-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WqDWULpSuDuF2VBJNT/SxCq49fQl59Q4aY9K9gvoCnS7FE5sK0r0GQWkBhgQeVjb N+s+zbwep9kwqrcOrTPVjg== 0000810084-96-000013.txt : 19960729 0000810084-96-000013.hdr.sgml : 19960729 ACCESSION NUMBER: 0000810084-96-000013 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960726 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOJECT MEDICAL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000810084 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 931099680 STATE OF INCORPORATION: OR FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-15360 FILM NUMBER: 96599535 BUSINESS ADDRESS: STREET 1: 7620 S W BRIDGEPORT RD CITY: PORTLAND STATE: OR ZIP: 97224 BUSINESS PHONE: 5036397221 FORMER COMPANY: FORMER CONFORMED NAME: BIOJECT MEDICAL SYSTEMS LTD DATE OF NAME CHANGE: 19920703 DEF 14A 1 PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [x] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [x] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 BIOJECT MEDICAL TECHNOLOGIES INC. - ----------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - ----------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2), or Item 22(a)(2) of Schedule 14A. [ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a- 6(i)(3). [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: _________________________________________________________________________ 2) Aggregate number of securities to which transaction applies: _________________________________________________________________________ 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ________________________________________________________________________ 4) Proposed maximum aggregate value of transaction: _________________________________________________________________________ 5) Total fee paid: _________________________________________________________________________ [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: ____________________________________________________________________________ 2) Form, Schedule or Registration Statement No.: _____________________________________________________________________________ 3) Filing Party: _____________________________________________________________________________ 4) Date Filed: _____________________________________________________________________________ Bioject Medical Technologies Inc. 7620 SW Bridgeport Road Portland OR 97224 August 9, 1996 Dear Shareholders: You are cordially invited to attend the 1996 annual meeting of the shareholders of BIOJECT MEDICAL TECHNOLOGIES INC., to be held at the Oregon Convention Center, 777 NE Martin Luther King Jr. Blvd., Room C120-122, Portland, Oregon, on Thursday, September 19, 1996 at 9:00 a.m., Pacific Daylight Time. The matters to be acted upon at the meeting -- to elect the Board of Directors; to amend the Company's 1992 Stock Incentive Plan; and to transact such other business as may properly come before the meeting -- are described in the attached Notice of Meeting and Proxy Statement. We believe the annual meeting provides an excellent opportunity for shareholders to become better acquainted with BIOJECT and its board members and officers. Although we would like very much to have each shareholder attend the 1996 meeting, we realize this is not possible. Whether or not you plan to be present at the meeting, it is important that your shares be represented. Therefore, we urge you to complete, sign and return the enclosed proxy as soon as possible. If you return your proxy promptly, you can help your Company avoid the expense of follow-up mailings to ensure a quorum so that the meeting can be held. If you decide between now and September that you can attend the meeting in person, you may revoke your proxy at that time and vote your shares at the meeting. We appreciate your continued support of Bioject and look forward to greeting you personally at the meeting or receiving your proxy. Sincerely, /S/ JAMES C. O'SHEA _________________________________ James C. O'Shea Chairman of the Board, President and Chief Executive Officer BIOJECT MEDICAL TECHNOLOGIES INC. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS NOTICE IS HEREBY GIVEN that the annual meeting (the "Meeting") of the shareholders of BIOJECT MEDICAL TECHNOLOGIES INC. (the "Company") will be held on Thursday, September 19, 1996, at 9:00 a.m., Pacific Daylight Time, at the Oregon Convention Center, 777 NE Martin Luther King Jr. Blvd., Room C120-122, Portland, Oregon, for the following purposes: 1. To elect six directors for the ensuing year; 2. To amend the 1992 Stock Incentive Plan to extend the date on which Awards may be made under the Plan; 3. To transact such other business as may properly come before the Meeting or any adjournment thereof. These matters are more fully described in the proxy statement accompanying this Notice. Accompanying this Notice of Meeting is a proxy statement and a form of proxy, together with the annual report of the Company containing the consolidated financial statements of the Company for the year ended March 31, 1996, and the auditors' report on the financial statements. The Company's first quarter report is also included. Only holders of common stock of record at the close of business on August 2, 1996 will be entitled to vote at the Annual Meeting of Shareholders and any adjournments thereof. Shareholders who are unable to attend the Meeting in person are requested to complete, sign, date and return the enclosed form of proxy directly to American Stock Transfer and Trust Co., postage prepaid. A proxy will not be valid unless it is received at the office of American Stock Transfer and Trust Co., 40 Wall Street, 46th Floor, New York, New York 10005 before the time fixed for the meeting. DATED at Portland, Oregon, this 9th day of August, 1996. BY ORDER OF THE BOARD /S/ PEGGY JARVIS MILLER _______________________________ Peggy Jarvis Miller Vice President, Chief Financial Officer and Secretary BIOJECT MEDICAL TECHNOLOGIES INC. TABLE OF CONTENTS MANAGEMENT SOLICITATION APPOINTMENT AND REVOCABILITY OF PROXIES VOTING OF PROXIES VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF PROPOSAL #1: ELECTION OF DIRECTORS Board of Directors Composition, Compensation and Committees EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS Biographical Information Executive Compensation Grant of Stock Options Option Exercises and Fiscal Year End Values Report on Repricing of Options/SAR's Employment Contracts Escrowed Shares SEC Filings REPORT OF COMPENSATION AND STOCK OPTION COMMITTEES ON EXECUTIVE COMPENSATION Base Salary Annual Incentives Long-Term Incentives Compensation Committee Interlocks and Insider Participation CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS STOCK PERFORMANCE CHART PROPOSAL #2: AMENDMENT TO 1992 STOCK INCENTIVE PLAN Awards and Eligibility Purposes Options Stock Bonuses Stock Sales Stock Appreciation Rights Tax Consequences to the Company and its Subsidiaries Tax Consequences to Recipient Changes in Capital Structure OTHER MATTERS TO BE ACTED UPON SHAREHOLDER PROPOSAL AND NOMINATION PROCEDURES FOR THE MEETING ANNUAL REPORT INDEPENDENT ACCOUNTANTS PROPOSALS OF SHAREHOLDERS FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS BIOJECT MEDICAL TECHNOLOGIES INC. PROXY STATEMENT as of August 9, 1996 MANAGEMENT SOLICITATION This proxy statement and accompanying form of proxy are furnished in connection with the solicitation of proxies by the Board of Directors of BIOJECT MEDICAL TECHNOLOGIES INC. (the "Company"), for use at the annual general meeting (the "Meeting") of shareholders of the Company to be held on September 19, 1996, at the time and place and for the purposes set forth in the Notice of Meeting. The form of proxy accompanying this information circular is solicited by the Board of Directors of the Company. Proxies may be solicited by officers, directors and regular supervisory and executive employees of the Company, none of whom will receive any additional compensation for their services. In addition, the Company has retained the services of Allen Nelson & Co. to assist in the solicitation of proxies. Proxies may be solicited personally or by mail, telephone, telex, facsimile, telegraph or messenger. The Company estimates it will pay Allen Nelson & Co. its customary and reasonable fees not expected to exceed $3,000, plus reimbursement of certain out-of-pocket expenses, for its services in soliciting proxies. The Company will also pay persons holding shares of the common stock in their names or in the names of nominees, but not owning such shares beneficially, such as brokerage houses, banks and other fiduciaries, for the expense of forwarding soliciting materials to their principals. The cost of this solicitation will be borne directly by the Company. The approximate mailing date of the Notice of Meeting, proxy statement and form of proxy is August 9, 1996. APPOINTMENT AND REVOCABILITY OF PROXIES The persons named in the accompanying form of proxy are officers of the Company. In addition to revocation in any other manner permitted by law, a proxy may be revoked by: (i) signing another proxy bearing a later date and depositing it in the manner set forth in the Notice of Meeting; (ii) signing and dating a written notice of revocation (in the same manner as a proxy is required to be executed) and either depositing it in the manner set forth in the Notice of Meeting at any time before the time fixed for the Meeting or an adjournment thereof or with the chairman of the Meeting on the day of the Meeting or an adjournment thereof; or (iii) attending the Meeting or an adjournment thereof, and casting a ballot in person. Such revocation will have effect only in respect of those matters which have not already been acted upon. Additional proxy forms may be obtained by calling or writing to American Stock Transfer & Trust Co., Shareholder Services, 40 Wall Street, 46th Floor, New York, NY 10005. Telephone: (718) 921-8200. VOTING OF PROXIES The securities represented by the proxy will be voted or withheld from voting in accordance with the instructions of the shareholder on any ballot that may be called for, and if the shareholder specifies a choice with respect to any matter to be acted upon, the securities shall be voted accordingly. The form of proxy confers authority upon the named proxyholder with respect to matters identified in the accompanying Notice of Meeting. If a choice with respect to such matters is not specified, it is intended that the person designated by management in the form of proxy will vote the securities represented by the proxy in favor of each matter identified in the proxy statement and for election to the Board of Directors the nominees named in this proxy statement. The proxy confers discretionary authority upon the named proxyholder with respect to amendments to or variations in matters identified in the accompanying Notice of Meeting and other matters which may properly come before the Meeting. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF The voting securities of the Company consist of common stock without par value (the "Common Shares"). The Record Date has been fixed in advance by the directors as August 2, 1996, for the purpose of determining shareholders entitled to a notice of and to vote at the Meeting. Each share issued at the time of the Record Date carries the right to one vote at the Meeting. As of August 2, 1996, a total of 15,616,712 shares of the Company's common stock were issued and outstanding. The presence in person or by proxy of holders of record of a majority of the outstanding Common Shares is required to constitute a quorum for the transaction of business at the Meeting. If a quorum is present, the five nominees for election to the Board of Directors who receive the greatest number of votes cast at the Meeting shall be elected directors. For all other matters to come before the Meeting, a proposal will be approved if the number of votes cast in favor of the proposal exceed the number of votes cast against the proposal. Abstentions and broker "non-votes" will be considered represented at the Meeting for the purpose of calculating a quorum, but will have no other effect on the election of directors or any other matter to come before the Meeting. The following tables set forth certain information concerning the beneficial ownership of the Company's common stock at June 30, 1996, by: (i) each person known by the Company to own beneficially more than 5 percent of the outstanding capital stock of the Company; (ii) each of the directors; and (iii) all directors and officers as a group. Each shareholder listed below has sole voting and investment power with respect to the shares beneficially owned, except as indicated:
NUMBER OF SHARES PERCENTAGE BENEFICIALLY BENEFICIALLY NAME OF BENEFICIAL OWNER OWNED (1) OWNED __________________________________________________ ________________ ____________ Carl E. Wilcox (2) 851 SW Sixth, Suite 1500, Portland, Oregon 97204 1,726,500 10.9% Hambrecht & Quist 50 Rowes Wharf, Boston, Massachusetts 02110 1,003,000 6.4 James C. O'Shea (3) 271,541 1.7 William A. Gouveia (4) 43,750 * John Ruedy, MD (5) 103,250 * Cecil E. Spearman (5) 68,250 * Grace Keeney Fey (6) 9,750 * Peggy J. Miller (7) 123,653 * Arthur S. Przybyl (8) 112,500 * All Directors and Executive Officers as a Group (9 persons) (2)(9) 752,928 4.6
