<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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] No fee required.
[ ] 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:
N/A
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
(5) Total fee paid:
N/A
- --------------------------------------------------------------------------------
[ ] 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.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
LOGO
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 27, 1997
------------------------
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 27, 1997 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: David Cohen, Klaus Goffloo, Benjamin L.
Holmes, Thomas Ihlenfeldt, 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 400,000 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 150,000 shares.
4. To ratify the appointment of Ernst & Young LLP as the independent
auditors for the Company for the fiscal year ending December 31, 1997.
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 May 9, 1997 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
CRAIG W. JOHNSON
Secretary
San Jose, California
May 23, 1997
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> 3
LOGO
------------------------
PROXY STATEMENT
FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
------------------------
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 27, 1997 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 May 23, 1997 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 properly come before
the meeting, as the case may be with respect to the item not 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
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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. The Company
has retained the services of Skinner & Co., Inc. to aid in the solicitation of
proxies from brokers, bank nominees and other institutional owners. The Company
estimates that it will pay Skinner & Co. a fee not to exceed $3,000 for its
services and will reimburse Skinner & Co. for certain out of pocket expenses
that are usual and proper. 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 Company shareholders of record at the close of business on May 9, 1997
are entitled to notice of and to vote at the meeting. As of May 9, 1997,
12,158,888 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 eight directors. At the Annual
Meeting, the Board of Directors has nominated eight directors to be elected to
serve until the next Annual Meeting and until their successors are elected and
qualified at the meeting. Unless otherwise instructed, the proxy holders will
vote the proxies received by them for the Company's eight 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, 1996, 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.......... 62 Retired Vice President and General Manager of 1992
the Medical Products Group of Hewlett-Packard
Company; Chairman of the Board of Directors of
the Company
David Cohen................. 44 Attorney practicing law with the firm of Cohen & 1996
Ostler
Klaus Goffloo............... 50 Chairman of Heraeus Med GmbH, member of the 1996
Board of Directors of Hereaus Holding Company
Thomas Ihlenfeldt........... 49 Managing Director of Heraeus Med GmbH 1996
E. Walter Lange............. 64 Business consultant; former Group Vice 1992
President, Eli Lilly & Co.
Robert V. McCormick......... 52 President and Chief Executive Officer of the 1992
Company
Rodney Perkins, M.D......... 59 Practicing otologic surgeon; President of the 1984
California Ear 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.... 64 Technology consultant; former President and 1984
Chief Executive 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 to 1985, and a Vice President of HP, from 1985 until his
retirement in December 1994. 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, and a
member of the Board on Health Care Service, Institute of Medicine, National
Academy of Sciences. He is a member of the Board of Visitors of the UCLA and
Boston University Medical Schools. He was also Chairman of the Board of
Directors of the Health Industry Manufacturers Association (HIMA).
DAVID COHEN has served as a Director of the Company since August 31, 1996.
Mr. Cohen has been an attorney practicing law with the firm of Cohen & Ostler, A
Professional Corporation, for more than five years. Mr. Cohen's firm served as
counsel to Heraeus Med GmbH ("Heraeus Med") and Heraeus Surgical Inc. ("HSI") in
connection with the Company's acquisition of HSI.
KLAUS GOFFLOO has served as a Director of the Company since August 30,
1996. He served as general manager of the Electrical Heating and Air
Conditioning group of Siemens AG from 1986 until 1992 and since that time has
served as Chairman of Heraeus Med and as a member of the Board of Directors of
Hereaus Holding Company.
THOMAS IHLENFELDT has served as a Director of the Company since August 30,
1996. He joined the Heraeus group of companies in 1984 and has served in various
positions. Since mid-1995 Mr. Ihlenfeldt has served as Managing Director of
Heraeus Med. From 1990 through 1995 Mr. Ihlenfeldt served as President and Chief
Executive Officer of HSI, formerly Heraeus LaserSonics.
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.
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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.
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 Eli Lilly's worldwide product
planning, corporate strategic planning, business development and market
research.
