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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Information Required In Proxy Statement
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12
Somanetics Corporation
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(Name of Registrant as Specified In Its Charter)
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SEC 1913 (02-02)
[SOMANETICS LOGO]
1653 EAST MAPLE ROAD
TROY, MICHIGAN 48083-4208
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 10, 2003
To the Shareholders of Somanetics Corporation:
THIS IS OUR NOTICE TO YOU that the annual meeting of shareholders of
Somanetics Corporation will be held at the Sterling Inn Banquet & Conference
Center, 34911 Van Dyke, Sterling Heights, Michigan 48312, at 10:00 a.m. eastern
daylight time on Thursday, April 10, 2003 for the following purposes:
1. To select two directors, each to serve until the 2006 annual meeting of
shareholders and until his successor is elected and qualified.
2. To consider and act upon a proposal to approve an amendment to the
Somanetics Corporation 1997 Stock Option Plan to increase the number of
common shares reserved for issuance pursuant to the exercise of options
granted under the 1997 Plan by 450,000 shares, from 2,110,000 to
2,560,000 shares.
3. To transact such other business as may properly come before the meeting
and any adjournment thereof.
Only shareholders of record on February 11, 2003 will be entitled to
notice of the meeting or any adjournment of the meeting and to vote at the
meeting or any adjournment of the meeting.
All shareholders are cordially invited to attend the meeting. Whether
or not you expect to attend the meeting, please complete, date and sign the
enclosed proxy and return it as promptly as possible to ensure your
representation at the meeting. A return postage-prepaid envelope is enclosed for
that purpose. If you return the proxy, you may withdraw your proxy and vote your
shares in person if you attend the meeting.
Your attention is called to the attached proxy statement and the
accompanying proxy. A copy of our annual report for the fiscal year ended
November 30, 2002 accompanies this notice.
By order of the Board of Directors
Bruce J. Barrett
President and Chief Executive Officer
Troy, Michigan
February 20, 2003
SOMANETICS CORPORATION
1653 EAST MAPLE ROAD
TROY, MICHIGAN 48083-4208
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 10, 2003
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Somanetics Corporation. The proxies are
being solicited for use at the 2003 annual meeting of shareholders to be held at
the Sterling Inn Banquet & Conference Center, 34911 Van Dyke, Sterling Heights,
Michigan 48312, at 10:00 a.m. eastern daylight time on Thursday, April 10, 2003,
and at any adjournment of that meeting. The 2003 annual meeting of shareholders
is being held for the purposes described in the notice of annual meeting of
shareholders on the prior page. We expect that this proxy statement and
accompanying proxy will be first sent or given to shareholders on or about
February 20, 2003.
Solicitation
We will bear the entire cost of soliciting proxies in the enclosed
form, including the costs of preparing, assembling, printing and mailing this
proxy statement, the accompanying proxy and any additional information we
furnish to shareholders. We may supplement our solicitation of proxies by mail
with telephone, telegraph or personal solicitation by our directors, officers or
other regular employees. We will not pay any additional compensation to our
directors, officers or other regular employees for these services. We have also
engaged Georgeson Shareholder to solicit proxies by mail or telephone or in
person, at an expected cost to us of approximately $6,500 plus reasonable
out-of-pocket expenses. We will request that brokers, nominees and other similar
record holders forward soliciting material, and we will reimburse them upon
request for their out-of-pocket expenses.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Voting Rights and Outstanding Shares
Only shareholders of record at the close of business on February 11,
2003 will be entitled to notice of the annual meeting or any adjournment of the
meeting and to vote at the annual meeting or any adjournment of the meeting. As
of the close of business on February 11, 2003, we had 9,077,801 outstanding
common shares, $0.01 par value, the only class of our stock outstanding and
entitled to vote.
Each common share is entitled to one vote on each matter submitted for
a vote at the meeting. The presence, in person or by proxy, of the holders of
record of a majority of the
1
outstanding common shares entitled to vote, or 4,538,901 shares, is necessary to
constitute a quorum for the transaction of business at the meeting or any
adjournment of the meeting.
Revocability of Proxies
A shareholder giving a proxy may revoke it at any time before it is
voted by giving written notice of revocation to our Secretary or by executing
and delivering to our Secretary a later dated proxy. A shareholder's attendance
at the meeting will not have the effect of revoking any proxy given by that
shareholder unless the shareholder gives written notice of revocation to our
Secretary before the proxy is voted. Any written notice revoking a proxy, and
any later dated proxy, should be sent to Somanetics Corporation, 1653 East Maple
Road, Troy, Michigan 48083-4208, Attention: Investor Relations Department.
Valid proxies in the enclosed form that are returned in time for the
meeting and executed and dated in accordance with the instructions on the proxy
will be voted as specified in the proxy. If no specification is made, the
proxies will be voted FOR the election as directors of the nominees listed
below, and FOR the proposed increase in the number of common shares reserved for
issuance pursuant to the exercise of options granted under the 1997 Stock Option
Plan.
Principal Holders of Our Voting Securities
The following table contains information with respect to the beneficial
ownership of our common shares as of February 11, 2003 by each person known by
us to beneficially own more than 5% of our common shares, our only outstanding
class of voting shares:
PERCENTAGE OF
AMOUNT AND NATURE OF COMMON SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OWNED (1)
------------------------------------------------------------ --------------------------- ------------------
Bruce J. Barrett............................................ 847,025 (2) 8.7%
1653 East Maple Road
Troy, Michigan 48083-4208
BMI Capital Corporation..................................... 985,000 (3) 10.9%
570 Lexington Ave.
New York, NY 10022
------------------------------------
(1) Based on 9,077,801 common shares outstanding as of February 11, 2003.
(2) Includes 699,533 common shares that Mr. Barrett has the right to acquire
within 60 days of February 11, 2003 and 147,492 common shares owned jointly with
his wife.
(3) BMI Capital Corporation is an investment advisor having sole power to
dispose of the shares shown above as beneficially owned by it, but no voting
power over these shares. The information concerning BMI Capital Corporation is
based solely on a Schedule 13G, dated January 28, 2003, filed by it with the
Securities and Exchange Commission on January 30, 2003. A. Brean Murray, one of
our directors, is the Chairman of BMI Capital Corporation, and he disclaims
beneficial ownership of the shares beneficially owned by it.
2
I. ELECTION OF DIRECTORS
Our Board of Directors proposes that the two persons named below as
"nominees for election as directors for a three-year term" be elected as our
directors, each to hold office until the annual meeting of shareholders to be
held in 2006 and until his successor is elected and qualified. Mr. Henry was
last elected as a director at the 2000 annual meeting of shareholders on April
18, 2000, and Mr. Follis was last elected as a director at the 2002 annual
meeting of shareholders on April 17, 2002, but will become a Class II director
at the 2003 annual meeting of shareholders as a result of a reduction in the
size of the Board of Directors to six members effective on the date of the 2003
annual meeting of shareholders. If a quorum is present, the two nominees
receiving the greatest number of votes cast at the meeting or its adjournment
will be elected. Withheld votes and broker non-votes will not be deemed votes
cast in determining which nominees receive the greatest number of votes cast,
but will be counted for purposes of determining whether a quorum is present. The
persons named in the accompanying proxy intend to vote all valid proxies
received by them FOR the election of the nominees listed below unless the person
giving the proxy withholds authority to vote for these nominees. The nominees
listed below have consented to serve if elected. If any nominee is unable or
declines to serve, which we do not expect to happen, the proxy holders intend to
vote the proxies in accordance with their best judgment for another qualified
person.
The following information is furnished as of February 11, 2003 with
respect to our nominees for election as directors, with respect to each person
whose term of office as one of our directors will continue after the meeting,
with respect to one person whose term of office as one of our directors will not
continue after the meeting, with respect to each of our executive officers who
is named in the Summary Compensation Table below, and with respect to all of our
directors and executive officers as a group:
AMOUNT AND PERCENTAGE
NATURE OF OF
POSITION AND OFFICES COMMON SHARES COMMON TERM
DIRECTOR WITH US AND OTHER BENEFICIALLY SHARES TO
NAME SINCE AGE PRINCIPAL OCCUPATION OWNED OWNED(1) EXPIRE
---- ----- --- -------------------- ----- -------- ------
NOMINEES FOR ELECTION AS DIRECTORS FOR A THREE-YEAR TERM
Daniel S. Follis....... 4/89 65 Director, President of 48,431 (2) * 2006
Verschuren & Follis, Inc. and
President of Follis Corporation
Robert R. Henry........ 12/98 62 Director and President of 269,500 (3) 3.0% 2006
Robert R. Henry & Co., Inc.
DIRECTORS CONTINUING IN OFFICE
Bruce J. Barrett....... 6/94 43 President, Chief Executive 847,025 (4) 8.7% 2004
Officer and a Director
A. Brean Murray........ 6/99 65 Director and Chairman of 412,675 (5) 4.4% 2004
Brean Murray & Co., Inc.
3
AMOUNT AND PERCENTAGE
NATURE OF OF
POSITION AND OFFICES COMMON SHARES COMMON TERM
DIRECTOR WITH US AND OTHER BENEFICIALLY SHARES TO
NAME SINCE AGE PRINCIPAL OCCUPATION OWNED OWNED(1) EXPIRE
---- ----- --- -------------------- ----- -------- ------
DIRECTORS CONTINUING IN OFFICE
Dr. James I. Ausman.... 6/94 65 Director and Professor of the 31,785 (6) * 2005
Department of Neurosurgery
at the University of Illinois
at Chicago
Joe B. Wolfe........... 11/01 60 President and sole proprietor 20,500 (7) * 2005
of Wolfe & Company
DIRECTOR NOT CONTINUING IN OFFICE
H. Raymond Wallace..... 6/94 67 Chairman of the Board 28,611 (8) * 2003
OTHER EXECUTIVE OFFICERS
Dana Capocaccia........................................................ 70,800 (9) *
Richard S. Scheuing.................................................... 133,092 (10) 1.4%
Mary Ann Victor........................................................ 97,500 (11) 1.1%
Pamela A. Winters...................................................... 130,150 (12) 1.4%
All directors and executive officers as a group (14 persons)........... 2,272,099 (13) 21.2%
------------------------------------
* Less than 1%
(1) Based on 9,077,801 common shares outstanding as of February 11, 2003.
(2) Includes 19,000 common shares that Mr. Follis has the right to acquire
within 60 days of February 11, 2003. The 48,431 common shares shown
above as beneficially owned by Mr. Follis include 8,820 common shares
owned by The Infinity Fund, a limited partnership in which Mr. Follis
is a 6.068% limited partner and a 50% general partner and which is
administered by Verschuren & Follis, Inc., a corporation in which Mr.
Follis is a 50% shareholder, a director and the President.
(3) Includes 9,500 common shares that Mr. Henry has the right to acquire
within 60 days of February 11, 2003.
(4) Includes 699,533 common shares that Mr. Barrett has the right to
acquire within 60 days of February 11, 2003 and 147,492 common shares
owned jointly with his wife.
(5) Includes (1) 30,000 common shares owned by A. Brean Murray, (2) 80,290
common shares owned by Brean Murray & Co., Inc., an investment banking
company that is a wholly-owned subsidiary of BMI Holding Co.; A. Brean
Murray owns 65.19% of the outstanding voting stock of BMI Holding Co.
and his wife owns 17.78% of the outstanding voting stock of BMI Holding
Co., (3) 67,885 common shares owned by the Brean Murray & Co., Inc.
Profit Sharing Trust, (4) 125,000 common shares that Brean Murray &
Co., Inc. has the right to acquire within 60 days of February 11, 2003
upon the exercise of Warrants granted to it on April 9, 2001 and
January 16, 2002 for its services as placement agent in our limited
offering and public offering that closed on those dates, and (5)
109,500 additional common shares that A. Brean Murray has the right to
acquire within 60 days of February 11, 2003 upon the exercise of
options granted to A. Brean Murray by us in connection with his service
as one of our directors. Does not include 985,000 common shares owned
by BMI Capital Corporation. See "Principal Holders of Our Voting
Securities." Mr. Murray is the Chairman of BMI Capital Corporation, and
he disclaims beneficial ownership of the shares beneficially owned by
it.