_________________________________________ * Less than one percent. (1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes shares over which the indicated beneficial owner exercises voting and/or investment power. Shares of common stock subject to options currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding the options but not deemed outstanding for computing the percentage of ownership of any other person. Except as indicated, and subject to community property laws where applicable, the persons names in the table above have sole voting and investment power with respect to all shares of common stock as shown as beneficially owned by them. (2) Includes 1,500,000 shares owned by WAM Partnership. WAM Partnership is an Oregon general partnership. The partners of WAM Partnership are Mr. Wilcox, a founder and former Chairman and C.E.O. of the Company, and Mr. J. Thomas Morrow, a founder of the Company and former director. Mr. Wilcox, as managing partner, votes shares of common stock owned by the Partnership. See "Executive Compensation and Other Transactions -- Escrowed Shares." Also includes options to purchase 200,000 shares of common stock which are presently exercisable. (3) Includes 250,000 options which are vested and exercisable. (4) Consists entirely of options to purchase common stock which are presently exercisable. Does not include 8,750 option shares which become exercisable after 60 days. (5) Includes 61,250 options to purchase shares of common stock which are presently exercisable. Does not include 8,750 options shares which become exercisable after 60 days. (6) Includes 8,750 options to purchase shares of common stock which are presently exercisable. Does not include 8,750 option shares which become exercisable after 60 days. (7) Includes 115,000 options to purchase shares of common stock which are vested but do not become exercisable until January 29, 1997. Does not include 12,500 option shares which become vested and exercisable after 60 days. (8) Consists entirely of options to purchase shares of common stock which are vested but do not become exercisable until January 29, 1997. (9) Includes options to purchase an aggregate of 666,250 shares of Common Stock, 400,000 of which are presently exercisable, 52,500 of which are vested and become exercisable on November 3, 1996 and 213,750 of which are vested but do not become exercisable until January 29, 1997. All of the outstanding capital stock of Bioject Medical Systems Ltd. is owned by the Company. All the outstanding capital stock of Bioject Inc. is owned by the Company and Bioject Medical Systems Ltd. PROPOSAL #1: ELECTION OF DIRECTORS The Articles of Incorporation of the Company provide for the holders of Common Shares to elect a Board of Directors at the 1996 Meeting. Each director elected will hold office until the next annual general meeting or until his successor is duly elected or appointed, unless his office is earlier vacated in accordance with the articles of the Company or he becomes disqualified to act as a director. The following table sets forth the names and ages of the current directors and director nominee of Bioject Medical Technologies Inc., each of whom is nominated for election. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEES LISTED BELOW. YEAR ELECTED NAME AGE POSITION DIRECTOR ------------------ ----- ------------------------- ------------ James C. O'Shea 51 Chairman, Chief Executive Officer and President 1995 John Ruedy, M.D. 64 Director(a)(b) 1987 Cecil E. Spearman 64 Director(c)(d) 1987 William Gouveia 54 Director(b)(c) 1994 Grace Keeney Fey 50 Director(a)(d) 1995 Eric T. Herfindal 55 Director Nominee ---- _____________ (a) Member of Stock Option Committee (b) Member of Compensation Committee (c) Member of Nominating Committee (d) Member of Audit Committee JAMES C. O'SHEA has served as Chairman and Chief Executive Officer of the Company since March 1995. Prior to joining Bioject, he was President and Chief Operating Officer of Biopure Corporation, a developer of red blood cell substitutes. Prior to 1989, Mr. O'Shea was Executive Vice President of Marketing and Scientific Affairs at Delmed Inc., a manufacturer of peritoneal dialysis solutions and parenteral products. Mr. O'Shea holds a bachelors degree from Rutgers University. He is a member of the Board of Directors of publicly-owned Photographic Sciences Corporation, serving as Chairman of the Compensation Committee and previously serving as Chairman of the Executive Committee. JOHN RUEDY, M.D. has served as a director of the Company since 1987. Since July 1992, he has served as Dean of the Faculty of Medicine at Dalhousie University in Halifax, Nova Scotia. From 1978 through June 1992, Dr. Ruedy served as Professor of Medicine at the University of British Columbia and Head of the Department of Medicine at St. Paul's Hospital, Vancouver, British Columbia. Since 1966, he has held an appointment to the Department of Medicine and Pharmacology at McGill University and was Chairman of the Department of Pharmacology and Therapeutics from 1975 through 1978. Dr. Ruedy is also serving as a director for the Canadian AIDS Clinical Trials Network. CECIL E. SPEARMAN joined the Company as a director in 1987. Since June 1981, Mr. Spearman has been Chief Executive Officer of Spearman Industries, Inc., which owns and operates tennis and fitness clubs. Since May 1979, Mr. Spearman has also acted as an independent consultant to marketing and manufacturing companies in the healthcare industry. From 1989 to November 1990, he was Chief Executive Officer and Director of Safety-Ject Medical Products Ltd., a medical device manufacturer. From May 1973 to March 1979, Mr. Spearman was President of Bergen Brunswig Corp.'s medical supply division. From October 1968 to May 1973, he was Vice President and General Manager for American Hospital Supply. WILLIAM A. GOUVEIA was elected a director of the Company in January 1994. Mr. Gouveia serves in two capacities at Boston's New England Medical Center: Director of Pharmacy (1972 to present) and Special Assistant for Pharmaceutical Research and Development (1989 to present). He has the following faculty appointments: Associate Professor of Medicine at Tufts University School of Medicine (1995), Adjunct Clinical Professor of Pharmacy at Massachusetts College of Pharmacy and Allied Health Professions, and Adjunct Professor at Northeastern University Bouve College of Pharmacy and Health Sciences. He holds an M.S. in Hospital Pharmacy from Northeastern University (1966). He has published over 75 articles in leading healthcare journals, as well as numerous book chapters, and has delivered presentations in the U.S. and international health care organizations and colleges. In 1984, he founded the Massachusetts-based Chartwell Home Therapies. He is a Fellow of the American Society of Health-System Pharmacists (ASHP) and has served as chair and member of various committees of the ASHP. GRACE K. FEY, CFA, was elected a director of the Company in October 1995. Ms. Fey is Executive Vice President and Director of Frontier Capital Management Company, a Boston-based investment management firm, Since 1988. From 1986 to 1988, she was a Senior Vice President of Investment Management Associates, an investment management firm. From 1980 to 1986, Ms. Fey was Vice President of Winchester Capital Management, also an investment management firm. ERIC T. HERFINDAL has served as Senior Vice President of Axion Healthcare, Inc., a disease management company, since 1993 and has also served as Senior Vice President of OnCare Inc., an oncology physician practice management company and subsidiary of Axion, since 1993. Prior to joining Axion, he served for over 20 years as a Professor of Clinical Pharmacy, School of Pharmacy, at the University of California Medical Center in San Francisco, where he is currently a Professor Emeritus. He holds a Doctorate in Pharmacy from the University of California, San Francisco, and a Masters in Public Health from the University of California, Berkeley. He is the author of twenty-five articles and the editor or co-editor of ten books in the field of pharmacy, including the TEXTBOOK OF THERAPEUTICS: DRUG AND DISEASE MANAGEMENT, currently in its sixth edition. Dr. Herfindal has been active in various professional organizations, serves on a number of editorial and advisory boards, and is a frequent lecturer at national and international healthcare meetings. BOARD OF DIRECTORS COMPOSITION, COMPENSATION AND COMMITTEES. The Board of Directors is currently composed of five members, one of whom is an employee of the Company. Following the shareholder vote, the Board will be composed of six members, one of whom is an employee of the Company. All directors hold office for one year or until their successors have been elected and qualified. There are no family relationships between any of the directors, director nominee or executive officers of the Company. The Company pays its directors no annual cash or per meeting compensation for services. Under the terms of the 1992 Stock Incentive Plan, each non-employee director is automatically awarded an option to purchase 17,500 shares of the Company's common stock immediately following the close of each annual shareholders' meeting, at an exercise price equal to the fair market value on date of the grant. Such options are vested and exercisable with respect to one-half of the shares at six months from the date of grant with the remaining shares vested and exercisable six months thereafter. The options expire eight years after grant unless previously exercised or terminated due to termination of service. There were eight meetings of the Board of Directors during the last fiscal year. Except for one telephonic meeting for which Ms. Fey was not present, each of the incumbent directors being nominated for re-election attended all meetings of the Board of Directors and committees on which they served. There are four standing committees of the Board of Directors -- the Audit Committee, Stock Option Committee, Compensation Committee and the Nominating Committee. The Audit Committee meets with the Company's independent accountants to review the scope and findings of the annual audit and accounting policies and procedures of the Company which are then reported by the committee to the directors of the Company. The Stock Option Committee administers the 1992 Stock Incentive Plan. The Compensation Committee administers cash compensation for the executive officers. The Nominating Committee reviews and recommends to the full Board nominees for directors of the Company to be submitted for election at the next annual shareholders' meeting. The Audit Committee met one time during fiscal 1996. The Stock Option Committee met one time during fiscal 1996. The Compensation Committee met two times during fiscal 1996 and took action by resolution six additional times. The Nominating Committee met one time during fiscal 1996. EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS The following individuals comprise the executive officers of the Company: Year Elected Name Age Position Officer - --------------------- --- -------------------------------- ------------ James C. O'Shea 51 Chairman, Chief Executive Officer and President 1995 Peggy J. Miller 49 Vice President, Chief Financial Officer and Secretary/Treasurer 1993 Steven F. Peterson 47 Vice President of Product Development of Bioject Inc. 1993 Richard R. Stout, M.D. 43 Vice President of Clinical Affairs of Bioject Inc. 1994 J. Michael Redmond 36 Vice President, Sales and Marketing of Bioject Inc. 1996 BIOGRAPHICAL INFORMATION. JAMES C. O'SHEA. Please see biography information in section "ELECTION OF DIRECTORS." PEGGY J. MILLER joined Bioject as Chief Financial Officer, Vice President and Secretary/Treasurer, in February 1993. From April 1991 to January 1993, Ms. Miller was Vice President for Finance at Oregon Health Sciences University, an academic health sciences center. From September 1987 to April 1991, she was Senior Manager at Arthur Andersen & Co., independent public accountants. From July 1985 to September 1987, she served as Vice President Finance of ALPKEM Corporation, a manufacturer and distributor of automated blood analyzers and supplies to hospitals and clinics. Prior to June 1985, she served as an Audit Manager at Price Waterhouse, independent public accountants. Ms. Miller is a Certified Public Accountant and serves on the Board of Directors of CHAP, the Community Health Accreditation Program, an affiliate of the National League for Nursing. STEVEN F. PETERSON joined the Company in May 1991 as Director of Regulatory Affairs. He served as Director of Product Development and Manufacturing Engineering of Bioject Inc. from April 1992 and was promoted to Vice President of Research and Development in fiscal 1994. From June 1978 to May 1991, he held various management positions for subsidiaries of Baxter Healthcare Corp. specializing in medical products. From April 1973 to June 1978, Mr. Peterson was manager of quality engineering for ITT Telecommunications, a manufacturer of electronic telephone switching equipment. RICHARD R. STOUT, M.D. joined the Company in April 1994 as Director of Clinical and Regulatory Affairs. He was promoted to Vice President of Clinical Affairs in December 1994. From 1992-1993 he was the Director of Clinical and Regulatory Affairs at EndoVascular Instruments, Inc., a developer of surgical devices and methods for endarterectomy and intraluminal graft placement. Dr. Stout acted as the Manager of Tachycardia Clinical Studies at Telectronics Pacing Systems from 1990-1992, an international medical device company involved in manufacturing and distributing cardiac pacemakers and implantable defibrillators. From 1987 to 1989, Dr. Stout was Director of Medical Programs at Biotronic Inc., also a manufacturer and distributor of implantable cardiac pacemakers. J. MICHAEL REDMOND was appointed Vice President of Sales and Marketing effective February 8, 1996. Mr. Redmond has twelve years of experience in medical marketing and product sales. Prior to joining the Company he was Director of Business Development and Director of Sales and Marketing for Kollsman Inc. Kollsman is a private label developer and manufacturer of medical instrumentation. He also held positions with Abbott Laboratories in the diagnostics division and in product management. EXECUTIVE COMPENSATION. The following table sets forth the cash compensation paid by the Company to its Chief Executive Officer and to the other executive officers having salary and bonus compensation greater than $100,000 (collectively the "named executive officers"), for services rendered to the Company during the fiscal years ended March 31, 1996, 1995 and 1994.
