-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Z28S++r4GYyL9CTXH9Z/zFPN6vQECQGM9Ic5Q4Ss+FVj1xJtzQrLetSrEX7Ww2Hx VMqUuV4VWHg9FOvLYDaqZw== 0000898430-94-000605.txt : 19940817 0000898430-94-000605.hdr.sgml : 19940817 ACCESSION NUMBER: 0000898430-94-000605 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940702 FILED AS OF DATE: 19940815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACUSON CORP CENTRAL INDEX KEY: 0000717014 STANDARD INDUSTRIAL CLASSIFICATION: 3845 IRS NUMBER: 942784998 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10068 FILM NUMBER: 94544234 BUSINESS ADDRESS: STREET 1: 1220 CHARLESTON RD STREET 2: PO BOX 7393 CITY: MOUNTAIN VIEW STATE: CA ZIP: 94039 BUSINESS PHONE: 4159699112 MAIL ADDRESS: STREET 1: P O BOX 7393 STREET 2: 1220 CHARLESTON RD CITY: MOUNTAIN VIEW STATE: CA ZIP: 74039 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended JULY 2, 1994 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ------------- ----------- Commission file number 0-14953 ------- ACUSON CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 94-2784998 - - ------------------------ ----------------------------------- (State of Incorporation) (IRS Employer Identification No) 1220 CHARLESTON ROAD P. O. BOX 7393 MOUNTAIN VIEW, CA 94039-7393 (Address of principal executive offices) Registrant's telephone number, including area code, is (415) 969-9112 -------------- N/A -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No ----- ---- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 29, 1994 ------------------------------ ---------------------------- Common Stock, $.0001 par value 28,394,495 shares _______________________________________________________________________________ FORM 10Q ACUSON CORPORATION INDEX
PAGE NUMBER PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Condensed Consolidated Balance Sheets as of July 2, 1994 and December 31, 1993 1 Condensed Consolidated Statements of Operations for the Three Months Ended July 2, 1994 and July 3, 1993 and for the Six Months Ended July 2, 1994 and July 3, 1993 3 Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 2, 1994 and July 3, 1993 4 Notes to Unaudited Condensed Consolidated Financial Statements 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II. OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders 8 ITEM 6. Exhibits and Reports on Form 8-K 8 Signature 9
________________________________________________________________________________ ACUSON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
JULY 2, DECEMBER 31, ASSETS 1994 1993 (Unaudited) - - --------------------------------------------------------------------- CURRENT ASSETS Cash and cash equivalents $ 51,970 $ 11,184 Short-term investments 21,018 48,103 -------- -------- Total cash and short-term investments 72,988 59,287 Accounts receivable, net 78,080 62,976 Inventories 45,776 41,964 Other current assets 25,838 37,095 -------- -------- Total current assets 222,682 201,322 PROPERTY AND EQUIPMENT At cost, net of accumulated depreciation and amortization of $83,829 in 1994 and $75,700 in 1993 47,734 44,307 OTHER ASSETS Net investment in leases 5,763 19,502 Other long-term assets 8,018 5,950 -------- -------- Total Assets $284,197 $271,081 ======== ========
________________________________________________________________________________ See accompanying notes to unaudited condensed consolidated financial statements. 1 _______________________________________________________________________________ ACUSON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts)
JULY 2, DECEMBER 31, LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993 (Unaudited) - - --------------------------------------------------------------------- CURRENT LIABILITIES Accounts payable $ 22,102 $ 12,644 Other accrued liabilities 67,481 75,176 -------- -------- Total current liabilities 89,583 87,820 -------- -------- Commitments and contingencies (Note 4) STOCKHOLDERS' EQUITY Preferred stock, par value $.0001 authorized - 10,000 shares outstanding - none -- -- Common stock, par value $.0001 authorized - 50,000 shares outstanding - 28,389 shares in 1994 and 28,279 shares in 1993 71,196 69,115 Cumulative translation adjustment (1,480) (2,259) Unrealized holding loss (359) -- Retained earnings 125,257 116,405 -------- -------- Total stockholders' equity 194,614 183,261 -------- -------- Total Liabilities and Stockholders' Equity $284,197 $271,081 ======== ========
_______________________________________________________________________________ See accompanying notes to unaudited condensed consolidated financial statements. 2 ________________________________________________________________________________ ACUSON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED ----------------------------------------- JULY 2, JULY 3, JULY 2, JULY 3, 1994 1993 1994 1993 - - ------------------------------------------------------------------------------------- NET SALES Product $69,568 $ 55,572 $144,256 $122,031 Service 18,446 16,528 36,583 32,364 ------- -------- -------- -------- Total net sales 88,014 72,100 180,839 154,395 ------- -------- -------- -------- COST OF SALES Product 29,720 21,299 60,852 47,214 Service 8,749 8,705 17,510 17,272 ------- -------- -------- -------- Total cost of sales 38,469 30,004 78,362 64,486 ------- -------- -------- -------- Gross profit 49,545 42,096 102,477 89,909 ------- -------- -------- -------- OPERATING EXPENSES Selling, general and administrative 25,550 26,422 52,190 53,460 Product development 18,499 15,162 35,816 29,385 Restructuring expense --- 12,000 --- 12,000 ------- -------- -------- -------- Total operating expenses 44,049 53,584 88,006 94,845 ------- -------- -------- -------- Income (loss) from operations 5,496 (11,488) 14,471 (4,936) INTEREST INCOME, NET 795 1,146 1,950 2,310 ------- -------- -------- -------- Income (loss) before income taxes 6,291 (10,342) 16,421 (2,626) PROVISION FOR (BENEFIT FROM) INCOME TAXES 2,202 (3,620) 5,748 (919) ------- -------- -------- -------- Net income (loss) $ 4,089 $ (6,722) $ 10,673 $ (1,707) ======= ======== ======== ======== EARNINGS (LOSS) PER SHARE $0.14 $(0.23) $0.37 $(0.06) ======= ======= ======== ======== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 29,494 28,991 29,436 29,293 ======= ======= ======== ========
________________________________________________________________________________ See accompanying notes to unaudited condensed consolidated financial statements. 3 ________________________________________________________________ ACUSON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
SIX MONTHS ENDED -------------------- JULY 2, JULY 3, 1994 1993 - - --------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 10,673 $ (1,707) Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 9,679 8,884 Changes in: Accounts receivable (15,919) 10,202 Inventories (3,991) 2,143 Other current assets 5,712 (3,601) Accounts payable 9,399 3,876 Other accrued liabilities (8,492) (2,611) -------- -------- Net cash provided by operating activities 7,061 17,186 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Decrease in short-term investments 27,086 3,039 Investment in property and equipment (12,547) (6,547) Decrease (increase) in investment in leases 19,641 (6,678) Increase in other assets (1,981) (1,373) -------- -------- Net cash provided by (used in) investing activities 32,199 (11,559) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Repurchase of common stock (1,458) (16,008) Issuance of common stock under stock option and stock purchase plans 2,558 3,086 -------- -------- Net cash provided by (used in) financing activities 1,100 (12,922) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 426 (89) -------- -------- Net increase (decrease) in cash and cash equivalents 40,786 (7,384) CASH AND CASH EQUIVALENTS, BEGINNING OF 11,184 21,483 PERIOD -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 51,970 $ 14,099 ======== ========
________________________________________________________________________________ See accompanying notes to unaudited condensed consolidated financial statements. 4 ________________________________________________________________________________ ACUSON CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - INTERIM STATEMENTS In the opinion of management, the unaudited interim condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary to summarize fairly the Company's condensed consolidated financial position as of July 2, 1994 and its condensed consolidated results of operations and cash flows for the periods ended July 2, 1994 and July 3, 1993. The results of operations for the three and six months ended July 2, 1994 are not necessarily indicative of the results to be expected for the entire year ending December 31, 1994. Certain information reported in prior years has been reclassified to conform to the 1994 presentation. The Company's principle accounting policies are set forth in the financial statements for the year ended December 31, 1993 and notes thereto contained in the Company's Annual Report filed with the Securities and Exchange Commission. NOTE 2 - INVESTMENTS Under Statement of Financial Accounting Standards No. 115, the Company's investments, which consisted entirely of debt securities, were classified as available-for-sale. These securities mature at various dates through the year 1995. As of July 2, 1994, the securities' gross unrealized holding loss was approximately $553,000. The unrealized holding loss of approximately $359,000, net of the tax effect, was reported as a separate component of stockholders' equity. The Company has determined that the unrealized holding loss is not a permanent impairment of the fair value of its investments. During the six months ended July 2, 1994, the Company sold certain of its available-for-sale securities for proceeds of approximately $5,100,000. The Company realized a gain of approximately $15,000 on those sales. NOTE 3 - INVENTORIES The components of inventories were as follows (in thousands):
JULY 2, DEC. 31, 1994 1993 - - ---------------------------------------------------------------------------------------------------------- Raw materials $24,215 $17,093 Work-in-process 7,026 5,820 Finished goods 14,535 19,051 ------- ------- Total inventories $45,776 $41,964 ======= =======
