<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / 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 Section 240.14a-11(c) or Section
240.14a-12
Electroscope, Inc.
- --------------------------------------------------------------------------------
(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>
ELECTROSCOPE, INC.
4828 Sterling Drive
Boulder, CO 80301
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held August 15, 1997
To Our Shareholders:
The Annual Meeting of Shareholders of Electroscope, Inc., a Colorado
corporation (the "Company"), will be held at 10:00 a.m., Mountain Time, on
August 15, 1997, at the offices of Chrisman Bynum & Johnson, 1900 Fifteenth
Street, Boulder, Colorado, 80302, for the following purposes, all of which
are more completely set forth in the accompanying Proxy Statement.
1. To elect eight (8) Directors;
2. To approve the adoption of the 1997 Stock Option Plan which
authorizes options to purchase 800,000 shares;
3. To ratify the appointment of Arthur Andersen LLP as the
Independent Public Accountants for the Company;
4. To transact such other business as may properly come before
the meeting, or any adjournment thereof.
All shareholders are cordially invited to attend the meeting, although
only shareholders of record at the close of business on July 3, 1997, will be
entitled to notice of, and to vote at, the meeting or any and all
adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Patrick F. Crane, President, CEO
July 15, 1997
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING. YOUR PROMPT RETURN OF THE PROXY WILL HELP TO ASSURE A
QUORUM AT THE MEETING AND AVOID ADDITIONAL COMPANY EXPENSE FOR
FURTHER SOLICITATION. YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT
IS VOTED.
<PAGE>
ELECTROSCOPE, INC.
4828 Sterling Drive
Boulder, CO 80301
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held August 15, 1997
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Electroscope, Inc., a Colorado
corporation (the "Company"), for use at the Annual Meeting of Shareholders of
the Company to be held at 10:00 a.m. Mountain Standard Time, on August 15,
1997, at the offices of Chrisman Bynum & Johnson, 1900 Fifteenth Street,
Boulder, CO 80302, and at any and all adjournments of such meeting.
If the enclosed Proxy Card is properly executed and returned in time to
be voted at the meeting, the shares of Common Stock represented will be voted
in accordance with the instructions contained therein. Executed proxies that
contain no instructions will be voted for each of the nominees for director
indicated herein and for the proposal to adopt the Company's 1997 Stock
Option Plan. It is anticipated that this Proxy Statement and the
accompanying Proxy Card and Proxy Notice will be mailed to the Company's
shareholders on or about July 15, 1997.
SHAREHOLDERS WHO EXECUTE PROXIES FOR THE ANNUAL MEETING MAY REVOKE THEIR
PROXIES AT ANY TIME PRIOR TO THEIR EXERCISE BY DELIVERING WRITTEN NOTICE OF
REVOCATION TO THE COMPANY, BY DELIVERING A DULY EXECUTED PROXY CARD BEARING A
LATER DATE, OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
The costs of the meeting, including the costs of preparing and mailing
the Proxy Statement, Proxy Notice and Proxy Card, will be borne by the
Company. The Company may, in addition, use the services of its directors,
officers and employees to solicit proxies, personally or by telephone, but at
no additional salary or compensation. The Company will also request banks,
brokers, and others who hold shares of Common Stock of the Company in nominee
names to distribute annual reports and proxy soliciting materials to
beneficial owners, and will reimburse such banks and brokers for reasonable
out-of-pocket expenses which they may incur in so doing.
1
<PAGE>
OUTSTANDING CAPITAL STOCK
The record date for shareholders entitled to vote at the Annual Meeting
is July 3, 1997. At the close of business on that day, there were 5,352,507
shares of no par value Common Stock (the "Common Stock") of the Company
outstanding and entitled to vote at the meeting.
QUORUM AND VOTING
The presence in person or by proxy of the holders of a majority of the
total issued and outstanding shares of Common Stock of the Company which are
entitled to be voted at the Annual Meeting is necessary in order to
constitute a quorum for the meeting. If a quorum is present, directors will
be elected by a plurality of the votes present in person or by proxy.
Approval of Proposal 2, the adoption of the Company's 1997 Option Plan,
requires an affirmative vote of at least a majority of the quorum. The
aggregate number of votes cast by all shareholders present in person or by
proxy will be used to determine whether a proposal will carry. Thus, in the
case of the election of directors, an abstention from voting has no effect on
the item on which the shareholder abstained from voting. In addition, broker
"non-votes" will be counted for purposes of attaining a quorum.
ACTION TO BE TAKEN AT THE MEETING
The accompanying proxy, unless the shareholder otherwise specifies in
the proxy, will be voted (i) FOR the election of each of the eight nominees
named herein for the office of director, (ii) FOR adoption of the 1997 Stock
Option Plan, (iii) FOR approval of the appointment of Arthur Andersen LLP and
(iv) at the discretion of the proxy holders, on any other matter that may
properly come before the meeting or any adjournment thereof.
Where shareholders have appropriately specified how their proxies are to
be voted, they will be voted accordingly. If any other matter of business is
brought before the meeting, the proxy holders may vote the proxies at their
discretion. The directors do not know of any such other matter of business.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of June 30, 1997, the number of shares
of the Company's Common Stock owned by any person who is known by the Company
to be the beneficial owner of more than 5% of the Company's voting
securities, by all individual Directors, by all Named Executive Officers and
by all Officers and Directors as a group:
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<PAGE>
SHARES
BENEFICIALLY
BENEFICIAL OWNER(2) OWNED(1)
- ------------------- ------------
Patrick F. Crane (3) 22,222
Roger C. Odell (4) 948,205
David W. Newton (5) 312,983
David Auth, Ph.D. 56,668
Donald R. Temple, M.D. (6) 30,940
Joe W. Tippett, M.D. (7) 125,266
Robert D. Tucker, M.D., Ph.D. (8) 197,856
C. Randle Voyles, M.D. (9) 227,070
All executive officers and directors as a
group (9 Persons) (10) 1,936,215
OTHER SHAREHOLDERS HOLDING 5% OR MORE:
Invesco Trust Company (11) 779,000
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of June 30, 1997, or within 60 days
of such date, are treated as outstanding when determining the percent of
the class owned by such individual and when determining the percent owned
by the group. Unless otherwise indicated, each person named or included
in the group has sole voting and investment power with respect to the
shares of Common Stock set forth opposite the shareholder's name.
(2) The address of each director and officer of the Company is 4828 Sterling
Drive, Boulder, CO 80301.
(3) Represents 22,222 shares issued pursuant to the Employment Agreement
between the Company and Mr. Crane.
(4) Includes 2,200 shares issuable pursuant to currently exercisable options
and 9,996 shares owned by Mr. Odell's children, for which he disclaims
beneficial ownership.
(5) Includes 2,000 shares issuable pursuant to currently exercisable options.
(6) Includes 30,940 shares issuable pursuant to currently exercisable options.
(7) Includes 7,740 shares issuable pursuant to currently exercisable options
and 8,334 shares issuable pursuant to currently exercisable warrants.
(8) Includes 28,940 shares issuable pursuant to currently exercisable options.
(9) Includes 28,940 shares issuable pursuant to currently exercisable options
and 2,500 shares issuable pursuant to currently exercisable warrants.
(10) Includes 114,760 shares issuable pursuant to currently exercisable options,
and 10,834 shares issuable pursuant to currently exercisable warrants.
(11) The address of Invesco Trust Company is 7800 E. Union Avenue, Denver, CO
80237.
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ELECTION OF DIRECTORS
(Proxy Item #1)
The Company's Board of Directors has nominated the eight persons listed
below for election as directors for the ensuing year, each to hold office
until the 1998 Annual Meeting of Shareholders and until their successors are
duly elected and qualified, or until their death, resignation or removal. Each
of the nominees is a member of the present Board of Directors of the Company.
A shareholder using the enclosed proxy form can vote for all or any of the
nominees of the Board of Directors or such shareholder may withhold his or her
vote from all or any of such nominees. If the proxy card is properly executed
but not marked, it will be voted for all of the nominees. Each of the
nominees has agreed to serve as a director if elected; however, should any
nominee become unable or unwilling to accept nomination or election, the
persons named in the proxy will exercise their voting power in favor of such
other person or persons as the Board of Directors of the Company may
recommend. There are no family relationships among these nominees.
THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR EACH NOMINEE
FOR THE BOARD OF DIRECTORS.
