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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:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive addition materials
/ / Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
LASERSCOPE
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
LASERSCOPE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
/ / 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:
------------------------------------------------------------------------
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[INSERT LOGO]
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 7, 1996
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TO THE SHAREHOLDERS OF LASERSCOPE:
Notice is hereby given that the Annual Meeting of Shareholders of Laserscope
(the "Company"), a California corporation, will be held at the Company's
principal executive offices at 3052 Orchard Drive, San Jose, California, on
Friday, June 7, 1996 at 9:00 a.m. local time, for the following purposes:
1. To elect the following directors to serve for the ensuing year and until
their successors are elected: Benjamin L. Holmes, E. Walter Lange, Robert
V. McCormick, Rodney Perkins, M.D. and Robert J. Pressley, Ph.D.
2. To authorize an amendment to the Company's 1994 Stock Option Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 150,000 shares.
3. To authorize an amendment to the Company's 1989 Employee Stock Purchase
Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 200,000 shares.
4. To ratify the appointment of Ernst & Young LLP as the independent
auditors for the Company for the fiscal year ending December 31, 1996.
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on April 19, 1996 will
be entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the meeting, you are urged to
mark, sign, date and return the enclosed proxy card as promptly as possible in
the postage-prepaid envelope enclosed for that purpose. If you decide to attend
the meeting, you may vote in person even if you returned a proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
[SIG]
CRAIG W. JOHNSON
SECRETARY
San Jose, California
April 26, 1996
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THE ENCLOSED PROXY IN THE RETURN ENVELOPE SO THAT YOUR SHARES
MAY BE REPRESENTED AT THE MEETING.
<PAGE>
[LASERSCOPE LOGO]
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PROXY STATEMENT FOR 1996 ANNUAL MEETING OF SHAREHOLDERS
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INTRODUCTION
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Laserscope (the "Company"), a California corporation, for use at the Annual
Meeting of Shareholders to be held Friday, June 7, 1996 at 9:00 a.m. local time,
or at any adjournment or postponement thereof, for the purposes set forth in
this Proxy Statement and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the Company's principal
executive offices at 3052 Orchard Drive, San Jose, California 95134-2011. The
Company's telephone number at that location is (408) 943-0636.
These proxy solicitation materials were mailed on or about April 26, 1996 to
all shareholders entitled to vote at the meeting.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Dennis LaLumandiere, Inspector of Elections) a written notice of revocation or a
duly executed proxy bearing a later date or by attending the meeting and voting
in person.
VOTING AND SOLICITATION
Every shareholder voting for the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of shares held by such
shareholder, or distribute the shareholder's votes on the same principle among
as many candidates as the shareholder thinks fit, provided that votes cannot be
cast for more than the number of directors authorized by the Company's bylaws.
However, no shareholder shall be entitled to cumulate votes unless the
candidate's name has been placed in nomination prior to the voting and the
shareholder, or any other shareholder, has given notice at the meeting prior to
the voting of the intention to cumulate the shareholder's votes. On all other
matters, each share has one vote.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections with the assistance of the Company's transfer agent.
The Inspector of Elections will also determine whether or not a quorum is
present. Except with respect to the election of directors and except in certain
other specific circumstances, the affirmative vote of a majority of shares
REPRESENTED AND VOTING with respect to a particular matter at a duly held
meeting at which a quorum is present (which shares voting affirmatively also
constitute a majority of the required quorum) is required under California law
for approval of proposals presented to shareholders. In general, California law
also provides that a quorum consists of a majority of the shares ENTITLED TO
VOTE, represented either in person or by proxy. The Inspector of Elections will
treat abstentions as shares that are present and ENTITLED TO VOTE for purposes
of determining the presence of a quorum but as not VOTING for purposes of
determining the approval of any matter submitted to the shareholders for a vote.
Any proxy which is returned using the form of proxy enclosed and which is not
marked as to a particular item will be voted for the election of directors, for
the approval of the amendment to the Company's 1994 Stock Option Plan, for the
approval of the amendment of the 1989 Employee Stock Purchase Plan, for
ratification of the appointment of the designated independent auditors and as
the proxy holders deem advisable on other matters that may come before the
meeting, as the case may be with respect to the item not
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marked. If a broker indicates on the enclosed proxy or its substitute that it
does not have discretionary authority as to certain shares to vote on a
particular matter ("broker non-votes"), those shares will not be considered as
VOTING with respect to that matter. While there is no definitive specific
statutory or case law authority in California concerning the proper treatment of
abstentions and broker non-votes, the Company believes that the tabulation
procedures to be followed by the Inspector of Elections are consistent with the
general statutory requirements in California concerning voting of shares and
determination of a quorum.
The cost of soliciting proxies will be borne by the Company. In addition,
the Company will reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to such beneficial owners. Proxies may be solicited by certain of the
Company's directors, officers and regular employees, without additional
compensation, personally or by telephone or telegram.
RECORD DATE AND SHARE OWNERSHIP
Only shareholders of record at the close of business on April 19, 1996 are
entitled to notice of and to vote at the meeting. As of April 19, 1996,
7,060,319 shares of the Company's Common Stock were issued and outstanding.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
The Company's bylaws currently provide for seven directors. At the Annual
Meeting, the Board of Directors has nominated five directors to be elected to
serve until the next Annual Meeting and until their successors are elected and
qualified at the meeting. The Company's Board of Directors proposes to fill the
remaining seats at such time as it has identified qualified candidates. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's five nominees named below, all of whom are presently directors
of the Company. In the event that any nominee of the Company is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the present Board of
Directors to fill the vacancy. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner in accordance with cumulative voting
as will assure the election of as many of the nominees listed below as possible,
and, in such event, the specific nominees for whom the proxy holders will vote
will be determined by the proxy holders. Assuming a quorum is present, the
nominees for director receiving the greatest number of votes cast at the Annual
Meeting will be elected, up to the number of directors authorized by the
Company's bylaws. The term of office of each person elected as a director will
continue until the next Annual Meeting of Shareholders or until his or her
successor has been elected and qualified.
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The nominees' names, ages as of December 31, 1995, and certain information
about them are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- --------------------------------- --- -------------------------------------------------------------- ---------
<S> <C> <C> <C>
Benjamin L. Holmes 61 Retired Vice President and General Manager of the Medical 1992
Products Group of Hewlett-Packard Company; Chairman of the
Board of Directors of the Company
E. Walter Lange 63 Business consultant; former Group Vice President, Eli Lilly & 1992
Co.
Robert V. McCormick 51 President and Chief Executive Officer of the Company 1992
Rodney Perkins, M.D. 58 Practicing otologic surgeon; President of the California Ear 1984
Institute at Stanford, a clinic specializing in the diagnosis
and treatment of hearing disorders; and President of Project
HEAR, a non-profit research organization
Robert J. Pressley, Ph.D. 63 Technology consultant; former President and Chief Executive 1984
Officer of Silicon Video Corporation
</TABLE>
Except as set forth below, each of the nominees has been engaged in the
principal occupation set forth next to his name above during the past five
years. There is no family relationship between any director or executive officer
of the Company.
Benjamin L. Holmes has been a director of the Company since January 1992 and
was appointed Chairman of the Board of Directors in June 1995. Mr. Holmes was
General Manager of the Medical Products Group of Hewlett-Packard Company ("HP")
from 1983, and a Vice President of HP, from 1985 until his retirement in October
1995. Mr. Holmes is a member of the Board of Directors of Project HOPE and the
Massachusetts High Technology Council. He is also a member of the Massachusetts
Governor's Council on Economic Growth and Technology, Commissioner of the
Massachusetts Universal Health Care Commission, and a member of the Board on
Health Care Service, Institute of Medicine, National Academy of Sciences. He is
also Past Chairman of the Board of Directors of the Health Industry
Manufacturers Association (HIMA).
E. Walter Lange has been a Director of the Company since January 1992. Mr.
Lange has more than 31 years of experience in the pharmaceutical industry,
having served in a variety of executive positions at Eli Lilly & Co. from 1960
to 1991. Most recently, Mr. Lange was Group Vice President of Marketing,
Planning and Development and was responsible for Lilly's worldwide product
planning, corporate strategic planning, business development and market
research.
Robert V. McCormick has been President of the Company since December 1991
and Chief Executive Officer since July 1992. Between December 1991 and July 1992
he also served as the Company's Chief Operating Officer. He has been a director
of the Company since July 1992. Mr. McCormick also served as the Company's
Senior Vice President of Marketing and Field Operations from April 1991 to
December 1991. Mr. McCormick was employed by Acuson Corporation, a manufacturer
of medical imaging equipment, from 1983 to April 1991 in a variety of sales and
marketing executive positions culminating as Vice President of Marketing and
Field Operations.
Rodney Perkins, M.D. is a co-founder of the Company and has been a Director
since its founding. Dr. Perkins also served as Chairman of the Board of
Directors from its founding until June 1995 and Chief Executive Officer from
February to May 1987, and from October 1991 to July 1992. He also served as the
President of the Company from October to December 1991. Dr. Perkins, a
specialist in otologic surgery, is President of the California Ear Institute at
Stanford and has been in private practice since 1968. He is Clinical Associate
Professor of Surgery at Stanford University School of
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Medicine, and is the founder and President of Project HEAR, a non-profit medical
institute for ear research and education. Dr. Perkins is a founder of Collagen
Corporation, a biomaterials company, and a member of its Board of Directors. Dr.
Perkins is also a founder and the Chairman of the Board of Directors of ReSound
Corporation, a hearing health care company.
Robert J. Pressley, Ph.D. is a co-founder of the Company and has been a
Director since its founding. Dr. Pressley founded Silicon Video, a developer of
electronic products, and served as its President and Chief Executive Officer
from January 1991 to January 1994. Dr. Pressley also founded XMR, Inc., a
manufacturer of eximer lasers and laser systems, and served as its Chief
Executive Officer from March 1979 until March 1990.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings during
the year ended December 31, 1995. The Board of Directors has an Audit Committee
and a Human Resources Committee. It does not have a nominating committee or a
committee performing the functions of a nominating committee.
The Audit Committee of the Board of Directors consists of Messrs. Marshall,
Lange and Holmes. The Audit Committee held four meetings during 1995. The Audit
Committee recommends engagement of the Company's independent auditors, and is
primarily responsible for approving the services performed by the Company's
independent accountants and for reviewing and evaluating the Company's
accounting principles and its system of internal accounting controls.
The Human Resources Committee of the Board of Directors consists of Dr.
Pressley and Dr. Perkins. It held four meetings during 1995. The Human Resources
Committee makes recommendations to the Board of Directors regarding the
Company's executive compensation policy, and approves and makes recommendations
to the Board of Directors concerning the grant of stock options.
No incumbent director attended fewer than 75% of the aggregate number of
meetings of the Board of Directors and meetings of the committees of the Board
of Directors that he was eligible to attend.
COMPENSATION OF DIRECTORS
Non-employee members of the Board of Directors receive a retainer of $2,000
per quarter and $500 per meeting of the Board of Directors attended. In
addition, non-employee members of the Board of Directors receive options to
purchase shares of the Company's Common Stock pursuant to its 1990 Directors'
Stock Option Plan (the "1990 Directors' Option Plan") and 1995 Directors' Stock
Option Plan (the "1995 Directors' Option Plan").
The 1990 Directors' Option Plan, which has been terminated by the Board of
Directors with respect to the grant of any future options, provided for the
grant of nonstatutory options to non-employee directors of the Company at an
exercise price not less than the fair market value of the Company's Common Stock
on the date of grant. Under the 1990 Directors' Option Plan, persons who were
non-employee directors as of October 18, 1991, as well as persons who have
joined the Board since that date through election by the shareholders of the
Company or appointment by the Board of Directors to fill a vacancy, have been
granted an option to purchase 45,000 shares of the Company's Common Stock.
Options issued pursuant to this plan vest and become exercisable over three
years with respect to each optionee who remains a director and expire five years
after the date of grant.
The 1995 Directors' Option Plan was approved by the Board of Directors in
November 1995 and also provides for the grant of nonstatutory options to
non-employee directors of the Company at an exercise price not less than the
fair market value of the Company's Common Stock on the date of grant. Under the
1995 Directors' Option Plan, persons who were non-employee directors as of
November 30, 1995, as well as persons who have joined the Board since that date
through election by the shareholders of the Company or appointment by the Board
of Directors to fill a vacancy, have been
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granted an option to purchase 45,000 shares of the Company's Common Stock.
Options issued pursuant to this plan vest and become exercisable over three
years with respect to each optionee who remains a director and expire five years
after the date of grant.