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 a Clinical Associate
Professor of Surgery at Stanford University School of 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. He also serves on the board of
directors of NovaCept (formerly AcuVasive and prior to that, EnVision Surgical
Systems), a manufacturer of microvisualization catheter products and private,
development stage medical device 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 Corporation, 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 6 meetings during the
year ended December 31, 1996. 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. Lange,
Holmes and Ihlenfeldt. The Audit Committee held 6 meetings during 1996. 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 Mr.
Cohen and Drs. Pressley and Perkins. It held 5 meetings during 1996. 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.
HERAEUS MED ARRANGEMENTS
In accordance with the Company's acquisition agreement ("Heraeus
Agreement") dated April 23, 1996 with Heraeus Med GmbH ("Heraeus Med") pursuant
to which the Company acquired (the "HSI Acquisition") Heraeus Surgical, Inc.
("HSI") on August 30, 1997, the Company appointed three designees of Heraeus Med
(the "Heraeus Directors") to the Company's Board of Directors. Subject to the
requirements described below, the Heraeus Agreement, as amended, requires the
Company to use its best efforts to have three Heraeus Med designees appointed to
the Company's Board of Directors. Messrs. Cohen, Goffloo and
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Ihlenfeldt are the initial Heraeus Directors and were appointed to the Company's
Board of Directors on August 30, 1996. Under the Heraeus Agreement, the Company
and Heraeus Med have certain continuing obligations to each other. These
obligations include: reciprocal indemnification obligations in connection with
the HSI Acquisition; Heraeus Med's obligation not to develop, manufacture,
service or sell hospital or physician office-based laser surgical systems or
accessories prior to August 30, 2003; and the Company's obligation not to
develop, manufacture, service or sell products outside the United States based
on the mounting device technology licensed to the Company prior to August 30,
2006. In addition, the Company is obligated to register the Common Stock issued
to Heraeus Med (the "Heraeus Shares") as partial consideration for HSI. The
Company has also agreed to pay all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any registration in connection with any such
registration. The Company and Heraeus Med have agreed to customary reciprocal
indemnification obligations in connection with any such registration. Under the
original terms of the Heraeus Agreement, the Company was required to amend its
Bylaws, prior to August 30, 1997, to reduce its Board size from eight to seven
members. In May 1997, Heraeus Med and Laserscope amended the Heraeus Agreement
(the "Heraeus Amendment") to retain the Board's current structure of eight
members. Specifically, the Heraeus Amendment provides that upon the death,
resignation or removal of any member of the Board, or the declaring by the Board
of any vacancy on the Board, the Board shall promptly amend the Company's Bylaws
to set the exact number of directors at seven. For so long as Heraeus Med owns
at least 3.3 million shares of Company Common Stock, the Company shall use its
best efforts to have three nominees of Heraeus Med elected to the Board. For as
long as Heraeus Med owns at least 1.6 million shares of Company Common Stock,
the Company shall use its best efforts to have two nominees of Heraeus Med
elected to the Board. For as long as Heraeus Med owns at least 600,000 shares of
Company Common Stock, the Company shall use its best efforts to have one nominee
of Heraeus Med elected to the Board, and the Company shall not, without the
prior consent of Heraeus Med, increase, or ask its shareholders to increase, the
number of directors beyond eight or, once reduced to seven under the Heraeus
Amendment, beyond seven.
The Company has entered into a supply relationship with Heraeus Med
pursuant to which Hereaus Med has agreed to supply the Company certain products
for resale and for use in the Company's production process. During 1996, the
Company purchased approximately $937,000 of such products pursuant to the
Hereaus Med supply arrangement.
COMPENSATION OF DIRECTORS
Non-employee members of the Board of Directors (other than the Heraeus
Directors) receive a retainer of $2,000 per quarter and $500 per meeting of the
Board of Directors attended. In addition, non-employee members (other than the
Heraeus Directors) 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"). Pursuant to the Heraeus Agreement, the Company
has agreed to reimburse Heraeus Med for the reasonable expenses of the Heraeus
Directors in attending board meetings and fulfilling their duties as directors,
up to a maximum of $25,000 per year.