The following table sets forth the directors of the Company, their ages
as of March 31, 1997, all positions and offices held with the Company and the
period from which served:
Name Age Position
---- --- --------
Patrick F. Crane 50 Chief Executive Officer, President
and Director
David W. Newton 50 Vice President, Research and
Development and Director
Roger C. Odell 46 Chairman of the Board of Directors
David Auth 56 Director
Donald R. Temple, M.D.(1)(2) 56 Director
Joe W. Tippett, M.D.(1)(2) 59 Director
Robert D. Tucker, Ph.D. M.D.(1)(2) 50 Director
C. Randle Voyles, M.D.(2) 47 Director
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
4
<PAGE>
All directors hold office until the next annual meeting of shareholders
or until their successors have been duly elected and qualified. Executive
officers of the Company are appointed by, and serve at the discretion of, the
Board of Directors and are elected annually. The Board of Directors has an
Audit Committee and a Compensation Committee. There is no family relationship
between any director of the Company and any other director or officer of the
Company.
PATRICK F. CRANE has over 20 years of diversified experience in the medical
device business with specific executive responsibility for research and
development, marketing, strategic planning, and the office of the Chief
Executive. From 1992 to 1997 he was with Ohmeda Medical Systems, a division
of British Oxygen Corporation (London and NY Stock Exchanges), as the Vice
President of Research and Development and Project Director for Mergers and
Acquisitions. From 1987 to 1991 he was the Chairman, President and Chief
Executive Officer of Cybermedic, Inc. In addition, Mr. Crane has held
executive positions with Valleylab, the electrosurgical division of Pfizer,
Inc. (NYSE), and Physio Control Corporation. Mr. Crane has earned an MSE from
the University of Michigan and an MBA from the University of Puget Sound. He
serves on the Board of Directors of Staodyn, Inc., a NASDAQ listed company.
He completed the Stanford Executive Program in March 1997.
DAVID W. NEWTON, a co-founder of the Company, has been Vice President and a
Director of the Company since its inception in 1991. From 1989 until 1991,
Mr. Newton was President of Newton Associates, Inc., a contract engineering
firm. From 1985 to 1989, Mr. Newton was President of Tienet, Inc., a
developer of integrated computer systems. Mr. Newton has an additional 14
years of experience as an electrical engineer designing electrosurgical
generators and related accessories. Mr. Newton holds nine patents in the
field of medical electronic equipment and holds a bachelors degree in
electrical engineering from the University of Colorado.
ROGER C. ODELL, a co-founder of the Company and Chairman of the Board, has
been a Director of the Company since its inception in 1991. From 1976 until
1991, Mr. Odell was employed at Valleylab in a variety of increasingly
responsible engineering capacities, primarily involving electrosurgical
products. Mr. Odell holds an associate of applied science degree in
electrical engineering from Alfred State University.
DAVID C. AUTH has been a Director of the Company since October, 1996. Dr.
Auth received his bachelors degree in physics from the Catholic University of
America in 1962 and his doctorate in physics from Georgetown University in
1969. He founded and served as Chief Executive Officer of Heart Technology,
Inc. from 1988 through 1995 when the company was merged with Boston Scientific
Corporation. He currently serves as an Affiliate Professor of Bioengineering
at the University of Washington, and serves as a member of the Board of
Directors of a number of enterprises.
5
<PAGE>
DR. DONALD R. TEMPLE has been a Director of the Company since April 1993. Dr.
Temple has been on the faculty of the University of Colorado School of
Medicine since 1975. He currently has a joint appointment in the Department
of Cellular and Structural Biology and in the Department of Transplant
Surgery. Dr. Temple has received numerous teaching awards, and has been
elected to the Society of Clinical Anatomists. Dr. Temple received his
medical degree from Wayne State University.
DR. JOE W. TIPPETT has been a Director of the Company since July 1991. Dr.
Tippett has been the President of Southeast Orthopedic Clinic, P.A. in San
Antonio, Texas since 1972. Dr. Tippett is President of the Arthroscopy
Association of North America. Dr. Tippett is also the President of Dale
Energy Corporation, and is the Chairman of D.O.C. Tunisia, both oil companies.
Dr. Tippett received both a bachelors degree in zoology and a medical degree
from the University of North Carolina at Chapel Hill.
DR. ROBERT D. TUCKER has been a Director of the Company since February 1991.
From 1983 to present, Dr. Tucker has been an Associate Professor of Clinical
Pathology at the University of Iowa Hospitals and Clinics, Iowa City, Iowa.
Dr. Tucker received a bachelors degree in mathematics and physics from the
University of Nebraska, a doctorate degree in biophysics from the University
of Minnesota and a medical degree from the University of Nebraska.
DR. C. RANDLE VOYLES has been a Director of the Company since July 1995. Dr.
Voyles has practiced surgery in Jackson, Mississippi, since 1981 where he is
also Associate Clinical Professor of Surgery at the University of Mississippi
School of Medicine. His numerous academic publications include works on the
practical aspects of laparoscopic surgery, electrosurgery, and management of
complications. Dr. Voyles received a masters degree from the University of
Louisville and a medical degree from the University of Mississippi.
During the fiscal year ended March 31, 1997, there were twelve meetings
of the Board of Directors. All directors attended at least 75% of the
meetings of the Board and committees of the Board on which they were members.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and holders of more than
10% of the Company's Common Stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock of the Company. Based solely upon a review of Forms 3 and 4 and
amendments thereto furnished to the Company during the fiscal year ended March
31, 1997 and Forms 5 and amendments thereto furnished to the Company with
respect to the fiscal year ended March 31, 1997, to the best of the Company's
knowledge, the Company's directors, officers and holders of more than 10% of
its Common Stock complied with all Section 16(a) filing requirements except as
follows:
Mr. James Cartwright, Vice President of Operations, filed a late Form 5
in May 1997 with respect to the purchase of 1,200 shares.
6
<PAGE>
Mr. Newton filed a late Form 5 in May 1997 with respect to the purchase
of 1,000 shares.
Mr. C. Robert Payne, formerly the Vice President of Regulatory Affairs,
filed a late Form 5 in May 1997 with respect to the purchase of 8,550 shares
and the sale of 2,400 shares by a non-controlled trust of which he is a
partial beneficiary.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain information regarding compensation
earned or awarded to the Chairman of the Board of Directors (the "Named
Executive Officer") during the Company's last three fiscal years ended March
31, 1995, 1996 and 1997. No other executive officer of the Company received
total salary and bonus compensation in excess of $100,000 for the fiscal year
ended March 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
Long Term
Annual Compensation Compensation Awards
--------------------- ----------------------
Name and Other Annual Securities Underlying
Principal Position Year Salary ($) Bonus($) Compensation ($) Options/# of Shares(2)
- ------------------ ---- ---------- -------- ---------------- ----------------------
<S> <C> <C> <C> <C> <C>
Patrick F. Crane 1997 N/A N/A N/A N/A(1)
President/CEO 1996 N/A N/A N/A N/A
1995 N/A N/A N/A N/A
Roger C. Odell 1997 83,883 N/A N/A ---
Chairman of Board 1996 77,562 N/A N/A 2,200(3)
1995 70,231 N/A N/A ---
</TABLE>
(1) Mr. Crane became employed by the Company on May 5, 1997 as President and
Chief Executive Officer at an annual salary of $150,000.
(2) Number of shares of Common Stock subject to options granted during the
year indicated.
(3) Mr. Odell's options were granted in February 1996 at $6.00 per share and
are fully vested.
COMPENSATION OF DIRECTORS
Outside directors, with the exception of Director Auth, who received no
compensation, are currently paid $10,000 per year for attending meetings.
Directors are also reimbursed for their out-of-pocket expenses for attending
Board meetings.
7
<PAGE>
STOCK OPTIONS
On February 14, 1991, the Board of Directors and the shareholders of the
Company adopted a stock option plan (the "Plan") providing for grants of stock
options, stock appreciation rights and/or supplemental bonuses to employees
and directors of the Company who are also employees. The Plan permits the
granting of incentive stock options meeting the requirements of Section 422A
of the Internal Revenue Code of 1986, as amended, and also nonqualified stock
options which do not meet the requirements of Section 422A. As amended by the
Board of Directors and approved by the shareholders, the Company has reserved
1,150,000 shares of its Common Stock for issuance upon exercise of options
granted under the Plan. The Plan is administered by the Compensation
Committee of the Board of Directors.
As of June 30, 1997, options to purchase an aggregate of 1,150,000 shares
of Common Stock (net of options canceled) had been granted pursuant to the
Plan and 180,562 options had been exercised. As of June 30, 1997, the market
value of all shares of Common Stock subject to outstanding options was
$2,587,500 (based upon the closing bid price as reported on the NASDAQ System
on such date).
OPTIONS GRANTED
There were no options granted to the Named Executive Officer during the
Company's last fiscal year ended March 31, 1997.
The following table sets forth certain information regarding the number
and value of exercisable and unexercisable options to purchase shares of
Common Stock held as of the end of the Company's 1997 fiscal year by the Named
Executive Officer:
AGGREGATED 1997
FISCAL YEAR END OPTION VALUES
<TABLE>
Number of Shares Value of Unexercised
Shares Underlying Unexercised in-the-Money Options
Acquired Value Options at March 31, 1997 (#) at March 31, 1997(1) ($)
on Exercise Realized ----------------------------- --------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger C. Odell 2,200 (1)
</TABLE>
(1) The exercise price of the options exceeds their fair market value.
