DSCP Datascope (MM)

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

 

 

SCHEDULE 14F-1

 

 

 

 

INFORMATION STATEMENT PURSUANT TO

SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934

AND RULE 14F-1 THEREUNDER

 

 

 

 

 

 

 

DATASCOPE CORP.

(Exact name of registrant as specified in its charter)

 

 

 

 

0-6516

(Commission File Number)

 

 

 

 

 

 

 

 

14 Philips Parkway

Montvale, New Jersey 07645-9998

(Address of principal executive offices and zip code)

 

 

 

 

(201) 391-8100

(Registrant’s telephone number, including area code):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

DATASCOPE CORP.
14 Philips Parkway
Montvale, New Jersey 07645
(201) 391-8100

 

 

INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF
THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER

 

This Information Statement is being mailed on or about October 24, 2008, as part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the “ Schedule 14D-9 ”) of Datascope Corp. (“ Datascope ” or the “ Company ”) to the holders of record of shares of common stock of Datascope (the “ Common Stock ”). You are receiving this Information Statement in connection with the possible election of persons designated by Getinge AB, a Swedish aktiebolag (“ Parent ”), to a majority of the seats on the Board of Directors of Datascope (the “ Datascope Board ”).

 

On September 15, 2008, Datascope entered into an Agreement and Plan of Merger (the “ Merger Agreement ”) with Parent and DaVinci Merger Sub, Inc., a Delaware corporation (“ Purchaser ”) and a wholly-owned, indirect subsidiary of Parent. Pursuant to the Merger Agreement, subject to certain conditions and as more fully described in the Merger Agreement, (1) Parent will cause Purchaser to commence a cash tender offer (the “ Offer ”) for all outstanding shares of Common Stock at a price of $53.00 per share, net to the seller in cash, without interest and less any applicable withholding taxes (or such other amount per share as may be paid pursuant to the Offer) (the “ Offer Price ”), and (2) Purchaser will be merged with and into Datascope (the “ Merger ”). If the Offer and the Merger are completed, Datascope will become a wholly-owned, indirect subsidiary of Parent.

 

The Merger Agreement provides that, promptly upon the close of the Offer, and from time to time thereafter, Purchaser will be entitled to designate directors (referred to as “ Purchaser’s Designees ”) on the Datascope Board that will give Purchaser board representation that is at least proportionate to its ownership interest. The Merger Agreement requires that Datascope promptly take necessary action to cause Purchaser’s Designees to be elected or appointed to the Datascope Board under the circumstances described in the Merger Agreement. This Information Statement is required by Section 14(f) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and Rule 14f-1 thereunder.

 

You are urged to read this Information Statement carefully. You are not, however, required to take any action in connection with this Information Statement.

 

The information contained in this Information Statement concerning Parent and Purchaser and Purchaser’s Designees has been furnished to us by Parent and Purchaser. Datascope assumes no responsibility for the accuracy or completeness of such information.

 

RIGHT TO DESIGNATE DIRECTORS; PARENT’S DESIGNEES

 

The Merger Agreement provides that, promptly after Purchaser accepts for payment and pays for any shares of Common Stock tendered and not withdrawn pursuant to the Offer (the “ Appointment Time ”), and at all times thereafter, Purchaser shall be entitled to elect or designate such number of directors, rounded up to the next whole number, on the Datascope Board as is equal to the product of the total number of directors on the Datascope Board (giving effect to the directors elected or designated by Purchaser pursuant to this sentence) multiplied by the percentage that the aggregate number of shares of the Common Stock beneficially owned by Parent, Purchaser or any of its affiliates bears to the total number of shares of the Common Stock then outstanding, such directors to be split up among the three classes of the Datascope Board so as to keep the classes approximately even in the number of directors. The Merger Agreement further provides that Datascope will, upon request by Purchaser at any time following the purchase of and payment for shares of the Common Stock pursuant to the Offer, take such actions, including, but not limited to (a) promptly filling vacancies or newly created directorships on the Datascope Board, (b) promptly increasing the size of the Datascope Board (including by amending the bylaws of Datascope if necessary so as to increase the size of

the Datascope Board) and/or (c) promptly securing the resignations of such number of incumbent directors as are necessary or desirable to enable Purchaser’s Designees to be so elected or designated to the Datascope Board, and shall use reasonable best efforts to cause Purchaser’s Designees to be so elected or designated at such time.