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 stock options to nonemployee 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
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, which was approved by the Board of
Directors in November 1995 and by the Company's shareholders in August 1996,
provides for the grant of nonstatutory stock options to non-
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<PAGE> 8
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 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 designated or nominated by shareholders who hold 10% or more of the
outstanding Company Common Stock, including the Heraeus Directors, are not
eligible to receive options under the 1995 Directors' Option Plan.
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 400,000 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 1,700,000 shares of Common Stock have been reserved for
issuance under the 1994 Option Plan. Subject to shareholder approval, this
amount would be increased to an aggregate of 2,100,000 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 April 30, 1997 and after giving effect to the amendment to the 1994
Option Plan, 55,706 shares had been issued upon exercise of options granted
under the 1994 Option Plan, options for 1,487,277 shares were outstanding under
the 1994 Option Plan and 557,017 shares remained available for future grants. As
of April 30, 1997, the fair market value of shares subject to outstanding
options was $8,831,450.83 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, 1996 (i) options to purchase 250,000
shares of Common Stock were granted under the 1994 Option Plan to the current
executive officers as a group (6 persons as of December 31, 1996), and (ii)
391,225 shares of Common Stock were granted under the 1994 Option Plan to all
other employees.
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<PAGE> 9
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 except that with respect to executive officers (including
executive officers who are also directors), the 1994 Option Plan is administered
exclusively by the Human Resources Committee (comprised of Mr. Cohen and Drs.
Perkins and Pressley, the outside directors of the Company who are not eligible
to participate in the 1994 Option Plan). 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 stock 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 stock 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.
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<PAGE> 10
(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 stock options may be granted to persons other than the
Company's Chief Executive 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 an 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
thirty days (or such other period of time not exceeding three months in the
case of an incentive stock option as is determined by the Board of
Directors or its committee with such determination in the case of an
incentive stock option being made at the time of grant) 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 twelve months as is determined
by the Board of Directors or its committee with such determination in the
case of an incentive stock option being made at the time of grant) 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 twelve months, as is
determined by the Board of Directors or its committee with such
determination in the case of an incentive stock option being made at the
time of grant) 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 six
months (or such other period of time as is determined by the Board of
Directors or its committee with such determination in the case of an
incentive stock option being made at the time of grant) after the date of
death, but in no event may the option be exercised after its termination
date.
If an optionee should die within three months (or such other period of
time not exceeding three months as is determined by the Board of Directors
or its committee with such determination in the case of an incentive stock
option being made at the time of grant) 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, owns 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
8
<PAGE> 11
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 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 incentive stock options under Section 422 of the
Code, 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 stock 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
9
<PAGE> 12
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 transfer of the shares to 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 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. 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 net capital gain (net
long-term capital gain minus short term capital loss) 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 stock 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 that would increase the shares reserved
for issuance thereunder by 150,000 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 450,000 shares of Common Stock have
been previously reserved for issuance under the Employee Stock Purchase Plan. As
of April 30, 1997, and after giving effect to the amendment to the Employee
Stock Purchase Plan, 390,608 shares had been issued under the Employee Stock
Purchase Plan, and 159,392 shares remained available for future grants.
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<PAGE> 13
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.
PURPOSE
The purpose of the Employee Stock Purchase Plan is to provide employees of
the Company (and any of its subsidiaries that are 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 Mr. Cohen and Drs. 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 designated by the Board) 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
(the "Offering Date") 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 of six months duration, 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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<PAGE> 14
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 Offering Date to participants 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 on the Offering Date, 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
total combined 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 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
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<PAGE> 15
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.
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.
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 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
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<PAGE> 16
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. 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.
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 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. 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.
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.