ADOPTION OF THE 1997 STOCK OPTION PLAN
(PROXY ITEM # 2)
On July 1, 1997, the Board of Directors adopted, subject to shareholder
approval, the Electroscope 1997 Stock Option Plan (the "Plan"). The number of
common shares available for issuance under the Plan is 800,000 shares, subject
to adjustment for dividend, stock split or other relevant changes in the
Company's capitalization. The 1997 Plan, as adopted, is set forth as Exhibit
A to this Proxy Statement.
8
<PAGE>
The Board of Directors believes that the Plan will be of material benefit
to the Company by assisting the Company and its subsidiaries in attracting,
retaining and motivating key employees of proven ability. The Board of
Directors also believes that the best interests of the Company and its
shareholders require that the Company continue to be in a position to offer
options to present and prospective key personnel and expand its ability to
offer options to present and prospective consultants and to present and
prospective directors who are not employees of the Company or any subsidiary
of the Company.
The purpose of the Plan is to promote the interests of the Company and
its shareholders by helping the Company and its subsidiaries attract, retain,
and motivate key employees and consultants, including officers and directors
who are employees or consultants to the Company or any of its subsidiaries,
and nonemployee directors of the Company.
As of July 1, 1997, options to purchase an aggregate of 287,162 shares of
Common Stock had been granted pursuant to the Plan to the Company's President
pursuant to his employment agreement and no options had been exercised. As of
June 30, 1997, the market value of all shares of Common Stock subject to
outstanding options was $646,115 (based upon the closing bid price as reported
on the NASDAQ System on such date.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION
OF THE PLAN WHICH PROVIDES FOR THE GRANT OF UP TO 800,000 OPTIONS.
The adoption of the 1997 Plan will be approved if the number of votes
cast favoring the action exceed the number of votes cast opposing the action.
Unless otherwise specified, proxies solicited by the Board of Directors will
be voted FOR the adoption of the Plan. The following description of the Plan,
as amended, is qualified in its entirety by reference to the Plan included
herewith as Exhibit A.
SUMMARY OF THE PLAN
1997 STOCK OPTION PLAN
The Company's 1997 Stock Option Plan (the "1997 Plan") was adopted by the
Board of Directors on July 1, 1997 with options available to purchase 800,000
shares of the Company's common stock. The 1997 Plan permits the grant of
ISO's and NSO's at the discretion of the Compensation Committee, however, the
exercise price of any ISO or NSO granted under the 1997 Plan must be at least
100% of the fair market value on the date of grant. The Compensation
Committee determines the terms and conditions of options granted under the
1997 Plan, including the exercise price. Qualifying participants include
employees, directors or consultants to the Company. Unless otherwise
specified in the option agreement, stock options will be exercisable 20% per
year over a five year period. The Compensation Committee may allow a
participant to deliver a promissory note to the Company as full or
9
<PAGE>
partial payment for the exercise of a stock option or may arrange or guarantee
loans to a participant by a third party.
If a participant terminates his employment without cause, any stock
option remains exercisable for three months. If a participant terminates
employment because of a disability, he is allowed to exercise his options for
a period of twelve months after termination. If a participant dies while
employed by the Company, the stock options may be exercised by his estate or
representative for a period of one year, to the extent they were vested on the
date of death. If a participant's employment is terminated for "cause" as
defined in the 1997 Plan, the stock options will terminate immediately.
Stock options are not assignable or transferable by a participant, other
than by will or the laws of descent or distribution, unless the Compensation
Committee, in its sole discretion, permits the assignment or transfer of an
NSO and the exercise thereof by a person other than a participant.
In the event of a Corporate Transaction as defined in the 1997 Plan,
which includes a merger, consolidation or acquisition, a share exchange in
which 95% or more of the outstanding capital stock of the Company is exchanged
for capital stock of another corporation or the sale, transfer or other
disposition of all or substantially all of the Company's assets, all stock
options shall automatically be accelerated so that the stock options will
become exercisable as to those shares which could be purchased twelve months
after the date of consummation of the Corporate Transaction.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. A participant will not realize taxable income
upon the grant of an incentive stock option under the 1997 Plan. In addition,
a participant will not realize taxable income upon the exercise of an
incentive stock option if the optionee holds the shares acquired until at
least one year after exercise and, if later, until two years after the date of
grant of option. The amount by which the fair market value of the shares
exceeds the option price at the time of exercise generally is an item of tax
preference for purposes of the alternative minimum tax. If an optionee
acquires stock through the exercise of an incentive stock option under the
Plan and subsequently sells the stock after holding the stock for the period
described above, the gain, which is the difference between the sale price of
the stock and the option exercise price, will be taxed as capital gain. The
gain will not be treated as ordinary income except when the holding period
requirements discussed above are not satisfied.
An incentive stock option does not entitle the Company to an income tax
deduction except to the extent that an optionee realizes ordinary income
therefrom.
NONSTATUTORY OPTIONS. An optionee generally will not realize taxable
income upon the grant of a nonstatutory stock option. When an optionee
exercises a nonstatutory stock option, the optionee will realize taxable
ordinary income at that time equal to the difference between the option price
and the fair market value of the stock on the date of exercise.
10
<PAGE>
An optionee will generally have a basis in stock acquired through the
exercise of a nonstatutory stock option under the 1997 Plan equal to the fair
market value of the stock on the date of exercise. If the optionee
subsequently sells the stock, the gain, which is the difference between the
sale price and the basis, will be taxed as capital gain.
Any ordinary income realized by an optionee upon exercise of a
nonstatutory stock option will be allowable to the Company as a deduction at
the time it is realized by the optionee.
Participants in the Plan should consult their own tax advisors to
determine the specific tax consequences of the Plan for them.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROXY ITEM # 3)
The Board of Directors has appointed the firm of Arthur Andersen LLP to
act as independent accountants for the Company for the fiscal year ending
March 31, 1998. This appointment will be submitted to the Company's
shareholders for ratification. This firm has audited the financial statements
of the company for the fiscal year ended March 31, 1997 and for prior years,
and has advised the Company that neither the firm nor any of its partners has
any direct or indirect material financial interests in the Company, nor have
they had any connections during the past three years with the Company, in any
capacity other than that of independent accountants and auditors. Arthur
Andersen LLP will have representatives at the 1997 Annual Meeting who will
have an opportunity to make a statement and will be available to respond to
appropriate questions.
In the event the shareholders do not ratify the appointment of Arthur
Andersen LLP, the selection of other independent auditors will be considered
by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
OTHER MATTERS
Management of the Company knows of no other matter which may come before
the meeting. However, if any additional matters are properly presented at the
meeting, it is intended that the persons named in the enclosed Proxy, or
their substitutes, will vote such Proxy in accordance with their judgment on
such matters.
Shareholder proposals intended for presentation at the Company's 1998
Annual Meeting of Shareholders must be received by the Company at its
principal offices in Boulder, Colorado, not later than June 30, 1998.
11
<PAGE>
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report of the Company for the fiscal year ended March 31,
1997, including audited Financial Statements for the year then ended, was
mailed to Shareholders on or about July 15, 1997, and is not incorporated
into these proxy materials.
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED IF YOU DO NOT PLAN TO ATTEND
THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY. IN THE
EVENT YOU ARE ABLE TO ATTEND, WE WILL, IF YOU REQUEST, CANCEL THE PROXY.
SIGNATURE
By Order of the Board of Directors
/s/ PATRICK F. CRANE
- ----------------------------------
Patrick F. Crane, President
Boulder, Colorado
July 15, 1997
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ELECTROSCOPE, INC.
1997 STOCK OPTION PLAN
I. PURPOSE
The ELECTROSCOPE, INC. 1997 STOCK OPTION PLAN ("PLAN") provides for the
grant of Stock Options to employees, directors and consultants of
Electroscope, Inc. (the "COMPANY"), and such of its subsidiaries (as defined
in Section 424(f) of the Internal Revenue Code of 1986, as amended (the
"CODE")), as the Board of Directors of the Company (the "BOARD") shall from
time to time designate ("PARTICIPATING SUBSIDIARIES") in order to advance the
interests of the Company and its Participating Subsidiaries through the
motivation, attraction and retention of key personnel.
II. INCENTIVE STOCK OPTIONS AND NON-INCENTIVE STOCK OPTIONS
The Stock Options granted under the Plan may be either:
a) Incentive Stock Options ("ISOs") which are intended to be
"Incentive Stock Options" as that term is defined in Section 422 of the
Code; or
b) Nonstatutory Stock Options ("NSOs") which are intended to be
options that do not qualify as "Incentive Stock Options" under Section 422
of the Code.
