LUXTEC CORPORATION
March 11, 1999
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
LUXTEC CORPORATION, to be held on Thursday, April 22, 1999, at 11:00 A.M. at the
Company's Board Room, 326 Clark Street, Worcester, Massachusetts.
The Notice of Meeting and the Proxy Statement that follow describe the
business to be considered and acted upon by the stockholders at the Meeting,
after which management will also report on the affairs of the Company.
The Board of Directors of the Company encourages your participation in the
Company's electoral process and, to that end, solicits your proxy. You may give
your proxy by completing, dating and signing the Proxy Card and returning it
promptly in the enclosed envelope. You are urged to do so even if you plan to
attend the meeting.
A copy of the Company's 1998 Annual Report to Stockholders is
simultaneously being mailed to all stockholders entitled to vote, but is not to
be considered a part of the proxy solicitation material. This Proxy Statement
and the Proxy Card were first mailed to stockholders on or about March 11, 1999.
Sincerely,
VICTOR J. PACI
Clerk
326 Clark Street, Worcester, Massachusetts, 01606
LUXTEC CORPORATION
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On April 22, 1999
Notice is hereby given that the Annual Meeting (the "Meeting") of
Stockholders of Luxtec Corporation (the "Company") will be held at the Corporate
Offices of the Company located at 326 Clark Street, Worcester, Massachusetts,
01606-1214, at 11:00 a.m., local time, to consider and act upon the following
matters:
1. A proposal to elect three (3) Class III directors of the Company, each
to hold office for a three-year term.
2. A proposal to ratify the amendment of the Company's 1992 Stock Option
Plan, as amended (the "Plan"), to increase the number of shares authorized for
issuance under the plan to 500,000.
3. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
Stockholders of record at the close of business on February 18, 1999, are
entitled to notice of and to vote at the Meeting and any adjourned sessions
thereof. All stockholders are cordially invited to attend the Meeting.
` By Order of the Board of Directors
VICTOR J. PACI
Clerk
Worcester, Massachusetts
March 11, 1999
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, COMPLETE, DATE,
SIGN AND MAIL THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS
OF THE COMPANY, AND PROMPTLY RETURN IT IN THE PRE-ADDRESSED ENVELOPE PROVIDED
FOR THAT PURPOSE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW ANY PROXY GIVEN BY
YOU AND VOTE YOUR SHARES IN PERSON.
<PAGE>
LUXTEC CORPORATION
326 Clark Street
Worcester, MA 01606
___________________________________
PROXY STATEMENT
March 11, 1999
___________________________________
This Proxy Statement (the "Proxy Statement") is being furnished to
stockholders of Luxtec Corporation, a Massachusetts corporation ("Luxtec" or the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of Luxtec Corporation (the "Luxtec Board"), for use at the 1999 Annual
Meeting of Stockholders of the Company, including any adjournments or
postponements thereof (the "Meeting"), scheduled to be held on Thursday, April
22, 1999, at 11:00 A.M. in the Company's Board Room, 326 Clark Street,
Worcester, Massachusetts, 01606-1214. This Proxy Statement relates to the
election of three (3) Class III Directors of Luxtec and the amendment of
Luxtec's 1992 Stock Option Plan, as amended (the "Plan"), each of which is
described herein. This Proxy Statement was first mailed to Luxtec Stockholders
on or about March 11, 1999. All solicitation expenses, including costs of
preparing, assembling and mailing proxy material, will be borne by the Company.
With respect to the Meeting, the close of business on February 18, 1999,
has been established as the record date for determining the stockholders
entitled to notice of and to vote at the Meeting and at any adjournments or
postponements thereof. As of the record date, there were issued and outstanding
and entitled to vote 2,872,149 shares of Luxtec common stock, par value $0.01
per share ("Common Stock"). Holders of shares of Luxtec Common Stock are
entitled to one vote for each share owned at the record date on all matters to
come before the Meeting and any adjournments or postponements thereof. The
presence in person or by proxy of holders of a majority of the shares of Luxtec
Common Stock entitled to vote at the Meeting constitutes a quorum for the
transaction of business.
In connection with the Meeting, any proxy may be revoked at any time before
it is voted by written notice received by the Clerk of the Company or by
attending the Meeting and voting in person; but if not so revoked, the shares
represented by such proxy will be voted. Attendance at the Meeting will not by
itself constitute revocation of a proxy unless the stockholder so attending so
notifies the Clerk of Luxtec in writing at any time prior to the voting of the
proxy. All proxies will be voted in accordance with the instructions contained
therein. If no choice is specified for one or more proposals in a proxy
submitted by or on behalf of a stockholder, the shares represented by such proxy
will be voted in favor of such proposals and in the discretion of the named
proxies with respect to any other proposals which may properly come before the
Meeting. Broker non-votes (i.e., shares held by brokers or nominees as to which
(i) instructions have not been received from the beneficial owners or the
persons entitled to vote and (ii) the broker or nominee does not have
discretionary voting power on a particular matter) and proxies that withhold
authority to vote for election as a director or that reflect abstentions will be
deemed present for the purpose of determining the presence of a quorum for the
transaction of business. With respect to Proposal 1 (election of Directors),
broker non-votes and abstentions will have no effect on the outcome of voting on
such proposals. With respect to Proposal 2 (amendment of the Plan), a broker
non-vote will have no effect on the outcome of voting on such proposal and an
abstention will have the effect of voting against such proposal.
The Luxtec Board does not know of any matters which will be brought before
the Meeting other than those matters specifically set forth in the Notice of
Meeting. However, if any other matter properly comes before the Meeting, it is
intended that the persons named in the enclosed form of Proxy, or their
substitute acting thereunder, will vote on such matter in accordance with their
best judgment.
The Board of Directors has reappointed Arthur Andersen LLP as Independent
Public Accountants for the Company. The Company does not anticipate that a
representative of Arthur Andersen LLP will be present at the Meeting.
<PAGE>
PROPOSAL 1
ELECTION OF LUXTEC DIRECTORS
Section 50A of Chapter 156B of the Massachusetts General Laws provides for
a Board of Directors of such number as is fixed by the directors, and which is
divided into three classes serving staggered three-year terms. The Luxtec Board
has fixed the number of Directors at seven (7). At the Meeting, the terms of the
three (3) members of Class III, James Berardo, James J. Goodman, and Thomas J.
Vander Salm, expire. Mr. Berardo, Mr. Goodman and Dr. Vander Salm are currently
members of the Board and are the only nominees for election as Class III
Directors for a term to expire at the 2002 Annual Meeting of Stockholders.