 

The Merger Agreement also provides that, upon Purchaser’s request following the Appointment Time, Datascope shall also cause persons elected or designated by Purchaser to constitute the same percentage (rounded up to the next whole number) as is on the Datascope Board of (i) each committee of the Datascope Board, (ii) each board of directors (or similar body) of each of Datascope’s subsidiaries and (iii) each committee (or similar body) of such board, in each case to the extent permitted by applicable law and the NASDAQ Marketplace Rules.

 

Purchaser will select its designees from among its directors and executive officers listed on Schedule A to this Information Statement. If additional designees are required in order to constitute a majority of the Datascope Board, such additional designees will be selected by Purchaser from among the directors and executive officers of Parent contained in Schedule I to the Offer to Purchase, dated September 30, 2008 (as amended or supplemented from time to time, the “ Offer to Purchase ”), of Purchaser and Parent, which was filed with the Securities and Exchange Commission (the “ SEC ”) as Exhibit 99.(A)(1)(A) to Purchaser’s and Parent’s tender offer statement on Schedule TO, which schedule is incorporated by reference herein.

 

None of the persons from among whom Purchaser’s Designees will be selected, or their associates, is a director of, or holds any management or other employment position with, Datascope. To our knowledge, except as set forth in Schedule A annexed hereto, none of the persons from among whom Purchaser’s Designees will be selected or their associates beneficially owns any equity securities, or rights to acquire any equity securities, of Datascope or has been involved in any transactions with Datascope or any of its directors or executive officers that are required to be disclosed pursuant to the rules and regulations of the SEC.

 

CERTAIN INFORMATION REGARDING DATASCOPE

 

The Common Stock is the only class of voting securities of Datascope currently outstanding. Each share of Common Stock has one vote. As of the close of business on September 12, 2008, there were 15,873,152 shares of Common Stock issued and outstanding (which does not include deferred share units held by current or former Datascope directors).

 

DIRECTORS OF DATASCOPE

 

Set forth below are the name, age and position of each director of Datascope as of September 12, 2008.

 

 

 

 

 

THE BOARD OF DIRECTORS AND BOARD COMMITTEES

 

As of the date of this Information Statement, the Datascope Board has seven directors and maintains an audit committee, a compensation committee and a nominations and corporate governance committee. The current membership and the function of each of these committees are described below. Other than Messrs. Altschiller and Saper, each of our directors is “independent” as defined under the National Association of Securities Dealers, Inc.’s listing standards. Mr. Loughlin is the Lead Independent Director of the Datascope Board.

 

During the fiscal year ended June 30, 2008 (“ Fiscal 2008 ”), the Datascope Board held 15 meetings. Each of the directors attended 75% or more of the aggregate number of meetings of the Datascope Board and committees on which he served. Directors are encouraged to attend the Annual Meeting of Stockholders, and all members of the Datascope Board attended Datascope’s Annual Meeting of Stockholders in December 2007. There were also two consents executed outside of the Datascope Board and committee meetings during Fiscal 2008.

 

The Datascope Board has an audit committee (the “ Audit Committee ”) comprised of Messrs. Klatell, Loughlin, Wyman and Dantzker. Each of the members of the Audit Committee is “independent” as defined under the National Association of Securities Dealers, Inc.’s listing standards. The primary functions of the Audit Committee are to monitor the quality and integrity of the audits of Datascope’s financial statements, to monitor the financial reporting process and systems of internal controls regarding finance, accounting and legal and regulatory compliance, to monitor the independence, qualification and performance of Datascope’s independent registered public accounting firm and to provide an avenue of communication between the independent registered public accounting firm, management and the Datascope Board. The Audit Committee also receives information generated by Datascope’s anonymous system for reporting violations of its ethics and

business practice policies. The Audit Committee held nine meetings during Fiscal 2008. The Datascope Board has determined that Mr. Loughlin is a financial expert and independent as defined under applicable SEC rules.

