<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
Datascope Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Datascope Corp.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee previously paid with preliminary Materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
DATASCOPE CORP.
14 PHILIPS PARKWAY
MONTVALE, NEW JERSEY 07645
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 9, 1997
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Datascope
Corp. (the "Corporation") will be held at 11:00 o'clock A.M., local time, on
December 9, 1997, at The Harmonie Club, 4 East 60th Street, New York, New York,
for the following purposes:
1. To elect three directors of the Corporation to hold office until the
Annual Meeting of Shareholders occurring in 2000 and until the election
and qualification of their respective successors;
2. To approve an amendment to the Datascope Corp. 1995 Stock Option Plan
(the "1995 Option Plan") to increase the number of shares of the
Corporation's Common Stock which may be the subject of options granted
pursuant to the 1995 Option Plan from 750,000 shares in the aggregate to
1,500,000 shares in the aggregate;
3. To approve the adoption of the Datascope Corp. 1997 Executive Bonus Plan
(the "1997 Executive Bonus Plan");
4. To approve the adoption of the Datascope Corp. Annual Incentive Plan
(the "Annual Incentive Plan"); and
5. To transact such other business as may properly come before the meeting.
Only holders of record of the Corporation's Common Stock at the close of
business on October 28, 1997 are entitled to notice of, and to vote at, the
meeting and any adjournment thereof. Such shareholders may vote in person or by
proxy.
SHAREHOLDERS WHO FIND IT CONVENIENT ARE CORDIALLY INVITED TO ATTEND THE
MEETING IN PERSON. IF YOU ARE NOT ABLE TO DO SO AND WISH THAT YOUR STOCK BE
VOTED, YOU ARE REQUESTED TO FILL IN, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
By Order of the Board of Directors,
MURRAY PITKOWSKY,
Secretary
Dated: November 1, 1997
<PAGE> 3
DATASCOPE CORP.
14 PHILIPS PARKWAY
MONTVALE, NEW JERSEY 07645
------------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Datascope Corp. (the "Corporation") of proxies to be
used at the Annual Meeting of Shareholders of the Corporation to be held at
11:00 o'clock A.M., local time, on December 9, 1997, at The Harmonie Club, 4
East 60th Street, New York, New York, and at any adjournments thereof. The
purposes of the meeting are:
1. To elect three directors of the Corporation to hold office until the
Annual Meeting of Shareholders occurring in 2000 and until the election
and qualification of their respective successors;
2. To approve an amendment to the Datascope Corp. 1995 Stock Option Plan
(the "1995 Option Plan") to increase the number of shares of the
Corporation's Common Stock which may be the subject of options granted
pursuant to the 1995 Option Plan from 750,000 shares in the aggregate to
1,500,000 shares in the aggregate;
3. To approve the adoption of the Datascope Corp. 1997 Executive Bonus Plan
(the "1997 Executive Bonus Plan");
4. To approve the adoption of the Datascope Corp. Annual Incentive Plan
(the "Annual Incentive Plan"); and
5. To transact such other business as may properly come before the meeting.
If proxy cards in the accompanying form are properly executed and returned,
the shares of Common Stock represented thereby will be voted as instructed on
the proxy. If no instructions are given, such shares will be voted (i) for the
election as directors of the nominees of the Board of Directors named below,
(ii) in favor of the proposal to increase the number of shares of the
Corporation's Common Stock which may be the subject of options granted pursuant
to the 1995 Option Plan, (iii) for the approval of the 1997 Executive Bonus
Plan, (iv) for the approval of the Annual Incentive Plan, and (v) in the
discretion of the Proxies named in the proxy card on any other proposals to
properly come before the meeting or any adjournment thereof. Any proxy may be
revoked by a shareholder prior to its exercise upon written notice to the
Secretary of the Corporation, or by the vote of a shareholder cast in person at
the meeting. The approximate date of mailing of this Proxy Statement is November
1, 1997.
VOTING
Holders of record of the Corporation's Common Stock on October 28, 1997,
will be entitled to vote at the Annual Meeting or any adjournment thereof. As of
that date, there were 16,056,550 shares of Common Stock outstanding and entitled
to vote, and a majority, or 8,028,276 of these shares, will constitute a quorum
for the transaction of business. Abstentions and broker non-votes are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business. Each share of Common Stock entitles the holder thereof
to one vote on all matters to come before the meeting, including the election of
directors.
The favorable vote of a majority of the votes cast at the meeting is
necessary to elect each director of the Corporation, to increase the number of
shares of the Corporation's Common Stock which may be the subject of options
granted pursuant to the 1995 Option Plan, to approve the 1997 Executive Bonus
Plan and to approve the Annual Incentive Plan. Abstentions and broker non-votes
are not considered votes cast and will have no effect on the outcome of the
matters scheduled to be considered at the Annual Meeting. The Board of Directors
recommends a vote FOR each of the nominees named below, the increase in the
number of shares of the Corporation's Common Stock which may be the subject of
options granted pursuant to the 1995 Option Plan, the approval of the 1997
Executive Bonus Plan and the approval of the Annual Incentive Plan.
<PAGE> 4
ELECTION OF DIRECTORS
Three directors are to be elected at the Annual Meeting. The Board of
Directors has recommended the persons named in the table below as nominees for
election as directors. All such persons are presently directors of the
Corporation. Unless otherwise specified in the accompanying proxy, the shares
voted pursuant to it will be voted for the persons named below as nominees for
election as directors. If, for any reason, at the time of the election any of
the nominees should be unable or unwilling to accept election, it is intended
that such proxy will be voted for the election, in such nominee's place, of a
substitute nominee recommended by the Board of Directors. However, the Board of
Directors has no reason to believe that any nominee will be unable or unwilling
to serve as a director.
INFORMATION AS TO NOMINEES AND OTHER DIRECTORS
The following information is supplied with respect to the nominees for
election as directors of the Corporation in Class III, and for the directors in
Classes II and I whose terms expire at the Annual Meeting of Shareholders
occurring in 1999 and 1998, respectively, and until the election and
qualification of their respective successors. Unless otherwise indicated below,
each director has had the principal occupation(s) indicated on the table for
five years or more.
NOMINEES FOR DIRECTOR
CLASS III (If elected each director will hold office until the Annual
Meeting of Shareholders occurring in 2000 and until the election and
qualification of their respective successors.)
CLASS III
<TABLE>
<CAPTION>
HAS BEEN A
DIRECTOR
OF THE
PRINCIPAL OCCUPATION CORPORATION
NAME OF DIRECTOR AGE OR EMPLOYMENT DURING
- ----------------------- ----- ------------------------------------------ -----------------
<S> <C> <C> <C>
Lawrence Saper......... 69 Chairman of the Board, President and Chief 1964-present
Executive Officer of the Corporation
Alan B. Abramson....... 51 Attorney(1) 1996-present
Arno Nash.............. 70 Chairman of Iterman Industrial Products 1965-1967;
Ltd.(2) 1996-present
</TABLE>
- ---------------
(1) Mr. Abramson has served as President of Abramson Brothers Incorporated since
1972.
(2) Mr. Nash has served as Chairman of Iterman Industrial Products Ltd. since
1965.
DIRECTORS WHOSE TERM OF OFFICE
WILL CONTINUE AFTER THE ANNUAL MEETING
CLASS II
<TABLE>
<CAPTION>
HAS BEEN A
DIRECTOR
OF THE
PRINCIPAL OCCUPATION CORPORATION
NAME OF NOMINEE AGE OR EMPLOYMENT DURING
- -------------------------- ----- --------------------------------------- -----------------
<S> <C> <C> <C>
David Altschiller......... 56 Chairman/Chief Executive Officer of 1982-present
Hill, Holliday & Altschiller(3)
Joseph Grayzel, M.D....... 66 Consultant to the Corporation and 1969-present
Physician
</TABLE>
- ---------------
(3) Hill, Holliday & Altschiller is the New York office of Hill, Holliday,
Connors, Cosmopulos, Inc., a Boston advertising agency.
2
<PAGE> 5
CLASS I
<TABLE>
<CAPTION>
HAS BEEN A
DIRECTOR
OF THE
PRINCIPAL OCCUPATION CORPORATION
NAME OF DIRECTOR AGE OR EMPLOYMENT DURING
- -------------------------- ----- --------------------------------------- -----------------
<S> <C> <C> <C>
George Heller............. 75 Director(4) 1970-1979;
1980-present
William L. Asmundson...... 60 Senior Investment Manager of 1969-present
Rockefeller & Co. Inc.
</TABLE>
- ---------------
(4) Mr. Heller also served as Senior Vice President of the Corporation from 1970
through 1979 and from 1980 through October 1992 and as Secretary of the
Corporation from 1970 through 1979 and from 1980 through December 1992.
MEETINGS OF THE BOARD
During the fiscal year ended June 30, 1997, four meetings of the Board of
Directors were held. Each of the directors attended 75% or more of the aggregate
number of meetings of the Board of Directors and committees on which he served.
The Board of Directors has an audit committee consisting of Messrs.
Altschiller, Asmundson and Abramson. The primary functions of the committee are
to review the Corporation's financial statements, recommend the appointment of
the Corporation's independent auditors and review the overall scope of the
audit. This committee held two meetings during the Corporation's last fiscal
year.
The Corporation has a stock bonus committee consisting of Dr. Grayzel and
Messrs. Saper and Heller. This committee is empowered to authorize the issuance
of up to 100 shares of the Corporation's Common Stock to each of certain
employees of the Corporation or its subsidiaries who have been employed for at
least 10 years or who have provided outstanding services on behalf of the
Corporation. This committee did not hold any meetings during the Corporation's
last fiscal year.
The Board of Directors also has a compensation committee consisting of
Messrs. Altschiller, Asmundson and Abramson. The primary responsibility of this
committee is to administer and make recommendations to the Board regarding the
Corporation's bonus plans, to review the compensation arrangements relating to
officers who are members of the Board of Directors and to administer the
Datascope Corp. 1981 Incentive Stock Option Plan (the "1981 Option Plan") and
the 1995 Option Plan. This committee held four meetings during the Corporation's
last fiscal year.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's directors and executive officers and
persons who beneficially own more than 10% of a registered class of the
Corporation's equity securities ("Reporting Persons") to file reports of
ownership and changes in ownership with the Commission on a timely basis.
Reporting Persons are required to furnish the Corporation with copies of all
such forms that they file. Based solely on its review of such forms, the
Corporation believes that all filing requirements applicable to Reporting
Persons during and with respect to fiscal 1997 were complied with on a timely
basis.
3
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN SHAREHOLDERS
The following table provides information as to each person who is known to
the Corporation to be the beneficial owner of more than 5% of the Corporation's
voting securities as of October 1, 1997 (unless otherwise indicated):
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(1) COMMON STOCK(2)
----------------------------------------------- ------------------------ ----------------
<S> <C> <C>
Lawrence Saper................................. 2,953,963(3) 17.6%
14 Philips Parkway
Montvale, NJ 07645
FMR Corp. ..................................... 1,190,000(4) 7.4%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ---------------
(1) This table identifies persons having sole voting and investment power with
respect to the shares set forth opposite their names as of October 1, 1997,
except as otherwise disclosed in the footnotes to the table, according to
information publicly filed or furnished to the Corporation by each of them.
(2) Shares beneficially owned, as recorded in this table, expressed as a
percentage of the shares of the Common Stock of the Corporation outstanding
as of October 1, 1997. For purposes of calculating Mr. Saper's beneficial
ownership, any shares issuable pursuant to options exercisable within 60
days of October 1, 1997 are deemed to be outstanding.
(3) Includes (i) 34,741 shares owned by Trusts created by Mr. Saper for his
minor children, (ii) 3,150 shares owned by Carol Saper, Mr. Saper's wife,
and (iii) 350,328 shares which are owned by an irrevocable trust of which
Carol Saper and Daniel Brodsky are Trustees. Mr. Saper will receive annual
distributions from that Trust equal to 34% of the Trust's initial fair
market value until September 28, 1997; thereafter the sole beneficiaries are
Carol Saper and Mr. Saper's descendants. The Trustees have the sole right to
vote and dispose of the shares. He disclaims beneficial ownership of all of
the foregoing shares. Includes 545,000 shares which are issuable pursuant to
currently exercisable options. This includes an option to purchase 500,000
shares, which option became exercisable on August 3, 1994, subject to the
condition that the average of the high and low bid price of the Common Stock
as quoted on NASDAQ on the date of exercise is at least $20. The exercise
price of the option is $14.00, which was the fair market value of the Common
Stock on the date of grant.
(4) According to a Schedule 13G dated February 14, 1997, which was filed with
the Securities and Exchange Commission by FMR Corp. ("FMR"), Edward C.
Johnson 3d, Abigail P. Johnson, Fidelity Management & Research Company, an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, as amended, and a wholly-owned subsidiary of FMR ("Fidelity")
and Fidelity OTC Portfolio, Mr. Johnson 3d is the Chairman of FMR and the
owner of 12% of the aggregate outstanding voting stock of FMR and Ms.
Johnson is a director of FMR and the owner of 24.5% of the aggregate
outstanding voting stock of FMR and each may be deemed to be members of a
controlling group with respect to FMR. The Schedule 13G states that, at
December 31, 1996, (i) Fidelity was the beneficial owner of 1,190,000 shares
of Common Stock as a result of acting as investment adviser to various
registered investment companies (the "Funds"), (ii) Fidelity OTC Portfolio,
one of the Funds, was the beneficial owner of 939,600 shares of Common Stock
(5.82% of the then outstanding shares of Common Stock), (iii) each of Mr.
Johnson 3d, FMR (through its control of Fidelity) and the Funds has sole
power to dispose of the 1,190,000 shares and (iv) the power to vote all of
the 1,190,000 shares resides with the Board of Trustees of the Funds. The
address of FMR, Fidelity and Fidelity OTC Portfolio is 82 Devonshire Street,
Boston, Massachusetts 02109.
