<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>
- --------------------------------------------------------------------------------
(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
[ENODSONICS LOGO]
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 8, 2000 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 seven (7) 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.
/s/ REINHARD J. WARNKING
---------------------------------
REINHARD J. WARNKING
Chairman of the Board and Chief
Executive Officer
May 10, 2000
1
<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 8, 2000 at 10:00 a.m. at EndoSonics Corporation, 2870
Kilgore Road, Rancho Cordova, California, for the following purposes:
1. To elect a seven (7) member Board of Directors for EndoSonics
from the following nominees: 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 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, 2000.
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 10, 2000
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
/s/ MICHAEL W. HALL
------------------------------------
MICHAEL W. HALL
Secretary
Rancho Cordova, California
May 10, 2000
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.
2
<PAGE> 4
ENDOSONICS CORPORATION
2870 KILGORE ROAD
RANCHO CORDOVA, CA 95670
--------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 8, 2000
--------------------
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 8, 2000 at
10:00 a.m., at which time stockholders of record on April 10, 2000 will be
entitled to vote. On April 10, 2000, EndoSonics had outstanding 17,744,711
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 10, 2000 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
Seven (7) 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 seven (7) 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, 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>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- -----
<S> <C> <C> <C>
Julie A. Brooks 54 Vice President, Legal and Public Affairs and General 1998
Counsel of Channelpoint, Inc., an Internet company
headquartered in Colorado, since 1999.
Thomas J. Cable 60 Private investor and consultant. 1984
Dale Conrad 60 Private investor and consultant. 1998
James Stapfer 49 European Representative of Fukuda Denshi America, a 1998
Japanese medical equipment producer.
Gregg W. Stone, M.D. 43 Director of Cardiovascular Research and Education at 1999
the Cardiovascular Research Foundation, Lenox Hill
Heart and Vascular Institute, New York City, New York.
Reinhard J. Warnking 51 President and Chief Executive Officer of EndoSonics 1993
Corporation, and elected Chairman of the Board of
Directors on March 17, 2000.
W. Michael Wright 52 President and Chief Executive Officer of WellPartner, 1997
Inc.
</TABLE>
Except as set forth below, each of the nominees has been engaged in the
principal occupation set forth next to his or her name above during the past
five years. There is no family relationship between any director or executive
officer of the Company.
Ms. Brooks has served as a director of the Company since June 1998. She
is currently the Vice President, Legal and Public Affairs and General Counsel of
Channelpoint, Inc., an Internet company headquartered in Colorado, since 1999.
Previously, Ms. Brooks was Senior Vice President, Legal & External Affairs,
General Counsel and Secretary of Access Health, Inc. from 1996 to 1999. Prior to
her role at Access Health, she founded and managed The General Counsel, Inc., a
Seattle-based legal services company, from 1992 to 1996. She was Vice President,
Legal Affairs, General Counsel and Secretary for Westmark International, Inc. an
international manufacturer of diagnostic ultrasound, patient monitoring systems
and clinical information systems, from 1986 to 1992.
4
<PAGE> 6
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 and Howse Ventures, a venture capital firm, from 1976 through 1998.
Mr. Conrad has served as director of the Company since August 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.
Mr. Stapfer has served as director of the Company since October 1998. He
is the European Representative of Fukuda Denshi America, a Japanese medical
equipment producer.
Dr. Stone has served as director of the Company since February 1999. He
is the Director of Cardiovascular Research and Education at the Cardiovascular
Research Foundation, Lenox Hill Heart and Vascular Institute, New York City, New
York. Dr. Stone graduated from the University of Michigan and the Johns Hopkins
School of Medicine in Baltimore, and completed his internship and residency at
New York Hospital's Cornell Medical Center in New York City in 1985. He then
completed a Cardiology Fellowship at Cedars Sinai Medical Center in Los Angeles
in 1988, and a second Fellowship in Advanced Coronary Angioplasty at the Mid
America Heart Institute in 1989. 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.
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, and was elected Chairman of the Board of Directors on March
17, 2000. 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.
Mr. Wright has served as Director of the Company since December 1997. He
has been President and Chief Executive Officer of WellPartner, Inc. since July
1999. Prior to this role, Mr. Wright held the position of President and Chief
Executive Officer for Gene Therapeutics, Inc., MicroHeart, Inc. and TomTec
Imaging Systems, Inc. Mr. Wright also served in various management capacities
with Johnson & Johnson from 1968 to 1995.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met 9 times during the year ended December 31,
1999. 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, 1999.