4
(6) Includes 19,011 common shares that Dr. Ausman has the right to acquire
within 60 days of February 11, 2003, 9,744 common shares owned jointly
with his wife, and 3,030 shares held in an individual retirement
account over which Dr. Ausman exercises sole voting and investment
control.
(7) Includes 20,500 common shares that Mr. Wolfe has the right to acquire
within 60 days of February 11, 2003.
(8) Includes 17,011 common shares that Mr. Wallace has the right to acquire
within 60 days of February 11, 2003 and 1,000 shares held in a living
trust; Mr. Wallace has sole voting and dispositive power over the
shares held in the trust.
(9) Includes 70,600 common shares that Mr. Capocaccia has the right to
acquire within 60 days of February 11, 2003 and 200 common shares held
by a partnership in which Mr. Capocaccia is a general partner and
shares voting and investment power with the other partners.
(10) Includes 133,092 common shares that Mr. Scheuing has the right to
acquire within 60 days of February 11, 2003.
(11) Includes 92,400 common shares that Ms. Victor has the right to acquire
within 60 days of February 11, 2003, 2,000 common shares held by Ms.
Victor's husband and 3,100 common shares held by Ms. Victor's husband
jointly with his mother.
(12) Includes 130,150 common shares that Ms. Winters has the right to
acquire within 60 days of February 11, 2003.
(13) Includes 1,620,327 common shares that all executive officers and
directors as a group have the right to acquire within 60 days of
February 11, 2003.
BIOGRAPHICAL INFORMATION
The following is a brief account of the business experience during the
past five years of each nominee for our Board of Directors and of each of our
directors whose term of office will continue after the meeting:
Daniel S. Follis. Mr. Follis has served as one of our directors since
April 1989. Since 1981, he has served as President of Verschuren & Follis, Inc.,
which advises and administers The Infinity Fund, a limited partnership that
invests in emerging growth companies. Since 1995 he has also served as President
of Follis Corporation, a sales and marketing company engaged in media sales,
television production, serving as a manufacturer's representative and investment
management. Mr. Follis received a B.A. degree in business from Michigan State
University.
Robert R. Henry. Mr. Henry has served as one of our directors since
December 1998. He has been President of Robert R. Henry & Co., Inc., a financial
consulting and investment firm, since 1989. Mr. Henry has been an advisory
director of Morgan Stanley Dean Witter since 1989, and from 1977 through 1989
was a managing director of Morgan Stanley. He is also a director of Middleby
Corporation. He received an M.B.A. from Harvard Business School and a B.A. from
Williams College.
Bruce J. Barrett. Mr. Barrett has served as our President and Chief
Executive Officer and as one of our directors since June 1994. Mr. Barrett
previously served, from June 1993 until
5
May 1994, as the Director, Hospital Products Division for Abbott Laboratories,
Ltd., a health care equipment manufacturer and distributor, and from September
1989 until May 1993, as the Director, Sales and Marketing for Abbott Critical
Care Systems, a division of Abbott Laboratories, Inc., a health care equipment
manufacturer and distributor. While at Abbott Critical Care Systems, Mr. Barrett
managed Abbott's invasive oximetry products for approximately four years. From
September 1981 until June 1987, he served as the group product manager of
hemodynamic monitoring products of Baxter Edwards Critical Care, an affiliate of
Baxter International, Inc., another health care equipment manufacturer and
distributor. Mr. Barrett received a B.S. degree in marketing from Indiana State
University and an M.B.A. degree from Arizona State University. Mr. Barrett is a
party to an employment agreement with us that requires us to elect him to the
offices he currently holds.
A. Brean Murray. Mr. Murray has served as one of our directors since
June 1999. Since it was founded in December 1973, he has served as Chairman,
President, Chief Executive Officer and a Director of Brean Murray & Co., Inc.,
an investment banking company that is a wholly-owned subsidiary of BMI Holding
Co. He has also served as Chairman, President, Chief Executive Officer and a
Director of BMI Holding Co. since it was founded in December 1973. Brean Murray
& Co., Inc. was the underwriter of our public offerings of common shares in June
1997 and April 1998 and the placement agent in our Private Equity Line
Agreement, our April 2001 private placement of securities and our January 2002
public offering of securities. Mr. Murray is also a director of Doral Financial
Corporation and of Specialty Toner Corporation. Mr. Murray is a Trustee of John
Jay College of Criminal Justice. Mr. Murray received a B.S. degree in economics
from Villanova University.
James I. Ausman, M.D., Ph.D. Dr. Ausman has served as one of our
directors since June 1994. He has been Professor of the Department of
Neurosurgery at the University of Illinois at Chicago since August 1991 and
served as its head from 1991 until September 2001. From September 1978 until
July 1991, he was Chairman of the Department of Neurosurgery at Henry Ford
Hospital in Detroit. From December 1987 until July 1991, he served as Director
of the Henry Ford Neurosurgical Institute, also at Henry Ford Hospital. In
addition, he was Clinical Professor of Surgery, Section of Neurosurgery at the
University of Michigan in Ann Arbor from 1980 until 1991. Dr. Ausman received a
B.S. degree in chemistry and biology from Tufts University, a Doctorate of
Medicine from Johns Hopkins University School of Medicine, a Masters of Arts in
Physiology from the State University of New York at Buffalo, and a Ph.D. in
Pharmacology from George Washington University. He has also received graduate
training in neurosurgery at the University of Minnesota and has obtained board
certification from the American Board of Neurological Surgery.
Joe B. Wolfe. Mr. Wolfe has served as one of our directors since
November 2001. Pursuant to our License Agreement with CorRestore LLC, we agreed
to increase the size of our Board of Directors and add CorRestore LLC's designee
as a director. Joe B. Wolfe is CorRestore LLC's designee. Since March 1998, he
has served as President and sole proprietor of Wolfe & Company, a financial
advisory company. From 1992 to 1998, he was Chief Executive Officer of Frontline
Capital, Inc., an NASD-registered broker-dealer. Before 1992, Mr. Wolfe was in
the financial services and investment banking industry for 25 years. Mr. Wolfe
received a B.S. degree in industrial management from Georgia Institute of
Technology.
6
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended November 30, 2002, our Board of Directors
held four meetings.
Audit Committee
Our Board of Directors has an Audit Committee that consists of three
directors. Robert R. Henry (Chairman), H. Raymond Wallace and Daniel S. Follis
are the current members of this committee. Each of the members of our Audit
Committee is independent as independence is defined in Rule 4200(a)(14) of the
National Association of Securities Dealers' listing standards, as those
standards have been modified or supplemented. The Audit Committee:
- recommends to the Board the independent accountants to be selected
or retained to audit our financial statements;
- takes, or recommends that the full board takes, appropriate action
to oversee the independence of our independent accountants;
- oversees our independent accountants' relationship by discussing
with our independent accountants the nature, scope and rigor of
the audit process, receiving and reviewing audit reports and
providing our independent accountants with full access to the
committee and the board to report on any and all appropriate
matters;
- reviews the audited financial statements and discusses them with
management and the independent accountants, including discussions
concerning the quality of our accounting principles, policies and
practices as applied in our financial reporting;
- recommends to the board whether the audited financial statements
should be included in our Annual Report on Form 10-K.
- reviews with management and the independent accountants the
quarterly financial information before we file our Form 10-Qs;
this review is performed by the committee or its chairperson;
- discusses with management and the independent accountants the
quality and adequacy of our internal controls;
- discusses with management the status of pending litigation and
other areas of oversight as the committee deems appropriate; and
- reports committee activities to the full board.
During the fiscal year ended November 30, 2002, our Audit Committee held seven
meetings. Our Board of Directors has adopted a written charter for the Audit
Committee, a copy of which was attached as an appendix to our proxy statement in
connection with the 2001 annual meeting of shareholders.
7
Audit Committee Report
Our Audit Committee has:
- reviewed and discussed our audited financial statements for the
fiscal year ended November 30, 2002 with our management;
- discussed with our independent auditors the matters required to be
discussed by SAS 61 (Codification of Statements on Auditing
Standards, AU 380), as it has been modified or supplemented;
- received the written disclosures and the letter from our
independent accountants required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees), as it has been
modified or supplemented; and
- discussed with our independent accountants our independent
accountants' independence.
Based on the review and discussions described above in this paragraph, our Audit
Committee recommended to our Board of Directors that the audited financial
statements for the fiscal year ended November 30, 2002 be included in our Annual
Report on Form 10-K for the fiscal year ended November 30, 2002 for filing with
the Securities and Exchange Commission.
Management is responsible for the Company's financial reporting process
including its system of internal control, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. The Company's independent auditors are responsible for
auditing those financial statements. Our responsibility is to monitor and review
these processes. It is not our duty or our responsibility to conduct auditing or
accounting reviews or procedures. We are not employees of the Company and we may
not be, and we may not represent ourselves to be or to serve as, accountants or
auditors by profession or experts in the field of accounting or auditing.
Therefore, we have relied, without independent verification, on management's
representation that the financial statements have been prepared with integrity
and objectivity and in conformity with accounting principles generally accepted
in the United States of America and on the representations of the independent
auditors included in their report on the Company's financial statements. Our
oversight does not provide us with an independent basis to determine that
management has maintained appropriate accounting and financial reporting
principles or policies, or appropriate internal controls and procedures designed
to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, our considerations and discussions with management and
the independent auditors do not assure that the Company's financial statements
are presented in accordance with generally accepted accounting principles, that
the audit of our Company's financial statements has been carried out in
accordance with generally accepted auditing standards or that our Company's
independent accountants are in fact "independent."
By the Audit Committee
Robert R. Henry, Chairman
H. Raymond Wallace
Daniel S. Follis
8
Compensation Committee
Our Board of Directors has a Compensation Committee which consists of
two directors. H. Raymond Wallace (Chairman) and James I. Ausman, M.D., Ph.D.
are the current members of this committee. The Compensation Committee makes
recommendations to the Board of Directors with respect to compensation
arrangements and plans for senior management, officers and directors of the
Company and administers the Company's 1991 Incentive Stock Option Plan and 1997
Stock Option Plan. During the fiscal year ended November 30, 2002, the
Compensation Committee held six meetings.
We do not have a nominating committee.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information for each of the fiscal years
ended November 30, 2002, 2001 and 2000 concerning compensation of (1) all
individuals serving as our Chief Executive Officer during the fiscal year ended
November 30, 2002, and (2) our four most highly-compensated other executive
officers in fiscal 2002:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
AWARDS
----------
ANNUAL COMPENSATION SECURITIES ALL OTHER
------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ($)
--------------------------- ---- --------- -------- ---------- ------------------
Bruce J. Barrett, President..... 2002 164,750 0 100,000 -0-
and Chief Executive Officer 2001 177,339 0 218,000 -0-
2000 211,000 34,526 40,000 -0-
Dana Capocaccia, Vice........... 2002 134,345 0 35,000 -0-
President, Corporate
Development (1)
Richard S. Scheuing, Vice....... 2002 110,000 0 10,000 -0-
President, Research and 2001 110,000 0 34,000 -0-
Development 2000 102,927 10,251 15,000 -0-
Mary Ann Victor, Vice President 2002 95,875 0 60,000 -0-
of Communications and 2001 80,892 0 41,400 -0-
Administration and Secretary 2000 78,719 7,864 12,000 -0-
Pamela A. Winters, Vice......... 2002 100,625 0 60,000 -0-
President, Operations 2001 85,000 0 42,000 -0-
2000 81,250 8,041 12,000 -0-
-------------------------------------
(1) Mr. Capocaccia became one of our executive officers on August 1, 2002. The
Compensation shown in the table for fiscal 2002 is compensation paid to him in
all capacities in fiscal 2002.