The Luxtec Board recommends that the shareholders vote "FOR" the election
of Mr. Berardo, Mr. Goodman and Dr. Vander Salm to be directors of the Company
until the 2002 Annual Meeting of Stockholders and until their successors are
duly elected and qualified. Unless authority is withheld, it is the intention of
the persons voting under the enclosed proxy to vote such proxy in favor of the
election of Mr. Berardo, Mr. Goodman and Dr. Vander Salm to be directors of the
Company until the 2002 Annual Meeting of Stockholders and until their successors
are duly elected and qualified. The affirmative vote of a plurality of the
shares of Luxtec Common Stock present or represented by proxy, and voting, at
the Meeting is required for the election of Mr. Berardo, Mr. Goodman and Dr.
Vander Salm.
The following table and narrative sets forth information regarding the
principal occupation, other affiliations, committee memberships and age, for the
three nominees and each director continuing in office.
<TABLE>
---------------------------------- ------ ------------ --------------------------------------------- ----------
<S> <C> <C> <C> <C> <C>
Director Position Term
Name Age Since With Company Ends
---------------------------------- ------ ------------ --------------------------------------------- ----------
---------------------------------- ------ ------------ --------------------------------------------- ----------
Nominees for Election:
---------------------------------- ------ ------------ --------------------------------------------- ----------
---------------------------------- ------ ------------ --------------------------------------------- ----------
James Berardo (2)(3) 39 1995 Director 1999
---------------------------------- ------ ------------ --------------------------------------------- ----------
---------------------------------- ------ ------------ --------------------------------------------- ----------
James J. Goodman (3) 40 1996 Director 1999
---------------------------------- ------ ------------ --------------------------------------------- ----------
---------------------------------- ------ ------------ --------------------------------------------- ----------
Thomas J. Vander Salm (1)(2) 58 1984 Director 1999
---------------------------------- ------ ------------ --------------------------------------------- ----------
---------------------------------- ------ ------------ --------------------------------------------- ----------
---------------------------------- ------ ------------ --------------------------------------------- ----------
---------------------------------- ------ ------------ --------------------------------------------- ----------
Directors Continuing in Office
---------------------------------- ------ ------------ --------------------------------------------- ----------
---------------------------------- ------ ------------ --------------------------------------------- ----------
James W. Hobbs (1) 50 1993 President, Chief Executive Officer, Director 2001
---------------------------------- ------ ------------ --------------------------------------------- ----------
---------------------------------- ------ ------------ --------------------------------------------- ----------
Paul Epstein (2) 68 1995 Vice President of Business Development and 2001
Strategic Planning, Director
---------------------------------- ------ ------------ --------------------------------------------- ----------
---------------------------------- ------ ------------ --------------------------------------------- ----------
Patrick G. Phillipps (1) 53 1995 Vice President of Engineering, Director 2000
---------------------------------- ------ ------------ --------------------------------------------- ----------
---------------------------------- ------ ------------ --------------------------------------------- ----------
Louis C. Wallace (1)(3) 58 1989 Director 2000
---------------------------------- ------ ------------ --------------------------------------------- ----------
</TABLE>
(1) Member of the Nominating Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
James Berardo has been a Director of the Company since 1995. Mr. Berardo
currently serves as President of Darlco, Inc., a real estate development and
investment management company. Mr. Berardo joined Darlco in 1986, serving in
various financial capacities prior to assuming his current position in March,
1995.
Paul Epstein joined the Company in 1995 as Vice President of Business
Development and Strategic Planning and as a Director. Mr. Epstein, a co-founder
of CardioDyne, Inc., served as Chairman, Vice President and Chief Financial
Officer from the time of CardioDyne's founding in February, 1989 until the
merger with Luxtec in October, 1995. Previously, Mr. Epstein co-founded
Electronic Image Systems Corporation, Brattle Instrument Corporation and, most
recently, Omni-Flow, Inc., which introduced the first multiple medication,
programmable infusion pump and was acquired by Abbott Laboratories in 1989. Mr.
Epstein holds B.S. and M.S. degrees in Chemical Engineering and a B.S. degree in
Business Management from MIT. Mr. Epstein has been jointly awarded eleven
patents in the medical instrumentation and communication fields.
<PAGE>
James J. Goodman has been a Director of the Company since 1996. Mr. Goodman
is President of Gemini Investors LLC, a private firm based in Wellesley, MA that
invests in emerging growth companies across a wide range of industries. Gemini
(and its predecessor) have invested in more than a dozen companies over the last
four years. Prior to founding Gemini, Mr. Goodman was Vice President at
Berkshire Partners, a leading private equity firm, from 1989 to 1993. Mr.
Goodman was educated at Harvard University where he received his undergraduate
degree in Economics in 1979 and M.B.A. and J.D. degrees in 1984.
James W. Hobbs was elected to the positions of President, Chief Executive
Officer and Director in 1993. Mr. Hobbs was Chief Executive Officer of Graylyn
Associates from 1992 to 1993. Graylyn was an investment firm founded by Mr.
Hobbs to invest in early stage medical technology. Prior to Graylyn, Mr. Hobbs
served as the President and Chief Executive Officer of Genica Pharmaceuticals
from 1990 to 1992. Genica Pharmaceuticals was a corporation engaged in providing
new diagnostic assays and conducting therapeutic research for neurological
disorders. Mr. Hobbs was with Johnson and Johnson Professional Diagnostics as
Vice President and General Manager from 1985 to 1989.
Patrick Phillipps joined the Company in 1995 as Vice President of
Engineering and a Director. Mr. Phillipps, a co-founder of CardioDyne, Inc.,
served as President and Chief Executive Officer from the time of CardioDyne's
founding in February, 1989 until the merger with Luxtec in October, 1995.
Previously, Mr. Phillipps founded the Engineering Department of Lifeline
Systems, Inc., where he served as Vice President of Engineering and oversaw the
development and introduction of a new generation of Lifeline's hospital based
emergency call system for home use by the elderly. Mr. Phillipps holds an S.B.
degree in Electrical Engineering from MIT and has been jointly awarded over a
dozen patents in the medical monitoring and related fields.
Dr. Thomas Vander Salm has been a Director of the Company since 1984. Dr.
Vander Salm is Chief of Cardio Thoracic Surgery and has been a Professor of
Surgery at the University of Massachusetts Medical School in Worcester, MA since
1970.
Louis C. Wallace has been a Director of the Company since 1989. Mr. Wallace
is the founder and President of Specialty Surgical Instrumentation, Inc.
(S.S.I.), a manufacturer and distributor of surgical instruments. S.S.I. was
established in Nashville, TN in 1976.
Board and Committee Meetings
During the fiscal year ended October 31, 1998 (the "1998 Fiscal Year"), the
Luxtec Board held five (5) meetings. During the 1998 Fiscal Year, each incumbent
director attended at least 75% of the aggregate of the number of meetings of the
Luxtec Board and the total number of meetings held by all committees on which
the individual served.