Summary Compensation Table Long-Term Annual Compensation Compensation All Name and Principal Fiscal _________________________________________ Option Other Position (1) Year Salary Bonus Other Awards(2) Compensation ________________________ ______ _________________________________________ ___________ _____________ James C. O'Shea 1996 $ 192,737(3) - $ 4,117(4) 500,000(5) $ 146,996(6) Chairman, Chief Executive 1995 -(3) - - - - Officer and President 1994 - - - - - Arthur S. Przybyl 1996 115,385(7) - 3,300(8) 112,500(9) 49,000(7) Former President and 1995 119,091 - 4,200(8) 200,000(9) - Chief Operating Officer 1994 18,192(10) - 600(8) - - Peggy J. Miller 1996 105,000 - - 127,500(11) - Vice President, Chief 1995 99,835 3,325(12) - 75,000(13) - Financial Officer and 1994 92,693 28,037(14) - 5,000(15) - Secretary / Treasurer
________________________ (1) No other executive officers had salary and bonus compensation greater than $100,000 in fiscal 1996. (2) The Company has in effect one major long-term compensation plan, the 1992 Stock Incentive Plan, through which all employees, officers and non-employee consultants of the Company may be awarded incentive and non-statutory stock options, stock bonuses, stock appreciation rights and restricted stock under terms and performance criteria as determined by a committee of the Board of Directors. Non-employee directors are also awarded options to purchase a fixed number of shares on an annual basis. The 1992 Stock Incentive Plan was approved by the Company's shareholders on November 20, 1992. Amounts listed reflect the number of options granted in the respective fiscal years, the exercise prices for which were greater than or equal to the fair market value of the Company's common stock on the date of grant. The Company also has a 401(k) Retirement Benefit Plan for its employees including its executive officers which provides for voluntary employer matches of employee contributions up to 6% of salary and for discretionary profit sharing contributions to all employees. Such employer contributions may be made in cash or common stock. (3) Mr. O'Shea was appointed Chairman and Chief Executive Officer on March 28, 1995 and commenced his salaried employment with the Company on April 10, 1995. (4) Represents supplemental life and disability insurance premiums paid pursuant to an employment agreement with Mr. O'Shea. No other executive officers are entitled to this benefit. (5) In connection with his employment, Mr. O'Shea was granted options to purchase 500,000 shares of common stock of which 150,000 option shares vested immediately, 150,000 option shares vesting one-half on April 10,1996 and one-half on April 10, 1997, and 200,000 option shares vesting one-half on April 10, 1997 and one-half on April 10, 1998. (6) In connection with the commencement of Mr. O'Shea's employment with the Company, he was reimbursed his moving expenses including the costs of selling his former residence, transportation and storage of household goods, certain other incidental moving expenses and a gross-up for taxes incurred on these reimbursements. (7) Mr. Przybyl resigned from the Company effective January 26, 1996. He was granted severance totalling $49,000. (8) Mr. Przybyl received an automobile allowance of $300 per month. (9) 200,000 options were granted on July 8, 1995 and with 50,000 vesting immediately, 100,000 vesting on February 1, 1996, and 50,000 vesting on February 1, 1997. On January 26, 1996, these 200,000 options were cancelled and replaced with an option to purchase 112,500 shares of the Company's common stock at $1.25 per share. The new options vested immediately, become exercisable on January 29, 1997, and expire on July 29, 1998. Acceleration of expiration in the event of employment termination was waived. (10) Mr. Przybyl joined the Company on February 1, 1994. (11) On January 26, 1996, Ms. Miller was granted 127,500 options with 101,250 vesting immediately and become exercisable on January 29, 1997, 12,500 vesting on February 1, 1996 and becoming exercisable on January 29, 1997, 1,250 vesting on July 31, 1996 and becoming exercisable on January 29, 1997 and 12,500 vesting and becoming exercisable on February 1, 1997. These options replaced 75,000 options granted in fiscal 1995, 5,000 options granted in fiscal 1994 and 90,000 options granted in fiscal 1993. (12) The fiscal 1995 bonus for Ms. Miller consists of 1,000 shares of the Company's common stock valued at fair market value at the date of grant with the gross-up for withholding taxes. (13) These options were granted July 8, 1994 of which 25,000 vested immediately and the remaining 50,000 vesting at the rate of one-third on each successive February 1. (14) The fiscal 1994 bonus for Ms. Miller consists of 4,000 shares of the Company's common stock valued at fair market value at the date of grant with a gross-up for withholding taxes. (15) These options were granted August 1, 1993 vesting one-third on each successive anniversary of the date of grant. GRANT OF STOCK OPTIONS. Shown below is information on grants of stock options pursuant to the Company's 1992 Stock Incentive Plan during the fiscal year ended March 31, 1996 to the named executive officers. No stock appreciation rights were granted during fiscal 1996.
OPTION GRANTS IN LAST FISCAL YEAR INDIVIDUAL GRANTS _________________________________________________ Potential Realizable Percentage of Values at Assumed Total Options Annual Rates of Stock Granted to Exercise or Price Appreciation for Options Employees in Base Price Expiration Option Term (8) Name Granted Fiscal 1996 (per share) Date 5% 10% _______________ _______ ______________ ___________ __________ ________ ________ James C. O'Shea 150,000(1) 11% $2.69 05/24/05 $24,085 $277,357 150,000(2) 11 3.50 05/24/05 - 155,857 200,000(3) 15 4.50 05/24/05 - 7,810 Arthur S. Przybyl 112,500(4) 11 1.25 07/29/98 23,574 49,028 Peggy J. Miller 67,500(5) 5 1.25 01/17/01 23,311 51,512 3,750(6) - 1.25 07/31/00 1,153 2,519 56,250(7) 4 1.25 01/31/02 23,913 54,250
_____________________ (1) These options vested immediately upon grant and became exercisable November 25, 1995. Fair market value of the Company's common stock on the date of grant was $1.75 per share. (2) These options become vested and exercisable one-half on April 10, 1996 and one-half on April 10, 1997. Fair market value of the Company's common stock on the date of grant was $1.75. (3) These options become vested and exercisable one-half on April 10, 1997 and one-half on April 10, 1998. Fair market value of the Company's common stock on the date of grant was $1.75. (4) These options vested immediately and become exercisable on January 29, 1997. They replace 200,000 options shares priced at $4.00 or more per share of which 150,000 would have been vested and exercisable on February 1, 1996. (5) These options vested immediately and become exercisable on January 29, 1997. They replace 90,000 fully vested option shares priced at $4.25 per share. (6) Of this total, 2,500 options vested immediately and become exercisable on January 29, 1997. The remaining balance become vested on August 1, 1997 and exercisable on January 29, 1997. These options replace 5,000 option shares priced at $5.00 per share of which two-thirds were vested and exercisable at the date of replacement. (7) Of this total, 43,750 options vested immediately or on February 1, 1996, and become exercisable on January 29, 1997. The remaining balance become vested and exercisable on February 1, 1997. They replace 75,000 option shares priced at $4.00 per share, all of which except for 16,667 options were vested and exercisable at the date of replacement or immediately thereafter on February 1, 1996. (8) Potential realizable value is based on the assumption that the stock price of the common stock appreciates at the annual rate shown (compounded annually) from the date of grant until the end of the applicable option term. These numbers are calculated based on the requirements promulgated by the Securities and Exchange Commission and do not reflect the Company's estimate of future stock price performance. The actual value, if any, which may be realized by any officer will vary based on exercise date and the market price of the related common stock when sold. OPTION EXERCISES AND FISCAL YEAR END VALUES. Shown below is information with respect to exercised options and unexercised options to purchase the Company's common stock granted in fiscal 1996 and prior years to the named executive officers and held by them at March 31, 1996. None of the named executive officers exercised any stock options during fiscal 1996. No stock appreciation rights were outstanding or exercised during fiscal 1996.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values Number of Unexercised Value of Unexercised Options held at In-the-Money Options March 31, 1996 March 31, 1996(1) ______________________________ __________________________________ Name Exercisable Unexercisable Exercisable Unexercisable __________________ ___________ _____________ ___________ _____________ James C. O'Shea 150,000 350,000 - - Arthur S. Przybyl - 112,500 - 7,031 Peggy J. Miller - 127,500 - 7,969
_______________ (1) Based on the difference between the exercise price and the average of the bid and ask price on NASDAQ of the Company's common stock on that date ($1.3125). The actual value, if any, which may be realized by any officer will vary based on exercise date and the market price of the related common stock when sold. REPORT ON REPRICING OF OPTIONS/SAR'S. Shown below is information with respect to the Company's ten-year history on the repricing of stock options and stock appreciation rights (SAR's) held by named executive officers.
