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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
LASERSCOPE
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
LASERSCOPE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] 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
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(2) Aggregate number of securities to which transaction applies:
N/A
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(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
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(5) Total fee paid:
N/A
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[ ] 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:
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(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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LOGO
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 23, 1998
------------------------
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 Tuesday, June 23, 1998 at 9:00 a.m. local time, for the following
purposes:
1. To elect the following directors to serve for the ensuing year and
until their successors are elected: Benjamin L. Holmes, E. Walter Lange,
Robert V. McCormick, Rodney Perkins, M.D. and Robert J. Pressley, Ph.D.
2. To authorize an amendment to the Company's 1994 Stock Option Plan
to increase the number of shares of Common Stock reserved for issuance
thereunder by 450,000 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, 1998.
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 11, 1998 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 19, 1998
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON, YOU ARE URGED TO SIGN AND MAIL THE ENCLOSED PROXY IN THE RETURN ENVELOPE
PROMPTLY SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
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LOGO
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PROXY STATEMENT
FOR 1998 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 Tuesday, June 23, 1998 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 19, 1998 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
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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 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 $7,500 for its
services including its usual and proper out of pocket expenses. 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 11,
1998 are entitled to notice of and to vote at the meeting. As of May 11, 1998,
12,373,468 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 five directors. See "Heraeus Med
Arrangements." At the Annual Meeting, the Board of Directors has nominated five
directors to be elected to serve until the next Annual Meeting and until their
successors are elected and qualified at the meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
Company's five nominees named below, all of whom are presently directors of the
Company. In the event that any nominee of the Company is unable or declines to
serve as a director at the time of the Annual Meeting, the proxies will be voted
for any nominee who shall be designated by the present Board of Directors to
fill the vacancy. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies received by
them in such a manner in accordance with cumulative voting as will assure the
election of as many of the nominees listed below as possible and, in such event,
the specific nominees for whom the proxy holders will vote will be determined by
the proxy holders. Assuming a quorum is present, the nominees for director
receiving the greatest number of votes cast at the Annual Meeting will be
elected, up to the number of directors authorized by the Company's Bylaws. The
term of office of each person elected as a director will continue until the next
Annual Meeting of Shareholders or until his or her successor has been elected
and qualified.
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The nominees' names, ages as of December 31, 1997, 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................... 63 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
E. Walter Lange...................... 65 Business consultant; former Group Vice 1992
President, Eli Lilly & Co.
Robert V. McCormick.................. 53 President and Chief Executive Officer of the 1992
Company
Rodney Perkins, M.D. ................ 61 Practicing otologic surgeon; President of the 1984
California Ear Institute at Stanford, a clinic
specializing in the diagnosis and treatment of
hearing disorders; President of Project HEAR, a
non-profit research organization
Robert J. Pressley, Ph.D. ........... 65 Technology consultant; former President and 1984
Chief Executive Officer of Candescent
Technologies Corporation (formerly named
Silicon Video Corporation)
</TABLE>
Except as set forth below, each of the nominees has been engaged in the
principal occupation set forth next to his name above during the past five
years. There is no family relationship between any director or executive officer
of the Company.
BENJAMIN L. HOLMES has been a director of the Company since January 1992
and was appointed Chairman of the Board of Directors in June 1995. Mr. Holmes
was General Manager of the Medical Products Group of Hewlett-Packard Company
("HP") from 1983, and a Vice President of HP, from 1985 until his retirement in
October 1995. Mr. Holmes is a member of the Board of Directors of Project HOPE
and the Massachusetts High Technology Council. He is also a member of the
Massachusetts Governor's Council on Economic Growth and Technology, Past
Commissioner of the Massachusetts Universal Health Care Commission, and a past
member of the Board on Health Care Service, Institute of Medicine, National
Academy of Sciences. He is also Past Chairman of the Board of Directors of the
Health Industry Manufacturers Association (HIMA).
ROBERT V. McCORMICK has been President of the Company since December 1991
and Chief Executive Officer since July 1992. Between December 1991 and July 1992
he also served as the Company's Chief Operating Officer. He has been a director
of the Company since July 1992. Mr. McCormick also served as the Company's
Senior Vice President of Marketing and Field Operations from April 1991 to
December 1991. Mr. McCormick was employed by Acuson Corporation, a manufacturer
of medical imaging equipment, from 1983 to April 1991 in a variety of sales and
marketing executive positions culminating as Vice President of Marketing and
Field Operations.