4
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table provides information as of October 1, 1997 with respect
to the Common Stock of the Corporation beneficially owned by each director and
nominee (except Mr. Saper, whose holdings are shown in the preceding table) and
each of the Named Executive Officers (as defined in "Executive Compensation"
below), other than Mr. Saper, and by all directors and executive officers as a
group (including Mr. Saper):
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP COMMON STOCK(2)
- ---------------------------------------------------------- -------------------- ---------------
<S> <C> <C>
Alan B. Abramson.......................................... 5,000(3) *
David Altschiller......................................... 16,500(4) *
William L. Asmundson...................................... 28,250(4) *
Joseph Grayzel, M.D. ..................................... 267,992(5) 1.6%
George Heller............................................. 68,432(6) *
Arno Nash................................................. 13,500(3) *
Murray Pitkowsky.......................................... 78,260(7) *
Stanton Rowe.............................................. 6,352(8) *
Russell Van Zandt......................................... 31,167(9) *
S. Arieh Zak.............................................. 29,000(10) *
All executive officers and directors as a group 3,518,462(11) 21.0%
(consisting of 15 individuals)..........................
</TABLE>
- ---------------
* Less than 1%.
(1) This table identifies persons having sole voting and investment power with
respect to the shares set forth opposite their names, except as otherwise
disclosed in the footnotes to the table, according to information furnished
to the Corporation by each of them.
(2) Shares beneficially owned, as recorded in this table, expressed as a
percentage of the shares of the Common Stock of the Corporation outstanding
as of October 1, 1997. For the purpose of calculating each person's
beneficial ownership, any shares issuable pursuant to options exercisable
within 60 days of October 1, 1997 are deemed to be beneficially owned by,
and outstanding with respect to, such person.
(3) Includes 5,000 shares which are issuable pursuant to currently exercisable
options.
(4) Includes 14,000 shares which are issuable pursuant to currently exercisable
options.
(5) Does not include 31,500 shares held in the name of Dr. Grayzel's children
(all of whom have attained majority) under the Uniform Gift to Minors Act,
as to which shares Dr. Grayzel disclaims beneficial ownership. Includes
51,000 shares which are issuable pursuant to currently exercisable options.
Does not include 25,000 shares which are issuable pursuant to options which
will vest on the attainment of certain milestones.
(6) Includes 8,000 shares which are issuable pursuant to currently exercisable
options.
(7) Includes 38,750 shares which are issuable pursuant to currently exercisable
options.
(8) Includes 6,250 shares which are issuable pursuant to currently exercisable
options.
(9) Includes 25,500 shares which are issuable pursuant to currently exercisable
options.
(10) Includes 29,000 shares which are issuable pursuant to currently exercisable
options.
(11) Includes 751,963 shares which are issuable pursuant to currently
exercisable options.
5
<PAGE> 8
EXECUTIVE OFFICERS OF THE CORPORATION
The following table sets forth the names, ages and all positions and
offices with the Corporation held by the Corporation's present executive
officers. Unless otherwise indicated below, each person has held the office
indicated for more than five years:
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES PRESENTLY HELD
- --------------------------------- --- --------------------------------------------
<S> <C> <C>
Lawrence Saper................... 69 Chairman of the Board, President and Chief
Executive Officer
Murray Pitkowsky................. 66 Senior Vice President, Chief Financial
Officer, Secretary and Treasurer(1)
John Gilbert..................... 40 Vice President; President, Collagen Products
Division(2)
Timothy J. Haines................ 40 Vice President, International Distribution
and Markets(3)
Stanton Rowe..................... 46 Vice President, Business Development(4)
Jason Sholder.................... 52 Vice President; President, Cardiac Assist
Division(5)
Donald Southard.................. 51 Vice President; President, Patient
Monitoring Division(6)
Russell Van Zandt................ 56 Vice President; President, InterVascular,
Inc.(7)
S. Arieh Zak, Esq................ 36 Vice President, Regulatory Affairs and
Corporate Counsel(8)
</TABLE>
- ---------------
(1) Mr. Pitkowsky has been employed by the Corporation as Senior Vice President
since October 1992, as Chief Financial Officer and Treasurer since December
1996, and as Secretary since January 1993. From April 1986 through October
1992, Mr. Pitkowsky served as Vice President, Finance and Treasurer of the
Corporation. He also served as Treasurer from February 1994 to May 1994, and
as Chief Financial Officer from August 1994 to May 1995.
(2) Mr. Gilbert has been employed by the Corporation as Vice President and
President of the Collagen Products Division since September 1997. Mr.
Gilbert served as General Manager of the Collagen Products Division from May
1997 to September 1997. Previously, he served as Director of VasoSeal Sales
for the Collagen Products Division from July 1995. Mr. Gilbert served as an
Area Sales Director for the Patient Monitoring Division, beginning in 1994.
Prior to becoming Area Sales Director, Mr. Gilbert served as a Regional
Sales Manager and Zone Manager for the Patient Monitoring Division. Mr.
Gilbert has been employed by the Corporation since 1983.
(3) Mr. Haines has been employed by the Corporation as Vice President,
International Distribution and Markets of the Corporation since August 1997.
Mr. Haines was Vice President, Managing Director, Europe at Heartpoint from
March 1997 to August 1997. Mr. Haines served as a Vice President of the
Corporation and as the President of the Patient Monitoring Division from
July 1996 to March 1997. From July 1993 to June 1996, Mr. Haines served as
the President of InterVascular, Inc., a wholly owned subsidiary of the
Corporation. From June 1992 to July 1993, Mr. Haines served as Vice
President, Operations of Telectronics, Inc.
(4) Mr. Rowe has been employed by the Corporation as Vice President, Business
Development since September 1996. From September 1996 to February 1997, Mr.
Rowe also served as Acting President, Cardiac Assist Division. Prior to his
employment with the Corporation, Mr. Rowe served as Vice President, New
Business Development of Johnson & Johnson Interventional Systems Company
from January 1990 to July 1996.
(5) Mr. Sholder has been employed as a Vice President of the Corporation and as
the President of the Cardiac Assist Division since June 1997. Prior to his
employment with the Corporation, Mr. Sholder served as Senior Vice
President, Technology of Pacesetter, Inc. from December 1993 to May 1997, as
6
<PAGE> 9
Vice President, Clinical Research and Regulatory Affairs from March 1989 to
December 1993, and in various other executive positions at Pacesetter, Inc.
since February 1977.
(6) Mr. Southard has been employed as a Vice President of the Corporation and as
the President of the Patient Monitoring Division since February 1997. Mr.
Southard served as Vice President, Sales of the Patient Monitoring Division
from July 1996 to February 1997. Prior to his employment with the
Corporation, Mr. Southard served as Vice President, Sales and Marketing of
Elscint, Inc. from August 1994 to June 1996, and as Chief Executive Officer
of Serviscope Corp. from November 1991 to May 1994.
(7) Mr. Van Zandt has been employed by the Corporation as a Vice President of
the Corporation since July 1992, and as the President of InterVascular, Inc.
since July 1996. From July 1992 through June 1996, Mr. Van Zandt served as
President of the Cardiac Assist Division. From November 1989 through July
1992, Mr. Van Zandt served as President of Bard Vascular Systems. From April
1986 through November 1989, Mr. Van Zandt served as President of Bard
Canada, Inc.
(8) Mr. Zak has been employed by the Corporation as Corporate Counsel since
November 1992, and as Vice President of Regulatory Affairs since September
1995. From 1986 through 1992 Mr. Zak served as a litigation associate at
Sullivan & Cromwell.
7
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the fiscal years ended June 30, 1997,
1996 and 1995, the compensation for services in all capacities to the
Corporation of those persons who were at June 30, 1997 the chief executive
officer and the other four most highly compensated executive officers of the
Corporation (collectively, the "Named Executives"):
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------
ANNUAL COMPENSATION PAYOUTS
---------------------------------------- AWARDS -------------------
OTHER ANNUAL -------------------- ALL OTHER
COMPEN- RESTRICTED LTIP COMPEN-
NAME AND SALARY BONUS SATION STOCK OPTIONS PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($) ($) AWARDS($) (#) ($) ($)(1)
- ------------------------------- ---- ------- -------- ------------ ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence Saper................. 1997 795,000 600,000 195,033(2) -- -- -- 9,869
Chairman of the Board, 1996 630,000 400,000 313,897(2) -- -- -- 8,742
President and Chief Executive 1995 630,000 400,000 137,221(2) -- -- -- 8,540
Officer
Murray Pitkowsky,.............. 1997 215,000 75,000 -- -- 15,000 -- 6,989
Senior Vice President, 1996 215,000 75,000 -- -- 10,000 -- 6,418
Chief Financial Officer, 1995 215,000 75,000 -- -- -- -- 6,205
Secretary and Treasurer
Stanton Rowe................... 1997 154,071 60,000 86,328(3) -- 25,000 -- 822
Vice President, 1996 -- -- -- -- -- -- --
Business Development 1995 -- -- -- -- -- -- --
Russell Van Zandt.............. 1997 215,000 35,000 273,441(4) 15,000 -- 3,024
Vice President; 1996 214,050 75,000 -- -- 10,000 -- 3,718
President, InterVascular Inc. 1995 208,400 120,000 -- -- 5,000 -- 4,936
S. Arieh Zak................... 1997 182,500 122,500(5) -- -- 15,000 -- 5,960
Vice President, 1996 170,625 122,500(5) -- -- 10,000 -- 6,368
Regulatory Affairs and 1995 155,625 75,000 -- -- 13,000 -- 5,379
Corporate Counsel
</TABLE>
- ---------------
(1) Amounts in this column represent (a) Corporation matching contributions
under the Corporation's 401(k) Savings and Supplemental Retirement Plan, (b)
premiums for term life insurance and (c) with respect to split dollar life
insurance policies maintained by the Corporation for the benefit of Messrs.
Saper and Pitkowsky, the actuarial value of the benefit to such Named
Executives of the current year's insurance premium paid by the Corporation
in excess of that required to fund the death benefit under the policy. The
amounts comprising items (a), (b) and (c) described in the preceding
sentence for each Named Executive in fiscal year 1995 are as follows. Saper:
(a) $4,620, (b) $885 and (c) $3,035. Pitkowsky: (a) $4,620, (b) $597 and (c)
$988. Van Zandt: (a) $4,051 and (b) $885. Zak: (a) $4,714 and (b) $665. The
amounts comprising items (a), (b) and (c) described above for each Named
Executive in fiscal year 1996 are as follows. Saper: (a) $4,750, (b) $1,026
and (c) $2,966. Pitkowsky: (a) $4,620, (b) $863 and (c) $935. Van Zandt (a)
$2,692 and (b) $1,026. Zak: (a) $5,432 and (b) $936. The amount comprising
items (a), (b) and (c) described above for each Named Executive in fiscal
year 1997 are as follows. Saper: (a) $4,750, (b) $1,124 and (c) $3,995.
Pitkowsky: (a) $4,750, (b) $732 and (c) $1,507. Rowe: (a) $0 and (b) $822.
Van Zandt: (a) $1,900 and (b) $1,124. Zak: (a) $4,875 and (b) $1,085.
Cumulative net life insurance premiums paid under the split dollar life
insurance program are recoverable (i) with respect to Mr. Saper, on death,
if not recovered earlier, and (ii) with respect to Mr. Pitkowsky, at
retirement or death.
(2) Includes payments for automobile and expense allowance, respectively, in the
following amounts: $66,297 and $0 in fiscal 1997; $66,684 and $45,876 in
fiscal 1996 and $67,476 and $69,745 in fiscal 1995. Includes $16,266 for
personal tax services in fiscal year 1997 and $21,780 in fiscal year 1996.
Also includes $112,470 reimbursement for executive portion of split dollar
life insurance in fiscal year 1997 and $179,557 in fiscal year 1996 covering
fiscal years 1995 and 1996.
(3) Includes $85,619 reimbursement for relocation expenses and $709 representing
personal use of an automobile leased by the Corporation.
8
<PAGE> 11
(4) Includes $267,900 reimbursement for relocation expenses and $5,541
representing personal use of an automobile leased by the Corporation.
(5) Includes special incentive award of $95,000 granted in May 1995 for which
payment was made as follows: $47,500 in fiscal year 1996 and $47,500 in
fiscal year 1997.
OPTIONS OF NAMED EXECUTIVES TO PURCHASE SECURITIES
On October 1, 1981, the Corporation adopted the 1981 Option Plan, which was
subsequently approved by the shareholders at the 1981 Annual Meeting. Options
that qualify as, and options that do not qualify as, incentive stock options
under the Internal Revenue Code of 1986, as amended (the "Code"), may be granted
thereunder. The 1981 Option Plan, as amended, reserved 3,075,000 shares of
Common Stock for issuance to key employees and officers recommended and approved
by the Board of Directors, or a committee thereof, at a price not less than 100%
(or, in the case of an incentive stock option granted to a 10% shareholder,
110%) of the fair market value of the shares purchased thereunder on the date of
grant. No option may be exercisable more than ten years from the date of grant,
and an incentive stock option granted to a 10% shareholder may not be
exercisable more than five years from the date of grant. The Stock Option Plan
is administered by the Compensation Committee of the Board of Directors. The
1981 Option Plan terminated on September 30, 1996; but options issued thereunder
remain outstanding. Consequently, the Corporation can no longer issue options
under the 1981 Option Plan.
On September 19, 1995, the Corporation adopted the 1995 Option Plan, which
was subsequently approved by the shareholders at the 1995 Annual Meeting.
Options that qualify as, and options that do not qualify as, incentive stock
options under the Code may be granted thereunder. The 1995 Option Plan reserved
750,000 shares of Common Stock for issuance to key employees and officers
recommended and approved by the Board of Directors, or a committee thereof, at a
price not less than 100% (or, in the case of an incentive stock option granted
to a 10% shareholder, 110%) of the fair market value of the shares purchased
thereunder on the date of grant. No option may be exercisable more than ten
years from the date of grant, and an incentive stock option granted to a 10%
shareholder may not be exercisable more than five years from the date of grant.
