<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
ENDOSONICS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[ENDOSONICS LETTERHEAD]
TO THE STOCKHOLDERS OF ENDOSONICS CORPORATION
You are cordially invited to attend the Annual Meeting of Stockholders of
EndoSonics Corporation ("EndoSonics" or the "Company") on June 10, 1999 at 10:00
a.m., California time. The Annual Meeting will be held at EndoSonics
Corporation, 2870 Kilgore Road, Rancho Cordova, California.
At the meeting, you will be asked to consider and vote upon the following
proposals: (i) the election of eight (8) individuals to serve as the Company's
Board of Directors; (ii) the increase of the maximum number of shares of Common
Stock authorized for issuance under the 1998 Stock Option Plan by 500,000
shares; and (iii) the ratification of Ernst & Young LLP as the Company's
independent auditors for the current fiscal year.
Whether or not you plan to attend the Annual Meeting, please mark, sign,
date and return the enclosed proxy card promptly in the accompanying
postage-paid reply envelope. By returning the proxy, you can help EndoSonics
avoid the expense of duplicate proxy solicitations and possibly having to
reschedule the Annual Meeting if a quorum of the outstanding shares is not
present or represented by proxy. If you decide to attend the Annual Meeting and
wish to change your proxy vote, you may do so simply by voting in person at the
Annual Meeting.
REINHARD J. WARNKING
President and Chief Executive Officer
May 3, 1999
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF ENDOSONICS CORPORATION
--------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
EndoSonics Corporation, a Delaware corporation ("EndoSonics" or the "Company"),
will be held on June 10, 1999 at 10:00 a.m. at EndoSonics Corporation, 2870
Kilgore Road, Rancho Cordova, California, for the following purposes:
1. To elect an eight (8) member Board of Directors for EndoSonics from
the following nominees: Roger H. Salquist, Julie A. Brooks, Thomas J.
Cable, Dale Conrad, Jakob Stapfer, Gregg W. Stone, M.D., Reinhard J.
Warnking and W. Michael Wright.
2. To increase the maximum number of shares of Common Stock authorized
for issuance under the 1998 Stock Option Plan (the "1998 Option Plan")
of EndoSonics Corporation by 500,000 shares.
3. To ratify the selection of Ernst & Young LLP as EndoSonics'
independent auditors for the current fiscal year ending December 31,
1999.
4. To transact such other business as may properly come before the
meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 12, 1999 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any continuation or adjournment thereof.
By Order of the Board of Directors
MICHAEL W. HALL
Secretary
Rancho Cordova, California
May 3, 1999
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ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU EXPECT TO
ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE GIVEN
YOUR PROXY, YOU MAY VOTE IN PERSON IF YOU ATTEND THE MEETING.
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<PAGE> 4
ENDOSONICS CORPORATION
2870 KILGORE ROAD
RANCHO CORDOVA, CA 95670
--------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 10, 1999
--------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
EndoSonics Corporation ("EndoSonics" or the "Company") for use at the Annual
Meeting of Stockholders (the "Annual Meeting") to be held on June 10, 1999 at
10:00 a.m., at which time stockholders of record on April 12, 1998 will be
entitled to vote. On April 12, 1999, EndoSonics had outstanding 17,775,903
shares of Common Stock. Stockholders of record on such date are entitled to one
vote for each share of Common Stock held on all matters to be voted upon at the
meeting.
EndoSonics intends to mail this proxy statement and the accompanying proxy
card on or about May 3, 1999 to all stockholders entitled to vote at the Annual
Meeting. EndoSonics' principal executive offices are located at 2870 Kilgore
Road, Rancho Cordova, California 95670. The telephone number at that address is
(916) 638-8008.
VOTING
Pursuant to Delaware law, directors are elected by a plurality of the
votes cast. The other matters submitted for stockholder approval at the Annual
Meeting will be decided by the affirmative vote of a majority of shares present
in person or represented by proxy at the Annual Meeting and entitled to vote on
each matter. With regard to the election of directors, votes may be cast in
favor of or withheld from each nominee; votes that are withheld will be excluded
entirely from the vote and will have no effect. With respect to each of the
other proposals described in the Notice of Annual Meeting of Stockholders and in
this Proxy Statement, if a choice as to that proposal has been specified by a
stockholder on the Proxy, the shares will be voted accordingly. If no choice is
specified, the shares will be voted IN FAVOR OF the approval of the proposal.
Abstentions and broker non-votes (i.e., the submission of a Proxy by a broker or
nominee specifically indicating the lack of discretionary authority to vote on
the proposal) are counted for purposes of determining the presence or absence of
a quorum for the transaction of business. Abstentions will be counted towards
the tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative notes, whereas broker non-votes will not be
counted for purposes of determining whether a proposal has been approved or not.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by the holder of
record by filing with the Secretary of EndoSonics at the Company's principal
executive office, a written notice of revocation or a new duly executed proxy
bearing a date later than the date indicated on the previous proxy, or it may be
revoked by the holder of record attending the meeting and voting in person.
Attendance at the meeting will not, by itself, revoke a proxy.
SOLICITATION
EndoSonics will bear the entire cost of proxy solicitation, including
costs of preparing, assembling, printing and mailing this proxy statement, the
proxy card and any additional material furnished to stockholders. Copies of the
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others, to forward to such beneficial owners. EndoSonics may reimburse persons
representing beneficial owners of shares for their expenses in forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of EndoSonics. No
additional compensation will be paid to directors, officers or other regular
employees for such services.
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<PAGE> 5
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Eight (8) directors will be elected at the Annual Meeting by the holders
of EndoSonics Common Stock to serve until the next Annual Meeting and until
their successors are elected and qualified, or until their earlier death,
resignation or removal. The Board of Directors will vote all proxies received by
them FOR the nominees listed below unless otherwise instructed in writing on
such proxy. The eight (8) candidates receiving the highest number of affirmative
votes of shares entitled to vote at the Annual Meeting will be elected directors
of EndoSonics. Stockholders of EndoSonics are not entitled to cumulative voting
rights. In the event any nominee is unable to or declines to serve as a director
at the time of the Annual Meeting, the proxies will be voted for an additional
nominee who shall be designated by the annual current Board of Directors to fill
the vacancy. As of the date of this Proxy Statement, the Board of Directors is
not aware of any nominee who is unable or will decline to serve as director.
INFORMATION WITH RESPECT TO NOMINEES
Set forth below, as of February 28, 1999, for each nominee for director of
EndoSonics, is information regarding their age, position(s) with EndoSonics, the
period they have served as a director, any family relationship with any other
director or executive officer of EndoSonics, and the directorships currently
held by them in corporations whose shares are publicly registered.
<TABLE>
<CAPTION>
NOMINEE, AGE AND PRINCIPAL OCCUPATION AND
FIRST YEAR AS DIRECTOR BUSINESS EXPERIENCE
- -------------------------------------- ---------------------------------------------------------------------------------------
<S> <C>
Julie A. Brooks, 53, 1998.................Ms. Julie A. Brooks has been Senior Vice President, Legal & External Affairs, General
Counsel and Secretary of Access Health, Inc. since 1996. Prior to her role at Access
Health, Ms. Brooks founded and managed The General Counsel, Inc., a Seattle-based legal
services company, from 1992 to 1996.
Thomas J. Cable, 59, 1984.................Mr. Cable is a private investor and a director of Fischer Imaging Corporation, and Ostex
International. He founded and was a general partner of Cable & Howse Ventures, a venture
capital firm from 1976 through 1998.
Dale Conrad, 59, 1998 (new)...............Mr. Conrad was elected to the Board in August of 1998. Prior to that he was on the Board
of Directors of Fiberchem, Inc. from August 1995 until April 1998. He was the CEO of FCI
Environmental from March 1993 until August 1995.
Roger Salquist, 57, 1996..................Mr. Salquist was appointed Chairman of the Board in November of 1996. Since March 1997,
Mr. Salquist has been a partner in Bay City Capital, a life sciences merchant banking
firm. Mr. Salquist served as Chairman and Chief Executive Officer of Calgene, Inc., a
Davis, California-based agribusiness biotechnology company, from 1984 through August
1996. Mr. Salquist serves on the Advisory Council of the Stanford University Graduate
School of Business and is a member of the Board of Trustees of the University of San
Francisco.
Jakob Stapfer, 48, 1998 (new).............Mr. Stapfer was elected to the Board in October of 1998. He is the President and CEO of
Fukuda Denshi America, a Japanese medical equipment producer.