The Audit Committee presently is composed of three directors: James
Berardo, Paul Epstein and Thomas J. Vander Salm. Responsibilities of this
committee include engagement of independent auditors, review of audit fees,
supervision of matters relating to audit functions, review and setting of
internal policies and procedures regarding audits, accounting and other
financial controls, and reviewing related party transactions. During the 1998
Fiscal Year, the Audit Committee met one time.
The Compensation Committee presently is composed of three directors: James
Berardo, James J. Goodman and Louis C. Wallace. Responsibilities of this
committee include approval of remuneration arrangements for executive officers
of the Company, review and approval of compensation plans relating to executive
officers and directors, including grants of stock options and other benefits
under the Company's stock option plan, and general review of the Company's
employee compensation policies. None of the members of the Compensation
Committee has been an employee of the Company at any time and none has any
relationship with either the Company or the Company's officers requiring
disclosure under applicable regulations of the Securities and Exchange
Commission. During the 1998 Fiscal Year, the Compensation Committee met two (2)
times.
<PAGE>
The Nominating committee presently is composed of four directors: James
Hobbs, Patrick Phillipps, Thomas VanderSalm and Louis Wallace. The
responsibility of this committee is to recommend new members of the Board of
Directors when a vacancy exists. During the 1998 Fiscal Year, the Nominating
Committee did not meet. The Nominating Committee will consider all nominees
recommended to it by holders of Luxtec Common Stock. Such recommendations should
be presented to the Nominating committee prior to November 12, 1999. Such
recommendations should include all material information known to the
recommending stockholder with respect to such nominee.
Director Compensation
The Company pays non-employee directors $500 for attendance at each meeting
of the Luxtec Board, $250 per each meeting of a committee thereof ($150 per
meeting of a committee if such meeting is concurrent with a regular meeting of
the Luxtec Board), and $100 per meeting held by telephone conference. The
Company also pays expenses for attendance at meetings of the Luxtec Board and
committees thereof. Additionally, non-employee Directors are compensated with
options to purchase shares of Common Stock of the Company, in accordance with
the 1995 Stock Option Plan For Non-Employee Directors.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers of the Company who are not also directors. The executive officers are
elected annually by the Board of Directors following the Annual Meeting of
Stockholders and serve at the discretion of the Board.
<TABLE>
<S> <C> <C> <C>
Name Age Position With Company
- --------------------- ---------- -----------------------------------------------------------------------------------
- --------------------- ---------- -----------------------------------------------------------------------------------
David C. Mutch 55 Vice President of Sales and Marketing
- --------------------- ---------- -----------------------------------------------------------------------------------
- --------------------- ---------- -----------------------------------------------------------------------------------
Samuel M. Stein 59 Vice President of Finance, Chief Financial Officer, Treasurer and Assistant Clerk
- --------------------- ---------- -----------------------------------------------------------------------------------
</TABLE>
David Mutch is Vice President of Sales and Marketing of the Company. Mr.
Mutch joined the Company in September, 1992 as Director of Sales and Marketing
and assumed his present position in December, 1994. Previously, Mr. Mutch held
various management positions with Hewlett Packard Company over a twenty-one year
career. During his last five years at Hewlett Packard, Mr. Mutch was the
Marketing Manager for the Health Care Information Systems Division.
Samuel Stein is Vice President, Chief Financial Officer, Treasurer and
Assistant Clerk of the Company. Mr. Stein joined the Company in October, 1993 as
Vice President of Finance and Chief Financial Officer and was elected to the
further offices of Treasurer and Assistant Clerk during 1994. From 1990 to 1993,
Mr. Stein was employed as the Corporate Controller of Great American Software,
Inc., an accounting software manufacturer.
<PAGE>
EXECUTIVE COMPENSATION
The table below sets forth certain compensation information for the fiscal
years ended October 31, 1998, 1997 and 1996 of those persons who were at October
31, 1998: (i) the Chief Executive Officer, and (ii)the most highly compensated
executive officers whose total annual salary and bonus exceeded $100,000
(collectively, the "Named Officers").
<TABLE>
Summary Compensation Table
<S> <C> <C> <C> <C> <C> <C>
Long-Term
Annual Compensation
Compensation Awards
------------------------------------------------------- ------------------
Securities
Name and Fiscal Other Annual Underlying
Principal Position Year Salary($) Bonus($) Compensation ($)(1) Options (#)
James Hobbs 1998 $178,148 $18,000 $7,800 0
President, CEO and Director 1997 $176,069 $10,000 $7,800 24,000
1996 $170,474 $21,400 $7,800 0
Samuel M. Stein 1998 $99,686 $18,000 $7,800 0
CFO and Treasurer 1997 $97,677 $15,000 $7,800 12,000
1996 $95,760 $15,438 $7,800 0
David C. Mutch 1998 $99,686 $15,000 $7,800 0
VP Marketing and Sales 1997 $97,677 $14,000 $7,800 12,000
1996 $95,760 $15,438 $7,800 0
Patrick G. Phillipps 1998 $99,686 $14,000 $7,800 0
VP Engineering 1997 $97,677 $14,000 $7,800 12,000
1996 $95,760 $15,438 $7,800 0
</TABLE>
(1) Automobile allowance.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted in the last fiscal year to any of the Named
Officers.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to options to
purchase the Company's Common Stock granted under the 1992 Stock Option Plan, as
amended, including (i) the number of shares purchased upon exercise of options
in the most recent fiscal year, (ii) the net value realized upon such exercise,
(iii) the number of unexercised options outstanding at October 31, 1998, and
(iv) the value of such unexercised options at October 31, 1998:
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
<S> <C> <C> <C> <C> <C> <C>
- ------------------- ---------------- ----------- ------------------------------------ ------------------------------
Number of Securities Underlying Value of Unexercised
Shares Value Unexercised Options at October 31, In-The-Money Options at
Acquired on Realized 1998 (#) October 31, 1998 ($)(1)
Name Exercise (#) ($) Exercisable Unexercisable Exercisable/Unexercisable
- ------------------- ---------------- ----------- ------------------------------------ ------------------------------
James Hobbs - - 56,050 67,950 $50,000 $0
Samuel Stein - - 14,750 47,250 $6,200 $0
David Mutch - - 14,750 47,250 $6,200 $0
Patrick Phillipps - - 8,484 11,850 $0 $0
</TABLE>
(1) Value is based on the closing sale price of the Common Stock ($2.25) as
of October 31, 1998 minus the exercise price under such option.
Executive Employment Agreements
The Company has entered into an employment agreement with James W. Hobbs,
pursuant to which the Company has agreed to employ Mr. Hobbs as President and
Chief Executive Officer. The agreement with Mr. Hobbs was entered into on June
10, 1993 with an initial term of one year with automatic renewals for successive
terms of one year each unless either party gives notice of intention not to
renew. The Compensation Committee of the Luxtec Board set Mr. Hobbs' base salary
at $178,950 for 1998 and at $184,300 for 1999. Mr. Hobbs is entitled to receive
an annual bonus in cash and/or equity of the Company from an annual bonus pool
for all employees based, in Fiscal Year 1998, on 1.9% of the net sales of the
Company, with such bonus to be determined by the Compensation Committee. Factors
taken into account by the Compensation Committee in determining bonuses include
return on investment, net sales, and net income compared to the business plan.