Ten-Year Option/SAR Repricings Length of Market Price Exercise Original Number of of Stock Price Option Term Options/SAR's at Time of at Time of New at Date of Repriced or Repricing or Repricing or Exercise Repricing or Name Date Amended Amendment Amendment Price Amendment ___________________ ________ _____________ ____________ ____________ ________ ____________ Arthur S. Przybyl 01/26/96(a) 37,500(1) $1.25 $4.63 $1.25 6 years Then President and 75,000(1) 1.25 4.00 1.25 7 years Chief Operating Officer Peggy J. Miller 01/26/96(a) 67,500(2) 1.25 4.25 1.25 5 years Vice President 01/26/96(a) 3,750(2) 1.25 5.00 1.25 4.5 years and Chief Financial 01/26/96(a) 56,250(2) 1.25 4.00 1.25 6 years Officer Richard Hollis 12/23/92(b) 40,000 3.50 5.00 3.50 16 months Then Chief Operating Officer
________________ (1) Replaces 50,000 and 100,000 options, respectively. (2) Replaces 90,000, 5,000 and 75,000 options, respectively. (a) These options were repriced based on the Compensation and Stock Option Committees' belief that the difference between the current fair market value of the Company's common stock and the option exercise prices before repricing did not meaningfully align employees' and shareholders' interests and, therefore, did not serve the long-term interests of the Company. In order to be eligible for this repricing, the named executive officers were required to forfeit 25% of option shares previously granted. The foregoing report has been furnished by the Compensation and Stock Option Committees consisting of Ms. Fey and Messrs. Gouveia, Ruedy, and Spearman. (b) This transaction resulted from the cancellation of options originally granted to Mr. Hollis on April 28, 1992 and the issuance of a similar amount of new options on December 23, 1992. The full report from the Board on this transaction was contained in the proxy statement for the fiscal year ended March 31, 1993. EMPLOYMENT CONTRACTS. The Company entered into an employment agreement with Mr. O'Shea to serve as Chairman and Chief Executive Officer. His salary, currently $195,000 per annum, is subject to annual adjustment by the Board of Directors. His agreement continues until terminated. In addition to his base salary, Mr. O'Shea was granted a total of 500,000 incentive stock options at prices ranging from $2.69 to $4.50 per share which vest variously over a three year period. He will receive 100,000 shares of common stock when the Company first achieves two consecutive quarters of positive earnings per share. He received relocation expense reimbursements grossed-up for withholding taxes and will receive annual payment of certain disability and life insurance policy premiums. In the event he is terminated, he will receive his base salary for up to two years. If he becomes disabled, he will continue at 75% of his then current salary for not less than six months and at 50% of such salary for the successive six months. In the event of his death, his salary will continue for 60 days following the end of the month of his death. Under the agreement, he is permitted to participate in any net profit sharing, deferred compensation or other programs. In addition, he is prohibited from competing with the Company for three years following termination of the agreement. The Company has entered into an employment agreement with Ms. Miller to serve as Vice President and Chief Financial Officer. In the event she is terminated, she will receive her base salary for up to four months. Her salary, currently $105,000 per annum, is subject to annual adjustment by the Board of Directors. Her agreement continues until terminated. In the event she is disabled, she will continue at 75% of her then current salary for not less than six months and then at 50% of such salary through the end of the current term. In the event of her death, her salary will continue for 60 days following the end of the month of her death. Under the agreement, she is permitted to participate in any net profit sharing, deferred compensation or other programs. In addition, she is prohibited from competing with the Company for three years following termination of the agreement. The Company has entered into an employment agreement with Mr. Redmond to serve as Vice President of Sales and Marketing. In the event he is terminated, he will receive his base salary for up to four months. His salary, currently $100,000 per annum, plus $500 per month car allowance, is subject to annual adjustment by the Board of Directors. His agreement continues until terminated. In the event he is disabled, he will continue at 75% of his then current salary for not less than six months and then at 50% of such salary through the end of the current term. In the event of his death, his salary will continue for 60 days following the end of the month of his death. Under the agreement, he is permitted to participate in any net profit sharing, deferred compensation or other programs. In addition, he is prohibited from competing with the Company for three years following termination of the agreement. ESCROWED SHARES. As a result of the Company's initial public offering on the Vancouver Stock Exchange, 1.5 million shares of the Company were held in escrow pursuant to an Escrow Agreement dated May 30, 1986, among the Company, WAM Partnership and the escrow agent, Montreal Trust Company. WAM Partnership is owned by Carl E. Wilcox, former Chairman and C.E.O., and J. Thomas Morrow, former Director, and managed by Mr. Wilcox. Both Mr. Wilcox and Mr. Morrow are founders of the Company. The Escrow Agreement provided that these escrowed shares would be released from escrow based on two times the excess of cumulative cash flow for five consecutive years (as defined in the agreement) over 25% of the per share price in the Company's initial public offering, multiplied by the number of shares in escrow, calculated on an annual basis. Alternatively, the shares could be released by making application and obtaining consent of the Superintendent of Brokers of British Columbia based on demonstrating company value. Under the escrow agreement, any shares not released by July 14, 1996 would be cancelled. In connection with Mr. Wilcox's resignation as Chairman and C.E.O. of the Company, the Board of Directors granted Mr. Wilcox a special power of attorney to exclusively perform all acts necessary to obtain extension of the escrow and/or release of the WAM Partnership escrow shares. In addition, the Board agreed to pay up to $10,000 of costs associated with such extension and/or release. On June 3, 1996, the British Columbia Securities Commission informed the Company that its Executive Director (formerly the Superintendent of Brokers) consented to the release of all shares originally held in escrow. This means that the 1.5 million shares of common stock which had been held under this escrow arrangement are now held by the owners of the shares without risk of cancellation and may be sold. Upon release, approximately 150,000 of these shares are considered to have been contributed back to the Company and reissued to certain former employees in consideration for past services rendered on behalf of the Company. The Company will record the shares as contributed capital with a corresponding non-cash charge to compensation expense at the fair market value of the stock on the date of issuance. Accordingly, a non-cash charge of up to $210,938 will be recorded in the financial statements in the first quarter of fiscal 1997 (quarter ending June 30, 1996). SEC FILINGS. Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers, directors and 10 percent shareholders to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the "Commission"). Officers, directors and 10 percent shareholders are required by Commission regulations to furnish the Company with all Section 16(a) reports they file. Based solely on the Company's review of the copies of such reports the Company received and written representations from the Company's officers and directors, the Company believes that all required reports were timely filed in fiscal 1996. REPORT OF COMPENSATION AND STOCK OPTION COMMITTEES ON EXECUTIVE COMPENSATION The Company has maintained a philosophy of seeking to attract and retain a key group of experienced executives capable of successfully completing product development, ramping up manufacturing, launching marketing and sales, and providing strong financial management. Mindful of conserving cash resources, the Company has provided a combination of annual cash compensation and stock option grants which emphasizes lower cash compensation in exchange for potential long-term gains through stock option appreciation. The Company believes such a strategy is in the best interests of the shareholders and provides proper incentives to increase long-term shareholder value. The Company's Compensation Committee is responsible for reviewing cash compensation paid to the Company's executive officers and makes recommendations to the Stock Option Committee for stock option and common stock grants. The Stock Option Committee is responsible for administering all stock option and common stock grants including awards to the Company's executive officers. Overall, the Company's executive compensation mix is composed as follows: Base Salary. This is an amount of annual cash compensation which the Company believes is the minimum necessary to attract and retain qualified executives and is administered on behalf of the Board of Directors by the Chief Executive Officer for all executive officers other than the C.E.O. As can be determined from the Summary Compensation Table preceding, under this policy only three of the Company's six executive officers have cash compensation exceeding $100,000 per year. Until the Company achieves significant revenues, it has been the Board's policy to hold base salaries to at or below market, determined based on the Company's experience in recruiting key executives, relying instead on stock option incentives to attract and retain qualified executive officers. In fiscal 1996, the Company's Chief Executive Officer, Mr. O'Shea, was paid an annual salary of $195,000 beginning April 10, 1995. This salary was determined based on a review of competitive salaries by the recruitment consultants engaged by the Board to assist it in identifying and screening candidates for the chief executive officer position and is considered, based on the Board's experience during the recruitment process, as being at or below market for the position. As part of the Company's negotiation with Mr. O'Shea regarding his compensation package, the Board agreed to pay premiums on certain life and disability policies owned by Mr. O'Shea. Payment of these premiums is similar to supplemental policy premiums paid by the Company on behalf of its former chief executive officer. In addition to his annual salary, Mr. O'Shea was granted one time reimbursement of moving and other expenses including gross-up for taxes necessary to relocate him from his former residence. The value of such reimbursements totaled $146,996 and was considered, based on discussions with the executive search firm, to be reasonable and necessary to engage an executive with the ability and experience that the Company was seeking. Annual Incentives. As circumstances are appropriate, the Company has annual incentive programs for individual executives or for the executive officer group as a whole. These programs have specific performance criteria and awards determined based on Company business goals for the period. In fiscal 1996, the Company did not have individual or group incentive programs with respect to any of its executive officers because of the uncertainties involved in the transition to the new chief executive officer. The Company may also award cash, stock and option grants on a discretionary basis to its executive officers where, in the opinion of the Company's Stock Option Committee, performance merited such compensation. With respect to fiscal 1996, Mr. O'Shea received a discretionary stock option award which entitles him to purchase 25,000 shares of the Company's common stock at $1.3125 per share. Such award was made to Mr. O'Shea for his leadership in implementing improved management practices at the Company and for the progress made on the Company's phase-in of the product cost reduction program. Long-Term Incentives. At present the Company's primary long-term incentive program is the 1992 Stock Incentive Plan which is available to all employees, executive officers and non-employee consultants of the Company. The Board of Directors' Stock Option Committee grants all options pursuant to this plan. Generally, executive officers upon joining the Company are granted options vesting over a three-year period at current fair market value in amounts which, in the Stock Option Committee's opinion, are consistent with their positions and responsibilities with the Company. In addition, based on individual annual performance and contribution to the long-term goals of the Company, executive officers may receive additional stock option grants. The amount and terms of such options are discretionary and are determined subjectively by the Stock Option Committee taking into account Company and individual performance. Generally, such