E. WALTER LANGE has been a Director of the Company since January 1992. Mr.
Lange has more than 31 years of experience in the pharmaceutical industry,
having served in a variety of executive positions at Eli Lilly & Co. from 1960
to 1991. Most recently, Mr. Lange was Group Vice President of Marketing,
Planning and Development and was responsible for Lilly's worldwide product
planning, corporate strategic planning, business development and market
research. Mr. Lange has been a self-employed business consultant since 1991.
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 Professor
of Surgery at Stanford University School of Medicine, and is the founder and
President of
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Project HEAR a non-profit medical institute for ear research and education. Dr.
Perkins is a founder of Collagen Corporation, a biomaterials company. Dr.
Perkins is also a founder and the Chairman of the Board of Directors of ReSound
Corporation, a hearing health care company.
ROBERT J. PRESSLEY, Ph.D. is a co-founder of the Company and has been a
Director since its founding. Dr. Pressley co-founded Candescent Technologies
Corporation (formerly named 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. Dr. Pressley has been a
self-employed technology consultant since January 1995.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings during
the year ended December 31, 1997. 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 currently consists of Messrs.
Lange and Holmes. Thomas Ihlenfeldt served as a member of the Audit Committee
during the year ended December 31, 1997. Mr. Ihlenfeldt resigned his
directorship on May 7, 1998. See "Heraeus Med Arrangements." The Audit Committee
held five meetings during 1997. 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 currently consists
of Drs. Pressley and Perkins. David Cohen served as a member of the Human
Resources Committee during the year ended December 31, 1997. Mr. Cohen resigned
his directorship on May 7, 1998. See "Heraeus Med Arrangements." It held five
meetings during 1997. 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. Mr. Klaus Goffloo served as a
director during the year ended December 31, 1997. Mr. Goffloo resigned his
directorship on May 7, 1998. See "Heraeus Med Arrangements."
HERAEUS MED ARRANGEMENTS
On May 7, 1998, Heraeus Med GmbH ("Heraeus Med") sold 4,268,345 shares of
Laserscope common stock, constituting all the shares of Laserscope common stock
held by Heraeus Med, to certain investors (the "Investors") in a private
placement transaction (the "Private Placement"). In connection with the Private
Placement, Laserscope agreed to register with the Securities and Exchange
Commission, prior to June 7, 1998, the shares acquired from Heraeus Med by the
Investors. In addition, on April 29, 1998, Laserscope's Board of Directors
approved the Private Placement and related matters, excluding these transactions
from the application of (a) Laserscope's Common Shares Rights Agreement dated as
of October 31, 1996, as amended, (b) Laserscope's management continuity
agreements with certain of its executive officers and (c) the standstill
provisions of the Heraeus Agreement (as defined below). Under the terms of an
agreement dated April 22, 1996 (the "Heraeus Agreement") between Heraeus and
Laserscope, Laserscope agreed to use its best efforts to elect nominees of
Heraeus Med to Laserscope's Board of Directors provided Heraeus Med held
specified amounts of Laserscope Common Stock. Specifically, the Heraeus
Agreement obligated the Company to use its best efforts to have three nominees
of Heraeus Med elected to the Board of Directors so long as Heraeus Med owns at
least 3.3 million shares of Laserscope's Common Stock, two nominees of Heraeus
Med elected to the Board of Directors so long as Heraeus Med owns at least 1.6
million shares of Laserscope Common Stock and one nominee of Heraeus Med so long
as Heraeus Med owns at least 600,000 shares of Laserscope Common Stock. Messrs.
David Cohen, Klaus Goffloo and Thomas Ihlenfeldt
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were the Heraeus Med nominees (the "Heraeus Directors") to the Laserscope Board
of Directors. As a result of the Private Placement, Heraeus Med no longer holds
shares of Laserscope Common Stock and Laserscope no longer is obligated to
nominate Heraeus designees to the Laserscope Board of Directors.
On May 7, 1998, in connection with the consummation of the Private
Placement, Messrs. Cohen, Goffloo and Ihlenfeldt resigned from Laserscope's
Board of Directors. In connection with such resignations, Laserscope's Board,
pursuant to the Company's Bylaws, reduced the number of Laserscope directors
from eight to five.
The Company has entered into a supply relationship with Heraeus Med
pursuant to which Heraeus Med has agreed to supply the Company certain products
for resale and for use in the Company's production process. During 1997, the
Company purchased approximately $2,161,000 of such products pursuant to the
Heraeus 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 in the aggregate. On May 7, 1998, the
Heraeus Directors resigned from the Company's Board of Directors. See "Proposal
No. 1 -- Election of Directors -- Heraeus Med Arrangements."
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 of Directors 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-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 of Directors 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.
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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 450,000 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 2,100,000 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 2,550,000 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 in 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; only employees may be granted "incentive stock options." 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 (ERISA).