All Stock Options shall be ISOs only to the extent specified in the Option
Agreement. Subject to the other provisions of the Plan, a Participant may
receive ISOs and NSOs at the same time, provided that the ISOs and NSOs are
clearly designated as such, and the exercise of one does not affect the
exercise of the other.
Except as otherwise expressly provided herein, all of the provisions and
requirements of the Plan relating to Stock Options shall apply to ISOs and
NSOs.
III. ADMINISTRATION
The Plan shall be administered by the Board, or by a committee composed
solely of two or more directors ("COMMITTEE") each of whom is a Non-Employee
Director. The Committee or the Board, as the case may be, shall have full
authority to administer the Plan, including authority to interpret and
construe any provision of the Plan and any Stock Options granted thereunder,
and to adopt such rules and regulations for administering the Plan as it may
deem necessary in order to comply with the requirements of the Code or in
order that Stock Options that are intended to be ISOs will be classified as
incentive stock options under the Code, or in order to conform to any
regulation or to any change in any law or regulation applicable thereto. The
Board shall have the power to reprice and accelerate the vesting of Stock
Options. The Board may reserve to itself any of the authority granted to the
Committee as set forth herein, and it may perform and discharge all of the
functions and responsibilities of the Committee at any time that
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a duly constituted Committee is not appointed and serving. All references in
this Plan to the "Committee" shall be deemed to refer to the Board whenever
the Board is discharging the powers and responsibilities of the Committee,
and to any special committee appointed by the Board to administer particular
aspects of this Plan.
All actions taken and all interpretations and determinations made by the
Committee in good faith (including determinations of Fair Market Value) shall
be final and binding upon all Participants, the Company and all other
interested persons. No member of the Committee shall be personally liable
for any action, determination or interpretation made in good faith with
respect to this Plan, and all members of the Committee shall, in addition to
their rights as directors, be fully protected by the Company with respect to
any such action, determination or interpretation. Rule 16b-3 under the
Securities Exchange Act of 1934 (the "EXCHANGE ACT") provides that the grant
of a stock option to a director or officer of a company will be exempt from
the provisions of Section 16(b) of the Exchange Act if the conditions set
forth in that Rule are satisfied. Unless otherwise specified by the
Committee, grants of Stock Options hereunder to individuals who are officers
or directors of the Company shall be made in a manner that satisfies the
conditions of that Rule.
IV. DEFINITIONS
4.1. "STOCK OPTION." A Stock Option is the right granted under the
Plan to an Employee, director, or consultant to purchase, at such time or
times and at such price or prices ("OPTION PRICE") as are determined by the
Committee, the number of shares of Common Stock determined by the Committee.
4.2. "COMMON STOCK." A share of Common Stock means a share of
authorized common stock of the Company.
4.3. "FAIR MARKET VALUE." If the Common Stock is traded publicly, the
Fair Market Value of a share of Common Stock on any date shall be the average
of the representative closing bid and asked prices, as quoted by the National
Association of Securities Dealers, Inc. through NASDAQ (its automated system
for reporting quotes), for the date in question, or, if the Common Stock is
listed on the NASDAQ National System or is listed on a national stock
exchange, the officially quoted closing price on NASDAQ or such exchange, as
the case may be, on the date in question. If the Common Stock is not traded
publicly, the Fair Market Value of a share of Common Stock on any date shall
be determined in good faith by the Committee after such consultations with
outside legal, accounting and other experts as the Committee may deem
advisable, and the Committee may maintain a written record of its method of
determining such value.
4.4. "EMPLOYEE." An Employee is an employee of the Company or any
Participating Subsidiary.
4.5. "PARTICIPANT." A Participant is an Employee, director or
consultant to whom a Stock Option is granted.
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4.6. "NON-EMPLOYEE DIRECTOR." A Non-Employee Director is a person who
satisfies the definition of a "non-employee director" set forth in Rule 16b-3
under the Exchange Act or any successor rule or regulation, as it may be
amended from time to time.
4.7. "CORPORATE TRANSACTION." A Corporate Transaction shall mean one
or more of the following transactions unless persons who were holders of
outstanding voting capital stock of the Company which was outstanding
immediately prior to such transaction are immediately after such transaction
holders of 51% or more of the outstanding voting capital stock of the
surviving or acquiring entity (or equivalent equity interest if the entity is
not a corporation): (i) a merger, consolidation or acquisition, (ii) a share
exchange (with or without a stockholder vote) in which 95% or more of the
outstanding capital stock of the Company is exchanged for capital stock of
another corporation; or (iii) the sale, transfer or other disposition of all
or substantially all of the Company's assets.
4.8. "SECURITIES ACT." Securities Act shall mean the Securities Act of
1933, as amended.
4.9. "CHANGE IN CONTROL." Change in Control shall mean any of the
following events occurring after the Effective Date of the Company's
Registration Statement filed with the Securities Exchange Commission for its
Initial Public Offering.
A. If any one Person (as defined below), after the date of the
Company's Initial Public Offering, in a single transaction or in a series of
transactions shall purchase or otherwise acquire or become the beneficial
owner of securities of the Company representing twenty percent (20%) or more
of the combined voting power of the Company's then outstanding voting
securities (including any voting securities issuable upon conversion of
convertible securities of the Company held by such Person).
B. If at any annual or special meeting of Company stockholders
following a contested election the Board of Directors of the Company shall
cease to be an Authorized Board. For purposes of this paragraph, a "CONTESTED
ELECTION" shall mean (i) an election contest subject to Rule 14a-11 under the
Exchange Act or (ii) an election which would have been subject to Rule 14a-11
if at the time of such election the Company had securities registered
pursuant to Section 12 of the Exchange Act.
C. If a change of control of the Company (i) required to be
reported in accordance with Item 6 of Schedule 14A under the Exchange Act, or
(ii) which would be required to be reported in accordance with Item 6 of
Schedule 14A if at the time of such election the Company had securities
registered pursuant to Section 12 of the Exchange Act, has otherwise
occurred, unless a Constitutional Majority of an Authorized Board approves
the change of control and specifically waives the application of this section.
For purposes of this Section 4.9 "PERSON" shall have the
meaning set forth in Sections 13(d) and 14(d)(2) of the Exchange Act, as in
effect on the date thereof, and shall include, without limitation, any
"AFFILIATE" or "ASSOCIATE" of such Person (as those terms are used in Rule
12b-2 under the Exchange Act); provided, however, that the term "Person"
shall not
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include the Company or any trustee or other fiduciary holding securities
under any employee benefit plan of the Company. For purposes of this Section
4.9, (i) beneficial ownership shall be computed in accordance with Rule 13d-3
under the Exchange Act; and (ii) "AUTHORIZED BOARD" shall mean a Board of
Directors of the Company of which a number of directors equal to a majority
of the authorized number of directors constituting the entire Board,
including vacancies (a "CONSTITUTIONAL MAJORITY"), were either members of the
Board of Directors on the date of the Company's Initial Public Offering or
were nominated or elected a director by a Constitutional Majority at the date
of nomination or election of an Authorized Board.
4.10. "INITIAL PUBLIC OFFERING". "Initial Public Offering" shall mean
the Company's first offering of securities to the public which is registered
pursuant to the Securities Act.
V. ELIGIBILITY AND PARTICIPATION
Grants of ISOs may be made to Employees of the Company or any Participating
Subsidiary. Grants of NSOs may be made to Employees or directors of, or
consultants to, the Company or any Participating Subsidiary. Any director of
the Company or of a Participating Subsidiary who is also an Employee shall also
be eligible to receive ISOs. The Board or Committee shall from time to time
determine the Participants to whom Stock Options shall be granted, the number of
shares of Common Stock subject to each Stock Option to be granted to each such
Participant, and the Option Price of such Stock Options, all as provided in this
Plan. The Option Price of any ISO or NSO shall be not less than the Fair Market
Value of a share of Common Stock on the date on which the Stock Option is
granted. If an ISO is granted to an Employee who then owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary corporation of the Company, the Option Price
of such ISO shall be at least 110% of the Fair Market Value of the Common Stock
subject to the ISO at the time such ISOs are granted, and such ISO shall not be
exercisable after five years after the date on which it was granted. Each Stock
Option shall be evidenced by a written agreement ("OPTION AGREEMENT") containing
such terms and provisions as the Committee may determine, subject to the
provisions of this Plan.
VI. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
6.1. MAXIMUM NUMBER. The maximum aggregate number of shares of Common
Stock that may be made subject to Stock Options shall be 800,000 authorized
shares. To the extent the aggregate Fair Market Value (determined as of the
time the ISO is granted) of the stock with respect to which ISOs are
exercisable for the first time by an individual in a particular calendar year
exceeds $100,000, such excess Stock Options shall be treated as NSOs. If any
shares of Common Stock subject to Stock Options are not purchased or
otherwise paid for before such Stock Options expire, such shares may again be
made subject to Stock Options.