NOTE 4 - LEGAL CONTINGENCIES On July 1, 1993 and July 30, 1993, individuals purporting to represent a class of persons who purchased Acuson common stock during the period between October 24, 1990 and July 22, 1992 filed two separate, but related, actions against the Company, twelve of its officers and one former officer in the Federal District Court for the Northern District of California alleging that the defendants' statements about the Company were incomplete or inaccurate, in violation of federal securities laws. Plaintiffs seek damages in an unspecified amount, as well as equitable relief or injunctive relief and attorneys' fees, experts' fees and costs. The Company intends to defend the suits vigorously. Management believes that the ultimate outcome of this matter will not have a material adverse effect on the Company's financial condition. ________________________________________________________________________________ 5 ________________________________________________________________________________ ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net sales for the quarter ended July 2, 1994 increased from $72.1 million in the quarter ended July 3, 1993 to $88.0 million. For the first six months of 1994, net sales were $180.8 million, an increase of 17.1% compared to the first six months of 1993. The increased revenues were primarily the result of increased worldwide product shipments in response to the release of Acoustic Response Technology (ART) and increased international shipments that were favorably impacted in particular by the Acuson (R) 128XP/4. The increased sales were offset by lower average unit selling prices resulting from competitive pricing pressures and by more sales of lower priced product configurations. Service revenue for the quarter ended July 2, 1994 increased 11.6% to $18.5 million from $16.5 million in the quarter ended July 3, 1993, primarily due to growing service contract revenue from a larger base of installed systems. The Company believes that its results for the six months ended July 2, 1994 may not be indicative of the results for the entire year. Acuson expects that future revenues may be impacted for an indeterminate period by market uncertainties regarding the purchase of hospital equipment due to ongoing worldwide medical cost containment pressures and concern about the potential impacts of U.S. health care reform. The gross profit for the second quarter of 1994 was 56.3% of net sales, compared to 58.4% in the comparable 1993 period. For the six months ended July 2, 1994, gross profit was 56.7% of net sales, compared to 58.2% in the first six months of 1993. The percentage decrease reflected a reduction in selling prices and an increased proportion of products which have a lower gross margin. Selling, general and administrative expenses totaled $25.6 million in the quarter ended July 2, 1994, down from $26.4 million in the comparable prior year's period. For the six months ended July 2, 1994, selling, general and administrative expenses were $52.2 million compared to $53.5 million in the first six months of 1993. As a percentage of sales, such expenses in the current year totaled 28.9% compared to 34.6% in 1993. Expenditures as a percentage of sales decreased as a result of a reduction in the Company's work force following the restructuring in the second quarter of 1993. Product development costs in the second quarter of 1994 totaled $18.5 million or 21.0% of sales, compared to $15.2 million or 21.0% of sales in the second quarter of 1993. For the six months ended July 2, 1994, product development costs were $35.8 million or 19.8% of net sales compared to $29.4 million or 19.0% of net sales in the first six months of 1993. The increase in product development expense resulted from increased costs for multiple product development programs. In 1993 the Company restructured its worldwide operations in order to address a reduction in worldwide demand for medical diagnostic ultrasound products. The restructuring consisted of a series of planned actions, including a reduction of approximately 15% of the Company's worldwide work force, the restructuring of facilities and the write-down of certain assets. In connection with these actions, the Company recorded a one-time pre-tax charge of $12,000,000 during the second quarter of 1993. Substantially all of the $1.1 million restructuring balance which remained at December 31, 1993, was used during the six months ended July 2, 1994. The actual costs of the restructuring were substantially in alignment with original expectations. The provision for income taxes was $2.2 million in the second quarter of 1994 versus a benefit of $3.6 million in 1993. For the six months ended July 2, 1994 the tax provision was $5.7 million versus a benefit of $0.9 million in 1993. The benefits in 1993 resulted from the loss reported in the quarter ended July 3, 1993. The effective tax rate for the quarter ended July 2, 1994 remained constant at approximately 35.0%. 6 ________________________________________________________________________________ LIQUIDITY AND CAPITAL RESOURCE The Company's cash and short-term investments balance has increased $13.7 million during the six months ended July 2, 1994 to $73.0 million as of July 3, 1993. During the six months ended July 2, 1994, the Company generated $7.1 million in cash from operations, as compared to 1993 when operations generated $17.2 million in cash. The Company's financing and investing activities for the six months ended July 2, 1994 have generated $32.2 million in cash, with $21.6 million provided by the sale of the Company's lease portfolio. The Company also has raised $2.6 million in cash for the six months ended July 2, 1994 through employee participation in the Company's stock option and stock purchase plans, compared to $3.1 million in the comparable six-month period in 1993. The Board of Directors had previously authorized the repurchase of a total of 12,000,000 shares of the Company's common stock over an unspecified period of time. Through December 31, 1993, the Company completed the repurchase of a total of 8,000,000 shares. Of the remaining 4,000,000 share authorization, as of July 2, 1994, the Company had repurchased 165,000 shares. There were 28,389,142 shares of Acuson common stock outstanding as of July 2, 1994. At July 2, 1994, the Company's working capital totaled $133.1 million. The Company also has a revolving unsecured credit facility for $50 million which is in effect through July 1995. No compensating balances are required and the full amount is available under this credit facility. Based on its current operating plan, the Company believes that the liquidity provided by its existing cash and short-term investment balances, the borrowing arrangements described above, and cash generated from operations will be sufficient to meet the Company's operating and capital requirements for fiscal 1994. ________________________________________________________________________________ 7 ______________________________________________________________________________ PART II ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a) The Annual Meeting of Stockholders of the Company was held on May 17, 1994. c) The result of Stockholders' votes at the Annual Meeting were as follows: (i) All nominees for director of the Company were elected by the following vote:
Name Votes For Votes Withheld Broker Non-Votes/Abstentions ---- --------- -------------- ---------------------------- Royce Diener 26,631,535 142,139 0 Robert J. Gallagher 26,641,639 132,035 0 Samuel H. Maslak 26,642,382 131,292 0 Thomas J. Perkins 26,640,960 132,714 0
(ii) The appointment of Arthur Andersen & Co. as independent public accountants of the Company was ratified by the following vote: For 26,671,181 Against 50,536 Abstain 51,957 Broker Non-Votes 0
================================================================================ ________________________________________________________________________________ ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits -------- 10.1 The Company's Employee Stock Purchase Plan (1) 10.2 The Company's 1982 Incentive Stock Option Plan (1) 10.3 The Company's 1986 Supplemental Stock Option Plan (1) 11.1 Statement regarding computation of per share earnings for the quarter ended July 2, 1994 (1) Management contract or compensatory plan required to be filed as an exhibit. b) Reports on Form 8-K ------------------- The Company filed no reports on Form 8-K during the quarter ended July 2, 1994. ______________________________________________________________________________ 8 ________________________________________________________________________________ SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ACUSON CORPORATION (Registrant) August 15, 1994 By /s/ Stephen T. Johnson ----------------------------------- Stephen T. Johnson Vice President, Chief Financial Officer and Treasurer (duly authorized Officer and Principal Financial and Accounting Officer) 9 EX-10.1 2 EMPLOYEE STOCK PURCHASE PLAN ACUSON CORPORATION EMPLOYEE STOCK PURCHASE PLAN 1. PURPOSE ------- (a) The purpose of the Plan is to provide a means by which employees of ACUSON CORPORATION, a Delaware corporation (the "Company"), and its Affiliates, as defined in subparagraph 1(b), which are designated as provided in subparagraph 2(b), may be given an opportunity to purchase stock of the Company. (b) The word "affiliate" as used in the Plan means any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 425(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended (the "Code"). (c) The Company, by means of the Plan, seeks to retain the services of its employees, to secure and retain the services of new employees, and to provide incentives for such persons to exert maximum efforts for the success of the Company by providing eligible employees with an opportunity to participate as shareholders in the Company's future growth. (d) The Company intends that the rights to purchase stock of the Company granted under the Plan be considered options issued under an "employee stock purchase plan" as that term is defined in Section 423(b) of the Code. 2. ADMINISTRATION -------------- (a) The Plan shall be administered by the Board of Directors (the "Board") of the Company unless and until the Board delegates the administration to a committee, as provided in subparagraph 2(c). Whether or not the board has delegated administration, the Board shall have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan. (b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan: (i) To determine how rights to purchase stock of the Company shall be granted and the provisions of each offering of such rights (which need not be identical) consistent with the provisions of the Plan. (ii) To designate from time to time which Affiliates of the Company shall be eligible to participate in the Plan. (iii) To construe and interpret the Plan and rights granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. (iv) To amend the Plan as provided in paragraph 13. (v) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company. (c) The Board may delegate administration of the Plan to a committee composed of not fewer than two (2) members (the "Committee"), all of the members of which Committee shall be persons who in the opinion of counsel to the Company are "disinterested persons," within the meaning of Rule 16b-3(d)(2) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Any such person shall otherwise comply with the requirements of Rule 16b-3 promulgated under the Exchange Act. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be -1- adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. 3. SHARES SUBJECT TO THE PLAN -------------------------- (a) Subject to the provisions of paragraph 12 relating to adjustments upon changes in stock, the stock that may be sold pursuant to rights granted under the Plan shall not exceed in the aggregate two million four hundred fifty thousand (2,450,000) shares of the Company's common stock, par value $0.001 per share (the "Common Stock"). If any right granted under the Plan shall for any reason terminate without having been exercised, the Common Stock not purchased under such right shall again become available for the Plan. (b) The Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 4. GRANTS OF RIGHTS; OFFERING -------------------------- The Board or the Committee may from time to time grant or provide for the grant of rights to purchase stock of the Company under the Plan to eligible employees (an "Offering") on a date or dates (the "Offering Date(s)") selected by the Board or the Committee. Each Offering shall be in such form and shall contain such terms and conditions as the Board or the Committee shall deem appropriate. If an employee has more than one right outstanding under the Plan, unless he or she otherwise indicates in agreement or notices delivered hereunder: (1) each agreement or notice delivered by that employee will be deemed to apply to all of his rights under the Plan, and (2) a right with a lower exercise price (or an earlier-granted right, if two rights have identical exercise prices), will be exercised to the fullest possible extent before a right with a higher exercise price (or later-granted, if two rights have identical exercise prices) will be exercised. The provisions of separate Offerings need not be identical, but each Offering shall include (through incorporation of the provisions of this Plan by reference in the Offering or otherwise) the substance of the provisions contained in paragraphs 5 through 8, inclusive. 5. ELIGIBILITY ----------- (a) Rights may be granted only to employees of the Company or, as the Board or the Committee may designate as provided in subparagraph 2(b), to employees of any Affiliate of the Company. Except as provided in subparagraph 5(b), an employee of the Company or any Affiliate shall not be eligible to be granted rights under the Plan, unless, on the Offering Date, such employee has been in the employ of the Company or any Affiliate for such continuous period preceding such grant as the Board or the Committee may require, but in no event shall the required period of continuous employment be equal to or greater than two (2) years. In addition, unless otherwise determined by the Board or the Committee, no employee of the Company or any Affiliate shall be eligible to be granted rights under the Plan, unless, on the Offering Date, such employee's customary employment with the Company or such Affiliate is at least twenty (20) hours per week and at least five (5) months per calendar year. (b) Unless otherwise determined by the Board or the Committee, each person who, during the course of an Offering with multiple Exercise Dates, first becomes an eligible employee of the Company or designated Affiliate will, on the first Exercise Date (as defined in the Offering) which coincides with the day on which such person becomes an eligible employee or occurs thereafter, receive a right under that Offering, which right shall be deemed to be a part of that Offering. Such right shall have the same characteristics as any rights originally granted under that Offering, as described herein, except that: (i) the date on which such right is granted shall be the "Offering Date" of such right for all purposes, including determination of the exercise price of such right; (ii) the Purchase Period (as defined below) for such right shall begin on its Offering Date and end coincident with the end of such Offering; and (iii) the Board or Committee may provide that if such person first becomes an eligible employee within a specified period of time before the end of the Purchase Period (as defined below) for such Offering, he or she will not receive any right under that Offering. -2- (c) If necessary to comply with Rule 16b-3 promulgated under the Exchange Act, a director shall not be eligible for the benefits of the Plan unless and until such director is expressly declared eligible to participate in the Plan by action of the Board or Committee, and only if, at any time discretion is exercised by the Board in the selection of a director as a person to whom rights may be granted, or in the determination of the number of shares which may be covered by rights granted to a director, a majority of the Board and a majority of the directors acting in such a matter are disinterested persons, as defined in subparagraph 2(d). The Board shall otherwise comply with the requirements of Rule 16b-3 promulgated under the Exchange Act, as from time to time in effect. (d) No employee shall be eligible for the grant of any rights under the Plan if, immediately after any such rights are granted, such employee owns stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Affiliate. For purposes of this subparagraph 5(d), the rules of Section 425(d) of the Code shall apply in determining the stock ownership of any employee, and stock which such employee may purchase under all outstanding rights and options shall be treated as stock owned by such employee. (e) An eligible employee may be granted rights under the Plan only if such rights, together with any other rights granted under "employee stock purchase plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of the Code, do not permit such employee's rights to purchase stock of the Company or any Affiliate 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 rights are granted) for each calendar year in which such rights are outstanding at any time. 6. RIGHTS; PURCHASE PRICE ---------------------- (a) On each Offering Date, each eligible employee, pursuant to an Offering made under the Plan, shall be granted the right to purchase the number of shares of Common Stock of the Company purchasable with up to fifteen percent (15%) of such employee's Compensation [as defined in subparagraph 7(a)] for the period that begins on the Offering Date and ends on the date stated in the Offering, which date shall be no more than twenty-seven months after the Offering Date (the "Purchase Period"). In connection with each Offering made under this Plan, the Board or the Committee shall specify a maximum number of shares which may be purchased by any employee as well as a maximum aggregate number of shares which may be purchased by all eligible employees pursuant to such Offering. In addition, in connection with each Offering with multiple Exercise Dates, the Board or the Committee may specify a maximum aggregate number of shares which may be purchased by all eligible employees on any given Exercise Date under the Offering. If the aggregate purchase of shares upon exercise of rights granted under the Offering would exceed any such maximum aggregate number, the Board or the Committee shall make a pro rata allocation of the shares available in as nearly a uniform manner as shall be practicable and as it shall deem to be equitable. (b) The purchase price of Common Stock acquired pursuant to rights granted under the Plan shall be not less than the lesser of an amount equal to eighty- five percent (85%) of the fair market value of the Common Stock on: (i) the relevant Offering Date, as specified in paragraph 4; or (ii) the Exercise Date, as defined in subparagraph 8(a). 