Directors who are employees of the Company do not receive any additional
compensation for their services as a director.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR ALL OF THE NOMINEES LISTED
ABOVE.
PROPOSAL NO. 2
AMENDMENT OF THE 1994 STOCK OPTION PLAN
At the Annual Meeting, shareholders are being asked to approve an amendment
to the 1994 Stock Option Plan (the "1994 Option Plan") that would increase the
shares reserved for issuance thereunder by 150,000 shares.
GENERAL
The Company's 1994 Option Plan provides for the grant of options to
employees and consultants of the Company. The 1994 Option Plan was adopted by
the Board of Directors in March 1994 and approved by the shareholders in June
1994. A total of 575,000 shares of Common Stock has been reserved for issuance
under the 1994 Option Plan. Subject to shareholder approval, this amount would
be increased to an aggregate of 725,000 shares. The aggregate number of shares
reserved for issuance under the 1994 Option Plan includes options previously
granted and exercised under the 1994 Option Plan. The increase in shares
reserved for issuance under the 1994 Option Plan has been necessitated by the
hiring of new employees and the grant of additional stock options to current
employees as previously granted options vest and become exercisable. The
increase will assist the Company being able to continue its policy of equity
ownership by employees and consultants as an incentive to contribute to the
Company's success.
Options granted under the 1994 Option Plan may be either "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or nonstatutory stock options at the discretion of the
Board of Directors and as reflected in the terms of the written option
agreement. The 1994 Option Plan is not a qualified deferred compensation plan
under Section 401(a) of the Code, and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended.
As of March 31, 1996 and after giving effect to the amendment to the 1994
Option Plan, no shares had been issued upon exercise of options granted under
the 1994 Option Plan, options for 696,912 shares were outstanding under the 1994
Option Plan and 28,088 shares remained available for future grants. As of March
31, 1996, the fair market value of shares subject to outstanding options was
$2,177,850, based upon the closing price of the Common Stock as reported on the
Nasdaq National Market on such date.
During the year ended December 31, 1995, (i) options to purchase 285,000
shares of Common Stock were granted under the 1994 Option Plan to the current
executive officers as a group (4 persons), (ii) options to purchase 50,000
shares of Common Stock were granted under the 1994 Option Plan to current
directors who are not executive officers as a group (one person) and (iii)
options to purchase 401,000 shares of Common Stock were granted under the 1994
Option Plan to all other employees, including current officers who are not
executive officers, as a group (109 persons as of December 31, 1995). Such
option grants exclude options granted to replace certain options which were
cancelled during November 1995 in a repricing which numbered 109,688 shares,
50,000 shares and 295,696 shares for current executive officers, current
directors and employees, respectively.
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PURPOSE
The purposes of the 1994 Option Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees and consultants of the Company and to promote
the success of the Company's business.
ADMINISTRATION
The 1994 Option Plan may be administered by the Board of Directors or by a
committee of the Board of Directors. The 1994 Option Plan is currently
administered by the Board of Directors and the Human Resources Committee of the
Board of Directors. Members of the Board of Directors receive no additional
compensation for their services in connection with the administration of the
1994 Option Plan. All questions of interpretation of the 1994 Option Plan are
determined by the Board of Directors or its committee and its decisions are
final and binding upon all participants. All directors currently hold office
until the annual meeting of shareholders of the Company following their
election, or until their successors are duly elected and qualified.
ELIGIBILITY
The 1994 Option Plan provides that either incentive stock options or
nonstatutory options may be granted to employees (including officers and
directors who are also employees) of the Company or any of its subsidiaries. In
addition, the 1994 Option Plan provides that nonstatutory options may be granted
to consultants (not including directors who are not compensated for their
services or are paid only a director's fee by the Company) of the Company or any
of its subsidiaries. The Board of Directors or its committee selects the
optionees and determines the number of shares to be subject to each option. In
making such determination, there are taken into account the duties and
responsibilities of the optionee, the value of the optionee's services, the
optionee's present and potential contribution to the success of the Company, and
other relevant factors.
The 1994 Option Plan provides that the maximum number of shares of Common
Stock which may be granted under options to any one employee during any fiscal
year shall be 325,000, subject to adjustment as provided in the 1994 Option
Plan. This limitation is intended to preserve the Company's ability to deduct
for federal income tax purposes any compensation income relating to stock
options granted to certain executive officers under the 1994 Option Plan.
Without this limitation, federal tax legislation enacted in 1993 might not allow
the Company to deduct such compensation income.
In addition to the foregoing limitation on discretion for certain grants,
there is also a limit on the aggregate market value of shares subject to all
incentive stock options that may be granted to an optionee during any calendar
year.
TERMS OF OPTIONS
Each option is evidenced by a stock option agreement between the Company and
the optionee. Each option is subject to the following additional principal terms
and conditions:
(a) EXERCISE OF THE OPTION. The Board of Directors or its committee
determines when options may be exercised. In general, such options become
exercisable on a ratable basis over four years with respect to employees and
over two to four years with respect to consultants. An option is exercised
by giving written notice of exercise to the Company specifying the number of
full shares of Common Stock to be purchased and by tendering of payment of
the purchase price. The purchase price of the shares purchased upon exercise
of an option shall be paid in consideration of such form as is determined by
the Board of Directors or its committee and specified in the option
agreement, and such form of consideration may vary for each option.
(b) EXERCISE PRICE. The exercise price of each option granted under
the 1994 Option Plan is determined by the Board of Directors or its
committee and may not be less than 100% of the fair market value of the
Common Stock on the date the option is granted; provided, however, that
nonstatutory options may be granted to persons other than the Company's
Chief Executive
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Officer or its other four most highly compensated officers whose
compensation is required to be reported to shareholders under the Securities
Exchange Act of 1934 at exercise prices of not less than 50% of the fair
market value on the date the option is granted. The fair market value per
share is equal to the closing price on the Nasdaq National Market on the
date of grant. In the case of an option granted to an optionee who owns more
than 10% of the voting power of all classes of stock of the Company, its
parent or subsidiaries, the exercise price must not be less than 110% of the
fair market value on the date of the grant.
(c) TERMINATION OF EMPLOYMENT. If the optionee's employment or
consulting relationship terminates for any reason other than disability or
death, options under the 1994 Option Plan may be exercised not later than
three months (or such other period of time not exceeding six months in the
case of an incentive stock option as is determined by the Board of Directors
or its committee) after such termination and may be exercised only to the
extent the option was exercisable on the date of termination. In no event
may an option be exercised by any person after the expiration of its term.
(d) DISABILITY. If an optionee is unable to continue his or her
employment or consulting relationship with the Company as a result of his
total and permanent disability, options may be exercised within six months
(or such other period of time not exceeding 12 months as is determined by
the Board of Directors or its committee) of termination and may be exercised
only to the extent the option was exercisable on the date of termination,
but in no event may the option be exercised after its termination date.
(e) DEATH. Under the 1994 Option Plan, if an optionee should die while
employed or retained by the Company, and such optionee has been continuously
employed or retained by the Company since the date of grant of the option,
the option may be exercised within six months after the date of death (or
such other period of time, not exceeding six months, as is determined by the
Board of Directors or its committee) by the optionee's estate or by a person
who acquired the right to exercise the option by bequest or inheritance to
the extent the optionee would have been entitled to exercise the option had
the optionee continued living and remained employed or retained by the
Company for three (3) months (or such other period of time as is determined
by the Board of Directors or its committee) after the date of death, but in
no event may the option be exercised after its termination date.
If an optionee should die within 30 days (or such other period of time
not exceeding three months as is determined by the Board of Directors or its
committee) after the optionee has ceased to be continuously employed or
retained by the Company, the option may be exercised within six months after
the date of death by the optionee's estate or by a person who acquired the
right to exercise the option by bequest or inheritance to the extent that
the optionee was entitled to exercise the option at the date of termination,
but in no event may the option be exercised after its termination date.
(f) TERM OF OPTIONS. The 1994 Option Plan provides that options
granted under the 1994 Option Plan have the term provided in the option
agreement. In general, these agreements provide for a term of five years.
Incentive stock options granted to an optionee who, immediately before the
grant of such option, owned more than 10% of the total combined voting power
of all classes of stock of the Company, its parents or subsidiaries, may not
in any case have a term of more than five years. No option may be exercised
by any person after its expiration.
(g) OPTION NOT TRANSFERABLE. An option is not transferable by the
optionee other than by will or the laws of descent and distribution, and is
exercisable only by the optionee during his or her lifetime and in the event
of the optionee's death by a person who acquires the right to exercise the
option by bequest or inheritance or by reason of the optionee's death.
(h) ACCELERATION OF OPTIONS. In the event of a merger or consolidation
in which the Company is not the surviving entity, or a proposed sale of all
or substantially all of the assets of the
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Company, the Board of Directors is obligated to accomplish either a
substitution or assumption of options or give 30 days' notice of the
acceleration of the optionee's right to exercise his or her outstanding
options as to some or all of the optioned stock at any time within 30 days
of such notice. The exercisability of options held by the Company's
executive officers may also be accelerated upon the occurrence of such
events. See "Transactions with Management and Others."
(i) OTHER PROVISIONS. The option agreement may contain such other
terms, provisions and conditions not inconsistent with the 1994 Option Plan
as may be determined by the Board of Directors or its committee.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event any change, such as a stock split or dividend, is made in the
Company's capitalization that results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, appropriate adjustment shall be made in the exercise price of each
outstanding option, the number of shares subject to each option, the annual
limitation on grants to employees, as well as the number of shares available for
issuance under the 1994 Option Plan. In the event of the proposed dissolution or
liquidation of the Company, each option will terminate unless otherwise provided
by the Board of Directors or its committee.
AMENDMENT AND TERMINATION
The Board of Directors may amend the 1994 Option Plan at any time or from
time to time or may terminate it without approval of the shareholders; provided,
however, that shareholder approval is required for any amendment to the 1994
Option Plan that increases the number of shares that may be issued under the
1994 Option Plan, modifies the standards of eligibility, modifies the limitation
on grants to employees described in the 1994 Option Plan or results in other
changes which would require shareholder approval to qualify options granted
under the 1994 Option Plan as performance-based compensation under Section
162(m) of the Code, or so long as the Company has a class of equity securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), materially increases the benefits to participants that may
accrue under the 1994 Option Plan. However, no action by the Board of Directors
or shareholders may alter or impair any option previously granted under the 1994
Option Plan. The 1994 Option Plan shall terminate in April 2004, provided that
any options then outstanding under the 1994 Option Plan shall remain outstanding
until they expire by their terms.
FEDERAL INCOME TAX ASPECTS OF THE 1994 OPTION PLAN
The following is a brief summary of the United States federal income tax
consequences of transactions under the 1994 Stock Option Plan based on federal
securities and income tax laws in effect as of this date. This summary is not
intended to be exhaustive and does not discuss the tax consequences of a
participant's death or provisions of the income tax laws of any municipality,
state or other country in which an optionee may reside. This summary does not
purport to be complete. The Company advises all optionees to consult their own
tax advisors concerning tax implications of option grants and exercises, and the
disposition of shares acquired upon such exercise, under the 1994 Stock Option
Plan.
Options granted under the 1994 Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or nonstatutory options.
If an option granted under the 1994 Option Plan is an incentive stock
option, under U.S. tax laws the optionee will recognize no income upon grant of
the incentive stock option and incur no tax liability upon its exercise,
although the exercise may give rise to alternative minimum tax. The Company will
not be allowed a deduction for federal income tax purposes as a result of the
exercise of an incentive stock option regardless of the applicability of the
alternative minimum tax. Upon the sale or exchange of the shares at least two
years after grant of the option and one year after receipt of the shares by the
optionee, any gain will be treated as long-term capital gain under U.S. tax
laws. If these holding periods are not satisfied, the optionee will recognize
ordinary income equal to the difference
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between the exercise price and the lower of the fair market value of the stock
at the date of the option exercise or the sale price of the stock. A different
rule for measuring ordinary income upon such a premature disposition may apply
if the optionee is also an officer, director, or 10% shareholder of the Company.
The Company will be entitled to a deduction in the same amount as the ordinary
income recognized by the optionee. Any gain recognized on such a premature
disposition of the shares in excess of the amount treated as ordinary income
will be characterized under U.S. tax laws as long-term capital gain if the sale
occurs more than one year after exercise of the option or as short-term capital
gain if the sale is made earlier. The tax rate on long-term capital gains under
current U.S. tax laws is capped at 28%. Capital losses are allowed under U.S.
tax laws in full against capital gains plus $3,000 of other income.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income under U.S. tax laws at the time he or she is granted a nonstatutory
option. However, upon its exercise, under U.S. tax laws the optionee will
recognize ordinary income for tax purposes measured by the excess of the then
fair market value of the shares over the exercise price. In certain
circumstances, where the shares are subject to a substantial risk of forfeiture
when acquired or where the optionee is an officer, director or 10% shareholder
of the Company, the date of taxation may be deferred unless the optionee files
an election with the Internal Revenue Service under Section 83(b) of the Code.