The Stock Option Plan is administered by the Compensation Committee of the Board
of Directors. The 1995 Option Plan terminates on September 17, 2005. One of the
proposals at the annual meeting is to increase the number of shares of the
Corporation's Common Stock which may be the subject of options granted pursuant
to the 1995 Option Plan. See "Amendment to the 1995 Stock Option Plan."
9
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZED
--------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES FOR OPTION TERM
OPTIONS IN FISCAL EXERCISE PRICE EXPIRATION -------------------
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
- ------------------- ----------- ----------- -------------- ------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Lawrence Saper..... 0 -- -- -- -- --
Murray Pitkowsky... 15,000(1) 3.2 16.50 Oct. 22, 2006 155,598 394,284
Stanton Rowe....... 25,000(1) 5.3 16.50 Oct. 22, 2006 259,329 657,139
Russell Van
Zandt............ 15,000(1) 3.2 16.50 Oct. 22, 2006 155,598 394,284
S. Arieh Zak....... 15,000(1) 3.2 16.50 Oct. 22, 2006 155,598 394,284
</TABLE>
- ---------------
(1) The option becomes exercisable in four equal annual installments beginning
on October 23, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR AT FISCAL YEAR
ACQUIRED VALUE END(#) END($)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Lawrence Saper................ 0 0 545,000/0 2,719,000/0
Murray Pitkowsky.............. 0 0 31,250/23,750 149,621/51,024
Stanton Rowe.................. 0 0 0/25,000 0/73,450
Russell Van Zandt............. 1,750 8,641 17,500/25,500 0/56,384
S. Arieh Zak.................. 0 0 21,250/24,750 45,736/53,962
</TABLE>
PENSION PLAN AND SUPPLEMENTAL BENEFIT PLANS
Pension Plan Table
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------
REMUNERATION 15 20 25 30 35
--------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000......................... 28,125 37,500 46,875 56,250 65,625
$150,000......................... 33,750 45,000 56,250 67,500 78,750
$175,000......................... 39,375 52,500 65,625 78,750 91,875
$200,000......................... 45,000 60,000 75,000 90,000 105,000
$225,000......................... 50,625 67,500 84,375 101,250 118,125
$250,000......................... 56,250 75,000 93,750 112,500 131,250
$300,000......................... 67,500 90,000 112,500 135,000 157,500
$400,000......................... 90,000 120,000 150,000 180,000 210,000
$450,000......................... 101,250 135,000 168,750 202,500 236,250
$500,000......................... 112,500 150,000 187,500 225,000 262,500
</TABLE>
Pension Plan
The Corporation maintains the Datascope Corp. Pension Plan. Each year the
Corporation contributes an amount necessary to fund the plan on an actuarial
basis. Pension benefits to be received upon retirement are determined by an
employee's highest 5 consecutive years' earnings (based on base salary,
commission and certain bonus compensation paid to sales and service
representatives) in the 10 years preceding retirement, length of service with
the Corporation and age at retirement. Mr. Saper is currently credited with 33
years of service under the plan, Mr. Pitkowsky with 11 years, Mr. Van Zandt with
5 years, and Mr. Zak with 5 years; Mr. Rowe will be retroactively credited with
1 year of service in January 1998. Pensions are reduced by 1.5%
10
<PAGE> 13
of an employee's estimated primary Social Security benefit for each year of
credited service (to a maximum of 33 1/3 years). The net pension is limited as
required by the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). The foregoing table illustrates annual pension benefits on a single
life basis, assuming retirement at age 65 and prior to reduction for Social
Security benefits or application of the ERISA limits.
Supplemental Benefit Plans
The Corporation also maintains certain plans which provide for supplemental
pension benefits for Messrs. Saper and Pitkowsky (the "Supplemental Benefits
Plans"). Under the terms of the plan maintained for Mr. Pitkowsky, he is
entitled to receive upon retirement a total annual benefit of $120,000, which is
payable for 15 years. The payments to be received were determined based upon Mr.
Pitkowsky's employment by the Corporation past age 65. The plan in effect for
Mr. Pitkowsky also provides for survivor benefits, including monthly payments
upon death. The plan in effect for Mr. Saper during fiscal year 1997 provides
that upon his retirement, Mr. Saper is entitled to receive annual lifetime
payments, the amounts of which will be based on 60% of the average total
compensation for the three years in which Mr. Saper's compensation was greatest
of the ten years immediately preceding Mr. Saper's retirement, less the benefit
payable under the Datascope Corp. Pension Plan. However, the supplemental
retirement benefit will not be less than the value of the benefit that would
have been payable had Mr. Saper's retirement occurred at age 65, which amount is
actuarially increased to his actual retirement date. At June 30, 1997, the
estimated annual benefit payable to Mr. Saper under his Supplemental Benefits
Plan approximates $1,090,000. Under the terms of Mr. Saper's Supplemental
Benefits Plan, the annual benefit will be increased to reflect changes in his
compensation to retirement. The plan in effect for Mr. Saper provides survivor
benefits in the form of a $10,000,000 life insurance policy, maintained pursuant
to a split-dollar agreement among Mr. Saper, the Corporation, and a trust for
the benefit of Mr. Saper's family (the "Trust"). The Corporation's net
investment in the program is recoverable on Mr. Saper's death, but may be repaid
sooner by the Trust. Benefits under each Supplemental Benefits Plan are paid
from the general funds of the Corporation; however, the Corporation purchases
key-man insurance intended to recover a substantial portion of the net after-tax
cost of the benefits.
COMPENSATION OF DIRECTORS
During fiscal year 1997, each director of the Corporation (except Mr. Saper
and Dr. Grayzel) (the "Non-Employee Directors") received an annual retainer of
$12,000 in cash and an attendance fee of $1,500 for each meeting of the Board
attended by that director and $750 per committee meeting attended. In addition,
each committee chairman received an annual retainer of $3,000.
Effective as of the 1997 shareholders meeting, the annual retainer for each
Non-Employee Director has been increased to $24,000, which is payable in shares
of the Corporation's Common Stock in order to assure that such directors have an
ownership interest in the Corporation in common with other shareholders. Payment
of the annual retainer will generally occur at the beginning of each calendar
year. In connection with the payment of annual retainers, the Corporation has
reserved 25,000 shares of Common Stock for issuance. A director may elect to
defer receipt of compensation, in which case the annual retainer will be paid
entirely in shares of Common Stock. In the case of directors electing current
receipt of compensation, 40% of such portion is paid in cash (to approximate
current federal income tax liability) and the balance in Common Stock.
From time to time, the Corporation has granted options to directors to
purchase shares of Common Stock. These options remain exercisable in full until
the earlier of ten years after the date of grant or the termination of status as
a director of the Corporation, and are not transferable except that each of the
options may be exercised by an executor or administrator within one year after
an optionee's death or disability but not beyond the option's normal expiration
date. Each option provides that the optionee may pay for any shares acquired
pursuant to the exercise of such option by cash or check or by transfer to the
Corporation of a number of shares of the Corporation's Common Stock with an
aggregate market value equal to the aggregate option exercise price. Such
options do not qualify as incentive stock options under the Code. For federal
income tax purposes, an optionee will realize taxable income on the date of
exercise of an option, and the
11
<PAGE> 14
Corporation will then be allowed a deduction from income, equal to the excess of
(a) the aggregate market value, on the date of exercise, of the shares so
acquired over (b) the aggregate option exercise price for such shares.
Transactions with respect to stock options granted to directors who are
officers of the Corporation pursuant to the 1981 Option Plan and the 1995 Option
Plan and with respect to the certain director options which have been approved
by the Corporation's shareholders are exempt from the short-swing trading
liability provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), pursuant to Rule 16b-3 of the Exchange Act. The
1981 Option Plan and the 1995 Option Plan do not cover grants to directors who
are not employees or officers of the Corporation.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Corporation has entered into a five-year employment agreement with Mr.
Saper, dated as of July 1, 1996. The employment agreement provides for automatic
one-year extensions of the term of the agreement after July 1, 1997 unless
either party gives notice of intent not to extend one hundred and eighty days
before any extension. The employment agreement provides for an annual base
salary of $795,000 until July 1, 1997, after which increases will be as
determined by the Board of Directors or its Compensation Committee. Pursuant to
the terms of the employment agreement, Mr. Saper is entitled to an annual bonus
based on criteria determined by the Compensation Committee. Under the employment
agreement, Mr. Saper is also entitled to receive bonus compensation in
accordance with any long-term and annual incentive compensation plans that are
maintained by the Corporation for the benefit of its executives, and to
participate in any other bonus plans maintained by the Corporation for its
executives. See "Compensation Committee Report on Executive Compensation." Mr.
Saper is also entitled to certain retirement benefits. See "Pension Plan and
Supplemental Benefit Plans." Mr. Saper may terminate the employment agreement
for good reason, including a significant breach by the Corporation of its
obligations thereunder or certain changes-in-control of the Corporation, in
which event Mr. Saper is entitled to receive a lump-sum payment equal to his
compensation as then in effect (including base salary and prior year's bonus
compensation) multiplied by the number of years (including any partial years)
remaining in his term of employment.
The Corporation has agreed that in the event of a change in control of the
Corporation Mr. Pitkowsky would be entitled to a lump-sum payment of 2.5 times
his annual base salary then in effect.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee of the Board of Directors (the "Compensation
Committee") establishes and reviews the Corporation's arrangements and programs
for compensating executive officers, including the Named Executives. The
Compensation Committee is composed entirely of directors who are neither
officers nor employees of the Corporation. The Compensation Committee has been
advised by outside legal counsel and by compensation consultants in formulating
the Compensation Committee's overall philosophy and objectives regarding
executive compensation and in structuring the Chief Executive Officer's
compensation package.
PHILOSOPHY AND POLICY
The Compensation Committee's policy is to design executive compensation
packages that reward the achievement of both short-term and long-term objectives
of the Corporation. Under this approach, the attainment of yearly earnings and
other short-term targets is compensated through yearly bonuses under the bonus
plans described below, and long-term performance of the Corporation is rewarded
through the grant of stock options under the 1995 Option Plan described above.
The bonuses and stock options are in addition to executives' yearly base
salaries, which are determined in a manner to be competitive with companies
which the Compensation Committee believes are comparable to the Corporation in
the Corporation's industry.
The Bonus Plan for all employees allows for annual bonus payments to
eligible executives based on attainment of overall corporate and division
earnings targets. The divisional earnings targets are established
12
<PAGE> 15
annually by the divisional presidents and approved by Mr. Saper and the overall
corporate earnings targets are established annually by the Corporation's Board
of Directors. Bonuses are granted to participants if the target level of
earnings growth is achieved, and the size of the executive's bonus increases
with the level of earnings growth up to a certain maximum level of bonus. Mr.
Saper has the discretion, subject to approval of the Board of Directors, to
grant special awards or adjust annual awards in the event that corporate or
divisional results do not adequately reflect a participant's effort. The
percentage of an eligible executive's salary which may be earned as a bonus
varies depending on the employee's position with the Corporation. In 1997, the
Compensation Committee approved a new Bonus Plan, which is subject to
shareholder approval. See "Annual Incentive Plan" for a description of that
Plan.
The Compensation Committee believes that, in addition to compensating
executives for the long-term performance of the Corporation, the grant of stock
options aligns the interest of the executives with those of the Corporation's
shareholders. The Compensation Committee determines the recipients of stock
option grants and the size of the grants consistent with these principles, and
based on the employee's performance and position with the Corporation.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Saper's compensation for fiscal year 1997 was determined by an
employment agreement entered into as of July 1996. The overall compensation
included in the agreement was determined in a manner to be competitive with
companies which the Compensation Committee believes are comparable to the
Corporation in the Corporation's industry. Part of Mr. Saper's bonus for fiscal
year 1997 was determined under the 1997 Executive Bonus Plan, which is described
below. See "1997 Executive Bonus Plan." The Compensation Committee also awarded
Mr. Saper a discretionary bonus to reward Mr. Saper's leadership of the
Corporation during fiscal year 1997, with a special emphasis on the
strengthening of the Corporation's management team and the development of new
products. Mr. Saper earned a bonus of $500,850 under the 1997 Executive Bonus
Plan (see "1997 Executive Bonus Plan"), which, together with the discretionary
bonus awarded by the Compensation Committee, resulted in total bonus
compensation of $600,000 for Mr. Saper for fiscal year 1997.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Code generally disallows a tax deduction for
compensation over $1,000,000 paid to the Corporation's Chief Executive Officer
and certain other highly compensated executive officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. The 1997 Executive Bonus Plan and the Annual
Incentive Plan are subject to shareholder approval so amounts payable to Mr.
Saper under the 1997 Executive Bonus Plan and to Covered Employees under the
Annual Incentive Plan can be deducted under Section 162(m) of the Code.
COMPENSATION COMMITTEE
David Altschiller (Chairman)
Alan B. Abramson
William L. Asmundson
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act of 1933, as amended
(the "Securities Act"), or the Exchange Act, except to the extent that the
Corporation specifically incorporated this information by reference and shall
not otherwise be deemed filed under such Acts.
13
<PAGE> 16
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
Common Stock with the cumulative total return of the Standard & Poor's 500 Stock
Index and the Standard & Poor's Medical Products and Supplies Index for the five
year period commencing July 1, 1992 and each subsequent June 30 through June 30,
1997. The graph assumes that the value of the investment in Common Stock was
$100 on July 1, 1992 and that all dividends were reinvested.