 

The Datascope Board has a compensation committee (the “ Compensation Committee ”) comprised of Messrs. Abramson, Klatell and Loughlin. Each of the members of the Compensation Committee is “independent” as defined under applicable National Association of Securities Dealers, Inc.’s listing standards. The primary responsibilities of the Compensation Committee are to discharge the Datascope Board’s responsibilities relating to compensation of executive officers, to produce an annual report on executive compensation for inclusion in Datascope’s proxy statement and to oversee, review and advise the Datascope Board on the adoption of policies that govern Datascope’s compensation, equity and employee benefit plans and programs. The Compensation Committee held ten meetings during Fiscal 2008.

 

The Datascope Board has a nominations and corporate governance committee (the “ Nominating Committee ”) comprised of Messrs. Abramson, Klatell and Wyman. Each of the members of the Nominating Committee is “independent” as defined under applicable National Association of Securities Dealers, Inc.’s listing standards. The primary objectives of the Nominating Committee are to develop and recommend to the Datascope Board a set of effective corporate governance policies and procedures applicable to the Datascope Board, to identify individuals qualified to become members of the Datascope Board and its committees and to recommend to the Datascope Board the nominees to stand for election as directors and to review and recommend compensation of the members of the Datascope Board and its committees. The Nominating Committee recommends candidates based on their business experience, diversity and personal skills in technology, finance, marketing, financial reporting and other areas that are expected to contribute to an effective board of directors. The Nominating Committee employs several methods to identify candidates, which include obtaining recommendations for candidates from members of the Datascope Board and management. The Nominating Committee held three meetings during Fiscal 2008. The Nominating Committee will consider stockholder recommendations for director sent to the Nominating Committee, Datascope Corp., 14 Philips Parkway, Montvale, New Jersey 07645, Attention: Secretary. Any recommendation from a stockholder should include the name, background and qualifications of such candidate and should be accompanied by evidence of such stockholder’s ownership of Datascope’s common stock.

 

The charters of the Audit Committee, the Compensation Committee and the Nominating Committee are posted on Datascope’s website at www.datascope.com. The Business Conduct Policy Guide of Datascope, which covers all employees of Datascope, is also posted on Datascope’s website.

 

Stockholders who wish to contact an individual director, the Datascope Board or a committee of the Datascope Board should send their correspondence to Datascope Corp., 14 Philips Parkway, Montvale, New Jersey 07645, Attention: Board of Directors. Each communication should specify the applicable addressee or addressees to be contacted as well as the general topic of the communication. Datascope will initially receive and process communications before forwarding them to the addressee. Datascope generally will not forward to the directors a stockholder communication that it determines to be primarily commercial in nature or relates to an improper or irrelevant topic or that requests general information about Datascope.

 

SECURITY OWNERSHIP OF CERTAIN STOCKHOLDERS

 

The following table provides information as to each person who is known to Datascope to be the beneficial owner of more than 5% of Datascope’s voting securities as of September 12, 2008 (unless otherwise indicated):

 

 

 

 

 

SECURITY OWNERSHIP OF MANAGEMENT

 

The following table shows the number of shares of Common Stock beneficially owned by Datascope’s directors, the executive officers identified in the summary compensation table below (excluding Mr. Saper, whose holdings are shown in the preceding table) and all directors and executive officers as a group (including Mr. Saper) as of September 12, 2008:

 

 

 

 

EXECUTIVE OFFICERS OF DATASCOPE

 

The following table sets forth the names, ages and all positions and offices held by Datascope’s present executive officers. Unless otherwise indicated below, each person has held the office indicated for more than five years:

 

 

 

 

 

EXECUTIVE COMPENSATION

 

The Compensation Committee

 

Alan Abramson, Robert Klatell and James Loughlin are the members of the Compensation Committee. Mr. Abramson, who has served on the Compensation Committee for eleven years, is the chairperson of the Compensation Committee. Each member of the Compensation Committee is an independent director as defined under applicable National Association of Securities Dealers, Inc.’s listing standards as well as the charter of the Compensation Committee. The Compensation Committee is appointed by the Datascope Board and is governed by a written charter adopted by the Datascope Board. A copy of the charter is available on Datascope’s website at www.datascope.com.

 

The primary responsibility of the Compensation Committee is to review, approve and administer Datascope’s compensation programs and to review and approve the compensation of the executive officers of Datascope, including base salary, annual cash bonus, long-term cash incentives, equity-based incentive compensation, change-in-control benefits, perquisites and general benefits.