The income recognized by an optionee who is also an employee of the Company will
be subject to tax withholding by the Company by payment in cash or out of the
current earnings paid to the optionee. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by tax optionee.
Upon resale of such shares by the optionee, any difference between the sales
price and the exercise price, to the extent not recognized as ordinary income as
provided above, will be treated under U.S. tax laws as capital gain or loss, and
will qualify for long-term capital gain or loss treatment if the shares have
been held for more than one year.
REQUIRED VOTE
The affirmative vote of a majority of shares of Common Stock represented and
voting at the Annual Meeting with respect to the amendment to the 1994 Option
Plan (which shares voting affirmatively also constitute a majority of the
required quorum) is required for its approval.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE AMENDMENT OF THE 1994 STOCK
OPTION PLAN.
PROPOSAL NO. 3
AMENDMENT OF THE 1989 EMPLOYEE STOCK PURCHASE PLAN
At the Annual Meeting, shareholders are being asked to approve an amendment
to the 1989 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan")
that would increase the shares reserved for issuance thereunder by 200,000
shares of Common Stock.
GENERAL
The 1989 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan")
was adopted by the Board of Directors in September 1989 and approved by the
shareholders in the same month. A total of 250,000 shares of Common Stock have
been previously reserved for issuance under the Employee Stock Purchase Plan. As
of March 31, 1996, and after giving effect to the amendment to the Employee
Stock Purchase Plan, 293,638 shares had been issued under the Employee Stock
Purchase Plan, and 156,362 shares remained available for future grants.
The Employee Stock Purchase Plan, and the right of participants to make
purchases thereunder, is intended to qualify under Section 423 of the Code. The
Employee Stock Purchase Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code, and is not subject to the provisions of ERISA.
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PURPOSE
The purpose of the Employee Stock Purchase Plan is to provide employees of
the Company (and any of its subsidiaries that is designated by the Board) who
participate in the Employee Stock Purchase Plan with an opportunity to purchase
Common Stock of the Company through payroll deductions.
ADMINISTRATION
The Employee Stock Purchase Plan may be administered by the Board or a
committee appointed by the Board. Currently, the Employee Stock Purchase Plan is
administered by the Board of Directors, except that with respect to executive
officers (including executive officers who are also directors), the Employee
Stock Purchase Plan is administered exclusively by the Human Resources Committee
(comprised of Messrs. Perkins and Pressley, the outside directors of the Company
who are not eligible to participate in the Employee Stock Purchase Plan). All
questions of interpretation of the Employee Stock Purchase Plan are determined
by the Board or its committee, and its decisions are final and binding upon all
participants. Members of the Board or its committee who are eligible employees
are permitted to participate in the Employee Stock Purchase Plan, provided that
any such eligible member may not vote on any matter affecting the administration
of the Employee Stock Purchase Plan or the grant of any option pursuant to it,
or serve on a committee appointed to administer the Employee Stock Purchase
Plan. No charges for administrative or other costs may be made against the
payroll deductions of a participant in the Employee Stock Purchase Plan. Members
of the Board receive no additional compensation for their services in connection
with the administration of the Employee Stock Purchase Plan. All directors
currently hold office until the annual meeting of shareholders of the Company
following their election, or until their successors are duly elected and
qualified.
ELIGIBILITY
Any person who is employed by the Company (or any of its majority-owned
subsidiaries) for at least twenty hours per week and more than five months in, a
calendar year is eligible to participate in the Employee Stock Purchase Plan
after six months of service with the Company, provided that the employee is
employed on the first day of an offering period and subject to certain
limitations imposed by Section 423(b) of the Code.
OFFERING DATES
The Employee Stock Purchase Plan is implemented by consecutive twenty-four
month offering periods beginning on July 1 of each year. Each offering period is
divided into four exercise periods, with an exercise date at the end of each
period. The Board may alter the duration of the offering periods without
shareholder approval. In the event that the fair market value of the Company's
Common Stock is lower on an exercise date than it was on the first business day
of an offering period, all participants in that offering period shall be deemed
to have withdrawn immediately after the exercise date and to have enrolled as
participants in a new offering period beginning on the next business day. The
length of the new offering period will vary between six, eighteen and
twenty-four months as determined under the Employee Stock Purchase Plan.
PARTICIPATION IN THE PLAN
Eligible employees become participants in the Employee Stock Purchase Plan
by delivering to the Company a subscription agreement authorizing payroll
deductions at least ten business days prior to the applicable offering date,
unless a later time for filing the subscription agreement has been set by the
Board for all eligible employees with respect to a given offering.
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PURCHASE PRICE
The purchase price per share at which shares are sold under the Employee
Stock Purchase Plan is the lower of 85% of the fair market value of the Common
Stock on the applicable date of commencement of the offering period or on the
applicable exercise date. The fair market value of the Common Stock on a given
date shall be the closing price of the Common Stock as reported on the Nasdaq
National Market as of such date.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions during
the offering period. The deductions may be up to 10% of a participant's eligible
compensation received on each pay day during the offering period. Eligible
compensation consists of the regular straight time gross earnings, payments for
overtime, shift premium, incentive compensation, incentive payments and bonuses.
Payroll deductions shall commence on the first payday following the offering
date, and shall continue at the same rate until the end of the offering period
unless sooner terminated as provided in the Employee Stock Purchase Plan.
A participant may discontinue his or her participation in the Employee Stock
Purchase Plan at any time during an offering period. A participant may, on one
occasion only during any particular offering period, change the rate of his or
her contributions during such offering period by completing and filing with the
Company a new subscription agreement. The change in rate shall be effective with
the first full payroll period following the date of filing of the new
subscription agreement.
All payroll deductions are credited to the participant's account under the
Employee Stock Purchase Plan and are deposited with the general funds of the
Company. All payroll deductions received or held by the Company may be used by
the Company for any corporate purpose. No interest accrues on the payroll
deductions of a participant in the Employee Stock Purchase Plan.
PURCHASE OF STOCK
By executing a subscription agreement to participate in the Employee Stock
Purchase Plan, the participant is entitled to have shares placed under option.
The maximum number of shares placed under option to a participant in an offering
period is that number determined by dividing $50,000 by the fair market value of
one share on the offering date; provided, however, that the participant's actual
purchase will be limited to the number of shares determined by dividing the
amount of the participant's total payroll deductions accumulated during each
offering period by the lower of (i) 85% of the fair market value of the Common
Stock at the beginning of the offering period, or (ii) 85% of the fair market
value of the Common Stock on the applicable exercise date. Unless the
participant's participation is discontinued, each participant's option for the
purchase of shares will be exercised automatically at the end of the offering
period at the applicable price.
Notwithstanding the foregoing, no participant shall be permitted to
subscribe for shares under the Employee Stock Purchase Plan if immediately after
the grant of the option the participant would own five percent or more of the
voting power or value of all classes of stock of the Company or of a parent or
of any of its subsidiaries (including stock that may be purchased under the
Employee Stock Purchase Plan or pursuant to any other options), nor shall any
participant be granted an option that would permit the participant to buy
pursuant to the Employee Stock Purchase Plan more than $25,000 worth of stock
(determined at the fair market value of the shares at the time the option is
granted) in any calendar year. Furthermore, if the number of shares that would
otherwise be placed under option at the beginning of an offering period exceeds
the number of shares then available for issuance under the Employee Stock
Purchase Plan, a pro rata allocation of the available shares shall be made in as
equitable a manner as is practicable.
WITHDRAWAL
While each participant in the Employee Stock Purchase Plan is required to
sign a subscription agreement authorizing payroll deductions, the participant's
interest may be changed once during any given offering period by completing and
filing a new subscription agreement with the Company. In
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addition, a participant's interest may be terminated in whole, but not in part,
by signing and delivering to the Company a notice of withdrawal from the
Employee Stock Purchase Plan. Such withdrawal may be elected at any time prior
to the end of the applicable six-month period prior to an exercise date under
the Plan, unless the subscription agreement was made irrevocably by the
participant (at his or her own election).
Any withdrawal by the participant of accumulated payroll deductions for a
given offering period automatically terminates the participant's interest in
that offering period. In effect, the participant is given an option, for a
maximum number of shares, which may or may not be exercised at the end of each
six-month exercise period. However, unless the participant actively withdraws
from the offering period, the option will be exercised automatically at the end
of each exercise period, and the maximum number of full shares purchasable
(within the limits of the Employee Stock Purchase Plan) with the participant's
accumulated payroll deductions will be purchased for that participant at the
applicable price.
A participant's withdrawal from an offering period does not have an effect
upon such participant's eligibility to participate in subsequent offering
periods under the Employee Stock Purchase Plan; however, the participant may not
re-enroll in the same offering period after withdrawal. Officers, directors and
other persons subject to Section 16 of the Exchange Act may not re-enroll for a
period of six months after withdrawal.
TERMINATION OF EMPLOYMENT
Termination of a participant's employment for any reason, including
retirement or death, prior to any exercise date cancels his or her participation
in the Employee Stock Purchase Plan immediately. In such event, the payroll
deductions credited to the participant's account during the offering period but
not yet used to exercise the option will be returned to such participant, or in
the case of death, to the person or persons entitled thereto as specified in the
participant's subscription agreement.
CAPITAL CHANGES
In the event any change, such as a stock split of stock dividend, is made in
the Company's capitalization which results in an increase or decrease in the
number of outstanding shares of Common Stock without receipt of consideration by
the Company, appropriate adjustments will be made in the shares subject to
purchase and in the purchase price per share, as well as in the number of shares
available for issuance under the Employee Stock Purchase Plan.
NONASSIGNABILITY
No rights or accumulated payroll deductions of a participant under the
Employee Stock Purchase Plan may be pledged, assigned or transferred for any
reason and any such attempt may be treated by the Company as an election to
withdraw from the Employee Stock Purchase Plan.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may at any time amend or terminate the Employee Stock Purchase
Plan, except that such termination shall not affect options previously granted
nor may any amendment make any change in an option granted prior thereto which
adversely affects the rights of any participant. No amendment may be made to the
Employee Stock Purchase Plan without prior approval of the shareholders of the
Company if such amendment would increase the number of shares reserved under the
Employee Stock Purchase Plan, permit a new class of employees to participate in
the Employee Stock Purchase Plan or make any other change to the Employee Stock
Purchase Plan for which shareholder approval is required to comply with the
rules regarding "discretionary plans" under Section 16 of the Exchange Act and
Rule 16b-3 (or any successor rule) thereto.
FEDERAL INCOME TAX ASPECTS OF THE EMPLOYEE STOCK PURCHASE PLAN
The following is a brief summary of the U.S. federal income tax consequences
of transactions under the Employee Stock Purchase Plan based on federal income
tax laws in effect as of this date. This summary is not intended to be
exhaustive and does not address all matters which may be
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relevant to a particular optionee based on his or her specific circumstances.
The summary addresses only current U.S. federal income tax law and expressly
does not discuss the income tax law of any state, municipality or non-U.S.
taxing jurisdiction or gift, estate or other tax laws other than federal income
tax law. THE COMPANY ADVISES ALL PARTICIPANTS UNDER THE EMPLOYEE STOCK PURCHASE
PLAN TO CONSULT THEIR OWN TAX ADVISORS CONCERNING TAX IMPLICATIONS OF OPTION
GRANTS AND EXERCISES AND THE DISPOSITION OF STOCK ACQUIRED UPON SUCH EXERCISES,
UNDER THE EMPLOYEE STOCK PURCHASE PLAN.
The Employee Stock Purchase Plan, and the right of participants to make
purchases thereunder, is intended to qualify under the provisions of Sections
421 and 423 of the Code. Under these provisions, no income will be taxable to a
participant until the shares purchased under the Plan are sold or otherwise
disposed of. Upon sale or other disposition of the shares, the participant will
generally be subject to tax and the amount of the tax will depend upon how long
the shares have been held by the participant. If the shares are sold or
otherwise disposed of more than two years from the first day of the offering
period during which the shares were purchased, and more than one year from the
exercise date of such shares, the participant will recognize ordinary income
measured as the lesser of (a) the excess of the fair market value of the shares
at the time of such sale or disposition over the purchase price, or (b) an
amount equal 15% of the fair market value of the shares as of the first day of
the offering period. Any additional gain will be treated as long-term capital
gain. If the shares are sold or otherwise disposed of before the expiration of
these holding periods, the participant will recognize ordinary income generally
measured as the excess of the fair market value of the shares on the date the
shares are purchased over the purchase price. Any additional gain or loss on
such sale or disposition will be long-term or short-term capital gain or loss,
depending on how long the shares were held by the participant. The Company is
not entitled to a deduction for amounts taxed as ordinary income or capital gain
to a participant except to the extent of ordinary income recognized by a
participant upon a sale or disposition of shares prior to the expiration of the
holding period(s) described above. Currently, the tax rate on net capital gain
(net long-term capital gain minus net short-term capital loss) is capped at 28%.