7. PARTICIPATION; WITHDRAWAL; TERMINATION -------------------------------------- (a) An eligible employee may become a participant in an Offering by delivering an agreement to the Company within the time specified in the Offering, in such form as the Company provides. Each such agreement shall authorize payroll deductions of up to fifteen percent (15%) of such employee's total compensation paid during the applicable period, including amounts elected to be deferred under the Company's 401(k) plan ("Compensation") and shall remain effective under subsequent Offerings unless and until such employee terminates his or her payroll deductions. At any time a participant may reduce or terminate his or her payroll deductions by delivering a written notice or agreement to the Company on such form as the Company provides. A -3- participant may increase (or an employee may begin) such payroll deductions effective for a given Offering after the beginning of the Purchase Period for that Offering only as provided in the Offering. Unless otherwise provided at time of offering, payroll deductions may be elected in whole percentages only. The payroll deductions made for each participant shall be credited to an account maintained for such participant under the Plan, but all funds shall be retained with the general funds of the Company. A participant may not make any additional payments into his or her account. (b) If a participant terminates his or her payroll deductions, such participant may withdraw from the Offering by delivering to the Company a notice of withdrawal in such form as the Company provides. Such withdrawal may be elected at any time prior to the end of the Purchase Period for which it is to be effective. Upon such withdrawal from the Offering by a participant, the Company shall distribute as soon as practical to such participant an amount equal to all of his or her accumulated payroll deductions (reduced to the extent such deductions have been used to acquire stock for the participant) under the Offering without interest, and such person's participation in that Offering shall be automatically terminated. A participant's withdrawal from an Offering will have no effect upon such participant's eligibility to participate in any other Offerings under the Plan, but such participant will be required to deliver a new participation agreement in order to participate in other Offerings under the Plan. (c) Rights granted pursuant to any Offering under the Plan shall terminate immediately upon cessation of any participating employee's employment with the Company or an Affiliate, for any reason other than death or retirement, and the Company shall distribute as soon as practical to such employee an amount equal to all of his or her accumulated payroll deductions (reduced to the extent such deductions have been used to acquire stock for the participant), without interest. (d) In the event of the retirement, if such retirement occurs three (3) months or less prior to the next Exercise Date (as defined in subparagraph 8(a)), or death of a participant during the Purchase Period, the retired participant or his or her transferee pursuant to subparagraph 7(e) shall have the option of withdrawing from the ongoing Offering as provided in subparagraph 7(b) or taking no action and thereby continuing participation in the ongoing Offering. If retirement occurs more than three (3) months prior to the next Exercise Date (as defined in subparagraph 8(a)) all rights granted pursuant to the Offering shall terminate immediately and as soon as practical the Company shall distribute to such retired participant an amount equal to all of his or her accumulated payroll deductions (reduced to the extent such deductions have been used to acquire stock for the participant) without interest. (e) Rights granted under the Plan shall not be transferable, other than by will or the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom such rights are granted only by such person. 8. EXERCISE -------- (a) On each exercise date, as defined in the relevant Offering (an "Exercise Date"), each participant's accumulated payroll deductions (without any increase for interest) will be applied to the purchase of whole shares of Common Stock of the Company, up to the maximum number of shares permitted pursuant to the terms of the Plan and the applicable Offering, at the purchase price specified in the Offering. No fractional shares shall be issued upon the exercise of rights granted under the Plan. The amount, if any, of accumulated payroll deductions remaining in any participant's account at the end of the Purchase Period (after the purchase of shares) which is equal to the amount required to purchase whole shares of Common Stock on the final Exercise Date shall be distributed in full to such participant as soon as practical after the Purchase Period, without interest. Any remaining amount of accumulated payroll deductions in each participant's account at the end of the Purchase Period (after the purchase of shares and the distribution referred to in the preceding sentence, if any) which is less than the amount required to purchase one share of Common Stock on the final Exercise Date shall be held in each such participant's account for the purchase of shares under the next Offering under the Plan, unless such participant withdraws from such next Offering, as provided in subparagraph 7(b), or is no longer eligible to be granted rights under the Plan, as provided in paragraph 5, in which case such amount shall be distributed to such participant as soon as practical after the Purchase Period, without interest. -4- (b) No rights granted under the Plan may be exercised to any extent unless the Plan (including rights granted thereunder) is covered by an effective registration statement pursuant to the Securities Act of 1933, as amended (the "Securities Act"). If, on an Exercise Date of any Offering hereunder, the Plan is not so registered, no rights granted under the Plan or any Offering shall be exercised and all payroll deductions accumulated during the Purchase Period shall be distributed to the participants, without interest. 9. COVENANTS OF THE COMPANY ------------------------ (a) During the terms of the rights granted under the Plan, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such rights. (b) The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of Common Stock upon exercise of the rights granted under the Plan. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such rights unless and until such authority is obtained. 10. USE OF PROCEEDS --------------- Proceeds from the sale of Common Stock pursuant to rights granted under the Plan shall constitute general funds of the Company. 11. MISCELLANEOUS ------------- (a) A participant shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to rights granted under the Plan unless and until certificates representing such shares shall have been issued. (b) Throughout the term of any Offering, the Company shall make available to each participant, not later than 120 days after the close of each of the Company's fiscal years during the Offering, upon request, such financial and other information regarding the Company as comprises the annual report to the shareholders of the Company provided for in the bylaws of the Company. (c) Nothing in the Plan or any instrument executed or Offering granted pursuant thereto shall confer upon any eligible employee or participant any right to continue in the employ of the Company or any Affiliate or shall affect the right of the Company or any Affiliate to terminate the employment of any eligible employee or participant with or without cause. 12. ADJUSTMENTS UPON CHANGES IN STOCK --------------------------------- (a) If any change is made in the Common Stock subject to the Plan, or subject to any rights granted under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the Board shall make appropriate adjustments in the maximum number of shares subject to the Plan and the number of shares and price per share subject to outstanding rights. (b) In the event of: (1) a dissolution or liquidation of the Company in which another corporation succeeds to the assets of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) any other capital reorganization in which more than 50% of the shares of the Company entitled to vote are exchanged, then the surviving corporation shall either assume any options outstanding under the Plan or shall substitute similar options for those outstanding under the Plan or the outstanding options shall remain in full force and effect. -5- 13. AMENDMENT OF THE PLAN --------------------- (a) The Board at any time, and from time to time, may amend the Plan. However, except as provided in paragraph 12 relating to adjustments upon changes in Common Stock, no amendment shall be effective unless approved by the vote of the holders of a majority of the voting power of the shares of the Company represented in person or by proxy and entitled to vote at a duly held stockholders meeting, within twelve (12) months before or after the adoption of the amendment, where the amendment will: (i) increase the number of shares reserved for rights under the Plan; (ii) materially modify the requirements as to eligibility for participation in the Plan (to the extent such modification requires stockholder approval in order for the Plan to satisfy the requirements of Section 423 of the Code); or (iii) modify the Plan in any other way if such modification requires stockholder approval in order for the Plan to satisfy the requirements of Section 423 of the Code or to comply with the requirements of Rule 16b-3 promulgated under the Exchange Act. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible employees with the maximum benefits provided or intended to be provided under the provisions of the Code and the regulations promulgated thereunder relating to employee stock purchase plans and/or to bring the Plan and/or rights granted under it into compliance therewith. (b) Rights and obligations under any rights granted before amendment of the Plan shall not be altered or impaired by any amendment of the Plan, except with the consent of the person to whom such rights were granted. 14. TERMINATION OR SUSPENSION OF THE PLAN ------------------------------------- (a) The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate ten years from the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No rights may be granted under the Plan while the Plan is suspended or after it is terminated. (b) Rights and obligations under any rights granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except with the consent of the person to whom such rights were granted. 