Although there is no maximum percentage bonus, 30% of base salary is the
expected guideline. Mr. Hobbs is entitled to severance pay in an amount equal to
six months of his then current annual salary if his employment is terminated by
(i) the Company without cause or (ii) Mr. Hobbs for Good Reason (as defined in
the agreement).
<PAGE>
SECURITIES OWNERSHIP
The following table sets forth certain information as of February 18, 1999,
with respect to the Common Stock owned by (a) each director of the Company, (b)
the Named Officers, (c) all directors and executive officers of the Company as a
group, and (d) each person who is known by the Company to own beneficially more
than 5% of the Common Stock. Unless otherwise indicated in the footnotes to the
table, all stock is owned of record and beneficially by the persons listed in
the table.
<TABLE>
<S> <C> <C> <C>
Percentage of Common
Number of Shares Stock Outstanding
Name and Addresses (1) Beneficially Owned (2)
- -------------------------------------------------------------- ------------------------------ ----------------------
Directors and Officers
James Berardo 168,520 (3) 5.85%
Director
Paul Epstein 168,988 (4) 5.89%
Vice President of Business Development and Strategic
Planning and Director
James J. Goodman 458,000 (5) 13.77%
Director
James W. Hobbs 134,539 (6) 4.55%
President, Chief Executive Officer and Director
David C. Mutch 35,773 (7) 1.24%
Vice President of Sales and Marketing
Patrick G. Phillipps 241,882 (8) 8.41%
Vice President of Engineering and Director
Samuel M. Stein 16,548 (9) *
Vice President of Finance, Chief Financial Officer,
Treasurer and Assistant Clerk
Thomas J. Vander Salm 68,700 (10) 2.38%
Director
Louis C. Wallace 57,250 (11) 1.98%
Director
All directors and executive officers as a group (9 persons) 1,350,200 39.53%
Principal Stockholders
Denton A. Cooley, MD 419,046 14.45%
6624 Fannin, Suite 2700
Houston, TX 77030
G&G Diagnostics Fund, L.P. I & L.P. III 209,484 7.22%
30 Ossipee Road
Newton, MA 02164
Rita Kloots 155,100 5.41%
Box 1077
Sturbridge, MA 01566
</TABLE>
* Less than 1%
(1) The mailing address of each of the Company's directors and executive
officers is c/o Luxtec Corporation, 326 Clark Street, Worcester, Massachusetts,
01606-1214
<PAGE>
(2) Unless otherwise indicated in these footnotes, each stockholder has
sole voting and investment power with respect to the shares beneficially owned.
Shares of Common Stock subject to options or warrants exercisable as of February
18, 1999 (or exercisable within 60 days after such date), are deemed outstanding
for purposes of computing the percentage ownership of the person holding such
option or warrant but are not outstanding for purposes of computing the
percentage of any other person.
(3) Includes 154,520 shares held by various trusts of which Mr. Berardo is
a trustee and over which Mr. Berardo shares investment and voting control. Mr.
Berardo disclaims beneficial ownership of such shares. Also includes 12,000
shares issuable upon exercise of stock options.
(4) Includes 82,218 shares held by Mr. Epstein's wife, Mary Epstein. Mr.
Epstein disclaims beneficial ownership of such shares.
(5) Consists of shares issuable to Gemini Investors LLC ("Gemini"), upon
exercise of a warrant to acquire shares of Common Stock. Mr.Goodman is president
of Gemini. Mr. Goodman disclaims beneficial ownership of such shares. Also
includes 8,000 shares issuable upon exercise of stock options.
(6) Includes 89,384 shares issuable upon exercise of stock options.
(7) Includes 14,750 shares issuable upon exercise of stock options.
(8) Includes 106,905 shares beneficially owned Mr. Phillipps's wife, Janice
B. Phillipps. Also includes 8,484 shares issuable upon exercise of stock
options.
(9) Includes 14,750 shares issuable upon exercise of stock options.
(10) Includes 32,000 shares beneficially owned by the Vander Salm Family
Trust, of which Mr. Vander Salm is a trustee and over which Mr.Vander Salm
shares investment and voting control. Also includes 20,000 shares issuable upon
exercise of stock options.
(11) Includes 20,000 shares issuable upon exercise of stock options.
CERTAIN TRANSACTIONS
Mr. Louis C. Wallace is currently, and has been since 1989, a member of the
Board of Directors of the Company. Mr. Wallace is the founder and President of
Specialty Surgical Instrumentation, Inc. ("SSI), a surgical distributor in ten
(10) southeastern states. SSI is the largest single customer of the Company,
representing approximately thirteen percent (13%) of net sales during fiscal
1998. SSI and the Company operate at arms length with a contract with terms and
conditions substantially the same as the other domestic distributors of the
Company's products. The Company expects that SSI will represent approximately
the same percentage of net sales during fiscal 1999 as occurred during fiscal
1998.
<PAGE>
PROPOSAL 2
AMENDMENT OF THE COMPANY'S 1992 STOCK OPTION PLAN TO INCREASE THE NUMBER OF
SHARES AUTHORIZED FOR ISSUANCE UNDER THE PLAN
The Luxtec Board has authorized, subject to stockholder ratification, an
increase in the number of shares available under the Company's 1992 Stock Option
Plan, as amended, (the "1992 Stock Plan") from 400,000 to 500,000 shares. The
purpose of the proposed amendment is to provide the Company with additional
capacity to award stock options to existing personnel and to attract qualified
new employees through grants of stock options.
The proposed amendment will cause Section 4 of the 1992 Stock Plan to be
replaced with the following revised Section 4:
4. Stock. The stock subject to Options, Awards and Purchases shall be
authorized but unissued shares of Common Stock of the Company, par value $.01
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 500,000, subject to adjustment as provided in paragraph
13. If any Stock Right granted under the Plan shall expire or terminate for any
reason without having been exercised in whole or in part, the unpurchased shares
subject to such Stock Right and any unvested shares so reacquired by the Company
shall again be available for grants of Stock Rights under the plan.
The Luxtec Board recommends that the shareholders vote "FOR" the proposed
amendment of the 1992 Stock Plan and the enclosed proxy will be so voted unless
a contrary vote is indicated. The affirmative vote of the holders of a majority
of the shares of Luxtec Common Stock represented in person or by proxy, and
voting, at the Meeting is required for approval of the amendment to the 1992
Stock Plan. Except for such amendment, if approved, the 1992 Stock Plan will
remain unchanged. This following is a summary of the provisions of the 1992
Stock Plan. This summary is qualified in its entirety by reference to the 1992
Stock Plan, a copy of which may be obtained from the Company.