options vest over a number of years and are intended to focus executive officers on achieving the long-term goals of the Company and to directly reward them for corresponding increases in shareholder value. In connection with his employment with the Company, Mr. O'Shea was granted options to purchase 500,000 shares of the Company's common stock as follows: 150,000 shares at $2.69 per share vesting immediately on the date of grant; 150,000 shares at $3.50 per share vesting over two years; and 200,000 shares at $4.50 per share vesting over three years. As an additional incentive to achieve profitability, Mr. O'Shea will receive 100,000 shares of common stock when the Company first achieves two consecutive quarters of positive earnings per share before any charges for such incentive compensation. The stock and option package was determined by negotiation with Mr. O'Shea wherein he agreed to a reduced base salary for a larger potential equity ownership of the Company. The Company also has a 401(k) Retirement Benefit Plan for its employees including its executive officers which provides for voluntary employer matches of employee contributions up to 6% of salary and for discretionary profit sharing contributions to all employees. In fiscal 1996, Mr. O'Shea received $675 (or 540 shares) of Company common stock under the matching provisions of the 401(k) Plan. Due to the availability of operating loss carryforwards, the Compensation and Stock Option Committees determined Mr. O'Shea's compensation package without regard to the limitations of deductibility imposed by Internal Revenue Code Section 162(m). The Company is engaged in a highly competitive industry. In order to succeed, the Company believes that it must be able to attract and retain qualified executives. The Board of Directors believes that the above described compensation structure will help the Company to achieve these objectives. The foregoing report has been furnished by the following directors: for the Compensation Committee, William A. Gouveia and Cecil F. Spearman, and for the Stock Option Committee, Grace K. Fey and John Ruedy, M.D. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Effective with the annual shareholders' meeting in October 1995, the Board adopted a structure whereby in addition to the Stock Option Committee, executive compensation was administered by a separate committee of the Board. Prior to that time, executive compensation was administered by the Board as a whole. Jim O'Shea, the Company's Chairman, President, Chief Executive Officer and a Director, participated in deliberations concerning executive officer compensation, but abstained from deliberations concerning his own compensation. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On January 12, 1995, the Board of Directors announced the resignation of the Company's Chairman and Chief Executive Officer, Carl E. Wilcox. In consideration for Mr. Wilcox's long service to the Company, the Board granted Mr. Wilcox 100,000 shares of common stock valued at $241,000 and cash compensation totalling $247,000. The Board also vested 200,000 previously granted option shares at $4.00 per share and extended the expiration date to January 14, 1998. The Board granted Mr. Wilcox a special power of attorney to exclusively perform all acts necessary to obtain extension and/or release of the WAM Partnership escrow shares. On June 3, 1996, the British Columbia Securities Commission informed the Company that release of the escrow shares had been granted. The Board also agreed to pay Mr. Wilcox $20,000 per year for two years under a covenant not-to-compete. Mr. Wilcox continued to serve as a Director of the Company until October 25, 1995. STOCK PERFORMANCE CHART The following chart compares the yearly stock market (U.S.) percentage change in the cumulative total stockholder return on the Company's common stock during the five fiscal years ended March 31, 1996 with the cumulative total return on the NASDAQ Stock Market (U.S.) Index and the Hambrecht and Quist Healthcare Index (exclusive of biotechnology companies). The comparison assumes $100 was invested on March 31, 1991, in the Company's common stock and in each of the foregoing indices and assumes reinvestment of dividends. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG BIOJECT MEDICAL TECHNOLOGIES INC., NASDAQ STOCK INDEX AND HAMBRECHT AND QUIST HEALTH CARE FUND EXCLUDING BIOTECH INDEX 3/91 3/92 3/93 3/94 3/95 3/96 ____ ____ ____ ____ ____ ____ Bioject Medical Technologies Inc. $100 $170 $113 $103 $ 53 $ 35 NASDAQ Stock Index $100 $127 $147 $158 $176 $289 Hambrecht and Quist Health Care Fund Excluding Biotech Index $100 $146 $108 $ 96 $129 $196 PROPOSAL #2: AMENDMENT TO 1992 STOCK INCENTIVE PLAN The 1992 Stock Incentive Plan (the "Plan") was initially adopted by the Board on July 30, 1992, was approved by the shareholders of the Company at the annual meeting held on November 20, 1992 and was amended effective September 21, 1994. The Plan as amended authorizes the grant of options to purchase up to 3,000,000 shares of the Company's common stock. At the time of initial adoption of the Plan, 729,100 options had already been granted. Since that time, the Company has expanded its sales force, created a clinical department, built a manufacturing engineering group and recruited a new chief executive officer, all of which required option grants to recruit and retain qualified employees. As of July 25, 1996, a total of 570,756 options were available to be granted to current or future employees. Management believes that the ability to grant incentive options is crucial to its continuing ability to attract and retain qualified employees. Shares outstanding under the Plan which expire or are otherwise terminated or not issued pursuant to Awards become available for grants of new Awards under the Plan. ON JULY 25, 1996, THE BOARD ADOPTED, SUBJECT TO SHAREHOLDER APPROVAL, AN AMENDMENT (THE "AMENDMENT") TO THE PLAN EXTENDING THE LAST DATE ON WHICH AWARDS (AS DEFINED BELOW) COULD BE MADE PURSUANT TO THE PLAN FROM JUNE 8, 1998 TO JULY 29, 2002. NO OTHER REVISIONS OR CHANGES WERE MADE TO THE PLAN. The average of the high and low sales prices for the Company's common stock reported on the NASDAQ National Market on July 25, 1996 was $1.20. A summary description of certain terms and provisions of the amended Plan follows. AWARDS AND ELIGIBILITY. The Plan provides for stock-based awards to (i) employees and officers of the Company and its subsidiaries, (ii) selected non-employee agents, consultants, advisers and independent contractors of the Company or any parent or subsidiary, and (iii) outside (non-employee) directors of the Company. Awards which may be granted under the Plan include stock options, stock bonuses, stock appreciation rights, and specified sales of stock (collectively, "Awards"). The Stock Option Committee of the Board of Directors (the "Committee") administers the Plan and determines the key employees and non-employee advisors of the Company and its subsidiaries who are to receive Awards under the Plan and the types, amounts, and terms of such Awards. The Committee currently consists of Ms. Fey and Dr. Ruedy. Subject to shareholder approval, no Awards may be granted under the Plan, as amended, on or after July 29, 2002. At July 25, 1996, a total of 59 persons were eligible for Awards under the Plan, including each of the Company's 5 executive officers, 45 other employees, 5 non-employee advisors, and each of the Company's four outside (non-employee) directors. At that date, these persons represented the pool of individuals considered to be eligible to participate in the Plan. Outside directors may receive only the non-discretionary options as described under "Election of Directors -Board of Directors Composition, Compensation and Committees." PURPOSES. The purpose of the Plan is to promote and advance the interests of the Company and its shareholders by enabling the Company to attract, retain, and reward key employees, non-employee advisors, and directors. The Plan is also intended to strengthen the commonality of interests between the Company's shareholders and such employees, non-employee advisors, and directors by offering equity-based incentive Awards to promote a proprietary interest in pursuing the long-term growth, profitability, and financial success of the Company. OPTIONS. Options granted under the Plan may be either incentive stock options meeting the requirements of Section 422 of the Internal Revenue Code (the "Code") or nonqualified options. The Committee determines the number of shares of common stock subject to options granted, the option price, the term of the option, the time or times at which the option may be exercised and whether an option is an incentive or nonqualified stock option. Incentive stock options, however, may be exercisable not more than ten years from the date of grant. The Plan does not limit the maximum term or amount of award for nonqualified options. The exercise price per share for options granted under the Plan generally must be at least 100 percent (for incentive stock options) or 75 percent (for nonqualified options) of the fair market value of a share of common stock on the date the option is granted. The purchase price for options may be paid in cash or, at the discretion of the Committee, in whole or in part in shares of common stock. In the event that the employment or service of the optionee with the Company or a parent or subsidiary corporation of the Company terminates for any reason other than for death or physical disability, vested options may be exercised at any time prior to the earlier of the expiration date of the option or the expiration of 90 days after the date of such termination. In the event of termination of employment due to death or disability, the options may be exercised at any time prior to the earlier of the expiration date of the option or the expiration of one year after the date of such termination. STOCK BONUSES. The Committee may award Shares under the Plan as stock bonuses. Shares awarded as a stock bonus shall be subject to such terms, conditions, and restrictions as shall be determined by the Committee, all of which shall be evidenced in a writing signed by the recipient prior to receiving the bonus Shares. STOCK SALES. The Committee may issue Shares under the Plan for such consideration (including promissory notes and services) as determined by the Committee, provided that in no event shall the consideration be less than 75 percent of the fair market value of the Shares at the time of issuance. Shares so issued shall be subject to the terms, conditions and restrictions determined by the Committee. The restrictions may include restrictions concerning transferability, repurchase by the Company and forfeiture of the Shares issued, together with such other restrictions as may be determined by the Committee. STOCK APPRECIATION RIGHTS. The Committee may grant stock appreciation rights ("SARs") under the Plan. A recipient of SARs will receive, upon exercise, a payment (in cash or in shares of common stock) based on the increase in the price of a share of common stock between the date of grant and the date of exercise. SARs may be granted in connection with options or other Awards granted under the Plan or may be granted as independent Awards. If a SAR is granted in connection with an option, the SAR shall be exercisable only to the extent and on the same conditions that the related option could be exercised. Upon exercise of a SAR, any option or portion thereof to which the SAR relates terminates. If a SAR is granted in connection with an option, upon exercise of the option, the SAR or portion thereof to which the option relates terminates. TAX CONSEQUENCES TO THE COMPANY AND ITS SUBSIDIARIES. To the extent participants qualify for capital gains treatment with respect to the sale of shares acquired pursuant to exercise of an incentive stock options, the Company or its subsidiaries will not be entitled to any tax deductions in connection with incentive stock options. In all other cases, the Company or its subsidiaries will be entitled to receive a federal income tax deduction at the same time and in the same amount as the amount which is taxable to participants as ordinary income with respect to Awards. TAX CONSEQUENCES TO RECIPIENT. Incentive Stock Options. Incentive stock options under the Plan are intended to meet the requirements of Section 422 of the Internal Revenue Code. No income results to a participant upon the grant of an incentive stock option or upon the issuance of shares when the option is exercised. The amount realized on the sale or taxable exchange of such shares in excess of the exercise price will be considered a capital gain, except that if such disposition occurs within one year after exercise of the option or two years after grant of the option, the participant will recognize taxable compensation at ordinary income tax rates measured by the amount by which the lesser of (i) the fair market value on the date of exercise minus the exercise price or (ii) the amount realized on the sale of the share exceeds the exercise price. For purposes of determining alternative minimum taxable income, an incentive