9
Option Grants Table
The following table sets forth information concerning individual grants
of stock options made during the fiscal year ended November 30, 2002 to each of
our executive officers named in the Summary Compensation Table above:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------------
POTENTIAL
% OF REALIZABLE VALUE AT
TOTAL ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------------
NAME GRANTED (#) YEAR ($/SH) DATE 5% ($) 10% ($)
---- ----------- ----------- ----------- ----------- ----------- --------------
Bruce J. Barrett........... 100,000 (1) 20.5 $2.95 5/9/12 185,524 470,154
Dana Capocaccia............ 35,000 (1) 7.2 $2.95 5/9/12 64,933 164,554
Richard S. Scheuing........ 10,000 (1) 2.0 $2.95 5/9/12 18,552 47,015
Mary Ann Victor............ 60,000 (1) 12.3 $2.95 5/9/12 111,314 282,092
Pamela A. Winters.......... 60,000 (1) 12.3 $2.95 5/9/12 111,314 282,092
-------------------------------------
(1) The options listed in the table were granted to Messrs. Barrett,
Capocaccia and Scheuing, Ms. Victor and Ms. Winters in fiscal 2002
under our 1997 Stock Option Plan, exercisable at the then current fair
market value of the underlying common shares. Each of these options is
exercisable in one-third cumulative annual increments beginning May 10,
2003. Each option also becomes 100% exercisable immediately 10 days
before or upon specified changes in control of the Company. The portion
of each of these options that is exercisable at the date of termination
of employment remains exercisable until the expiration date of the
option, unless termination is for cause.
If, upon exercise of any of the options described above, we must pay
any amount for income tax withholding, in the Compensation Committee's or the
Board of Directors' sole discretion, either the optionee will pay such amount to
us or we will appropriately reduce the number of common shares we deliver to the
optionee to reimburse us for such payment. The Compensation Committee or the
Board may also permit the optionee to choose to have these shares withheld or to
tender common shares the optionee already owns. The Compensation Committee or
the Board may also make such other arrangements with respect to income tax
withholding as it shall determine.
10
Aggregated Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth information concerning each exercise of
stock options during the fiscal year ended November 30, 2002 by each of the
executive officers named in the Summary Compensation Table above and the value
of unexercised options held by them as of November 30, 2002:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END (#) AT FY-END ($)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ------------ ----------- ------------- ----------- -------------
Bruce J. Barrett...... 0 0 648,533 167,667 3,773 2,087
Dana Capocaccia....... 0 0 61,850 45,150 6,575 575
Richard S. Scheuing... 0 0 121,759 24,666 587 393
Mary Ann Victor....... 0 0 80,100 77,300 712 566
Pamela A. Winters..... 0 0 117,150 79,000 720 660
"Value Realized" represents the fair value of the underlying securities on the
exercise date minus the aggregate exercise price of the options.
Compensation of Directors
We refer to our directors who are not our officers or employees as
Outside Directors. Our Outside Directors receive $1,000 for each Board meeting
attended in person, $250 for each telephonic Board meeting attended, and $250
for each Board committee meeting attended on a date other than the date of a
Board meeting. We also reimburse Outside Directors for their reasonable expenses
of attending Board and Board committee meetings. In addition, our Board of
Directors has determined to grant Outside Directors who continue to serve as our
directors after each annual meeting of shareholders, 10-year options to purchase
3,500 common shares each year on the date of the annual meeting of shareholders,
exercisable at the fair market value of the common shares on the date of grant.
For a description of relationships between A. Brean Murray, one of our
directors, and us, see "Compensation Committee Interlocks and Insider
Participation."
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Bruce J. Barrett. As of May 13, 1994, we entered into an employment
agreement with Bruce J. Barrett, pursuant to which, as amended, he is employed
as President and Chief Executive Officer, or in such other position as the Board
of Directors determines, for a period ending April 30, 2006. Mr. Barrett's
annual salary is currently $225,500, which may be increased by the Board of
Directors. Mr. Barrett is also entitled to participate in any bonus plan
established by the Compensation Committee of the Board of Directors. We adopted
a non-officer bonus plan for fiscal 2002 and a bonus plan for fiscal 2003 that
covers officers. Mr. Barrett is entitled to various fringe benefits under the
agreement, including 12 months of compensation and six months of benefits if his
employment under the agreement is terminated
11
without cause or if the agreement expires without being renewed. Mr. Barrett has
agreed not to compete with the Company during specified periods following the
termination of his employment.
Richard S. Scheuing. As of January 11, 2002, we entered into a
three-year agreement with Richard S. Scheuing, pursuant to which he is entitled
to a bonus equal to six months of salary if he stays employed with our successor
after a change in control for at least three months or if, during that period,
the successor terminates his employment without cause or he quits for good
reason. Mr. Scheuing's current annual salary is $110,000, which may be increased
by the Board of Directors. Mr. Scheuing has agreed not to compete with the
Company and not to solicit our employees during specified periods following the
termination of his employment, and he has agreed to various confidentiality
obligations.
Stock Option Terms. All options granted under our stock option plans
through February 11, 2003, that are not already 100% exercisable immediately,
including options granted to Messrs. Barrett, Capocaccia and Scheuing, Ms.
Victor and Ms. Winters, become 100% exercisable immediately ten days before or
upon specified changes in control of the Company.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended November 30, 2002, James I. Ausman, M.D.,
Ph.D., H. Raymond Wallace and, until April 17, 2002, A. Brean Murray served as
the members of our Compensation Committee. None of the members of our
Compensation Committee was, during the fiscal year ended November 30, 2002, one
of our officers or employees, or one of our former officers, except that Mr.
Wallace became our non-salaried Chairman of the Board on January 27, 1995 and
became a non-officer Chairman of the Board effective April 6, 1995. None of the
committee members had any relationship with us requiring disclosure by us
pursuant to Securities and Exchange Commission rules regarding disclosure of
related-party transactions, except that Mr. Murray had the relationships with us
described below.
Pursuant to the Placement Agency Agreement between us and Brean Murray
& Co., Inc., dated January 11, 2002, we engaged Brean Murray & Co., Inc. as our
exclusive Placement Agent in connection with our January 2002 public offering of
common shares. Brean Murray & Co., Inc. received for its services (1) $340,000
as a placement agent fee, and (2) warrants to purchase 100,000 common shares at
$5.10 per share exercisable during the four-year period beginning January 11,
2003. A. Brean Murray, one of our directors since June 1999, is the Chairman,
President and Chief Executive Officer of Brean Murray & Co., Inc. Brean Murray &
Co., Inc. is a wholly-owned subsidiary of BMI Holding Co. A. Brean Murray is
also the Chairman, President and Chief Executive Officer of BMI Holding Co. and
he and his wife own 83% of the outstanding voting stock of BMI Holding Co.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
officers and directors, and persons who own more than ten percent of a
registered class of our equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission.
12
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish us with copies of all Section 16(a) reports they file.
Based solely on review of the copies of such reports furnished to us during or
with respect to fiscal 2002, or written representations that no Forms 5 were
required, we believe that during the fiscal year ended November 30, 2002 all
Section 16(a) filing requirements applicable to our officers, directors and
greater than ten-percent beneficial owners were complied with.
CERTAIN TRANSACTIONS
See "Executive Compensation -- Compensation Committee Interlocks and
Insider Participation" for a description of relationships between us and A.
Brean Murray.
II. PROPOSAL TO APPROVE AN AMENDMENT TO THE
SOMANETICS CORPORATION 1997 STOCK OPTION PLAN
TO INCREASE AUTHORIZED SHARES
GENERAL
We seek to increase the number of shares subject to the Somanetics
Corporation 1997 Stock Option Plan. You are being asked to consider and approve
an amendment to the 1997 plan to increase the number of common shares, par value
$0.01 per share, reserved for issuance upon the exercise of options granted
under the 1997 plan by 450,000 shares. Pursuant to the 1997 plan, 2,110,000
common shares are currently reserved for issuance upon the exercise of options
granted or to be granted to participants in the 1997 plan. Our key employees,
officers, directors, consultants and advisors and those of any entity in which
we have a direct or indirect ownership interest of 50% or more of the total
combined voting power of all classes of outstanding voting equity interests are
eligible to participate in the 1997 plan. Our Board of Directors or a committee
appointed by our Board of Directors determines which persons eligible to
participate in the 1997 plan are actually granted options under the 1997 plan.
Options granted under the 1997 plan may be incentive stock options,
nonqualified options, or both. Incentive stock options are options that meet the
requirements set forth in the 1997 plan, that are intended to be incentive stock
options, and that qualify as incentive stock options under Section 422 of the
Internal Revenue Code and the related rules and regulations. Nonqualified
options are options that meet the requirements set forth in the 1997 plan but
are not intended to be incentive stock options, or do not qualify as incentive
stock options under Section 422. The 1997 plan contains various provisions to
ensure that incentive stock options comply with Section 422. The Board of
Directors adopted the 1997 plan on January 15, 1997, amended the 1997 plan on
January 15, 1998, January 21, 1999, February 16, 2000, December 4, 2000 and
February 21, 2002 to increase the number of shares reserved for issuance under
the 1997 plan, and approved the currently proposed amendment on January 23,
2003, subject to shareholder approval.
Our 1991 Incentive Stock Option Plan, which terminated in 2001, except
for the options granted before that date. As of February 12, 2003, options to
purchase 66,972 common shares remained outstanding under the 1991 plan. In
addition, as of February 11, 2003, we had granted,
13
and there remained outstanding, options independent of any of our stock option
plans to purchase 258,678 common shares. As of February 11, 2003, (1) options to
purchase 2,014,855 common shares were outstanding under the 1997 plan, (2)
options to purchase 3,033 common shares granted under the 1997 plan had been
exercised, and (3) 92,112 common shares remained available for the grant of
options under the 1997 plan. The proposed amendment to the 1997 plan would
increase the number of common shares reserved for issuance upon the exercise of
options granted or to be granted under the 1997 plan by 450,000 common shares.
Our 1993 Director Stock Option Plan terminated in 1998, except for the
options granted before that date. As of February 11, 2003, options to purchase
2,498 common shares remained outstanding under the director plan. Our Board of
Directors has determined to grant Outside Directors who continue to serve as our
directors after each annual meeting of shareholders, 10-year options to purchase
3,500 common shares each year on the date of the annual meeting of shareholders,
exercisable at the fair market value of the common shares on the date of grant,
all under the amended 1997 plan.
We also have the following warrants outstanding: (1) warrants granted
to Kingsbridge Capital Limited to purchase an aggregate of 205,097 common shares
in connection with the March 6, 2000 Private Equity Line Agreement, (2) warrants
granted to CorRestore LLC and its agent Wolfe & Company to purchase an aggregate
of 2,500,000 common shares in connection with the June 2, 2000 CorRestore
License Agreement, (3) warrants to purchase an aggregate of 25,000 common shares
granted to Brean Murray & Co., Inc. in connection with our private placement of
common shares that closed in April 2001, and (4) warrants to purchase an
aggregate of 100,000 common shares granted to Brean Murray & Co., Inc. in
connection with our public offering of common shares that closed in January
2002.
The Board of Directors believes that it is in our best interests and in
the best interests of our shareholders to approve the proposed amendment to the
1997 plan to allow us to continue to grant options in accordance with the 1997
plan.
The purpose of the 1997 plan is to provide our key employees, officers,
directors, consultants and advisors with an increased incentive to make
significant and extraordinary contributions to our long-term performance and
growth, to join the interests of our key employees, officers, directors,
consultants and advisors with the interests of our shareholders and to help us
attract and retain our key employees, officers, directors, consultants and
advisors. The 1997 plan, however, could have an "anti-takeover" effect,
particularly with regard to the Committee's ability to accelerate the
exercisability of stock options in connection with a change in control.