Cumulative Total Return
Years as of June 30th
-----------------------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
Datascope Corp. 100 64 68 73 76 84
S & P 500 Index 100 114 115 145 183 247
S & P Medical Products &
Supplies Index 100 82 79 121 159 211
14
<PAGE> 17
APPROVAL OF AMENDMENT TO THE 1995 STOCK OPTION PLAN
As of October 1, 1997, there were 28,850 shares of authorized Common Stock
remaining which may be the subject of new options (each an "Option") issued
under the 1995 Option Plan. The Board of Directors of the Corporation believes
that the authorization of additional shares of Common Stock that may be issued
pursuant to Options granted to officers and key employees under the 1995 Option
Plan would assist the Corporation in attracting and retaining qualified
employees. Accordingly, the Board of Directors approved an amendment to the 1995
Option Plan that would increase the aggregate number of shares of Common Stock
which may be the subject of Options granted pursuant to the Plan from 750,000 to
1,500,000 shares. The Board of Directors recommends that the amendment to the
1995 Option Plan be presented to the Corporation's shareholders for approval. If
the amendment to the 1995 Option Plan is not approved, no additional Options
would be granted under the 1995 Option Plan after the options initially
authorized are granted. The increased number of shares of Common Stock subject
to the 1995 Option Plan would constitute approximately 4.4% of the shares of
Common Stock that were outstanding, and reserved for issuance pursuant to
outstanding Options, as of October 1, 1997.
STOCK OPTION PLAN
The following is a summary of the material provisions of the 1995 Option
Plan. Such summary should, however, be read in conjunction with, and is
qualified in its entirety by the complete text of the 1995 Option Plan, as
proposed to be amended, as set forth in Exhibit A to this Proxy Statement and
incorporated herein by reference.
General Information. The 1995 Option Plan currently provides for the
issuance of Options to purchase up to 750,000 shares of Common Stock. Each
Option may be either an Incentive Stock Option ("ISO") as defined in Section 422
of the Code or a Non-Qualified Stock Option ("NQSO"). The 1995 Option Plan is
designed to aid the Corporation and its subsidiaries in retaining and attracting
personnel of exceptional ability by enabling key employees to purchase a
proprietary interest in the Corporation, thereby stimulating in such individual
an increased desire to render greater services which will contribute to the
continued growth and success of the Corporation and its subsidiaries. Officers
and key employees (approximately 200 persons) are currently eligible for grants
of Options under the 1995 Option Plan. Any one participant may be granted
Options to purchase a maximum of 150,000 shares of Common Stock in any one year
(subject to adjustment as described below). Generally, any Option granted under
the 1995 Option Plan which is forfeited, expires or terminates prior to vesting
or exercise will again be available for award under the 1995 Option Plan;
provided, however, that in the case of a cancellation or termination of an
Option in the same fiscal year that such Option was granted (or for purposes of
determining the maximum number of Options which may be granted to a participant
under the Plan, the cancellation or termination of an Option at any time), both
the canceled Option and the newly granted Option shall be counted in determining
whether the participant has received the maximum number of Options permitted to
be issued to any one participant under the Plan.
Term. The 1995 Option Plan will terminate on September 17, 2005, unless
the Board of Directors, in its sole discretion, terminates the 1995 Option Plan
prior to that date.
Stock Subject to the Plan. As of October 1, 1997, Options granted to
purchase an aggregate of 715,150 shares of Common Stock (with per share exercise
prices ranging from $16.50 to $24.125 and expiration dates ranging from
September 2005 to September 2007) were outstanding under the 1995 Option Plan.
On October 1, 1997, the closing price of the Common Stock was $21.875 per share.
Plan Administration. The Compensation Committee or other duly designated
committee (the "Committee") of the Board shall administer the 1995 Option Plan.
The Committee has the full authority to interpret the 1995 Option Plan, to
establish and amend rules and regulations relating to it, to determine the key
employees to whom Options may be granted under the 1995 Option Plan, to select
from among the eligible individuals those to whom Options are to be granted, to
determine the terms and provisions of the
15
<PAGE> 18
respective Option agreements, and to make all other determinations necessary or
advisable for the administration of the 1995 Option Plan. Members of the
Committee are not eligible to receive Options under the
1995 Option Plan; each member of the Committee is both a "disinterested person"
within the meaning of Rule 16b-3 under the Exchange Act and an "outside
director" as that term is defined for the purposes of Section 162(m) of the
Code.
The Stock Option Plan may be wholly or partially amended or otherwise
modified, or suspended at any time or from time to time by the Committee, with
the approval of the Board of Directors. However, the following amendments can
only be adopted subject to approval of the shareholders of the Corporation: any
amendment which (i) increases the number of Shares that may be the subject of
Options granted under the 1995 Option Plan, (ii) expands that class of
individuals eligible to receive Options under the 1995 Option Plan, (iii)
increases the period during which Options may be granted or the permissible term
of Options under the 1995 Option Plan, (iv) decreases the minimum exercise price
of such Options, or (v) would require the approval of Shareholders in order for
options granted under the 1995 Option Plan to satisfy the requirements for
performance-based compensation for purposes of Section 162(m) (4) (C) of the
Code (or successor provisions).
Neither the amendment, suspension nor termination of the 1995 Option Plan
shall, without the consent of the holder of such Option, alter or impair any
rights or obligations under any Option theretofore granted.
Options Issued Under 1995 Option Plan. The terms of specific Options are
determined by the Committee. The per share exercise price of the Common Stock
subject to Options shall not be less than 100% of the fair market value of the
shares of Common Stock on the date of grant. However, in the case of ISOs
granted to a holder of shares representing at least 10% of the total combined
voting power of the Corporation, or of any subsidiary or parent thereof (a "10%
Shareholder"), the per share exercise price shall not be less than 110% of the
fair market value of the Common Stock on the date of the grant. Each Option will
be exercisable during the period or periods specified by the Committee, and set
forth in an option agreement, which period or periods shall not exceed 10 years
from the date of grant, or five years, in the case of ISOs granted to a 10%
Shareholder. The aggregate fair market value, determined as of the date of
grant, of the Common Stock subject to ISOs which may first become exercisable by
an individual (under the 1995 Option Plan or any other plan of any parent or
subsidiary of the Corporation) in any calendar year shall not exceed $100,000.
All shares available for issuance under the 1995 Option Plan may be ISOs.
The 1995 Option Plan provides that the Committee shall make adjustments
with respect to the unexercised portion of any Option to prevent the inequitable
dilution or enlargement of the rights of any holder of an Option. In the event
of a merger or consolidation where the Corporation is not the surviving
corporation, and the agreements governing such transaction do not provide for
the substitution of new options in lieu of Options, the holder of any Option
granted under the 1995 Option Plan will have the right, not less than five days
prior to the record date for the determination of Shareholders entitled to
participate in such merger or consolidation, to exercise the total unexercised
portion of his or her Option without regard to any installment provisions of
such Option, provided that all conditions precedent to the exercise of such
Option, other than the passage of time, have been satisfied.
Upon the exercise of an Option, the holder of such Option shall pay the
Corporation the exercise price plus the amount of the required federal and state
withholding taxes, if any. The 1995 Option Plan allows the participant to pay
the exercise price in cash or previously owned shares of Common Stock, (which
have been held by the option holder for at least 6 months prior to the date the
shares are surrendered for payment), or a combination thereof. The 1995 Option
Plan also allows participants to elect to have shares withheld upon exercise for
the payment of withholding taxes.
Should any employee terminate, either voluntarily or involuntarily, his or
her employment at the Corporation or any of its subsidiaries, while holding any
outstanding Options granted under the 1995 Option Plan, such Options will
terminate on the date of such termination of employment, regardless of the term
of the Option. However, if the termination of employment is due to retirement,
the holder may exercise any Option which the holder could have exercised on the
date of such termination of employment, provided that such exercise is within
the Option term and within three months of such termination of employment. In
addition, if
16
<PAGE> 19
the termination of employment is due to either death or disability of the
holder, the holder may exercise any Option which the holder could have exercised
on the date of such termination of employment, provided that such exercise is
within the Option term and within one year of such termination of employment.
An employee exercising an Option is not permitted to sell or transfer any
Common Stock acquired thereby within seven months following the date of such
exercise without the prior written consent of the Corporation. In the event that
during the first six months of such period the holder of the Option ceases to be
an employee of the Corporation or its subsidiaries for any reason (other than
death), then the Corporation shall have the right for the duration of such seven
month period to repurchase all such shares of Common Stock which are subject to
such restriction at a purchase price equal to the aggregate exercise price paid
by the employee for such shares of Common Stock. The Compensation Committee has
waived this restriction on a per-employee basis for up to 2,500 exercisable
Options per calendar year from each Option grant.
New Plan Benefits. As of the date of this Proxy Statement, no Options have
been granted under the 1995 Option Plan with respect to any shares of Common
Stock which are the subject of the proposed amendment to the 1995 Option Plan.
FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a description of the federal income tax consequences
under the Code, of the grant and exercise of the benefits awarded under the 1995
Option Plan. This description does not purport to be a complete description of
the federal income tax aspects of the 1995 Option Plan. The summary does not
include any discussion of state, local or foreign income tax consequences or the
effect of gift, estate or inheritance taxes, any of which may be significant to
a particular employee eligible to receive Options.
There will be no federal income tax consequences to employees or the
Corporation on the grant of a NQSO. On the exercise of a NQSO, the employee
generally will have taxable ordinary income, subject to withholding, equal to
the excess of the fair market value of the shares of Common Stock received on
the exercise date over the option price of the shares. The Corporation will be
entitled to a tax deduction in that year which includes the year in which the
employee includes the income, and in an amount equal to the amount of income
recognized by the employee provided the Corporation complies with applicable
withholding and/or reporting rules. Any ordinary income realized by an employee
upon exercise of a NQSO will increase his tax basis in the Common Stock thereby
acquired.
With respect to Common Stock acquired upon the exercise of an Option which
will not be transferable for the first seven months after exercise without the
written consent of the Committee, and which will be subject to repurchase by the
Corporation at the option exercise price should the participant cease to be an
officer or employee of the Corporation or its subsidiaries during the first six
months of such seven month period, for federal income tax purposes the Common
Stock will be subject to a "substantial risk of forfeiture" during such six
month period. Thus, a participant will defer the recognition of income until the
end of that six month period (or until such restriction is terminated) and
recognize compensation income equal to the difference between the exercise price
and the market value of the Common Stock at such time unless the participant
elects to recognize compensation income on the exercise date. Any additional
gain or any loss recognized upon the subsequent disposition of the acquired
Common Stock will be a capital gain or loss.
With respect to ISOs, no compensation income is recognized by a
participant, and no deduction is available to the Corporation upon either the
grant or exercise of an ISO. However, the difference between the exercise price
of an ISO and the market price of the Common Stock acquired on the date that the
substantial risk of forfeiture of the underlying Common Stock lapses will be
included in alternative minimum taxable income of a participant for the purposes
of the "alternative minimum tax." Generally, if an optionee holds the shares
acquired upon exercise of ISOs until the later of (i) two years from the grant
of the ISOs or (ii) one year from the date of acquisition of the shares upon
exercise of ISOs, any gain recognized by the participant on a sale of such
shares will be treated as capital gain. The gain recognized upon the sale is the
difference between the option price and the sale price of the Common Stock. The
net federal income tax effects on the holder of ISOs generally is to defer,
until the shares are sold, taxation (other than for alternative minimum tax
purposes) of any increase in the value of the Common Stock from the time of
grant to the time of exercise,
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<PAGE> 20
and to treat such gain as capital gain. If the optionee sells the shares prior
to the expiration of the holding period set forth above (a "disqualified
disposition"), the optionee will realize ordinary compensation income in the
amount equal to the difference between the exercise price and the fair market
value on the date that the substantial risk of forfeiture of the underlying
Common Stock lapses. The compensation income will be added to the optionee's
basis for purposes of determining the gain on the sale of the shares. Such gain
will be capital gain if the shares are held as capital assets. If the
application of the above-described rule would result in a loss to the optionee,
the compensation income required to be recognized thereby would be limited to
the excess, if any, of the amount realized on the sale over the basis of the
shares sold. If an optionee disposes of shares obtained upon exercise of an ISO
prior to the expiration of the holding period described above (a "disqualified
disposition"), the Corporation will, subject to satisfying certain withholding
and/or reporting obligations, be entitled to a deduction in the amount of the
compensation income that the optionee recognizes as a result of the disposition.
An employee who surrenders shares of Common Stock in payment of the
exercise price of an Option will not recognize gain or loss on his or her
surrender of such shares, but, in the case of an NQSO, will recognize ordinary
income on the exercise of an NQSO as described above. Of the shares received in
such an exchange, that number of shares equal to the number of shares
surrendered will have the same tax basis and capital gains holding period as the
shares surrendered. The balance of the shares received will have a tax basis
equal to their fair market value on the date of exercise, and the capital gains
holding period will begin on the date of exercise. The use by an employee of
shares of Common Stock previously acquired pursuant to the exercise of an ISO
will be treated as a taxable disposition if the transferred shares have not been
held by the employee for the requisite holding period described above.
If the Corporation delivers cash, in lieu of fractional shares, the
employee will recognize ordinary income equal to the cash paid and the fair
market value of any shares issued as of the date of exercise. An amount equal to
any such ordinary income will be deductible by the Corporation, provided it
complies with applicable withholding requirements.
Section 162(m) of the Code, which generally disallows a tax deduction for
compensation over $1,000,000 paid to the Chief Executive Officer and certain
other highly compensated executive officers, provides that "performance-based"
compensation will not be subject to the $1,000,000 deduction limitation. Since
an employer is not entitled to a deduction upon the grant or exercise of an ISO
in any event (except in the case of a disqualified disposition), this provision
generally does not affect the Corporation's tax treatment with regard to ISOs.
Options (other than ISOs) granted under a plan approved by shareholders with an
exercise price equal to the fair market value of the underlying stock as of the
date of grant are considered performance-based compensation, if certain
requirements are met. The 1995 Option Plan meets such requirements and,
accordingly, any income realized by employees with respect to the 1995 Option
Plan is not subject to the deduction limitation of Section 162(m).