6.2. CAPITAL CHANGES. In the event any changes are made to the shares
of Common Stock (whether by reason of reorganization, recapitalization, stock
dividend, stock split, combination of shares, exchange of shares, change in
corporate structure or otherwise), appropriate adjustments shall be made in:
(i) the number of shares of Common Stock theretofore made subject to Stock
Options, and in the Option Price of said shares; and (ii) the aggregate
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number of shares which may be made subject to Stock Options in the future.
If any of the foregoing adjustments shall result in a fractional share, the
fraction shall be disregarded, and the Company shall have no obligation to
make any cash or other payment with respect to such a fractional share.
VII. EXERCISE OF STOCK OPTIONS
7.1. TIME OF EXERCISE. Subject to the provisions of the Plan, the
Committee, in its discretion, shall determine the time when a Stock Option,
or a portion of a Stock Option, shall become exercisable, and the time when a
Stock Option, or a portion of a Stock Option, shall expire. Such time or
times shall be set forth in the Option Agreement evidencing such Stock
Option. Unless otherwise specified in an Option Agreement, a Stock Option
shall become exercisable (i) with respect to 20% of the shares subject
thereto on the anniversary of the date of grant, and (ii) with respect to
1/48th of the remaining shares subject thereto at the end of each month after
the first anniversary of the date of grant, (so that all Stock Options are
fully vested five (5) years after the date of grant) subject to continued
employment with the Company or a Participating Subsidiary and Section 7.4
hereof. A Stock Option shall expire, to the extent not exercised, no later
than the tenth anniversary of the date on which it was granted. The
Committee may accelerate the vesting of any Participant's Stock Option by
giving written notice to the Participant. Upon receipt of such notice, the
Participant and the Company shall amend the Option Agreement to reflect the
new vesting schedule. The acceleration of the exercise period of a Stock
Option shall not affect the expiration date of that Stock Option.
7.2. EXCHANGE OF OUTSTANDING STOCK. The Committee, in its sole
discretion, may permit a Participant to (i) surrender to the Company whole
shares of Common Stock previously acquired by the Participant and/or (ii)
request that the Company withhold whole shares of Common Stock issuable upon
exercise of the Stock Option, as part or full payment for the exercise of a
Stock Option. Such surrendered or withheld shares shall be valued at their
Fair Market Value on the date of exercise. Shares credited to a Participant
shall again be available for grant under the Plan.
7.3. USE OF PROMISSORY NOTE; EXERCISE LOANS. The Committee may, in its
sole discretion, impose terms and conditions, including conditions relating
to the manner and timing of payments, on the exercise of Stock Options. Such
terms and conditions may include, but are not limited to, permitting a
Participant to deliver to the Company his promissory note as full or partial
payment for the exercise of a Stock Option. The Committee, in its sole
discretion, may authorize the Company to make a loan to a Participant in
connection with the exercise of Stock Options, or authorize the Company to
arrange or guarantee loans to a Participant by a third party. Any loan by
the Company or acceptance of a promissory note shall be made in accordance
with the corporate law of the Company's state of incorporation.
7.4. TERMINATION OF EMPLOYMENT BEFORE EXERCISE. If the employment of a
Participant who was an employee of the Company or a Participating Subsidiary
when the Stock Option was granted shall terminate for any reason other than
the Participant's death or disability, any Stock Option granted to the
Participant, to the extent then exercisable under the applicable Option
Agreement(s), shall remain exercisable after the termination of the
Participant's employment for
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a period of three (3) months (but not later than the specified expiration
date). If the Participant's employment is terminated because the Participant
is disabled within the meaning of Section 22(e)(3) of the Code, any Stock
Option granted to the Participant, to the extent then exercisable under the
applicable Option Agreement(s), shall remain exercisable after the
termination of his employment for a period of twelve (12) months (but not
later than the specified expiration date). If the Participant dies while
employed by the Company or a Participating Subsidiary, or during the
three-month or twelve-month periods referred to above, his Stock Options may
be exercised by the Participant's estate, duly appointed representative or
beneficiary who acquires the Stock Options by will or by the laws of descent
and distribution, to the extent that they were exercisable on the date of
cessation of his employment, but no further installments of the Participant's
Stock Options will become exercisable and each of the Participant's Stock
Options shall terminate on the first anniversary of the date of the
Participant's death (but not later than the specified expiration dates). If
a Stock Option is not exercised during the applicable period, it shall be
deemed to have been forfeited and of no further force or effect.
Notwithstanding the foregoing provisions of this Section 7.4, but
subject to the other provisions of this Plan, the Option Agreement may
specify longer periods for exercise of a NSO or ISO (unless to do so in the
case of an ISO would cause the ISO not to qualify as an incentive stock
option pursuant to Section 422 of the Code) after any such an event.
Upon action of the Committee in its sole discretion, except as provided
in a written employment or consulting agreement of the Company or a
Participating Subsidiary with the Participant, which is referenced in the
Option Agreement, any Stock Option shall terminate immediately, and may not
be exercised: (i) if prior to the date of exercise, Participant is
terminated for cause as an Employee of the Company or its Participating
Subsidiary, or if not an Employee, for cause as a director or consultant for
the Company or its Participating Subsidiary; or (ii) if subsequent to a
Participant's termination and prior to the expiration of the term of the
Stock Option conditions arise or are discovered with respect to a Participant
that would have constituted cause for termination. "CAUSE" shall have the
meaning given to it in the Participant's written employment, consultant or
director agreement with the Company or Participating Subsidiary. If no such
written agreement exists, "cause" shall mean (i) dishonesty which is not the
result of an inadvertent or innocent mistake with respect to the Company or
any of its subsidiaries; (ii) willful misfeasance or nonfeasance of duty
intended to injure or having the effect of injuring in some material fashion
the reputation, business or business relationships of the Company or any of
its subsidiaries or any of their respective officers, directors or employees;
(iii) conviction upon a charge of any crime involving moral turpitude or a
crime other than a vehicle offense which could reflect in some material
fashion unfavorably upon the Company or any of its subsidiaries; or (iv)
willful or prolonged absence from work by the Participant (other than by
reason of disability due to physical or mental illness) or failure, neglect
or refusal by the Participant to perform his duties and responsibilities
without the same being corrected upon twenty (20) days prior written notice.
In addition, unless specifically provided otherwise in reference to this Plan
in a written employment, consultant or director agreement with the Company or
Participating Subsidiary, "cause" for purposes of this Section 7.4 shall
exist (and termination of the Stock Option may occur even if not so provided
in the written employment, consultant or director agreement with the Company
or Participating Subsidiary) if the Participant materially breaches any
provision of an agreement with the Company or any of its subsidiaries
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with respect to obligations regarding non-competition, confidentiality,
non-solicitation of customers, and non-hire of customers and employees of the
Company or a Subsidiary, or if the Participant commits a material breach of
any other obligation to the Company or any of its subsidiaries under
conditions where the existence of this risk of termination of the Stock
Option would not constitute a substantial risk of forfeiture under Section 83
of the Code if Section 83 of the Code would apply in respect of such Stock
Options in such circumstance and require such Stock Option to be treated as
taxable income to the Participant prior to exercise or transfer of the Stock
Option.
7.5. DISPOSITION OF FORFEITED STOCK OPTIONS. Any shares of Common
Stock subject to Stock Options forfeited by a Participant shall not
thereafter be eligible for purchase by the Participant, but may be made
subject to Stock Options granted to other Participants.
7.6. CONDITIONS OF EXERCISE. Notice of exercise shall be in the form
attached to the Option Agreement and shall, in the discretion of the Company,
contain a representation, in the form provided by the Company, that the
shares are being purchased for investment only and not for resale or
distribution, and such other representations and agreements as the Company
may reasonably require.
VIII. NO CONTRACT OF EMPLOYMENT
Nothing in this Plan shall confer upon the Participant the right to
continue as an employee, consultant or director of the Company or any
Participating Subsidiary, nor shall it interfere in any way with the right of
the Company, or any Participating Subsidiary, to discharge the Participant at
any time for any reason whatsoever, with or without cause. Nothing in this
Article VIII shall affect any rights or obligations of the Company or any
Participant under any written contract of employment.
IX. NO RIGHTS AS A STOCKHOLDER
A Participant shall have no rights as a stockholder with respect to any
shares of Common Stock subject to a Stock Option. Except as provided in
Section 6.2, no adjustment shall be made in the number of shares of Common
Stock issued to a Participant, or in any other rights of the Participant upon
exercise of a Stock Option by reason of any dividend, distribution or other
right granted to stockholders for which the record date is prior to the date
of exercise of the Participant's Stock Option. The Committee, the Board and
the Company have no continuing duty to provide a Participant with information
concerning the Company.