15. EFFECTIVE DATE OF PLAN ---------------------- The Plan shall become effective as determined by the Board, but no rights granted under the Plan shall be exercised unless and until the Plan has been approved by the vote of the holders of a majority of the outstanding shares of the Company entitled to vote or by the written consent of the outstanding shares entitled to vote to the extent necessary to obtain employee stock purchase plan treatment under Section 423 of the Code, and, if required, an appropriate permit has been issued by the Commissioner of Corporations of the State of California. -6- EX-10.2 3 INCENTIVE STOCK OPTION PLAN ACUSON CORPORATION 1982 INCENTIVE STOCK OPTION PLAN -------------------------------- 1. PURPOSE. -------- (a) The purpose of the Plan is to provide a means by which selected employees of Acuson Corporation (the "Company") and its affiliates, as defined in subparagraph l(b), may be given an opportunity to purchase shares of the Common Stock of the Company (the "Stock"). (b) The word "Affiliate" as used in the Plan means any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 425(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended from time to time (the "Code"). (c) The Company, by means of the Plan, seeks to retain the services of persons now holding positions, to secure and retain the services of persons capable of filling such positions, and to provide incentives for such persons to exert maximum efforts for the success of the Company. (d) The Company intends that the options issued under the Plan be incentive stock options as that term is used in Section 422A of the Code. 2. ADMINISTRATION. -------------- (a) The Plan shall be administered by the Board of Directors (the "Board") of the Company unless and until the Board delegates administration to a committee, as provided in subparagraph 2(c). Whether or not the Board has delegated administration, the Board shall have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan. (b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan: (l) To determine from time to time which of the persons eligible under the Plan shall be granted options; when and how the option shall be granted; the provisions of each option granted (which need not be identical), including the time or times during the term of each option within which all or portions of such option may be exercised; and the number of shares for which an option shall be granted to each such person. (2) To construe and interpret the Plan and options granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any option agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. (3) To amend the Plan as provided in paragraph 10. (4) Generally, to exercise such powers and perform such acts as the Board deems necessary or expedient to promote the best interests of the Company. (c) The Board may delegate administration of the Plan to a committee composed of not fewer than two (2) members (the "Committee"), all of the members of which Committee shall be persons who in the opinion of counsel to the Company are "disinterested persons," within the meaning of Rule 16b-3(d)(2) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Any such person shall otherwise comply with the requirements of Rule 16b-3 promulgated under the Exchange Act. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by -1- the Board, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. Subject to paragraph 2(d) the Board may abolish the Committee at any time and revest in the Board the administration of the Plan. (d) Notwithstanding anything in this paragraph 2 to the contrary, the Board may delegate to a committee of one or more members of the Board the authority to grant options to eligible persons who are not officers of the Company or members of the Board. 3. SHARES SUBJECT TO THE PLAN. -------------------------- (a) Subject to the provisions of paragraph 9 relating to adjustments upon changes in stock, the stock that may be sold pursuant to options granted under the Plan shall not exceed in the aggregate eleven million two hundred fifty thousand (11,250,000) shares of the Stock; provided, however, that such aggregate number of shares shall be reduced to reflect the number of shares of the Stock which has been sold under, or may be sold pursuant to outstanding options granted under, the Company's 1986 Supplemental Stock Option Plan to the same extent as if such sales had been made or options had been granted pursuant to this Plan. If any option granted under the Plan shall for any reason expire or otherwise terminate without having been exercised in full, the Stock not purchased under such option shall again become available for the Plan. (b) The Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. (c) For options granted before January 1, 1987, an option may be granted to an eligible person under the Plan only if such option, and any other options specified by Section 422A(b)(8) of the Internal Revenue Code of 1954, as amended, which were previously granted to such person during the calendar year in which such option is proposed to be granted, are for the purchase of shares of stock of the Company having an aggregate fair market value (determined as of the times the respective options are granted) not in excess of one hundred thousand dollars ($100,000) plus any unused limit carryover (as defined in Section 422A(c)(4) of the Internal Revenue Code of 1954, as amended) to such calendar year. For options granted after December 31, 1986, an option may be granted to an eligible person under the Plan only if the aggregate fair market value (determined at the time the option is granted) of the stock with respect to which incentive stock options are exercisable for the first time by such optionee during any calendar year under all such plans of the Company and its Affiliates does not exceed one hundred thousand dollars ($100,000). Should it be determined that any option granted under the Plan exceeds such maximum, such option shall be considered not to qualify for treatment as an incentive stock option under Section 422A of the Code to the extent, but only to the extent, of such excess. 4. ELIGIBILITY. ----------- (a) Options may be granted to employees (including officers) of the Company or its Affiliates. A director of the Company shall not be eligible for the benefits of the Plan unless such director is also an employee (including an officer) of the Company or any Affiliate. (b) A director shall in no event be eligible for the benefits of the Plan unless and until such director is expressly declared eligible to participate in the Plan by action of the Board or the committee, and only if, at any time discretion is exercised by the Board in the selection of a director as a person to whom options may be granted, or in the determination of the number of shares which may be covered by options granted to a director, a majority of the Board and a majority of the directors acting in such matter are disinterested persons, as defined in subparagraph 2(d). The Board shall otherwise comply with the requirements of Rule 16b-3 promulgated under the Exchange Act, as from time to time in effect. This subparagraph 4(b) shall not apply prior to the date of the first registration of an equity security of the Company under Section 12 of the Exchange Act. -2- (c) No person shall be eligible for the grant of an option under the Plan if, at the time of grant, such person owns (or is deemed to own pursuant to Section 425(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates unless the option price is at least one hundred ten percent (110%) of the fair market value of the Stock at the date of grant and the term of the option does not exceed five (5) years from the date of grant. 5. OPTION PROVISIONS. ----------------- Each option shall be in such form and shall contain such terms and conditions as the Board or the committee shall deem appropriate. The provisions of separate options need not be identical, but each option shall include (through incorporation of provisions hereof by reference in the option or otherwise) the substance of each of the following provisions: (a) The term of any option shall not be greater than ten (10) years from the date it was granted. (b) The exercise price of each option shall be not less than one hundred percent (100%) of the fair market value of the Stock subject to the option on the date the option is granted. (c) The purchase price of Stock acquired pursuant to an option shall be paid as specified in the option either (i) in cash at the time the option is exercised, or (ii) at the discretion of the Board or the committee, (A) by delivery to the Company of other shares of the Stock, (B) according to a deferred payment or other arrangement (which may include, without limiting the generality of the foregoing, the use of other shares of the Stock) with the person to whom the option is granted or to whom the option is transferred pursuant to subparagraph 5(d), or (C) in any other form of legal consideration that may be acceptable to the Board or the committee in their discretion, either at the time of grant or exercise of the option. In the case of any deferred payment arrangement, interest shall be payable at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement. (d) An option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom the option is granted only by such person. (e) The total number of shares of the Stock subject to an option may, but need not, be allotted in periodic installments (which may, but need not, be equal). From time to time during each of such installment periods, the option may be exercised with respect to some or all of the shares allotted to that period, and/or with respect to some or all of the shares allotted to any prior period as to which the option was not fully exercised. During the remainder of the term of the option (if its term extends beyond the end of the installment periods), the option may be exercised from time to time with respect to any shares then remaining subject to the option. The provisions of this subparagraph 5(e) are subject to any option provisions governing the time of vesting of installments, the dates on which options may be exercised, and the minimum number of shares as to which an option may be exercised. (f) Notwithstanding anything to the contrary contained in the Plan, no option granted prior to January 1, 1987 shall be exercisable to any extent while there is outstanding (within the meaning of Section 422A(c)(7) of the Internal Revenue Code of 1954, as amended) any incentive stock option (within the meaning of Section 422A of the Code) which was granted before the granting of such later option to the holder of such later option to purchase stock of the Company, or of any corporation which at the time of the granting of such later option was an Affiliate of the Company, or of a predecessor corporation of any such corporation. (g) The Company may require any optionee, or any person to whom the option is transferred under subparagraph 5(d), as a condition of exercising any