Summary Description of the 1992 Stock Plan
Purpose. The purpose of the 1992 Stock Plan is to attract and retain the
best available personnel for positions of substantial responsibility and to
provide additional incentives to employees of the company.
Administration. The 1992 Stock Plan is administered by the Compensation
Committee (the "Committee") which consists of directors of the Company appointed
by its Board of Directors. The committee is currently composed of Mr. Wallace,
Mr. Berardo and Mr. Goodman. Subject to the provisions of the 1992 Stock Plan,
the Committee has discretion to determine when awards are made, which employees
are granted awards, the number of shares subject to each award and all other
relevant terms of the awards. The Committee also has broad discretion to
construe and interpret the 1992 Stock Plan and adopt rules and regulations
thereunder.
Eligibility. Pursuant to the 1992 Stock Plan, Options, Awards and Purchases
(collectively "Stock Rights") may be granted to persons who are directors,
officers, employees and consultants of the Company. Incentive stock options
("ISOs") may only be granted to employees and officers. Non-qualified stock
options (collectively with ISOs, "Options") may be granted to directors,
officers, employees and consultants of the Company. Awards of stock in the
Company ("Awards"), and opportunities to make direct purchases of stock in the
Company ("Purchases"), may be granted to directors, officers, employees and
consultants of the Company.
Shares Subject to the 1992 Stock Plan. The shares issued or to be issued
under the 1992 Stock Plan are shares of Luxtec Common Stock, which may be newly
issued shares or shares held in the treasury or acquired in the open market. If
adopted, the amendment would increase from 400,000 to 500,000 the number of
shares that could be issued under the 1992 Stock Plan. The Company cannot grant
more than 100,000 options to any one individual in any calendar year. The
foregoing limits are subject to adjustment for stock dividends, stock splits or
other changes in the Company's capitalization.
<PAGE>
Stock Options. The Committee in its discretion may issue stock options
which qualify as ISOs under the Code or non-qualified stock options. The
Committee will determine the time or times when each Option becomes exercisable,
the period within which it remains exercisable and the price per share at which
it is exercisable, provided that no Option shall be exercised (i) more than 10
years after it is granted, and (ii) more than 5 years from the date of grant for
ISOs granted to employees deemed to beneficially own greater than 10% of the
total outstanding stock of the Company, and further provided that the exercise
price of ISOs may not be less than the fair market value of Luxtec Common Stock
on the date of the grant. The reported closing price of Luxtec Common Stock by
the American Stock Exchange ("AMEX") on February 11, 1999, was $2.38 per share.
Stock Rights are not assignable or transferable except upon the death of
the grantee. Stock Rights may be exercised only by the grantee during the
grantee's lifetime, and with respect to ISOs, only while the grantee is employed
by the Company and for three months thereafter or six months after the death of
the grantee by the administrator of the estate of such grantee.
As of October 31, 1998, Stock Rights for the purchase of a total of 354,360
shares of Luxtec Common Stock were outstanding under the 1992 Stock Plan,
119,474 of which were exercisable. Stock Rights to purchase an additional 39,350
shares remained available as of such date for grant under the 1992 Stock Plan.
Stock Rights granted to date are exercisable at varying dates. In general,
options granted vest 20% at date of grant, and 20% each year for a period of
four years. Other performance-based options will vest at a rate of 20% each year
for a period of five years, commencing on the sixth year from the date of grant,
subject to acceleration if certain financial milestones are achieved.
Federal Income Tax Rules. The grant of an ISO or a non-qualified stock
option will not result in income for the optionee or in an income tax deduction
for the Company.
The exercise of a non-qualified stock option will generally result in
taxable income to the optionee and deduction for the Company, in each case
measured by the difference between the purchase price and the fair market value
of the shares of Luxtec Common Stock determined generally at the time of
exercise at which time income tax withholding will be required.
The exercise of an ISO will not result in income for the optionee if the
optionee is an employee of the Company or one of its subsidiaries from the date
of grant until three months before exercise. The excess of the market value on
the exercise date over the purchase price is an item of tax preference,
potentially subject to the alternative minimum tax. Provided the optionee does
not dispose of the shares of Luxtec Common Stock within two years of the date of
grant and one year after exercise, any gain on a disposition of the shares will
be taxed to the optionee as long-term capital gain and the Company will not be
entitled to a deduction. If the Optionee disposes of the shares prior to the
expiration of either of the holding periods, the optionee will recognize taxable
income and the company will be entitled to a deduction equal to the lesser of
(i) the fair market value of the shares on the exercise date minus the purchase
price or (ii) the amount realized on disposition minus the purchase price. Any
gain greater than the taxable income portion will be treated as long term or
short term capital gain.
No options were granted in the last fiscal year to the Named Officers.
<PAGE>
STOCKHOLDER PROPOSALS
The Luxtec Board will make provision for presentation of proposals by
shareholders at the 2000 Annual Meeting of Stockholders (or special meeting in
lieu thereof) provided such proposals are submitted by eligible shareholders who
have complied with the relevant regulations of the Securities and Exchange
Commission. Such proposals must be received by the Company no later than
November 12, 2000, to be considered for inclusion to the Company's proxy
materials relating to that meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of reports furnished to the Company or written
representations from the Company's directors and executive officers, the Company
believes that all reports required to be filed pursuant to Section 16 of the
Exchange Act were satisfied by the Company's directors, executive officers and
ten percent (10%) holders during the 1998 fiscal year.
GENERAL
The management of the Company knows of no matter other than the foregoing
to be brought before the Luxtec Meeting. However, the enclosed proxy gives
discretionary authority in the event any additional matters should be presented.
The Company will provide free of charge to any stockholder from whom a
proxy is solicited pursuant to this Proxy Statement, upon written request from
such stockholder, a copy of the Company's annual report filed with the
Securities and Exchange Commission on Form 10-K for the Company's fiscal year
ended October 31, 1998. Requests for such report should be directed to Luxtec
Corporation, 326 Clark Street, Worcester, Massachusetts 01606-1214, Attention:
Chief Financial Officer.
The Company expects to hold its next stockholder meeting on or about April
15, 2000 and proxy materials in connection with that meeting are expected to be
mailed approximately 30 days prior to the meeting.