Capital losses are allowed in full against capital gains plus $3,000 of other
income.
DIRECTORS AND OFFICERS SUBJECT TO SECTION 16(B) LIABILITY. In the case of
an optionee who is subject to Section 16(b) of the Exchange Act, the Exercise
Date for purposes of calculating such participant's compensation income and the
beginning of the capital gain holding period may be deferred for up to six
months under certain circumstances. Such individuals should consult with their
personal tax advisors prior to participating in the Employee Stock Purchase Plan
or selling shares issued pursuant to such plan.
The ordinary income reported under the rules described above, added to the
actual purchase price of the shares, determines the tax basis of the shares for
the purpose of determining capital gain or loss on a sale or exchange of the
shares.
The Company is entitled to a deduction for amounts taxed as ordinary income
to a participant only to the extent that ordinary income must be reported upon
disposition of shares by the participant before the expiration of the holding
periods described above.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Common Stock
present and voting at the Annual Meeting with respect to the amendment to the
Employee Stock Purchase Plan is required for its approval.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE AMENDMENT TO THE 1989
EMPLOYEE STOCK PURCHASE PLAN.
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PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent auditors,
to audit the financial statements of the Company for the fiscal year ending
December 31, 1996 and recommends that the shareholders vote for ratification of
such appointment. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection. Ernst & Young LLP has audited
the financial statements of the Company and its predecessor corporation and
partnership since inception. Representatives of Ernst & Young LLP are expected
to be present at the meeting and will have the opportunity to make a statement
if they desire to do so. They are also expected to be available to respond to
appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS VOTING IN FAVOR OF THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE COMPANY.
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COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 20, 1996 as to (i) each person who is known by the
Company to own beneficially more than five percent of the Company's Common
Stock, (ii) each of the Company's directors, (iii) each of the executive
officers named in the Summary Compensation Table beginning on page 20, and (iv)
all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
------------------------------
NUMBER (2) PERCENT OF TOTAL
----------- -----------------
<S> <C> <C>
Thomas B. Boyd............................................................ 35,286 *
Benjamin L. Holmes........................................................ 61,041 *
Bonnie Jones.............................................................. 53,407 *
Dennis LaLumandiere....................................................... 34,946 *
E. Walter Lange........................................................... 51,250 *
Robert V. McCormick....................................................... 339,781 4.6 %
Rodney Perkins, M.D....................................................... 177,717 2.5 %
Robert J. Pressley, Ph.D.................................................. 72,266 1.0 %
Joseph F. Rondinone, Ph.D. (3)............................................ 1,121 *
Eli Wismer (4)............................................................ 17,378 *
All directors and executive officers as a group (12 persons).............. 850,410 11.0 %
</TABLE>
- ------------------------
* Less than 1%.
(1) The persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the other footnotes to this table.
(2) Includes with respect to each named person the following shares subject to
options exercisable within 60 days of March 15, 1996: Mr. Boyd -- 32,812;
Mr. Holmes -- 58,541; Ms. Jones -- 49,219; Mr. LaLumandiere -- 32,300; Mr.
Lange -- 51,250; Mr. McCormick -- 277,082; Dr. Perkins -- 111,250 Dr.
Pressley -- 51,250; Dr. Rondinone -- 0; Mr. Wismer -- 0.
(3) Dr. Rondinone terminated his employment with the Company in January 1996.
(4) Mr. Wismer terminated his employment with the Company in October 1995.
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NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND
THE PERFORMANCE GRAPH ON PAGE 19 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS.
REPORT OF THE HUMAN RESOURCES COMMITTEE
EXECUTIVE COMPENSATION PHILOSOPHY
Accomplishment of corporate goals to enhance shareholder value are an
integral part of the strategic plan for Laserscope. In order to achieve these
goals, compensation programs for all Laserscope employees, including executive
officers, have been developed to provide incentives and rewards for the
accomplishment of these goals.
Goal setting throughout the corporation is a key element underlying the
compensation program. At the start of each year, a number of corporate goals are
established by the Chief Executive Officer and the executive officers, covering
a broad range of business objectives such as financial performance, business
diversification and employee retention and morale enhancement. Similarly, each
executive officer establishes for his or her area of responsibility a number of
goals that contribute to corporate goals. Individual employees also have goals
that in turn contribute to the goals for that employee's department. Corporate
goals are communicated within the Company by each executive and at company-wide
meetings. Accomplishment of Company goals are reviewed at the quarterly meetings
with all employees to provide an understanding of how personal goals interrelate
to corporate goals. Progress toward individual goals are reviewed during the
year and the extent to which goals have been accomplished is a factor in
assessing employees' performance and compensation.
The Company's executive officers have a particular responsibility for the
achievement of the Company's broad business goals and, accordingly, their
compensation is determined by reference both to individual performance and to
corporate performance. Of these two elements, corporate performance can have the
most significant impact on executives' compensation through cash bonuses and the
value of stock options.
The Company's executive compensation programs are based upon:
1. PAY FOR PERFORMANCE -- Laserscope believes that it is important to
reward individual executives for their individual performance as well as for
the overall performance of the Company.
2. BE COMPETITIVE -- To attract and retain talented individuals, it is
important to maintain compensation levels and programs that are competitive
in the employment market.
3. SHAREHOLDER RETURN -- Ultimately, management's responsibility is to
generate a return for the Company's shareholders. Consequently, it is
critical to establish programs that align management's interests with those
of the Company's shareholders.
COMPENSATION OF EXECUTIVE OFFICERS
The three key elements of Laserscope's executive compensation are (i)
salary, (ii) annual cash bonuses and (iii) stock options. The Committee believes
that these three elements satisfy the compensation objectives stated above.
Salaries are generally reviewed at the end of each year and adjusted after
taking into account factors such as individual performance and experience level,
market surveys, level of responsibility and salary levels within the Company.
Cash bonus targets are established at the beginning of each year and are
based on corporate financial performance for the year and individual goals for
each executive. For 1996 (as in 1995) no cash bonus is payable unless the
Company achieves targeted budgeted levels of operating profit. If the
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Company achieves a specified level of operating profit, then each executive
becomes eligible for a target level of bonus. The target bonus increases as
actual profit increases. The portion of the bonus that is actually paid is based
on an assessment of the individual executive's performance.
Stock options are a key element in aligning the interests of management and
shareholders, since they motivate executives to maximize shareholder value over
time. Value accrues to executives only as the value of the Company's stock
appreciates. Vesting schedules are used to encourage a long-term commitment to
the Company by its executive officers. The level of stock options held by each
executive officer are reviewed at the end of each year and additional awards are
considered to optimize the level of incentives and rewards.
Specific recommendations with respect to each of these three compensation
elements for the executive officers (except the President and Chief Executive
Officer) are made by the President and Chief Executive Officer, with the final
decisions being made by the Human Resources Committee and reviewed by the Board
of Directors (except that the Human Resources Committee has exclusive and final
authority with respect to the grant of stock options to executive officers of
the Company). In the case of the Chief Executive Officer, the Human Resources
Committee determines any actions to be taken and such actions are reviewed by
the Board of Directors except that the Human Resources Committee has exclusive
and final authority with respect to the grant of stock options to Mr. McCormick.
OPTION REPRICING. In November 1995 the Human Resources Committee considered
whether the exercise price of outstanding options granted under the Company's
1994 Stock Option Plan should be modified. The exercise price of options granted
under such plan since its inception, ranging from $3.63 to $4.75 per share, was
above the Company's current market price per share. The Human Resources
Committee determined that the purpose of its option plans to provide an equity
incentive for employees would not be achieved for employees holding options
exercisable above the market price and that the Company would likely have
difficulty retaining qualified employees with equity incentives that would be
rendered ineffective if not adjusted. Therefore, the Human Resources Committee
concluded that it was in the interest of the Company and the shareholders to
reprice certain options to create such incentives and to motivate the Company's
employees.
Accordingly, the Human Resources Committee offered to all employees
(including executive officers and one director who had been granted options
under the 1994 Stock Option Plan pursuant to a consulting agreement) who did not
terminate before February 1, 1996 and held outstanding options to purchase
Common Stock of the Company under the Company's 1994 Stock Option Plan the
opportunity to exchange options that had not yet become exercisable for new
stock options with an exercise price of $2.00 per share (which was the closing
price per share of the Company's Common Stock on the Nasdaq National Market on
the date of the Committee's action). All other terms of the new stock options
remained substantially the same as the surrendered options (including number of
shares, vesting and expiration date).
COMPENSATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
Robert V. McCormick has served as the Company's President since December
1991. He was Chief Operating Officer from December 1991 to July 1992 and since
July 1992 has been President and Chief Executive Officer. Mr. McCormick's salary
was increased by 6% to $263,443 effective December 25, 1995. More importantly,
the Committee structured Mr. McCormick's compensation to maintain a long term
focus on the recovery of Laserscope's business and stock price. Consequently,
the most significant elements of Mr. McCormick's potential compensation (bonuses
and stock options) are premised on substantial improvements in the Company's
operating performance.
Mr. McCormick is eligible for a target cash bonus of up to 30% of his base
salary, if the Company achieves its budgeted level of operating profit. In the
event that this budgeted profit level is exceeded, Mr. McCormick's bonus may be
higher. Based on the Company's performance in 1995, Mr. McCormick did not
receive a cash bonus.
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Mr. McCormick was granted an option to purchase 120,000 shares of Common
Stock (vesting over four years) in February 1995 at an exercise price of $4.00.
In November 1995, 97,500 of these options were canceled and reissued with an
exercise price of $2.00. Mr. McCormick was also granted an option to purchase
45,000 shares of Common Stock (vesting over four years) in November 1995 at an
exercise price of $2.00. In aggregate, Mr. McCormick has been granted options to
purchase a total of 455,000 shares of Common Stock at exercise prices of $2.00
to $5.75 with vesting periods of four to five years, depending on the specific
option granted.
HUMAN RESOURCES COMMITTEE
Rodney Perkins, M.D.
Robert J. Pressley, Ph.D. (Chairman)
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are currently no employee directors serving on the Human Resources
Committee of the Board of Directors. The following non-employee directors serve
on the Company's Human Resources Committee: Rodney Perkins, M.D. and Robert J.
Pressley, Ph.D.
Dr. Perkins purchased an aggregate of 16,667 shares of the Company's Common
Stock on September 11, 1989 under the Company's 1984 Stock Purchase Plan at an
aggregate price of $75,002. Dr. Perkins purchased such shares through promissory
notes in favor of the Company bearing interest at the annual rate 9% and secured
by the shares purchased. At December 31, 1995, Dr. Perkins owed an aggregate of
$128,603 under such notes, the largest amount of indebtedness owed by him to the
Company at any time during 1995.
Dr. Perkins is also Chairman of the Board of Directors and a member of the
Board of Directors' Human Resources Committee of ReSound Corporation, a publicly
traded hearing health care company. The Company and ReSound Corporation have not
conducted any business with each other in the past and the Company does not
presently anticipate doing so in the future.
Dr. Perkins was also a founding shareholder of AcuVasive (formerly Envision
Surgical Systems), a manufacturer of microvisualization catheter products
("AcuVasive"). The Company has a commercial relationship with AcuVasive, Mr.
McCormick is a member of its Board of Directors and Dr. Perkins and the Company
are each holders of AcuVasive's capital stock. See "Transactions with Management
and Others."
See "Proposal No. 1 -- Election of Directors -- Compensation of Directors"
for a discussion of certain information with respect to directors serving on the
Human Resources Committee.
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PERFORMANCE GRAPH
The following graph summarizes cumulative total shareholder return data
(assuming reinvestment of dividends) for the period since December 31, 1990. The
graph assumes that $100 was invested on December 31, 1990 (i) in the Common
Stock of Laserscope, (ii) in the CRSP Total Return Index for the Nasdaq Stock
Market (U.S. companies), and (iii) in the MG Medical Instruments and Supplies
Index (provided by Media General Financial Services, Inc.). The stock price
performance on the following graph is not necessarily indicative of future stock
price performance.