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, 1997, 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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<PAGE> 17
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 31, 1997 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>
Heraeus Med GmbH(3)................................................. 4,609,345 37.9%
Thomas B. Boyd...................................................... 80,358 *
David Cohen(4)...................................................... 0 *
Roy Fiebiger........................................................ 28,486 *
Klaus Goffloo(4).................................................... 0 *
Benjamin L. Holmes.................................................. 44,583 *
Thomas Ihlenfeldt(4)................................................ 0 *
Bonnie Jones(5)..................................................... 86,959 *
Dennis LaLumandiere................................................. 61,266 *
E. Walter Lange..................................................... 26,250 *
Robert V. McCormick................................................. 331,832 2.7%
Rodney Perkins, M.D................................................. 147,717 1.2%
Robert J. Pressley, Ph.D............................................ 42,266 *
Eric M. Reuter...................................................... 8,033 *
All directors and executive officers as a group (13
persons)(3), (4).................................................. 5,467,095 42.7%
</TABLE>
- ---------------
* Less than 1%.
(1) The persons named in this table have sole voting and investment power with
respect to all shares of Laserscope 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 31, 1997: Mr. Boyd -- 76,378;
Mr. Fiebiger -- 27,236; Mr. Holmes -- 42,083; Ms. Jones -- 79,332; Mr.
LaLumandiere -- 57,290; Mr. Lange -- 21,250; Mr. McCormick -- 226,874; Dr.
Perkins -- 81,250 Dr. Pressley -- 21,250; Mr. Reuter -- 7,833.
(3) Does not include up to 500,000 shares of Laserscope common stock which
Laserscope may issue to Heraeus Med in certain circumstances in connection
with its indemnification obligations to Heraeus Med in connection with
Laserscope's acquisition of Heraeus Surgical, Inc. Includes a total of
640,776 shares subject to options exercisable within 60 days of March 31,
1997.
(4) Messrs. Cohen, Goffloo and Ihlenfeldt are affiliated with Heraeus Med and
may be deemed to exercise beneficial ownership of the shares of Laserscope
common stock held by Heraeus Med. Messrs. Cohen, Goffloo and Ihlenfeldt
disclaim beneficial ownership of the shares of Laserscope common stock held
by Heraeus Med.
(5) Ms. Jones resigned as an officer of the Company effective January 1997.
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<PAGE> 18
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
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 corporate performance and to
their individual 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 -- 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
necessary to maintain compensation levels and programs that are competitive
in the local employment market.
3. Shareholder Return -- Ultimately, management's responsibility is to
generate a return for the Company's shareholders by growing both the size
and the profitability of the Company. Executive compensation programs must
align management's interests with those of the Company's shareholders.
COMPENSATION OF EXECUTIVE OFFICERS
Laserscope's executive compensation consists of three parts; (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, market surveys of
remuneration in comparable positions, level of responsibility and relative
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 1997 cash bonuses are related to operating profit. No
bonuses are paid unless the Company achieves at least 70% of our targeted
levels. These target bonuses increase 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 obviously a key element in aligning the interests of
management and shareholders, since they jointly share in stock value increases
over time. Multi-year 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.
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<PAGE> 19
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 5% to $276,615 effective December 23, 1996. More importantly,
the Committee continued the structure of Mr. McCormick's compensation to
maintain a long term focus on the growth 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 45% 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 1996, Mr. McCormick received a
cash bonus in the amount of $129,486.
Mr. McCormick was granted an option to purchase 40,000 shares of Common
Stock (vesting over four years) in April 1996 at an exercise price of $3.48. In
aggregate, Mr. McCormick has been granted options to purchase a total of 495,000
shares of Common Stock at exercise prices of $2.00 to $6.00 with vesting periods
of four to five years, depending on the specific option granted.
HUMAN RESOURCES COMMITTEE
David Cohen
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: David Cohen, 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 in September 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. During 1995 the principal and accrued interest on these
notes were refinanced and the notes now carry annual interest rates of 5.79%. At
December 31, 1996, Dr. Perkins owed an aggregate of $136,067 under such notes,
the largest amount of indebtedness owed by him to the Company at any time during
1996.
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 is also a founding shareholder of NovaCept (formerly AcuVasive,
and, prior to that, Envision Surgical Systems), a manufacturer of
microvisualization catheter products. Mr. McCormick resigned as a member of
NovaCept's Board of Directors on September 18, 1996. Dr. Perkins and the Company
are each holders of NovaCept's capital stock. See "Transactions with Management
and Others."