JAMES W. HOBBS
President
<PAGE>
EXHIBIT A
LUXTEC CORPORATION
1992 STOCK PLAN
1. Purpose. This 1992 Stock Plan (the "Plan") is intended to provide
incentives: (a) to the officers and other employees of Luxtec Corporation (the
"Company"), and of any present or future parent or subsidiary of the Company
(Collectively, "Related Corporations"), by providing them with opportunities to
purchase stock in the Company pursuant to options granted hereunder which
qualify as "incentive stock options" ("ISOs") under Section 422 (b) of the
Internal Revenue Code of 1986, as amended (the "Code"); (b) to directors,
officers, employees and consultants of the Company and Related Corporations by
providing them with opportunities to purchase stock in the Company pursuant them
with opportunities to purchase stock in the Company pursuant to options granted
hereunder which do not qualify as ISOs ("Non-Qualified Options"); (c) to
directors, officers, employees and consultants of the Company and Related
Corporations by providing them with awards of stock in the Company ("Awards");
and (d) to directors, officers, employees and consultants of the Company and
Related Corporations by providing them with opportunities to make direct
purchases of stock in the Company ("Purchases"). Both ISOs and Non-Qualified
Options are referred to hereafter individually as an "Option" and collectively
as "Options." Options, Awards and authorizations to make Purchases are referred
to hereafter collectively as "Stock Rights." As used herein, the terms "parent"
and "subsidiary" mean "parent corporation" and "subsidiary corporation,"
respectively, as those terms are defined in Section 424 of the Code.
2. Administration of the Plan.
A. Board or Committee Administration. The Plan shall be administered by the
Board of Directors of the Company (the "Board") or by a committee appointed by
the Board (the "Committee"); provided, that, to the extent required by Rule
16b-3 or any successor provision ("Rule 16b-3") of the Securities Exchange Act
of 1934, with respect to specific grants of Stock Rights, the Plan shall be
administered by a disinterested administrator or administrators within the
meaning of Rule 16b-3. Hereinafter, all references in this Plan to the
"Committee" shall mean the Board if no Committee has been appointed. Subject to
ratification of the grant or authorization of each Stock Right by the Board (if
so required by applicable state law), and subject to the terms of the Plan, the
Committee shall have the authority to (i) determine the employees of the Company
and Related Corporations (from among the class of employees eligible under
paragraph 3 to receive ISOs) to whom ISOs may be granted, and determine (from
among the class of individuals and entities eligible under paragraph 3 to
receive Non-Qualified Options and Awards and to make Purchases) to whom
Non-Qualified Options, Awards and authorizations to make Purchases may be
granted; (ii) determine the time or times at which Options or Awards may be
granted or Purchases made; (iii) determine the options price of shares subject
to each Option, which price shall not be less than the minimum price specified
in paragraph 6, and the purchase price of shares subject to each Purchase; (iv)
determine whether each Option granted shall be an ISO or a Non-Qualified Option;
(v) determine (subject to paragraph 7) the time or times when each Option shall
become exercisable and the duration of the exercise period; (vi) determine
whether restrictions such as repurchase options are to be imposed on shares
subject to Options, Awards and Purchases and the nature of such restrictions, if
any, and (vii) interpret the Plan and prescribe and rescind rules and
regulations relating to it. If the Committee determines to issue a Non-Qualified
Option, it shall take whatever actions it deems necessary, under Section 422 of
the Code and the regulations promulgated thereunder, to ensure that such Option
is not treated as an ISO. The interpretation and construction by the Committee
of any provisions of the Plan or of any Stock Right granted under it shall be
final unless otherwise determined by the Board. The Committee may from time to
time adopt such rules and regulations for carrying out the Plan as it may deem
best. No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Stock Right
granted under it.
<PAGE>
B. Committee Actions. The Committee may select one of its members as its
chairman, and shall hold meetings at such time and places as it may determine.
Acts by a majority of the Committee, or acts reduced to or approved in writing
by a majority of the members of the Committee (if consistent with applicable
state law), shall be the valid acts of the Committee. From time to time the
Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or remove all members of
the Committee and thereafter directly administer the Plan.
C. Grant of Stock Rights to Board Members. Stock Rights may be granted to
members of the Board consistent with the provisions of the first sentence of
paragraph 2(A) above, if applicable. All grants of Stock Rights to members of
the Board shall in all other respects be made in accordance with the provisions
of this Plan applicable to other eligible persons. Consistent with the
provisions of the first sentence of paragraph 2(A) above, members of the Board
who either (i) are eligible for Stock Rights pursuant to the Plan or (ii) have
been granted Stock Rights may vote on any matters affecting the administration
of the Plan or the grant of any Stock Rights pursuant to the Plan, except that
no such member shall act upon the granting to himself of Stock Rights, but any
such member may be counted in determining the existence of a quorum at any
meeting of the Board during which action is taken with respect to the granting
to him of Stock Rights.
3. Eligible Employees and Others. ISOs may be granted to any employee of
the Company or any Related Corporation. Those officers and directors of the
Company who are not employees may not be granted ISOs under the Plan.
Non-Qualified Options, Awards and authorizations to make Purchases may be
granted to any employee, officer or director (whether or not also an employee)
or consultant of the Company or any Related Corporation. The Committee may take
into consideration a recipient's individual circumstances in determining whether
to grant an ISO, a Non-Qualified Option, an Award or an authorization to make a
Purchase. Granting of any Stock Right to any individual or entity shall neither
entitle that individual or entity to, nor disqualify him from, participation in
any other grant of Stock Rights.
The number of options that may be granted to any one individual in any
calendar year is limited to 100,000.
4. Stock. The stock subject to Options, Awards and Purchases shall be
authorized but unissued shares of Common Stock of the Company, par value $.01
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 500,000, subject to adjustment as provided in paragraph
13. If any Stock Right granted under the Plan shall expire or terminate for any
reason without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, the unpurchased shares subject to such Stock
Right and any unvested shares so reacquired by the Company shall again be
available for grants of Stock Rights under the Plan.
5. Granting of Stock Rights. Stock Rights may be granted under the Plan at
any time after June 11, 1992 and prior to June 10, 2002. The date of grant of a
Stock Right under the Plan will be the date specified by the Committee at the
time it grants the Stock Right; provided, however, that such date shall not be
prior to the date on which the Committee acts to approve the grant. The
Committee shall have the right, with the consent of the optionee, to convert an
ISO granted under the Plan to a Non-Qualified Option pursuant to paragraph 16.
6. Minimum Option Price; ISO Limitations.
A. Price for Non-Qualified Options. The exercise price per share specified
in the agreement relating to each Non-Qualified Option granted under the Plan
shall in no event be less than the minimum legal consideration required therefor
under the laws of Massachusetts or the laws of any jurisdiction in which the
Company or its successors in interest may be organized.
<PAGE>
B. Price for ISOs. The exercise price per share specified in the agreement
relating to each ISO granted under the Plan shall not be less than the fair
market value per share of Common Stock on the Date of such grant. In the case of
an ISO to be granted to an employee owning stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than one hundred ten percent
(110%) of the fair market value per share of Common Stock on the date of grant.
For purposes of determining stockownership under this paragraph, the rules of
Section 424(d) of the Code shall apply.