Gregg W. Stone, M.D., 42, 1999 (new)......Dr. Stone was elected to the Board in February of 1999. He is the Director of
Cardiovascular Research and Education at the Washington Hospital Center in Washington,
DC. Dr. Stone graduated from the University of Michigan and the Johns
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
Hopkins School of Medicine in Baltimore, and completed his internship and residency at
the New York Hospital's Cornell Medical Center in New York City in 1985. He also serves
as chairman of the EndoSonics scientific advisory board, along with terms on numerous
other advisory boards, key editorial positions and participation in major research
products.
Reinhard J. Warnking, 50, 1993............Mr. Warnking joined EndoSonics in 1993 as a director, President and Chief Operating
Officer. Mr. Warnking was appointed Chief Executive Officer on February 1, 1995. Mr.
Warnking was the President and Chief Executive Officer of Acoustic Imaging Technology
Corporation, a manufacturer of ultrasound and transducer systems from August 1991 to
March 1993.
W. Michael Wright, 51, 1997...............Mr. Wright has been President and Chief Executive Officer of Gene Therapeutics, Inc.
since September 1998. From September 1997 until August 1998, Mr. Wright was President
and Chief Executive Officer of MicroHeart, Inc., a developer and manufacturer of
bio-surgical products for use in the treatment of cardiovascular disease. From January
1996 until June 1997, Mr. Wright served as the President and Chief Executive Officer of
TomTec Imaging Systems, Inc., a firm engaged in the development and manufacture of
ultrasound imaging products. From January 1995 until October 1995, Mr. Wright was
engaged by Medtronic to manage the transfer of the HEMOPUMP(R) Cardiac Assist Systems
business to Medtronic from Johnson & Johnson. From 1968 until 1995, Mr. Wright worked
for Johnson & Johnson where he managed various divisions developing leading edge
cardiovascular and healthcare related products.
</TABLE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met 9 times during the year ended December 31,
1998. Each incumbent nominee for Director attended at least 75% of the aggregate
of (1) the total number of meetings of the Board of Directors and (2) the total
number of meetings held by all Committees of the Board on which such Director
served.
EndoSonics has a standing Audit Committee composed of Messrs. Thomas
J. Cable, and W. Michael Wright. The Audit Committee is primarily responsible
for approving the services performed by the Company's independent auditors and
for reviewing and evaluating the Company's accounting principles and reporting
practices and its system of internal accounting controls. The Audit Committee
met two (2) times during the year ended December 31, 1998.
EndoSonics has a standing Compensation Committee which met twelve (12)
times during the year ended December 31, 1998. For the 1998 fiscal year, this
Committee consisted of Roger Salquist and Ms. Julie Brooks. The Committee
administers the 1998 Employee Stock Purchase Plan, the 1988 Stock Option Plan,
and the 1998 Stock Option Plan, and reviews and acts on matters relating to
compensation levels and benefit plans for key executives of EndoSonics. The
Compensation Committee has the exclusive power and authority to make stock
option grants under the 1998 Stock Option Plan to the Company's officers.
REMUNERATION
The following directors were paid the indicated fees and retainers in
connection with their Board service for the 1998 fiscal year:
<TABLE>
<S> <C> <C>
Roger Salquist (Chairman) $40,000
Julie A. Brooks $ 3,417
Thomas J. Cable $ 7,150
William Davis $ 4,474 (For service through June 4, 1998)
Dale Conrad $ 1,298 (For service from August 11, 1998)
Michael Henson $ 2,711 (For service through June 4, 1998)
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C> <C>
Edward M. Leonard $ 5,250
Menahem Nassi $ 3,711 (For service through June 4, 1998)
Jakob Stapfer $ 0
Gregg W. Stone, M.D $ 0
W. Michael Wright $ 7,000
</TABLE>
The Directors' Compensation policy in effect for 1998 was as follows:
<TABLE>
<CAPTION>
Compensation* Service
------------- --------------------------------------------------------------------
<S> <C>
$ 1,000.00 Per quarter retainer.
$ 500.00 Per in-person board meeting, or for committee meeting
(not held in conjunction with Board of Directors meeting.)
$ 250.00 For telephonic board or committee meeting, or for in-person committee
meeting (held in conjunction with Board of Directors meeting.)
$ 100.00 Monthly retainer for Chairmen of Compensation and Audit Committees.
</TABLE>
*for non-officer directors,
other than the Chairman
STOCK OPTIONS
Each non-employee Board member receives an automatic option grant for
10,000 shares of Common Stock under the Company's 1998 Stock Option Plan (the
"Plan") on the date of his or her initial election or appointment to the Board.
In addition, on the date of each Annual Stockholders Meeting, each individual
re-elected as a non-employee Board member will receive an automatic option grant
for an additional 5,000 shares of Common Stock, provided such individual has
served as a Board member for at least six months. Each automatic option grant
will become exercisable for one-fourth of the shares upon the optionee's
completion of each year of Board service over the four-year period measured from
the grant date. However, the option will become immediately exercisable for all
of the option shares if the optionee dies or becomes disabled during his or her
period of Board service or if the Company is acquired by merger or asset sale,
or if there should occur a hostile take-over of the Company through a successful
tender offer for more than 25% of the Company's outstanding Common Stock or a
change in the majority of the Board effected through one or more contested
elections for Board membership. Each automatic option grant will have a maximum
term of 10 years, subject to earlier termination upon the optionee's cessation
of Board service.
Upon the successful completion of a hostile tender offer for more than 50%
of the Company's outstanding Common Stock, each automatic option grant will be
canceled, and the non-employee Board member will be entitled to a cash
distribution from the Company based upon the tender-offer price.
At the 1998 Annual Stockholders Meeting held on June 4, 1998, Messrs.
Cable, Salquist and Wright each received an automatic stock option grant under
the Automatic Option Grant Program of the 1998 Option Plan for 5,000 shares of
Common Stock in connection with their re-election as non-employee Board members.
Each of those options has an exercise price of $5.94 per share, the fair market
value per share of Common Stock on the grant date.
At the 1997 Annual Stockholders Meeting held on May 28, 1997, Messrs.
Cable, Davis, and Henson, each received an automatic stock option grant under
the Automatic Option Grant Program of the Plan for 5,000 shares of Common Stock
in connection with their re-election as non-employee Board members. Each of
those options has an exercise price of $10.875 per share, the fair market value
per share of Common Stock on the grant date.
Mr. Salquist received an automatic option grant for 10,000 shares upon his
appointment to the Board on November 5, 1996 with an exercise price of $12.75.
Mr. Salquist also received three additional option grants in connection with his
commencement of Board service. The first two of those additional grants were
made on November 5, 1996 at the time he joined the Board. One grant is for 5,000
shares and was made pursuant to the Discretionary Option Grant Program in effect
under the Plan and the second grant is for 25,000 shares and was made to Mr.
Salquist as a special incentive for him to join the Board. Both grants have an
exercise price of $12.75 per share. The final grant to Mr. Salquist covers
10,000 shares and was made to him under the Discretionary Option Grant Program
on December 6, 1996. The remaining terms and provisions of each of these option
grants are
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<PAGE> 8
basically the same as those in effect for his 10,000-share option grant under
the Automatic Option Grant Program.
Dr. Stone, a member of the Company's Board of Directors, has served as a
member of the Company's Clinical Advisory Board. In this capacity, Dr. Stone
received an option grant for 7,500 shares on October 7, 1998, with an exercise
price of $4.50 per share.
All directors hold office until the next Annual Meeting of Stockholders
and until their successors have been elected. Officers are appointed to serve,
at the discretion of the Board of Directors, until their successors are
appointed. There are no family relationships among executive officers or
directors of EndoSonics. There are no arrangements or understandings involving
any director or any nominee regarding such person's status as a director or
nominee.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NINE
NOMINEES NAMED ABOVE.
PROPOSAL NO. 2
AMENDMENT TO THE 1998 STOCK OPTION PLAN
OF ENDOSONICS CORPORATION
The stockholders are being asked to approve the increase in the number of
shares of Common Stock reserved for issuance under the Company's 1998 Stock
Option Plan (the "1998 Option Plan") of an additional 500,000 shares.
The Board of Directors believes that, in order to attract and retain
qualified employees, officers, consultants and directors to the Company and to
provide them with incentives to remain with the Company and work for its
long-term success, it is necessary to grant options to purchase Common Stock to
such persons to ensure that they have a proprietary interest in the Company. The
Board of Directors believes that the Company's near-term option requirements
will be satisfied if 500,000 additional shares of Common Stock are reserved for
issuance under the 1998 Option Plan.
The 1998 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.
