granted an option as of such date to purchase that
number of whole shares of Stock determined by dividing the total amount
to be credited to the Participant's account by the option price per
share set forth in Section 9.02(a) below. The option price per share
for such Stock shall be determined under Section 9.02 hereof, and the
number of shares exercisable shall be determined under Section 9.03
hereof.
9.02 OPTION PRICE. Subject to the limitations hereinbelow, the option price
for such Stock shall be the lower of the amounts determined under
paragraphs (a) and (b) below:
(a) Eighty-five percent (85%) of the closing price
for a share of the Corporation's Stock as reported on the
NASDAQ National Market System or on an established
securities exchange as of the commencement date of the
Phase; or
(b) Eighty-five percent (85%) of the closing price
for a share of the Corporation's Stock as reported on the
NASDAQ National Market System or on an established
securities exchange as of the termination date of the
Phase.
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In the event that the commencement or termination date of a Phase is a
Saturday, Sunday or holiday, the amounts determined under the foregoing
subsections shall be determined using the price as of the last preceding
trading day.
If the Corporation's Stock is not so reported in the NASDAQ National
Market System or upon an established securities exchange, the option
price shall equal the lesser of (i) eighty-five percent (85%) of the
average of the closing "bid" and "asked" prices quoted on the NASDAQ
Small-Cap Market as of the commencement date of the Phase, or if there
are no such quoted "bid" and "asked" prices on such date, on the next
preceding date for which there are quotes, and (ii) eighty-five percent
(85%) of the average of the closing "bid" and "asked" prices quoted on
the NASDAQ Small-Cap Market as of the termination date of the phase, or
if there are no such quoted "bid" and "asked" prices on such date, on
the next preceding date for which there are such quotes.
If the Corporation's Stock is not listed on an established securities
exchange, the NASDAQ National Market System or the NASDAQ Small-Cap
Market, then the option price shall equal the lesser of (i) eighty-five
percent (85%) of the fair market value of a share of the Corporation's
Stock as of the commencement date of the Phase, and (ii) eighty-five
percent (85%) of the fair market value of such stock as of the
termination date of the Phase. Such "fair market value" shall be
determined by the Board.
9.03 LIMITATIONS. No employee shall be granted an option hereunder:
(a) Which permits his or her rights to purchase
Stock under all employee stock purchase plans of the
Corporation or its Subsidiaries to accrue at a rate which
exceeds Twenty-Five Thousand Dollars ($25,000) of fair
market value of such Stock (determined at the time such
option is granted) for each calendar year in which such
option is outstanding at any time;
(b) If such employee would own and/or hold,
immediately after the grant of the option, Stock
possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of
the Corporation or of any Subsidiary. For purposes of
determining stock ownership under this paragraph, the
rules of Section 424(d) of the Code shall apply.
(c) Which, if exercised, would cause the limits
established by the Administrator under Section 5.02 to
be exceeded.
9.04 EXERCISE OF OPTION. Subject to a Participant's right to withdraw in the
manner provided in Section 10.01, a Participant's option for the
purchase of shares of
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Stock will be exercised automatically on the termination date of that
Phase. However, in no event shall a Participant be allowed to exercise
an option for more shares of Stock than can be purchased with the
payroll deductions accumulated by the Participant in his or her
bookkeeping account during such Phase, whether or not the accumulated
payroll deductions are less than the full percentage amount that such
Participant anticipated he or she would contribute at the beginning of
such Phase.
9.05 DELIVERY OF SHARES. As promptly as practicable after the termination of
any Phase, the Corporation's transfer agent or other authorized
representative shall deliver to each Participant herein certificates for
that number of whole shares of Stock purchased upon the exercise of the
Participant's option. Any accumulated payroll deductions remaining
after the exercise of the Participant's option pursuant to Section 9.04
above shall remain credited to the Participant's bookkeeping account and
applied to the purchase of shares of Stock in the next succeeding Phase,
unless the Participant requests a withdrawal of such amount pursuant to
Section 10.01.
The shares of the Corporation's common stock to be delivered to a
Participant pursuant to the exercise of an option under Section 9.04 of
the Plan will be registered in the name of the Participant or, if the
Participant so directs by written notice to the Administrator prior to
the termination date of the Phase, in the names of the Participant and
one other person the Participant may designate as his joint tenant with
rights of survivorship, to the extent permitted by law.