As of April 15, 1998 and after giving effect to the amendment to the 1994
Option Plan, 147,949 shares had been issued upon exercise of options granted
under the 1994 Option Plan, options for 1,594,492 shares were outstanding under
the 1994 Option Plan and 807,559 shares remain available for future grants. As
of April 15, 1998, the fair market value of shares subject to outstanding
options was $4,285,994 based upon the closing price of the Common Stock as
reported on the Nasdaq Stock Market on such date.
During the year ended December 31, 1997, (i) options to purchase 200,000
shares of Common Stock were granted under the 1994 Option Plan to the current
executive officers as a group (six persons as of December 31, 1997), and (ii)
options to purchase 515,600 shares of Common Stock were granted under the 1994
Option Plan to all other employees.
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
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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.
(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, as amended, 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 Stock 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
30 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
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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
or her 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. In no event may an
option be exercised by any person after the expiration of its term.
(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 12 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. 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. In no event may
an option be exercised by any person after the expiration of its term.
(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, 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.
8
<PAGE> 12
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 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 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 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% for shares held more than one year, but not more
than 18 months after the date of exercise, and 20% for shares held more than 18
months after the date of exercise. Capital losses are allowed under U.S. tax
laws in full against capital gains plus $3,000 of other income.
9
<PAGE> 13
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.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE AMENDMENT OF THE 1994
STOCK OPTION PLAN.
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<PAGE> 14
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 600,000 shares of Common Stock have
been previously reserved for issuance under the Employee Stock Purchase Plan. As
of April 15, 1998, and after giving effect to the amendment to the Employee
Stock Purchase Plan, 495,223 shares had been issued under the Employee Stock
Purchase Plan, and 254,777 shares remain available for future grants.
The Employee Stock Purchase Plan, and the right of participants to make
purchases thereunder, is intended to qualify under Section 423 of the Code. The
Employee Stock Purchase Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code, and is not subject to the provisions of ERISA.
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 of
Directors) 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 of
Directors or a committee appointed by the Board of Directors. 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
of Directors or its committee, and its decisions are final and binding upon all
participants. Members of the Board of Directors 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 of Directors 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 of Directors) for at least 20 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.
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<PAGE> 15
OFFERING DATES
The Employee Stock Purchase Plan is implemented by consecutive 24-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 of Directors 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, 18
and 24 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 of Directors for all eligible employees with respect to a given offering.
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 Stock 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
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<PAGE> 16
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 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 Employee
Stock Purchase 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.
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<PAGE> 17
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors 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 the Employee Stock Purchase Plan
to consult their own tax advisors concerning tax implications of the purchase
and disposition of stock acquired 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% for
shares held more than one year, but not more than 18 months after the date of
exercise, and 20% for shares held more than 18 months after the date of
exercise. 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.
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<PAGE> 18
RECOMMENDATION OF THE BOARD OF DIRECTORS
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, 1998, 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 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.
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 May 11, 1998 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 22, and (iv)
all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
-----------------------------
NUMBER(2) PERCENT OF TOTAL
--------- ----------------
<S> <C> <C>
Entities affiliated with Special Situations Fund L.P........ 1,900,000 15.4%
153 East 53rd Street, 51st Floor
New York, NY 10022(3)
Thomas B. Boyd.............................................. 124,325 1.0%
Kevin Candio................................................ 75,723 *
Roy Fiebiger(4)............................................. 1,250 *
Benjamin L. Holmes.......................................... 75,625 *
Dennis LaLumandiere......................................... 94,205 *
E. Walter Lange............................................. 43,750 *
Robert V. McCormick......................................... 389,288 3.1%
Rodney Perkins, M.D. ....................................... 165,217 1.3%
Robert J. Pressley, Ph.D. .................................. 59,766 *
Eric M. Reuter.............................................. 28,867 *
All directors and executive officers as a group (11
persons).................................................. 3,006,880 22.7%
</TABLE>
- ---------------
* Less than 1%.
(1) The persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the other footnotes to this table. Unless otherwise indicated,
the address of each individual named above is: c/o Laserscope 3052 Orchard
Drive, San Jose, California 95134-2011.
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<PAGE> 19
(2) Includes with respect to each named person and with respect to all directors
and executive officers as a group the following shares subject to options
exercisable within 60 days of May 11, 1998: Mr. Boyd -- 119,374; Mr.
Candio -- 43,958; Mr. Fiebiger -- 48,854; Mr. Holmes -- 73,125; Mr.
LaLumandiere -- 89,896; Mr. Lange -- 38,750; Mr. McCormick -- 280,858; Dr.
Perkins -- 98,750; Dr. Pressley -- 38,750; Mr. Reuter -- 28,667.