Persons deemed to be our affiliates, i.e., persons who directly or
indirectly through one or more intermediaries, control, are controlled by, or
are under common control with, us, must resell securities acquired under the
1997 plan pursuant to a registration statement under the Securities Act of 1933
and the related rules and regulations, Rule 144 under the Securities Act or an
applicable exemption under the Securities Act.
14
We are the issuer of the securities offered pursuant to the 1997 plan.
The common shares we issue upon exercise of stock options under the 1997 plan
may be either our authorized and unissued or reacquired common shares. The 1997
plan is not subject to any provisions of the Employee Retirement Income Security
Act of 1974 and is not qualified under Section 401(a) of the Code.
APPROVAL OF THE 1997 PLAN AMENDMENT
Shareholder approval of the proposed amendment to the 1997 plan
requires the approval by a majority of the votes cast by the holders of common
shares at the meeting and entitled to vote on the action. Abstentions, withheld
votes and broker non-votes will not be deemed votes cast in determining approval
of this proposal, but will be counted in determining the number of common shares
present or represented by proxy in determining whether a quorum is present. We
do not intend to place the proposed amendment to the 1997 plan into effect
unless such approval is obtained at the meeting, and such approval is sought, in
part, to exempt the granting of options under the 1997 plan from the provisions
of Section 162(m) of the Internal Revenue Code and in order to comply with
shareholder approval requirements for securities traded on The Nasdaq SmallCap
Market.
A FULL COPY OF THE 1997 PLAN, AS PROPOSED TO BE AMENDED, MARKED TO SHOW
THE PROPOSED CHANGES, IS ATTACHED AS EXHIBIT A TO THIS PROXY STATEMENT. THE
MAJOR FEATURES OF THE 1997 PLAN, AS PROPOSED TO BE AMENDED, ARE SUMMARIZED
BELOW, BUT THIS IS ONLY A SUMMARY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE ACTUAL TEXT. CAPITALIZED TERMS NOT OTHERWISE DEFINED IN THIS PROXY
STATEMENT HAVE THE MEANINGS GIVEN THEM IN THE 1997 PLAN. AS OF FEBRUARY 11,
2003, THE CLOSING SALES PRICE OF OUR COMMON SHARES WAS $1.69.
ADMINISTRATION
The 1997 plan is administered by a committee or entity appointed by our
Board of Directors to perform any of the functions and duties of the Committee
under the 1997 plan and, with respect to administration of the 1997 plan
regarding participants who are subject to Section 16(a) and (b) of the
Securities Exchange Act of 1934 and the related rules and regulations, that is a
committee meeting the standards of Rule 16b-3 under the Exchange Act, or any
similar successor rule, or the Board of Directors as a whole. The administrator
is referred to in the 1997 plan as the "Committee". Members of the Committee
serve at the pleasure of the Board of Directors and may be removed or replaced
by the Board of Directors at any time. The Committee currently consists of H.
Raymond Wallace (Chairman) and James I. Ausman, M.D., Ph.D. or the Board of
Directors as a whole.
Subject to the provisions of the 1997 plan, the Committee is authorized
to interpret the 1997 plan, to make, amend and rescind rules relating to the
1997 plan, and to make all other determinations necessary or advisable for the
1997 plan's administration. The Committee's interpretation of any provision of
the 1997 plan is, unless otherwise determined by our Board of Directors, final
and conclusive. Subject to the provisions of the 1997 plan, the Committee
determines, from those eligible to be participants under the 1997 plan, the
persons to be granted stock options, the amount of stock to be optioned to each
such person, the time such options shall
15
be granted, the time or times such options shall be exercisable and the terms
and conditions of any stock options. Such terms and conditions may, in the
Committee's sole discretion include, without limitation, provisions providing
for termination of the option, forfeiture of the gain on any option exercises or
both if the participant competes with us or otherwise acts contrary to our
interests, and provisions imposing restrictions, potential forfeiture or both on
shares acquired upon exercise of options granted pursuant to the 1997 plan. The
Committee may condition any grant on the potential participant's agreement to
such terms and conditions. Under the 1997 plan, in exercising its discretion,
there is no requirement whatsoever that the Committee follow past practices, act
in a manner consistent with past practices, or treat any key employee, officer,
director, consultant or advisor in a manner consistent with the treatment
afforded other key employees, officers, directors, consultants or advisors with
respect to the 1997 plan or otherwise.
Subject to the requirements of the Internal Revenue Code with respect
to incentive stock options that are intended to remain incentive stock options,
when a participant ceases to be one of our employees for any reason, the stock
option agreement may provide for the acceleration of, or the Committee may
accelerate, in its discretion, in whole or in part, the time or installments
with respect to which the stock option shall be exercisable, subject to any
restrictions, terms and conditions fixed by the Committee. The Committee may
exercise its discretion at the date of the grant of the stock option or after
the date of grant.
In addition to any other rights of indemnification they may have, we
will indemnify the members of the Committee in connection with any claim,
action, suit or proceeding relating to any action taken or failure to act under
or in connection with the 1997 plan or any option granted under the 1997 plan to
the full extent provided for under our Restated Articles of Incorporation or
bylaws with respect to indemnification of our directors.
1997 PLAN PARTICIPANTS
The Committee, in its discretion, selects the persons who are eligible
to participate in the 1997 plan and determines the grants and awards to those
individuals. The only limitation on eligibility under the 1997 plan is that
individuals must be one of our key employees, officers, directors, consultants
or advisors, as determined by the Committee in its discretion; provided that
incentive stock options may be granted only to our employees, as defined in the
Internal Revenue Code, to the extent required by Section 422 of the Internal
Revenue Code.
Approximately 28 key employees, six directors, and five consultants and
advisors are currently eligible to participate in the 1997 plan, of which 25 key
employees and all of the directors and consultants have been granted options
under the 1991 Plan, the 1997 plan, the Directors Plan or independent of any
stock option plan.
Subject to the adjustments described under the caption "Shares Subject
to Grant or Award", no participant may be granted stock options to purchase more
than 300,000 common shares in the aggregate in any fiscal year. In addition,
grants and awards are subject to the maximum number of shares remaining
available for the grant of stock options under the 1997 plan. There are also
limitations on the maximum value of incentive stock options that may
16
become first exercisable by any person in any year. Each option grant under the
1997 plan must be evidenced by a written agreement containing provisions
approved by the Committee.
SHARES SUBJECT TO GRANT OR AWARD
The maximum number of common shares reserved for issuance upon the
exercise of stock options granted under the 1997 plan is currently 2,110,000
common shares and is proposed to be amended to be 2,560,000 common shares. These
common shares may consist in whole or in part of authorized and unissued or
reacquired common shares. Unless the 1997 plan has terminated, shares covered by
the unexercised portion of canceled, expired or otherwise terminated options
under the 1997 plan are again available for option and sale.
The number and type of shares subject to each outstanding stock option,
the option price with respect to outstanding stock options, the aggregate number
and type of shares remaining available under the 1997 plan, and the maximum
number and type of shares that may be granted to any participant in any fiscal
year are subject to such adjustment as the Committee, in its discretion, deems
appropriate to reflect events such as stock dividends, stock splits,
recapitalizations, mergers, statutory share exchanges or reorganizations of or
by Somanetics; provided that no fractional shares may be issued pursuant to the
1997 plan, no rights may be granted under the 1997 plan with respect to
fractional shares, and any fractional shares resulting from such adjustments
shall be eliminated from any outstanding option.
AMENDMENT OR TERMINATION OF THE 1997 PLAN
Our Board of Directors may terminate or amend the 1997 plan, or amend
any stock option agreement under the 1997 plan, at any time; provided that,
- to the extent required by Section 162(m) of the Internal Revenue
Code and related regulations, or any successor rule, but only with
respect to amendments or revisions affecting participants whose
compensation is subject to Section 162(m) of the Internal Revenue
Code, and to the extent required by Section 422 of the Code, or
any successor section, but only with respect to incentive stock
options, no such amendment or revision may increase the maximum
number of shares in the aggregate that are subject to the 1997
plan without our shareholders' approval or ratification, and
- no such amendment or revision may change the option price or alter
or impair any stock option previously granted under the 1997 plan,
in a manner adverse to a participant, without the consent of that
participant,
all except as described under the caption "Shares Subject to Grant".
Unless sooner terminated by our Board of Directors, the 1997 plan will
terminate on January 15, 2007, which is ten years after its original adoption by
our Board of Directors. No stock options may be granted under the 1997 plan
after that date. Termination of the 1997 plan will not affect the validity of
any option outstanding on the date of termination.
17
STOCK OPTIONS
Grant of Stock Options
Both incentive stock options and nonqualified options may be granted
under the 1997 plan. An incentive stock option is intended to be an incentive
stock option and qualifies as incentive stock options under Section 422 of the
Internal Revenue Code. Any incentive stock option granted under the 1997 plan
must have an exercise price that is not less than 100% of the fair market value
of the shares on the date on which the option is granted. For an incentive stock
option granted to a participant who owns more than 10% of our total combined
voting shares, the exercise price must not be less than 110% of the fair market
value of the shares subject to that option on the date the option is granted. A
nonqualified option granted under the 1997 plan must have an exercise price that
is not less than the par value, if any, of the common shares.
At the time any option granted under the 1997 plan is exercised, the
participant must pay the full option price for all shares purchased:
- in cash, or
- with the consent of the Committee, in its discretion, and to
the extent permitted by applicable law,
- in common shares,
- by a promissory note payable to the order of us that is
acceptable to the Committee,
- by a cash down payment and a promissory note for the
unpaid balance,
- subject to any conditions established by the Committee, by
having us retain from the shares to be delivered upon
exercise of the stock option that number of shares having
a fair market value on the date of exercise equal to the
option price,
- by delivery to us of written notice of the exercise, in
such form as the Committee may prescribe, accompanied by
irrevocable instructions to a stock broker to promptly
deliver to us full payment for the shares with respect to
which the option is exercised from the proceeds of the
stock broker's sale of the shares or loan against them,
- in such other manner as the Committee determines is
appropriate, in its discretion.
The aggregate fair market value, determined as of the date the option is
granted, of the underlying stock with respect to which incentive stock options
are exercisable for the first time by an individual during any calendar year
under all of our plans cannot exceed $100,000.
Term of Stock Options
If not sooner terminated, each stock option granted under the 1997 plan
will expire not more than ten years from the date of grant; provided that, with
respect to an incentive stock option granted to a participant who, at the time
of the grant, owns more than 10% of our total
18
combined voting stock, the option must expire not more than five years after the
date of the grant.
Continuation of Employment
Options granted under the 1997 plan may be exercised only while the
participant is one of our employees, officers, directors, consultants or
advisors, except as described under the caption "Extraordinary Transactions" and
except that the Committee may, in its discretion, permit the exercise of all or
any portion of the options granted to a participant:
- for a period not to exceed three months following such termination
with respect to incentive stock options that are intended to
remain incentive stock options if such termination is not due to
death or permanent disability of the participant,
- for a period not to exceed one year following termination of
employment with respect to incentive stock options that are
intended to remain incentive stock options if termination of
employment is due to the death or permanent disability of the
participant, and
- for a period not to extend beyond the expiration date with respect
to nonqualified options or incentive stock options that are not
intended to remain incentive stock options,
all subject to any restrictions, terms and conditions fixed by the Committee
either at the date of the award or at the date it exercises its discretion.
In no event, however, is an option exercisable after its expiration
date, and, unless the Committee in its discretion determines otherwise pursuant
to the 1997 plan, an option may only be exercised after termination of a
participant's employment, consultation or other service to the extent
exercisable on the date of such termination or to the extent exercisable as a
result of the reason for such termination. The Committee may evidence the
exercise of its discretion in any manner it deems appropriate, including by
resolution, by a provision in the option, or by an amendment to the option.
Subject to the requirements of the Internal Revenue Code with respect
to incentive stock options that are intended to remain incentive stock options,
when a participant ceases to be one of our employees for any reason, the stock
option agreement may provide for the acceleration of, or the Committee may
accelerate, in its discretion, in whole or in part, the time or installments
with respect to which the stock option shall be exercisable, subject to any
restrictions, terms and conditions fixed by the Committee. The Committee may
exercise its discretion at the date of the grant of the stock option or after
the date of grant.