 

As set forth in its charter, the Compensation Committee determines which employees are “executive officers” whose compensation is subject to its review and approval. The Compensation Committee has determined that the “executive officers” for this purpose are the Chief Executive Officer (the “ CEO ”), each of the CEO’s direct reports and the head of each division. All of the named executive officers are “executive officers” as determined by the Compensation Committee. In addition, the Compensation Committee also reviewed the compensation and termination package of Adam Saper, Director of Business Development, Patient Monitoring Division, who is the son of Lawrence Saper, the CEO.

 

Compensation Committee Interlocks and Insider Participation

 

No person who served as a member of the Compensation Committee during Fiscal 2008 was a current or former officer or employee of Datascope or engaged in certain transactions with Datascope required to be disclosed by regulations of the SEC. Additionally, there were no Compensation Committee “interlocks” during Fiscal 2008 which generally means that no executive officer of Datascope served as a director or member of the Compensation Committee of another entity, one of whose executive officers served as a director or member of the Compensation Committee.

 

The Compensation Committee Process

 

Datascope’s compensation process for executive officers involves both the Compensation Committee and certain members of senior management, principally the CEO, the Chief Financial Officer, the Chief Operating Officer and the Vice President, Human Resources. These members of management principally assist the

Compensation Committee in establishing business performance targets and objectives, evaluating the performance of employees and recommending salary levels, cash incentive awards and equity awards for executive officers. They present the Compensation Committee with historical breakdowns of the components of compensation for each executive officer, as well as the total compensation earned, and make recommendations for each executive officer’s overall compensation package for the following fiscal year. The CEO provides an evaluation of the performance of the senior executive officers, including the named executive officers but excluding himself. The Compensation Committee reviews the recommendations of the CEO carefully in light of his working relationship with the other executives and his direct knowledge of their contributions to and goals for continuing achievement with Datascope. In evaluating the performance of the executive officers, the Compensation Committee does not rely solely on predetermined formulas or a limited set of criteria and may accord different weight at different times to different factors for each executive officer.

 

Pursuant to the charter of the Compensation Committee, the Compensation Committee has the authority to select and retain consultants. The Compensation Committee engaged Pearl Meyer & Partners (“ PM&P ”), an independent consulting firm, as its compensation consultant beginning in 2006 to assist the Compensation Committee in considering future executive compensation. Under the terms of its engagement, PM&P reports to and may only accept assignments approved by the Compensation Committee. The Compensation Committee has from time to time requested PM&P to identify specific peer groups of companies, to provide research regarding compensation programs and compensation levels among the companies in the peer groups, to perform market benchmarking compensation studies, to assist the Compensation Committee in evaluating the design of the compensation programs and to provide ongoing advice with respect to the compensation programs for the executive officers and non-employee directors. In May 2007 (for Fiscal 2008), PM&P conducted a competitive market review of the CEO’s compensation. In May 2006 (for the fiscal year ended June 30, 2007 (“ Fiscal 2007 ”)), PM&P conducted a competitive market review of the compensation for the CEO and each of the other named executive officers based on analysis of the compensation practices of general industry peer companies and CEO Founders Data (defined below), as well as several broad-based general industry compensation surveys. At the direction of the Compensation Committee, PM&P meets with management to receive and review the information received from management.

 

The Compensation Committee’s process for determining compensation for the executive officers generally begins with management presenting to the Compensation Committee its compensation proposal. The Compensation Committee evaluates the proposal in light of the information provided by PM&P and may discuss the proposal with PM&P to obtain its input. If the proposal is acceptable to the Compensation Committee it will then approve it, with such adjustments to the terms of the proposal to the extent the Compensation Committee deems advisable. If applicable, the Compensation Committee will then submit the proposal, as so adjusted with any changes deemed advisable by the Compensation Committee, to the Datascope Board and, if required or advisable, to stockholders of Datascope for their approval.

 

The Compensation Committee meets as often as needed to perform its responsibilities. In Fiscal 2008, Compensation Committee held ten meetings. The Compensation Committee communicates with management to develop the meeting agenda in advance of each meeting and members of management are often invited by the Compensation Committee to participate in meetings. The Compensation Committee also meets with Dechert LLP, outside counsel to Datascope, and PM&P. The Compensation Committee periodically meets in executive sessions without management.