(3) Includes 500,000 shares held by Special Situations Private Equity Fund L.P.,
1,050,000 shares held by Special Situations Fund III, L.P. and 350,000
shares held by Special Situations Cayman Fund L.P.
(4) Mr. Fiebiger resigned from the Company effective March 28, 1998.
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 21 shall not be incorporated by reference into any
such filings.
REPORT OF THE HUMAN RESOURCES COMMITTEE
EXECUTIVE COMPENSATION PHILOSOPHY
The Company's executive officers are responsible for the achievement of the
Company's broad business goals and, accordingly, their compensation continues to
be determined by reference both to corporate performance and to their individual
performance. Of these two elements, the Human Resources Committee believes
corporate performance should 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 -- Rewarding individual executives for their
individual performance as well as for the overall performance of the
Company.
2. Competitive Environment -- Attracting and retaining talented
individuals requires the Company to maintain compensation levels and
programs that are competitive in the relevant 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, surveys of
remuneration in comparable positions in the relevant geographic area, 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 1998, cash bonuses are related to operating profit. No
bonuses are paid unless the Company achieves at least 70% of targeted profit
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 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 is reviewed at the end of each year and additional awards are
considered to optimize the level of incentives and rewards.
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<PAGE> 20
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.
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 $290,446 effective January 5, 1998. 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 in 1998 for a target cash bonus of 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, but is capped at 75% of his base salary. Based on the Company's
performance in 1997, Mr. McCormick received no cash bonus.
Mr. McCormick was granted an option to purchase 30,000 shares of Common
Stock (vesting over four years) in December 1997 at an exercise price of $4.63.
In aggregate, Mr. McCormick has been granted options to purchase a total of
525,000 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
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 served as Chief Executive Officer of Laserscope from February
to May 1987 and from October 1991 to July 1992 and as President of Laserscope
form October to December 1991. 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 $75,001. 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% and are due in November 1998. At December 31,
1997, Dr. Perkins owed an aggregate of $144,155 under such notes, the largest
amount of indebtedness owed by him to the Company at any time during 1997.
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.
17
<PAGE> 21
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 $74,997. 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% and are due in November 1998. At December 31, 1997, Dr. Pressley
owed an aggregate of $144,361 under such notes, the largest amount of
indebtedness owed by him to the Company at any time.
See "Proposal No. 1 -- Election of Directors -- Heraeus Med Arrangements"
for a discussion of certain agreements between the Company and Heraeus Med.
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> 22
PERFORMANCE GRAPH
The following graph summarizes cumulative total shareholder return data
(assuming reinvestment of dividends) for the period since December 31, 1992. The
graph assumes that $100 was invested on December 31, 1992 (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 LASERSCOPE CRSP NASDAQ INSTRUMENTS AND
(FISCAL YEAR COVERED) (LSCP) INDEX (U.S.) SUPPLIES INDEX
<S> <C> <C> <C>
12/31/92 100 100 100
12/31/93 105 115 85
12/30/94 69 112 93
12/29/95 37 159 150
12/29/96 119 195 158
12/31/97 86 240 187
</TABLE>
19
<PAGE> 23
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 1997 who were serving as executive officers at December 31,
1997, 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
--------------------------- ---- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert V. McCormick 1997 $276,614 -- 30,000 $21,021
President and Chief Executive
Officer 1996 $263,455 $129,486 40,000 $15,706
1995 $248,060 -- 165,000 $18,186
Thomas B. Boyd 1997 $179,928 -- 30,000 $17,320
Senior Vice President of Operations
and 1996 $171,350 $ 51,749 40,000 $13,232
International 1995 $168,324(7) -- 45,000 $13,219
Roy Fiebiger(8) 1997 $174,000 -- -- $17,141
Senior Vice President of Marketing,
and 1996 $158,292 $ 47,888 40,000 $10,199
Strategic Development 1995 $ 48,557(9) $ 10,000 65,000 $ 1,869
Kevin Candio 1997 $115,759 $ 21,748 60,000 $ 7,082
Vice President of Sales and Service 1996 $104,190 $146,186 10,000 $ 7,235
1995 $ 83,376 $ 22,758 5,000 $ 6,498
Dennis LaLumandiere 1997 $140,000 -- 30,000 $12,862
Vice President of Finance, Chief 1996 $124,426 $ 37,580 40,000 $ 9,543
Financial Officer and Assistant
Secretary 1995 $119,690 -- 40,000 $ 3,279
Eric M. Reuter 1997 $147,500(10) -- 50,000 $13,632
Vice President of Research and 1996 $104,114(11) $ 10,519 50,000 $ 2,462
Development 1995 -- -- -- --
</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. Mr. Candio's bonuses consisted of sales commissions.