EndoSonics has a standing Compensation Committee which met five (5)
times during the year ended December 31, 1999. Through October 1999, this
Committee consisted of Roger Salquist and Ms. Julie Brooks. During November and
December 1999, the Compensation Committee consisted of Ms. Julie Brooks and
Michael Wright. The Committee administers the 1998 Employee Stock Purchase Plan,
the 1988 Stock Option Plan, the 1998 Stock Option Plan and the 1999
Non-Qualified Plan, and reviews and acts on matters relating to compensation
levels and benefit plans for key executives of EndoSonics. The Compensation
Committee has the power and authority to make stock option grants under the 1998
Stock Option Plan to the Company's officers.
EndoSonics has a standing Executive Committee which met three (3) times
during the year ended December 31, 1999, two of these times consisted of 3-day
visit and one time consisted of a 1-day visit. From October 18,1999, this
Committee consists of Dale Conrad. The Committee consults with Reinhard
Warnking, President and C.E.O. of the Company, on operating and financial
matters concerning the Company, to assist in establishing strategic and tactical
directions for the Company and to address such other matters and take such
actions as may be authorized by the Board from time to time.
REMUNERATION
The following directors were paid the indicated fees and retainers in
connection with their Board service for the 1999 fiscal year:
5
<PAGE> 7
<TABLE>
<S> <C> <C>
Roger Salquist (former Chairman) $ 36,666.63 (For service through October 31, 1999)
Julie A. Brooks $ 9,700.00
Thomas J. Cable $ 9,200.00
Dale Conrad $ 12,550.00
Edward Leonard $ 2,277.76 (For service through June 9, 1999)
Jakob Stapfer $ 7,250.00
Gregg W. Stone, M.D. $ 6,321.13 (For service from February 8, 1999)
W. Michael Wright $ 7,500.00
</TABLE>
The Directors' Compensation policy in effect for 1999 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
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 1999 Annual Stockholders Meeting held on June 10, 1999, Ms.
Brooks and Messrs. Cable, Conrad, Salquist, Stapfer, Stone 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 $8.0625 per share, the fair market value per share of
Common Stock on the grant date. Effective November 1, 1999, Mr. Roger Salquist,
Chairman, resigned from the Company's Board of Directors, to devote his full
attention to the portfolio companies and the investing activities of the North
American Nutrition and Agribusiness Fund (NANAF), of which he is Chief
Investment Officer.
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 $5.9375 per share, the fair
market value per share of Common Stock on the grant date.
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<PAGE> 8
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 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 and a consultant for our Sales
and Marketing department. In these capacities, Dr. Stone received payments of
$26,000 and $32,000, respectfully.
On April 19, 1999, Mr. Wright, as a member of the Company's Board of
Directors, signed a Consulting Agreement to assist the Company in exploration of
IVUS-guided joint stenting with other companies. In this capacity, Mr. Wright
was paid $7,500 for his consulting services.
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 SEVEN
NOMINEES NAMED ABOVE.
PROPOSAL NO. 2
AMENDMENT TO THE 1998 STOCK OPTION PLAN
OF ENDOSONICS CORPORATION
The stockholders are being asked to approve an 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.
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<PAGE> 9
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.
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 1,750,000 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
8
<PAGE> 10
or subsidiary corporations (whether now existing or subsequently established).
As of March 31, 2000 approximately 400 employees (including 7 officers of the
Company and 6 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.
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.
9
<PAGE> 11
(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 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 Option Plan as may be
determined by the Administrator.
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<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 10, 2000 the fair market
value per share of the Common Stock was $5.1875 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
11
<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 that 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 that the excess, if any, of the
fair market value of the Common Stock on the date of exercise over the exercise
price will be an item of adjustment for purposes of the 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. Upon the sale, exchange or other disposition 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 either 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
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
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 in an amount equal to the
excess, if any, of the fair market value of the shares on the date of exercise
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.
Alternative Minimum Tax. The exercise of an incentive stock option may
result in an item of adjustment for purposes of the alternative minimum tax
under Section 55 of the Code.
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<PAGE> 14
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 may recognize 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.
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
qualify 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.
STOCK APPRECIATION RIGHTS
No taxable income is generally recognized upon the receipt of a stock
appreciation right, but upon exercise of the stock appreciation right, the fair
market value of the shares (or cash in lieu of shares) received generally will
be taxable as ordinary income to the recipient in the year of such exercise. The
Company generally will be entitled to a compensation deduction for the same
amount that the recipient recognizes as ordinary income.