The terms and provisions of the 1998 Option Plan are described more fully
below. The description, however, is not intended to be a complete exposition of
all the terms of the Plan. A copy of the 1998 Option Plan will be furnished by
the Company to any stockholder upon written request to the Secretary of the
Company at the Company's principal office located at 2870 Kilgore Road, Rancho
Cordova, CA, 95670.
PLAN STRUCTURE
The 1998 Option Plan is divided into two separate components:
DISCRETIONARY OPTION GRANT PROGRAM. Officers, employees, nonemployee Board
members and independent consultants may, at the discretion of the plan
administrator, be granted options to purchase shares of Common Stock of the
Company. The options granted under this Discretionary Option Grant Program may
be either incentive stock options that are designed to meet the requirements of
Section 422 of the Internal Revenue Code, as amended (the "Code"), or
non-statutory stock options not intended to satisfy such requirements.
AUTOMATIC OPTION GRANT PROGRAM. Nonemployee Board members will
automatically receive option grants at designated intervals over their period of
Board service under the 1998 Option Plan's Automatic Option Grant Program. Each
grant will be for a fixed number of shares with an exercise price equal to the
fair market value of the option shares on the grant date.
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ADMINISTRATION
If permitted by Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") 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"), grants under the
Discretionary Option Grant Program of 1998 Option Plan may (but need not) be
made by different administrative bodies with respect to employees or consultants
who are also officers or directors and employees who are neither directors nor
officers.
With respect to grants of options to employees or consultants who are
also officers or directors of the Company, grants under the Discretionary Option
Grant Program shall be made by (A) the Board of Directors, if the Board of
Directors may make grants under the 1998 Option Plan in compliance with Rule
16b-3 of the Exchange Act and Section 162(m) of the Code as the latter applies
so as to qualify grants of options to "covered employees" as performance-based
compensation, or (B) a committee designated by the Board of Directors to make
grants under the 1998 Option Plan, which committee shall be constituted in such
a manner as to permit such grants to comply with Rule 16b-3, to qualify grants
of options to "covered employees" as performance-based compensation under
Section 162(m) of the Code and otherwise so as to satisfy the Applicable Laws.
With respect to grants of options to employees or consultants who are
neither directors nor officers of the Company, the Discretionary Option Grant
Program will be administered by (A) the Board of Directors or (B) a committee
designated by the Board of Directors, which committee will be constituted in
such a manner so as to satisfy the Applicable Laws. The Board of Directors or
the committee designated by the Board of Directors to administer the
Discretionary Option Grant Program is referred to in this Proxy Statement as the
"Administrator." The Administrator receives no additional compensation for its
services in connection with the administration of the 1998 Option Plan.
The Automatic Option Grant Program provides for the grant of
nonstatutory stock options to nonemployee directors of the Company. It is
designed to work automatically and not to require administration; however, to
the extent administration is necessary, it will be provided by the Board of
Directors.
SHARE RESERVE
The maximum number of shares of Common Stock issuable over the term
of the 1998 Option Plan may not exceed 1,250,000 shares (including the 500,000
shares for which stockholder approval is sought under this Proposal). Should an
option be terminated or canceled for any reason prior to exercise or surrender
in full, the shares subject to the portion of the option not so exercised or
surrendered will be available for subsequent grant. In no event may any one
participant in the Plan be granted stock options for more than 550,000 shares in
the aggregate in any calendar year, subject to adjustment as provided for in the
1998 Option Plan.
ELIGIBILITY
The persons eligible to participate in the 1998 Option Plan are
limited to (i) employees (including officers), (ii) the nonemployee Board
members, and (iii) independent consultants in the service of the Company or its
parent or subsidiary corporations (whether now existing or subsequently
established). As of March 31, 1999 approximately 374 employees (including 7
officers of the Company and 8 non-employee Board members) were eligible to
participate in the 1998 Option Plan.
DISCRETIONARY OPTION GRANT PROGRAM
The terms of options granted under the Discretionary Option Grant
Program are determined by the Administrator. Each option is evidenced by a stock
option agreement between the Company and the optionee and is subject to the
following additional terms and conditions:
(a) Exercise of the Option. The optionee must earn the right to
exercise the option by continuing to work for the Company. The Administrator
determines when options are exercisable. 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 payment of the purchase price
to the Company. The method of payment of the exercise price of the shares
purchased upon exercise of an option may be cash or a number of other methods,
including use of a promissory note, as determined by the Administrator.
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<PAGE> 10
The vesting schedule for each granted option will be determined by
the Administrator and will be set forth in the instrument evidencing such grant.
The granted option may be (i) immediately exercisable for vested shares, (ii)
immediately exercisable for unvested shares subject to the Company's repurchase
rights, or (iii) exercisable in installments for vested shares over the
optionee's period of service.
(b) Exercise Price. The exercise price of options granted under the
Discretionary Option Grant Program is determined by the Administrator, and must
be at least equal to the fair market value of the shares on the date of grant,
as determined by the Administrator, based upon the closing price on the Nasdaq
National Market on the date of grant. Incentive stock options granted to
stockholders owning more than 10% of the total combined voting power of all
classes of the Company's stock (such holders are referred to as "10%
Stockholders") are subject to the additional restriction that the exercise price
on such options must be at least 110% of the fair market value on the date of
the grant.
(c) Termination of Employment. If the optionee's employment or
consulting relationship with the Company is terminated for any reason other than
death or total and permanent disability, options under the Discretionary Option
Grant Program may be exercised not later than three months (or such other period
after, not exceeding three months in the case of incentive stock options or six
months in the case of nonstatutory stock options, as is determined by the
Administrator) after the date of such termination to the extent the option was
exercisable on the date of such 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 in the case of incentive
stock options as is determined by the Administrator) after the date of
termination and may be exercised only to the extent the option was exercisable
on the date of termination, but in no event may the option be exercised after
its termination date.
(e) Death. If an optionee should die while employed or retained by
the Company, and such optionee has been continuously employed or retained by the
Company since the date of grant of the option, the option may be exercised
within six months after the date of death (or such other period of time, not
exceeding twelve months, as is determined by the Administrator) by the
optionee's estate or by a person who acquired the right to exercise the option
by bequest or inheritance to the extent the optionee would have been entitled to
exercise the option had the optionee continued living and remained employed or
retained by the Company for three months after the date of death, but in no
event may the option be exercised after its termination date.
If an optionee should die within 30 days (or such other period of
time not exceeding three months as is determined by the Administrator) after the
optionee has ceased to be continuously employed or retained by the Company, the
option may be exercised within six months after the date of death by the
optionee's estate or by a person who acquired the right to exercise the option
by bequest or inheritance to the extent that the optionee was entitled to
exercise the option at the date of termination, but in no event may the option
be exercised after its termination date.
(f) Option Termination Date. Incentive stock options granted under
the 1998 Option Plan expire ten years from the date of grant unless a shorter
period is provided in the option agreement. Incentive stock options granted to
10% Stockholders may not have a term of more than five years.
(g) Nontransferability of Options. Incentive stock options are not
transferable by the optionee, other than by will or the laws of descent and
distribution, and are exercisable only by the optionee during his or her
lifetime or, in the event of death, by a person who acquires the right to
exercise the option by bequest or inheritance or by reason of the death of the
optionee. In the case of nonstatutory stock options, the Administrator may at
its discretion in certain circumstances allow the transferability of such
options.
(h) Acceleration of Option. In the event of a merger of the Company
with or into another corporation or sale of substantially all of the Company's
assets the exercisability of all options will be accelerated in full unless the
successor corporation assumes or substitutes the options in connection with such
transaction. The Administrator has full power and authority, exercisable either
at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration of one or more
outstanding options under the Discretionary Option Grant Program in the event of
certain change in control transactions (generally the acquisition by any person
of more than 25% of the total outstanding securities of the Company or a change
in composition of
7
<PAGE> 11
the Board of Directors such that the incumbent directors no longer constitute a
majority) so that each such option will, immediately prior to such change in
control, become exercisable for all the shares of Common Stock at that time
subject to that option and may be exercised for all or any portion of those
shares as fully-vested shares.
The acceleration of options in the event of a merger or sale of the
Company or in a change in control may be seen as an anti-takeover provision and
may have the effect of discouraging a merger proposal, a takeover attempt or
other efforts to gain control of the Company.
(i) Other Provisions. The option agreement may contain such other
terms, provisions and conditions not inconsistent with the 1998 Plan as may be
determined by the Administrator.