(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 1995, 1996 and 1997 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 1995, 1996 and 1997 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 earlier termination in the event of the
termination of the participant's relationship with the Company. All options
were granted at market value on the date of grant. In the event that
certain change in control events were to occur, the options would be
assumed or equivalent options substituted by a successor corporation,
unless the Board of Directors determined that the options should become
immediately exercisable. The exercise price may be paid, subject to certain
20
<PAGE> 24
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) Mr. Fiebiger resigned from the Company effective March 27, 1998.
(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) Includes $12,000 mortgage allowance paid to Mr. Reuter in connection with
the relocation of his principal residence to the San Jose metropolitan
area.
(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.
STOCK OPTION GRANTS IN 1997
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 1997 and the value of all options held by such executive officers on December
31, 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION TERM(3)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME (SHARES)(1) FISCAL YEAR(2) (PER SHARE) DATE 5% 10%
---- ----------- -------------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert V. McCormick........... 30,000(4) 4.2% $4.63 12/19/02 $38,300 $ 84,700
Thomas B. Boyd................ 30,000(4) 4.2% $4.63 12/19/02 $38,300 $ 84,700
Roy Fiebiger(6)............... -- -- -- -- -- --
Kevin Candio.................. 10,000(5) 1.4% $7.50 2/14/02 $20,700 $ 45,800
50,000(4) 7.0% $4.63 12/19/02 $63,900 $141,200
Dennis LaLumandiere........... 30,000(4) 4.2% $4.63 12/19/02 $38,300 $ 84,700
Eric M. Reuter................ 50,000(4) 7.0% $4.63 12/19/02 $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 715,600 shares
of Common Stock during 1997.
(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 December 19, 1997.
(5) Options listed were granted on February 14, 1997.
(6) Mr. Fiebiger resigned from the Company effective March 27, 1998.
21
<PAGE> 25
AGGREGATED OPTION EXERCISES IN 1997
AND YEAR-END OPTION VALUES
The following table sets forth information for the named executive officers
with respect to exercises in 1997 of options to purchase Common Stock of the
Company.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS(1) AT
12/31/97 12/31/97
SHARES --------------- --------------------
ACQUIRED ON VALUE (EXERCISABLE/ (EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- --------------- --------------------
<S> <C> <C> <C> <C>
Robert V. McCormick................ 150,000 $341,100 265,182/109,818 $243,200/$164,900
Thomas B. Boyd..................... -- -- 97,708/82,292 $ 73,200/$ 80,000
Roy Fiebiger(2).................... -- -- 41,145/63,855 $ 78,100/$125,000
Kevin Candio....................... 2,000 $ 5,600 37,249/65,751 $ 39,700/$ 10,900
Dennis LaLumandiere................ -- -- 76,937/71,563 $ 70,400/$ 64,600
Eric M. Reuter..................... -- -- 16,166/83,334 --/ --
</TABLE>
- ---------------
(1) Based on the closing price of the Company's Common Stock as reported on the
NASDAQ Stock Market on December 31, 1997 of $4.50 per share.
(2) Mr. Fiebiger resigned from the Company effective March 27, 1998.
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 expired in April 1998 and replacement agreements were subsequently
approved in April 1998. These agreements provide (1) for continued employment or
salary continuation at the Company or its successor for at least twelve (12)
months (the "Severance Period") 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, in addition to providing an automatic
45% bonus for Laserscope's chief executive officer and a 25% bonus for other
executives, with such payments to be made either during the Severance Period in
accordance with Laserscope's standard payroll practices, or, at the election of
the officer, in lump sum within ten days of the officer's termination date, (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 or
if in connection with such Change in Control the executive's salary is reduced,
(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.
22
<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% and are due in November
1998.
<TABLE>
<CAPTION>
INDEBTEDNESS
TO THE COMPANY
TOTAL SHARES AGGREGATE AS OF
PURCHASER PURCHASED PRICE 12/31/97(1)(2)
--------- ------------ --------- --------------
<S> <C> <C> <C>
Rodney Perkins, M.D. .................................. 16,667 $75,001 $144,155
Robert J. Pressley, Ph.D. ............................. 16,666 $74,997 $144,361
</TABLE>
- ---------------
(1) In all cases, the amount shown was also the largest amount of indebtedness
owed to the Company at any time during 1997.
(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 1997 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.
During 1997 Dr. Pressley received $5,000 in compensation from the Company
for consulting services to the Company beyond his duties as a Board member.
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.
See "Proposal No. 1 -- Election of Directors -- Heraeus Med Arrangements"
for a discussion of certain agreements between the Company and Heraeus Med.