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, Jakob Stapfer, Gregg W. Stone, M.D., 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
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).
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<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 1,750,000 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 FOR 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, 1999. 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, 2000 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, 2000.
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<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 10, 2000 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>
INVESCO, Inc. (1) 2,465,000 13.9%
1315 Peachtree Street, N.E.
Suite 500
Atlanta, GA 30309
Loomis, Sayles & Company, L.P. (2) 1,248,700 7.0%
One Financial Center
Boston, Massachusetts 02111
Fukuda Denshi Company, Ltd. (3) 1,052,577 5.9%
3-39-4 Hungo Bunkyo-Ku
Tokyo 113, Japan
Merrill Lynch & Company, Inc. (4) 1,026,300 5.8%
World Financial Center, North Tower
250 Vesey Street
New York, NY 10381
Trimark Financial Corporation (5) 907,900 5.1%
One First Canadian Place, Suite 5600
P.O. Box 487
Toronto, ON MSX 1E5
Reinhard J. Warnking (6) 508,237 2.9%
Michael J. Eberle (7) 179,998 1.0%
Richard D. Hebert (8) 5,417 *
Robrecht Michiels (9) -- *
Joerg Schulze-Clewing (10) 60,977 *
Gary L. Wilson (11) 31,901 *
Oti M. Wooster (12) 62,092 *
Julie A. Brooks (13) 6,253 *
Thomas J. Cable (14) 42,505 *
Dale Conrad (15) 15,628 *
Jakob Stapfer (16) 5,211 *
Gregg W. Stone, M.D. (17) 12,334 *
W. Michael Wright (18) 10,212 *
All directors and executive officers as a group (13 persons) 940,765 5.3%
</TABLE>
*Represents less than 1% of the issued and outstanding shares
(#) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange 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 10, 2000 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
15
<PAGE> 17
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 February 4, 2000, INVESCO, Inc. reported that as of
December 31, 1999, it had shared voting and investment power over
2,465,000 shares.
(2) Pursuant to a Schedule 13G filed with the Securities and Exchange
Commission on February 4, 2000, Loomis, Sayles & Company, L.P. reported
that as of December 31, 1999, it had sole voting power over 1,020,200
shares and investment power over 1,248,700 shares.
(3) Pursuant to a Schedule 13G filed with the Securities and Exchange
Commission on October 7, 1998, Fukuda Denshi Company, Ltd. reported that
as of December 31, 1998, it had sole voting and investment power over
1,052,577 shares.
(4) Pursuant to a Schedule 13G filed with the Securities and Exchange
Commission on February 4, 2000. Merrill Lynch & Company, Inc. reported
that as of December 31, 1999, it had shared and investment power over
1,026,300 shares.
(5) Pursuant to a Schedule 13G filed with the Securities and Exchange
Commission on February 4, 2000. Trimark Financial Corporation reported
that as of December 31, 1999, it had sole voting and investment power
over 907,900 shares.
(6) Includes 187,340 shares owned by Mr. Warnking and 320,897 shares
obtainable upon exercise of options that are currently exercisable or
will become exercisable within 60 days after April 10, 2000.
(7) Includes 31,250 shares owned by Mr. Eberle and 148,748 shares obtainable
upon exercise of options that are currently exercisable or will become
exercisable within 60 days after April 10, 2000.
(8) Includes 5,417 shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 10, 2000.
(9) Mr. Michiels currently has no shares obtainable upon exercise of options
that are currently exercisable or will become exercisable within 60 days
after April 10, 2000.
(10) Includes 8,483 shares owned by Mr. Schulze-Clewing and 52,494 shares
obtainable upon exercise of options that are currently exercisable or
will become exercisable within 60 days after April 10, 2000.
(11) Includes 652 shares owned by Mr. Wilson and 31,249 shares obtainable
upon exercise of options that are currently exercisable or will become
exercisable within 60 days after April 10, 2000.
(12) Includes 333 shares owned by Ms. Wooster and 61,759 shares obtainable
upon exercise of options that are currently exercisable or will become
exercisable within 60 days after April 10, 2000.
(13) Includes 6,253 shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 10, 2000.
(14) Includes 42,505 shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 10, 2000.
(15) Includes 10,000 shares owned by Mr. Conrad and 5,628 shares obtainable
upon exercise of options that are currently exercisable or will become
exercisable within 60 days after April 10, 2000.