ARTICLE X - WITHDRAWAL OR
DISCONTINUATION OF PAYROLL WITHHOLDINGS
10.01 WITHDRAWAL. A Participant may request a withdrawal of all accumulated
payroll deductions then credited to the Participant's bookkeeping
account by completing a change of election form and filing such form
with the Administrator. The Participant's request shall be effective
as of the beginning of the next payroll period immediately following
the date that the Administrator receives the Participant's properly
completed change of election form. As soon as administratively
feasible after the end of that Phase, all payroll deductions credited
to a bookkeeping account for the Participant will be paid to such
Participant and no further payroll deductions will be made during that
Phase or any future Phase unless the Participant completes a new Plan
enrollment form as provided in Section 8.02 above. If the Participant
requests a withdrawal, the option granted to the Participant under
that Phase of the Plan shall immediately lapse and shall not be
exercisable. Partial withdrawals of payroll deductions are not
permitted.
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Notwithstanding the foregoing, in order to be effective for a
particular Phase, the Participant's request for withdrawal must be
properly completed and received by the Administrator on or before the
date that is fifteen (15) days before the date of the last paycheck
during the Phase, or on or before such other date established by the
Administrator. Requests for withdrawal that are received after that
due date shall not be effective and no withdrawal shall be made,
unless otherwise determined by the Administrator.
10.02 DISCONTINUATION. A Participant may also request that the
Administrator discontinue any further payroll deductions that would
otherwise be made during the remainder of the Phase by completing a
change of election form and filing such form with the Administrator on
or before the date that is fifteen (15) days before the date of the
last paycheck during the phase, or on or before such other date
established by the Administrator. The Participant's request shall be
effective as of the beginning of the next payroll period immediately
following the date that the Administrator receives the Participant's
properly completed change of election form. Upon the effective date
of the Participant's request, the Corporation will discontinue making
payroll deductions for such Participant for that Phase, and all future
Phases, unless the Participant completes another change of election
form as provided above.
ARTICLE XI - TERMINATION OF EMPLOYMENT
11.01 If a Participant's employment terminates with the Corporation for any
reason, voluntarily or involuntarily, including by reason of
retirement or death, the payroll deductions credited to such
Participant's bookkeeping account for such Phase, if any, will be
returned to the Participant (or, in the case of death, to the
Participant's estate) and any options granted to such Participant
under the Plan shall immediately lapse and shall not be exercisable.
The return of such payroll deductions shall be made to the Participant
(or to the Participant's estate) as soon as administratively
practicable. In the event that such termination occurs near the end
of a Phase and the Corporation is unable to discontinue payroll
deductions for such Participant for his or her final paycheck(s), such
deductions shall still be made but shall be returned to the
Participant (or his or her estate) as provided herein. In no event
shall the accumulated payroll deductions be used to purchase any
shares of Stock.
If the option lapses as a result of the Participant's death, any
accumulated payroll deductions credited to the Participant's
bookkeeping account will be paid to the Participant's estate. In the
event a Participant dies after exercise of the Participant's option
but prior to delivery of the Stock to be transferred pursuant to the
exercise of the option under Section 9.04 above, any such Stock and/or
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accumulated payroll deductions remaining after such exercise shall be
paid by the Corporation to the Participant's estate.
The Corporation will not be responsible for or be required to give
effect to the disposition of any cash or Stock or the exercise of any
option in accordance with any will or other testamentary disposition
made by such Participant or in accordance with the provisions of any
law concerning intestacy, or otherwise. No person shall, prior to the
death of a Participant, acquire any interest in any Stock, in any
option or in the cash credited to the Participant's bookkeeping
account during any Phase of the Plan.
11.02 In the event that any Subsidiary ceases to be a Subsidiary of the
Corporation, the employees of such Subsidiary shall be considered to
have terminated their employment for purposes of Section 11.01 hereof
as of the date the Subsidiary ceased to be a Subsidiary of the
Corporation.
ARTICLE XII - STOCK RESERVED FOR OPTIONS
12.01 Two Hundred Fifty Thousand (250,000) shares of Stock, which may be
authorized but unissued shares of the Corporation (or the number and
kind of securities to which said 250,000 shares may be adjusted in
accordance with Section 14.01 hereof) are reserved for issuance upon
the exercise of options to be granted under the Plan. Shares subject
to the unexercised portion of any lapsed or expired option may again
be subject to option under the Plan.
12.02 The Participant (or a joint tenant named pursuant to Section 9.05
above) shall have no rights as a shareholder with respect to any
shares of Stock subject to the Participant's option until the date of
the issuance of a stock certificate evidencing such shares as provided
in Section 9.05. No adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to
the date such stock certificate is actually issued, except as
otherwise provided in Section 14.01 hereof.