The 1995 Option Plan is not subject to any provisions of the Employee
Retirement Income Security Act of 1974 and is not required to be qualified under
Section 401(a) of the Code.
RESTRICTIONS ON RESALE
Registration Under the Securities Act. The Corporation may register the
shares of Common Stock underlying the Options on a Registration Statement on
Form S-8 filed with the Securities and Exchange Commission. The Commission has
indicated that optionees who have acquired shares pursuant to a bona fide public
offering registered on Form S-8 and who are not affiliates of the Corporation,
at the time of their proposed reoffer or resale, may generally resell or reoffer
the shares so acquired. Optionees who are affiliates of the Corporation may
resell or reoffer shares acquired pursuant to an Option only if such reoffer or
resale is made pursuant to an exemption from the registration requirements of
the Securities Act or pursuant to a prospectus which meets the requirements of
General Instruction C of Form S-8. In the case of affiliates, the exemption
provided by Rule 144 under the Securities Act would be available so long as the
Corporation continues to be in compliance with the reporting requirements and
the affiliate complies with the volume limitations and the other requirements of
that rule.
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<PAGE> 21
Exemption from Section 16(b) of the Exchange Act. The 1995 Option Plan
meets the requirements of Rule 16b-3 of the Exchange Act, which exempts the
acquisition of certain options under the 1995 Option Plan from the operation of
Section 16(b) under the Exchange Act.
BOARD RECOMMENDATION
The Board of Directors believes that it is in the best interests of the
Corporation and its shareholders to approve the amendment to the 1995 Option
Plan so that the Corporation can continue to attract, retain and motivate
qualified employees and to align their interests with those of the Corporation's
shareholders. See "Compensation Committee Report on Executive Compensation."
Approval of the amendment to the 1995 Option Plan requires the affirmative vote
of a majority of the votes cast at the Annual Meeting. Accordingly, the Board of
Directors recommends that you vote FOR the approval of the amendment to the 1995
Option Plan.
APPROVAL OF THE 1997 EXECUTIVE BONUS PLAN
Pursuant to Mr. Saper's employment agreement, in fiscal 1997, the
Compensation Committee adopted the 1997 Executive Bonus Plan. Under the terms of
the 1997 Executive Bonus Plan, the payment of a bonus is conditioned upon
receiving shareholder approval of the 1997 Executive Bonus Plan. Shareholder
approval of the 1997 Executive Bonus Plan is also required for any bonus under
the Plan to be deductible to the Corporation under Section 162(m) of the Code.
General Information. The 1997 Executive Bonus Plan provides for a bonus
payable to Mr. Saper based on the consolidated operating earnings of the
Corporation and its subsidiaries before income taxes, as determined in
accordance with generally accepted accounting principles consistently applied
("GAAP"), as reported in the Corporation's audited financial statements,
adjusted to exclude in its entirety any special items and extraordinary items in
accordance with GAAP (the "Earnings"), for the period beginning January 1, 1997
and ending June 30, 1997 (the "Plan Period") when compared with the prior year
period (the "Base Period"). If the growth in Earnings for the Plan Period is
less than 15% (the "Earnings Threshold") when compared with the Base Period,
then no bonus will be paid to Mr. Saper under the Plan. However, if the growth
in Earnings for the Plan Period is equal to or greater than the Earnings
Threshold when compared with the Base Period (the "Bonus Earnings"), then,
depending on the extent to which the Bonus Earnings exceed the Earnings
Threshold, a bonus ranging from a minimum of $397,500 to a maximum of $795,000
is payable to Mr. Saper under the Plan, subject to shareholder approval of the
Plan.
Plan Administration. The 1997 Executive Bonus Plan is administered by the
Compensation Committee. Under the 1997 Executive Bonus Plan, this Committee is
charged with responsibility for interpreting the Plan, establishing and amending
rules and regulations relating to the Plan, and determining the terms and
provisions for making awards and making all other determinations necessary or
advisable for the administration of the Plan. In addition, even if the Plan's
performance goals are met, the Committee retains the right to reduce the bonus
awarded under the Plan if, in its judgement, subjective factors warrant a
reduction. The bonus award is to be paid in cash as soon as practicable
following (i) issuance of the written certification from the Committee that the
performance goals under the Plan have been attained (which has already occurred)
and (ii) shareholder approval of the Plan.
New Plan Benefits. In accordance with the 1997 Executive Bonus Plan, Mr.
Saper was awarded a bonus of $500,850 in cash, subject to shareholder approval
of the Plan.
BOARD RECOMMENDATION
The Board of Directors believes that it is desirable and in the best
interest of the Corporation and its shareholders to enable the Corporation to
reward its executives through incentive compensation plans, and to enable the
Corporation's executive compensation plans to comply with the requirements of
Section 162(m) of the Code to permit the deductibility of compensation over
$1,000,000 paid to the Chief Executive Officer and certain highly compensated
executive officers. Mr. Saper has played a central role in increasing the
19
<PAGE> 22
Corporation's competitive strength and sustaining its continued growth. As a
result, the Board recommends a vote FOR the 1997 Executive Bonus Plan. In the
event that the 1997 Executive Bonus Plan is not approved by the Corporation's
shareholders, any bonus granted to Mr. Saper for fiscal year 1997 would be
discretionary and any such bonus would not be deductible under Section 162(m) of
the Code to the extent that (when combined with other non-exempt compensation)
it exceeds the limit set forth in that statute.
APPROVAL OF THE ANNUAL INCENTIVE PLAN
In September 1997, the Compensation Committee adopted the Annual Incentive
Plan for selected management employees of the Corporation and its divisions and
subsidiaries (each division and subsidiary is referred to herein as a "Business
Unit"). The Annual Incentive Plan provides for annual bonus payments to
Participants (as defined below) based on any one or more performance criteria.
Shareholder approval of the Annual Incentive Plan is required in order for the
Plan to be effective and for bonuses payable thereunder to (i) the Chief
Executive Officer and (ii) any other Participant who is designated by the
Compensation Committee, either (x) prior to the Determination Date (as defined
below) or (y) such later date as such Participant commences employment, to be a
"covered employee" within the meaning of Section 162(m) of the Code whose
"applicable employee remuneration" (within the meaning of Section 162(m) of the
Code) for such Performance Period (as defined below) is expected to exceed $1
million (each a "Covered Employee"), to be deductible under Section 162(m) of
the Code.
The following is a summary of the material terms of the Annual Incentive
Plan. Such summary, however, should be read in conjunction with, and is
qualified in its entirety by, the complete text of the Annual Incentive Plan, as
set forth in Exhibit B to this Proxy Statement and incorporated herein by
reference.
Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly held corporation for compensation paid in excess of $1
million in any taxable year to the Chief Executive Officer or any of the four
other most highly compensated executive officers. The Corporation intends to
structure awards under the Annual Incentive Plan so that any compensation paid
under the Plan to any Covered Employee would be qualified "performance-based
compensation" eligible for continued deductibility with shareholder approval. To
allow the Corporation to so qualify for such compensation, the Corporation is
seeking approval of the Annual Incentive Plan and the material terms of the
performance criteria applicable to the Plan.
Maximum Award. No Participant may receive an award under the Annual
Incentive Plan with respect to a fiscal year of the Corporation ("Performance
Period") that exceeds the lesser of either 200% of such Participant's base
salary or $3,000,000.
Plan Administration. The Annual Incentive Plan will be administered by the
Compensation Committee, which is composed entirely of non-employee directors who
meet the criteria of "outside director" under Section 162(m) of the Code. The
Committee may delegate its responsibilities for administering the Annual
Incentive Plan to the Chief Executive Officer, as the Committee deems necessary,
except that the Committee shall not delegate its responsibilities under the Plan
relating to any Covered Employee.
Eligible Persons; Participants. Only employees of the Company or its
Business Units who are at the level of Manager or at a more senior level are
eligible to participate in the Plan ("Eligible Persons") (approximately 120
employees). An Eligible Person shall participate in the Plan during a
Performance Period only if such eligible person commenced employment before the
end of either (a) the first quarter of such Performance Period (in the case of
an Eligible Person who would be a Covered Employee), or (b) the second quarter
of such Performance Period (in the case of an Eligible Person who would not be a
Covered Employee) (each a "Participant").
Awards. Awards may be granted only to Participants with respect to each
Performance Period, subject to the terms and conditions set forth in the Plan.
Performance Criteria. Generally within 90 days after the start of each
fiscal year (the "Determination Date"), the Committee will adopt, with respect
to each Participant, specific performance criteria, perform-
20
<PAGE> 23
ance thresholds and performance targets, together with a percentage of such
Participant's base salary to be awarded (subject to modification by the
Committee (as described below)) if such Participant exceeds each performance
threshold, and achieves or exceeds each target for the Performance Period. If a
Participant does not exceed each performance threshold, then no bonus will be
paid to such Participant.
Section 162(m) of the Code requires performance awards for Covered
Employees to be based upon objective performance criteria. For each Participant
who is a Covered Employee, the performance criteria may include one or more of
the following: (i) net sales, (ii) pre-tax earnings, (iii) after-tax earnings,
(iv) operating earnings, and (v) earnings per share, each as determined in
accordance with GAAP for the Corporation on a consolidated basis ("Financial
Criteria"). If a Covered Employee is employed by a Business Unit, the Financial
Criteria will be based on a combination of the results of such Business Unit
results and the consolidated results of the Corporation. Performance targets may
be set at a specific level or may be expressed as relative to performance in
prior fiscal years, and may be on an absolute or relative basis (including
comparisons of results for the Performance Period to either (x) results for the
prior fiscal year or (y) budget for the Performance Period), and, where
applicable, measured before extraordinary items and/or special items in
accordance with GAAP.
With respect to each Participant who is not a Covered Employee, the
performance criteria established by the Committee may be any, or a combination
of any, quantitative criteria (including, without limitation, any Financial
Criteria) or qualitative criteria (collectively, the "Individual Criteria"). If
such Participant is employed by a Business Unit, then the Financial Criteria for
such Participant may relate to either the results of such Business Unit or the
results of such Business Unit and consolidated results of the Corporation.
On each Determination Date, the Committee will also determine for each
Participant the weighting for each target and indicate the extent to which
performance awards will be made (subject to modification (as described below))
if such Participant's performance thresholds are exceeded, including if such
Participant's performance targets are achieved or exceeded.
Calculation of Award; Certification. As soon as practicable after the end
of the Performance Period, and subject to verification by the Corporation's
independent auditors of the applicable Financial Criteria, the Committee will
determine with respect to each Participant whether and the extent to which such
Participant's Performance Thresholds were exceeded, including the extent to
which, if any, each Target was attained or exceeded, and will calculate such
Participant's award, if any, by taking into account these factors and the
weighting for each target (subject to modification (as described below)). At
such time, the Committee will certify in writing to the Board the amount of each
award and whether each material term of the Plan relating to such award has been
satisfied.
Payment. So long as the Participant remains employed by the Company or a
Business Unit through the date of certification of such Participant's award,
such award will be payable in cash as promptly as practicable thereafter. See
"Employment Requirement."
Deferral. From time to time, prior to the beginning of a Performance
Period, the Committee may, in its sole discretion (under uniform rules
applicable to all Participants and in compliance with applicable law in effect
at such time), offer Participants the opportunity to defer receipt of all or a
portion of any award that is made (subject to modification (as described below))
for such Performance Period.
Modification of Awards. The Committee may, in its sole discretion, (i)
increase, decrease or eliminate the award payable to any Participant who is not
a Covered Employee and who would not become a Covered Employee as a result of
such increase or (ii) decrease or eliminate the award payable to any Covered
Employee, to reflect the individual performance and contribution of, and other
factors relating to, such Participant. The determination of the Committee shall
be final and conclusive.
Employment Requirement. No Participant will have any right to receive
payment of an award unless such Participant remains employed by the Company or a
Business Unit through the date of certification of such award. However, the
Committee may, in its sole discretion, pay all or any part of an award to any
Participant who, prior to such date of certification, retires, dies or becomes
permanently disabled or where other special circumstances exist with respect to
such Participant, so long as such Participant exceeded all of
21
<PAGE> 24
such Participant's Performance Thresholds. The maximum of such payment, if any,
will be calculated, and to the extent determined by the Committee, paid in cash
as promptly as practicable thereafter (subject to modification (as described
above)).
Term, Amendment and Termination of the Plan. The Annual Incentive Plan, if
approved by shareholders, will be effective beginning with fiscal year 1998. To
the extent required under Section 162(m) of the Code, (i) any change to the
material terms of the Financial Criteria for Covered Employees shall be
disclosed to and approved by the shareholders at the next annual meeting of
shareholders to be held following such change, and (ii) the material terms of
the Financial Criteria for Covered Employees shall be disclosed to and
reapproved by the shareholders no later than the 2002 annual meeting of
shareholders. The Compensation Committee may amend the Annual Incentive Plan at
any time. No such amendment shall be effective that alters the bonus or
performance criteria applicable to a Covered Employee for the Performance Period
in which such amendment is made or any prior Performance Period, except as may
be permitted under Section 162(m) of the Code. The Compensation Committee may
terminate the Annual Incentive Plan at any time.
New Plan Benefits. Since future awards under the proposed Annual Incentive
Plan will be based upon the future performance of the Corporation, its Business
Units and Participants, actual payments cannot be determined at this time. If
the Annual Incentive Plan had been in effect at the end of fiscal year 1997, and
fiscal year 1997 and 1996 data were applied to the Financial Criteria
established for Mr. Saper for fiscal year 1998, Mr. Saper would not have earned
an award under the Plan. However, if the Annual Incentive Plan had been in
effect for the period beginning January 1, 1997 and ending June 30, 1997 (which
was the performance period under the 1997 Executive Bonus Plan), Mr. Saper would
have earned an award of $636,000 under the Annual Incentive Plan. The amount of
this hypothetical award is higher than the amount that was awarded to Mr. Saper
under the 1997 Executive Bonus Plan (subject to shareholder approval of such
Plan) because of different financial criteria under that Plan. See "1997
Executive Bonus Plan." If both Plans had the same financial criteria, the awards
would have been equal.