Dr. Pressley purchased an aggregate of 16,667 shares of the Company's
Common Stock in September 1989 under the Company's 1984 Stock Purchase Plan at
an aggregate price of $75,002. Dr. Pressley purchased such shares through
promissory notes in favor of the Company bearing interest at the annual rate 9%
and secured by the shares purchased. During 1995 the principal and accrued
interest on these notes were refinanced and the notes now carry annual interest
rates of 5.79%. At December 31, 1996, Dr. Pressley owed an aggregate of $136,353
under such notes, the largest amount of indebtedness owed by him to the Company
at any time.
17
<PAGE> 20
Mr. Cohen's firm served as counsel to Heraeus Med and HSI in connection
with the Company's acquisition of HSI (the "HSI Acquisition"). In accordance
with the Company's acquisition agreement ("Heraeus Agreement") dated April 23,
1996 with Heraeus Med pursuant to which the Company acquired HSI, the Company
appointed three designees of Heraeus Med (the "Heraeus Directors") to the
Company's Board of Directors. The Heraeus Agreement requires the Company to use
its best efforts to have three nominees of Heraeus Med elected to the Board of
Directors for so long as Heraeus Med owns at least 3.3 million shares of Company
Common Stock, two nominees of Heraeus Med elected to the Board for so long as
Heraeus Med owns at least 1.6 million shares of Company Common Stock and one
nominee of Heraeus Med elected to the Board for so long as Heraeus Med owns at
least 600,000 shares of Company Common Stock. Messrs. Cohen, Goffloo and
Ihlenfeldt are the initial Heraeus Directors and were appointed to the Company's
Board of Directors on August 30, 1996. Under the Heraeus Agreement, the Company
and Heraeus Med have certain continuing obligations to each other. These
obligations include: reciprocal indemnification obligations in connection with
the HSI Acquisition; Heraeus Med's obligation not to develop, manufacture,
service or sell hospital or physician office-based laser surgical systems or
accessories prior to August 30, 2003; and the Company's obligation not to
develop, manufacture, service or sell products outside the United States based
on the mounting device technology licensed to the Company prior to August 30,
2006. In addition, the Company is obligated to register the Common Stock issued
to Heraeus Med (the "Heraeus Shares") as partial consideration for HSI. The
Company has also agreed to pay all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any registration in connection with any such
registration. The Company and Heraeus Med have agreed to customary reciprocal
indemnification obligations in connection with any such registration.
The Company has entered into a supply relationship with Heraeus Med
pursuant to which Hereaus Med has agreed to supply the Company certain products
for resale and for use in the Company's production process. During 1996, the
Company purchased approximately $937,000 of such products pursuant to the
Hereaus Med supply arrangement.
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.
18
<PAGE> 21
PERFORMANCE GRAPH
The following graph summarizes cumulative total shareholder return data
(assuming reinvestment of dividends) for the period since December 31, 1991. The
graph assumes that $100 was invested on December 31, 1991 (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
<TABLE>
<CAPTION>
MG MEDICAL
MEASUREMENT PERIOD CRSP NASDAQ INDEX INSTRUMENTS AND
(FISCAL YEAR COVERED) (U.S.) LASERSCOPE (LSCP) SUPPLIES INDEX
<S> <C> <C> <C>
12/31/91 100 100 100
12/31/92 116 69 89
12/31/93 134 72 75
12/30/94 131 48 83
12/29/95 184 25 134
12/31/96 227 82 140
</TABLE>
19
<PAGE> 22
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table shows the compensation received by the Company's Chief