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X. ASSIGNABILITY
No Stock Option granted under this Plan, nor any other rights acquired
by Participant under this Plan, shall be assignable or transferable by a
Participant, other than by will or the laws of descent and distribution.
Notwithstanding the preceding sentence, the Committee, in its sole
discretion, may permit the assignment or transfer of an NSO and the exercise
thereof by a person other than a Participant, on such terms and conditions as
the Committee in its sole discretion may determine. Any such terms shall be
set forth in the Option Agreement. In the event of a Participant's death,
the Stock Option may be exercised by the personal representative of the
Participant's estate or by the successor or successors in interest determined
under the Participant's will or under the applicable laws of descent and
distribution. The terms of any rights under this Plan in the hands of a
transferee or assignee shall be determined as if held by the Participant and
shall be of no greater extent or term than if the transfer or assignment had
not taken place.
XI. CORPORATE TRANSACTIONS AND CHANGES IN CONTROL
11.1. At least ten (10) days prior to the consummation of a Corporate
Transaction, the Company shall give Participants written notice of the
proposed Corporate Transaction. The vesting schedules of all Stock Options
shall automatically be accelerated so that the Stock Options shall become
exercisable as to those shares which could be purchased under those vesting
schedules 12 months after the date of consummation of the Corporation
Transaction. In addition, at the sole discretion of the Committee, the
vesting schedule of some or all other Stock Options may be accelerated so
that all or any portion of Stock Options outstanding under the Plan
immediately prior to the consummation of the Corporate Transaction shall, for
all purposes under this Plan, become exercisable as of such time. If a
Corporate Transaction is to occur, in lieu of allowing a Participant to
exercise the Participant's Stock Options, the Board may, in its sole
discretion, require some or all Participants to accept a cash payment in
consideration for the termination of the Participant's Stock Options. The
termination shall occur immediately prior to the consummation of the
Corporate Transaction and the cash payment shall be equal to the difference
between the price per share of Common Stock in the Corporate Transaction as
determined by the Board and the exercise price of a Participant's Stock
Options. All Stock Options, to the extent not previously exercised, shall
terminate upon the consummation of such Corporate Transaction and cease to be
exercisable unless expressly assumed by the successor corporation or parent
thereof. Provided, however, that if the Corporate Transaction is to be
accounted for as a "pooling-of-interest," then unexercised stock options
shall be exchanged for similar options of the acquiror or surviving entity or
voting common stock of the acquiror or surviving entity based on the value of
the options, as and to the extent required by APB No. 16, accounting
pronouncements of the Securities and Exchange Commission, and other
authoritative principles and pronouncements concerning pooling-of-interest
accounting. Notwithstanding the foregoing, the vesting of a Participant's
Stock Options shall not be accelerated (if and to the extent requested in
writing by the Participant) upon a Corporate Transaction if the participant
is a "disqualified individual" as that term is defined in Section 280G of the
Internal Revenue Code.
11.2. The vesting schedules of all Stock Options shall be automatically
accelerated so that the Stock Options shall become exercisable as to all shares
subject to the Stock Options if
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the Participant's employment is terminated without cause by the Company within
one (1) year following a Change in Control. "Without cause" means that "cause"
did not exist as defined in Section 7.4.
11.3. The employment, consulting or directorship agreement, or the
Option Agreement of a Participant may contain terms which vary from Sections
11.1 and 11.2 upon approval of the Board and the Committee.
XII. AMENDMENT
The Board of Directors may from time to time alter, amend, suspend or
discontinue the Plan, including, where applicable, any modifications or
amendments as it shall deem advisable in order that ISOs will be classified
as incentive stock options under the Code, or in order to conform to any
regulation or to any change in any law or regulation applicable thereto;
provided, however, that no such action shall adversely affect the rights and
obligations with respect to Stock Options at any time outstanding under the
Plan; and provided further that no such action shall, without the approval of
the stockholders of the Company, (i) increase the maximum number of shares of
Common Stock that may be made subject to Stock Options (unless necessary to
effect the adjustments required by Section 6.2), (ii) materially modify the
requirements as to eligibility for participation in the Plan, or (iii)
materially increase the benefits accruing to Participants under the Plan.
XIII. REGISTRATION OF OPTIONED SHARES
The Stock Options shall not be exercisable unless the purchase of such
optioned shares is pursuant to an applicable effective registration statement
under the Securities Act and applicable state securities laws or unless, in
the opinion of counsel to the Company, the proposed purchase of such optioned
shares would be exempt from the registration requirements of the Securities
Act and from the registration or qualification requirements of applicable
state securities laws. Any certificates for such shares shall bear such
legends as deemed appropriate by the Committee.
XIV. WITHHOLDING TAXES
The Company or Participating Subsidiary may take such steps as it may
deem necessary or appropriate for the withholding of any taxes or funds
(including the withholding of shares of Common Stock otherwise issuable which
have appropriate Fair Market Value) which the Company or the Participating
Subsidiary is required by any law or regulation of any governmental
authority, whether federal, state or local, domestic or foreign, to withhold
in connection with any Stock Options. To the extent provided by the terms of
an Option Agreement, a Participant may satisfy any federal, state or local
withholding obligation relating to the exercise of a Stock Option by any of
the following means or by a combination of such means: (i) tendering a cash
payment; (ii) authorizing the Company to withhold shares of Common Stock from
the shares otherwise issuable to the Participant upon such exercise; or (iii)
delivering to the Company previously owned and unencumbered shares of Common
Stock.
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XV. BROKERAGE ARRANGEMENTS
The Committee, in its discretion, may enter into arrangements with one
or more banks, brokers or other financial institutions to facilitate the
disposition of shares acquired upon the exercise of Stock Options including,
without limitation, arrangements for the simultaneous exercise of Stock
Options and the sale of shares acquired upon exercise.
XVI. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to stockholders of the Company for approval shall be construed as
creating any limitations on the power or authority of the Board to adopt such
other or additional incentive or other compensation arrangements of whatever
nature as the Board of Directors may deem necessary or desirable or preclude
or limit the continuation of any other plan, practice or arrangement for the
payment of compensation or fringe benefits to employees generally, or to any
class or group of employees, which the Company or any Participating
Subsidiary now has lawfully put into effect, including, without limitation,
any retirement, pension, savings and stock purchase plan, insurance, death
and disability benefits and executive short-term or long-term incentive plans.
XVII. SPECIAL CALIFORNIA PROVISIONS
17.1. SPECIAL PROVISIONS. In order for the grant or exercise of a
Stock Option to be exempt from the securities laws of the State of
California: (i) the total number of shares issuable upon exercise of all
outstanding Stock Options plus the total number of shares issuable under any
stock option, stock bonus or similar plan of the Company may not exceed
thirty percent (30%) of the then outstanding shares of capital stock of the
Company, measured on an as converted to common basis; (ii) the Option Price
of all Stock Options shall be at least 110% of Fair Market Value of a share
of Common Stock if the Participant owns more than ten percent (10%) of the
combined voting power of all classes of stock of the Company; (iii) no Stock
Option shall be exercisable more than 120 months from date of grant; (iv)
each Participant located in California shall receive the annual financial
statements of the Company; and (v) each Participant shall be delivered a copy
of this Plan, as amended, with each Option Agreement.
XVIII. EFFECTIVE DATE
This Plan was adopted by the Board on July 1, 1997 and became effective
on that date subject to the approval of the Company's stockholders within twelve
(12) months thereafter. However, if such approval is not obtained all
provisions of this Plan, and all grants hereunder, shall nevertheless be
effective except that all ISOs shall be NSOs. No Stock Options shall be
granted subsequent to ten years after the effective date of the Plan. Stock
Options outstanding subsequent to ten years after the effective date of the
Plan shall continue to be governed by the provisions of the Plan.
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NON-STATUTORY STOCK OPTION AGREEMENT
This NON-STATUTORY STOCK OPTION AGREEMENT is made ________, between
ELECTROSCOPE, INC. (hereinafter referred to as the "COMPANY"), and
_______________ (hereinafter referred to as "OPTIONEE").
WHEREAS, Optionee is an important and valuable contributor to the
Company and the Company deems it to be in its interest and in the interest of
its shareholders to secure the services of Optionee for the Company or such
of its subsidiary companies as may be designated by the Company; and
WHEREAS, the Company, as an incentive to Optionee to continue to serve
the Company or its subsidiaries and to increase Optionee's proprietary
interest in the Company, desires to enter into this Agreement containing the
terms and conditions hereinafter set forth and to grant Optionee an option to
purchase shares of the Common Stock of the Company.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements hereinafter contained, and for other good and valuable
consideration, the parties agree as follows:
1. GRANT OF OPTION. In consideration of the foregoing, the Company
hereby grants to Optionee the right and option (hereinafter referred to as
"THE OPTION") to purchase __________ shares of the Company's Common Stock
("SHARES") pursuant to the following schedule: subject to Section 7.4 of the
Plan, __________________________ . The option shall terminate on the tenth
anniversary of the date hereof and, accordingly, may not be exercised after
that date. The purchase price to be paid for such Shares upon exercise of
the option shall be $______ per share, being not less than the percentage of
fair market value of the Shares on the date of this Agreement required under
the Plan. This option is granted pursuant to, and is subject to the terms and
conditions of the Company's 1997 Stock Option Plan (the "PLAN"), a copy of
which has been furnished to Optionee and receipt of which Optionee hereby
acknowledges.