8
<PAGE> 12
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, each nonemployee Board
member will automatically be granted, upon his or her initial election or
appointment to the Board, a stock option to purchase 10,000 shares of Common
Stock. In addition, on the date of each Annual Stockholders' Meeting, each
individual who is to continue to serve as a nonemployee Board member will
automatically be granted a stock option to purchase 5,000 shares of Common
Stock, provided such individual has served on the Board for at least six (6)
months. Stockholder approval of this Proposal will also constitute pre-approval
of each option granted on or after the date of the Annual Meeting pursuant to
the provisions of the Automatic Option Grant Program summarized below and the
subsequent exercise of that option in accordance with those provisions.
The option exercise price per share for each automatic grant will be
equal to the fair market value per share of Common Stock on the grant date and
will be payable in cash or shares of Common Stock. The options may also be
exercised through a same-day sale program, pursuant to which a designated
brokerage firm effects the immediate sale of the shares purchased under the
option and pays over to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the exercise price for the purchase
shares.
Each option will have a maximum term of 10 years measured from the
grant date and will become exercisable in a series of four successive equal
annual installments over the optionee's period of Board service, with the first
such installment to become exercisable upon optionee's completion of one year of
Board service measured from the grant date. However, the option will immediately
become exercisable for all the option shares upon the optionee's death or
permanent disability while serving as a Board member or upon the occurrence of
certain merger or change in control transactions.
All automatic option grants held by the nonemployee Board member at
the time of his or her cessation of Board service will remain exercisable for a
period of six months for any or all shares for which those options are
exercisable at the time of such cessation of Board service. However, should the
optionee die while holding one or more options, then those options will remain
exercisable for a 12-month period following the date of the optionee's death and
may be exercised for any or all shares for which those options are exercisable
at the time of the optionee's cessation of Board service, by the personal
representative of the optionee's estate or by the persons to whom the options
are transferred by the optionee's will or by the laws of inheritance. In no
event may any such option be exercised after the expiration date of the 10-year
option term.
LIMITED STOCK APPRECIATION RIGHTS
In addition to stock options, certain tandem limited stock
appreciation rights providing for the cancellation of options subject to such
rights upon the occurrence of a hostile takeover of the Company in exchange for
a cash distribution from the Company within five days of the consummation of
such hostile takeover may be granted under the 1998 Option Plan. The amount of
the cash distribution to which an optionee would be entitled upon a hostile
takeover would be equal to the excess of (a) the greater of (i) the fair market
value of the stock on the date of cancellation or (ii) the highest reported per
share price paid in effecting such hostile takeover over (b) the aggregate
exercise price for such shares. (In the case of an incentive stock option, the
relevant per share price would be the fair market value on the date of
cancellation.) Under the Discretionary Option Grant Program, the Administrator
may, in its sole discretion at the time of grant, provide for such limited stock
appreciation rights with respect to any option granted to any officer subject to
the short-swing profit restrictions of Section 16 of the Exchange Act. Limited
stock appreciation rights are automatically granted in connection with options
issued under the Automatic Option Grant Program. These limited stock
appreciation rights could be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt or other efforts to
gain control of the Company.
GENERAL PLAN PROVISIONS
Valuation. For purposes of establishing the option exercise price and
for all other valuation purposes under the Plan, the fair market value per share
of Common Stock on any relevant date will be the closing selling price per share
as reported on the Nasdaq National Market. As of April 12, 1998 the fair market
value per share of the Common Stock was $4.9375 per share, as reported on the
Nasdaq National Market.
Changes in Capitalization. In the event any change is made to the
Common Stock issuable under the Plan (by reason of any stock dividend, stock
split, combination of shares, recapitalization, or other change affecting the
9
<PAGE> 13
outstanding Common Stock as a class without the Company's receipt of
consideration), appropriate adjustments will be made to (i) the maximum number
and/or class of securities available for issuance under the Plan, (ii) the
maximum number and class of securities for which any one participant may be
granted stock options in the aggregate under the Plan, (iii) the number and/or
class of securities for which automatic option grants are subsequently to be
made to each newly-elected or continuing non-employee Board member and (iv) the
number and/or class of securities and the price per share in effect under each
outstanding option in order to prevent the dilution or enlargement of benefits
thereunder. In the event of the proposed dissolution or liquidation of the
Company, each option will terminate unless otherwise provided by the
Administrator.
Amendment and Termination of the Plan. The Board may amend or modify
the Plan in any or all respects whatsoever, subject to any required stockholder
approval under applicable law or regulation. The Board may terminate the Plan at
any time, but in all events the Plan will terminate upon the earlier of May 2008
or the date all shares available for issuance under the Plan are issued as
vested shares or canceled pursuant to the exercise or surrender of options
granted under the Plan. Any options outstanding at the time of the termination
of the Plan will remain in force in accordance with the provisions of the
instruments evidencing those grants.
UNITED STATES FEDERAL INCOME TAX INFORMATION
The following is a brief summary of the U.S. federal income tax
consequences of transactions under the 1998 Option Plan based on federal income
tax laws in effect on the date of this Proxy Statement. 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 laws of any state, municipality, non-U.S. taxing
jurisdiction or gift, estate or other tax laws other than federal income tax
law. The Company advises all optionees to consult their own tax advisor
concerning the tax implications of option grants and exercises and the
disposition of stock acquired upon such exercises, under the 1998 Option Plan.
Incentive Stock Options. Options granted under the Discretionary
Option Grant Program may be either incentive stock options, which are intended
to qualify for the special tax treatment provided by Section 422 of the Code, or
nonstatutory stock options, which will not qualify. If an option granted under
the Discretionary Option Grant Program is an incentive stock option, the
optionee will recognize no income upon grant of the incentive stock option and
will incur no tax liability due to the exercise, except to the extent that such
exercise causes the optionee to incur alternative minimum tax. (See discussion
below.) 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 more than two years after grant of the option and one year after
exercise of the option by the optionee, any gain will be treated as a long-term
capital gain. If both of 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 Common Stock on the date of
the option exercise or the sale price of the Common Stock. The Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain or loss recognized on a disposition of the shares prior
to completion of both of the above holding periods in excess of the amount
treated as ordinary income will be characterized 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. For individual taxpayers, the current
U.S. federal income tax rate on long-term capital gains is 20% (in the case of
shares held more than 12 months after exercise), whereas the maximum rate on
other income is 39.6%. Capital losses for individual taxpayers are allowed in
full against capital gains plus $3,000 of other income.
Nonstatutory Stock Options. All other options granted under the
Discretionary Option Grant Program which do not qualify as incentive stock
options and all options granted under the Automatic Option Grant Program are
referred to as nonstatutory stock options. An optionee will not recognize any
taxable income at the time he or she is granted a nonstatutory stock option.
However, upon its exercise, the optionee will recognize ordinary income for tax
purposes measured by the excess of the fair market value of the shares over the
exercise price. The income recognized by an optionee who is also an employee of
the Company will be subject to income and employment tax withholding by the
Company by payment in cash by the optionee or out of the optionee's current
earnings. Upon the sale of such shares by the optionee, any difference between
the sale price and the fair market value of the shares as of the date of
exercise of the option will be treated 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 from date of exercise.
10
<PAGE> 14
Alternative Minimum Tax. The exercise of an incentive stock option
may subject the optionee to the alternative minimum tax under Section 55 of the
Code. The alternative minimum tax is calculated by applying a tax rate of 26% to
alternative minimum taxable income of joint filers up to $175,000 ($87,500 for
married taxpayers filing separately) and 28% to alternative minimum taxable
income above that amount. Alternative minimum taxable income is equal to (i)
taxable income adjusted for certain items, plus (ii) items of tax preference
less (iii) an exemption amount of $45,000 for joint returns, $33,750 for
unmarried individual returns and $22,500 in the case of married taxpayers filing
separately (which exemption amounts are phased out for upper income taxpayers).
Alternative minimum tax will be due if the tax determined under the foregoing
formula exceeds the regular tax of the taxpayer for the year.
In computing alternative minimum taxable income, shares purchased
upon exercise of an incentive stock option are treated as if they had been
acquired by the optionee pursuant to exercise of a nonstatutory stock option. As
a result, the optionee recognizes alternative minimum taxable income equal to
the excess of the fair market value of the Common Stock on the date of exercise
over the option exercise price. Because the alternative minimum tax calculation
may be complex, optionees should consult their own tax advisors prior to
exercising incentive stock options. In particular, optionees who choose to
exercise their incentive stock options before such options are fully vested are
strongly urged to consult their tax advisors prior to such exercise to make sure
that the alternative minimum tax consequences of exercise are understood.
If an optionee pays alternative minimum tax, the amount of such tax
may be carried forward as a credit against any subsequent year's regular tax in
excess of the alternative minimum tax for such year.