(16) Includes 5,211 shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 10, 2000.
16
<PAGE> 18
(17) Includes 12,334 shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 10, 2000.
(18) Includes 10,212 shares obtainable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 10, 2000.
17
<PAGE> 19
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 or her 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 that were considered in establishing the
components of each executive officer's compensation package for the 1999 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.
o Base Salary. The base salary levels for the executive officers were
established for the 1999 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.
o 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 1999, 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.
o 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.
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<PAGE> 20
o CEO Compensation. In setting the base salary for Mr. Reinhard J.
Warnking, the Company's Chief Executive Officer, for the 1999 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 the Company's performance.
The Committee awards incentive cash compensation to management based on
the achievement of specified financial objectives and the Company's overall
performance. In consideration of these factors, Mr. Warnking received no cash
bonus for fiscal year 1999.
The long-term incentive component of Mr. Warnking's compensation for the
1999 fiscal year consisted of a stock option grant on July 30, 1999 to purchase
80,000 shares at fair market value. As previously indicated, this grant was
designed to provide an incentive to Mr. Warnking to contribute to the Company's
financial success, and align his interests with the Company's stockholders.
o 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 that is not considered to be performance-based. The
non-performance based compensation to be paid to the Company's executive
officers for the 1998 fiscal year did not exceed the $1 million limit per
officer, so it is expected that the non-performance based compensation to be
paid to the Company's executive officers for fiscal year 1999 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
W. Michael Wright
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors for the 1999 fiscal year were Julie A. Brooks and Roger Salquist
through October 31, 1999. From November 1, 1999 through December 31, 1999, the
members of the Compensation Committee of the Company's Board of Directors were
Julie A. Brooks and W. Michael Wright. No member of the Compensation Committee
was at any time during the 1999 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 that has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
19
<PAGE> 21
STOCK PERFORMANCE GRAPH
The graph depicted below shows EndoSonics' stock price as an index
assuming $100 invested on December 1, 1994 (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 Chase H & Q, Incorporated Total Return
Index for Healthcare Companies (excluding Biotechnology). This information has
been provided to EndoSonics by Chase H & Q, Incorporated.
PERFORMANCE GRAPH FOR ENDOSONICS CORPORATION
INDEXED COMPARISON OF CUMULATIVE TOTAL RETURN
CRSP TOTAL RETURN INDEX FOR NASDAQ STOCK MARKET AND
THE CHASE H & Q TOTAL RETURN INDEX FOR HEALTHCARE COMPANIES
(EXCLUDING BIOTECHNOLOGY)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
DATES Endosonics Corp. Nasdaq Stock Market - U.S. H&Q Healthcare Excl. Biotech
- ----- ---------------- -------------------------- ----------------------------
<S> <C> <C> <C>
Dec-94 100.00 100.00 100.00
Jan-95 123.64 100.53 106.37
Feb-95 110.91 105.81 108.84
Mar-95 116.36 108.95 116.81
Apr-95 114.55 112.38 115.33
May-95 114.55 115.29 115.88
Jun-95 161.82 124.62 120.00
Jul-95 147.27 133.77 130.26
Aug-95 165.45 136.49 138.20
Sep-95 192.73 139.63 150.11
Oct-95 230.91 138.83 152.74
Nov-95 207.27 142.09 156.17
Dec-95 220.00 141.33 166.50
Jan-96 200.00 142.04 178.10
Feb-96 214.55 147.46 178.10
Mar-96 260.00 147.95 178.12
Apr-96 252.73 160.21 174.70
May-96 221.82 167.56 174.79
Jun-96 260.00 160.01 167.41
Jul-96 181.82 145.76 153.34
Aug-96 209.09 153.94 163.34
Sep-96 203.64 165.70 183.72
Oct-96 183.64 163.87 174.15
Nov-96 167.27 174.04 179.53
Dec-96 221.82 173.89 184.85
Jan-97 187.27 186.23 194.94
Feb-97 165.45 175.93 191.73
Mar-97 138.18 164.46 175.59
Apr-97 127.27 169.58 179.48
May-97 161.82 188.79 197.25
Jun-97 158.18 194.59 210.21
Jul-97 192.73 215.10 221.79
Aug-97 170.91 214.79 210.67
Sep-97 213.64 227.52 220.32
Oct-97 167.27 215.67 209.44
Nov-97 170.91 216.81 213.35
Dec-97 156.36 213.07 220.29
Jan-98 117.27 219.82 220.73
Feb-98 149.09 240.49 241.14
Mar-98 150.91 249.36 250.49
Apr-98 94.55 253.57 258.39
May-98 88.18 239.49 248.17
Jun-98 87.27 256.21 255.22
Jul-98 125.45 253.22 250.51
Aug-98 70.00 203.17 208.30
Sep-98 69.09 231.37 225.29
Oct-98 111.82 241.36 237.29
Nov-98 123.64 265.78 251.77
Dec-98 144.55 300.25 267.67
Jan-99 178.18 343.91 256.05
Feb-99 120.00 313.08 248.76
Mar-99 94.55 335.86 255.02
Apr-99 73.64 345.30 255.38
May-99 99.09 337.34 254.11
Jun-99 101.82 367.47 261.70
Jul-99 110.91 362.12 255.71
Aug-99 120.91 376.46 250.57
Sep-99 123.64 375.85 226.05
Oct-99 54.09 403.16 221.97
Nov-99 72.73 446.17 234.24
Dec-99 65.45 542.43 233.86
</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.