The Committee may require any participant to agree, as a condition to
the grant of an option, to remain in his or her position as one of our
employees, officers, directors, consultants or advisors for a minimum period
from the date the stock option is granted that is fixed by the Committee.
Nothing in the 1997 plan or in any option granted under the 1997 plan, nor any
action taken by the Committee under the 1997 plan gives any participant any
right with respect
19
to continuation of employment, consultation or other service with us or
interfere in any way with our right to terminate such person's employment,
consultation or other service at any time.
Sequential Exercise
We may grant additional stock options to the same participant even if
options previously granted to that participant remain unexercised. A participant
may exercise any option granted under the 1997 plan, if then exercisable, even
if options previously granted to that participant remain unexercised.
Transferability of Options
Except as otherwise described below, if required by Section 422 of the
Internal Revenue Code, but only with respect to incentive stock options, or to
the extent determined by the Committee in its discretion, (1) no option granted
under the 1997 plan is transferable by the participant other than by will, or by
the laws of descent and distribution or, for nonqualified options only (unless
permitted by Section 422 of the Internal Revenue Code), pursuant to a qualified
domestic relations order as defined in the Internal Revenue Code or Title I of
the Employee Retirement Income Security Act, or the rules thereunder, and (2)
each option is exercisable, during the lifetime of the participant, only by the
participant.
The Committee may, in its discretion, grant options on terms that
permit the optionee to transfer all or a portion of the options to the following
persons, and that permit the following persons to exercise the options
transferred to them:
- the optionee's spouse, children or grandchildren of the optionee,
who are referred to in the 1997 plan as "Immediate Family Members",
- a trust or trusts for the exclusive benefit of Immediate Family
Members,
- a partnership in which Immediate Family Members are the only
partners, or
- such other persons or entities as determined by the
Committee, in its discretion.
Any rights to transfer options are on such terms and conditions as the
Committee, in its discretion, may determine; provided that (1) the stock option
agreement pursuant to which such options are granted must be approved by the
Committee and must expressly provide for transferability in a manner consistent
with these provisions of the 1997 plan, and (2) subsequent transfers of
transferred options are prohibited except for transfers the original optionee
would be permitted to make (if he or she were still the owner of the option) in
accordance with the 1997 plan.
Following transfer, the options continue to be subject to the same
terms and conditions as were applicable immediately before transfer; provided
that for some purposes under the 1997 plan (generally relating to exercise of
the option) the term "Participant" is deemed to refer to the transferee. The
events of termination of employment, described above under the caption
"Continuation of Employment", continue to be applied to the original optionee.
Following such events of termination of employment of the original optionee, the
options are exercisable by the transferee only to the extent, and for the
periods, described above under the caption
20
"Continuation of Employment". The original optionee remains subject to
withholding taxes and related requirements upon exercise described below under
the caption "Federal Income Taxes--Withholding Payments". We have no obligation
to provide any notice to any transferee, including notice of any termination of
the option as a result of termination of the original optionee's employment or
other service.
Shareholder Rights
No participant in the 1997 plan has any of the rights of our
shareholders under any option granted under the 1997 plan until the actual
issuance of shares to the participant. Before such issuance no adjustment will
be made for dividends, distributions or other rights in respect of such shares,
except as described under the caption "Shares Subject to Grant".
EXTRAORDINARY TRANSACTIONS
Under the 1997 plan, specified consolidations, mergers, transfers of
substantially all of our properties and assets, dissolutions, liquidations,
reorganizations or reclassifications in such a way that holders of common shares
are entitled to receive stock, securities, cash or other assets with respect to,
or in exchange for, their common shares, are each referred to as a
"Transaction". If we engage in a Transaction, then each participant exercising a
1997 plan stock option after consummation of the Transaction will be entitled to
receive (for the same aggregate exercise price) the stock and other securities,
cash and assets the participant would have received in the Transaction if he or
she had exercised the option in full immediately before consummation of the
Transaction.
In addition, in connection with a Transaction, the Committee, acting in
its discretion without the consent of any participant and regardless of any
other provision of the 1997 plan, may:
- permit stock options outstanding under the 1997 plan to be
exercised in full for a limited period of time, after which all
unexercised stock options and all rights of participants under
such options would terminate,
- permit stock options outstanding under the 1997 plan to be
exercised in full for their then remaining terms, or
- require all stock options outstanding under the 1997 plan to be
surrendered to us for cancellation and payment to each participant
in cash of the excess of the fair market value of the underlying
common shares as of the date the Transaction is effective over the
exercise price, less any applicable withholding taxes.
The 1997 plan provides, however, that the Committee may not select an
alternative for a participant that would result in his or her liability under
Section 16(b) of the Exchange Act, without the participant's consent. If all of
the alternatives have such a result, the Committee will take action to put the
participant in as close to the same position as he or she would have been in if
one of the alternatives described above had been selected, but without resulting
in any payment by the participant under Section 16(b) of the Exchange Act. With
the consent of each
21
participant, the Committee may make such provision with respect to any
Transaction as it deems appropriate.
FEDERAL INCOME TAX CONSEQUENCES
The rules governing the tax treatment of options and shares acquired
upon the exercise of options are quite technical. Therefore, the description of
federal income tax consequences set forth below is necessarily general in nature
and does not purport to be complete. Moreover, statutory provisions are subject
to change, as are their interpretations, and their application may vary in
individual circumstances. Finally, the tax consequences under applicable state
and local income tax laws may not be the same as under the federal income tax
laws.
Incentive Stock Options
Incentive stock options granted under the 1997 plan are intended to
qualify as "Incentive Stock Options" under Section 422 of the Internal Revenue
Code. If the participant does not dispose of the shares acquired upon exercise
of an incentive stock option within one year after the transfer of shares to the
participant and within two years from grant of the option, the participant will
realize no taxable income as a result of the grant or exercise of such option,
and any gain or loss that is subsequently realized upon a sale or other
disposition of the shares may be treated as long-term capital gain or loss, as
the case may be. Under these circumstances, we will not be entitled to a
deduction for federal income tax purposes with respect to either the issuance of
the incentive stock options or the transfer of shares upon their exercise.
If the participant disposes of the shares acquired upon exercise of
incentive stock options before the above time periods expire, the participant
will recognize ordinary income in the year in which the disqualifying
disposition occurs, the amount of which will generally be the lesser of (1) the
excess of the market value of the shares on the date of exercise over the option
price, or (2) the gain recognized on such disposition. Such amount will
ordinarily be deductible by us for federal income tax purposes in the same year,
if the amount constitutes reasonable compensation. Moreover, we may be required
to satisfy certain federal income tax withholding requirements with respect to
such compensation, although deductibility of the compensation will not be
conditioned on satisfying withholding requirements. In addition, the excess, if
any, of the amount realized on a disqualifying disposition over the market value
of the shares on the date of exercise will be treated as capital gain.
Nonqualified Options
A participant who acquires shares by exercise of a nonqualified option
generally realizes taxable ordinary income at the time of exercise equal to the
difference between the exercise price and the fair market value of the shares on
the date of exercise. Such amount ordinarily will be deductible by us in the
same year, if the amount constitutes reasonable compensation. Moreover, we will
be required to satisfy certain federal income tax withholding requirements with
respect to such compensation, although deductibility of the compensation will
not be conditioned on satisfying withholding requirements. Subsequent
appreciation or decline in the value of the
22
shares will generally be treated as capital gain or loss on the sale or other
disposition of the shares.
Capital Gains Rates
If a participant recognizes capital gain upon the sale or other
disposition of shares acquired upon exercise of options, the tax rate applicable
to such gain will depend on a number of factors, including the date the options
are granted, the date the options are exercised, the date the shares are sold or
otherwise disposed of, the length of time the participant holds the shares, and
the participant's marginal tax bracket. Participants should consult their own
tax advisors concerning the impact to them of the long-term capital gain tax
rates, as well as the other tax consequences of participation in the 1997 plan.
Withholding Payments
If upon the exercise of any nonqualified option or a disqualifying
disposition, within the meaning of Section 422 of the Internal Revenue Code, of
shares acquired upon exercise of an incentive stock option, we must pay any
amount for income tax withholding, in the Committee's discretion, either the
participant shall pay such amount to us, or the amount of common shares we
deliver to the participant will be appropriately reduced, to reimburse us for
such payment.
We have the right to withhold the amount of such taxes from any other
sums or property due or to become due from us to the participant on such terms
and conditions as the Committee shall prescribe. We may also defer issuance of
the stock upon exercise of such option until the participant pays us the amount
of any such tax. The Committee may, in its discretion, permit participants to
satisfy such withholding obligations, in whole or in part, by electing to have
the amount of common shares delivered or deliverable by us upon exercise of a
stock option appropriately reduced, or by electing to tender common shares back
to us after exercise of a stock option to reimburse us for such income tax
withholding, subject to such rules and regulations, if any, as the Committee may
adopt. The Committee may make such other arrangements with respect to income tax
withholding as it shall determine.
Limitation on Compensation Deduction
Publicly-held corporations may not deduct compensation paid to some of
their executive officers in excess of $1 million. The employees covered by the
$1 million compensation deduction limitation are the chief executive officer and
those employees whose annual compensation is required to be reported to the
Securities and Exchange Commission because the employee is one of the company's
four highest compensated employees for the taxable year (other than the chief
executive officer). Ordinary income attributable to stock options generally is
included in an employee's compensation for purposes of the $1 million limitation
on deductibility of compensation.
There is an exception to the $1 million compensation deduction
limitation for compensation paid pursuant to a qualified performance-based
compensation plan. Compensation
23
attributable to a stock option satisfies the qualified performance-based
compensation exception if the following conditions are met:
- the grant is made by a compensation committee comprised of outside
directors,
- the plan under which the options may be granted states the maximum
number of shares with respect to which options may be granted
during a specified period to any employee,
- under the terms of the option, the amount of compensation the
employee would receive is based solely on an increase in the value
of the shares after the date of the grant, for example, the option
is granted at an exercise price equal to or greater than fair
market value as of the date of the grant, and
- the individuals eligible to receive grants, the maximum number of
shares for which grants may be made to any employee, the exercise
price of the options and other disclosures required by SEC proxy
rules are disclosed to shareholders and subsequently approved by
them.
If the amount of compensation a covered employee may receive under the
grant is not based solely on an increase in the value of the shares after the
date of the grant (for example, an option is granted with an exercise price that
is less than the fair market value of the underlying common shares as of the
date of the grant), none of the compensation attributable to the grant is
qualified performance-based compensation unless the grant is made subject to
reaching a performance goal that has been previously established and approved by
our shareholders and otherwise qualifies under Section 162(m) of the Internal
Revenue Code. We have not established any performance goals for grants under the
1997 plan that meet the requirements of the performance-based compensation
standard required by Section 162(m) of the Internal Revenue Code. The grant of
options by the Board of Directors or by a committee not meeting the requirements
of Section 162(m) will not qualify for the performance-based compensation
exception to the $1 million compensation deduction limitation.
ACCOUNTING TREATMENT
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" was issued. We have chosen to continue
to account for stock-based compensation of employees using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. Accordingly,
compensation costs for stock options granted to employees are measured as the
excess, if any, of the market price of our stock at the date of grant over the
amount an employee must pay to acquire the stock. No compensation expense has
been charged against income for stock option grants to employees. Stock-based
compensation of consultants and advisors is determined based on the fair value
of the options or warrants on the grant date pursuant to the methodology of SFAS
No. 123, estimated using the Black-Scholes model. The resulting amount is
recognized as compensation expense and an increase in additional paid-in capital
over the vesting period of the option.