COMPARISON OF TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CRSP NASDAQ INDEX (U.S.) LASERSCOPE (LSCP) MG MEDICAL INSTRUMENTS AND SUPPLIES INDEX
<S> <C> <C> <C>
12/31/90 100 100 100
12/31/91 161 31 174
12/31/92 187 21 155
12/31/93 215 22 132
12/31/94 210 15 145
12/31/95 296 8 233
</TABLE>
19
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table shows the compensation received by the Company's Chief
Executive Officer, the four other most highly compensated executive officers of
the Company for 1995 who were serving as executive officers at December 31,
1995, one highly compensated executive officer who was not serving as an
executive officer at December 31, 1995 and the compensation received by each
such individual for the Company's two prior years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION OPTION/SARS
--------------------------- (SHARES) ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (1) BONUS (2)(3) (4)(5) COMPENSATION (6)
- ------------------------------------------ --------- ------------- ------------ ------------- -----------------
<S> <C> <C> <C> <C> <C>
Robert V. McCormick ...................... 1995 $ 248,060 -- 165,000 $ 2,004
President and Chief Executive Officer 1994 $ 236,250 -- -- $ 2,045
1993 $ 225,000 -- 40,000 $ 1,927
Thomas B. Boyd ........................... 1995 $ 168,324(7) -- 45,000 $ 2,400
Senior Vice President of Operations and 1994 $ 183,428(8) $ 20,000 65,000 $ 1,471
Finance 1993 -- -- -- --
Bonnie Jones ............................. 1995 $ 107,330 -- 35,000 $ 1,543
Vice President of Human Resources 1994 $ 99,750 -- 15,000 $ 1,496
1993 $ 95,000 $ 9,500 35,000 $ 1,425
Dennis LaLumandiere ...................... 1995 $ 119,690 -- 40,000 $ 1,794
Vice President of Finance, Chief 1994 $ 103,500 -- 15,000 $ 1,548
Financial Officer 1993 $ 96,885 $ 9,821 8,500 $ 1,438
Joseph F. Rondinone ...................... 1995 $ 131,250 -- -- $ 1,312
Vice President of Research and 1994 $ 125,000 -- 25,000 $ 1,250
Development (9) 1993 $ 162,766(10) -- 27,000 $ 1,136
Eli Wismer ............................... 1995 $ 150,909 $ 32,643 -- $ 1,744
Vice President of North American Sales & 1994 $ 153,399(12) $ 78,160 50,000 $ 1,927
Education (11) 1993 $ 193,953(12) $ 83,135 20,000 $ 1,786
</TABLE>
- ------------------------
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Includes bonuses earned in the indicated fiscal year and paid in the
subsequent fiscal year. Excludes bonuses paid in the indicated fiscal year
but earned in the preceding fiscal year.
(3) Executive officers are entitled to discretionary bonuses based on
individual and corporate performance. These bonuses are determined by the
Board of Directors based on the recommendation of the Human Resources
Committee.
(4) The options listed with respect to 1995 long-term compensation awards
include options granted upon the repricing of previously granted options.
Options to purchase the following number of shares granted to the following
persons in 1995 were canceled as a result of their repricing on November 30,
1995: Mr. McCormick -- 97,500: Mr. LaLumandiere -- 12,188. Such canceled
options have not been included with respect to 1995 long-term compensations
award. The repriced options retain the same term and vesting schedule as
those options which were replaced.
(5) All options granted in 1993, 1994 and 1995 to new employees and officers of
the Company have 5-year terms and become exercisable cumulatively at the
rate of 12.5% of the total six months after the vesting commencement date
(first date of employment for new employees and date of grant for officers),
and 1/48 of the shares subject to the option in equal monthly installments
thereafter. All option granted in 1993, 1994 and 1995 to existing employees
also have 5-year terms
20
<PAGE>
but become exerciseable cumulatively at the rate of 1/48 of the shares
subject to the option in equal monthly installments following their
respective grant date. All unvested options are subject to earlier
termination in the event of the termination of the participant's
relationship with the Company. All options were granted at market value on
the date of grant. In the event that certain change in control events were
to occur, the options would be assumed or equivalent options substituted by
a successor corporation, unless the Board of Directors determines that the
options should become immediately exercisable. The exercise price may be
paid, subject to certain conditions, by delivery of already owned shares or
with the proceeds from the sale of the option shares. In addition, the
Management Continuity Agreements entered into between the Company and each
of its executive officers may affect the vesting and manner of exercise of
options granted by the Company to these individuals. See "Transactions with
Management and Others."
(6) Consists of the Company's contributions to its 401(k) plan for the benefit
of the named executive officers.
(7) Includes $8,331 paid to Mr. Boyd in connection with the relocation of his
principal residence to the San Jose metropolitan area.
(8) Includes salary paid to Mr. Boyd during the period beginning on the his
employment commencement of April 18, 1994 and ending on December 31, 1994
and $79,578 paid to Mr. Boyd in connection with the relocation of his
principal residence to the San Jose metropolitan area.
(9) Mr. Rondinone terminated his employment with the Company in January 1996.
(10) Includes $47,766 paid to Mr. Rondinone in connection with the relocation of
his principal residence to the San Jose metropolitan area.
(11) Mr. Wismer terminated his employment with the Company in October 1995.
(12) Includes the following amounts paid to Mr. Wismer in connection with the
relocation of his principal residence to the San Jose metropolitan area:
1994 -- $13,399 and 1993 -- $53,953.
21
<PAGE>
STOCK OPTION GRANTS IN 1995
The following table sets forth information for the named executive officers
with respect to grants of options to purchase Common Stock of the Company made
in 1995 and the value of all options held by such executive officers on December
31, 1995.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
OPTIONS STOCK PRICE
OPTIONS GRANTED TO APPRECIATION FOR
GRANTED EMPLOYEES IN EXERCISE OR OPTION TERM (3)
(SHARES) FISCAL YEAR BASE PRICE EXPIRATION --------------------
NAME (1) (2) (PER SHARE) DATE 5% 10%
- -------------------------------------- ----------- ------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert V. McCormick................... 22,500(4) 3.3% $ 4.00 2/17/00 $ 24,900 $ 55,000
97,500(5) 14.2% $ 2.00 2/17/00 $ 44,600 $ 96,700
45,000(6) 6.6% $ 2.00 11/30/00 $ 24,900 $ 55,000
Thomas B. Boyd........................ 45,000(6) 6.6% $ 2.00 11/30/00 $ 24,900 $ 55,000
Bonnie Jones.......................... 35,000(6) 5.1% $ 2.00 11/30/00 $ 19,300 $ 42,700
Dennis LaLumandiere................... 2,812(4) 0.4% $ 4.00 2/17/00 $ 3,100 $ 6,900
12,188(5) 1.8% $ 2.00 2/17/00 $ 5,600 $ 12,100
25,000(6) 3.6% $ 2.00 11/30/00 $ 13,800 $ 30,500
Joseph F. Rondinone, Ph.D (7)......... -- -- -- -- -- --
Eli Wismer (8)........................ -- -- -- -- -- --
</TABLE>
- ------------------------
(1) For a description of the material terms of the options, see footnote 5 of
the Summary Compensation Table.
(2) The Company granted options to employees for an aggregate of 686,000 shares
of Common Stock during 1995 excluding 175,453 issued to replace options
canceled from the 1984 Employee Stock Option Plan and 405,384 issued to
replace options canceled from the 1994 Employee Stock Option Plan.
(3) Gains are reported net of the option exercise price but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercises are
dependent on future performance of the Company's Common Stock, as well as
the optionee's continued employment through the vesting period.
(4) Options listed were granted on February 17, 1995.
(5) Options listed were granted on November 30, 1995 to replace options which
were originally granted on February 17, 1995 then canceled on November 30,
1995 due to repricing.
(6) Options listed were granted on November 30, 1995.
(7) Dr. Rondinone terminated his employment with the Company in January 1996
(8) Mr. Wismer terminated his employment with the Company in October 1995.
22
<PAGE>
AGGREGATED OPTION EXERCISES IN 1995
AND YEAR-END OPTION VALUES
The following table sets forth information for the named executive officers
with respect to exercises in 1995 of options to purchase Common Stock of the
Company.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 12/31/95: AT 12/31/95:
SHARES --------------------- ---------------------
ACQUIRED ON VALUE (EXERCISABLE/ (EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE) (1) UNEXERCISABLE) (1)(2)
- ----------------------------------------------- ----------- ----------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Robert McCormick............................... -- -- 217,083 / 237,917 -- / --
Thomas B. Boyd................................. -- -- 26,041 / 83,959 -- / --
Bonnie Jones................................... -- -- 41,712 / 65,288 -- / --
Dennis LaLumandiere............................ -- -- 26,103 / 57,397 -- / --
Joseph F. Rondinone, Ph.D. (3)................. -- -- 42,562 / 39,438 -- / --
Eli Wismer (4)................................. -- -- 58,978 / 0 -- / --
</TABLE>
- ------------------------
(1) Based on the closing price of the Company's Common Stock as reported on the
Nasdaq National Market on December 29, 1995 of $1.938 per share.
(2) The closing price of the Company's Common Stock on the Nasdaq National
Market on December 29, 1995 was less than the exercise price of the
referenced options.
(3) Dr. Rondinone terminated his employment with the Company in January 1996.
(4) Mr. Wismer terminated his employment with the Company in October 1995.
23
<PAGE>
OPTION REPRICING TABLE
On November 30, 1995 the Company allowed employees, including executive
officers named on the Summary Compensation Table, to cancel outstanding options
that had been granted under the Company's 1994 Stock Option Plan but that had
not yet become exercisable and replace them with new options for an equal number
of shares. Such new options, which have the same exercisability restrictions,
were granted at a price of $2.00 per share, the fair market value of the
Company's Common Stock on the date of grant. In accordance with regulations
promulgated by the Securities and Exchange Commission, such repricing requires
the Company to disclose all repricings of the Company's options held by its
executive officers that have occurred during the last ten completed fiscal
years, in the format set forth below:
<TABLE>
<CAPTION>
LENGTH OF
EXERCISE ORIGINAL OPTION
NUMBER OF MARKET PRICE OF PRICE AT NEW TERM REMAINING
DATE OF OPTIONS STOCK AT TIME TIME OF EXERCISE AT DATE OF
NAME REPRICING REPRICED OF REPRICING REPRICING PRICE REPRICING
- --------------------------------------- --------- ----------- --------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Herbert Bellucci,...................... 07/25/91 15,000 $ 9.25 $ 26.00 $ 9.25 4.5 years
Former Senior Vice President of 06/26/92 15,000 $ 5.75 $ 9.25 $ 5.75 3.6 years
Operations (1) 06/26/92 40,000 $ 5.75 $ 7.75 $ 5.75 9.7 years
Robert Bogart.......................... 07/25/91 10,000 $ 9.25 $ 26.00 $ 9.25 4.5 years
Former Vice President of 06/26/92 10,000 $ 5.75 $ 9.25 $ 5.75 3.6 years
Engineering (1) 06/26/92 20,000 $ 5.75 $ 7.75 $ 5.75 9.7 years
Paul Davis............................. 07/25/91 25,000 $ 9.25 $ 14.25 $ 9.25 4.8 years
Former Vice President and 06/26/92 25,000 $ 5.75 $ 9.25 $ 5.75 3.8 years
General Counsel (1) 06/26/92 40,000 $ 5.75 $ 7.75 $ 5.75 9.7 years
Benjamin Holmes........................ 11/30/95 50,000 $ 2.00 $ 3.75 $ 2.00 5.7 years
Chairman of the Board of Directors
(2)
Robert Jagunich........................ 07/25/91 10,000 $ 9.25 $ 26.00 $ 9.25 4.5 years
Former Vice President of
Marketing (1)
Bonnie Jones........................... 07/25/91 5,000 $ 9.25 $ 26.00 $ 9.25 4.5 years
Vice President of Human Resources 06/26/92 5,000 $ 5.75 $ 9.25 $ 5.75 4.1 years
06/26/92 5,000 $ 5.75 $ 9.25 $ 5.75 3.6 years
Dennis LaLumandiere.................... 07/25/91 5,000 $ 9.25 $ 26.00 $ 9.25 4.5 years
Vice President of Finance 06/26/92 5,000 $ 5.75 $ 9.25 $ 5.75 3.6 years
and Chief Financial Officer 06/26/92 15,000 $ 5.75 $ 5.88 $ 5.75 9.8 years
11/30/95 12,188 $ 2.00 $ 4.00 $ 2.00 4.2 years
Robert McCormick....................... 07/25/91 150,000 $ 9.25 $ 14.25 $ 9.25 4.8 years
President and Chief Executive 06/26/92 150,000 $ 5.75 $ 9.25 $ 5.75 3.8 years
Officer 06/26/92 50,000 $ 5.75 $ 8.13 $ 5.75 9.5 years
11/30/95 97,500 $ 2.00 $ 4.00 $ 2.00 4.2 years
Alfred Merriweather.................... 07/25/91 15,000 $ 9.25 $ 26.00 $ 9.25 4.5 years
Former Vice President of Finance 06/26/92 15,000 $ 5.75 $ 9.25 $ 5.75 3.6 years
and Chief Financial Officer (1) 06/26/92 40,000 $ 5.75 $ 7.75 $ 5.75 9.7 years
Rodney Perkins, M.D.................... 06/26/92 60,000 $ 5.75 $ 7.13 $ 5.75 4.3 years
Director and Former President,
Chief Executive Officer and Chairman
of the Board (2)
Herbert Taus........................... 07/25/91 40,000 $ 9.25 $ 26.00 $ 9.25 4.5 years
Former President and Chief
Executive Officer (1)
Eli Wismer............................. 06/26/92 35,000 $ 5.75 $ 7.00 $ 5.75 4.4 years
Former Vice President of North
American Sales and Education (1)
</TABLE>
- ------------------------------
(1) No longer employed by the Company, but was an executive officer of the
Company within the ten-year period covered by the table.