20
<PAGE> 22
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 1999 fiscal year was in excess of $100,000 for
services rendered in all capacities to the Company for each of the last three
fiscal years. No other executive officer who would have otherwise been
includable in such table on the basis of salary and bonus earned for the 1999
fiscal year resigned or terminated employment during that fiscal year. All the
individuals named in the table will hereinafter be referred to as the "Named
Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------ ------------
NUMBER OF
SECURITIES
SALARY BONUS OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) COMPENSATION(2) OPTIONS (#) COMPENSATION(3)
--------------------------- ---- --- ---- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Reinhard J. Warnking 1999 290,000 (4) 266,354 80,000
Chief Executive 1998 223,712 85,026 92,789 60,000
Officer and President(3) 1997 208,146 65,205 198,936 50,000
Michael J. Eberle 1999 172,559 11,625 20,000
Senior Vice President 1998 152,842 35,213 30,000
and General Manager, 1997 146,757 24,990 49,875 20,000
SmartWire Division
Richard L. Fischer 1999 153,916 25,113 20,000
Vice President, Finance 1998 140,013 29,009 20,000
and Chief Financial 1997 20,377 5,600 75,000
Officer(5)
Joreg Schulze Clewing 1999 142,688 10,500 20,000
Vice President and 1998 117,949 19,500 40,000
General Manager 1997 108,557 10,000 40,000
Imaging Division
Michael J. Sorna 1999 141,140 4,000
Vice President, Sales 1998 149,634 19,000 20,000
and Marketing, 1997 119,466 81,050 365,434 25,000
European Operations(6)
</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) 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.
(4) Mr. Warnking received no cash bonus for fiscal year 1999. On February 7,
2000 he was granted an option for the purchase of 100,000 shares of Common
Stock, which will vest in six equal installments, with the first such
installment vesting on November 2, 2000, and the balance vesting over the
next five calendar quarters. Vesting will be accelerated fully in the event
the price of the Company's Common Stock reaches and remains at $10.00 per
share under certain conditions.
(5) 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. Mr. Fischer resigned his position as Vice
President of Finance and Chief Financial Officer on January 7, 2000.
(6) Mr. Sorna became employed by the Company on July 24, 1997. He was previously
employed by Cardiometrics, Inc. Other annual compensation for 1997 includes
$203,746 of merger consideration based on Mr. Sorna's outstanding stock
options on the effective date of the Cardiometrics acquisition. Mr. Sorna
resigned his position effective September 10, 1999.
21
<PAGE> 23
OPTION GRANTS IN LAST FISCAL YEAR
STOCK OPTIONS
The following table provides information with respect to the stock
option grants made during the 1999 fiscal year under EndoSonics 1998 Option Plan
to the Named Officers which are reflected in the Summary Comparison Table.
Except for the limited stock appreciation rights described in Footnote (1)
below, no stock appreciation rights were granted during such fiscal year to the
Named Officers.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term
--------------------------------------------------------------------------------
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price(2) Expiration
Name Granted(1) Fiscal Year ($/sh) Date 5%($)(3) 10%($)(3)
- ---- ---------- ----------- ------ ---- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Reinhard J. Warnking 80,000 12% $7.6250 7/29/09
Michael J. Eberle 20,000 3% $7.6250 7/29/09
Richard L. Fischer 20,000 3% $7.6250 7/29/09
Joerg Schulze Clewing 20,000 3% $7.6250 7/29/09
Michael J. Sorna 4,000 1% $7.6250 7/29/09
</TABLE>
(1) Options were granted on July 30, 1999.