24
OPTION GRANTS UNDER THE PLANS
Options may be granted under the 1997 plan at the Committee's
discretion, subject to shareholder approval of the proposed amendment to the
1997 plan if options are granted in excess of the 2,110,000 common shares
currently authorized and before such approval. The following table sets forth,
as to Bruce J. Barrett, Dana Capocaccia, Richard S. Scheuing, Mary Ann Victor,
Pamela A. Winters, all current executive officers as a group, all current
directors who are not executive officers as a group, all employees (including
officers) who are not executive officers, as a group, and all other consultants
and advisors, as a group, the options granted under the 1997 plan, the 1991
plan, the directors plan and independent of any option plan, collectively
referred to as the "Plans", during the fiscal year ended November 30, 2002:
NEW PLAN BENEFITS
Somanetics Corporation 1991 Incentive Stock Option Plan
Somanetics Corporation 1997 Stock Option Plan
Somanetics Corporation Stock Options Granted Independent of Any Plan
Somanetics Corporation 1993 Director Stock Option Plan
Number of Common
Shares Subject to Options
Granted Under the Plans
In the Fiscal Year Ended
Name and Position November 30, 2002
Bruce J. Barrett, President and Chief
Executive Officer................................ 100,000
Dana Capocaccia, Vice President, Corporate
Development...................................... 35,000
Richard S. Scheuing, Vice President,
Research and Development......................... 10,000
Mary Ann Victor, Vice President of
Communications and Administration
and Secretary.................................... 60,000
Pamela A. Winters, Vice President,
Operations....................................... 60,000
All current executive officers as a
group (8 persons) ............................... 440,000
All current directors who are not executive
officers as a group (6 persons).................. 21,000
All employees (including officers) who
are not executive officers as a
group (15 persons)............................... 48,500
All other consultants and advisors as
a group (8 persons).............................. 0
The dollar values of these options cannot be determined because they
depend on the market value of the underlying shares on the date of exercise. No
associate of any director, nominee or executive officer has been granted options
under the Plans. In addition, no person
25
not named above has received five percent or more of the options authorized
under the Plans, in the aggregate.
Our Board of Directors has (1) terminated the Directors Plan, which
means that no future grants of stock options will be made under the Directors
Plan, and (2) determined to grant Outside Directors who continue to serve as our
directors after each annual meeting of shareholders, 10-year options to purchase
3,500 common shares each year on the date of the annual meeting of shareholders,
exercisable at the fair market value of the common shares on the date of grant.
EQUITY COMPENSATION PLAN INFORMATION
The following information is provided as of November 30, 2002 with
respect to compensation plans, including individual compensation arrangements,
under with our equity securities are authorized for issuance:
(c)
Number of securities
(a) (b) remaining available for
Number of securities to Weighted-average future issuance under
be issued upon exercise exercise price of equity compensation plans
of outstanding options, outstanding options (excluding securities
Plan category warrants and rights warrants and rights reflected in column (a))
------------------ -------------------------- -------------------------- -------------------------
Equity compensation
plans approved by
security holders (1)..... 4,790,672 $3.43 92,112
Equity compensation
plans not approved by
security holders (2)..... 383,678 $5.61 0
--------- ------
Total...................... 5,174,350 92,112
========= ======
------------------------------------
(1) These plans consist of: (a) the 1991 Incentive Stock Option Plan, which
terminated in 2001 except for the options granted before that date, (b) the 1993
Director Stock Option Plan, terminated in 1998, except for the options granted
before that date, (c) the Somanetics 1997 Stock Option Plan, before the
amendment described in this Part II to increase the authorized shares under that
plan by 450,000 shares, (d) the warrants granted to Kingsbridge Capital Limited
to purchase an aggregate of 205,097 common shares at $4.25 a share in connection
with the March 6, 2000 Private Equity Line Agreement, and (e) the Warrants
granted to CorRestore LLC and its agent Wolfe & Company to purchase an aggregate
of 2,500,000 common shares at $3.00 a share in connection with the June 2, 2000
CorRestore License Agreement.
(2) These plans consist of: (a) non-qualified options to purchase 258,678
common shares granted to 22 of our directors, officers, employees and advisors,
including six current executive
26
officers, three former executive officers and one current director, granted
independent of our stock option plans (including one option granted in fiscal
2002 to purchase 100,000 common shares as an inducement essential to an new
executive officer entering into an employment agreement with us), (b) warrants
to purchase an aggregate of 25,000 common shares at $2.10 a share through April
9, 2006 granted to Brean Murray & Co., Inc. in connection with our private
placement of common shares that closed in April 2001, and (c) warrants to
purchase an aggregate of 100,000 common shares at $5.10 a share through January
11, 2007 granted to Brean Murray & Co., Inc. in connection with our public
offering of common shares that closed in January 2002. The options and warrants
are subject to anti-dilution adjustments. Brean Murray & Co., Inc. has piggyback
registration rights with respect to its warrants to purchase 25,000 common
shares and demand and piggyback registration rights with respect to its warrants
to purchase 100,000 common shares.
The options granted independent of our stock option plans were granted
on May 16, 1994, July 21, 1994, December 22, 1995, January 5, 1996, April 24,
1997 and August 1, 2002. All of the options have vested, except for an option to
purchase 100,000 common shares granted on August 1, 2002, which vests in
one-third cumulative annual installments beginning August 1, 2003, and also 100%
immediately 10 business days before or upon specified changes in control of us.
Options granted to three current and former officers and vested at the time of
termination of employment, continue to be exercisable until the original
termination date notwithstanding such termination, unless such termination is
for cause, in which case such options expire at the date of such termination.
Other options expire at the date of termination of employment, unless extended
in the discretion of the Compensation Committee of our Board of Directors.
The non-plan options expire 10 years after they were granted, except
for two options to purchase 21,500 common shares granted on December 22, 1995,
which expire March 13, 2005. The exercise prices of these options, which were at
least the fair market value of the underlying common shares on the date of
grant, range from $2.30 to $13.125. Payment of the exercise price is made in the
same manner as described above under the caption "Stock Options -- Grant of
Stock Options" with respect to options granted under the 1997 Plan. In addition,
the options are subject to the same provisions in connection with business
combinations as described above under the caption "Extraordinary Transactions"
with respect to options granted under the 1997 Plan. The options may not be
transferred other than by will or by the laws of descent and distribution, and
during the optionee's lifetime, the option is exercisable only by the optionee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT TO THE 1997 PLAN, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY
OTHERWISE.
27
III. OTHER MATTERS
ANNUAL REPORT
A COPY OF OUR ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED
NOVEMBER 30, 2002 ACCOMPANIES THIS PROXY STATEMENT. WE FILE AN ANNUAL REPORT ON
FORM 10-K WITH THE SECURITIES AND EXCHANGE COMMISSION. WE WILL PROVIDE, WITHOUT
CHARGE, TO EACH PERSON BEING SOLICITED BY THIS PROXY STATEMENT, UPON THE WRITTEN
REQUEST OF ANY SUCH PERSON, A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 2002 (AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, EXCLUDING EXHIBITS FOR WHICH A REASONABLE CHARGE SHALL BE IMPOSED).
ALL SUCH REQUESTS SHOULD BE DIRECTED TO SOMANETICS CORPORATION, 1653 EAST MAPLE
ROAD, TROY, MICHIGAN 48083-4208, ATTENTION: INVESTOR RELATIONS DEPARTMENT.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP are our independent accountants and have reported
on the financial statements in our 2002 Annual Report to Shareholders, which
accompanies this proxy statement. Our independent accountants are appointed by
our Board of Directors after receiving the recommendation of its Audit
Committee. We will not select our independent accountants for the fiscal year
ending November 30, 2003 until later in our fiscal year.
A representative of Deloitte & Touche LLP is expected to be present at
the Annual Meeting of Shareholders and will have the opportunity to make a
statement at the meeting if he desires to do so. The representative will also be
available to respond to appropriate questions.
For the year ended November 30, 2002, we retained Deloitte & Touche LLP
to provide services in the following categories and amounts of fees billed:
Audit Fees.......................................................................... $61,000
Financial Information Systems Design and Implementation Fees........................ $0
All Other Fees...................................................................... $77,100
The other fees consisted of tax return preparation fees, fees relating to our
Registration Statement on Form S-1 in connection with our January 2002 public
offering of common shares, and fees relating to our Registration Statement on
Form S-8 in connection with the increase in authorized shares under the 1997
Plan in 2002. Our Audit Committee has considered whether the provision of the
services covered under the captions "Financial Information Systems Design and
Implementation Fees" and "All Other Fees" is compatible with maintaining
Deloitte & Touche LLP's independence.
SHAREHOLDER PROPOSALS
Proposals of shareholders that are intended to be presented at our 2004
Annual Meeting of Shareholders must be received by our Secretary at our offices,
1653 East Maple Road, Troy, Michigan 48083-4208, no later than October 23, 2003
to be considered for inclusion in the proxy
28
statement and proxy relating to that meeting. Such proposals should be sent by
certified mail, return receipt requested.
We must receive notice of any proposals of shareholders that are
intended to be presented at our 2004 Annual Meeting of Shareholders, but that
are not intended to be considered for inclusion in our proxy statement and proxy
related to that meeting, no later than January 6, 2004 to be considered timely.
Such proposals should be sent by certified mail, return receipt requested and
addressed to Somanetics Corporation, 1653 East Maple Road, Troy, Michigan
48083-4208, Attention: Investor Relations Department. If we do not have notice
of the matter by that date, our form of proxy in connection with that meeting
may confer discretionary authority to vote on that matter, and the persons named
in our form of proxy will vote the shares represented by such proxies in
accordance with their best judgment.
OTHER BUSINESS
Neither we nor the members of our Board of Directors intend to bring
before the annual meeting any matters other than those set forth in the Notice
of Annual Meeting of Shareholders, and none of us has any present knowledge that
other matters will be presented for action at the annual meeting by others.
However, if other matters are properly presented to the meeting, the persons
named in the enclosed proxy intend to vote the shares represented by the proxy
in accordance with their best judgment.
By order of the Board of Directors
Bruce J. Barrett
President and Chief Executive Officer
Troy, Michigan
February 20, 2003
29
EXHIBIT A
AMENDED AND RESTATED
SOMANETICS CORPORATION
1997 STOCK OPTION PLAN
1. Definitions: As used herein, the following terms shall have the
following meanings:
(a) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the applicable rules and regulations thereunder.
(b) "Committee" shall mean, (i) with respect to administration
of the Plan regarding Participants who are subject to Section 16(a) and
(b) of the Exchange Act, a committee meeting the standards of Rule
16b-3 of the Rules and Regulations under the Exchange Act, or any
similar successor rule, appointed by the Board of Directors of the
Company to perform any of the functions and duties of the Committee
under the Plan, or the Board of Directors as a whole, and (ii) with
respect to administration of the Plan regarding all other Participants,
such committee or the Board of Directors of the Company, as described
in clause (i), or such other committee or entity appointed by the Board
of Directors of the Company to perform any of the functions and duties
of the Committee under the Plan.
(c) "Common Shares" shall mean the Common Shares, par value
$.01 per share, of the Company.
(d) "Company" shall mean Somanetics Corporation, a Michigan
corporation, or any successor thereof.
(e) "Discretion" shall mean the sole discretion of the
Committee, with no requirement whatsoever that the Committee follow
past practices, act in a manner consistent with past practices, or
treat any key employee, director, consultant or advisor in a manner
consistent with the treatment afforded other key employees, directors,
consultants or advisors with respect to the Plan or otherwise.
(f) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder.
(g) "Incentive Option" shall mean an option to purchase Common
Shares which meets the requirements set forth in the Plan and also is
intended to be, and qualifies as, an incentive stock option within the
meaning of Section 422 of the Code.
(h) "Nonqualified Option" shall mean an option to purchase
Common Shares which meets the requirements set forth in the Plan but is
not intended to be, or does not qualify as, an incentive stock option
within the meaning of the Code.
(i) "Participant" shall mean any individual designated by the
Committee under Paragraph 6 for participation in the Plan.