such option, to give written assurances satisfactory to the Company stating that such person is acquiring the Stock subject to the option for such person's own account and -3- not with any present intention of selling or otherwise distributing the Stock. The requirement of providing written assurances, and any assurances given pursuant to the requirement, shall be inoperative if (i) the issuance of the shares upon the exercise of the option has been registered under a then currently effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), or (ii) a determination is made by counsel for the Company that such written assurances are not required in the circumstances under the then applicable federal securities laws. (h) An option shall terminate three (3) months after termination of the optionee's employment with the Company or an Affiliate, unless (i) the termination of employment of the optionee is due to such person's permanent and total disability, within the meaning of Section 422A(c)(7) of the Code, in which case the option may, but need not, provide that it may be exercised at any time within one (l) year following such termination of employment; or (ii) the optionee dies while in the employ of the Company or an Affiliate, or within not more than three (3) months after termination of such employment, in which case the option may, but need not, provide that it may be exercised at any time within eighteen (18) months following the death of the optionee by the person or persons to whom the optionee's rights under such option pass by will or by the laws of descent and distribution; or (iii) the option by its terms specifies either (a) that it shall terminate sooner than three (3) months after termination of employment, or (b) that it may be exercised more than three (3) months after termination of the optionee's employment with the Company or an Affiliate. This subparagraph 5(h) shall not be construed to extend the term of any option or to permit anyone to exercise the option after expiration of its terms, nor shall it be construed to increase the number of shares as to which any option is exercisable from the amount exercisable on the date of termination of the optionee's employment. (i) The option may, but need not, include a provision whereby the optionee may elect at any time during the term of his or her employment with the Company or any Affiliate to exercise the option as to any part or all of the shares subject to the option prior to the stated vesting date of the option or of any installment or installments specified in the option. Any shares so purchased from any unvested installment or option may be subject to a repurchase right in favor of the Company or to any other restriction the Board or the committee determines to be appropriate. (j) If and to the extent authorized by the Board or the committee in its discretion, a person who has received options may make an election to have shares of stock of the Company withheld by the Company or to tender any such stock to the Company upon any exercise of an option to pay the amount of tax that the Board or the committee in its discretion determines to be required by law to be withheld by the Company. Any shares of stock so withheld or tendered will be valued by the Board or the committee at their fair market value as of the date they are withheld or tendered. The value of the shares withheld or tendered may not exceed the required federal, state and local and foreign withholding tax obligations as computed by the Company. Unless the Board or the committee otherwise permits, the optionee shall pay to the Company in cash, promptly when the amount of such obligations become determinable, all applicable federal, state, local and foreign withholding taxes that the Board or the committee determines to result from the lapse of restrictions imposed on exercise of an option, from a transfer or other disposition of shares acquired upon exercise of an option or otherwise related to the option or the shares acquired upon exercise of the option. 6. COVENANTS OF THE COMPANY. ------------------------ (a) During the terms of the options granted under the Plan, the Company shall keep available at all times the number of shares of the Stock required to satisfy such options. (b) The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of the Stock upon exercise of the options granted under the Plan; provided, however, that this undertaking shall not require the Company to register under the Securities Act either the Plan, any option granted under the Plan or any shares of the Stock issued or issuable pursuant to any such option. If the Company is unable to obtain from any such regulatory commission or agency -4- the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell shares of the Stock upon exercise of such options unless and until such authority is obtained. 7. USE OF PROCEEDS FROM STOCK. -------------------------- Proceeds from the sale of shares of the Stock pursuant to options granted under the Plan shall constitute general funds of the Company. 8. MISCELLANEOUS. ------------- (a) The Board or the committee shall have the power to accelerate the time during which an option may be exercised, notwithstanding the provisions in the option stating the time during which it may be exercised. (b) Neither an optionee nor any person to whom an option is transferred under subparagraph 5(d) shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such option unless and until such person has satisfied all requirements for exercise of the option pursuant to its terms. (c) Throughout the term of any option granted pursuant to the Plan, the Company will make available to the holder of such option, not later than 120 days after the close of each of the Company's fiscal years during the option term, upon request, such financial and other information regarding the Company as comprises the annual report to the stockholders of the Company provided for in the bylaws of the Company. (d) Nothing in the Plan or any instrument executed or option granted pursuant thereto shall confer upon any eligible participant or optionee any right to continue in the employ of the Company or any Affiliate or shall affect the right of the Company or any Affiliate to terminate the employment of any eligible participant or optionee with or without cause. 9. ADJUSTMENTS UPON CHANGES IN STOCK. --------------------------------- (a) If any change is made in the Stock subject to the Plan or subject to any option granted under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the Board shall make appropriate adjustments in the class(es) and maximum number of shares subject to the Plan and the number of shares and price per share of stock subject to outstanding options. (b) In the event of: (l) a dissolution or liquidation of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) any other capital reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, then, at the sole discretion of the Board and to the extent permitted by applicable law, (i) any surviving corporation shall assume any options outstanding under the Plan or shall substitute similar options for those outstanding under the Plan, or (ii) the time during which such options may be exercised shall be accelerated and the options terminated if not exercised prior to such event, or (iii) such options shall continue in full force and effect. -5- 10. AMENDMENT OF THE PLAN. --------------------- (a) The Board at any time, and from time to time, may amend the Plan. However, except as provided in paragraph 9 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the vote of the holders of a majority of the voting power of the shares of the Company represented in person or by proxy and entitled to vote at a duly held stockholders meeting, within twelve (12) months before or after the adoption of the amendment, where the amendment will: (i) Increase the number of shares reserved for options under the Plan; (ii) Materially modify the requirements as to eligibility for participation in the Plan (to the extent such modification requires stockholder approval in order for the Plan to satisfy the requirements of Section 422A(b) of the Code); or (iii) Modify the Plan in any other way if such modification requires stockholder approval in order for the Plan to satisfy the requirements of Section 422A(b) of the Code or to comply with the requirements of Rule 16b-3 promulgated under the Exchange Act. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide optionees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to employee stock options and/or to bring the Plan and/or options granted under it into compliance therewith. (b) Rights and obligations under any option granted before amendment of the Plan shall not be altered or impaired by any amendment of the Plan, except with the consent of the person to whom the option was granted. 11. TERMINATION OR SUSPENSION OF THE PLAN. ------------------------------------- (a) The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate within ten (10) years from the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No options may be granted under the Plan while the Plan is suspended or after it is terminated. (b) Rights and obligations under any option granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except with the consent of the person to whom the option was granted. 