ARTICLE XIII - ACCOUNTING AND USE OF FUNDS
13.01 Payroll deductions for Participants shall be credited to bookkeeping
accounts, established by the Corporation for each such Participant
under the Plan. A Participant may not make any cash payments into
such account. Such account shall be solely for bookkeeping purposes
and shall not require the Corporation to establish any separate fund
or trust hereunder. All funds from payroll deductions received or
held by the Corporation under the Plan may be used, without
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limitation, for any corporate purpose by the Corporation, which shall
not be obligated to segregate such funds from its other funds.
ARTICLE XIV - ADJUSTMENT PROVISION
14.01 Subject to any required action by the shareholders of the Corporation,
in the event of an increase or decrease in the number of outstanding
shares of Stock or in the event the Stock is changed into or exchanged
for a different number or kind of shares of stock or other securities
of the Corporation or another corporation by reason of a
reorganization, merger, consolidation, divestiture (including a
spin-off), liquidation, recapitalization, reclassification, stock
dividend, stock split, combination of shares, rights offering or any
other change in the corporate structure or shares of the Corporation,
the Board (or, if the Corporation is not the surviving corporation in
any such transaction, the board of directors of the surviving
corporation), in its sole discretion, shall adjust the number and kind
of securities subject to and reserved under the Plan and, to prevent
the dilution or enlargement of rights of those Eligible Employees to
whom options have been granted, shall adjust the number and kind of
securities subject to such outstanding options and, where applicable,
the exercise price per share for such securities.
In the event of sale by the Corporation of substantially all of its
assets and the consequent discontinuance of its business, or in the
event of a merger, exchange, consolidation, reorganization,
divestiture (including a spin-off), liquidation, reclassification or
extraordinary dividend (collectively referred to as a "transaction"),
after which the Corporation is not the surviving corporation, the
Board may, in its sole discretion, at the time of adoption of the plan
for such transaction, may provide for one or more of the following:
(a) The acceleration of the exercisability of outstanding
options granted at the commencement of the Phase then in
effect, to the extent of the accumulated payroll
deductions made as of the date of such acceleration
pursuant to Article 8 hereof;
(b) The complete termination of this Plan and a refund of
amounts credited to the Participants' bookkeeping
accounts hereunder; or
(c) The continuance of the Plan only with respect to
completion of the then current Phase and the exercise of
options thereunder. In the event of such continuance,
Participants shall have the right to exercise their
options as to an equivalent number of shares of stock of
the corporation succeeding the Corporation by reason of
such transaction.
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In the event of a transaction where the Corporation survives, then the
Plan shall continue in effect, unless the Board takes one or more of
the actions set forth above. The grant of an option pursuant to the
Plan shall not limit in any way the right or power of the Corporation
to make adjustments, reclassifications, reorganizations or changes in
its capital or business structure or to merge, exchange or consolidate
or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
ARTICLE XV - NONTRANSFERABILITY OF OPTIONS
15.01 Options granted under any Phase of the Plan shall not be transferable
and shall be exercisable only by the Participant during the
Participant's lifetime.
15.02 Neither payroll deductions granted to a Participant's account, nor any
rights with regard to the exercise of an option or to receive Stock
under any Phase of the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way by the Participant. Any such
attempted assignment, transfer, pledge or other disposition shall be
null and void and without effect, except that the Corporation may, at
its option, treat such act as an election to withdraw in accordance
with Section 10.01.
ARTICLE XVI - AMENDMENT AND TERMINATION
16.01 The Plan may be terminated at any time by the Board of Directors,
provided that, except as permitted in Section 14.01 hereof, no such
termination shall take effect with respect to any options then
outstanding. The Board may, from time to time, amend the Plan as it
may deem proper and in the best interests of the Corporation or as may
be necessary to comply with Code Section 423 or other applicable laws
or regulations; provided, however, no such amendment shall, without
the consent of a Participant, materially adversely affect or impair
the right of a Participant with respect to any outstanding option; and
provided, further, that no such amendment shall, unless the
shareholders of the Corporation have approved the same, directly or
indirectly:
(a) Increase the total number of shares for which options
may be granted under the Plan (except as provided in
Section 14.01 herein);
(b) Modify the group of Subsidiaries whose employees may be
eligible to participate in the Plan or materially modify
any other requirements as to eligibility for
participation in the Plan; or
(c) Materially increase the benefits accruing to Participants
under the Plan.