BOARD RECOMMENDATION
The Board of Directors believes that it is desirable and in the best
interests of the Corporation and its shareholders to reward its employees
through incentive compensation plans and to enable the Corporation's executive
compensation plans to comply with the requirements of Section 162(m) of the Code
to permit the deductibility of compensation over $1,000,000 paid to any Covered
Employee. As a result, the Board recommends a vote FOR the Annual Incentive
Plan.
COMPLIANCE WITH THE SECURITIES EXCHANGE ACT
The Corporation's executive officers and directors are required under the
Exchange Act to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Copies of those reports must also be
furnished to the Corporation. Based solely on the Corporation's review of the
copies of such reports it has received, the Corporation believes that all its
executive officers and directors, and greater than ten percent beneficial owners
complied with all filing requirements applicable to them.
OTHER BUSINESS
The Board of Directors of the Corporation knows of no other matters to be
presented at the Annual Meeting. However, if any other matters properly come
before the meeting, or any adjournment thereof, it is intended that proxies in
the accompanying form will be voted in accordance with the judgment of the
persons named therein.
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<PAGE> 25
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next annual
meeting of the Corporation's shareholders must be received by the Corporation
for inclusion in the Corporation's 1998 Proxy Statement and form of proxy on or
prior to July 4, 1998.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
The Annual Report to Shareholders of the Corporation for the year ended
June 30, 1997 (the "Annual Report") is being furnished simultaneously herewith.
Such Annual Report is not to be considered a part of this Proxy Statement.
Upon the written request of any shareholder, management will provide, free
of charge, a copy of the Corporation's annual report on Form 10-K for the fiscal
year ended June 30, 1997, including the financial statements and schedules
thereto. Requests should be directed to Secretary, Datascope Corp., 14 Philips
Parkway, Montvale, New Jersey 07645.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Corporation's financial statements for the years ended June 30, 1997
and 1996 have been examined by the firm of Deloitte & Touche LLP, independent
certified public accountants. Representatives of Deloitte & Touche LLP are
expected to be present at the Annual Meeting of Shareholders to make a statement
if they so desire and they are expected to be available to respond to
appropriate questions.
The Corporation's Board of Directors intends to review the appointment of
independent certified public accountants at a meeting subsequent to the Annual
Meeting of Shareholders.
COST OF SOLICITATION
The cost of soliciting proxies in the accompanying form has been or will be
borne by the Corporation. The Corporation has engaged the firm of MacKenzie
Partners, Inc. as proxy solicitors. The fee to such firm for solicitation
services is estimated to be $7,500 plus reimbursement of out-of-pocket expenses.
In addition, directors, officers and employees of the Corporation may solicit
proxies personally or by telephone or other means of communication. Although
there is no formal agreement to do so, arrangements may be made with brokerage
houses and other custodians, nominees and fiduciaries to send proxies and proxy
material to their principals, and the Corporation may reimburse them for any
attendant expenses.
It is important that your shares be represented at the meeting. If you are
unable to be present in person, you are respectfully requested to sign the
enclosed proxy and return it in the enclosed stamped and addressed envelope as
promptly as possible.
By Order of the Board of Directors,
MURRAY PITKOWSKY,
Secretary
Dated: November 1, 1997
Montvale, New Jersey
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<PAGE> 26
EXHIBIT A
DATASCOPE CORP.
1995 STOCK OPTION PLAN
(AS OF SEPTEMBER 18, 1997)
1. Purpose. The 1995 Stock Option Plan (the "Plan") of Datascope Corp.
(the "Company"), a Delaware corporation, is designed to aid the Company and its
subsidiaries in retaining and attracting personnel of exceptional ability by
enabling key employees to purchase a proprietary interest in the Company,
thereby stimulating in such individuals an increased desire to render greater
services which will contribute to the continued growth and success of the
Company and its subsidiaries. Certain of the options to be granted under the
Plan are intended to satisfy the requirements for classification as "Incentive
Stock Options" as defined in Section 422, of the Internal Revenue Code of 1986,
as amended (the "Code"). (An option granted under the Plan which is intended to
satisfy the requirements for classification as an Incentive Stock Option shall
be referred to herein as a "Plan Incentive Stock Option").
2. Amount and Source of Stock. The aggregate number and class of shares
which may be the subject of options granted pursuant to the Plan is 1,500,000
shares ("Shares") of Common Stock, par value $.01 per share, of the Company,
subject to adjustment as provided in paragraph 10, all of which may be subject
to Plan Incentive Stock Options. Any one participant may be granted Options to
purchase a maximum of 150,000 Shares in any one year, subject to adjustment as
provided in paragraph 10. Such Shares may be reserved or made available from the
Company's authorized and unissued Shares or from Shares reacquired and held in
the Company's treasury. In the event that any option granted hereunder shall
terminate prior to its exercise in full, for any reason, including, without
limitation, an option exchange pursuant to paragraph 13 hereof, or in the event
that any Shares issued upon the exercise of an option granted hereunder shall be
reacquired by the Company as provided in paragraph 12 hereof, then the Shares
subject to the option so exercised or the Shares so reacquired shall be added to
the Shares otherwise available for issuance pursuant to the exercise of options
under the Plan; provided, however, that in the case of a cancellation or
termination of an option in the same fiscal year that such option was granted
(or for purposes of determining the maximum number of options which may be
granted to a participant under the Plan, the cancellation or termination of an
option at any time), both the canceled option and the newly granted option shall
be counted in determining whether the participant has received the maximum
number of options permitted to be issued to any one participant under the Plan.
3. Administration of the Plan. The Plan shall be administered by a
committee of the Board of Directors of the Company (the "Board") comprised of
three or more members of the Board, selected by the Board (the "Committee"). All
of the members of the Committee shall be both "disinterested persons" as that
term is described in Rule 16b-3(c)(2) (or any successor provision) promulgated
under the Securities Exchange Act of 1934, as amended, and "outside directors"
as that term is defined for purposes of Section 162(m) of the Code (or any
successor provision).
The Committee shall have full authority to interpret the Plan, to establish
and amend rules and regulations relating to it, to determine the key employees
to whom options may be granted under the Plan, to select from among the eligible
individuals those to whom options are to be granted, to determine the terms and
provisions of the respective option agreements (which need not be identical) and
to make all other determinations necessary or advisable for the administration
of the Plan. The Committee, with approval by the Board, shall have full
authority to amend the Plan; provided, however, that any amendment that (i)
increases the number of Shares that may be the subject of stock options granted
under the Plan, (ii) expands that class of individuals eligible to receive
options under the Plan, (iii) increases the period during which options may be
granted or the permissible term of options under the Plan, (iv) decreases the
minimum exercise price of such options, or (v) would require the approval of
Shareholders in order for options granted under the Plan to satisfy the
requirements for performance-based compensation for purposes of Code Section
162(m)(4)(C) (or successor provision) shall only be adopted by the Committee
subject to Board and shareholder approval. No amendment to the Plan shall,
without the consent of the holder of an existing option, materially and
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<PAGE> 27
adversely affect his or her rights under any option. The date on which the
Committee adopts resolutions granting an option to a specified individual shall
constitute the date of grant of such option (the "Date of Grant"); provided,
however, that if the grant of an option is made subject to the occurrence of a
subsequent event (such as, for example, the commencement of employment), the
date on which such subsequent event occurs shall be the Date of Grant. Such
resolutions shall also specify whether the option is or is not intended to
qualify as a Plan Incentive Stock Option; provided, however, that in the event
no such specification is made, in such resolutions the Committee will be deemed
to have specified that such option is intended to qualify as a Plan Incentive
Stock Option; provided, further, however that in the event the Code's
requirements for qualification as an Incentive Stock Option are inconsistent
with the terms of an option that is specified, whether explicitly or implicitly,
as intended to qualify as a Plan Incentive Stock Option, then such specification
shall be deemed changed to the minimum extent necessary to be consistent with
such requirements of the Code. The adoption of any such resolution by the
majority of the members of the Committee shall complete the necessary corporate
action constituting the grant of said option and an offer of Shares for-sale to
said individual under the Plan.
4. Eligibility. All officers and key employees of the Company or
subsidiaries of the Company, as determined by the Committee, shall be eligible
to receive options hereunder; provided, however, that no Plan Incentive Stock
Option shall be granted hereunder to any person who, together with his spouse,
children and trusts and custodial accounts for their benefit, immediately at the
time of the grant of such option and assuming its immediate exercise, would
beneficially own, within the meaning of Section 424(d) of the Code, Shares
possessing more than ten percent (10%) of the total combined voting power of all
of the outstanding Common Stock of the Company ("Ten Percent Shareholder"),
unless the option granted to the Ten Percent Shareholder satisfies the
additional conditions for options granted to Ten Percent Shareholders set forth
in subparagraphs 5(a) and 6(a) hereof. For purposes of the Plan, a subsidiary
shall mean any "subsidiary corporation" as defined in Section 424(f) of the Code
or, with respect to any option under the Plan that is not an Incentive Stock
Option, any partnership of which the Company or any subsidiary of the Company is
a general partner. From time to time the Committee shall, in its sole
discretion, within the applicable limits of the Plan, select from among the
eligible individuals those persons to whom options shall be granted under the
Plan, the number of Shares subject to each option, and the exercise price, terms
and conditions of any options to be granted hereunder.
5. Option Price; Maximum Grant.
(a) The exercise price for the Shares purchasable under options granted
pursuant to the Plan shall not be less than 100%, or, in the case of a Plan
Incentive Stock Option granted to a Ten Percent Shareholder, 110% of the fair
market value per share of the Shares subject to option under the Plan at the
Date of Grant, solely as determined by the Committee in good faith. The exercise
price for options granted pursuant to the Plan shall be subject to adjustment as
provided in paragraph 10.
(b) To the extent necessary for any Plan Incentive Stock Options to qualify
as Incentive Stock Options, the aggregate fair market value, determined as of
the Date of Grant, of the Shares subject to such options which may first become
exercisable by an individual in any calendar year, under this Plan and all other
stock option plans of the Company and of any parent or subsidiary of the Company
pursuant to which Incentive Stock Options may be granted shall not exceed
$100,000.
6. Term of Option.
(a) Subject to the provisions of the Plan, the Committee shall have
absolute discretion in determining the period during which, the rate at which
and the terms and conditions upon which any option granted hereunder may be
exercised, and whether any option exercisable in installments is to be
exercisable on a cumulative or noncumulative basis; provided, however, that no
option granted hereunder shall be exercisable for a period exceeding ten (10)
years or, in the case of a Plan Incentive Stock Option granted to a Ten Percent
Shareholder, five (5) years from the Date of Grant. Unless the resolution
granting an option provides otherwise, each option granted hereunder shall,
subject to the provisions of paragraph 8 hereof, be exercisable for a period of
ten (10) years or, in the case of a Plan Incentive Stock Option granted to a Ten
Percent Shareholder, five (5) years from the Date of Grant.
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(b) The grant of options by the Committee shall be effective as of the date
on which the Committee shall authorize the option; provided, however, that no
options granted hereunder shall be exercisable unless and until the holders
shall enter into individual option agreements with the Company that shall set
forth the terms and conditions of such options. Each such agreement shall
expressly incorporate by reference the provisions of this Plan and shall state
that in the event of any inconsistency between the provisions hereof and the
provisions of such agreement, the provisions of this Plan shall govern.
7. Exercise of Options. An option shall be exercised when written notice
of such exercise, signed by the person entitled to exercise the option, has been
delivered or transmitted by registered or certified mail to the Secretary of the
Company at its then principal office. Said notice shall specify the number of
Shares for which the option is being exercised and shall be accompanied by (i)
such documentation, if any, as may be required by the Company as provided in
subparagraph 11(b), and (ii) payment of the aggregate option price. Such payment
shall be in the form of (i) cash or a certified check (unless such certification
is waived by the Company) payable to the order of the Company in the amount of
the aggregate option price, (ii) certificates duly endorsed for transfer (with
all transfer taxes paid or provided for) evidencing a number of shares of Common
Stock of the Company of which the aggregate market value on the date of exercise
is equal to the aggregate option exercise price of the shares being purchased,
or (iii) a combination of these methods of payment; provided, however, that
payment, whether in whole or in part, by surrendering certificates, may only be
made if the optionee has held such shares for a period of at least 6 months
prior to the date of surrender. Delivery of said notice shall constitute an
irrevocable election to purchase the Shares specified in said notice, and the
date on which the Company receives the last of said notice, documentation and
the aggregate option exercise price for all of the shares covered by the notice
shall, subject to the provisions of paragraph 11 hereof, be the date as of which
the Shares so purchased shall be deemed to have been issued. The person entitled
to exercise the option shall not have the right or status as a holder of the
Shares to which such exercise relates prior to receipt by the Company of the
payment, notice and documentation expressly referred to in this paragraph 7.
8. Exercise and Cancellation of Options Upon Termination of Employment or
Death. Except as set forth below, if a holder shall voluntarily or
involuntarily terminate his service as an employee of the Company or any
subsidiary of the Company, the option of such holder shall terminate upon the
date of such termination of employment regardless of the expiration date
specified in such option. If the termination of employment is due to retirement
(as defined by the Committee in its sole discretion), the holder shall have the
privilege of exercising any option that which the holder could have exercised on
the day upon which he ceased to be an employee of the Company or any subsidiary
of the Company, provided, however, that such exercise must be accomplished
within the term of such option and within three (3) months of the holder's
retirement. If the termination of employment is due to disability (to an extent
and in a manner as shall be determined by the Committee in its sole discretion),
he (or his duly appointed guardian or conservator) shall have the privilege of
exercising any option that he could have exercised on the day upon which he
ceased to be an employee of the Company or any subsidiary of the Company;
provided, however, that such exercise must be accomplished within the term of
such option and within one (1) year of the termination of his employment with
the Company or any subsidiary of the Company. If the termination of employment
is due to the death of the holder, the duly appointed executor or administrator
of his estate shall have the privilege at any time of exercising any option that
the holder could have exercised on the date of his death; provided, however,
that such exercise must be accomplished within the term of such option and
within one (1) year of the holder's death. For all purposes of the Plan, an
approved leave of absence shall not constitute interruption or termination of
employment. Nothing contained herein or in any option agreement shall be
construed to confer on any option holder any right to be continued in the employ
of the Company or any subsidiary of the Company or derogate from any right of
the Company or any subsidiary of the Company to retire, request the resignation
of or discharge such option holder or to lay off or require a leave of absence
of such option holder(with or without pay), at any time, with or without cause.