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, 1997, all Reporting Persons complied with all applicable
filing requirements.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 1999 Annual Meeting must be received by
the Company no later than January 13, 1999 in order that they may be included in
the proxy statement and form of proxy relating to that meeting.
23
<PAGE> 27
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 19, 1998
24
<PAGE> 28
LASERSCOPE
1994 STOCK OPTION PLAN
(AS AMENDED THROUGH APRIL 29, 1998)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Board and as reflected in
the terms of the written option agreement.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" shall mean the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" shall have the meaning set forth in Section 4(a)
below.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with Section 4(a) below, if one is appointed.
(f) "Common Stock" shall mean the Common Stock of the Company.
(g) "Company" shall mean Laserscope, a California corporation.
(h) "Consultant" shall mean any person who is engaged by the Company
or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, and any director of the Company
whether compensated for such services or not; provided that the term
Consultant shall not include directors who are not compensated for their
services or are paid only a director's fee by the Company.
(i) "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Administrator; provided that such
leave is for a period of not more than 90 days or reemployment upon the
expiration of such leave is 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;
-1-
<PAGE> 29
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the bid and asked prices for the Common
Stock or;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(o) "Named Executive" shall mean any individual who, on the last day
of the Company's fiscal year, is the chief executive officer of the Company
(or is acting in such capacity) or among the four highest compensated
officers of the Company (other than the chief executive officer). Such
officer status shall be determined pursuant to the executive compensation
disclosure rules under the Exchange Act.
(p) "Nonstatutory Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option.
(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 2,550,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares that were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan. Notwithstanding any other provision of the Plan, shares
issued under the Plan and later repurchased by the Company shall not become
available for future grant or sale under the Plan.
4. Administration of the Plan.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3 and
by the legal requirements relating to the administration of incentive
stock option plans, if any, of applicable securities laws and the Code
(collectively, the "Applicable Laws"), the Plan may (but need not) be
administered by different administrative bodies with respect to
Directors, Officers who are not Directors and Employees who are neither
Directors nor Officers.
-2-
<PAGE> 30
(ii) Administration with respect to Directors and Officers. With
respect to grants of Options to Employees or Consultants who are also
Officers or Directors of the Company, the Plan shall be administered by
(A) the Board, if the Board may administer the Plan in compliance with
Rule 16b-3 as it applies to a plan intended to qualify thereunder as a
discretionary plan and Section 162(m) of the Code as it applies so as to
qualify grants of Options to Named Executives as performance-based
compensation, or (B) a Committee designated by the Board to administer
the Plan, which Committee shall be constituted (I) in such a manner as
to permit the Plan to comply with Rule 16b-3 as it applies to a plan
intended to qualify thereunder as a discretionary plan, (II) in such a
manner as to qualify grants of Options to Named Executives as
performance-based compensation under Section 162(m) of the Code and
(III) in such a manner as to satisfy the Applicable Laws.
(iii) Administration with respect to Other Persons. With respect to
grants of Options to Employees or Consultants who are neither Directors
nor Officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws.
(iv) General. Once a Committee has been appointed pursuant to
subsection (ii) or (iii) of this Section 4(a), such Committee shall
continue to serve in its designated capacity until otherwise directed by
the Board. From time to time the Board may increase the size of any
Committee and appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution therefor, fill
vacancies (however caused) and remove all members of a Committee and
thereafter directly administer the Plan, all to the extent permitted by
the Applicable Laws and, in the case of a Committee appointed under
subsection (ii), to the extent permitted by Rule 16b-3 as it applies to
a plan intended to qualify thereunder as a discretionary plan, and to
the extent required under Section 162(m) of the Code to qualify grants
of Options to Named Executives as performance-based compensation.
(b) Powers of the Administrator. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(m) of the Plan;
(ii) to select the Employees and Consultants to whom Options may
from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(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
-3-
<PAGE> 31
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted only to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he or she is
otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair
Market Value of Stock Options are exercisable for the first time by an
Optionee during any calendar year (under all plans of the Company or any
Parent or Subsidiary) exceeds $100,000, such excess Options shall be
treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair
Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company,
nor shall it interfere in any way with his or her right or the Company's
right to terminate his or her employment or consulting relationship at any
time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the shareholders of the Company
as described in Section 20 of the Plan. It shall continue in effect for a term
of ten (10) years unless sooner terminated under Section 16 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. Limitation on Grants to Employees. Subject to adjustment as provided in
this Plan, the maximum number of Shares which may be granted under options to
any Employee under this Plan for any fiscal year of the Company shall be
325,000.
9. Option Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of
grant;
(B) granted to any Employee, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
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(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.