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ARTICLE XVII - NOTICES
17.01 All notices, forms, elections or other communications in connection
with the Plan or any Phase thereof shall be in such form as specified
by the Corporation or the Administrator from time to time, and shall
be deemed to have been duly given when received by the Participant or
his or her personal representative or by the Corporation or its
designated representative, as the case may be.
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AEQUITRON MEDICAL, INC.
AMENDED AND RESTATED
1988 STOCK OPTION PLAN
1. Purpose. The purpose of the Aequitron Medical, Inc. 1988 Stock Option
Plan is to provide a continuing, long-term incentive to selected eligible
officers and key employees of Aequitron Medical, Inc. (the "Corporation") and
of any subsidiary corporation of the Corporation (the "Subsidiary"), as herein
defined and to all Non-Employee Directors of the Corporation; to provide a
means of rewarding outstanding performance; and to enable the Corporation to
maintain a competitive position to attract and retain key personnel necessary
for continued growth and profitability.
2. Definitions. The following words and phrases as used herein shall
have the meanings set forth below:
2.1 "Board" shall mean the Board of Directors of the Corporation.
2.2 "Change in Control" shall mean the time at which any entity, person or
group (other than the Corporation, any subsidiary of the Corporation or any
savings, pension or other benefit plan for the benefit of any employees of the
Corporation or its subsidiaries) which prior to such time beneficially owned
less than twenty percent (20%) of the then outstanding Common Stock acquires
such additional shares of Common Stock in one or more transactions, or a series
of transactions, such that following such transaction or transactions such
entity, person or group beneficially owns, directly or indirectly, twenty
percent (20%), or more, of the outstanding Common Stock.
2.3 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.4 "Committee" shall mean the Stock Option Committee of the Board, or
such other committee of the Board as may be designated by the Board, from time
to time, for the purpose of administering this plan as contemplated by Article 3
hereof.
2.5 "Common Stock" shall mean the common stock, $.01 par value, of the
Corporation.
2.6 "Corporation" shall mean Aequitron Medical, Inc., a Minnesota
corporation.
2.7 "Non-Employee Directors" shall mean members of the Board who are not
employees of the Corporation or any Subsidiary.
2.8 "Fair Market Value" of any security on any given date shall be
determined by the Committee as follows: (a) if the security is listed for
trading on one or more national securities exchanges, or is traded on the
NASDAQ National Market System, the last reported sales price on the principal
such exchange or NASDAQ System on the date in question, or if such security
shall not have been traded on such principal exchange on such date, the last
reported sales price
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on such principal exchange or the NASDAQ System on the first day prior thereto
on which such security was so traded; or (b) if the security is not listed for
trading on a national securities exchange or the NASDAQ National Market System,
but is traded in the over-the-counter market, including the NASDAQ System, the
mean of the highest and lowest bid prices for such security on the date in
question, or if there are no such bid prices for such security on such date,
the mean of the highest and lowest bid prices on the first day prior thereto on
which such prices existed; or (c) if neither (a) nor (b) is applicable, by any
means deemed fair and reasonable by the Committee, which determination shall be
final and binding on all parties.
2.9 "ISO" shall mean any stock option granted pursuant to this Plan as an
"incentive stock option" within the meaning of Section 422 of the Code.
2.10 "NQO" shall mean any stock option granted pursuant to this Plan
which is not an ISO.
2.11 "Option" shall mean any stock option granted pursuant to this Plan,
whether an ISO or an NQO.
2.12 "Optionee" shall mean any person who is the holder of an Option
granted pursuant to this Plan.
2.13 "Plan" shall mean this 1988 Stock Option Plan of the Corporation.
2.14 "Subsidiary" shall mean any corporation which at the time qualifies
as a subsidiary of the Corporation under Section 425(f) of the Code.
3. Shares Available Under Plan. The number of shares which may be issued
pursuant to options granted under this Plan shall not exceed 1,600,000 shares
of the Common Stock of the Corporation; provided, however, that shares which
become available as a result of cancelled, unexercised, lapsed or terminated
options granted under this Plan shall be available for issuance pursuant to
options subsequently granted under this Plan. The shares issued upon exercise
of options granted under this Plan may be authorized and unissued shares or
shares previously acquired or to be acquired by the Corporation.
4. Administration
4.1 The Plan will be administered by the Board of Directors or a Committee
of at least three members selected by the Board, and who have not at any time
during the twelve month period before service on the Committee ("Committee"),
been eligible to receive any Option under the Plan, or under any other benefit
plan of the Corporation or any of its affiliates entitling the participants
therein to acquire stock or stock options of the Corporation or any of its
Subsidiaries, except for the granting of options that are exempt under SEC Rule
16b-3 or any successor rule. The Board or such Committee is hereinafter
described as the Committee.