Executive Officer, the five other most highly compensated executive officers of
the Company for 1996 who were serving as executive officers at December 31,
1996, 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 1996 $ 263,455 $ 129,486 40,000 $15,706
President and Chief Executive Officer 1995 $ 248,060 -- 165,000 $18,186
1994 $ 236,250 -- -- $15,430
Thomas B. Boyd 1996 $ 171,350 $ 51,749 40,000 $13,232
Senior Vice President of Operations 1995 $ 168,324(7) -- 45,000 $13,219
and International 1994 $ 183,428(8) $ 20,000 65,000 $ 9,111
Roy Fiebiger 1996 $ 158,292 $ 47,888 40,000 $10,199
Senior Vice President of Marketing, 1995 $ 48,557(9) $ 10,000 65,000 $ 1,869
Sales and Service 1994 -- -- -- --
Bonnie Jones 1996 $ 122,491 $ 36,993 40,000 $10,819
Vice President of Human 1995 $ 107,330 -- 35,000 $ 6,252
Resources(10) 1994 $ 99,750 -- 15,000 $ 4,552
Dennis LaLumandiere 1996 $ 124,426 $ 37,580 40,000 $ 9,543
Vice President of Finance, Chief 1995 $ 119,690 -- 40,000 $ 3,279
Financial Officer and Assistant 1994 $ 103,500 -- 15,000 $ 1,548
Secretary
Eric M. Reuter 1996 $ 104,114(11) $ 10,519 50,000 $ 2,462
Vice President of Research and 1995 -- -- -- --
Development(11) 1994 -- -- -- --
</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 1994, 1995 and 1996 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 options granted in 1994, 1995 and 1996 to
existing employees also have 5-year terms but become exercisable
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 termination upon 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 determined that
20
<PAGE> 23
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) benefit plan and
certain other employee benefits, including payment of disability and group
term life insurance premiums and a car allowance.
(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
commencement of his employment on 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) Includes salary paid to Mr. Fiebiger during the period beginning on the
commencement of his employment on August 28, 1995 and ending on December
31, 1995.
(10) Ms. Jones resigned as an officer of the Company effective January 1997.
(11) Includes salary paid to Mr. Reuter during the period beginning on the
commencement of his employment on August 22, 1996 and ending on December
31, 1996 and $70,614 paid to Mr. Reuter in connection with the relocation
of his principal residence to the San Jose metropolitan area.
21
<PAGE> 24
STOCK OPTION GRANTS IN 1996
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 1996 and the value of all options held by such executive officers on December
31, 1996.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------ ANNUAL RATES OF
% OF TOTAL STOCK
OPTIONS PRICE APPRECIATION
GRANTED TO FOR
OPTIONS EMPLOYEES EXERCISE OR OPTION TERM(3)
GRANTED IN FISCAL BASE PRICE EXPIRATION ------------------
NAME (SHARES)(1) YEAR(2) (PER SHARE) DATE 5% 10%
- ----------------------------------- ----------- ---------- ----------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert V. McCormick................ 40,000(4) 6.2% $3.48 4/04/01 $38,500 $ 85,100
Thomas B. Boyd..................... 40,000(4) 6.2% $3.48 4/04/01 $38,500 $ 85,100
Roy Fiebiger....................... 40,000(4) 6.2% $3.48 4/04/01 $38,500 $ 85,100
Bonnie Jones(6).................... 40,000(4) 6.2% $3.48 4/04/01 $38,500 $ 85,100
Dennis LaLumandiere................ 40,000(4) 6.2% $3.48 4/04/01 $38,500 $ 85,100
Eric M. Reuter..................... 50,000(5) 7.8% $4.63 8/29/01 $63,900 $141,200
</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 641,225 shares
of Common Stock during 1996.
(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 April 4, 1996.
(5) Options listed were granted on August 29, 1996.
(6) Ms. Jones resigned as an officer of the Company effective January 1997.