12. EFFECTIVE DATE OF PLAN. ---------------------- The Plan shall become effective as determined by the Board, but no options granted under the Plan shall be exercised unless and until the Plan has been approved by the vote of the holders of a majority of the outstanding shares of the Company entitled to vote or by the unanimous written consent of the holders of all outstanding shares of the Company entitled to vote, and, if required, an appropriate permit has been issued by the Commissioner of Corporations of the State of California. -6- EX-10.3 4 SUPPLEMENTAL STOCK OPTION PLAN ACUSON CORPORATION 1986 SUPPLEMENTAL STOCK OPTION PLAN ----------------------------------- 1. PURPOSE. ------- (a) The purpose of the Plan is to provide a means by which selected employees and directors (if declared eligible under paragraph 4) of and consultants to Acuson Corporation (the "Company") and its Affiliates, as defined in subparagraph l(b), may be given an opportunity to purchase stock of the Company. (b) The word "Affiliate" as used in the Plan means any parent corporation or subsidiary corporation of the Company as those terms are defined in Sections 425(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended from time to time (the "Code"). (c) The Company, by means of the Plan, seeks to retain the services of persons now holding key positions, to secure and retain the services of persons capable of filling such positions, and to provide incentives for such persons to exert maximum efforts for the success of the Company. (d) The Company intends that the options issued under the Plan not be incentive stock options as that term is used in Section 422A of the Code. 2. ADMINISTRATION. -------------- (a) The Plan shall be administered by the Board of Directors (the "Board") of the Company unless and until the Board delegates administration to a committee, as provided in subparagraphs 2(c) and 2(e). Whether or not the Board has delegated administration, the Board shall have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan. (b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan: (l) To determine from time to time which of the persons eligible under the Plan shall be granted options; when and how the option shall be granted; the provisions of each option granted (which need not be identical), including the time or times during the term of each option within which all or portions of such option may be exercised; and the number of shares for which an option shall be granted to each such person. (2) To construe and interpret the Plan and options granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any option agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. (3) To amend the Plan as provided in paragraph 10. (4) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company. (c) The Board may delegate administration of the Plan to a committee composed of not fewer than two (2) members (the "Committee"), all of the members of which Committee shall be persons who in the opinion of counsel to the Company are "disinterested persons," within the meaning of Rule 16b-3(d)(2) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Any such person shall otherwise comply with the requirements of Rule 16b-3 promulgated under the Exchange Act. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by -1- the Board, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. Subject to paragraph 2(d) the Board may abolish the Committee at any time and revest in the Board the administration of the Plan. (d) Notwithstanding anything in this paragraph 2 to the contrary, the Board may delegate to a committee of one or more members of the Board the authority to grant options to eligible persons who are not officers of the Company or members of the Board. 3. SHARES SUBJECT TO THE PLAN. -------------------------- (a) Subject to the provisions of paragraph 9 relating to adjustments upon changes in stock, the stock that may be sold pursuant to options granted under the Plan shall not exceed in the aggregate eleven million two hundred fifty thousand (11,250,000) shares of the Company's common stock; provided, however, that such aggregate number of shares shall be reduced to reflect the number of shares of the Company's common stock which have been sold under, or may be sold pursuant to outstanding options granted under, the Company's 1982 Incentive Stock Option Plan to the same extent as if such sales had been made or options had been granted pursuant to this Plan. If any option granted under the Plan shall for any reason expire or otherwise terminate without having been exercised in full, the stock not purchased under such option shall again become available for the Plan. (b) The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. (c) There is no maximum limit on the aggregate fair market value (determined as of the times the respective options are granted) of the stock for which any eligible person may be granted options under the Plan in any calendar year. 4. ELIGIBILITY. ----------- (a) Options may be granted only to selected employees (including officers) of, directors of or consultants to the Company or its Affiliates. A director of the Company shall not be eligible for the benefits of the Plan unless such director is also a selected employee (including an officer) of or consultant to the Company or any Affiliate. (b) A director shall in no event be eligible for the benefits of the Plan unless and until such director is expressly declared eligible to participate in the Plan by action of the Board or the Committee, and only if, at any time discretion is exercised by the Board in the selection of a director as a person to whom options may be granted, or in the determination of the number of shares which may be covered by options granted to a director, a majority of the Board and a majority of the directors acting in such matter are disinterested persons, as defined in subparagraph 2(d). The Board shall otherwise comply with the requirements of Rule 16b-3 promulgated under the Exchange Act, as from time to time in effect. (c) No person shall be eligible for the grant of an option under the Plan if, at the time of grant, such person owns stock possessing more than ten percent (10%) of the total combined voting power or value of all classes of stock of the Company or of any of its Affiliates unless the option price is at least one hundred ten percent (110%) of the fair market value of such stock at the date of grant and the term of the option does not exceed five (5) years from the date of grant. -2- 5. OPTION PROVISIONS. ----------------- Each option shall be in such form and shall contain such terms and conditions as the Board or the Committee shall deem appropriate. The provisions of separate options need not be identical, but each option shall include (through incorporation of provisions hereof by reference in the option or otherwise) the substance of each of the following provisions: (a) The term of any option shall not be greater than ten (10) years from the date it was granted. (b) The exercise price of each option shall be not less than ten percent (10%) of the fair market value of the stock subject to the option on the date the option is granted. (c) The purchase price of stock acquired pursuant to an option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the option is exercised, or (ii) at the discretion of the Board or the Committee, either at the time of grant or exercise of the option (A) by delivery to the Company of other common stock of the Company, (B) according to a deferred payment or other arrangement (which may include, without limiting the generality of the foregoing, the use of other common stock of the Company) with the person to whom the option is granted or to whom the option is transferred pursuant to subparagraph 5(d), or (C) in any other form of legal consideration that may be acceptable to the Board or the Committee. In the case of any deferred payment arrangement, an interest rate shall be stated which is not less than the rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement. (d) An option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom the option is granted only by such person. (e) The total number of shares of stock subject to an option may, but need not, be allotted in periodic installments (which may, but need not, be equal). From time to time during each of such installment periods, the option may be exercised with respect to some or all of the shares allotted to that period, and/or with respect to some or all of the shares allotted to any prior period as to which the option was not fully exercised. During the remainder of the term of the option (if its term extends beyond the end of the installment periods), the option may be exercised from time to time with respect to any shares then remaining subject to the option. The provisions of this subparagraph 5(e) are subject to any option provisions governing the minimum number of shares as to which an option may be exercised. (f) The Company may require any optionee, or any person to whom an option is transferred under subparagraph 5(d), as a condition of exercising any such option: (l) to give written assurances satisfactory to the Company as to the optionee's knowledge and experience in financial and business matters and/or to employ a purchaser representative who has such knowledge and experience in financial and business matters that he is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the option; and (2) to give written assurances satisfactory to the Company stating that such person is acquiring the stock subject to the option for such person's own account and not with any present intention of selling or otherwise distributing the stock. These requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise of the option has been registered under a then currently effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), or (ii), as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. (g) An option shall terminate three (3) months after termination of the optionee's employment with the Company or an Affiliate, unless (i) the termination of employment of the optionee is due to such person's permanent and total disability, within the meaning of Section 422A(c)(7) of the Code, in which case the option may, but need not, provide that it may be exercised at any time within one (1) year following such termination of employment; or (ii) the optionee dies while in the employ of the Company or an Affiliate, or within not more than -3- three (3) months after termination of such employment, in which case the option may, but need not, provide that it may be exercised at any time within eighteen (18) months following the death of the optionee by the person or persons to whom the optionee's rights under such option pass by will or by the laws of descent and distribution; or (iii) the option by its terms specifies either (a) that it shall terminate sooner than three (3) months after termination of the optionee's employment, or (b) that it may be exercised more than three (3) months after termination of the optionee's employment with the Company or an Affiliate. This