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.
22
<PAGE> 24
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 1999 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 Aggregate Underlying Unexercised In-the-Money Options
On Value Options at FY-End(#) at FY-End($)(2)
Exercise Realized -------------------------- ---------------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- --- ------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Reinhard J. Warnking 0 0 291,314 172,713 32,277 76,580
Michael J. Eberle 0 0 139,791 52,709 2,000 0
Richard L. Fischer (3) 0 0 38,334 76,666 0 0
Joerg Schulze Clewing 0 0 43,328 56,672 123,944 51,056
Michael J. Sorna (4) 0 0 0 0 0 0
</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 $4.50 per share, which was the closing
selling price per share of Common Stock on the Nasdaq National Market on
the last day of the 1999 fiscal year, less the option exercise price
payable per share.
(3) Mr. Fischer resigned his position effective January 7, 2000. Mr. Fischer
will provide consulting services through March 7, 2000. On March 7,
2000, Mr. Fischer's options will stop vesting, and those options that
were not exercisable will be cancelled. On June 7, 2000, Mr. Fischer's
unexercised vested options will be cancelled.
(4) Mr. Sorna resigned his position effective September 10, 1999. On this
date, Mr. Sorna's options stopped vesting, and those options that were
not exercisable were cancelled. On December 10, 1999, Mr. Sorna's
unexercised vested options were cancelled.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
None of the Named Officers 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.
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, the 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.
23
<PAGE> 25
Mr. Jakob (James) Stapfer, a member of the Company's Board of Directors,
is the European representative of Fukuda Denshi America, a wholly-owned
subsidiary of Fukuda Denshi Company, LLP, a corporation of Japan, with whom the
Company has entered into the following agreements: Distribution Agreement dated
August 31, 1998, Amendment to the Distribution Agreement (June 28, 1997) dated
August 31, 1998, Research and Development Agreement dated August 31, 1998,
Common Stock Purchase Agreement dated October 7, 1998, and the Investors' Rights
Agreement dated September 21, 1998. For fiscal year 1999, payments from Fukuda
Denshi Company, LLP under these agreements were in the aggregate approximately
$4,328,788.
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 the
Securities and Exchange Commission 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 1999
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 1999 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' 2001 annual meeting of stockholders, it must be received by
EndoSonics no later than January 3, 2001 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 18, 2000].
ANNUAL REPORT AND FINANCIAL STATEMENTS
EndoSonics' 1999 Annual Report, which includes its audited financial
statements for the fiscal year ended December 31, 1999, 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 that 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.
By Order of the Board of Directors
/s/ REINHARD J. WARNKING
------------------------------------
REINHARD J. WARNKING
Chairman of the Board and Chief
Executive Officer
Rancho Cordova, California
May 10, 2000
24
<PAGE> 26
PROXY
ENDOSONICS CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, JUNE 8, 2000
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 8, 2000 and the proxy
statement and appoints Reinhard J. Warnking and Jeffrey L. Elder, 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 8, 2000 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> 27
PLEASE MARK YOUR VOTE
AS INDICATED IN THIS [X]
EXAMPLE.
<TABLE>
<CAPTION>
FOR WITHHOLD
all AUTHORITY
nominees to vote
listed for all
below: nominees EXCEPTIONS FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C>
1. Election of Directors [ ] [ ] [ ] 3. Ratification of Ernst & [ ] [ ] [ ]
INSTRUCTION: To withhold authority Young LLP as independent
for any individual nominee, mark auditors for fiscal
the "EXCEPTIONS" box, and strike a year 2000.
line through the nominee's name in
the list below:
Julie A. Brooks Gregg W. Stone, M.D.
Thomas J. Cable Reinhard J. Warnking
Dale Conrad W. Michael Wright
James Stapfer
FOR AGAINST ABSTAIN
2. To approve the increase in the [ ] [ ] [ ] The Board of Directors recommends a vote FOR
number of shares of Common Stock each of the director nominees listed above and
issuable under the Company's 1998 for the other proposals set forth above. This
Stock Option Plan (the "1998 Option Proxy, when properly executed, will be voted as
Plan") by an additional 500,000 specified above. This Proxy will be voted FOR
shares. 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:
-------------------------------------------------------------------------------- ---------------------------
</TABLE>
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 -