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.
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<PAGE> 33
(b) Termination of Status as an Employee or Consultant. In the event
of termination of an Optionee's Continuous Status as an Employee or
Consultant, such Optionee may, but only within thirty (30) days (or such
other period of time, not exceeding three (3) months as is determined by
the Administrator, with such determination in the case of an Incentive
Stock Option being made at the time of grant of the Option) after the date
of such termination (but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement), exercise his
or her Option to the extent that he or she was entitled to exercise it at
the date of such termination. To the extent that the Optionee was not
entitled to exercise the Option at the date of such termination, or if the
optionee does not exercise such Option (which he or she was entitled to
exercise) within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
10(b) above, in the event of termination of an Optionee's Continuous Status
as an Employee or Consultant as a result of his or her total and permanent
disability (as defined in Section 22(e)(3) of the Code), he or she may, but
only within six (6) months (or such other period of time not exceeding
twelve (12) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the
time of grant of the Option) from the date of such termination (but in no
event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), exercise his or her Option to the extent he
or she was entitled to exercise it at the date of such termination. To the
extent that he or she was not entitled to exercise the Option at the date
of termination, or if he does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his death
an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant
of the Option, the Option may be exercised, at any time within six (6)
months (or such other period of time, not exceeding twelve (12) months,
as is determined by the Administrator, with such determination in the
case of an Incentive Stock Option being made at the time of grant of the
Option) following the date of death (but in no event later than the date
of expiration of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance but only to the
extent of the right to exercise that would have accrued had the Optionee
continued living and remained in Continuous Status as an Employee or
Consultant six (6) months (or such other period of time as is determined
by the Administrator as provided above) after the date of death, subject
to the limitation set forth in Section 5(b); or
(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> 34
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.
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
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<PAGE> 35
shall terminate as of a date fixed by the Administrator and give each Optionee
the right to exercise his or her Option as to all or any part of the Optioned
Stock, including Shares as to which the Option would not otherwise be
exercisable. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Administrator determines, in the exercise of
its sole discretion and in lieu of such assumption or substitution, that the
Optionee shall have the right to exercise the Option as to some or all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Administrator makes an Option exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee that the Option shall be exercisable for
a period of thirty (30) days from the date of such notice, and the Option will
terminate upon the expiration of such period.
15. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Option or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval
of the shareholders of the Company in the manner described in Section 20 of
the Plan:
(i) any increase in the number of Shares subject to the Plan, other
than in connection with an adjustment under Section 14 of the Plan;
(ii) any change in the designation of the class of persons eligible
to be granted Options;
(iii) any change in the limitation on grants to employees as
described in Section 8 of the Plan or other changes which would require
shareholder approval to qualify Options granted hereunder as
performance-based compensation under Section 162(m) of the Code; or
(iv) if the Company has a class of equity securities registered
under Section 12 of the Exchange Act at the time of such revision or
amendment, any material increase in the benefits accruing to
participants under the Plan.
(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 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
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<PAGE> 36
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 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> 37
LASERSCOPE
1989 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED THROUGH APRIL 29, 1998)
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.
(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.
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<PAGE> 38
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.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately
after the grant, such Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 425(d) of the Code) would
own stock and/or hold outstanding options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any subsidiary of the Company, or
(ii) which permits his or her rights to purchase stock under all employee
stock purchase plans of the Company and its subsidiaries to accrue at a
rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock
(determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at
any time.
4. Offering Periods. The Plan shall be implemented by consecutive Offering
Periods with a new Offering Period commencing on or about July 1 of each year;
provided, however, that an Offering Period may commence on or about January 1 in
the event the provisions of Section 10 of the Plan become operative. The Plan
shall continue thereafter until terminated in accordance with paragraph 20
hereof. Subject to the shareholder approval requirements of paragraph 20, the
Board of Directors of the Company shall have the power to change the duration of
Offering Periods with respect to future offerings without shareholder approval
if such change is announced at least five (5) days prior to the scheduled
beginning of the first Offering Period to be affected.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the Company's payroll
office at least ten (10) business days prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by
the Board for all eligible Employees with respect to a given Offering
Period.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Offering Date and shall end on the last payroll of
the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in paragraph 11.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each payday during
the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each payday during the Offering
Period, and the aggregate of such payroll deductions during the Offering
Period shall not exceed ten percent (10%) of the participant's aggregate
Compensation during said Offering Period.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan. A participant may not make any
additional payments into such account.
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<PAGE> 39
(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.
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.
-12-
<PAGE> 40
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.
(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 750,000 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.
-13-
<PAGE> 41
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.