C. $100,000 Annual Limitation on ISO Vesting. Each eligible employee may be
granted Options treated as ISOs only to the extent that, in the aggregate under
this Plan and all incentive stock option plans of the Company and any Related
Corporation, ISOs do not become exercisable for the first time by such employee
during any calendar year with respect to stock having a fair market value
(determined at the time the ISOs were granted) in excess of $100,000. The
Company intends to designate any Options granted in excess of such limitation as
Non-Qualified Options.
D. Determination of Fair Market Value. If, at the time an Option is granted
under the Plan, the Company's Common Stock is publicly traded, "fair market
value" shall be determined as of the last business day for which the prices or
quotes discussed in this sentence are available prior to the date such Option is
granted and shall mean (i) the average (on that date) of the high and low prices
of the Common stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price (on that date) of the
Common Stock on the NASDAQ National Market List, if the Common Stock is not then
traded on a national securities exchange; or (iii) the closing bid price (or
average of bid prices) last quoted (on that date) by an established quotation
service for over-the-counter securities, if the Common Stock is not reported on
the NASDAQ National Market List. However , if the Common Stock is not publicly
traded at the time an Option is granted under the Plan, "fair market value"
shall be deemed to be the fair value of the Common Stock as determined by the
Committee after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer prices of the
Common Stock in private transactions negotiated at arm's length.
7. Option Duration. Subject to earlier termination as provided in
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten years from the date of grant in the case of
Options generally and (ii) five years from the date of grant in the case of ISOs
granted to an employee owning stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
Related Corporation, as determined under paragraph 6 (B). Subject to earlier
termination as provided in paragraphs 9 and 10, the term of each ISO shall be
the term set forth in the original instrument granting such ISO, except with
respect to any part of such ISO that is converted into a Non-Qualified Option
pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:
A. Vesting. The Option shall either be fully exercisable on the date of
grant or shall become exercisable thereafter in such installments as the
Committee may specify.
B. Full Vesting of Installments. Once an installment becomes exercisable it
shall remain exercisable until expiration or termination of the Option, unless
otherwise specified by the Committee.
C. Partial Exercise. Each Option or installment may be exercised at any
time or from time to time, in whole or in part, for up to the total number of
shares with respect to which it is then exercisable.
<PAGE>
D. Acceleration of Vesting. The Committee shall have the right to
accelerate the date of exercise of any installment of any Option; provided that
the Committee shall not, without the consent of an optionee, accelerate the
exercise date of any installment of any Option granted to any employee as an ISO
(and not previously converted into a Non-Qualified Option pursuant to paragraph
16) if such acceleration would violate the annual vesting limitation contained
in Section 422 (d) of the Code, as described in paragraph 6 (C).
9. Termination of Employment. If an ISO optionee ceases to be employed by
the Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his ISOs shall
become exercisable, and his ISOs shall terminate after the passage of ninety
(90) days from the date of termination of his employment, but in no event later
than on their specified expiration dates, except to the extent that such ISOs
(or unexercised installments thereof) have been converted into Non-Qualified
Options pursuant to paragraph 16. For purposes of this paragraph 9, employment
shall be considered as continuing uninterrupted during any bona fide leave of
absence (such as those attributable to illness, military obligations or
governmental service) provided that the period of such leave does not exceed 90
days or, if longer, any period during which such optionee's right to
reemployment is guaranteed by statute. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the optionee after the approved period of absence. ISOs granted
under the Plan shall not be affected by any change of employment within or among
the Company and Related Corporations, so long as the optionee continues to be an
employee of the Company or any Related Corporation. Nothing in the Plan shall be
deemed to give any grantee of any Stock Right the right to be retained in
employment or other service by the Company or any Related Corporation for any
period of time.
10. Death; Disability.
A. Death. If an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of his death, any ISO of his may be exercised, to
the extent of the number of shares with respect to which he could have exercised
it on the date of his death, by his estate, personal representative or
beneficiary who has acquired the ISO by will or by the laws of descent and
distribution, at any time prior to the earlier of the specified expiration date
of the ISO 180 days from the date of the optionee's death.
B. Disability. If an ISO optionee ceases to be employed by the Company and
all Related Corporations by reason of his disability, he shall have the right to
exercise any ISO held by him on the date of termination of employment , to the
extent of the number of shares with respect to which he could have exercised it
on that date, at any time prior to the earlier of the specified expiration date
of the ISO or 180 days from the date of the termination of the optionee's
employment. For the purposes of the Plan, the term "disability" shall mean
"permanent and total disability" as defined in Section 22 (e) (3) of the Code or
successor statute.
11. Assignability. No Stock Right shall be assignable or transferable by
the grantee except by will or by the laws of descent and distribution. During
the lifetime of the grantee each Stock Right shall be exercisable only by him.
12. Terms and Conditions of Options. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
<PAGE>
13. Adjustments. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:
A. Stock Dividends and Stock Splits. If the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
B. Consolidations or Mergers. If the Company is to be consolidated with or
acquired by another entity in a merger, sale of all or substantially all of the
Company's assets or otherwise (an "Acquisition"), the Committee or the board of
directors of any entity assuming the obligations of the Company hereunder (the
"Successor Board"), shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by substituting on an
equitable basis for the shares then subject to such Options the consideration
payable with respect to the outstanding shares of Common Stock in connection
with the Acquisition; or (ii) upon written notice to the optionees, provide that
all Options must be exercised, to the extent then exercisable, within a
specified number of days of the date of such notice, at the end of which period
the Options shall terminate: or (iii) terminate all Options in exchange for a
cash payment equal to the excess of the fair market value of the shares subject
to such Options (to the extent then exercisable) over the exercise price
thereof.
C. Recapitalization or Reorganization. In the event of a recapitalization
or reorganization of the Company (other than a transaction described in
subparagraph B above) pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock,
an optionee upon exercising an Option shall be entitled to receive for the
purchase price paid upon such exercise the securities he would have received if
he had exercised his Option prior to such recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any adjustments
made pursuant to subparagraphs A, B or C with respect to ISOs shall be made only
after the Committee, after consulting with counsel for the Company, determines
whether such adjustments would constitute a "modification" of such ISOs (as that
term is defined in Section 424 of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee determines that such
adjustments made with respect to ISOs would constitute a modification of such
ISOs or would cause adverse tax consequences to the holders, it may refrain from
making such adjustments.
E. Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, each Option will terminate immediately prior to the
consummation of such proposed action or at such other time and subject to such
other conditions as shall be determined by the Committee.
F. Issuances of Securities. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
G. Fractional Shares. No fractional shares shall be issued under the Plan
and the optionee shall receive from the Company cash in lieu of such fractional
shares.
<PAGE>
H. Adjustments. Upon the happening of any of the events described in
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Stock Rights which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this paragraph 13 and, subject to paragraph 2, its determination
shall be conclusive.