8A. Election to Have Shares Withheld.
(a) A holder may elect to have Shares withheld by the Company in order to
satisfy federal and state withholding tax liability (a "share withholding
election"), provided, (i) the Committee shall not have revoked
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its advance approval of the holder's share withholding election; and (ii) the
share withholding election is made on or prior to the date on which the amount
of withholding tax liability is determined (the "Tax Date"). If a holder elects
within thirty (30) days of the date of exercise to be subject to withholding tax
on the exercise date pursuant to the provisions of Section 83(b) of the Code,
then the share withholding election may be made during such thirty (30) day
period. Notwithstanding the foregoing, a holder whose transactions in Common
Stock are subject to Section 16(b) of the Securities Exchange Act of 1934 may
make a share withholding election only if the following additional conditions
are met: (i) the share withholding election is made no sooner than six (6)
months after the Date of Grant, except, however, such six (6) month condition
shall not apply if the holder's death or disability (as shall be determined by
the Committee) occurs within such six (6) month period; and (ii) the share
withholding election is made (x) at least six (6) months prior to the Tax Date,
(y) during the period beginning on the third business day following the date of
release of the Company's quarterly or annual financial results and ending on the
twelfth business day following such date.
(b) A share withholding election shall be deemed made when written notice
of such election, signed by the holder, has been hand delivered or transmitted
by registered or certified mail to the Secretary of the Company at its then
principal office. Delivery of said notice shall constitute an irrevocable
election to have Shares withheld.
(c) Upon exercise of an option by a holder, the Company shall transfer the
total number of Shares subject to the option to the holder on the date of
exercise, provided, however, that pursuant to subparagraph (d) below, the holder
will be unconditionally obligated to tender shares back to the Company.
(d) If a holder has made a share withholding election pursuant to this
Section 8A; and (i) within thirty (30) days of the date of exercise of the
option, the holder elects pursuant to the provisions of Section 83(b) of the
Code to be subject to withholding tax on the date of exercise of his option,
then such holder will be unconditionally obligated to immediately tender back to
the Company the number of Shares having an aggregate fair market value (as
determined in good faith by the Committee) equal to the amount of tax required
to be withheld plus cash for any fractional amount, together with written notice
to the Company informing the Company of the holder's election pursuant to
Section 83(b) of the Code; or (ii) if the holder has not made an election
pursuant to the provisions of Section 83(b) of the Code, then on the Tax Date,
such holder will be unconditionally obligated to tender back to the Company the
number of Shares having an aggregate fair market value (as determined in good
faith by the Committee) equal to the amount of tax required to be withheld plus
cash for any fractional amount.
9. Non-transferability of Options. No option granted under the Plan shall
be sold, pledged, assigned or transferred in any manner except to the extent
that options may be exercised by an executor or administrator as provided in
paragraph 8 hereof. An option may be exercised, during the lifetime of the
holder thereof, only by such holder or his duly appointed guardian or
conservator in the event of his disability.
10. Adjustments Upon Changes in Capitalization.
(a) If the outstanding Shares are subdivided, consolidated, increased,
decreased, changed into, or exchanged for a different number or kind of shares
or other securities of the Company through reorganization, merger,
recapitalization, reclassification, capital adjustment or otherwise, or if the
Company shall issue additional Shares as a dividend or pursuant to a stock
split, then the number and kind of Shares available for issuance pursuant to the
exercise of options to be granted under this Plan and all Shares subject to the
unexercised portion of any option theretofore granted and the option price of
such options shall be adjusted to prevent the inequitable enlargement or
dilution of any rights hereunder; provided, however, that any such adjustment in
outstanding options under the Plan shall be made without change in the aggregate
exercise price applicable to the unexercised portion of any such outstanding
option. No such adjustment shall be made that (i) with respect to a Plan
Incentive Stock Option, would violate Code Section 422, or successor provision
or (ii) would constitute a cancellation and reissuance of an option for purposes
of Code Section 162(m) to the extent such reissuance would result in the grant
of options in excess of the maximum number of options permitted to be granted to
any participant under the Plan. Distributions to the Company's shareholders
consisting of property other than shares of Common Stock of the Company or its
successor and distributions to shareholders of rights to subscribe for Common
Stock shall not result in the adjustment of the Shares
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purchasable under outstanding options or the exercise price of outstanding
options. Adjustments under this paragraph shall be made by the Committee whose
determination thereof shall be conclusive and binding. Any fractional Share
resulting from adjustments pursuant to this paragraph shall be eliminated from
any then outstanding option. Nothing contained herein or in any option agreement
shall be construed to affect in any way the right or power of the Company to
make or become a party to any adjustments, reclassifications, reorganizations or
changes in its capital or business structure or to merge, consolidate, dissolve,
liquidate or otherwise transfer all or any part of its business or assets.
(b) If, in the event of a merger or consolidation, the Company is not the
surviving corporation, and in the event that the agreements governing such
merger or consolidation do not provide for the substitution of new options or
other rights in lieu of the options granted hereunder or for the express
assumption of such outstanding options by the surviving corporation, or in the
event of the dissolution or liquidation of the Company, the holder of any option
theretofore granted under this Plan shall have the right not less than five (5)
days prior to the record date for the determination of shareholders entitled to
participate in such merger consolidation, dissolution or liquidation, to
exercise his option, in whole or in part, without regard to any installment
provision that may have been made part of the terms and conditions of such
option; provided, that any conditions precedent to such exercise set forth in
any option agreement granted under this Plan, other than the passage of time,
have been satisfied. In any such event, the Company will mail or cause to be
mailed to each holder of an option hereunder a notice specifying the date that
is to be fixed as of which all holders of record of the Shares shall be entitled
to exchange their shares for securities, cash or other property issuable or
deliverable pursuant to such merger, consolidation, dissolution or liquidation.
Such notice shall be mailed at least ten (10) days prior to the date therein
specified. In the event any then outstanding option is not exercised in its
entirety on or prior to the date specified therein, all remaining outstanding
options granted hereunder and any and all rights thereunder shall terminate as
of said date.
11. General Restrictions.
(a) No option granted hereunder shall be exercisable if the Company shall,
at any time in its sole discretion, determine that (i) the listing upon any
securities exchange, registration or qualification under any state or federal
law of any Shares otherwise deliverable upon such exercise, or (ii) the consent
or approval of any regulatory body or the satisfaction of withholding tax or
other withholding liabilities, is necessary or appropriate in connection with
such exercise. In any of such events, the exercisability of such actions shall
be suspended and shall not be effective unless and until such withholding,
listing, registration, qualification or approval shall have been effected or
obtained free of any conditions not acceptable to the Company in its sole
discretion, notwithstanding any termination of any option or any portion of any
option during the period when exercisability has been suspended.
(b) The Committee may require, as a condition to the right to exercise an
option, that the Company receive from the option holder, at the time of any such
exercise, representations, warranties and agreements to the effect that the
Shares are being purchased by the holder only for investment and without any
present intention to sell or otherwise distribute such Shares and that the
option holder will not dispose of such Shares in transactions which, in the
opinion of counsel to the Company, would violate the registration provisions of
the Securities Act of 1933, as then amended, and the rules and regulations
thereunder. The certificate issued to evidence such Shares shall bear
appropriate legends summarizing such restrictions on the disposition thereof.
12. Restrictions on Transfers of Shares; Repurchase by the Company.
(a) Without the prior written consent of the Company, the individual
exercising an option hereunder shall not sell, transfer, pledge, hypothecate or
otherwise dispose of any Shares acquired upon the exercise of options hereunder
or any interest in any such Shares within seven (7) months following the date of
such exercise. In the event that during the first six months of such period the
option holder shall, for any reason (other than death), cease to be an officer
or employee of the Company or its subsidiaries, then forthwith upon the
occurrence of such event, the Company shall have the right for the duration of
such seven month period to repurchase from the option holder, and upon the
exercise of such right, the option holder shall be required to sell to the
Company, all such Shares owned by him which are then subject to restriction
under this
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subparagraph 12(a) for a price equal to the aggregate exercise price paid for
such Shares. The Company may exercise its right to repurchase shares by mailing
notice of exercise to the option holder prior to the expiration of the Company's
repurchase right. In the event the Company repurchases such Shares, the
certificate or certificates evidencing such Shares shall forthwith be delivered
to the Company against full payment of the sum of (i) an amount of money in the
form of cash or check equal to the amount, if any, paid by the optionee in cash
or check as payment of the exercise price, and (ii) a number of Shares equal to
the number of Shares, if any, paid by the optionee as payment of the exercise
price, without regard to the then fair market value of such Shares. In the event
the optionee had paid the option exercise price, in whole or in part, in Shares,
then the Company shall delay such repurchase until six (6) months and ten (10)
days from the date the optionee ceased to be an officer or employee of the
Company or its subsidiaries.
(b) The certificate or certificates delivered to individuals who exercise
options hereunder to evidence Shares acquired upon any exercise of an option (as
provided in paragraph 7 hereof) shall bear, in addition to any restrictive
legend required by subparagraph 11(b) hereof, a legend summarizing the
restrictions set forth in subparagraph (a) of this paragraph 12.
(c) In the event of the death of an option holder, all restrictions set
forth in subparagraph (a) and provided for in subparagraph (b) of this paragraph
shall terminate forthwith with respect to any and all Shares owned by such
holder at the date of his death, but neither the termination of such
restrictions upon the death of the holder nor any lapse of restrictions upon the
expiration of any period specified in subparagraph 12(a) hereof shall affect the
obligations of the holder (or his executor or administrator) to comply with the
requirements of subparagraph 11(b) in connection with any sale or other
disposition of any such Shares.
(d) Anything in the Plan to the contrary notwithstanding, the Committee
shall have the power, in its discretion, to lessen or eliminate the period of
time during which the transfer of a holder's Shares is restricted under, and/or
to eliminate or modify in the holder's favor the Company's right to repurchase
Shares pursuant to, this paragraph 12, whether before or after any option is
granted or exercised hereunder.
13. Exchange of Options. The Committee shall have the right to grant
options hereunder that are granted subject to the condition that the grantee
shall agree with the Company to terminate all or a portion of another option or
options previously granted under the Plan. The Shares that had been issuable
pursuant to the exercise of the option terminated in the exchange of options
shall, upon such termination, again become available for issuance pursuant to
the exercise of options under the Plan.
14. Termination. Unless the Plan shall theretofore have been terminated as
hereinafter provided, the Plan shall terminate on September 17, 2005, and no
options under the Plan shall thereafter be granted, provided, however, the Board
at any time may, in its sole discretion, terminate the Plan prior to the
foregoing date. No termination of the Plan shall, without the consent of the
holder of an existing option, materially and adversely affect his rights under
such option.
The Plan shall be submitted to the Shareholders of the Company for approval
in accordance with the applicable provisions of the Delaware General Corporation
Law as promptly as practicable and in any event within one year after the date
of the original adoption hereof by the Board. Any options granted hereunder
prior to such shareholder approval shall not be exercisable unless and until
such approval is obtained. If such approval is not obtained within such time
period, the Plan and any options granted hereunder shall be terminated.
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EXHIBIT B
DATASCOPE CORP.
ANNUAL INCENTIVE PLAN
(AS OF SEPTEMBER 17, 1997)
Section 1. Purpose. The purpose of the Datascope Corp. Annual Incentive
Plan (the "Plan") is to benefit and advance the interests of Datascope Corp., a
Delaware corporation (the "Company"), by rewarding selected employees of the
Company and its subsidiaries and divisions (each such subsidiary or division is
referred to herein as a "Business Unit") for their contributions to the
Company's financial success and thereby motivate them to continue to make such
contributions in the future by granting annual performance-based awards
("Awards").
Section 2. Administration of the Plan.
(a) Generally. The Plan shall be administered by the Compensation
Committee ("Committee") of the Company's Board of Directors ("Board"). The
Committee shall consist of two or more directors, each of whom is an "outside
director" (as defined in Section 162(m) of the Internal Revenue Code of 1986, as
amended, and regulations thereunder (the "Code")). The Committee is authorized
to administer, interpret and apply the Plan and from time to time may adopt such
rules, regulations and guidelines consistent with the provisions of the Plan as
it may deem advisable to carry out the Plan, except that the Committee may
authorize any one or more of its members, or any officer of the Company, to
execute and deliver documents on behalf of the Committee. The Committee's
interpretations of the Plan, and all actions taken and determinations made by
the Committee pursuant to the powers vested in it hereunder, shall be conclusive
and binding on all parties concerned, including the Company, its shareholders
and Participants (as defined below). The Committee shall have authority to
determine the terms and conditions of the Awards granted to Participants (as
defined below).
(b) Delegation. The Committee may delegate its responsibilities for
administering the Plan to the Chief Executive Officer, as the Committee deems
necessary. However, the Committee shall not delegate its responsibilities under
the Plan relating to (i) the Chief Executive Officer and (ii) any other
Participant who is designated by the Committee, either (x) prior to the
Determination Date (as defined below) or (y) such later date as such Participant
commences employment, to be a "covered employee" within the meaning of Section
162(m) of the Code whose "applicable employee remuneration" (within the meaning
of Section 162(m) of the Code) for such Performance Period (as defined below) is
expected to exceed $1,000,000 (each a "Covered Employee"). For purposes of the
Plan, (i) "Performance Period" means the current Fiscal Year (as defined below)
of the Company, and (ii) "Fiscal Year" means the fiscal year ending on June 30
or such other period that the Company may hereafter adopt as its fiscal year.