stock option is treated as a nonqualified option. Nonqualified Options. No taxable income is recognized upon the grant of a nonqualified option. In connection with the exercise of a nonqualified option, a participant will generally realize ordinary income measured by the difference between the exercise price and the fair market value of the shares acquired on the date of exercise. Bonus Shares and Stock Sales. Bonus shares awarded under the Plan and shares sold outright under the Plan, which are transferable or not subject to a substantial risk of forfeiture, are taxable as ordinary income equal to the excess of the fair market value of the shares received (determined as of the date of settlement) over the amount, if any, paid for the shares by the participant. In the case of shares that are not transferable and are subject to a substantial risk of forfeiture on the date of issuance, the participant will generally recognize ordinary income equal to the excess of the fair market value of shares received (determined as of the date on which the shares either become transferable or are not subject to a substantial risk of forfeiture) over the amount, if any, paid for the shares. In this case, a participant may elect to recognize income when the shares are received, rather than upon the expiration of the transfer restriction or risk of forfeiture, and, in such event, the amount of ordinary income will be determined as of the date of issuance rather than upon expiration of the applicable restriction. Stock Appreciation Rights. The grant of a SAR to a participant will not cause the recognition of income by the participant. Upon exercise of a SAR, the participant will realize ordinary income equal to the amount of cash payable to the participant plus the fair market value of any shares of common stock or other property delivered to the participant. CHANGES IN CAPITAL STRUCTURE. If the outstanding shares of common stock of the Company are hereafter increased or decreased or are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any recapitalization, reclassification, stock split, combination of shares or dividend payable in shares, the Committee shall make appropriate adjustments (i) in the number and kind of shares available for awards under the Plan; and (ii) in the number and kind of shares as to which outstanding options and stock appreciation rights, or portions thereof then unexercised, shall be exercisable, so that the participant's proportionate interest before and after the occurrence of the event is maintained. THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT TO THE PLAN. If a quorum is present at the annual meeting of shareholders, the proposal will be adopted if it receives the affirmative votes of the holders of a majority of the shares present, or represented, and entitled to vote upon the proposal at the meeting. Shareholders may expressly abstain from voting upon the proposal; such shares will have the effect of voting against the Amendment. Shares represented by duly executed and returned proxies of brokers or other nominees which are expressly not voted upon the proposed Amendment ("broker non-votes") will have no effect on the required vote. In the event the Amendment is not approved by the shareholders, the last date on which Awards can be made pursuant to the Plan will remain in effect only through June 8, 1998. OTHER MATTERS TO BE ACTED UPON It is not known whether any other matters will come before the Meeting other than as set out above and in the Notice of Meeting. However, if such should occur, the person named in the accompanying form of proxy intends to vote on the matters in accordance with his best judgment exercising discretionary authority with respect to amendments or variations or matters identified in the Notice of Meeting and other matters which may properly come before the Meeting or an adjournment thereof. SHAREHOLDER PROPOSAL AND NOMINATION PROCEDURES FOR THE MEETING Article II of the Company's Bylaws provides that advance notice of nominations for the election of directors or proposals for an amendment to the Company's Bylaws must be received by the Company thirty (30) days prior to the date of the shareholder meeting at which the shareholder wishes to present such nomination or proposal or, if less than 40 days' notice of the date of the meeting is given to shareholders, by the close of business on the 10th day following the date on which notice of the meeting was mailed to shareholders. Each notice of a nomination or proposal of a Bylaw amendment must contain, among other things, (i) the name and address of the shareholder who intends to make the nomination or proposal; (ii) a representation that the shareholder is a holder of record of common stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to present the nomination or proposal; (iii) certain biographical information concerning each person to be nominated for election as a director, the number of shares of common stock beneficially owned by such nominee, and the consent of such person to serve as a director if so elected; (iv) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (v) the provisions of any proposed Bylaw amendment and any financial interest of the shareholder in the proposal; and (vi) such other information regarding each nominee or proposal as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission. ANNUAL REPORT The Company's Annual Report to Shareholders for the fiscal year ended March 31, 1996, accompanies this proxy statement. On written request, the Company will provide, without charge, a copy of its Annual Report on Form 10-K for the fiscal year ended March 31, 1996, filed with the Securities and Exchange Commission (including a list briefly describing the exhibits thereto), to any record holder or beneficial owner of the Company's Common Stock on August 2, 1996, the record date for the 1996 annual meeting of shareholders, or to any person who subsequently becomes such a record holder or beneficial owner. Requests should be directed to the attention of the Secretary of the Company at the address of the Company set forth in the Notice of Annual Meeting of Shareholders immediately preceding this proxy statement. INDEPENDENT ACCOUNTANTS Arthur Andersen LLP, independent public accountants, examined the financial statements of the Company for fiscal 1996. No change in independent public accountants is contemplated for fiscal 1997. The Company expects representatives of Arthur Andersen LLP to be present at the 1996 annual meeting of shareholders and to be available to respond to appropriate questions from shareholders. The accountants will have the opportunity to make a statement at the meeting if they desire to do so. PROPOSALS OF SHAREHOLDERS FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS Proposals of shareholders to be presented at the Meeting to be held in September 1997 must be received at the Company's executive offices by April 4, 1997, in order to be included in the Company's proxy statement and form of proxy concerning that meeting. DATED at Portland, Oregon, this 9th day of August, 1996. BY ORDER OF THE BOARD /S/ PEGGY JARVIS MILLER _______________________ Peggy Jarvis Miller Vice President, Chief Financial Officer and Secretary NOTICE OF ANNUAL SHAREHOLDERS' MEETING AND PROXY STATEMENT ----------------------------- August 9, 1996 PORTLAND, OREGON ----------------------------- (BIOJECT LOGO) BIOJECT MEDICAL TECHNOLOGIES INC. ANNUAL MEETING OF STOCKHOLDERS September 19, 1996 This Proxy is Solicited on Behalf of the Board of Directors James C. O'Shea and Peggy J. Miller and each of them, as proxies, with full power of substitution in each of them, are hereby authorized to represent and to vote, as designated on the reverse of this proxy card, on all proposals and in the discretion of the proxies on such other matters as may properly come before the annual meeting of stockholders of Bioject Medical Technologies Inc. to be held on September 19, 1996 or any adjournment(s), postponement(s), or other delay(s) thereof (the "Meeting"), all shares of stock of Bioject Medical Technologies Inc. (the "Company") to which the undersigned is entitled to vote at the Meeting. Receipt of the Notice of Meeting and Proxy Statement is hereby acknowledged by the undersigned. (To be Signed on Reverse Side) /X/ Please mark your votes as in this example. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEES LISTED BELOW: 1. Election of the following nominee(s) as directors to serve in such capacities until their successors are duly elected and qualified. / / FOR ALL (Except as marked / / WITHHELD FOR ALL to the contrary below) Nominees: Grace K. Fey William A. Gouveia Eric T. Herfindal James C. O'Shea John Ruedy, M.D. Cecil E. Spearman 2. Approval of an amendment to the Company's 1992 Stock Incentive Plan. / / FOR / / AGAINST / / ABSTAIN 3. Transactions of such other business as may properly come before the meeting or any adjournments thereof. UNLESS OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED "FOR" THE NOMINEES AND WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. PLEASE SIGN, DATE, AND MAIL YOUR PROXY TODAY. SIGNATURE: ______________________________ DATE: _________________________ SIGNATURE: ______________________________ DATE: _________________________ (SIGNATURE, IF HELD JOINTLY) NOTE: _____________________________________________________ Capacity (Title of Authority, i.e., Executor, Trustee) EX-4.3 2 1992 STOCK INCENTIVE PLAN (AS AMENDED THROUGH JULY 25, 1996) BIOJECT MEDICAL TECHNOLOGIES INC. 1992 STOCK INCENTIVE PLAN (as amended through July 25, 1996) 1. Purpose. The purpose of this 1992 Stock Incentive Plan (the "Plan") is to enable Bioject Medical Technologies Inc., an Oregon corporation (the "Company"), to attract and retain the services of (a) selected employees, officers and directors of the Company or of any parent or subsidiary corporation of the Company, and (b) selected nonemployee agents, consultants, advisers and independent contractors of the Company or any parent or subsidiary. 2. Shares Subject to the Plan. Subject to adjustment as provided below and in paragraph 11, up to 3,000,000 shares of Common Stock of the Company (the "Shares") shall be offered and issued under the Plan. If an option or a stock appreciation right granted under the Plan expires, terminates or is cancelled, the unissued Shares subject to such option or stock appreciation right shall again be available under the Plan. If Shares sold or awarded as a bonus under the Plan are forfeited to the Company or repurchased by the Company, the number of Shares forfeited or repurchased shall again be available under the Plan. 3. Effective Date and Duration of Plan. (a) Effective Date. The Plan shall become effective when adopted by the Board of Directors of the Company (the "Board"). However, no option granted under the Plan shall become exercisable until the Plan is approved by the affirmative vote of the holders of a majority of the Common Stock of the Company represented at a shareholder meeting at which a quorum is present, and any such awards under the Plan prior to such approval shall be conditioned on and subject to such approval. Subject to this limitation, options and stock appreciation rights may be granted and Shares may be awarded as bonuses or sold under the Plan at any time after the effective date and before termination of the Plan. (b) Duration. No options or stock appreciation rights may be granted under the Plan, no stock bonuses may be awarded under the Plan, and no Shares may be sold pursuant to paragraph 8 of the Plan on or after July 30, 2002. However, the Plan shall continue in effect until all Shares available for issuance under the Plan have been issued and all restrictions on such Shares have lapsed. The Board may suspend or terminate the Plan at any time, except with respect to options, stock appreciation rights and Shares subject to restrictions then outstanding under the Plan. Termination shall not affect any outstanding options, stock appreciation rights, any right of the Company to repurchase Shares or the forfeitability of Shares issued under the Plan. 4. Administration. (a) The Plan shall be administered by a committee appointed by the Board consisting of not less than two directors (the "Committee"). The Committee shall determine and designate from time to time the individuals to whom awards shall be made, the amount of the awards, and the other terms and conditions of the awards; provided, however, that only the Board may amend or terminate the Plan as provided in paragraphs 3 and 14. At any time when the officers and directors of the Company are subject to Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), the Committee shall consist solely of "disinterested" directors as such term is defined from time to time in Rule 16b-3 under the Exchange Act. No member of the Committee shall be eligible to receive any award under the Plan while such person serves as a Committee member, except pursuant to paragraph 10. (b) Subject to the provisions of the Plan, the Committee may from time to time adopt and amend rules and regulations relating to administration of the Plan, advance the lapse of any waiting period, accelerate any exercise date, waive or modify any restriction applicable to Shares (except those restrictions imposed by law) and make all other determinations in the judgment of the Committee necessary or desirable for the administration of the Plan. The interpretation and construction of the provisions of the Plan and related agreements by the Committee shall be final and conclusive. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any related agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect, and it shall be the sole and final judge of such expediency. 5. Types of Awards; Eligibility. The Committee may, from time to time, take the following actions under the Plan: (i) grant Incentive Stock Options, as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), as provided in paragraph 6(b); (ii) grant options other than Incentive Stock Options ("Nonstatutory Stock Options") as provided in paragraph 6(c); (iii) award stock bonuses as provided in paragraph 7; (iv) sell Shares as provided in paragraph 8; and (v) grant stock appreciation rights as provided in paragraph 9. Any such awards may be made to employees (including employees who are officers or directors) of the Company or of any parent or subsidiary corporation of the Company, and to other individuals described in paragraph 1 who the Committee believes have made or will make an important contribution to the Company or its parent or subsidiaries; provided, however, that only employees of the Company or a parent or subsidiary shall be eligible to receive Incentive Stock Options under the Plan, and, provided further, that directors who are not employees shall receive awards only pursuant to paragraph 10. The Committee shall select the individuals to whom awards shall be made and shall specify the action taken with respect to each individual to whom an award is made under the Plan. At the discretion of the Committee, an individual may be given an election to surrender an award in exchange for the grant of a new award. 6. Option Grants (a) Grant. Each option granted under the Plan shall be evidenced by a stock option agreement in such form as the Committee shall prescribe from time to time in accordance with the Plan. With respect to each option grant, the Committee shall determine the number of Shares subject to the option, the option price, the period of the option, and the time or times at which the option may be exercised and whether the option is an Incentive Stock Option or a Nonstatutory Stock Option. (b) Incentive Stock Options. Incentive Stock Options granted under the Plan shall be subject to the following terms and conditions: (i) No employee may be granted Incentive Stock Options under the Plan such that the aggregate fair market value, on the date of grant, of the Shares with respect to which Incentive Stock Options are exercisable for the first time by that employee during any calendar year under the Plan and under any other incentive stock option plan (within the meaning of Section 422 of the Code) of the Company or of any parent or subsidiary corporation of the Company exceeds $100,000. (ii) An Incentive Stock Option may be granted under the Plan to an employee possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or of any parent or subsidiary corporation of the Company only if the option price is at least 110 percent of the fair market value, as described in paragraph 6(b)(iv), of the Shares subject to the option on the date it is granted, and the option by its terms is not exercisable more than five years from the date of grant. (iii) Subject to paragraphs 6(b)(ii) and 6(d), Incentive Stock Options granted under the Plan shall continue in effect for the period fixed by the Committee, except that no Incentive Stock Option shall be exercisable more than 10 years from the date of grant. (iv) The option price per Share shall be determined by the Committee at the time of grant. Subject to paragraph 6(b)(ii), the option price shall not be less than 100 percent of the fair market value of the Shares covered by the Incentive Stock Option at the date the option is granted. The fair market value shall be deemed to be the average of the closing bid and asked prices for the Common Stock of the Company as reported on the National Association of Securities Dealers, Inc. Automated Quotation System on the day preceding the day the option is granted, or if there has been no sale on that date, on the last preceding date on which a sale occurred, or such other reported value of the Common Stock of the Company as shall be specified by the Committee. (v) The Committee may at any time without the consent of the optionee convert an Incentive Stock Option into a Nonstatutory Stock Option. (c) Nonstatutory Stock Options. Nonstatutory Stock Options shall be subject to the following additional terms and conditions: (i) The option price for Nonstatutory Stock Options shall be determined by the Committee at the time of grant. The option price may not be less than 75 percent of the fair market value of the Shares covered by the Nonstatutory Stock Option on the date of grant. The fair market value of the Shares covered by a Nonstatutory Stock Option shall be determined pursuant to paragraph 6(b)(iv). (ii) Nonstatutory Stock Options granted under the Plan shall continue in effect for the period fixed by the Committee. (d) Exercise of Options. Except as provided in paragraph 6(f) or as determined by the Committee, no option granted under the Plan may be exercised unless at the time of such exercise the optionee is employed by or in the service of the Company or any parent or subsidiary corporation of the Company and shall have been so employed or have provided such service continuously since the date such option was granted. Absence on leave or on account of illness or disability under rules established by the Committee shall not, however, be deemed an interruption of employment for purposes of the Plan. Unless otherwise determined by the Committee, vesting of options shall not continue during an absence on leave (including an extended illness) or on account of disability. No option may be exercised by an officer or director of the Company within six months of the date of grant. Except as provided in paragraphs 6(f), 11 and 12, options granted under the Plan may be exercised from time to time over the period stated in each option in such amounts and at such times as shall be prescribed by the Committee, provided that options shall not be exercised for fractional shares. Unless otherwise determined by the Committee, if the optionee does not exercise an option in any one year with respect to the full number of Shares to which the optionee is entitled in that year, the optionee's rights shall be cumulative and the optionee may purchase those Shares in any subsequent year during the term of the option. (e) Nontransferability. Each option granted under the Plan by its terms shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the optionee's domicile at the time of death, and each option by its terms shall be exercisable during the optionee's lifetime only by the optionee. (f) Termination of Employment or Service. (i) In the event the employment or service of the optionee by the Company or a parent or subsidiary corporation of the Company terminates for any reason other than because of death or physical disability, the option may be exercised at any time prior to the expiration date of the option or the expiration of three months after the date of such termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of such termination. (ii) In the event of the termination of the optionee's employment or service with the Company or a parent or subsidiary corporation of the Company because the optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code), the option may be exercised at any time prior to the expiration date of the option or the expiration of one year after the date of such termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of such termination. (iii) In the event of the death of an optionee while employed by or providing service to the Company or a parent or subsidiary corporation of the Company, the option may be exercised at any time prior to the expiration date of the option or the expiration of one year after the date of such death, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option on the date of death, and only by the person or persons to whom such optionee's rights under the option shall pass by the optionee's will or by the laws of descent and distribution of the state or country of domicile at the time of death. (iv) The Committee, at the time of grant or at any time thereafter, may extend the three-month and one-year expiration periods any length of time not later than the original expiration date of the option, and may increase the portion of an option that is exercisable, subject to such terms and conditions as the Committee may determine. (v) To the extent that the option of any deceased optionee or of any optionee whose employment or service terminates is not exercised within the applicable period, all further rights to purchase Shares pursuant to such option shall cease and terminate. (g) Purchase of Shares. Unless the Committee determines otherwise, Shares may be acquired pursuant to an option only upon receipt by the Company of notice in writing from the optionee of the optionee's intention to exercise, specifying the number of Shares as to which the optionee desires to exercise the option and the date on which the optionee desires to complete the transaction, and, if required to comply with the Securities Act of 1933, as amended, or state securities laws, the notice shall include a representation that it is the optionee's present intention to acquire the Shares for investment and not with a view to distribution. The certificates representing the Shares shall bear any legends required by the Committee. Unless the Committee determines otherwise, on or before the date specified for completion of the purchase of Shares pursuant to an option, the optionee must have paid the Company the full purchase price of such Shares in cash (including, with the consent of the Committee, cash that may be the proceeds of a loan from the Company), or, with the consent of the Committee, in whole or in part, in Shares valued at fair market value, as determined pursuant to paragraph 6(b)(iv). Unless the Committee determines otherwise, all payments made to the Company in connection with the exercise of an option must be made by a certified or cashier's bank check or by the transfer of immediately available federal funds. No Shares shall be issued until full payment therefor has been made. With the consent of the Committee, an optionee may request the Company to apply automatically the Shares to be received upon the exercise of a portion of a stock option (even though stock certificates have not yet been issued) to satisfy the purchase price for additional portions of the option. Each optionee who has exercised an option shall immediately upon notification of the amount due, if any, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax withholding requirements. If additional withholding is or becomes required beyond any amount deposited before delivery of the certificates, the optionee shall pay such amount to the Company on demand. If the optionee fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the optionee by the Company or the parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, an optionee may deliver Shares to the Company to satisfy the withholding obligation. 7. Stock Bonuses. The Committee may award Shares under the Plan as stock bonuses. Shares awarded as a stock bonus shall be subject to such terms, conditions, and restrictions as shall be determined by the Committee, all of which shall be evidenced in a writing signed by the recipient prior to receiving the bonus Shares. The Committee may not require the recipient to pay any monetary consideration other than amounts necessary to satisfy tax withholding requirements. The certificates representing the Shares awarded shall bear any legends required by the Committee. The Company may require any recipient of a stock bonus to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the recipient fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the recipient by the Company or the parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, a recipient may deliver Shares to the Company to satisfy the withholding obligation. 8. Stock Sales. The Committee may issue Shares under the Plan for such consideration (including promissory notes and services) as determined by the Committee, provided that in no event shall the consideration be less than 75 percent of the fair market value of the Shares at the time of issuance, determined pursuant to paragraph 6(b)(iv). Shares issued under this paragraph 8 shall be subject to the terms, conditions and restrictions determined by the Committee. The restrictions may include restrictions concerning transferability, repurchase by the Company and forfeiture of the Shares issued, together with such other restrictions as may be determined by the Committee. The certificates representing the Shares shall bear any legends required by the Committee. The Company may require any purchaser of stock issued under this paragraph 8 to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the purchaser fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the purchaser by the Company or any parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, a purchaser may deliver Shares to the Company to satisfy the withholding obligation. 