(j) "Plan" shall mean this Somanetics Corporation 1997 Stock
Option Plan.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
(l) "Subsidiary" shall mean any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or
more of the total combined voting power of all classes of outstanding
voting equity interests.
2. Purpose of Plan: The purpose of the Plan is to provide key employees
(including officers), directors, consultants and advisors of the Company and its
Subsidiaries (collectively, "key employees") with an increased incentive to make
significant and extraordinary contributions to the long-term performance and
growth of the Company and its Subsidiaries, to join the interests of key
employees, directors, consultants and advisors with the interests of the
shareholders of the Company, and to facilitate attracting and retaining key
employees, directors, consultants and advisors of exceptional ability.
3. Administration: The Plan shall be administered by the Committee.
Subject to the provisions of the Plan, the Committee shall determine, from those
eligible to be Participants under the Plan, the persons to be granted stock
options, the amount of stock to be optioned to each such person, the time such
options shall be granted and the terms and conditions of any stock options. Such
terms and conditions may, in the Committee's Discretion, include, without
limitation, provisions providing for termination of the option, forfeiture of
the gain on any option exercises or both if the Participant competes with the
Company or otherwise acts contrary to the Company's interests, and provisions
imposing restrictions, potential forfeiture or both on shares acquired upon
exercise of options granted pursuant to this Plan. The Committee may condition
any grant on the potential Participant's agreement to such terms and conditions.
Subject to the provisions of the Plan, the Committee is authorized to
interpret the Plan, to promulgate, amend and rescind rules and regulations
relating to the Plan and to make all other determinations necessary or advisable
for its administration. Interpretation and construction of any provision of the
Plan by the Committee shall, unless otherwise determined by the Board of
Directors of the Company, be final and conclusive. A majority of the Committee
shall constitute a quorum, and the acts of a majority of the members present at
any meeting at which a quorum is present, or acts approved in writing by a
majority of the Committee, shall be the acts of the Committee.
4. Indemnification: In addition to such other rights of indemnification
as they may have, the members of the Committee shall be indemnified by the
Company in connection with any claim, action, suit or proceeding relating to any
action taken or failure to act under or in connection with the Plan or any
option granted hereunder to the full extent provided for under
2
the Company's articles of incorporation or bylaws with respect to
indemnification of directors of the Company.
5. Maximum Number of Shares Subject to Plan: The maximum number of
shares with respect to which stock options may be granted under the Plan shall
be an aggregate of [2,110,000] 2,560,000 Common Shares, which may consist in
---------
whole or in part of authorized and unissued or reacquired Common Shares. Unless
the Plan shall have been terminated, shares covered by the unexercised portion
of canceled, expired or otherwise terminated options under the Plan shall again
be available for option and sale.
Subject to Paragraph 16, the number and type of shares subject to each
outstanding stock option, the option price with respect to outstanding stock
options, the aggregate number and type of shares remaining available under the
Plan, and the maximum number and type of shares that may be granted to any
Participant in any fiscal year of the Company pursuant to Paragraph 6, shall be
subject to such adjustment as the Committee, in its Discretion, deems
appropriate to reflect such events as stock dividends, stock splits,
recapitalizations, mergers, statutory share exchanges or reorganizations of or
by the Company; provided that no fractional shares shall be issued pursuant to
the Plan, no rights may be granted under the Plan with respect to fractional
shares, and any fractional shares resulting from such adjustments shall be
eliminated from any outstanding option.
6. Participants: The Committee shall determine and designate from time
to time, in its Discretion, those key employees (including officers), directors,
consultants and advisors of or to the Company or any Subsidiary to whom options
are to be granted and who thereby become Participants under the Plan; provided,
however, that (a) Incentive Options shall be granted only to employees (as
defined in the Code) of the Company or a corporate Subsidiary, to the extent
required by Section 422 of the Code, or any successor provision, and (b) no
Participant may be granted stock options to purchase more than 300,000 Common
Shares in the aggregate in any fiscal year of the Company, subject to any
adjustments provided in the final paragraph of Paragraph 5 and in Paragraph 16.
7. Allotment of Shares: The Committee shall determine and fix the
number of Common Shares to be offered to each Participant; provided that no
Incentive Option may be granted under the Plan to any one Participant which
would result in the aggregate fair market value, determined as of the date the
option is granted, of the underlying stock with respect to which Incentive
Options are exercisable for the first time by such individual during any
calendar year (under all of such plans of the Company and its parent and
Subsidiary corporations) exceeding $100,000.
8. Option Price: Subject to the rules set forth in this Paragraph 8,
the Committee, in its Discretion, shall establish the option price at the time
any option is granted. With respect to an Incentive Option, such option price
shall not be less than 100% of the fair market value of the stock on the date on
which such option is granted; provided that with respect to an Incentive Option
granted to an employee who at the time of the grant owns (after applying the
attribution rules of Section 424(d) of the Code) more than 10% of the total
combined voting stock of the Company or of any parent or Subsidiary, the option
price shall not be less than 110% of the fair
3
market value of the stock subject to the Incentive Option on the date such
option is granted. With respect to a Nonqualified Option, the option price shall
be not less than the par value, if any, of the Common Shares. Fair market value
of a share shall be determined by the Committee and may be determined by using
the closing sale price of the Company's stock on any exchange or other market on
which the Common Shares shall be traded on such date, or if there is no sale on
such date, on the next following date on which there is a sale, or the average
of the closing bid and asked prices in any market or quotation system in which
the Common Shares shall be listed or traded on such date. The option price will
be subject to adjustment in accordance with the provisions of Paragraphs 5 and
16 of the Plan.
9. Granting and Exercise of Options: The granting of options under the
Plan shall be effected in accordance with determinations made by the Committee
pursuant to the provisions of the Plan, by execution of instruments in writing
in form approved by the Committee. Such instruments shall constitute binding
contracts between the Company and the Participant.
Subject to the terms of the Plan, the Committee, in its Discretion, may
grant to Participants Incentive Options, Nonqualified Options or any combination
thereof. Each option granted under the Plan shall designate the number of shares
covered thereby, if any, with respect to which the option is an Incentive Option
and the number of shares covered thereby, if any, with respect to which the
option is a Nonqualified Option.
Subject to the terms of the Plan, each option granted under the Plan
shall be exercisable at any such time or times or in any such installments as
may be determined by the Committee in its Discretion; provided that the
aggregate fair market value (determined as of the date the option is granted) of
the underlying stock with respect to which Incentive Options are exercisable for
the first time by such individual during any calendar year (under all of such
plans of the Company and its parent and Subsidiary corporations) shall not
exceed $100,000. Except as provided in Paragraph 13, options may be exercised
only while the Participant is an employee, director, consultant or advisor of
the Company or a Subsidiary.
Notwithstanding any other term or provision of this Plan, but subject
to the requirements of the Code with respect to Incentive Options that are
intended to remain Incentive Options, in connection with a Participant ceasing
to be an employee of the Company or a Subsidiary for any reason, the stock
option agreement may provide for the acceleration of, or the Committee may
accelerate, in its Discretion (exercised at the date of the grant of the stock
option or after the date of grant), in whole or in part, the time or times or
installments with respect to which any option granted under this Plan shall be
exercisable in connection with termination of a Participant's employment with
the Company or a Subsidiary, subject to any restrictions, terms and conditions
fixed by the Committee either at the date of the award or at the date it
exercises such Discretion.
Successive stock options may be granted to the same Participant,
whether or not the option or options previously granted to such Participant
remain unexercised. A Participant may exercise any option granted under the
Plan, if then exercisable, notwithstanding that options granted to such
Participant prior to the option then being exercised remain unexercised.
4
10. Payment of Option Price: At the time of the exercise in whole or in
part of any option granted under this Plan, payment in full in cash, or with the
consent of the Committee, in its Discretion, in Common Shares or by a promissory
note payable to the order of the Company which is acceptable to the Committee,
shall be made by the Participant for all shares so purchased. Such payment may,
with the consent of the Committee, in its Discretion, also consist of a cash
down payment and delivery of such a promissory note in the amount of the unpaid
exercise price. In the Discretion of, and subject to such conditions as may be
established by, the Committee, payment of the option price may also be made by
the Company retaining from the shares to be delivered upon exercise of the stock
option that number of shares having a fair market value on the date of exercise
equal to the option price of the number of shares with respect to which the
Participant exercises the option. In the Discretion of the Committee, a
Participant may exercise an option, if then exercisable, in whole or in part, by
delivery to the Company of written notice of the exercise in such form as the
Committee may prescribe, accompanied by irrevocable instructions to a stock
broker to promptly deliver to the Company full payment for the shares with
respect to which the option is exercised from the proceeds of the stock broker's
sale of or loan against some or all of the shares. Such payment may also be made
in such other manner as the Committee determines is appropriate, in its
Discretion. No Participant shall have any of the rights of a shareholder of the
Company under any option until the actual issuance of shares to such
Participant, and prior to such issuance no adjustment shall be made for
dividends, distributions or other rights in respect of such shares, except as
provided in Paragraphs 5 and 16.
11. Transferability of Option: Except as otherwise provided in this
Paragraph 11, (i) to the extent required by Section 422 of the Code, or any
successor section, but only with respect to Incentive Options, or (ii) to the
extent determined by the Committee in its Discretion (either by resolution or by
a provision in, or amendment to, the option), (a) no option granted under the
Plan to a Participant shall be transferable by such Participant otherwise than
(1) by will, or (2) by the laws of descent and distribution or, (3) with respect
to Nonqualified Options only (unless permitted by Section 422 of the Code or any
successor section), pursuant to a qualified domestic relations order as defined
in the Code or Title I of the Employee Retirement Income Security Act, or the
rules thereunder, and (b) such option shall be exercisable, during the lifetime
of the Participant, only by the Participant.
The Committee may, in its Discretion, authorize all or a portion of the
options to be granted to an optionee to be on terms which permit transfer by
such optionee to, and the exercise of such option by, (i) the spouse, children
or grandchildren of the optionee ("Immediate Family Members"), (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members, (iii) a
partnership in which such Immediate Family Members are the only partners, or
(iv) such other persons or entities as determined by the Committee, in its
Discretion, on such terms and conditions as the Committee, in its Discretion,
may determine; provided that (y) the stock option agreement pursuant to which
such options are granted must be approved by the Committee and must expressly
provide for transferability in a manner consistent with this Paragraph 11, and
(z) subsequent transfers of transferred options shall be prohibited except for
transfers the original optionee would be permitted to make (if he or she were
still the owner of the option) in accordance with this Paragraph 11.
5
Following transfer, any such options shall continue to be subject to
the same terms and conditions as were applicable immediately before transfer,
provided that for purposes of Paragraphs 9, 10, 14, 16 and 18 the term
"Participant" shall be deemed to refer to the transferee. The events of
termination of employment of Paragraph 13 shall continue to be applied with
respect to the original optionee, following which the options shall be
exercisable by the transferee only to the extent, and for the periods, specified
in Paragraph 13. The original optionee shall remain subject to withholding taxes
and related requirements upon exercise provided in Paragraph 15. The Company
shall have no obligation to provide any notice to any transferee, including,
without limitation, notice of any termination of the option as a result of
termination of the original optionee's employment with, or other service to, the
Company.
12. Continuance of Employment; No Right to Continued Employment: The
Committee may require, in its Discretion, that any Participant under the Plan to
whom an option shall be granted shall agree in writing as a condition of the
granting of such option to remain in his or her position as an employee,
director, consultant or advisor of the Company or a Subsidiary for a designated
minimum period from the date of the granting of such option as shall be fixed by
the Committee.
Nothing contained in the Plan or in any option granted pursuant to the
Plan, nor any action taken by the Committee hereunder, shall confer upon any
Participant any right with respect to continuation of employment, consultation
or other service by or to the Company or a Subsidiary nor interfere in any way
with the right of the Company or a Subsidiary to terminate such person's
employment, consultation or other service at any time.