4.2 The Committee will have plenary authority, subject to provisions of
the Plan, to determine when and to whom Options will be granted, the term of
each Option, the number of
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shares covered by it, the participation by the Optionee in other plans, and any
other terms or conditions of each Option. The Committee shall determine with
respect to each grant of an Option whether a participant shall receive an ISO
or an NQO. The number of shares, the term and the other terms and conditions
of a particular kind of Option need not be the same, even as to options granted
at the same time. The Committee's recommendations regarding option grants and
terms and conditions thereof will be conclusive.
4.3 The Committee will have the sole responsibility for construing and
interpreting the Plan, for establishing and amending any rules and regulations
as it deems necessary or desirable for the proper administration of the Plan,
and for resolving all questions arising under the Plan. Any decision or action
taken by the Committee arising out of or about the construction,
administration, interpretation and effect of the Plan and of its rules and
regulations will, to the extent permitted by law, be within its absolute
discretion, except as otherwise specifically provided herein, and will be
conclusive and binding on all Optionees, all successors, and any other person,
whether that person is claiming under or through any Optionee or otherwise.
4.4 The Committee will designate one of its members as chairman. It will
hold its meetings at the times and places as it may determine. A majority of
its members will constitute a quorum, and all determinations of the Committee
will be made by a majority of its members. Any determination reduced to
writing and signed by all members will be fully as effective as if it had been
made by a majority vote at a meeting duly called and held. The Committee may
appoint a secretary, who need not be a member of the Committee, and may make
such rules and regulations for the conduct of its business as it may deem
advisable.
4.5 No member of the Committee will be liable, in the absence of bad
faith, for any act or omission with respect to his services on the Committee.
Service on the Committee will constitute service as a member of the Board, so
that the members of the Committee will be entitled to indemnification and
reimbursement as Board members pursuant to its By-laws.
4.6 The Committee will regularly inform the Board as to its actions with
respect to all Options granted under the Plan and the terms and conditions and
any such Options in a manner, at any times, and in any form as the Board may
reasonably request.
4.7 Any other provision of the Plan to the contrary notwithstanding, the
Committee is authorized to take such action as it, in its discretion, may deem
necessary or advisable and fair and equitable to Optionees in the event of: a
Change in Control of the Corporation; a tender, exchange or similar offer for
all or any part of the Common Stock made by any entity, person or group (other
than the Corporation, any Subsidiary of the Corporation or any savings, pension
or other benefit plan for the benefit of employees of the Corporation or its
Subsidiaries); a merger of the Corporation into, a consolidation of the
Corporation with, or an acquisition of the Corporation by another corporation;
or a sale or transfer of all or substantially all of the Corporation's assets,
Such action, in the Committee's discretion, may include (but shall not be
deemed limited to): establishing, amending or waiving the forms, terms,
conditions or duration of Options so as to provide for earlier, later, extended
or additional terms for exercise of the whole, or any installment, thereof;
alternate forms of payment; or other modifications. The
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34
Committee may take any such actions pursuant to this Section 4.7 by adopting
rules or regulations of general applicability to all Optionees, or to certain
categories of Optionees; by amending or waiving terms and conditions in stock
option agreements; or by taking action with respect to individual Optionees.
The Committee may take any such actions before or after the public announcement
of any such Change in Control, tender offer, exchange offer, merger,
consolidation, acquisition or sale or transfer of assets.
5. Participants.
5.1 Participation in this Plan shall be limited to officers and regular
full-time executive, administrative, professional, production and technical
employees of the Corporation or of a Subsidiary, and to all Directors of the
Corporation. Non-Employee Directors of the Corporation shall only be able to
participate under this Plan as specified in Section 14 hereof.
5.2 Subject to other provisions of this Plan, Options may be granted to
the same participants on more than one occasion.
5.3 Except with respect to Options granted to Non-Employee Directors under
Section 14, the Committee's determination under the Plan including, without
limitation, determination of the persons to receive Options, the form, amount
and type of such Options, and the terms and provisions of Options need not he
uniform and may be made selectively among otherwise eligible participants,
whether or not the participants are similarly situated.
6. Terms and Conditions.
6.1 Each Option granted under the Plan shall be evidenced by a written
agreement, which shall be subject to the provisions of this Plan and to such
other terms and conditions as the Corporation may deem appropriate.