9. Stock Appreciation Rights. (a) Grant. Stock appreciation rights may be granted under the Plan by the Committee, subject to such rules, terms, and conditions as the Committee prescribes. (b) Exercise. (i) A stock appreciation right shall be exercisable only at the time or times established by the Committee. If a stock appreciation right is granted in connection with an option, the stock appreciation right shall be exercisable only to the extent and on the same conditions that the related option could be exercised. Upon exercise of a stock appreciation right, any option or portion thereof to which the stock appreciation right relates terminates. If a stock appreciation right is granted in connection with an option, upon exercise of the option, the stock appreciation right or portion thereof to which the option relates terminates. No stock appreciation right granted to an officer or director may be exercised during the first six months following the date of grant. (ii) The Committee may withdraw any stock appreciation right granted under the Plan at any time and may impose any conditions upon the exercise of a stock appreciation right or adopt rules and regulations from time to time affecting the rights of holders of stock appreciation rights. Such rules and regulations may govern the right to exercise stock appreciation rights granted before adoption or amendment of such rules and regulations as well as stock appreciation rights granted thereafter. (iii) Each stock appreciation right shall entitle the holder, upon exercise, to receive from the Company in exchange therefor an amount equal in value to the excess of the fair market value on the date of exercise of one Share over its fair market value on the date of grant (or, in the case of a stock appreciation right granted in connection with an option, the option price per Share under the option to which the stock appreciation right relates), multiplied by the number of Shares covered by the stock appreciation right or the option, or portion thereof, that is surrendered. No stock appreciation right shall be exercisable at a time that the amount determined under this subparagraph is negative. Payment by the Company upon exercise of a stock appreciation right may be made in Shares valued at fair market value, in cash, or partly in Shares and partly in cash, all as determined by the Committee. (iv) For purposes of this paragraph 9, the fair market value of the Shares shall be determined pursuant to paragraph 6(b)(iv), on the trading day preceding the date the stock appreciation right is exercised. (v) No fractional Shares shall be issued upon exercise of a stock appreciation right. In lieu thereof, cash may be paid in an amount equal to the value of the fraction or, if the Committee shall determine, the number of Shares may be rounded downward to the next whole Share. (vi) Each participant who has exercised a stock appreciation right shall, upon notification of the amount due, pay to the Company in cash amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the participant fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the participant by the Company or any parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, a participant may satisfy this obligation, in whole or in part, by having the Company withhold from any Shares to be issued upon the exercise that number of Shares that would satisfy the withholding amount due or by delivering Shares to the Company to satisfy the withholding amount. (vii) Upon the exercise of a stock appreciation right for Shares, the number of Shares reserved for issuance under the Plan shall be reduced by the number of Shares issued. Cash payments of stock appreciation rights shall not reduce the number of Shares reserved for issuance under the Plan. 10. Option Grants to Non-Employee Directors. (a) Automatic Grants. Immediately after the close of each annual shareholder meeting (commencing with the 1993 annual meeting), each person then serving as a Non-Employee Director, including any such person who is elected at such meeting, shall automatically be granted a Nonstatutory Stock Option to purchase 17,500 Shares. A "Non-Employee Director" is a director of the Company who is not an employee of the Company or of any parent or subsidiary corporation of the Company on the date the option is granted. (b) Terms of Options. The exercise price for options granted under this paragraph 10 shall be the fair market value of the Shares on the date of grant, determined pursuant to paragraph 6(b)(iv). Each such option shall have an eight-year term from the date of grant, unless earlier terminated as provided in paragraph 6(f), and shall become exercisable with respect to 8,750 shares six months after the date of grant, with the remaining 8,750 shares becoming exercisable on the first anniversary of the date of grant. 11. Changes in Capital Structure. If the outstanding shares of Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any recapitalization, reclassification, stock split, combination of shares or dividend payable in shares, the Committee shall make appropriate adjustments (i) in the number and kind of shares available for awards under the Plan; and (ii) in the number and kind of shares as to which outstanding options and stock appreciation rights, or portions thereof then unexercised, shall be exercisable, so that the participant's proportionate interest before and after the occurrence of the event is maintained, provided that this paragraph 11 shall not apply with respect to transactions referred to in paragraph 12. The Committee may also require that any securities issued in respect of or exchanged for Shares issued hereunder that are subject to restrictions be subject to similar restrictions. Notwithstanding the foregoing, the Committee shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Committee. Any such adjustment made by the Committee shall be conclusive. 12. Effect of Reorganization or Liquidation. (a) Cash, Stock or Other Property for Stock. Except as provided in paragraph 12(b), upon a merger, consolidation, reorganization, plan of exchange or liquidation involving the Company, as a result of which the shareholders of the Company receive cash, stock or other property in exchange for or in connection with their Common Stock (any such transaction to be referred to in this paragraph 12 as an "Accelerating Event"), any option or stock appreciation right granted hereunder shall terminate, except as specified in the following sentence, but the optionee shall have the right during a 30-day period immediately prior to any such Accelerating Event to exercise his or her option or stock appreciation right, in whole or in part, without any limitation on exercisability. With respect to an option or stock appreciation right granted to an officer or director less than six months prior to any Accelerating Event, such officer or director shall have the right to require the Company to purchase such option or stock appreciation right at a purchase price computed pursuant to paragraph 12(c) during the 30-day period following the expiration of six months following the date of such grant, and this right shall apply even if the option or stock appreciation right has otherwise terminated pursuant to paragraph 6(f) following such Accelerating Event. (b) Stock for Stock. If the shareholders of the Company receive capital stock of another corporation ("Exchange Stock") in exchange for their Common Stock in any transaction involving a merger, consolidation, reorganization, or plan of exchange, all options granted hereunder shall be converted into options to purchase shares of Exchange Stock and all stock appreciation rights granted hereunder shall be converted into stock appreciation rights measured by the Exchange Stock, unless the Committee, in its sole discretion, determines that any or all such options or stock appreciation rights granted hereunder shall not be converted, but instead shall terminate in accordance with the provisions of paragraph 12(a). The amount and price of converted options and stock appreciation rights shall be determined by adjusting the amount and price of the options or stock appreciation rights granted hereunder to take into account the relative values of the Exchange Stock and the Common Stock in the transaction. (c) Purchase Price. With respect to an option granted to an officer or director less than six months prior to an Accelerating Event, the purchase price payable pursuant to paragraph 12(a) shall be computed as follows: (i) With respect to a Nonstatutory Stock Option and a stock appreciation right as to which no Incentive Stock Option has been granted, the purchase price shall be the product of (A) the excess, if any, of the higher of (1) the purchase price paid for each Share in the Accelerating Event, or (2) the highest fair market value of a Share (determined pursuant to paragraph 6(b)(iv)) during the 30-day period ending on the day the Accelerating Event occurs, over the option price, and (B) the number of Shares covered by the option or stock appreciation right. (ii) With respect to an Incentive Stock Option and a stock appreciation right as to which an Incentive Stock Option has been granted, the purchase price shall be the product of (A) the excess, if any, of the fair market value of each Share on the date of exercise over the option price, and (B) the number of Shares covered by the option or stock appreciation right. (iii) No option or stock appreciation right may be exercised in connection with an Accelerating Event if the purchase price determined under this paragraph 12(c) is negative. (d) The rights set forth in this paragraph 12 shall be transferable only to the extent the related option or stock appreciation right is transferable. 13. Corporate Mergers, Acquisitions, Etc. The Committee may also grant options, grant stock appreciation rights, award stock bonuses and sell stock under the Plan having terms, conditions and provisions that vary from those specified in the Plan; provided that any such awards are granted in substitution for, or in connection with the assumption of, existing options, stock appreciation rights, stock bonuses and stock sold or awarded by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by reason of a transaction involving a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation to which the Company or a parent or subsidiary corporation of the Company is a party. 14. Amendment of Plan. (a) The Board may at any time, and from time to time, modify or amend the Plan in such respects as it shall deem advisable because of changes in the law while the Plan is in effect or for any other reason. Except as provided in paragraphs 6(b)(v), 11, 12 and 13, however, no change in an award already granted shall be made without the written consent of the holder of such award. (b) Notwithstanding any other provision in the Plan, paragraph 10 may be amended or modified by the Board or the shareholders of the Company only once in any six-month period, except as may be required to comport with changes in the Code, or the Employee Retirement Income Security Act, or the rules promulgated thereunder. 15. Approvals. The obligations of the Company under the Plan are subject to the approval of state and federal authorities or agencies with jurisdiction in the matter. The Company shall not be obligated to issue or deliver Shares under the Plan if such issuance or delivery would violate applicable state or federal securities laws, or if compliance with such laws would, in the opinion of the Company, be unduly burdensome or require the disclosure of information which would not be in the Company's best interests. 16. Employment and Service Rights. Nothing in the Plan or any award pursuant to the Plan shall (i) confer upon any employee any right to be continued in the employment of the Company or any parent or subsidiary corporation of the Company or shall interfere in any way with the right of the Company or any parent or subsidiary corporation of the Company by whom such employee is employed to terminate such employee's employment at any time, for any reason, with or without cause, or to increase or decrease such employee's compensation or benefits; or (ii) confer upon any person engaged by the Company or any parent or subsidiary corporation of the Company any right to be retained or employed by the Company or the parent or subsidiary or to the continuation, extension, renewal, or modification of any compensation, contract, or arrangement with or by the Company or the parent or subsidiary. 17. Rights as a Shareholder. The recipient of any award under the Plan shall have no rights as a shareholder with respect to any Shares until the date of issue to the recipient of a stock certificate for such Shares. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. -----END PRIVACY-ENHANCED MESSAGE-----