(b) If a Committee is established to administer the Plan, no member of
the Board who is eligible to participate in the Plan may be a member of the
Committee.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to
such participant of such shares and cash. In addition, a participant may
file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan who
is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the
estate of the participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to any one
or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as
the Company may designate.
16. Transferability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in paragraph 15 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with paragraph 11.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the per share purchase price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but have not yet been placed under option (collectively, the
"Reserves"), as well as the price per share of Common Stock covered by each
option under the Plan which has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in 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
-14-
<PAGE> 42
into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common
Stock subject to an option.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of a consolidation of the Company or merger with or into any other
corporation.
20. Amendment or Termination. The Board of Directors of the Company may at
any time and for any reason terminate or amend the Plan. Except as provided in
paragraph 19, no such termination can affect options previously granted,
provided that an Offering Period may be terminated by the Board of Directors on
any Exercise Date if the Board determines that the termination of the Plan is in
the best interests of the Company and its shareholders. Except as provided in
paragraph 19, no amendment may make any change in any option theretofore granted
which adversely affects the rights of any participant. In addition, to the
extent necessary to comply with Rule 16b-3 under the Securities Exchange Act of
1934, as amended, or under Section 423 of the Code (or any successor rule or
provision or any other applicable law or regulation), the Company shall obtain
shareholder approval in such a manner and to such a degree as so required.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Shareholder Approval.
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted. Such shareholder approval shall be obtained in
the manner and degree required under the California General Corporation
Law.
(b) If and in the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such
registration shall be solicited substantially in accordance with Section
14(a) of the Exchange Act and the rules and regulations promulgated
thereunder.
(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.
-15-
<PAGE> 43
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.
-16-
<PAGE> 44
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:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
A-1
<PAGE> 45
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)
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
A-2
<PAGE> 46
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:
--------------------------------------
B-1
<PAGE> 47
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:
--------------------------------------
C-1
<PAGE> 48
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF LASERSCOPE
1998 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 19, 1998, 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 1998 Annual Meeting of Shareholders of
Laserscope to be held on June 23, 1998 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) thereof.
------------------
SEE REVERSE
SIDE
------------------
<PAGE> 49
<TABLE>
<S> <C> <C> <C>
- -------
PLEASE MARK YOUR
X VOTES AS IN THIS
EXAMPLE
- -------
FOR ALL NOMINEES WITHHOLD AUTHORITY
LISTED TO THE RIGHT TO
(EXCEPT AS VOTE FOR ALL
INDICATED) NOMINEES
LISTED TO THE RIGHT
----------- -----------
1. Election of NOMINEES: Benjamin L. Holmes
Directors E. Walter Lange
Robert V. McCormick
Rodney Perkins, M.D.
Robert J. Pressley, Ph.D
----------- -----------
If you wish to withhold authority to vote for any
individual nominee, strike a line through that nominee's
name in the list to the right.
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
------------- -------------- -------------
<S> <C> <C> <C>
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 450,000 shares.
------------- -------------- -------------
------------- -------------- -------------
3. Proposal to approve an amendment to
the Company's 1989 Employee Stock
Purchase Plan to increase the number
of shares of Common Stock reserved
for issuance thereunder by 150,000
shares
------------- -------------- -------------
------------- -------------- -------------
4. Proposal to ratify the appointment
of Ernst & Young as the independent
auditors of the Company for the year
ending December 31, 1998.
------------- -------------- -------------
</TABLE>
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED AS FOLLOWS: (1) FOR THE ELECTION OF DIRECTORS; (2) FOR APPROVAL
OF THE AMENDMENT TO THE COMPANY'S 1994 STOCK OPTION PLAN; (3) FOR APPROVAL OF
THE AMENDMENT TO THE COMPANY'S 1989 EMPLOYEE STOCK PURCHASE PLAN; (4) FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG AS INDEPENDENT AUDITORS, AND AS
SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. IF THE STOCK IS REGISTERED IN
THE NAMES OF TWO OR MORE PERSONS, EACH SHOULD SIGN. EXECUTORS, ADMINISTRATORS,
TRUSTEES, GUARDIANS AND ATTORNEYS-IN-FACT SHOULD ADD THEIR TITLES. IF SIGNER IS
A CORPORATION, PLEASE GIVE FULL CORPORATE NAME AND HAVE A DULY AUTHORIZED
OFFICER SIGN, STATING TITLE. IF SIGNER IS A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
SIGNATURE(S) _________________________________________________ DATE ____________
NOTE: This Proxy should be marked, dated, signed by the shareholder(s) exactly
as his or her name appears hereon, and returned in the enclosed
envelope. Persons signing in a capacity should so indicate. If shares
are held by joint tenants or as community property, both should sign.