subparagraph 5(g) shall not be construed to extend the term of any option or to permit anyone to exercise the option after expiration of its term, nor shall it be construed to increase the number of shares as to which any option is exercisable from the amount exercisable on the date of termination of the optionee's employment. (h) The option may, but need not, include a provision whereby the optionee may elect at any time during the term of his or her employment with the Company or any Affiliate to exercise the option as to any part or all of the shares subject to the option prior to the stated vesting date of the option or of any installment or installments specified in the option. Any shares so purchased from any unvested installment or option may be subject to a repurchase right in favor of the Company or to any other restriction the Board or the Committee determines to be appropriate. (i) If and to the extent authorized by the Board or the Committee in its discretion, a person who has received options may make an election to have shares of stock of the Company withheld by the Company or to tender any such stock to the Company upon any exercise of an option to pay the amount of tax that the Board or the Committee in its discretion determines to be required by law to be withheld by the Company. Any shares of stock so withheld or tendered will be valued by the Board or the Committee at their fair market value as of the date they are withheld or tendered. The value of the shares withheld or tendered may not exceed the required federal, state, local and foreign withholding tax obligations as computed by the Company. Unless the Board or the Committee otherwise permits, the optionee shall pay to the Company in cash, promptly when the amount of such obligations become determinable, all applicable federal, state, local and foreign withholding taxes that the Board or the Committee determines to result from the lapse of restrictions imposed on exercise of an option, from a transfer or other disposition of shares acquired upon exercise of an option or otherwise related to the option or the shares acquired upon exercise of the option. 6. COVENANTS OF THE COMPANY. ------------------------ (a) During the terms of the options granted under the Plan, the Company shall keep available at all times the number of shares of stock required to satisfy such options. (b) The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of stock upon exercise of the options granted under the Plan; provided, however, that this undertaking shall not require the Company to register under the Securities Act either the Plan, any option granted under the Plan or any stock issued or issuable pursuant to any such option. If the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such options unless and until such authority is obtained. 7. USE OF PROCEEDS FROM STOCK. -------------------------- Proceeds from the sale of stock pursuant to options granted under the Plan shall constitute general funds of the Company. -4- 8. MISCELLANEOUS. ------------- (a) The Board or the Committee shall have the power to accelerate the time during which an option may be exercised or the time during which an option or any portion thereof will vest pursuant to subparagraph 5(e), notwithstanding the provisions in the option stating the time during which it may be exercised or the time during which it will vest. (b) Neither an optionee nor any person to whom an option is transferred under subparagraph 5(d) shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such option unless and until such person has satisfied all requirements for exercise of the option pursuant to its terms. (c) Throughout the term of any option granted pursuant to the Plan, the Company shall make available to the holder of such option, not later than one hundred twenty (120) days after the close of each of the Company's fiscal years during the option term, upon request, such financial and other information regarding the Company as comprises the annual report to the stockholders of the Company provided for in the bylaws of the Company and such other information regarding the Company as the holder of such option may reasonably request. (d) Nothing in the Plan or any instrument executed or option granted pursuant thereto shall confer upon any eligible participant or optionee any right to continue in the employ of the Company or any Affiliate or shall affect the right of the Company or any Affiliate to terminate the employment of any eligible participant or optionee with or without cause. 9. ADJUSTMENTS UPON CHANGES IN STOCK. --------------------------------- (a) If any change is made in the stock subject to the Plan, or subject to any option granted under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the Board shall appropriately adjust the class(es) and maximum number of shares subject to the Plan and the class(es) and number of shares and price per share of stock subject to outstanding options. (b) In the event of: (l) a dissolution or liquidation of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the Board shall appropriately adjust the class(es) and maximum number of shares subject to the Plan and the class(es) and number of shares and price per share of stock subject to outstanding options. (c) In the event of: (l) a dissolution or liquidation of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) any other capital reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, then, at the sole discretion of the Board and to the extent permitted by applicable law: (i) any surviving corporation shall assume any options outstanding under the Plan or shall substitute similar options for those outstanding under the Plan, or (ii) the time during which such options may be exercised shall be accelerated and the options terminated if not exercised prior to such event, or (iii) such options shall continue in full force and effect. 10. AMENDMENT OF THE PLAN. --------------------- (a) The Board at any time, and from time to time, may amend the Plan. However, except as provided in paragraph 9 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the -5- vote of the holders of a majority of the voting power of the shares of the Company represented in person or by proxy and entitled to vote at a duly held stockholders meeting, within twelve (12) months before or after the adoption of the amendment, where the amendment will: (1) Increase the number of shares reserved for options under the Plan; (2) Materially modify the requirements as to eligibility for participation in the Plan; or (3) Modify the Plan in any other way if such modification requires stockholder approval in order for the Plan to comply with the requirements of Rule 16b-3 promulgated under the Exchange Act. (b) Rights and obligations under any option granted before amendment of the Plan shall not be altered or impaired by any amendment of the Plan, except with the consent of the person to whom the option was granted. 11. TERMINATION OR SUSPENSION OF THE PLAN. ------------------------------------- (a) The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate ten (10) years from the date the Plan was adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No options may be granted under the Plan while the Plan is suspended or after it is terminated. (b) Rights and obligations under any option granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except with the consent of the person to whom the option was granted. 12. EFFECTIVE DATE OF PLAN. ---------------------- The Plan shall become effective as determined by the Board, but no options granted under the Plan shall be exercised unless and until the Plan has been approved by the vote or written consent of the holders of a majority of the outstanding shares of the Company entitled to vote, and, if required, an appropriate permit has been issued by the Commissioner of Corporations of the State of California. 13. CANCELLATION AND RE-GRANT OF OPTIONS. ------------------------------------ The Board or the Committee shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, (i) the repricing of any or all outstanding options under the Plan and/or (ii) the cancellation of any or all outstanding options under the Plan and the grant in substitution therefor new options under the Plan covering the same or different numbers of shares of Common Stock but having an exercise price per share not less than ten percent (10%) of the fair market value per share of Common Stock on the new grant date. -6- EX-11.1 5 EPS COMPUTATION ________________________________________________________________________________ ACUSON CORPORATION EXHIBIT 11.1 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS FOR THE QUARTER ENDED JULY 2, 1994 In accordance with Accounting Principles Board Opinion No. 15, the Company used the modified treasury stock method in computing the second quarter 1994 earnings per share. The following is the computation of earnings per share: Number of shares outstanding at July 2, 1994..................... 28,389,142 Number of shares assumed to be repurchased (limited to 20% of number of shares outstanding).............................. 5,677,828 Multiply by market value per common share........................ $ 13.79 ----------- Cost to repurchase............................................... $78,306,719 Assumed proceeds to the Company had everyone exercised........... 82,054,633 ----------- Excess assumed proceeds available................................ 3,747,914 Multiply by average interest rate for the period................. 1.25% ----------- Assumed interest on excess funds................................. 46,849 Less: tax provision.............................................. 16,397 ----------- Adjustment to net income......................................... 30,452 Add: net income................................................. 4,089,000 ----------- Adjusted net income.............................................. $ 4,119,452 =========== Divided by weighted shares outstanding, including common stock equivalents................................................... 29,493,986 Fiscal period earnings per share................................. $ 0.14 ======
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