6.2 Each Option agreement shall specify the period for which the Option
thereunder is granted (which in no event shall exceed ten years from the date
of the grant for any Option granted pursuant to Section 6.3(a) hereof, five
years from the date of grant for any Option granted pursuant to 6.3(b) hereof
and ten years and one day from the date of grant for any Option designated by
the Committee as an NQO) and shall provide that the Option shall expire at the
end of such period; provided, however, the term of each Option shall be subject
to the power of the Committee, among other things, to accelerate or otherwise
adjust the terms for exercise of Options pursuant to Section 4.7 hereof in the
event of the occurrence of any of the events set forth therein.
6.3 The exercise price per share shall be determined by the Committee at
the time any Option is granted and, if the Option is an ISO, shall be
determined as follows:
(a) For employees who do not own stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Corporation or of any Subsidiary, the ISO exercise price
per share shall not be less than one hundred
A-4
35
percent (100%) of Fair Market Value of the Common Stock of the
Corporation on the date the Option is granted, as determined by the
Committee.
(b) For employees who own stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Corporation or of any Subsidiary, the ISO exercise
price per share shall not be less than one hundred ten percent
(110%) of the Fair Market Value of the Common Stock of the
Corporation on the date the Option is granted, as determined by the
Committee.
6.4 An Option shall be exercisable at such time or times, and with respect
to such minimum number of shares, as may be determined by the Corporation at
the time of the grant. The Option agreement may require, if so determined by
the Corporation, that no part of the Option may be exercised until the Optionee
shall have remained in the employ of the Corporation or of a Subsidiary for
such period after the date of the Option as the Corporation may specify.
6.5 The Corporation may prescribe the form of legend which shall be
affixed to the stock certificate representing shares to be issued and the
shares shall be subject to the provisions of any repurchase agreement or other
agreement restricting the sale or transfer thereof. Such agreements or
restrictions shall be noted on the certificate representing the shares to be
issued.
7. Exercise of Option.
7.1 Each exercise of an Option granted hereunder, whether in whole or in
part, shall be by written notice thereof, delivered to the Secretary of the
Corporation (or such other person as he may designate). The notice shall state
the number of shares with respect to which the Options are being exercised and
shall be accompanied by payment in full for the number of shares so designated.
Shares shall be registered in the name of the Optionee unless the Optionee
otherwise directs in his or her notice of election.
7.2 Payment shall be made to the Corporation either (i) in cash, including
certified check, bank draft or money order (ii) at the discretion of the
Corporation, by delivering Common Stock of the Corporation already owned by the
participant or a combination of Common Stock and cash for all or a portion of
the purchase price of the shares so purchased. With respect to (ii) the Fair
Market Value of stock so delivered shall be determined as of the date
immediately preceding the date of exercise.
7.3 Upon notification of the amount due and prior to, or concurrently
with, the delivery to the Optionee of a certificate representing any shares
purchased pursuant to the exercise of an Option, the Optionee shall promptly
pay to the Corporation any amount necessary to satisfy applicable federal,
state or local withholding tax requirements.
A-5
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8. Adjustments of Option Stock. In case the shares issuable upon exercise
of any Option granted under the Plan at any time outstanding shall be subdivided
into a greater or combined into a lesser number of shares (whether with or
without par value), the number of shares purchasable upon exercise of such
Option immediately prior thereto shall be adjusted so that the Optionee shall
be entitled to receive a number of shares which he or she would have owned or
have been entitled to receive after the happening of such event had such Option
been exercised immediately prior to the happening of such subdivision or
combination or any record date with respect thereto. An adjustment made
pursuant to this paragraph shall become effective immediately after the
effective date of such subdivision or combination retroactive to the record
date, if any, for such subdivision or combination. The option price (as such
amount may have theretofore been adjusted pursuant to the provisions hereof)
shall be adjusted by multiplying the option price immediately prior to the
adjustment of the number of shares purchasable under the Option by a fraction,
of which the numerator shall be the number of shares purchasable upon the
exercise of the Option immediately prior to such adjustment, and of which the
denominator shall be the number of shares so purchasable immediately
thereafter. Substituted shares of stock shall be deemed shares under Section 3
of the Plan.
9. Assignments. Any Option granted under this Plan shall be exercisable
only by the Optionee to whom granted during his or her lifetime and shall not be
assignable or transferable otherwise than by will or by the laws of descent and
distribution.