2. METHOD OF EXERCISING OPTION. The option may be exercised, in whole
at any time or in part from time to time, by giving to the Company notice in
writing to that effect. Within thirty (30) days after the receipt by it of
notice of exercise of the option and upon due satisfaction of all conditions
pertaining to the option as set forth in this Agreement, the Company shall
cause certificates for the number of Shares with respect to which the option
is exercised to be issued in the name of Optionee, or his executors,
administrators, or other legal representatives, heirs, legatees, next of kin,
or distributees, and to be delivered to Optionee or his executors,
administrators, or other legal representatives, heirs, legatees, next of kin,
or distributees. Payment of the purchase price for the shares with respect
to which the option is exercised shall be made to the Company upon the
delivery of such stock, together with revenue stamps or checks in an amount
sufficient to pay any stock transfer taxes required on such delivery. The
Company shall give the person or persons entitled to the same at least five
(5) days' notice of the time and place for delivery and for the payment of
such purchase price.
-11-
<PAGE>
3. CONDITIONS OF OPTION. The option is subject to the following
additional conditions:
(a) The option herein granted to Optionee shall not be transferable by
Optionee other than by will or the laws of descent and distribution, and
shall be exercisable, during his lifetime, only by him.
(b) The option may be exercised by Optionee pursuant to the terms of
the Plan, but only to the extent that Optionee had the right to exercise
such option at the date of termination of the Optionee's service to the
Company.
4. REPRESENTATION AS TO INVESTMENT. Unless the Option and the shares
are registered pursuant to a then effective registration statement pursuant
to the Securities Act of 1933 and applicable state law, the exercise of such
option and the delivery of the Shares subject to it will be contingent upon
the Company being furnished by Optionee, his legal representatives, or other
persons entitled to exercise such option, with a statement in writing, in
substantially the form attached as Exhibit 2 hereto, that at the time of such
exercise it is his or their intention to acquire the Shares being purchased
solely for investment purposes and not with a view to distribution.
5. NOTICES. Any notice to be given by Optionee as required by this
Agreement shall be sent to the Company at its principal executive offices and
any notice from the Company to Optionee shall be sent to Optionee at his
address as it appears on the Company's books and records. Either party may
change the address to which notices are to be sent by informing the other
party in writing of the new address.
6. RESTRICTION AGAINST ASSIGNMENT. Except as otherwise expressly
provided above, Optionee agrees on behalf of himself and of his executors and
administrators, heirs, legatees, distributees, and any other person or
persons claiming any benefits under him by virtue of this Agreement, that
this Agreement and the rights, interests, and benefits under it shall not be
assigned, transferred, pledged, or hypothecated in any way by Optionee or any
executor, administrator, heir, legatee, distributee, or other person claiming
under Optionee by virtue of this Agreement. Such rights, interest, or
benefits shall not be subject to execution, attachment, or similar process.
Any attempted assignment, transfer, pledge or hypothecation, or other
disposition of this Agreement or of such rights, interests, and benefits
contrary to the preceding provisions, or the levy of any attachment or
similar process thereupon, shall be null and void and without effect.
7. FURTHER AGREEMENTS. The undersigned agrees, in connection with the
issuance of the Shares, and thereafter from time to time as requested by the
Company, to execute any stockholders agreement as provided in the Plan. The
undersigned will, if requested, by the Company in connection with a public
offering of the Company's securities, adhere to lock-up arrangements between
the Company and an underwriter involved in such public offering.
At such times as the Company intends (if ever) to be taxed as an "S
Corporation" for Federal income tax purposes, the undersigned will take all
actions concerning his ownership and transfer of the shares to not cause a
loss of such status.
-12-
<PAGE>
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Non-Statutory Stock Option Agreement as of the day and year first above
written.
ATTEST: ELECTROSCOPE, INC.
By: By:
-------------------------------- -------------------------------
Secretary President
-------------------------------
Optionee
-13-
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: Electroscope, Inc.
1. The undersigned hereby elects to purchase ___________________ shares of
Common Stock of Electroscope, Inc. pursuant to the terms of the attached
Non-statutory Stock Option Agreement, and tenders herewith payment of the
purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------- -----------------------------
(Name) Optionee (Address)
DATE:
-----------------------------
-14-
<PAGE>
EXHIBIT 2
INVESTMENT REPRESENTATION STATEMENT
TO: Electroscope, Inc.
With respect to the ____________________ shares of Common Stock ("SHARES") of
Electroscope, Inc. ("COMPANY") which the undersigned ("OPTIONEE") has
purchased from the Company today, the Optionee hereby represents and
warrants as follows:
1. The Optionee acknowledges that he has received no formal prospectus or
offering memorandum describing the business and operations of the Company.
He has, however, by virtue of his relationship with the Company, been given
access to all information that he believes is material to his decision to
purchase the Shares. The Optionee has had the opportunity to ask questions
of, and receive answers from, representatives of the Company concerning its
business operations. Any questions raised by the Optionee have been
answered to his satisfaction.
2. The Shares are being acquired by the Optionee for his account, for
investment purposes only, and not with a view to the distribution or resale
thereof.
3. No representations or promises have been made concerning the marketability
or value of the Shares. The Optionee understands that there is currently
no market for the transfer of the Shares. The Optionee further
acknowledges that, because the Shares have not been registered under the
Securities Act of 1933, and cannot be resold unless they are subsequently
registered under said Act or an exemption from registration is available,
the Optionee must continue to bear the economic risk of his investment in
the Shares for an indefinite period of time. Specifically, the Optionee
agrees that the Shares may not be transferred until the Company has
received an opinion of counsel reasonably satisfactory to it that the
proposed transfer will not violate federal or state securities laws unless
the Company receives this requirement. The Company has not agreed or
represented to the Optionee that the Shares will be purchased or redeemed
from the Optionee at any time in the future. Further, there have been no
representations, promises, or agreements that the Shares will be registered
under the Securities Act of 1933 at any time in the future or otherwise
qualified for sale under the applicable securities laws. The Optionee
further understands that a notation will be made on the appropriate records
of the Company and on the Stock Certificate representing the Shares so that
the transfer of Shares will not be effected on those records without
compliance with the restrictions referred to above.
DATE:
----------------------------- -----------------------------
Optionee
-15-
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
This INCENTIVE STOCK OPTION AGREEMENT is made ________, between
Electroscope, Inc. (hereinafter referred to as the "COMPANY"), and
_______________ (hereinafter referred to as "OPTIONEE").
WHEREAS, Optionee is an important and valuable employee of the Company
and the Company deems it to be in its interest and in the interest of its
shareholders to secure the services of Optionee for the Company or such of
its subsidiary companies as may be designated by the Company; and
WHEREAS, the Company, as an incentive to Optionee to continue to remain
in the employment of the Company or its subsidiaries and to increase
Optionee's proprietary interest in the Company, desires to enter into this
Agreement containing the terms and conditions hereinafter set forth and to
grant Optionee an option to purchase shares of the Common Stock of the
Company.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements hereinafter contained, and for other good and valuable
consideration, the parties agree as follows:
1. GRANT OF OPTION. In consideration of the foregoing, the Company
hereby grants to Optionee the right and option (hereinafter referred to as
"THE OPTION") to purchase __________ shares of the Company's Common Stock
("SHARES") pursuant to the following schedule: subject to Section 7.4 of the
Plan, ___________________________ . The option shall terminate on the tenth
anniversary of the date hereof and, accordingly, may not be exercised after
that date. The purchase price to be paid for such Shares upon exercise of
the option shall be $______, being at least the fair market value of the
Shares on the date of this Agreement. This option is granted pursuant to,
and is subject to the terms and conditions of the Company's 1997 Stock Option
Plan (the "PLAN"), a copy of which has been furnished to Optionee and receipt
of which Optionee hereby acknowledges.