(2) Options were granted pursuant to consulting agreements.
24
<PAGE>
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Dr. Perkins was a founding shareholder of AcuVasive (formerly EnVision
Surgical Systems), a manufacturer of microvisualization catheter products
("AcuVasive"), and is currently a member of its Board of Directors. The Company
is also party to a Product Development and Marketing Agreement with AcuVasive
dated June 4, 1993 (the "Development Agreement") pursuant to which AcuVasive
agreed to develop certain microvisualization catheter products for which
Laserscope has world-wide, exclusive, royalty-free marketing rights provided
that Laserscope purchases certain minimum volumes of such products from
AcuVasive. Should Laserscope fail to meet such minimums, its market rights under
the Development Agreement become non-exclusive. As of December 31, 1995,
AcuVasive had not completed and the Company did not expect that AcuVasive would
complete the development of such products. In addition, during 1995, the Company
loaned AcuVasive $100,000 pursuant to a promissory note. At December 31, 1995,
AcuVasive was in default of the payment terms of the note and the Company does
not expect to be repaid at least within the next year due to AcuVasive's current
lack of financial resources. Robert McCormick is also a director of AcuVasive,
and Dr. Perkins and the Company are each holders of AcuVasive's capital stock.
In March 1994, the Company entered into Management Continuity Agreements
with each of its executive officers, which were amended in December 1994 (the
"Prior Management Continuity Agreements"). The Prior Management Continuity
Agreements were to expire by their terms no later than December 31, 1996, and
were therefore superceded and replaced in April 1996 by a new version of such
agreements (the "1996 Management Continuity Agreements"). The 1996 Management
Continuity Agreements provide (1) for salary and benefits continuation if the
executive is terminated for any reason other than cause within 24 months (the
"Severance Period") following any Change in Control of the Company (as defined
below), such that if the termination occurs within 12 months of the Change of
Control, the Severance Period is 12 months, and if the termination occurs after
12 months but within 24 months of the Change of Control, the Severance Period is
nine months, (2) that such executives may, with 30 days written prior notice,
resign but will be entitled to receive his or her current salary and level of
benefits for the Severance Period, if, in connection with such Change in Control
the executive's duties or responsibilities are materially reduced or executive
is asked to relocate to a facility or location more than 50 miles from the
Company's current location, (3) that all stock options exercisable for the
Company's securities held by such executives shall become immediately vested and
shall be exercisable in full in accordance with the provisions of the option
agreement and plan pursuant to which such option was granted, and (4) that upon
the immediate vesting of stock options, the optionee will have the right
(subject to any limitations imposed by Section 16 of the Securities Exchange Act
of 1934 or other applicable securities laws and only to the extent permitted by
the terms of the applicable option plan) to deliver a non-recourse promissory
note (secured only by the pledged shares for repayment), at the prime rate of
interest determined as of the date of the note, in payment of the exercise price
for the outstanding options. For purposes of the 1996 Management Continuity
Agreements, a Change in Control of the Company shall be deemed to have occurred
upon the happening of any of the following events: (1) any acquisition of twenty
percent (20%) or more of the Company's then outstanding voting securities
without the approval of the Board of Directors, (2) any merger or consolidation
in which the Company is not the surviving entity, (3) approval of a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets, or (4) a
change in the composition of the Board of Directors of the Company, as a result
of which fewer than a majority of the directors are incumbent directors.
25
<PAGE>
The Company has sold Common Stock to certain employees and directors and
accepted promissory notes secured by that stock as payment for certain of those
shares. These notes originally carried annual interest rates of 9.0% to 9.5%.
During 1995 the principal and accrued interest on these notes were refinanced
and the notes now carry annual interest rates of 5.79%.
<TABLE>
<CAPTION>
INDEBTEDNESS
TOTAL TO THE COMPANY
SHARES AGGREGATE AS OF 12/31/95
PURCHASER PURCHASED PRICE (1)(2)
- ---------------------------------------------------- ----------- --------- --------------
<S> <C> <C> <C>
Rodney Perkins, M.D................................. 16,667 $ 75,001 $ 128,603
Robert J. Pressley, Ph.D............................ 16,666 $ 74,997 $ 128,788
</TABLE>
- ------------------------
(1) In all cases, the amount shown was also the largest amount of indebtedness
owed to the Company at any time during 1995.
(2) Payment in the form of promissory notes in the above transactions was
approved in each case by a majority of the disinterested directors of the
Company and such sales were made pursuant to the Company's 1984 Stock
Purchase Plan, which was approved by the shareholders of the Company.
During 1995 Mr. Holmes received $25,000 in compensation from the Company for
consulting services to the Company beyond his duties as Chairman of the Board of
Directors.
Non-employee members of the Company's Board of Directors receive cash
compensation and options to purchase shares of Common Stock in connection with
their service on the Board. See Proposal No. 1 -- Election of Directors --
Compensation of Directors."
The Company has entered into indemnification agreements with each of its
directors and executive officers, which may require the Company, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors or officers, to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified, and to obtain directors' and officers' liability insurance if
available on reasonable terms.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Company's directors, its
executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's securities and any subsequent changes in that ownership to the SEC.
Specific filing deadlines of these reports have been established and the Company
is required to disclose in this Proxy Statement any failure to file by these
dates during 1994. All of these filing requirements have been satisfied. In
making this statement, the Company has relied solely on written representations
of its directors and executive officers and any ten percent holders and copies
of the reports that they filed with the SEC.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 1997 Annual Meeting must be received by
the Company no later than December 28, 1996 in order that they may be included
in the proxy statement and form of proxy relating to that meeting.
26
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed form of Proxy to vote the shares
they represent as the Board of Directors may recommend.
BY ORDER OF THE BOARD OF
DIRECTORS
[SIG]
CRAIG W. JOHNSON
SECRETARY
Dated: April 26, 1996
27
<PAGE>
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF LASERSCOPE
1996 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Laserscope, a California corporation, hereby
acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy
Statement, each dated April 26, 1996, and hereby appoints Robert V. McCormick
and Dennis LaLumandiere or either of them, proxies and attorneys-in-fact, with
full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 1996 Annual Meeting of
Shareholders of Laserscope to be held on June 7, 1996 at 9:00 a.m., local time,
at the Company's principal executive offices at 3052 Orchard Drive, San Jose,
California 95134-2011 and at any adjournment or postponement thereof, and to
vote all shares of Common Stock which the undersigned would be entitled to vote
if then and there personally present, on the following matters, and, in their
discretion, upon such other matters that may properly come before the meeting
and any adjournment(s) thereof.
(To be Signed on Reverse Side)
<PAGE>
/x/ Please mark your
votes as in this
example.
FOR all nominees WITHHOLD authority
listed to the right to vote for all nominees
(except as indicated) listed to the right
1. Election of / / / /
Directors
Nominees Benjamin L. Holmes
E. Walter Lange
Robert V. McCormick
Rodney Perkins, M.D.
Robert J. Pressley,
Ph.D
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list to the right.
FOR AGAINST ABSTAIN
2. Proposal to approve an amendment to / / / / / /
the Company's 1994 Stock Option Plan
to increase the number of shares of
Common Stock reserved for issuance
thereunder by 150,000 shares.
3. Proposal to approve an amendment to / / / / / /
the Company's 1989 Employee Stock
Purchase Plan to increase the number
of shares of Common Stock reserved for
issuance thereunder by 200,000 shares.
4. Proposal to ratify the appointment of / / / / / /
Ernst & Young as the independent
auditors of the Company for the year
ending December 31, 1996.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED AS FOLLOWS: (1) FOR THE ELECTION OF DIRECTORS, (2) FOR APPROVAL OF
THE AMENDMENT TO THE COMPANY'S 1994 STOCK OPTION PLAN, (3) FOR APPROVAL OF THE
AMENDMENT TO THE COMPANY'S 1989 EMPLOYEE STOCK PURCHASE PLAN, (4) FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG AS INDEPENDENT AUDITORS, AND AS
SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. IF THE STOCK IS REGISTERED IN
THE NAMES OF TWO OR MORE PERSONS, EACH SHOULD SIGN. EXECUTORS, ADMINISTRATORS,
TRUSTEES, GUARDIANS AND ATTORNEYS-IN-FACT SHOULD ADD THEIR TITLES. IF SIGNER IS
A CORPORATION, PLEASE GIVE FULL CORPORATE NAME AND HAVE A DULY AUTHORIZED
OFFICER SIGN, STATING TITLE. IF SIGNER IS A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
SIGNATURE(S)_________________________________________________DATE______________
NOTE: This Proxy should be marked, dated, signed by the shareholder(s) exactly
as his or her name appears hereon, and returned in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are
held by joint tenants or as community property, both should sign.
<PAGE>
LASERSCOPE
1989 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED THROUGH NOVEMBER 30, 1995)
The following constitute the provisions of the 1989 Employee Stock Purchase
Plan of Laserscope.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean Laserscope.
(e) "COMPENSATION" shall mean all regular straight time gross
earnings, payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses and commissions (except to the extent that the
exclusion of any such items for all participants is specifically directed by the
Board or its committee).
(f) "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company, provided that such leave is for a period of
not more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(g) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
<PAGE>
(h) "EMPLOYEE" shall mean any person, including any officer of the
Company, whose customary employment with the Company or one of its Designated
Subsidiaries is at least twenty (20) hours per week and more than five (5)
months in any calendar year.
(i) "EXERCISE DATE" shall mean the date one day prior to the date six
months, twelve months, eighteen months, or twenty-four months after the first
Offering Date of an Offering Period.
(j) "EXERCISE PERIOD" shall mean a period commencing on an Offering
Date or on the day after an Exercise Date and terminating one day prior to the
date six (6) months later.
(k) "OFFERING DATE" shall mean the first business day of each
Offering Period of the Plan, except that in the case of an individual who
becomes an eligible Employee after the first business day of an Offering Period,
the term "Offering Date" shall mean the first business day following the
Exercise Date coincident with or next succeeding the date on which that
individual becomes an eligible Employee.
Options granted after the first business day of an Offering
Period will be subject to the same terms as the options granted on the first
business day of such Offering Period except that they will have a different
grant date (thus, potentially, a different exercise price) and, because they
expire at the same time as the options granted on the first business day of such
Offering Period, a shorter term.
(1) "OFFERING PERIOD" shall mean a period of six (6), eighteen (18)
or twenty-four (24) months during which options granted pursuant to the Plan may
be exercised. In general, the duration of an Offering Period will be twenty-
four (24) months, consisting of four six-month Exercise Periods. However,
Offering Periods that begin on or about January 1 as a result of the operation
of Section 10 of the Plan will have a duration of either six (6) or eighteen
(18) months, as provided in Section 10, and will consist of one (1) or three (3)
six-month Exercise Periods, respectively.
(m) "PLAN" shall mean this 1989 Employee Stock Purchase Plan.
(n) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
3. ELIGIBILITY.
(a) Any Employee as defined in paragraph 2 who (i) is employed on
March 31, 1990 or (ii) has been continuously employed by the Company for at
least six (6) consecutive months and who shall be employed by the Company on a
given Offering Date shall be eligible to participate in the Plan.