Deductibility of Executive Compensation. The Company anticipates that
any compensation deemed paid by it in connection with disqualifying dispositions
of incentive stock option shares or exercises of non-statutory options granted
with an exercise price equal to the fair market value of the option shares will
quality as performance-based compensation for purposes of Code Section 162(m)
and will not have to be taken into account for purposes of the $1 million
limitation per covered individual on the deductibility of the compensation paid
to certain executives of the Company.
PLAN BENEFITS
The actual benefits, if any, to participants in the 1998 Option Plan
are not determinable prospectively with respect to any individual participant or
class of participants prior to exercise of the options issued under the 1998
Option Plan as the value, if any, of such options to the optionees is
represented by the difference between the market price of a share of the
Company's Common Stock on the date of exercise and the exercise price of the
option. The Administrator has full discretion as to the recipients of awards
under the Discretionary Option Grant Program and the amounts of such awards.
With respect to the Automatic Option Grant Program, the following nonemployee
incumbent directors will each receive an option to purchase 5,000 shares of
Common Stock on the date of the Company's Annual Meeting of Stockholders
(assuming election of all such persons at the Meeting): Julie A. Brooks, Thomas
J. Cable, Dale Conrad, Roger H. Salquist, Jakob Stapfer, and W. Michael Wright.
ACCOUNTING TREATMENT
Option grants made to employees and employee Board members with an
exercise price less than the fair market value of the shares on the grant date
will result in compensation expense to the Company's earnings equal to the
difference between the exercise price and the fair market value of the shares on
the grant date. Such charge will be expensed by the Company over the period
benefited (usually the vesting period of the option). Option grants with an
exercise price not less than the fair market value of the shares on the grant
date will generally not result in any direct charge to the Company's earnings.
However, the estimated fair market value of those options is required to be
disclosed in the notes to the Company's financial statements, and the Company
must also disclose, in pro forma disclosures in the Company's financial
statements, the impact those options would have upon the Company's reported
earnings were the estimated fair market value of those options at the time of
grant treated as compensation expense. Whether or not granted at a discount, the
number of outstanding options may be a factor in determining the Company's
diluted earnings per share.
Option grants made to individuals who are not employees at the
Company, including non-employee Board members will result in compensation
expense to the Company's earnings equal to the fair market value of the granted
options. Such charge is also expensed over the period benefited (usually the
vesting period for options).
11
<PAGE> 15
REQUIRED VOTE
The approval in the increase of the maximum number of shares of
Common Stock authorized for issuance under the 1998 Option Plan by 500,000
shares to a total of 1,250,000 shares thereunder requires the affirmative vote
of the holders of a majority of the shares of the Company's Common Stock present
at the Annual Meeting in person or by proxy and entitled to vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE APPROVAL OF
THE INCREASE IN SHARES FOR THE 1998 OPTION PLAN.
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as independent auditors for
EndoSonics for the fiscal year ended December 31, 1998. The Board of Directors,
on the recommendation of EndoSonics' management, has selected that firm to
continue in this capacity for the current fiscal year. EndoSonics is asking the
stockholders to ratify the selection by the Board of Directors of Ernst & Young
LLP, as independent auditors to audit the consolidated financial statements of
EndoSonics for the fiscal year ending December 31, 1999 and to perform other
appropriate services. A representative of Ernst & Young LLP is expected to be
present at the Annual Meeting to respond to stockholders' questions, and that
representative will be given an opportunity to make a brief presentation to the
stockholders if he or she so desires. In the event that a majority of the shares
voted at the Annual Meeting do not vote for ratification of the selection of
Ernst & Young LLP, the Board of Directors will reconsider such selection. Under
all circumstances, the Board retains the corporate authority to change the
auditors at a later date.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1999.
12
<PAGE> 16
GENERAL
SECURITY OWNERSHIP OF OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to EndoSonics
regarding the ownership of EndoSonics' Common Stock as of April 12, 1999 by (i)
each stockholder known to EndoSonics to be a beneficial owner of more than five
percent (5%) of EndoSonics' Common Stock, (ii) each director and nominee for
director, (iii) the Named Officers (as such term is defined under the caption
"Executive Compensation and Related Information -- Summary of Cash and Certain
Other Compensation") and (iv) all current directors and executive officers of
EndoSonics as a group.
<TABLE>
<CAPTION>
Beneficial Ownership (#)
-----------------------------------
Approximate
Number of Percent of
Name and Address Shares Class
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
James O. Patterson & Company (1) 1,250,000 7.0%
3343 Peachtree Road, N.E
Atlanta, Georgia 30326
Fukuda Denshi Co., Ltd. (2) 1,052,577 5.9%
3-39-4 Hungo Bunkyo-Ku
Tokyo 113, Japan
Loomis, Sayles & Company (3) 884,700 5.0%
One Financial Center
Boston, Massachusetts 02111
Reinhard J. Warnking (4) 391,588 2.2%
Dr. Hans P. de Weerd (5) 150,000 *
Michael J. Eberle (6) 122,602 *
Richard L. Fischer (7) 21,832 *
Michael J. Sorna (8) 78,539 *
Julie A. Brooks (9) 2,500 *
Thomas J. Cable (10) 37,500 *
Dale Conrad (11) -- *
Roger Salquist (12) 42,372 *
Jakob Stapfer (13) -- *
Gregg W. Stone, M.D. (14) 3,375 *
W. Michael Wright (15) 5,208 *
All directors and executive officers as a group (16 persons)........ 1,079,232 6.1%
</TABLE>
* Less than 1%
(#) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities. Shares
of Common Stock subject to options and warrants which are currently
exercisable or convertible or which will become exercisable or
convertible within sixty (60) days after April 12, 1999 are deemed
outstanding for computing the beneficial ownership of the person holding
such option but are not deemed outstanding for computing the beneficial
ownership of any other person. Except as indicated by footnote, and
subject to community property laws where applicable, the persons named
in the table above have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them.
(1) Pursuant to a Schedule 13G filed with the Securities and Exchange
Commission on October 15, 1998. James O. Patterson & Company reported
that as of December 31, 1998, it had sole voting power and investment
power over 1,250,000 shares.
(2) Pursuant to a Schedule 13G filed with the Securities and Exchange
Commission on October 7, 1998. Fukuda Denshi Co., Ltd. reported that as
of December 31, 1998, it had sole voting power and investment power over
1,052,577 shares.
(3) Pursuant to a Schedule 13G filed with the Securities and Exchange
Commission on February 10, 1999.
13
<PAGE> 17
Loomis, Sayles, & Company, L.P.reported that as of December 31, 1998, it
had sole voting power over 739,200 shares and investment power over
884,700 shares.
(4) Includes 105,381 shares owned by Mr. Warnking and 286,207 shares
obtainable upon exercise of options that are currently exercisable or
will become exercisable within 60 days after April 12, 1999.
(5) Includes 150,000 shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 12, 1999.
(6) Includes 31,250 shares owned by Mr. Eberle and 122,602 shares obtainable
upon exercise of options that are currently exercisable or will become
exercisable within 60 days after April 12, 1999.
(7) Includes 1,000 shares owned by Mr. Fischer and 20,832 shares obtainable
upon exercise of options that are currently exercisable or will become
exercisable within 60 days after April 12, 1999.
(8) Includes 78,539 shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 12, 1999.
(9) Includes 2,500 shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 12, 1999.
(10) Includes 37,500 shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 12, 1999.
(11) Includes no shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 12, 1999.
(12) Includes 3,000 shares owned by Mr. Salquist and 39,372 shares obtainable
upon exercise of options that are currently exercisable or will become
exercisable within 60 days after April 12, 1999.
(13) Includes no shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 12, 1999.
(14) Includes 3,375 shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 12, 1999.
(15) Includes 5,208 shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 12, 1999.
14
<PAGE> 18
EXECUTIVE COMPENSATION AND RELATED INFORMATION
COMPENSATION COMMITTEE REPORT
It is the responsibility of the Compensation Committee of the EndoSonics
Board of Directors to make recommendations to the Board with respect to the base
salary and bonuses to be paid to the Company's executive officers each fiscal
year. In addition, the Compensation Committee has the exclusive authority to
administer the EndoSonics 1988 Stock Option Plan, the 1998 Employee Stock
Purchase Plan and the 1998 Stock Option Plan with respect to the grants made
thereunder to such officers and other key employees. The following is a summary
of the policies of the Compensation Committee which affect the compensation paid
to executive officers, as reflected in the tables and text set forth elsewhere
in this Proxy Statement.