If any person or entity owning restricted Common Stock obtained by exercise
of a Stock Right made hereunder receives shares or securities or cash in
connection with a corporate transaction described in subparagraphs A, B or C
above as a result of owning such restricted Common Stock, such shares or
securities or cash shall be subject to all of the conditions and restrictions
applicable to the restricted Common Stock with respect to which such shares or
securities or cash were issued, unless otherwise determined by the Committee or
the Successor Board.
14. Means of Exercising Stock Rights. A Stock Right (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor
either (a) in United Stated dollars in cash or by check, (b) at the discretion
of the Committee, through delivery of shares of Common Stock having a fair
market value equal as of the date of the exercise to the cash exercise price of
the Stock Right, (c) at the discretion of the Committee, by delivery of the
grantee's personal recourse note bearing interest payable not less than annually
at no less than 100% of the lowest applicable Federal rate, as defined in
Section 1274 (d) of the Code, (d) at the discretion of the Committee and
consistent with applicable law, through the delivery of an assignment to the
Company of a sufficient amount of the proceeds from the sale of the Common Stock
acquired upon exercise of the Stock Right and an authorization to the broker or
selling agent to pay that amount to the Company, which sale shall be at the
participant's direction at the time of exercise, or (e) at the discretion of the
Committee, by any combination of (a), (b), (c) and (d) above. If the Committee
exercises its discretion to permit payment of their exercise price of an ISO by
means of the methods set forth in clauses (b), (c) , (d) or (e) of the preceding
sentence, such discretion shall be exercised in writing at the time of the grant
of the ISO in question. The holder of a Stock Right shall not have the rights of
a shareholder with respect to the shares covered by his Stock Right until the
date of issuance of a stock certificate to him for such shares. Except as
expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such stock
certificate is issued.
15. Term and Amendment of Plan. This Plan was adopted by the Board on June
11, 1992, subject, with respect to the validation of ISOs granted under the
Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained prior to June 10, 1993, any grants of ISOs under
the Plan made prior to that date will be rescinded. The Plan shall expire at the
end of the day on June 10, 2002 (except as to Options outstanding on that date).
Subject to the provisions of paragraph 5 above, Stock Rights may be granted
under the Plan prior to the date of stockholder approval of the Plan. The Board
may terminate or amend the Plan in any respect at any time, except that, without
the approval of the stockholders obtained within 12 months before or after the
Board adopts a resolution authorizing any of the following actions: (a) the
total number of shares that may be issued under the Plan may not be increased
(except by adjustment pursuant to paragraph 13); (b) the benefits accruing to
participants under the Plan may not be materially increased; (c) the
requirements as to eligibility for participation in the Plan may not be
materially modified; (d) the provisions of paragraph 3 regarding eligibility for
grants of ISOs may not be modified; (e) the provisions of paragraph 6(B)
regarding the exercise price at which shares may be offered pursuant to ISOs may
not be modified (except by adjustment pursuant to paragraph 13) (f) the
expiration date of the Plan may not be extended; and (g) the Board may not take
any action which would cause the Plan to fail to comply with Rule 16b-3. Except
as otherwise provided in this paragraph 15, in no event may action of the Board
or stockholders alter or impair the rights of a grantee, without his consent,
under any Stock Right previously granted to him.
<PAGE>
16. Conversion of ISOs into Non-Qualified Options; Termination of ISOs. The
Committee, at the written request of any optionee, may in its discretion take
such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but shall not be limited to, extending the exercise period
or reducing the exercise price of the appropriate installments of such ISOs. At
the time of such conversion, the Committee (with the consent of the optionee)
may impose such conditions on the exercise of the resulting Non-Qualified
Options as the Committee in its discretion may determine, provided that such
conditions shall not be inconsistent with this Plan. Nothing in the Plan shall
be deemed to give any optionee the right to have such optionee's ISOs converted
into Non-Qualified Options, and no such conversion shall occur until and unless
the Committee takes appropriate action. The Committee, with the consent of the
optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.
17. Application of Funds. The proceeds received by the Company from the
sale of shares pursuant to Options granted an Purchases authorized under the
Plan shall be used for general corporate purposes.
18. Notice to Company of Disqualifying Disposition. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after he makes a Disqualifying Disposition (as described in Sections
421, 422 and 424 of the Code and regulations thereunder) of any stock acquired
pursuant to the exercise of ISOs granted under the Plan. A Disqualifying
Disposition is generally any disposition within two years of the date the ISO
was granted or within one year of the date the ISO was exercised, whichever
period ends later.
19. Withholding of Additional Income Taxes. Upon the exercise of a
Non-Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less that its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of a Stock Right hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includable in gross income. The Committee in its discretion may
condition (i) the exercise of an Option, (ii) the grant of an Award, (iii) the
making of a Purchase of Common Stock for less than its fair market value, or
(iv) the vesting or transferability of restricted stock or securities acquired
by exercising a Stock Right, on the grantee's making satisfactory arrangement
for such withholding. Such arrangement may include payment by the grantee in
cash or by check of the amount of the withholding taxes or, at the discretion of
the Committee, by the grantee's delivery of previously held shares of Common
Stock or the withholding from the shares of Common Stock otherwise the
withholding from the shares of Common Stock otherwise deliverable upon exercise
of a Stock Right shares having a fair market value equal to the amount of such
withholding taxes.
20. Governmental Regulation. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Stock Rights in connection
with the Plan.
21. Governing Law; Construction. The validity and construction of the Plan
and the instruments evidencing Stock Rights shall be governed by the laws of
Massachusetts, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized. In construing this Plan, the singular
shall include the plural and the masculine gender shall include the feminine and
neuter, unless the context otherwise requires.
PROXY
LUXTEC CORPORATION
326 Clark Street
Worcester, Massachusetts 01606-1214
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints James W. Hobbs and Samuel M. Stein or
either of them as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and and to vote as designated below, all the
shares of common stock of Luxtec Corporation (the "Company") held of record by
the undersigned on February 18, 1999, at the 1999 Annual Meeting of Stockholders
(the "Meeting") to be held on April 22, 1999, or any postponement or adjournment
thereof.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted FOR all nominees for director AND for proposal 2. In their discretion,
the Proxies are authorized to vote upon such other business as may properly come
before the Meeting or any adjournment thereof.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
[X] Please mark votes as in this example
1. To elect three (3) Class III directors of the Company, each to
hold a three-year term.
Nominees: James Berardo, James J. Goodman, Thomas J. Vander Salm
[ ] FOR [ ] WITHHELD
[ ] ______________________
For all nominees except as noted above
2. To ratify the amendment of the Company's 1992 Stock
Option Plan, as amended, to increase the number of shares
available for grants under the Plan from 400,000 to 500,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PAPER
PROMPTLY USING THE ENCLOSED ENVELOPE.
Please sign exactly as name appears at left.
When shares are held by joint tenants, both
should sign.
Signature: ____________________ Date: ________
Signature: ___________________ Date: _________