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(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 425(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company, or (ii) which permits his or her
rights to purchase stock under all employee stock purchase plans of the Company
and its subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand
Dollars ($25,000) worth of stock (determined at the fair market value of the
shares at the time such option is granted) for each calendar year in which such
option is outstanding at any time.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on or about July 1 of
each year; provided, however, that an Offering Period may commence on or about
January 1 in the event the provisions of Section 10 of the Plan become
operative. The Plan shall continue thereafter until terminated in accordance
with paragraph 20 hereof. Subject to the shareholder approval requirements of
paragraph 20, the Board of Directors of the Company shall have the power to
change the duration of Offering Periods with respect to future offerings without
shareholder approval if such change is announced at least five (5) days prior to
the scheduled beginning of the first Offering Period to be affected.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office at
least ten (10) business days prior to the applicable Offering Date, unless a
later time for filing the subscription agreement is set by the Board for all
eligible Employees with respect to a given Offering Period.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Offering Date and shall end on the last payroll of the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in paragraph 11.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each payday
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each payday during the Offering Period,
and the aggregate of such payroll deductions during the Offering Period shall
not exceed ten percent (10%) of the participant's aggregate Compensation during
said Offering Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan. A participant may not make any additional
payments into such account.
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(c) A participant may discontinue his or her participation in the
Plan as provided in paragraph 11, or may change the rate of his or her payroll
deductions one time during each Exercise Period (within the limitations of
Section 6(a)) by completing or filing with the Company a new subscription
agreement authorizing a change in payroll deduction rate. The change in rate
shall be effective with the first full payroll period following the Company's
receipt of the new subscription agreement. A participant's subscription
agreement shall remain in effect for successive Offering Periods unless revised
as provided herein or terminated as provided in paragraph 11.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and paragraph 3(b) herein, a participant's
payroll deductions may be decreased to 0% at such time during any Exercise
Period which is scheduled to end during the current calendar year that the
aggregate of all payroll deductions accumulated with respect to such Exercise
Period and any other Exercise Period ending within the same calendar year equal
$21,250. Payroll deductions shall recommence at the rate provided in such
participant's subscription agreement at the beginning of the first Exercise
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in paragraph 11.
7. GRANT OF OPTION.
(a) On the first Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Exercise Date during such Offering Period a number of shares of
the Company's Common Stock determined by dividing such Employee's payroll
deductions accumulated prior to such Exercise Date and retained in the
Participant's account as of the Exercise Date by the lower of (i) eighty-five
percent (85%) of the fair market value of a share of the Company's Common Stock
on the Offering Date or (ii) eighty-five percent (85%) of the fair market value
of a share of the Company's Common Stock on the Exercise Date; provided,
however, that the maximum number of shares an Employee may purchase during each
Offering Period shall be determined by dividing $50,000 by the fair market value
of a share of the Company's Common Stock on the Offering Date, and provided
further that such purchase shall be subject to the limitations set forth in
Section 3(b) and 12 hereof. The option shall be automatically exercised on the
Exercise Dates during the Offering Period or as otherwise directed by the
participant pursuant to Section 8, unless the participant has withdrawn pursuant
to Section 11, and shall expire on the last day of the Offering Period. Fair
market value of a share of the Company's Common Stock shall be determined as
provided in Section 7(b) herein.
(b) The option price per share of the shares offered in a given
Offering Period shall be the lower of: (i) 85% of the fair market value of a
share of the Common Stock of the Company on the Offering Date or (ii) 85% of the
fair market value of a share of the Common Stock of the Company on the Exercise
Date. The fair market value of the Company's Common Stock on a given date shall
be its closing price for such date, as reported in the Wall Street Journal.
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8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in paragraph 11 below, his or her option for the purchase of shares
will be exercised automatically on each Exercise Date of each Offering Period,
and the maximum number of full shares subject to option shall be purchased for
such participant at the applicable option price with the accumulated payroll
deductions in his or her account. No fractional shares will be purchased. Any
amount remaining in the participant's account after an Exercise Date shall be
held in the account until the next Exercise Date in such Offering Period, unless
the Offering Period has been over-subscribed or has terminated with such
Exercise Date, in which case such amount shall be refunded to the participant.
During a participant's lifetime, a participant's option to purchase shares
hereunder is exercisable only by him or her.
9. DELIVERY. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. In the event that
the fair market value of the Company's Common Stock is lower on an Exercise Date
than it was on the first Offering Date for that Offering Period, all Employees
participating in the Plan on the Exercise Date shall be deemed to have withdrawn
from the Offering Period immediately after the exercise of their option on such
Exercise Date and to have enrolled as participants in a new Offering Period
which begins on or about the day following such Exercise Date. In the event the
new Offering Period begins on or about July 1, the Offering Period shall have a
duration of twenty-four (24) months, consisting of four six-month Exercise
Periods. In the event the new Offering Period begins on or about January 1,
such new Offering Period shall have a duration of either six (6) or eighteen
(18) months, depending on the number of months remaining in the Offering Period
that is replaced by such new Offering Period, and shall consist of one (1) or
three (3) Exercise Periods, respectively. A participant may elect to remain in
the previous Offering Period by filing a written statement declaring such
election with the Company prior to the time of the automatic change to the new
Offering Period.
11. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account will be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period will be automatically terminated, and no further payroll deductions for
the purchase of shares will be made during the Offering Period. If a
participant withdraws from an Offering Period, payroll deductions will not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
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(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Exercise Date for any reason, including retirement or
death, the payroll deductions credited to such participant's account during the
Offering Period but not yet used to exercise the option will be returned to such
participant or, in the case of his or her death, to the person or persons
entitled thereto under paragraph 15, and such participant's option will be
automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during an
Offering Period in which the Employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the payroll deductions credited to
his or her account will be returned to such participant and such participant's
option terminated.
(d) A participant's withdrawal from an Offering Period will not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Exercise Period from which the participant
withdraws.
12. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. STOCK.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 450,000 shares, subject
to adjustment upon changes in capitalization of the Company as provided in
paragraph 19. If on a given Exercise Date the number of shares with respect to
which options are to be exercised exceeds the number of shares then available
under the Plan, the Board shall make a pro rata allocation of the shares
remaining available for purchase in as uniform a manner as shall be practicable
and as it shall determine to be equitable.
(b) The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. ADMINISTRATION. The Plan shall be administered by the Board of the
Company or a committee of members of the Board appointed by the Board. The
administration, interpretation or application of the Plan by the Board or its
committee shall be final, conclusive and binding upon all participants. Members
of the Board who are eligible Employees are permitted to participate in the
Plan, provided that:
(a) Members of the Board who are eligible to participate in the Plan
may not vote on any matter affecting the administration of the Plan or the grant
of any option pursuant to the Plan.
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(b) If a Committee is established to administer the Plan, no member
of the Board who is eligible to participate in the Plan may be a member of the
Committee.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 15 hereof) by the participant. Any
such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw funds from an Offering Period in accordance with paragraph 11.
17. USE OF FUNDS. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. REPORTS. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the per share purchase price, the number of shares purchased and the
remaining cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but have not yet been placed under option (collectively, the
"Reserves"), as well as the price per share of Common Stock covered by each
option under the Plan which has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in
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<PAGE>
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
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 of Common Stock
subject to an option.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of a consolidation of the Company or merger with or into any other
corporation.
20. AMENDMENT OR TERMINATION. The Board of Directors of the Company may
at any time and for any reason terminate or amend the Plan. Except as provided
in paragraph 19, no such termination can affect options previously granted,
provided that an Offering Period may be terminated by the Board of Directors on
any Exercise Date if the Board determines that the termination of the Plan is in
the best interests of the Company and its shareholders. Except as provided in
paragraph 19, no amendment may make any change in any option theretofore granted
which adversely affects the rights of any participant. In addition, to the
extent necessary to comply with Rule 16b-3 under the Securities Exchange Act of
1934, as amended, or under Section 423 of the Code (or any successor rule or
provision or any other applicable law or regulation), the Company shall obtain
shareholder approval in such a manner and to such a degree as so required.
21. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. SHAREHOLDER APPROVAL.
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date
the Plan is adopted. Such shareholder approval shall be obtained in the manner
and degree required under the California General Corporation Law.
(b) If and in the event that the Company registers any class of
equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such registration
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.
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(c) If any required approval by the shareholders of the Plan itself
or of any amendment thereto is solicited at any time otherwise than in the
manner described in paragraph 21(b) hereof, then the Company shall, at or prior
to the first annual meeting of shareholders held subsequent to the later of (1)
the first registration of any class of equity securities of the Company under
Section 12 of the Exchange Act or (2) the granting of an option hereunder to an
officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled to vote for the Plan
substantially the same information which would be required (if proxies to be
voted with respect to approval or disapproval of the Plan or amendment were then
being solicited) by the rules and regulations in effect under Section 14(a) of
the Exchange Act at the time such information is furnished, and
(ii) file with, or mail for filing to, the Securities and Exchange
Commission four copies of the written information referred to in subsection (i)
hereof not later than the date on which such information is first sent or given
to shareholders.
23. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
24. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in paragraph 22. It shall continue in
effect for a term of ten (10) years unless sooner terminated under paragraph 20.
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EXHIBIT A
LASERSCOPE
1989 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
Original ApplicationOffering Date:
- ----- --------------
Change in Payroll Deduction Rate
- -----
Change of Beneficiary(ies)
- -----
1. _____________________________________________________________ hereby elects
to participate in the Laserscope 1989 Employee Stock Purchase Plan (the
"Stock Purchase Plan") and subscribes to purchase shares of the Company's
Common Stock in accordance with this Subscription Agreement and the Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
______% of my Compensation on each payday (not to exceed 10%) during the
Offering Period in accordance with the Stock Purchase Plan. Such
deductions are to continue for succeeding Offering Periods under the Stock
Purchase Plan until I give written instructions for a change in or
termination of such deductions.
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price
determined in accordance with the Stock Purchase Plan.
I further understand that shares will be purchased for me automatically on
each Exercise Date unless I otherwise withdraw from the Offering Period by
giving written notice to the Company.
4. I have received a copy of the complete "Laserscope 1989 Employee Stock
Purchase Plan." I understand that my participation in the Employee Stock
Purchase Plan is in all respects subject to the terms of the Plan. I
understand that the grant of the option by the Company under this
Subscription Agreement is subject to obtaining shareholder approval of the
Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of:
-------------------------------------------------
---------------------------------------------------------------------------
-----------.
6. I acknowledge that, under the Internal Revenue Code, there are special tax
"holding period" rules that govern the tax consequences of buying and
selling shares under the Stock Purchase
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Plan. I understand that if I dispose of shares purchased under the Plan
within two years of the Offering Date (i.e., the first day of the Offering
Period) or within one year of the Exercise Date (i.e., the date the shares
are purchased), I will be treated for federal income tax purposes as having
received ordinary income at the time of the sale equal to the difference
between my purchase price and the market value of the stock ON THE EXERCISE
DATE. Any amount in excess of that difference will be treated as capital
gain. I hereby agree to notify the Company in writing within 30 days after
the date of any such disposition.
I further understand that if I hold the shares for both the 2-year and
l-year holding periods described above, at the time I dispose of the shares
I will be treated for federal income tax purposes as having received
ordinary income in an amount equal only to the lesser of (1) the difference
between my purchase price and the market value of the stock ON THE OFFERING
DATE or (2) the difference between my purchase price and the actual sale
price for my stock. Any additional gain I receive on the sale will be
treated as capital gain.
7. I hereby agree to be bound by the terms of the Stock Purchase Plan. The
effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Stock
Purchase Plan:
NAME: (Please print)
------------------------------------------------------------
(First) (Middle) (Last)
- ------------------------------ ---------------------------------------------
Relationship
---------------------------------------------
(Address)
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NAME: (Please print)
------------------------------------------------------------
(First) (Middle) (Last)
- ------------------------------ ---------------------------------------------
Relationship
---------------------------------------------
(Address)
Employee's Social
Security Number:
--------------------------------------------------
Employee's Address:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
------------------------ ---------------------------------------------
Signature of Employee
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EXHIBIT B
LASERSCOPE
1989 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Laserscope 1989
Stock Purchase Plan which began on ____________, 19___ (the "Offering Date")
hereby notifies the Company that he or she hereby withdraws from the Offering
Period. He or she hereby directs the Company to pay to the undersigned as
promptly as possible all the payroll deductions credited to his or her account
with respect to such Offering Period. The undersigned understands and agrees
that his or her option for such Offering Period will be automatically
terminated. The undersigned understands further that no further payroll
deductions will be made for the purchase of shares in the current Offering
Period and the undersigned shall be eligible to participate in succeeding
Offering Periods only by delivering to the Company a new Subscription Agreement.