General Compensation Policy. Under the supervision of the Compensation
Committee, EndoSonics has developed a compensation policy which is designed to
attract and retain qualified key executives critical to the Company's success
and to provide such executives with performance-based incentives tied to the
financial success of EndoSonics. One of the Committee's primary objectives is to
have a substantial portion of each officer's compensation contingent upon the
Company's performance as well as upon the individual's contribution to the
success of EndoSonics as measured by his personal performance. Accordingly, each
executive officer's compensation package is fundamentally comprised of three
elements: (i) base salary which reflects individual performance and expertise
and is designed to be competitive with salary levels in the industry, (ii)
variable performance awards payable in cash and tied to the Company's
achievement of certain financial goals; and (iii) long-term stock-based
incentive awards which strengthen the mutuality of interests between the
executive officers and the EndoSonics stockholders.
Factors. The principal factors which were considered in establishing the
components of each executive officer's compensation package for the 1998 fiscal
year are summarized below. However, the Committee may in its discretion apply
different factors, particularly different measures of financial performance, in
setting executive compensation for future fiscal years.
- Base Salary. The base salary levels for the executive officers were
established for the 1998 fiscal year on the basis of the following factors:
personal performance, the estimated salary levels in effect for similar
positions as a select group of companies with which the Company competes for
executive talent, and internal comparability considerations. The Committee,
however, did not rely upon any specific compensation surveys for comparisons.
Instead, the Committee made its decisions as to the appropriate market level of
base salary for each executive officer on the basis of its understanding of the
salary levels in effect for similar positions at those companies with which the
Company competes for executive talent. Base salaries will be reviewed on an
annual basis, and adjustments will be made in accordance with the factors
indicated above.
- Annual Incentive Compensation. EndoSonics has adopted an Employee Bonus
Plan pursuant to which the Board of Directors has discretionary authority to
award cash bonuses to executive officers and employees in accordance with
recommendations made by the Committee based upon the extent to which certain
financial and performance targets established semi-annually by the Committee are
met and the contribution of each such officer and employee to the attainment of
such targets. For fiscal year 1998, the performance targets for each of the
Named Officers included gross sales, cash flow, engineering product goals and
regulatory submission goals. The weight given to each factor varied from
individual to individual.
- Long-Term Incentive Compensation. EndoSonics has also adopted the 1988
Option Plan and the 1998 Option Plan. Each grant under these plans is designed
to align the interests of the executive officer with those of the stockholders
and provide each individual with a significant incentive to manage EndoSonics
from the perspective of an owner with an equity stake in the business. The
number of shares subject to each option grant is based upon the officer's
tenure, level of responsibility and relative position in EndoSonics. The
Committee has established certain general guidelines in making option grants to
the executive officers in an attempt to target a fixed number of unvested option
shares based upon the individual's position with the Company and his or her
existing holdings of unvested options. However, the Committee does not adhere
strictly to these guidelines and will vary the size of the option grant made to
each executive officer as it feels the circumstances warrant. Each grant allows
the officer to acquire shares of EndoSonics Common Stock at a fixed price per
share (the market price on the grant date) over a specified period of time (up
to 10 years). The option normally vests in periodic installments over a
four-year period, contingent upon the executive officer's continued employment
with the Company. Accordingly, the option will provide a return to the executive
officer only if he or she remains in the Company's employ and the market price
of the Company's Common Stock appreciates over the option term.
- CEO Compensation. In setting the base salary for Mr. Reinhard J.
Warnking, the Company's Chief
15
<PAGE> 19
Executive Officer, for the 1998 fiscal year, the Committee sought to provide him
with a level of salary which is at the median of the salaries paid to chief
executive officers of similarly-sized companies in the industry. There was no
intent on the Committee's part to have this particular component of Mr.
Warnking's compensation affected to any significant degree by Company
performance.
Mr. Warnking's incentive cash compensation for the 1998 fiscal year was
based on an overall assessment of his achievement in implementing certain
internal practices to strengthen the management team and further the Company's
business development.
The long-term incentive component of Mr. Warnking's compensation for the
1998 fiscal year consisted of a stock option grant on July 1,1998 to purchase
60,000 shares. As previously indicated, this grant was designed to provide a
special incentive to Mr.
Warnking to contribute to the Company's financial success.
- Compliance with Internal Revenue Code Section 162(m). Section 162(m) of
the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction
to publicly held corporations for compensation exceeding $1 million paid to
certain of the corporation's executive officers. The limitation applies only to
compensation which is not considered to be performance-based. The
non-performance based compensation to be paid to the Company's executive
officers for the 1997 fiscal year did not exceed the $1 million limit per
officer, no is it expected that the non-performance based compensation to be
paid to the Company's executive officers for fiscal year 1998 will exceed that
limit. The Company's 1988 Option Plan and 1998 Option Plan are structured so
that any compensation deemed paid to an executive officer in connection with the
exercise of option grants made under such plans will qualify as
performance-based compensation which will not be subject to the $1 million
limitation. Because it is very unlikely that the cash compensation payable to
any of the Company's executive officers in the foreseeable future will approach
the $1 million limit, the Committee has decided at this time not to take any
other action to limit or restructure the elements of cash compensation payable
to the Company's executive officers. The Committee will reconsider this decision
should the individual cash compensation of any executive officer ever approach
the $1 million level.
COMPENSATION COMMITTEE
Julie A. Brooks
Roger Salquist
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors for the 1998 fiscal year were Julie A. Brooks and Roger Salquist. No
member of the Compensation Committee was at any time during the 1998 fiscal year
or at any other time an officer or employee of EndoSonics.
No executive officer of EndoSonics served on the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
16
<PAGE> 20
STOCK PERFORMANCE GRAPH
The graph depicted below shown EndoSonics' stock price as an index
assuming $100 invested on March 4, 1992 (the date of EndoSonics' initial public
offering), along with the composite prices of companies listed on the CRSP Total
Return Index for National Association of Securities Dealers Automated Quotation
("Nasdaq") Stock Market and the Hambrecht & Quist Incorporated Total Return
Index for Healthcare Technology Companies (excluding Biotechnology). This
information has been provided to EndoSonics by Hambrecht & Quist Incorporated.
PERFORMANCE GRAPH FOR ENDOSONICS CORPORATION
INDEXED COMPARISON OF CUMULATIVE TOTAL RETURN
CRSP TOTAL RETURN INDEX FOR NASDAQ STOCK MARKET AND
THE HAMBRECHT AND QUIST TOTAL RETURN INDEX FOR HEALTHCARE TECHNOLOGY COMPANIES
(EXCLUDING BIOTECHNOLOGY)
<TABLE>
<CAPTION>
Nasdaq Stock Market H&Q Healthcare Excl.
DATES Endosonics Corp. U.S. Biotech
------ ---------------- ------------------- --------------------
<S> <C> <C> <C>
Dec-93 100.00 100.00 100.00
Jan-94 127.08 103.03 109.26
Feb-94 129.17 102.07 100.75
Mar-94 125.00 95.80 92.28
Apr-94 120.83 94.55 90.13
May-94 100.00 94.79 93.14
Jun-94 91.67 91.32 89.37
Jul-94 70.83 93.19 92.81
Aug-94 95.83 99.13 105.68
Sep-94 116.67 98.88 106.78
Oct-94 120.83 100.82 104.00
Nov-94 114.58 97.48 103.70
Dec-94 114.58 97.75 106.25
Jan-95 141.67 98.31 113.03
Feb-95 127.08 103.51 115.64
Mar-95 133.33 106.58 124.11
Apr-95 131.25 109.94 122.54
May-95 131.25 112.77 123.12
Jun-95 185.42 121.91 127.50
Jul-95 168.75 130.87 138.41
Aug-95 189.58 133.53 146.84
Sep-95 220.83 136.60 159.49
Oct-95 264.58 135.81 162.29
Nov-95 237.50 139.00 165.93
Dec-95 252.08 138.26 176.91
Jan-96 229.17 138.94 189.24
Feb-96 245.83 144.22 189.24
Mar-96 297.92 144.70 189.26
Apr-96 289.58 156.70 185.62
May-96 254.17 163.90 185.72
Jun-96 297.92 156.51 177.88
Jul-96 208.33 142.55 162.93
Aug-96 239.58 150.54 173.56
Sep-96 233.33 162.05 195.21
Oct-96 210.42 160.26 185.05
Nov-96 191.67 170.17 190.75
Dec-96 254.17 170.01 196.41
Jan-97 214.58 182.10 207.13
Feb-97 189.58 172.03 203.72
Mar-97 158.33 160.79 186.57
Apr-97 145.83 165.82 190.71
May-97 185.42 184.61 209.59
Jun-97 181.25 190.27 223.35
Jul-97 220.83 210.35 235.66
Aug-97 195.83 210.03 223.85
Sep-97 244.78 222.44 234.10
Oct-97 191.67 210.92 222.53
Nov-97 195.83 211.98 226.69
Dec-97 179.17 208.58 234.07
Jan-98 134.37 215.16 234.53
Feb-98 170.83 235.36 256.22
Mar-98 172.92 244.05 266.16
Apr-98 108.33 248.20 274.55
May-98 101.04 234.57 263.69
Jun-98 100.00 251.12 271.18
Jul-98 143.75 248.47 266.18
Aug-98 80.21 199.75 221.33
Sep-98 79.17 227.34 239.38
Oct-98 128.13 236.63 252.13
Nov-98 141.67 259.94 267.51
Dec-98 165.63 293.21 284.41
</TABLE>
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 which might incorporate future filings, including this
Proxy Statement, the preceding Compensation Committee Report on Executive
Compensation and the Company Stock Performance Graph will not be incorporated
by reference into any of those prior filings, nor will such report or graph be
incorporated by reference into any future filings made by the Company under
those statutes.