22
<PAGE> 25
AGGREGATED OPTION EXERCISES IN 1996
AND YEAR-END OPTION VALUES
The following table sets forth information for the named executive officers
with respect to exercises in 1996 of options to purchase Common Stock of the
Company.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT 12/31/96: AT 12/31/96:
ON VALUE -------------------- ----------------------
NAME EXERCISE REALIZED
- -------------------------------------- -------- -------- (EXERCISABLE/ (EXERCISABLE/
UNEXERCISABLE) UNEXERCISABLE)(1)
-------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert V. McCormick................... -- -- 340,729 / 154,271 $ 448,500 / $ 528,400
Thomas B. Boyd........................ -- -- 61,144 / 88,856 $ 87,200 / $ 241,500
Roy Fiebiger.......................... -- -- 19,899 / 85,101 $ 75,800 / $ 311,100
Bonnie Jones(2)....................... -- -- 75,639 / 71,361 $ 101,100 / $ 212,100
Dennis LaLumandiere................... -- -- 54,541 / 68,959 $ 93,900 / $ 210,800
Eric M. Reuter........................ -- -- -- / 50,000 -- / $ 81,300
</TABLE>
- ---------------
(1) Based on the closing price of the Company's Common Stock as reported on the
Nasdaq National Market System on December 31, 1996 of $6.25 per share.
(2) Ms. Jones resigned as an officer of the Company effective January 1997.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In March 1994, the Company entered into Management Continuity Agreements
with each of its executive officers, which were amended in December 1994. These
agreements provide (1) for continued
employment or salary continuation at the Company or its successor for at least
twelve (12) months following any Change in Control of the Company (as defined
below), at the same salary and with the same benefit program as were in effect
prior to such Change in Control, (2) that such executives may, with thirty (30)
days written prior notice, resign but will be entitled to receive his or her
current salary and level of benefits for the remainder of the twelve (12) months
following the Change in Control 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 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.
23
<PAGE> 26
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
TO THE COMPANY
TOTAL SHARES AGGREGATE AS OF
PURCHASER PURCHASED PRICE 12/31/96(1)(2)
- ------------------------------------------------------- ------------ --------- --------------
<S> <C> <C> <C>
Rodney Perkins, M.D.................................... 16,667 $75,001 $136,067
Robert J. Pressley, Ph.D............................... 16,666 $74,997 $136,353
</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 1996 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.
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.
The Company has entered into a supplier relationship with Heraeus Med
pursuant to which Hereaus Med has agreed to supply the Company certain products
for resale and for use in the Company's production process. During 1996, the
Company purchased approximately $937,000 of such products pursuant to the
Hereaus Med supply arrangement.
Under the Heraeus Agreement, the Company and Heraeus Med have certain
continuing obligations to each other. These obligations include: reciprocal
indemnification obligations in connection with the HSI Acquisition; Heraeus
Med's obligation not to develop, manufacture, service or sell hospital or
physician office-based laser surgical systems or accessories prior to August 30,
2003; the Company's obligation (subject to certain limitations described below)
to use its best efforts to have a specified number of Heraeus Med designees
elected to the Company's Board of Directors; and the Company's obligation not to
develop, manufacture, service or sell products outside the United States based
on the mounting device technology licensed to the Company prior to August 30,
2006. In addition, the Company is obligated to register the Heraeus Shares
issued to Heraeus Med as partial consideration for the acquisition of HSI and
has agreed to pay all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses and the expense of any special audits incident to or
required by any registration in connection with any such registration. The
Company and Heraeus Med have agreed to customary reciprocal indemnification
obligations in connection with any such registration.
The Heraeus Agreement requires the Company to use its best efforts to have
three nominees of Heraeus Med elected to the Board of Directors for so long as
Heraeus Med owns at least 3.3 million shares of Company Common Stock, two
nominees of Heraeus Med elected to the Board for so long as Heraeus Med owns at
least 1.6 million shares of Company Common Stock and one nominee of Heraeus Med
elected to the Board for so long as Heraeus Med owns at least 600,000 shares of
Company Common Stock. Messrs. Cohen, Goffloo and Ihlenfeldt are the initial
Heraeus Directors and were appointed to the Company's Board of Directors on
August 30, 1996. Mr. Goffloo is Chairman of Heraeus Med and is a member of the
Board of Directors of
24
<PAGE> 27
Hereaus Holding Company, Heraeus Med's parent company. Mr. Ihlenfeldt is
Managing Director of Heraeus Med. From 1990 through 1995 Mr. Ihlenfeldt served
as President and Chief Executive Officer of Heraeus Surgical, Inc. Mr. Cohen's
firm served as counsel to Heraeus Med and HSI in connection with the Company's
acquisition of HSI.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and changes in
ownership of the Company's Common Stock. Reporting Persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, based solely on its review of the copies of
such reports received or written representations from certain Reporting Persons
that no other reports were required, the Company believes that during its fiscal
year ended December 31, 1996, all Reporting Persons complied with all applicable
filing requirements, except as follows: Eric Reuter, the Company's Vice
President of Research and Development, on April 9, 1997, amended his Form 3
filed on August 30, 1996 to reflect his ownership of 200 shares of Company
Common Stock and an option to acquire 50,000 shares of Company Common Stock.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 1998 Annual Meeting must be received by
the Company no later than January 20, 1998 in order that they may be included in
the proxy statement and form of proxy relating to that meeting.