Name and Address of Participant
----------------------------------------
----------------------------------------
----------------------------------------
Signature
----------------------------------------
Date:
-----------------------------------
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EXHIBIT C
LASERSCOPE
1989 EMPLOYEE STOCK PURCHASE PLAN
NOTICE TO RESUME PAYROLL DEDUCTIONS
The undersigned participant in the Offering Period of the Laserscope 1989
Stock Purchase Plan which began on ____________, 19___ hereby notifies the
Company to resume payroll deductions for his or her account at the beginning of
the next Exercise Period within such Offering Period in accordance with the
terms of the Subscription Agreement executed by the undersigned at the beginning
of the Offering Period. The undersigned understands that he or she may change
the payroll deduction rate or the beneficiaries named in such Subscription
Agreement by submitting a revised Subscription Agreement.
Name and Address of Participant
----------------------------------------
----------------------------------------
----------------------------------------
Signature
----------------------------------------
Date:
-----------------------------------
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LASERSCOPE
1994 STOCK OPTION PLAN
(AS AMENDED THROUGH APRIL 4, 1996)
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Board and as reflected in
the terms of the written option agreement.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" shall mean the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "APPLICABLE LAWS" shall have the meaning set forth in Section
4(a) below.
(c) "BOARD" shall mean the Board of Directors of the Company.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" shall mean the Committee appointed by the Board of
Directors in accordance with Section 4(a) below, if one is appointed.
(f) "COMMON STOCK" shall mean the Common Stock of the Company.
(g) "COMPANY" shall mean Laserscope, a California corporation.
(h) "CONSULTANT" shall mean any person who is engaged by the Company
or any Parent or Subsidiary to render consulting services and is compensated for
such consulting services, and any director of the Company whether compensated
for such services or not; provided that the term Consultant shall not include
directors who are not compensated for their services or are paid only a
director's fee by the Company.
(i) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Administrator; provided that such leave is for
a period of not more than 90 days or reemployment upon the expiration of such
leave is
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guaranteed by contract or statute. For purposes of this Plan, a change in
status from an Employee to a Consultant or from a Consultant to an Employee will
not constitute a termination of employment.
(j) "DIRECTOR" shall mean a member of the Board.
(k) "EMPLOYEE" shall mean any person, including Named Executives,
Officers and Directors, employed by the Company or any Parent or Subsidiary of
the Company. The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock as quoted on such system on the date of determination (if
for a given day no sales were reported, the closing bid on that day shall be
used), as such price is reported in THE WALL STREET JOURNAL or such other source
as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but
not on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the bid and asked prices for the Common Stock or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "INCENTIVE STOCK OPTION" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(o) "NAMED EXECUTIVE" shall mean any individual who, on the last day
of the Company's fiscal year, is the chief executive officer of the Company (or
is acting in such capacity) or among the four highest compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(p) "NONSTATUTORY STOCK OPTION" shall mean an Option not intended to
qualify as an Incentive Stock Option.
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(q) "OFFICER" shall mean a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "OPTION" shall mean a stock option granted pursuant to the Plan.
(s) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
(t) "OPTIONEE" shall mean an Employee or Consultant who receives an
Option.
(u) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(v) "PLAN" shall mean this 1994 Stock Option Plan.
(w) "RULE 16B-3" shall mean Rule 16b-3 promulgated under the Exchange
Act as the same may be amended from time to time, or any successor provision.
(x) "SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 14 of the Plan.
(y) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 14 of
the Plan, the maximum aggregate number of shares that may be optioned and sold
under the Plan is 725,000 shares of Common Stock. The Shares may be authorized,
but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares that were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan. Notwithstanding any other provision of the Plan, shares
issued under the Plan and later repurchased by the Company shall not become
available for future grant or sale under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) COMPOSITION OF ADMINISTRATOR.
(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule 16b-3
and by the legal requirements relating to the administration of incentive stock
option plans, if any, of applicable securities laws and the Code (collectively,
the "Applicable Laws"), the Plan may (but need not) be administered by different
administrative bodies with respect to Directors, Officers who are not Directors
and Employees who are neither Directors nor Officers.
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(ii) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS.
With respect to grants of Options to Employees or Consultants who are also
Officers or Directors of the Company, the Plan shall be administered by (A) the
Board, if the Board may administer the Plan in compliance with Rule 16b-3 as it
applies to a plan intended to qualify thereunder as a discretionary plan and
Section 162(m) of the Code as it applies so as to qualify grants of Options to
Named Executives as performance-based compensation, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted (I) in such a manner as to permit the Plan to comply with Rule
16b-3 as it applies to a plan intended to qualify thereunder as a discretionary
plan, (II) in such a manner as to qualify grants of Options to Named Executives
as performance-based compensation under Section 162(m) of the Code and (III) in
such a manner as to satisfy the Applicable Laws.
(iii) ADMINISTRATION WITH RESPECT TO OTHER PERSONS. With
respect to grants of Options to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by (A)
the Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws.
(iv) GENERAL. Once a Committee has been appointed pursuant to
subsection (ii) or (iii) of this Section 4(a), such Committee shall continue
to serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of any Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies (however caused) and remove
all members of a Committee and thereafter directly administer the Plan, all to
the extent permitted by the Applicable Laws and, in the case of a Committee
appointed under subsection (ii), to the extent permitted by Rule 16b-3 as it
applies to a plan intended to qualify thereunder as a discretionary plan, and to
the extent required under Section 162(m) of the Code to qualify grants of
Options to Named Executives as performance-based compensation.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(m) of the Plan;
(ii) to select the Employees and Consultants to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
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(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any vesting
acceleration or waiver of forfeiture restrictions regarding any Option and/or
the shares of Common Stock relating thereto, based in each case on such factors
as the Administrator shall determine, in its sole discretion);
(vii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount, if any, of
any deemed earnings on any deferred amount during any deferral period); and
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. ELIGIBILITY.
(a) Nonstatutory Stock Options may be granted only to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he or she is
otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Stock Options are exercisable for the first time by an Optionee during
any calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock
Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
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6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 20 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 16 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. LIMITATION ON GRANTS TO EMPLOYEES. Subject to adjustment as provided
in this Plan, the maximum number of Shares which may be granted under options to
any Employee under this Plan for any fiscal year of the Company shall be
325,000.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant;
(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant;
(B) granted to a person who, at the time of the grant of
such Option, is a Named Executive of the Company, the per share Exercise Price
shall be no less than 100% of the Fair Market Value on the date of grant;
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(C) granted to any person other than a Named Executive,
the per Share exercise price shall be no less than 50% of the Fair Market Value
per Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the Company to retain from
the total number of Shares as to which the Option is exercised that number of
Shares having a Fair Market Value on the date of exercise equal to the exercise
price for the total number of Shares as to which the Option is exercised, (6)
delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds required to pay the exercise price, (7) delivery of an
irrevocable subscription agreement for the Shares that irrevocably obligates the
option holder to take and pay for the Shares not more than twelve months after
the date of delivery of the subscription agreement, (8) any combination of the
foregoing methods of payment, or (9) such other consideration and method of
payment for the issuance of Shares to the extent permitted under Applicable
Laws. In making its determination as to the type of consideration to accept,
the Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 9(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment
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will be made for a dividend or other right for which the record date is prior to
the date the stock certificate is issued, except as provided in Section 14 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant, such Optionee may, but only within thirty (30) days (or such other
period of time, not exceeding three (3) months as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option) after the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), exercise his or her Option to
the extent that he or she was entitled to exercise it at the date of such
termination. To the extent that the Optionee was not entitled to exercise the
Option at the date of such termination, or if the optionee does not exercise
such Option (which he or she was entitled to exercise) within the time specified
herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 10(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of his or her total and
permanent disability (as defined in Section 22(e)(3) of the Code), he or she
may, but only within six (6) months (or such other period of time not exceeding
twelve (12) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) from the date of such termination (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent he or she was
entitled to exercise it at the date of such termination. To the extent that he
or she was not entitled to exercise the Option at the date of termination, or if
he does not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his
death an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant of the
Option, the Option may be exercised, at any time within six (6) months (or such
other period of time, not exceeding twelve (12) months, as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option) following the date of death (but
in no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance but only to
the extent of the right to exercise that would have accrued had the Optionee
continued living and remained in Continuous Status as an Employee or Consultant
six (6) months (or such other period of time as is determined by the
Administrator as provided above) after the date of death, subject to the
limitation set forth in Section 5(b); or
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(ii) within three (3) months (or such other period of time not
exceeding three (3) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) after the termination of Continuous Status as an Employee
or Consultant, the Option may be exercised, at any time within six (6) months
following the date of death (but in no event later than the date of expiration
of the term of such Option as set forth in the Option Agreement), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of termination.
(e) RULE 16B-3. Options granted to persons subject to Section 16(b)
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
11. WITHHOLDING TAXES. As a condition to the exercise of Options granted
hereunder, the Optionee shall make such arrangements as the Administrator may
require for the satisfaction of any federal, state, local or foreign withholding
tax obligations that may arise in connection with the exercise, receipt or
vesting of such Option. The Company shall not be required to issue any Shares
under the Plan until such obligations are satisfied.
12. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash payment, or (b) out of Optionee's current
compensation, (c) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares that (i) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (ii) have a fair market value on the date
of surrender equal to or less than Optionee's marginal tax rate times the
ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option that number of Shares having
a fair market value equal to the amount required to be withheld. For this
purpose, the fair market value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined (the "Tax
Date").
Any surrender by an Officer or Director of previously owned
Shares to satisfy tax withholding obligations arising upon exercise of this
Option must comply with the applicable provisions of Rule 16b-3 and shall be
subject to such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of the Exchange
Act with respect to Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy
tax withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
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(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator;
(d) if the Optionee is an Officer or Director, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
13. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution. The designation of a
beneficiary by an Optionee will not constitute a transfer. An Option may be
exercised, during the lifetime of the Optionee, only by the Optionee or a
transferee permitted by this Section 13.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, the number of shares of Common
Stock that have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, the maximum number of shares of Common
Stock for which Options may be granted to any employee under Section 8 of the
Plan, and the price per share of Common Stock covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive. 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 of Common Stock subject to an Option.
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In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Administrator. The Administrator may,
in the exercise of its sole discretion in such instances, declare that any
Option shall terminate as of a date fixed by the Administrator and give each
Optionee the right to exercise his or her Option as to all or any part of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. In the event of a proposed sale of all or substantially all of
the assets of the Company, or the merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Administrator determines, in the exercise of
its sole discretion and in lieu of such assumption or substitution, that the
Optionee shall have the right to exercise the Option as to some or all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Administrator makes an Option exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee that the Option shall be exercisable for
a period of thirty (30) days from the date of such notice, and the Option will
terminate upon the expiration of such period.
15. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
16. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval of
the shareholders of the Company in the manner described in Section 20 of the
Plan:
(i) any increase in the number of Shares subject to the Plan,
other than in connection with an adjustment under Section 14 of the
Plan;
(ii) any change in the designation of the class of persons
eligible to be granted Options;
(iii) any change in the limitation on grants to employees as
described in Section 8 of the Plan or other changes which would
require shareholder approval to qualify Options granted hereunder as
performance-based compensation under Section 162(m) of the Code; or
(iv) if the Company has a class of equity securities registered
under Section 12 of the Exchange Act at the time of such revision or
amendment, any material increase in the benefits accruing to
participants under the Plan.
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(b) SHAREHOLDER APPROVAL. If any amendment requiring shareholder
approval under Section 13(a) of the Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section 12
of the Exchange Act, such shareholder approval shall be solicited as described
in Section 20 of the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
17. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
18. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
19. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
20. SHAREHOLDER APPROVAL.
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date
the Plan is adopted. Such shareholder approval shall be obtained in the manner
and to the degree required under applicable federal and state law.
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(b) In the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required approval of
the shareholders of the Company obtained after such registration shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder.
(c) If any required approval by the shareholders of the Plan itself
or of any amendment thereto is solicited at any time otherwise than in the
manner described in Section 20(b) hereof, then the Company shall, at or prior to
the first annual meeting of shareholders held subsequent to the later of (1) the
first registration of any class of equity securities of the Company under
Section 12 of the Exchange Act or (2) the granting of an Option hereunder to an
Officer or Director after such registration, do the following:
(i) furnish in writing to the holders entitled to vote for the
Plan substantially the same information that would be required (if proxies to be
voted with respect to approval or disapproval of the Plan or amendment were then
being solicited) by the rules and regulations in effect under Section 14(a) of
the Exchange Act at the time such information is furnished; and
(ii) file with, or mail for filing to, the Securities and
Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is first
sent or given to shareholders.
21. INFORMATION TO OPTIONEES. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company.
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