13. Termination of Employment; Expiration of Options: Subject to the
other provisions of the Plan, including, without limitation, Paragraphs 9 and 16
and this Paragraph 13, all rights to exercise options shall terminate when a
Participant ceases to be an employee, director, consultant or advisor of or to
the Company or a Subsidiary for any cause, except that the Committee may, in its
Discretion, permit the exercise of all or any portion of the options granted to
such Participant
(i) for a period not to exceed three months following such
termination with respect to Incentive Options that are intended to
remain Incentive Options if such termination is not due to death or
permanent disability of the Participant,
(ii) for a period not to exceed one year following termination
of employment with respect to Incentive Options that are Intended to
remain Incentive Options if termination of employment is due to the
death or permanent disability of the Participant, and
(iii) for a period not to extend beyond the expiration date
with respect to Nonqualified Options or Incentive Options that are not
intended to remain Incentive Options,
all subject to any restrictions, terms and conditions fixed by the Committee
either at the date of the award or at the date it exercises such Discretion. In
no event, however, shall an option be exercisable after its expiration date,
and, unless the Committee in its Discretion determines
6
otherwise (pursuant to Paragraph 9 or Paragraph 16), an option may only be
exercised after termination of a Participant's employment, consultation or other
service by or to the Company to the extent exercisable on the date of such
termination or to the extent exercisable as a result of the reason for such
termination. The Committee may evidence the exercise of its Discretion under
this Paragraph 13 in any manner it deems appropriate, including by resolution or
by a provision in, or amendment to, the option.
If not sooner terminated, each stock option granted under the Plan
shall expire not more than 10 years from the date of the granting thereof;
provided that with respect to an Incentive Option granted to a Participant who,
at the time of the grant, owns (after applying the attribution rules of Section
424(d) of the Code) more than 10% of the total combined voting stock of all
classes of stock of the Company or of any parent or Subsidiary, such option
shall expire not more than 5 years after the date of granting thereof.
14. Investment Purpose: If the Committee in its Discretion determines
that as a matter of law such procedure is or may be desirable, it may require a
Participant, upon any exercise of any option granted under the Plan or any
portion thereof and as a condition to the Company's obligation to deliver
certificates representing the shares subject to exercise, to execute and deliver
to the Company a written statement, in form satisfactory to the Committee,
representing and warranting that the Participant's purchase of Common Shares
upon exercise thereof shall be for such person's own account, for investment and
not with a view to the resale or distribution thereof and that any subsequent
sale or offer for sale of any such shares shall be made either pursuant to (a) a
Registration Statement on an appropriate form under the Securities Act, which
Registration Statement has become effective and is current with respect to the
shares being offered and sold, or (b) a specific exemption from the registration
requirements of the Securities Act, but in claiming such exemption the
Participant shall, prior to any offer for sale or sale of such shares, obtain a
favorable written opinion from counsel for or approved by the Company as to the
availability of such exemption. The Company may endorse an appropriate legend
referring to the foregoing restriction upon the certificate or certificates
representing any shares issued or transferred to the Participant upon exercise
of any option granted under the Plan.
15. Withholding Payments: If upon the exercise of any Nonqualified
Option or a disqualifying disposition (within the meaning of Section 422 of the
Code) of shares acquired upon exercise of an Incentive Option, there shall be
payable by the Company or a Subsidiary any amount for income tax withholding, in
the Committee's Discretion, either the Participant shall pay such amount to the
Company, or the amount of Common Shares delivered by the Company to the
Participant shall be appropriately reduced, to reimburse the Company or such
Subsidiary for such payment. The Company or any of its Subsidiaries shall have
the right to withhold the amount of such taxes from any other sums or property
due or to become due from the Company or any of its Subsidiaries to the
Participant upon such terms and conditions as the Committee shall prescribe. The
Company may also defer issuance of the stock upon exercise of such option until
payment by the Participant to the Company of the amount of any such tax. The
Committee may, in its Discretion, permit Participants to satisfy such
withholding obligations, in whole or in part, by electing to have the amount of
Common Shares delivered or deliverable by the Company upon exercise of a stock
option appropriately reduced, or by electing to tender Common Shares back to the
Company subsequent to exercise of a stock option to reimburse the Company or
such
7
Subsidiary for such income tax withholding, subject to such rules and
regulations, if any, as the Committee may adopt. The Committee may make such
other arrangements with respect to income tax withholding as it shall determine.
16. Extraordinary Transactions: In case the Company (i) consolidates
with or merges into any other corporation or other entity and is not the
continuing or surviving entity of such consolidation or merger, or (ii) permits
any other corporation or other entity to consolidate with or merge into the
Company and the Company is the continuing or surviving entity but, in connection
with such consolidation or merger, the Common Shares are changed into or
exchanged for stock or other securities of any other corporation or other entity
or cash or any other assets, or (iii) transfers all or substantially all of its
properties and assets to any other corporation or other person or entity, or
(iv) dissolves or liquidates, or (v) effects a capital reorganization or
reclassification in such a way that holders of Common Shares shall be entitled
to receive stock, securities, cash or other assets with respect to or in
exchange for the Common Shares, then, and in each such case, proper provision
shall be made so that, each Participant holding a stock option upon the exercise
of such option at any time after the consummation of such consolidation, merger,
transfer, dissolution, liquidation, reorganization or reclassification (each
transaction, for purposes of this Paragraph 16, being herein called a
"Transaction"), shall be entitled to receive (at the aggregate option price in
effect for all Common Shares issuable upon such exercise immediately prior to
such consummation and as adjusted to the time of such Transaction), in lieu of
Common Shares issuable upon such exercise prior to such consummation, the stock
and other securities, cash and assets to which such Participant would have been
entitled upon such consummation if such Participant had so exercised such stock
option in full immediately prior thereto (subject to adjustments subsequent to
such Transaction provided for in Paragraph 5).
Notwithstanding anything in the Plan to the contrary, in connection
with any Transaction and effective as of a date selected by the Committee, which
date shall, in the Committee's judgment, be far enough in advance of the
Transaction to permit Participants holding stock options to exercise their
options and participate in the Transaction as a holder of Common Shares, the
Committee, acting in its Discretion without the consent of any Participant, may
effect one or more of the following alternatives with respect to all of the
outstanding stock options (which alternatives may be made conditional on the
occurrence of the applicable Transaction and which may, if permitted by law,
vary among individual Participants): (a) accelerate the time at which stock
options then outstanding may be exercised so that such stock options may be
exercised in full for a limited period of time on or before a specified date
fixed by the Committee after which specified date all unexercised stock options
and all rights of Participants thereunder shall terminate; (b) accelerate the
time at which stock options then outstanding may be exercised so that such stock
options may be exercised in full for their then remaining term; or (c) require
the mandatory surrender to the Company of outstanding stock options held by such
Participants (irrespective of whether such stock options are then exercisable)
as of a date, before or not later than sixty days after such Transaction,
specified by the Committee, and in such event the Company shall thereupon cancel
such stock options and shall pay to each Participant an amount of cash equal to
the excess of the fair market value of the aggregate Common Shares subject to
such stock option, determined as of the date such Transaction is effective, over
the aggregate option price of such shares, less any applicable withholding
taxes; provided, however, the
8
Committee shall not select an alternative (unless consented to by the
Participant) such that, if a Participant exercised his or her accelerated stock
option pursuant to alternative (a) or (b) and participated in the Transaction or
received cash pursuant to alternative (c), the alternative would result in the
Participant's owing any money by virtue of the operation of Section 16(b) of the
Exchange Act. If all such alternatives have such a result, the Committee shall,
in its Discretion, take such action to put such Participant in as close to the
same position as such Participant would have been in had alternative (a), (b) or
(c) been selected but without resulting in any payment by such Participant
pursuant to Section 16(b) of the Exchange Act. Notwithstanding the foregoing,
with the consent of affected Participants, each with respect to such
Participant's option only, the Committee may in lieu of the foregoing make such
provision with respect to any Transaction as it deems appropriate.
17. Effectiveness of Plan: This Plan shall be effective on the date the
Board of Directors of the Company adopts this Plan, provided that the
shareholders of the Company approve the Plan within 12 months before or after
its adoption by the Board of Directors. Options may be granted before
shareholder approval of this Plan, but each such option shall be subject to
shareholder approval of this Plan. No option granted under this Plan shall be
exercisable unless and until this Plan shall have been approved by the Company's
shareholders.
18. Termination, Duration and Amendments to the Plan: The Plan may be
abandoned or terminated at any time by the Board of Directors of the Company.
Unless sooner terminated, the Plan shall terminate on the date ten years after
the earlier of its adoption by the Board of Directors or its approval by the
shareholders of the Company, and no stock options may be granted under the Plan
thereafter. The termination of the Plan shall not affect the validity of any
option which is outstanding on the date of termination.
For the purpose of conforming to any changes in applicable law or
governmental regulations, or for any other lawful purpose, the Board of
Directors shall have the right, with or without approval of the shareholders of
the Company, to amend or revise the terms of this Plan or any option agreement
under this Plan at any time; provided, however, that (i) to the extent required
by Section 162(m) of the Code and related regulations, or any successor rule,
but only with respect to amendments or revisions affecting Participants whose
compensation is subject to Section 162(m) of the Code, and to the extent
required by Section 422 of the Code, or any successor section, but only with
respect to Incentive Options, no such amendment or revision shall increase the
maximum number of shares in the aggregate which are subject to this Plan
(subject, however, to the provisions of Paragraphs 5 and 16) without the
approval or ratification of the shareholders of the Company, and (ii) no such
amendment or revision shall change the option price (except as contemplated by
Paragraphs 5 and 16) or alter or impair any option which shall have been
previously granted under this Plan, in a manner adverse to a Participant,
without the consent of such Participant.
As adopted by the Board of Directors on January 15, 1997, and amended
on January 15, 1998, January 21, 1999, February 16, 2000, December 4, [2000
and] 2000, February 21, [2002.] 2002 AND JANUARY __, 2003.
---- -------------------------
PROXY
SOMANETICS CORPORATION
BOARD OF DIRECTORS PROXY FOR ANNUAL MEETING APRIL 10, 2003. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SOMANETICS CORPORATION
The undersigned hereby appoints Bruce J. Barrett and Mary Ann Victor,
and each of them, attorneys and proxies with full power of substitution in each
of them, in the name, place and stead of the undersigned to vote as proxy all
the common shares, par value $0.01 per share, of the undersigned in Somanetics
Corporation (the "Company") which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Company to be held on April 10, 2003, and
at any and all adjournments thereof.
(TO BE SIGNED ON REVERSE SIDE)
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSAL 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
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1. Election of Directors
NOMINEES
[ ] FOR ALL NOMINEES [ ] Daniel S. Follis
[ ] Robert R. Henry
[ ] WITHHOLD AUTHORITY
FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See instructions below)
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), MARK
"FOR ALL EXCEPT" AND FILL IN THE CIRCLE NEXT TO EACH NOMINEE YOU
WISH TO WITHHOLD, AS SHOWN HERE:
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To change the address on your account, please check the box at
right and indicate your new address in the address space above. [ ]
Please note that changes to the registered name(s) on the account
may not be submitted via this method.
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FOR AGAINST ABSTAIN
2. Approval of an amendment to the Somanetics
Corporation 1997 Stock Option Plan to increase [ ] [ ] [ ]
the number of common shares reserved for issuance
pursuant to the exercise of options granted under
the 1997 plan by 450,000 shares, from 2,110,000
to 2,560,000 shares.
3. In their discretion with respect to any other
matters that may properly come before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE HEREIN. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE DIRECTORS NAMED IN PROPOSAL 1 AND FOR PROPOSAL 2 IF NO
INSTRUCTIONS TO THE CONTRARY ARE INDICATED OR IF NO INSTRUCTION IS GIVEN.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
Signature of Shareholder: Date: , 2003
------------------ ------------
Signature of Shareholder: Date: , 2003
------------------- ------------
NOTE: This proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, trustee or guardian, please give full title as such. If he signer
is a corporation, please sign full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.)