17
<PAGE> 21
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer, Mr. Warnking, who has served in such capacity since
February 1, 1995, and the other four most highly-compensated executive officers
whose compensation for the 1998 fiscal year was in excess of $100,000 for
services rendered in all capacities to the Company for each of the last three
fiscal years. No other executive officer who would have otherwise been
includable in such table on the basis of salary and bonus earned for the 1998
fiscal year resigned or terminated employment during that fiscal year. All the
individuals named in the table will hereinafter be referred to as the "Named
Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------------------------------------
NUMBER OF
SECURITIES
SALARY BONUS OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) COMPENSATION(2) OPTIONS (#) COMPENSATION(3)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reinhard J. Warnking 1998 223,712 85,026 92,789 60,000
Chief Executive 1997 208,146 65,205 198,936 50,000
Officer and President(4) 1996 200,905 70,317 22,267 75,000
Dr. Hans P. de Weerd 1998 138,220 22,806 20,000 36,513
Senior Vice President, 1997 121,443 21,353 52,500 20,000 27,226
European Operations(5) 1996 130,344 21,012 25,000 23,478
Michael J. Eberle 1998 152,842 35,213 30,000
Senior Vice President, 1997 146,757 24,990 49,875 20,000
Chief Technical Officer 1996 141,867 22,699 25,000
Richard L. Fischer 1998 140,013 29,009 20,000
Vice President, Finance 1997 20,377 5,600 75,000
And Chief Financial 1996 N/A N/A
Officer(6)
Michael J. Sorna 1998 149,634 19,000 20,000
Vice President, Sales 1997 119,466 81,050 365,434 25,000
and Marketing, 1996 N/A N/A N/A
European Operations(7)
</TABLE>
- ---------------
(1) Except as otherwise indicated, the amounts shown under the Bonus column are
cash bonuses earned for the indicated fiscal years under the Employee Bonus
Plan.
(2) Except as otherwise indicated, Other Annual Compensation includes moving and
relocation expenses and compensation related to the distribution of RADX or
Cardiometrics stock based on outstanding options.
(3) The amounts shown represent annual contributions of $36,513, $27,226, and
$23,478 by the Company to fund future retirement benefits payable to Dr. de
Weerd under the individual pension program in which he participates in the
Netherlands.
(4) Mr. Warnking first became employed by the Company on April 19, 1993 and was
elected Chief Executive Officer of the Company on February 1, 1995.
(5) Dr. de Weerd first became employed by the Company in August 1994. Dr. de
Weerd's annualized rates of base salary for the 1997 and 1998 fiscal years
were 245,190 NLG and 260,682 NLG, respectively, converted at exchange rates
of 2.019 NLG's and 1.886 NLG's, respectively.
(6) Mr. Fischer first became employed by the Company in November 1997 and was
appointed Vice President of Finance and Chief Financial Officer of the
Company in November 1997.
(7) Mr. Sorna became employed by the Company on July 24, 1997. He was previously
employed by Cardiometrics, Inc. Other annual compensation for 1997 includes
$203,746 of merger consideration based on Mr. Sorna's outstanding stock
options on the effective date of the Cardiometrics acquisition.
18
<PAGE> 22
OPTION GRANTS IN LAST FISCAL YEAR
STOCK OPTIONS
The following table provides information with respect to the stock option
grants made during the 1998 fiscal year under EndoSonics 1998 Option Plan to the
Named Officers which are reflected in the Summary Comparison Table. Except for
the limited stock appreciation rights described in Footnote (1) below, no stock
appreciation rights were granted during such fiscal year to the Named Officers.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term
----------------------------------------------------------------------------------------------
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price (2) Expiration
Name Granted (1) Fiscal Year ($/sh) Date 5%($)(3) 10%($)(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reinhard J. Warnking 60,000 9% $ 6.3125 7/01/08 $236,995 $603,429
Dr. Hans P. de Weerd 20,000 3% $ 6.3125 7/01/08 $ 79,399 $201,211
Michael J. Eberle 30,000 4.5% $ 6.3125 7/01/08 $119,096 $302,015
Richard L. Fischer 20,000 3% $ 6.3125 7/01/08 $ 79,399 $201,211
Michael J. Sorna 20,000 3% $ 6.3125 7/01/08 $ 79,399 $201,211
</TABLE>
(1) Options were granted on July 1, 1998.
The shares subject to each option will immediately vest in the event the
Company is acquired by a merger or asset sale, unless the options are
assumed by the acquiring entity. The Plan Administrator also has the
discretionary authority to provide for accelerated vesting of the option
shares upon the termination of the optionee's employment following a
hostile change in control of the Company, whether by tender offer for more
than 25% of the Company's outstanding voting stock or change in the
majority of the Board effected through one or more proxy contests. Each
option has a maximum term of 10 years, subject to earlier termination in
the event of the optionee's cessation of service with the Company.
Each option also includes a limited stock appreciation right pursuant to
which the underlying option will automatically be canceled upon the
successful completion of a hostile tender offer for more than 50% of the
outstanding Common Stock and the optionee will become entitled to a cash
distribution from the Company in an amount per canceled option share
(whether or not the option is otherwise at the time exercisable for all
the option shares) equal to the tender-offer price paid per share of
Common Stock less the option exercise price payable per share.
(2) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the exercise date or through a
cashless exercise procedure involving a same-day sale of the purchased
shares. The Company may also finance the option exercise by loaning the
optionee sufficient funds to pay the exercise price for the purchased
shares and the federal and state income or employment tax liability
incurred by the optionee in connection with such exercise. The optionee
may be permitted, subject to the approval of the Plan Administrator, to
apply a portion of the shares purchased under the option (or to deliver
existing shares of Common Stock) in satisfaction of such tax liability.
(3) There is no assurance provided to any executive officer or any other
holder of EndoSonics securities that the actual stock price appreciation
over the 10-year option term will be at the assumed 5% or 10% annual rates
of compounded stock price appreciation or at any other defined level.
Unless the market price of the Common Stock appreciates over the option
term, no value will be realized from the option grants made to the
executive officers.
19
<PAGE> 23
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The table below sets forth information concerning the exercise of options
during the 1998 fiscal year and unexercised options held by the named Officers
as of the end of such year. No stock appreciation rights were exercised by the
Named Officers during such fiscal year, and except for the limited stock
appreciation rights described in Footnote (1) to the Option Grant table above,
no stock appreciation rights were held by such individuals at the end of such
fiscal year.
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money Options
On Aggregate Options at FY-End (#) at FY-End ($) (2)
Exercise Value -------------------------------------------------------------
Name (#) Realized ($) (1) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reinhard J. Warnking 0 0 259,437 167,712 798,358 569,835
Dr. Hans P. de Weerd 0 0 150,000 -- 470,938 --
Michael J. Eberle 0 0 113,541 58,959 229,664 125,118
Richard L. Fischer 0 0 15,625 79,375 15,625 131,875
Michael J. Sorna 0 0 79,935 38,750 171,976 72,500
</TABLE>
(1) Based upon the market price of the purchased shares on the exercise date
less the option exercise price paid for such shares.
(2) Based upon the market price of $9.9375 per share, which was the closing
selling price per share of Common Stock on the Nasdaq National Market on
the last day of the 1998 fiscal year, less the option exercise price
payable per share.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
None of the Named Officers other than Hans de Weerd have employment
agreements with EndoSonics. The employment of each of those Named Officers may
be terminated at any time at the discretion of the Board of Directors. However,
Dr. de Weerd has an employment agreement with the Company terminable by either
party upon 3 months advance notice. Dr. de Weerd is leaving the Company in April
1999.