10. Severance; Death; Disability. An Option shall terminate, and no
rights thereunder may be exercised, if the person to whom it is granted ceases
to be employed by the Corporation or by a Subsidiary except that:
10.1 If the employment of the Optionee is terminated by any reason other
than his or her death or disability, the Optionee may at any time within not
more than three months after termination of his or her employment, exercise his
or her Option rights but only to the extent they were exercisable by the
Optionee on the date of termination of his or her employment; provided,
however, that if the employment is terminated by deliberate, willful or gross
misconduct as determined by the Committee, all rights under the Option shall
terminate and expire upon such termination.
10.2 If the Optionee dies while in the employ of the Corporation or a
Subsidiary, or within not more than three months after termination of his or
her employment, the Optionee's rights under the Option may be exercised at any
time within one year following such death by his or her personal representative
or by the person or persons to whom such rights under the Option shall pass by
will or by the laws of descent and distribution, but only to the extent they
were exercisable by the Optionee on the date of death.
10.3 If the employment of the Optionee is terminated because of permanent
disability, the Optionee, or his or her legal representative, may at any time
within not more than one year after termination of his or her employment,
exercise his or her Option rights but only to the extent they were exercisable
by the Optionee on the date of termination of his or her employment.
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10.4 Notwithstanding anything contained in Sections 10.1, 10.2 and 10.3 to
the contrary, no Option rights shall be exercisable by anyone after the
expiration of the term of the Option.
10.5 Transfers of employment between the Corporation and a Subsidiary, or
between Subsidiaries, will not constitute termination of employment for
purposes of any Option granted under this Plan. The Committee may specify in
the terms and conditions of an Option whether any authorized leave of absence
or absence for military or government service or for any other reasons will
constitute a termination of employment for purposes of the Option and the Plan.
11. Rights of Participants. Neither the participant nor the personal
representatives, heirs, or legatees of such participant shall be or have any of
the rights or privileges of a shareholder of the Corporation in respect of any
of the shares issuable upon the exercise of an Option granted under this Plan
unless and until certificates representing such shares shall have been issued
and delivered to the participant or to such personal representatives, heirs or
legatees.
12. Securities Registration. If any law or regulation of the Securities
and Exchange Commission or of any other body having jurisdiction shall require
the Corporation or the participant to take any action in connection with the
exercise of an Option, then notwithstanding any contrary provision of an Option
agreement or this Plan, the date for exercise of such Option and the delivery
of the shares purchased thereunder shall be deferred until the completion of
the necessary action. In the event that the Corporation shall deem it
necessary, the Corporation may condition the grant or exercise of an Option
granted under this Plan upon the receipt of a satisfactory certificate that the
Optionee is acquiring the Option or the shares obtained by exercise of the
Option for investment purposes and not with the view or intent to resell or
otherwise distribute such Option or shares. In such event, the stock
certificate evidencing such shares shall bear a legend referring to applicable
laws restricting transfer of such shares. In the event that the Corporation
shall deem it necessary to register under the Securities Act of 1933, as
amended, or any other applicable statute, any Options or any shares with
respect to which an Option shall have been granted or exercised, then the
participant shall cooperate with the Corporation and take such action as is
necessary to permit registration or qualification of such Options or shares.
13. Duration and Amendment.
13.1 There is no express limitation upon the duration of the Plan, except
for the requirement of the Code that all ISOs must be granted within ten years
from the date the Plan is approved by the shareholders.
13.2 The Board may terminate or may amend the Plan at any time, provided,
however, that the Board may not, without approval of the shareholders of the
Corporation, (i) increase the maximum number of shares as to which Options may
be granted under the Plan, (ii) permit the granting of ISO's at less than 100%
of Fair Market Value at time of grant, (iii) change the class of employees
eligible to receive Options under the Plan, or (iv) permit Directors to receive
options under the Plan other than pursuant to Section 14 hereof.