2. METHOD OF EXERCISING OPTION. The option may be exercised, in whole
at any time or in part from time to time, by giving to the Company notice in
writing to that effect. Within thirty (30) days after the receipt by it of
notice of exercise of the option and upon due satisfaction of all conditions
pertaining to the option as set forth in this Agreement, the Company shall
cause certificates for the number of Shares with respect to which the option
is exercised to be issued in the name of Optionee, or his executors,
administrators, or other legal representatives, heirs, legatees, next of kin,
or distributees, and to be delivered to Optionee or his executors,
administrators, or other legal representatives, heirs, legatees, next of kin,
or distributees. Payment of the purchase price for the shares with respect
to which the option is exercised shall be made to the Company upon the
delivery of such stock, together with revenue stamps or checks in an amount
sufficient to pay any stock transfer taxes required on such delivery. The
Company shall give the person or persons entitled to the same at least five
(5) days' notice of the time and place for delivery and for the payment of
such purchase price.
-16-
<PAGE>
3. CONDITIONS OF OPTION. The option is subject to the following
additional conditions:
(a) The option herein granted to Optionee shall not be transferable by
Optionee other than by will or the laws of descent and distribution, and
shall be exercisable, during his lifetime, only by him.
(b) The option may be exercised by Optionee pursuant to the terms of
the Plan, but only to the extent that Optionee had the right to exercise
such option at the date of termination of the Optionee's employment with
the Company.
4. REPRESENTATION AS TO INVESTMENT. Unless the Option and the shares
are registered pursuant to a then effective registration statement pursuant
to the Securities Act of 1933 and applicable state law, the exercise of such
option and the delivery of the Shares subject to it will be contingent upon
the Company being furnished by Optionee, his legal representatives, or other
persons entitled to exercise such option, with a statement in writing, in
substantially the form attached as Exhibit 2 hereto, that at the time of such
exercise it is his or their intention to acquire the Shares being purchased
solely for investment purposes and not with a view to distribution.
5. QUALIFICATION OF OPTION. The option is intended to qualify as an
incentive stock option within the meaning of the Internal Revenue Code of
1986, as amended, and shall be so construed, provided, however, that nothing
herein shall be deemed to be or interpreted as a representation, guarantee,
or other undertaking on the part of the Company that such option is or will
be determined to be an incentive stock option within that or any other
section of the Internal Revenue Code.
6. NOTICES. Any notice to be given by Optionee as required by this
Agreement shall be sent to the Company at its principal executive offices and
any notice from the Company to Optionee shall be sent to Optionee at his
address as it appears on the Company's books and records. Either party may
change the address to which notices are to be sent by informing the other
party in writing of the new address.
7. RESTRICTION AGAINST ASSIGNMENT. Except as otherwise expressly
provided above, Optionee agrees on behalf of himself and of his executors and
administrators, heirs, legatees, distributees, and any other person or
persons claiming any benefits under him by virtue of this Agreement, that
this Agreement and the rights, interests, and benefits under it shall not be
assigned, transferred, pledged, or hypothecated in any way by Optionee or any
executor, administrator, heir, legatee, distributee, or other person claiming
under Optionee by virtue of this Agreement. Such rights, interest, or
benefits shall not be subject to execution, attachment, or similar process.
Any attempted assignment, transfer, pledge or hypothecation, or other
disposition of this Agreement or of such rights, interests, and benefits
contrary to the preceding provisions, or the levy of any attachment or
similar process thereupon, shall be null and void and without effect.
8. FURTHER AGREEMENTS. The undersigned agrees, in connection with the
issuance of the Shares, and thereafter from time to time as requested by the
Company, to execute any
-17-
<PAGE>
stockholders agreement as provided in the Plan. The undersigned will, if
requested, by the Company in connection with a public offering of the
Company's securities, adhere to lock-up arrangements between the Company and
an underwriter involved in such public offering.
At such times as the Company intends (if ever) to be taxed as an "S
Corporation" for Federal income tax purposes, the undersigned will take all
actions concerning his ownership and transfer of the shares to not cause a
loss of such status.
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Incentive Stock Option Agreement as of the day and year first above written.
ATTEST: Electroscope, Inc.
By: By:
-------------------------------- -------------------------------
Secretary President
-------------------------------
Optionee
-18-
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: Electroscope, Inc.
1. The undersigned hereby elects to purchase ___________________ shares of
Common Stock of Electroscope, Inc. pursuant to the terms of the attached
Non-statutory Stock Option Agreement, and tenders herewith payment of the
purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------- -----------------------------
(Name) Optionee (Address)
DATE:
-----------------------------
-19-
<PAGE>
EXHIBIT 2
INVESTMENT REPRESENTATION STATEMENT
TO: Electroscope, Inc.
With respect to the ____________________ shares of Common Stock ("SHARES") of
Electroscope, Inc. ("COMPANY") which the undersigned ("OPTIONEE") has
purchased from the Company today, the Optionee hereby represents and
warrants as follows:
1. The Optionee acknowledges that he has received no formal prospectus or
offering memorandum describing the business and operations of the Company.
He has, however, by virtue of his relationship with the Company, been given
access to all information that he believes is material to his decision to
purchase the Shares. The Optionee has had the opportunity to ask questions
of, and receive answers from, representatives of the Company concerning its
business operations. Any questions raised by the Optionee have been
answered to his satisfaction.
2. The Shares are being acquired by the Optionee for his account, for
investment purposes only, and not with a view to the distribution or resale
thereof.
3. No representations or promises have been made concerning the marketability
or value of the Shares. The Optionee understands that there is currently
no market for the transfer of the Shares. The Optionee further
acknowledges that, because the Shares have not been registered under the
Securities Act of 1933, and cannot be resold unless they are subsequently
registered under said Act or an exemption from registration is available,
the Optionee must continue to bear the economic risk of his investment in
the Shares for an indefinite period of time. Specifically, the Optionee
agrees that the Shares may not be transferred until the Company has
received an opinion of counsel reasonably satisfactory to it that the
proposed transfer will not violate federal or state securities laws unless
the Company receives this requirement. The Company has not agreed or
represented to the Optionee that the Shares will be purchased or redeemed
from the Optionee at any time in the future. Further, there have been no
representations, promises, or agreements that the Shares will be registered
under the Securities Act of 1933 at any time in the future or otherwise
qualified for sale under the applicable securities laws. The Optionee
further understands that a notation will be made on the appropriate records
of the Company and on the Stock Certificate representing the Shares so that
the transfer of Shares will not be effected on those records without
compliance with the restrictions referred to above.
DATE:
----------------------------- -----------------------------
Optionee
-20-
<PAGE>
ELECTROSCOPE, INC.
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD AUGUST 15, 1997
The undersigned hereby constitutes, appoints and authorizes Patrick F.
Crane and Karl D. Hawkins and each of them, the true and lawful attorneys and
Proxies of the undersigned with full power of substitution and appointment,
for and in the name, place and stead of the undersigned, to act for and vote
as designated below, all of the undersigned's shares of the no par value
common stock of Electroscope, Inc., a Colorado corporation, at the Annual
Meeting of Shareholders to be held at Chrisman Bynum & Johnson, 1900 Fifteenth
Street, Boulder, CO 80302 at 10:00 a.m. Mountain Time, on August 15, 1997,
and at any and all adjournments thereof, for the following purposes:
1. To elect eight (8) Directors:
/ / For all nominees listed below (except as marked to the contrary):
/ / Withhold authority to vote for the nominees listed below:
David C. Auth
Patrick F. Crane
David W. Newton
Roger C. Odell
Donald R. Temple
Joe W. Tippett
Robert D. Tucker
C. Randle Voyles
(INSTRUCTION: To withhold authority to vote for any individual nominee,
draw a line through or otherwise strike out his name. If authority to vote for
the election of any nominee is not withheld, the execution of this Proxy shall
be deemed to grant such authority.)
2. To approve the adoption of the 1997 Stock Option Plan which authorizes
options to purchase 800,000 shares.
/ / FOR AGAINST ABSTAIN
3. To ratify the appointment of Arthur Andersen LLP as Independent Pubic
Accountants for the Company.
/ / FOR AGAINST ABSTAIN
4. To transact such other business as may properly come before the
meeting, or any adjournment thereof.
/ / FOR AGAINST ABSTAIN
The undersigned hereby revokes any Proxies as to said shares heretofore
given by the undersigned, and ratifies and confirms all that said attorneys and
Proxies may lawfully do by virtue hereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ALL PROPOSALS. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED
AT THE TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF
SHAREHOLDERS TO THE UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement furnished herewith.
<PAGE>
DATED: _____________, 1997.
------------------------------
------------------------------
Signature(s) should agree with the name(s) shown hereon. Executors,
administrators, trustees, guardians and attorneys should indicate their capacity
when signing. Attorneys should submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ELECTROSCOPE, INC. PLEASE SIGN AND RETURN THIS PROXY TO AMERICAN
SECURITIES TRANSFER, INCORPORATED, 938 QUAIL STREET, SUITE 101,
LAKEWOOD, CO 80215. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT
TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