(c) Reliance and Indemnification. The Committee may employ attorneys,
consultants, accountants or other persons, and the Committee, the Company and
its officers and directors shall be entitled to rely upon the advice, opinions
or valuations of any such persons. Neither any member of the Committee nor the
Chief Executive Officer shall be personally liable for any action, determination
or interpretation taken or made in good faith by the Committee or the Chief
Executive Officer with respect to the Plan or Awards granted hereunder, and all
members of the Committee and the Chief Executive Officer shall be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.
Section 3. Eligible Persons; Participants. Only employees of the Company
or its Business Units who are at the level of Manager or at a more senior level
are eligible to participate in the Plan ("Eligible Persons"). An Eligible Person
shall participate in the Plan during a Performance Period only if such Eligible
Person commenced employment before the end of either (a) the first quarter of
such Performance Period (in the case of an Eligible Person who would be a
Covered Employee), or (b) the second quarter of such Performance Period (in the
case of an Eligible Person who would not be a Covered Employee) (each a
"Participant"). An individual shall not be deemed an employee for purposes of
the Plan unless such individual receives
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compensation from either the Company or one of its Business Units for services
performed as an employee of the Company or any one of its Business Units.
Section 4. Awards. Awards may be granted only to Participants with respect
to each Performance Period, subject to the terms and conditions set forth in the
Plan.
Section 5. Determination of Targets, Performance Thresholds and Base Salary
Percentage. Prior to the beginning of each Performance Period or (x) with
respect to Covered Employees, prior to any later date described in Treasury
Regulation 1.162-27(e)(2) (or any successor thereto), or (y) with respect to any
Participants who are not Covered Employees who have commenced employment within
the time limit specified in Section 3, on such date of commencement (each a
"Determination Date"), the Committee shall adopt each of the following:
(a) with respect to each Covered Employee, one or more Targets, which
shall be equal to a desired level or levels for any Fiscal Year of any or a
combination of the following business criteria on an absolute or relative
basis (including comparisons of results for the Performance Period to
either (x) results for the prior Fiscal Year or (y) budget for the
Performance Period), and measured before extraordinary items and/or special
items: (i) net sales, (ii) pre-tax earnings, (iii) after-tax earnings, (iv)
operating earnings, and (v) earnings per share, each as determined in
accordance with generally accepted accounting principles consistently
applied for the Company on a consolidated basis (collectively, the
"Financial Criteria"); provided, however, that with respect to any Covered
Employee who is employed by a Business Unit, the Financial Criteria shall
be based on the results of such Business Unit and consolidated results of
the Company;
(b) with respect to each Participant who is not a Covered Employee,
one or more Targets, which shall be equal to a desired level or levels for
any Fiscal Year of any, or a combination of any, quantitative criteria
(including, without limitation, any Financial Criteria) or qualitative
criteria (collectively, the "Individual Criteria"); provided, however, that
with respect to such Participants who are employed by a Business Unit, the
Financial Criteria may be based on the results of such Business Unit rather
than consolidated results of the Company, or a combination of the two;
(c) a Performance Threshold, with respect to each Target, based upon
one or more Financial Criteria or Individual Criteria, as applicable,
representing a minimum amount which, if not exceeded, would result in no
Award being made to the Participant; and
(d) a Base Salary Percentage, representing the percentage of such
Participant's Base Salary (as defined in Section 7) in effect at the time
such Participant's Targets are established, which shall be payable as an
Award (subject to modification under Section 7(b)) in the event that 100%
of such Participant's Targets are achieved.
The Committee shall also determine on each Determination Date for each
Participant a mathematical formula or matrix which shall contain weighting for
each Target and indicate the extent to which Awards will be made (subject to
modification under Section 7(b)) if such Participant's Performance Thresholds
are exceeded, including if such Participant's Targets are achieved or exceeded.
Section 6. Calculation of Awards; Certification; Payment; Deferral. As
soon as practicable after the end of the Performance Period, and subject to
verification by the Company's independent auditors of the applicable Financial
Criteria, the Committee shall determine with respect to each Participant whether
and the extent to which such Participant's Performance Thresholds were exceeded,
including the extent to which, if any, each Target was attained or exceeded.
Such Participant's Award, if any, shall be calculated in accordance with the
mathematical formula or matrix determined pursuant to Section 5, and subject to
the limitations set forth in Section 7 hereof. The Committee shall certify in
writing to the Board the amount of such Award and whether each material term of
the Plan relating to such Award has been satisfied. Subject to Section 8 hereof,
such Award shall become payable in cash as promptly as practicable thereafter.
However, from time to time, prior to the beginning of a Performance Period, the
Committee may, in its sole discretion (under uniform rules applicable to all
Participants and in compliance with applicable law in effect at such time),
offer Participants
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<PAGE> 34
the opportunity to defer receipt of all or a portion of any Award that is made
(subject to modification under Section 7(b)) for such Performance Period.
Section 7. Limitations; Modifications to Awards. Each Award determined
pursuant to Section 6 hereof shall be subject to modification or forfeiture in
accordance with the following provisions:
(a) Limitations. The aggregate amount of any Award to any Participant
for any Performance Period shall not exceed the lesser of either (x) the
amount determined by multiplying such Participant's Base Salary by a factor
of two (2) or (y) $3,000,000. For purposes of the Plan, "Base Salary" shall
mean the annual base salary of the Participant on the first day of such
Performance Period or, in the case of a Participant commencing employment
after such date (to the extent permitted by Section 3), such Participant's
annual base salary on the date of such commencement.
(b) Modifications. The Committee may, in its sole discretion, (i)
increase, decrease or eliminate the Award payable to any Participant who is
not a Covered Employee and who would not become a Covered Employee as a
result of such increase or (ii) decrease or eliminate the Award payable to
any Covered Employee, to reflect the individual performance and
contribution of, and other factors relating to, such Participant. The
determination of the Committee shall be final and conclusive.
Section 8. Employment Requirement. No Participant shall have any right to
receive payment of any Award unless such Participant remains in the employ of
the Company or a Business Unit through the date of certification of such Award;
provided, however, that the Committee may, in its sole discretion, pay all or
any part of an Award to any Participant who, prior to such date of
certification, retires, dies or becomes permanently disabled or where other
special circumstances exist with respect to such Participant, so long as such
Participant exceeded such Participant's Performance Thresholds. The maximum
amount of such payment, if any, will be calculated, and to the extent determined
by the Committee, paid as provided in Section 6 (subject to modification under
Section 7(b)). The determination of the Committee shall be final and conclusive.
Section 9. Miscellaneous.
(a) No Contract; No Rights to Awards or Continued Employment. The Plan is
not a contract between the Company and any Participant or other employee. No
Participant or other employee shall have any claim or right to receive Awards
under the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any employee any right to be retained by the Company or any
of its Business Units.
(b) No Right to Future Participation. Participation in the Plan during one
Performance Period shall not guarantee participation during any other
Performance Period.
(c) Restriction on Transfer. The rights of a Participant with respect to
Awards under the Plan shall not be transferable by the Participant to whom such
Award is granted (other than by will or the laws of descent and distribution),
and any attempted assignment or transfer shall be null and void and shall permit
the Committee, in its sole discretion, to extinguish the Company's obligation
under the Plan to pay any Award with respect to such Participant.
(d) Tax Withholding. The Company or a subsidiary thereof, as appropriate,
shall have the right to deduct from all payments made under the Plan to a
Participant or to a Participant's beneficiary or beneficiaries any Federal,
state or local taxes required by law to be withheld with respect to such
payments.
(e) No Restriction on Right of Company to Effect Changes. The Plan shall
not affect in any way the right or power of the Company or its shareholders to
make or authorize any recapitalization, reorganization, merger, acquisition,
divestiture, consolidation, spin off, combination, liquidation, dissolution,
sale of assets, or other similar corporate transaction or event involving the
Company or a subsidiary thereof or any other event or series of events, whether
of a similar character or otherwise.
(f) Source of Payments. The Plan shall be unfunded. The Plan shall not
create or be construed to create a trust or separate fund or segregation of
assets of any kind or a fiduciary relationship between the Company and a
Participant or any other individual, corporation, partnership, association,
joint-stock company,
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<PAGE> 35
trust, unincorporated organization, or government or political subdivision
thereof. To the extent that any Participant is granted an Award under Section 6
(subject to modification under Section 7(b)), such Participant's right to
receive such Award shall be no greater than the right of any unsecured general
creditor of the Company.
(g) No Interest. If the Company for any reason fails to make payment of an
Award at the time such Award becomes payable, the Company shall not be liable
for any interest or other charges thereon.
(h) Amendment and Termination. The Committee may at any time and from time
to time alter, amend, suspend or terminate the Plan in whole or in part. No such
amendment shall be effective which alters the Award, Target or other criteria
relating to an Award applicable to a Covered Employee for the Performance Period
in which such amendment is made or any prior Performance Period, except any such
amendment that may be made without causing such Award to cease to qualify as
performance-based compensation under Section 162(m)(4)(C) of the Code.
(i) Governmental Regulations. The Plan, and all Awards hereunder, shall be
subject to all applicable rules and regulations of governmental or other
authorities.
(j) Headings. The headings of sections and subsections herein are included
solely for convenience of reference and shall not affect the meaning of any of
the provisions of the Plan.
(k) Governing Law. The validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined solely in accordance with the
laws of the State of New Jersey, without regard to the choice-of-law principles
thereof, and applicable federal law.
(l) Severability. If any term or provision ("Provision") of the Plan or
the application thereof (i) as to any Participant or circumstance (other than as
described in clause (ii)) is, to any extent, found to be illegal or invalid, or
(ii) would cause any Award to any Covered Employee not to constitute
performance-based compensation under Section 162(m)(4)(C) of the code, then the
Committee shall sever such Provision from the Plan and, thereupon, such
Provision shall not be a part of the Plan.
(m) Effective Date. The Plan shall be effective as of July 1, 1997;
provided, however, that it shall be a condition to the effectiveness of the
Plan, and any Awards made on or after July 1, 1997, that the shareholders of the
Company ("Shareholders") approve the Plan at the 1997 Annual Meeting of
Shareholders. Such approval shall meet the requirements of Section 162(m) of the
Code and the regulations thereunder. If such approval is not obtained, then the
Plan shall not be effective and any Award made on or after July 1, 1997 shall be
void ab initio.
(n) Approval and Reapproval by Shareholders. To the extent required under
Section 162(m) of the Code, (i) any change to the material terms of the
Financial Criteria shall be disclosed to and approved by the Shareholders at the
next Annual Meeting of Shareholders to be held following such change, and (ii)
the material terms of the Financial Criteria shall be disclosed to and
reapproved by the Shareholders no later than the Annual Meeting of Shareholders
that occurs in the fifth year following the year in which Shareholders approve
the Financial Criteria.
B-4
<PAGE> 36
PROXY DATASCOPE CORP. COMMON STOCK
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE CORPORATION FOR ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 9, 1997
The undersigned hereby constitutes and appoints LAWRENCE SAPER and MURRAY
PITKOWSKY, and each of them, with full power of substitution, attorneys and
proxies to represent and to vote all of the shares of Common stock, par value
$.01 per share, of DATASCOPE CORP. that the undersigned would be entitled to
vote, with all powers the undersigned would possess if personally present, at
the Annual Meeting of the Shareholders of DATASCOPE CORP., to be held at The
Harmonie Club, 4 East 60th Street, New York, New York, on December 9, 1997 at 11
o'clock A.M., local time, and at any adjournment thereof, on all matters coming
before said meeting:
1. ELECTION OF DIRECTORS. Nominees: Lawrence Saper, Alan B. Abramson and
Arno Nash (Mark only one of the following boxes.)
[ ]VOTE FOR ALL NOMINEES LISTED ABOVE, EXCEPT VOTE WITHHELD AS TO THE
FOLLOWING NOMINEES (IF ANY): ____________________________
[ ]VOTE WITHHELD FROM ALL NOMINEES.
2. PROPOSAL TO APPROVE THE AMENDMENT TO THE DATASCOPE CORP. 1995 STOCK
OPTION PLAN.
[ ] FOR [ ] AGAINST [
] ABSTAIN
3. PROPOSAL TO APPROVE THE ADOPTION OF THE DATASCOPE CORP. 1997 EXECUTIVE
BONUS PLAN.
[ ] FOR [ ] AGAINST [
] ABSTAIN
4. PROPOSAL TO APPROVE THE ADOPTION OF THE DATASCOPE CORP. ANNUAL INCENTIVE
PLAN.
[ ] FOR [ ] AGAINST [
] ABSTAIN
5. IN THEIR DISCRETION, UPON ANY OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
(continue and sign on other side)
<PAGE> 37
(Continued from other side)
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR the election as directors of the nominees of the Board of
Directors, FOR the proposal to approve the amendment to the Datascope Corp. 1995
Stock Option Plan, FOR the proposal to approve the adoption of the Datascope
Corp. 1997 Executive Bonus Plan and FOR the proposal to approve the adoption of
the Datascope Corp. Annual Incentive Plan.
The undersigned acknowledges receipt of the accompanying Proxy Statement
dated November 1, 1997.
Date: , 1997
---------------------------------------
---------------------------------------
Signature of Shareholder(s)
(When signing as attorney, trustee,
executor, administrator, guardian,
corporate officer, etc., please give
full title. If more than one trustee,
all should sign. Joint owners must each
sign.)
Please date and sign exactly as name
appears above.
I plan [ ] I do not plan [ ]
to attend the Annual Meeting.