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
CRAIG W. JOHNSON
Secretary
Dated: May 23, 1997
25
<PAGE> 28
LASERSCOPE
1994 STOCK OPTION PLAN
(AS AMENDED THROUGH APRIL 21, 1997)
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
<PAGE> 29
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 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.
-2-
<PAGE> 30
(p) "Nonstatutory Stock Option" shall mean an Option not
intended to qualify as an Incentive Stock Option.
(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 2,100,000 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.
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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.
(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:
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<PAGE> 32
(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;
(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,
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<PAGE> 33
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.
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
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<PAGE> 34
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;
(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.
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<PAGE> 35
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 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
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<PAGE> 36
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
(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.
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<PAGE> 37
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:
(a) the election must be made on or prior to the
applicable Tax Date;
(b) all elections shall be subject to the consent or
disapproval of the Administrator.
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.
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<PAGE> 38
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.
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.
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<PAGE> 39
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.
(b) Shareholder Approval. If any amendment requiring
shareholder approval under Section 16(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
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<PAGE> 40
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.
(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
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<PAGE> 41
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.
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<PAGE> 42
LASERSCOPE
1989 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED THROUGH APRIL 30, 1997)
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> 43
(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.
<PAGE> 44
(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.
-3-
<PAGE> 45
(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.
-4-
<PAGE> 46
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.
-5-
<PAGE> 47
(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 600,000
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.
-6-
<PAGE> 48
(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
-7-
<PAGE> 49
Plan which has not yet been exercised, 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 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.
-8-
<PAGE> 50
(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.
(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.
-9-
<PAGE> 51
EXHIBIT A
LASERSCOPE
1989 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_________ Original Application Offering 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:
________________________________________________________________________
________________________________________________________________________
_______.
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<PAGE> 52
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 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)
-2-
<PAGE> 53
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
-3-
<PAGE> 54
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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<PAGE> 55
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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<PAGE> 56
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF LASERSCOPE
1997 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 May 23, 1997, 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 1997 Annual Meeting of Shareholders of
Laserscope to be held on June 27, 1997 at 9:00 a.m., local time, at the
Company's principal executive offices at 3052 Orchard Drive, San Jose,
California 95134 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) hereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
-------------
SEE REVERSE
SIDE
-------------
<PAGE> 57
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
<TABLE>
<S> <C> <C> <C>
FOR ALL NOMINEES WITHHOLD AUTHORITY TO
LISTED TO THE RIGHT VOTE FOR ALL NOMINEES
(EXCEPT AS INDICATED) LISTED TO THE RIGHT
1. Election of / / / / NOMINEES: David Cohen
Directors Klaus Goffioo
Thomas Ihlenfeldt
Benjamin L. Holmes
E. Walter Lange
Robert V. McCormick
Rodney Perkins, M.D.
Robert J. Pressley, Ph.D.
</TABLE>
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.
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 400,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
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 150,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
4. Proposal to ratify the appointment of Ernst & Young as the independent
auditors of the Company for the year ending December 31, 1997.
FOR AGAINST ABSTAIN
/ / / / / /
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 FOR 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 capacity should so indicate. If shares
are held by joint tenants or as community property, both should sign.