The Compensation Committee of the Board of Directors has the authority as
administrator of the Company's 1988 Option Plan and the 1998 Option Plan to
provide for the accelerated vesting of the shares of Common Stock subject to any
outstanding options held by the Chief Executive Officer and the Company's other
executive officers and any unvested shares actually held by those individuals
under such plans, in the event their employment were to be terminated (whether
involuntarily or through a forced resignation) following a hostile take-over of
the Company effected through a successful tender for more than 25% of the
Company's outstanding Common Stock or through a change in the majority of the
Board as a result of one or more contested elections for Board membership.
In April 1998, the Board of Directors authorized the Company to enter into
a Key Employee Retention Agreement with each officer of the Company that would
provide to such officers certain benefits, including, among other things,
acceleration of vesting and salary continuation, in the event of the termination
of the officer's employment with the Company, other than for cause, following a
change-of-control transaction.
If the termination occurs more than 12 months but within 18 months after
the change in control, employee receives the benefits described above except
that the base salary continuation period is 12 months and bonus payments equal
the bonus accrued within that additional period.
OFFICER LOAN
On August 4, 1993, the Company extended a loan in the amount of $100,000
to Mr. Warnking, the Chief Executive Officer and President of the Company, for
purposes of assisting Mr. Warnking in the purchase of a residence. The loan was
secured by a deed of trust on such residence and was due and payable upon sale
of the property secured by such deed of trust. Interest on the loan accrued at
the rate of 3.95% per annum, compounded
20
<PAGE> 24
annually and was payable annually. As of December 31, 1997, the outstanding
balance on the loan was $116,398 including accrued interest. The loan was repaid
on March 20, 1998.
MERGER WITH MICROSOUND
In September, 1998, the Company completed the merger into and with the
Company of MicroSound Corporation ("MicroSound"), a Delaware Corporation, and a
majority-owned subsidiary of the Company (the "MicroSound Merger"). In the
MicroSound Merger, each stockholder of MicroSound received one share of Company
Common Stock for each share of MicroSound common stock held by such stockholder,
and each option holder of MicroSound received an option to purchase that number
of shares of the Company's Common Stock equal to the number of shares of
MicroSound common stock covered by such option. The company received advice from
an independent financial advisor in determining the value of MicroSound. The
shares of MicroSound common stock and a warrant to purchase shares of MicroSound
common stock held by the Company were cancelled. Mr. Warnking held 100,000
shares of MicroSound common stock, acquired at a purchase price of $0.125 per
share, which were exchanged for 100,000 shares of the Company's Common Stock.
These shares are subject to repurchase by the Company at the original purchase
price in the event of the termination of Mr. Warnking's employment with the
Company, with the repurchase rights terminating over a four-year period,
commencing in February, 1997. Mr. Warnking and Mr. Salquist received options for
the purchase of 60,000 and 10,000 shares, respectively, of the Company's Common
Stock in exchange for options to purchase like numbers of shares of MicroSound
common stock at an exercise price of $0.125 per share. These options vest, or
become exercisable, ratably over a four-year period commencing in February 1997.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The members of the Board of Directors, the executive officers of
EndoSonics and persons who hold more than 10% of the Company's outstanding
Common Stock are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934 which require them to file reports with respect
to their ownership of the Common Stock and their transactions in such Common
Stock. Based upon (i) the copies of Section 16(a) reports which EndoSonics
received from such persons for their 1998 fiscal year transactions in the Common
Stock and their Common Stock holdings and (ii) the written representations
received from one or more of such persons that no annual Form 5 reports were
required to be filed by them for the 1998 fiscal year, EndoSonics believes that
all reporting requirements under Section 16(a) for such fiscal year were met in
a timely manner by its executive officers, Board members and greater than
ten-percent stockholders.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
SEC Rule 14a-8 provides that certain stockholder proposals must be
included in the proxy statement for EndoSonics' annual meeting. For a
stockholder proposal to be considered for inclusion in the proxy statement for
EndoSonics' 2000 annual meeting of stockholders, it must be received by
EndoSonics no later than [January 1, 2000] at its principal office, 2870 Kilgore
Road, Rancho Cordova, California 95670, Attention: Corporate Secretary. To be
eligible for such proxy materials, such proposals must conform to the
requirements set forth in Regulation 14A under the Exchange Act as well as in
EndoSonics' bylaws.
In addition, the proxy solicited by the Board of Directors for the 2000
Annual Meeting of Stockholders will confer discretionary authority to vote on
any stockholder proposal presented at that meeting, unless EndoSonics is
provided with notice of such proposal by [March 15, 2000].
ANNUAL REPORT AND FINANCIAL STATEMENTS
EndoSonics' 1998 Annual Report, which includes its audited financial
statements for the fiscal year ended December 31, 1998, has accompanied or
preceded this proxy statement. EndoSonics will provide, without charge, upon
written request, a copy of its most recent Annual Report on Form 10-K, as filed
with the Securities and Exchange Commission. Requests should be directed to its
Corporate Secretary at EndoSonics Corporation, 2870 Kilgore Road, Rancho
Cordova, California 95670.
OTHER BUSINESS
The Board of Directors is not aware of any other matter which may be
presented for action at the Annual Meeting. Should any other matter requiring a
vote of the stockholders arise, it is intended that the proxy holders will vote
on such matters in accordance with their best judgment.
21
<PAGE> 25
PROXY
ENDOSONICS CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, JUNE 10, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned revokes all previous proxies, acknowledges receipt of the notice
of annual meeting of stockholders to be held on June 10, 1999 and the proxy
statement and appoints Reinhard J. Warnking and Richard L. Fischer, or either of
them, the proxy of the undersigned, with full power of substitution, to vote all
shares of Common Stock of EndoSonics Corporation which the undersigned is
entitled to vote, either on his or her own behalf or on behalf of an entity or
entities, at the Annual Meeting of Stockholders of EndoSonics to be held at
EndoSonics Corporation, 2870 Kilgore Road, Rancho Cordova, California, on
Thursday, June 10, 1999 at 10:00 a.m., and any adjournment or postponement
thereof, and to vote in their discretion on such other business as may properly
come before the Annual Meeting and any postponement or adjournment thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 26
Please mark your vote
as indicated in [X]
this example.
<TABLE>
<CAPTION>
WITHHOLD
FOR AUTHORITY
all nominees to vote for all
listed below: nominees EXCEPTIONS
<S> <C> <C> <C>
1. Election of Directors [ ] [ ] [ ]
INSTRUCTION: To withhold authority for
any individual nominee, mark the
"EXCEPTIONS" box, and strike a line
through the nominee's name in the
list below:
Julie A. Brooks Roger Salquist
Thomas J. Cable Gregg W. Stone, M.D.
Dale Conrad Reinhard J. Warnking
James Stapfer W. Michael Wright
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. To approve the increase in the number [ ] [ ] [ ]
of shares of Common Stock issuable under
the Company's 1998 Stock Option Plan
(the "1998 Option Plan") by an
additional 500,000.
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
3. Ratification of Ernst & Young LLP as [ ] [ ] [ ]
independent auditors for fiscal year 1999.
</TABLE>
The Board of Directors recommends a vote FOR each of the director nominees
listed above and for the other proposals set forth above. This Proxy, when
properly executed, will be voted as specified above. This Proxy will be voted
FOR each of the nominees listed under Proposal No. 1 and for Proposals 2 and 3
if no specification is made. This Proxy will also be voted at the discretion of
the proxy holders on such matters other than the three specific items as may
come before the meeting.
Please print the name(s) appearing on each share certificate(s) over which you
have voting authority:
- -----------------------------------
Dated:
-----------------------------
[Print name(s) as it (they) appear on certificate(s)]
PLEASE RETURN YOUR EXECUTED PROXY TO ENDOSONICS' TRANSFER AGENT IN THE ENCLOSED
ENVELOPE, OR, IF NECESSARY, DELIVER IT TO ENDOSONICS, 2870 KILGORE ROAD, RANCHO
CORDOVA, CA, ATTENTION: SECRETARY.
Signature(s) DATE:
--------------------------------------------------- ----------
Please sign exactly as your name(s) is (are) shown on the share certificate to
which the Proxy applies. When shares are held by joint tenants, both should
sign. When signing as an attorney, executor, administrator, trustee or guardian,
please give full title, as such. If a corporation, please sign in full corporate
name by the President or another authorized officer. If a partnership, please
sign in the partnership name by an authorized person.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