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14. Granting of Options to Directors. Each Non-Employee Director who on
and after the date after this Plan is approved by shareholders of the
Corporation is elected or reelected as a director of the Corporation or whose
term of offices continues after such meeting of Shareholders shall as of the
date of such election, reelection, or annual or special meeting automatically be
granted an option to purchase 10,000 shares of the Corporation's Common Stock
at an option price per share equal to 100% of the Fair Market Value of a share
on such date. In the case of a special meeting, the action of the holders of
shares in electing a Non-Employee Director shall constitute the granting of the
Option to such Director, and, in the case of an annual meeting, the action of
the holders of shares in electing or reelecting a Non-Employee Director shall
constitute the granting of an Option to such Director; and the date when the
holders of shares shall take such action shall be the date of grant of the
Option. No director shall receive more than one option to purchase 3,000
shares pursuant to this Plan in any one fiscal year. All such Options shall be
designated as NQOs and shall be subject to the same terms and provisions as are
then in effect with respect to granting of NQOs to salaried officers and key
employees of the Corporation, except that the Option shall be exercisable as to
all or any part of the shares subject to the Option beginning one year from the
date the Option is granted, and shall expire on the earlier of (i) twelve
months after the Optionee ceases to be a director (except by death) and (ii)
five years after the date of grant. Notwithstanding the foregoing, in the
event of a death of a Non-Employee Director, any option granted to such
Non-Employee Director may be exercised at any time within twelve months of
death of such Non-Employee Director or on the date on which the option, by its
terms expire, whichever is earlier. Subject to the foregoing, all provisions
of this Plan not inconsistent with the foregoing shall apply to Options granted
to Directors, except that directors shall always have the right to deliver
stock in exercise of options as provided in Section 7.2. Upon the effective
date of shareholder approval of this Plan, the Stock Option Grant Program of
the 1985 Incentive Stock Option Plan is terminated, except that options
outstanding or to be granted on the date of shareholder approval shall remain
outstanding until they, by their terms, expire.
15. Approval of Shareholders. This Plan expressly is subject to approval
of holders of a majority of the outstanding shares of Common Stock of the
Corporation, and if it is not so approved on or before one year after the date
of adoption of this Plan by the Board, the Plan shall not come into effect, and
any Options granted pursuant to this Plan shall be deemed cancelled.
16. Conditions of Employment. The granting of an Option to a participant
under this Plan who is an employee shall impose no obligation on the
Corporation to continue the employment of any participant and shall not lessen
or affect the right of the Corporation to terminate the employment of the
participant.
17. Other Options. Nothing in the Plan will be construed to limit the
authority of the Corporation to exercise its corporate rights and powers,
including, by way of illustration and not by way of limitation, the right to
grant options for proper corporate purposes otherwise than under the Plan to
any employee or any other person, firm, corporation, association, or other
A-8
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entity, or to grant options to, or assume options of, any person for the
acquisition by purchase, lease, merger, consolidation, or otherwise, of all or
any part of the business and assets of any person, firm, corporation,
association, or other entity.
A-9
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PRELIMINARY COPY--
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AEQUITRON MEDICAL, INC.
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PROXY FOR 1995 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 26, 1995
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James B. Hickey, Jr. and William M.
Milne, officers of the Company, with full power of substitution, his or
her Proxy to represent and vote, as designated below, all shares of
Aequitron Medical, Inc. registered in the name of the undersigned, with
the powers the undersigned would possess if personally present at the
Company's 1995 Annual Meeting of Shareholders to be held at 4:00 p.m.,
local time on Tuesday, September 26, 1995, at the Radisson Plaza Hotel,
35 South Seventh Street, Minneapolis, Minnesota, and at any adjournment
thereof, hereby revoking all proxies previously given with respect to
the meeting.
The Board of Directors recommends that you vote "FOR" each proposal.
1. ELECTION OF DIRECTORS:
/ / FOR the nominees listed below / / WITHHOLD AUTHORITY to vote for
(except as marked to the contrary) all nominees listed below
James B. Hickey, Jr. Ervin F. Kamm, Jr.
(INSTRUCTION: To withhold authority to vote for an individual nominee, write that nominee's name in the space provided below.)
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2. APPROVE the Aequitron Medical, Inc. 1995 Employee Stock Purchase Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. APPROVE an amendment to the Company's 1988 Stock Option Plan to increase the number of authorized shares.
/ / FOR / / AGAINST / / ABSTAIN
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4. APPROVE an amendment to the Company's 1988 Stock Option Plan to increase the number of nonqualified stock options granted
to nonemployee directors under the formula plan.
/ / FOR / / AGAINST / / ABSTAIN
5. OTHER MATTERS: In their discretion, the appointed Proxies are authorized to vote upon such other business as may properly
come before the Annual Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES, FOR THE APPROVAL OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN, FOR THE AMENDMENTS TO THE 1988 STOCK OPTION PLAN, AND IN
ACCORDANCE WITH THE DISCRETIONARY AUTHORITY CONFERRED HEREBY.
Date: , 1995
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Signature
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Signature if held jointly
PLEASE DATE AND SIGN ABOVE exactly as
name(s) appear at the left. Executors,
administrators, trustees, guardians, etc.,
should indicate capacity when signing. For
stock held in Joint Tenancy, each joint
owner should sign.
/ / PLEASE CHECK IF YOU PLAN ON ATTENDING THE MEETING
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