 

Although many compensation decisions are made in the first quarter of the fiscal year, the compensation planning process continues throughout the year. Business planning, evaluation of management performance and of compensation programs, consideration of the business environment and monitoring of compensation programs offered by comparable companies and companies in our industry are performed throughout the fiscal year as the Compensation Committee determines is necessary.

 

Information Provided by Compensation Consultants

 

The Compensation Committee, together with PM&P, reviews from time to time benchmarking data with regard to its executive officer positions and annually reviews such data with regard to the compensation of its

CEO. In May 2007 (for Fiscal 2008), PM&P conducted a competitive market review of the CEO’s compensation. In May 2006 (for Fiscal 2007), PM&P conducted a competitive market review of the compensation for the CEO and each of the other named executive officers based on analysis of the compensation practices of general industry peer companies and CEO Founders Data (defined below), as well as several broad-based general industry compensation surveys. In reviewing the broad-based compensation survey data, the Compensation Committee does not consider the specific survey participants to be material to its compensation determination process. In light of Datascope’s proposed transaction with Purchaser and Parent, salaries of executive officers have not yet been established for Fiscal 2008, and PM&P has not been asked to conduct a competitive market review in 2008 (for the fiscal year ended June 30, 2009 (“ Fiscal 2009 ”)), although PM&P did provide some competitive market data in connection with the Compensation Committee’s approval of Mr. Laudani’s compensation package during Fiscal 2008. The Compensation Committee considers the competitiveness of our overall compensation arrangements in relation to a peer group of comparable medical device companies identified by PM&P. The Compensation Committee reviews compensation levels for our named executive officers, including the CEO, compared to executive compensation levels at the peer group companies. The Compensation Committee, with the assistance of PM&P, regularly reviews the composition of the peer group. During Fiscal 2008, the peer group consisted of the following companies:

 

 

These peer companies have been selected to represent Datascope’s competitive market based on their industry focus, business mix, sales size and number of employees. Although some larger direct competitors have been included, Datascope is comparable in sales size with the peer group median.

 

For Fiscal 2007, PM&P has also provided the Compensation Committee with reports regarding two supplemental reference groups that were similar to Datascope in terms of sales and market capitalization: (1) a “comparator” group of general industry companies; and (2) a group of companies in which the founding CEO held at least 5% beneficial ownership of each company’s equity (“ CEO Founders Data ”).

 

Although the Compensation Committee reviews data pertaining to the above-described peer group, the Compensation Committee recognizes the difficulty in choosing a group of publicly-traded companies that has market capitalization, size and business mix that all closely match that of Datascope. Therefore, although the Compensation Committee reviews data pertaining to our identified peer group, the Compensation Committee does not believe that it is appropriate to establish compensation levels primarily based on benchmarking. Furthermore, the Compensation Committee does not target a certain percentile or the median for each compensation element shown in our peer group, but rather considers the total compensation of our executive officers. Nonetheless, the Compensation Committee recognizes that Datascope’s compensation practices must be competitive in the marketplace to attract and retain highly qualified key executive officers. Therefore, this

marketplace information is one of the many factors that the Compensation Committee considers in assessing the reasonableness of compensation. In addition to compensation data for its peer group, the Compensation Committee also considers information from other sources, such as compensation survey data, individual performance, CEO Founders Data (especially with respect to long-term compensation), data from the comparator group, compensation data for executives at larger competitors in the medical devices industry, year-to-year financial and stock performance, progress towards strategic objectives of Datascope and the individual’s compensation levels relative to that of other executives of Datascope. With regard to the compensation level of our CEO, the Compensation Committee also considers the unique contributions of a founding CEO, his status as a founder and his holdings of Common Stock.

 

Compensation Discussion and Analysis

 

Compensation Objectives

 

The objective of the Compensation Committee in setting Datascope’s compensation policy is to provide compensation packages that will allow Datascope to:

 

 

What Our Compensation Program is Designed to Reward

 

Overall, the compensation program is designed to reward individual, divisional and company short-term and long-term performance. A portion of the compensation opportunity for the executive officers is comprised of a combination of annual cash bonuses, which reward annual executive, divisional and company performance, and long-term cash incentives and, in certain cases, restricted stock awards, which reward long-term growth in company net earnings performance. The Compensation Committee believes that by weighting total compensation in favor of the performance-based components of the total compensation program, the Compensation Committee appropriately rewards individual achievement while at the same time providing incentives to promote company performance (see “Compensation of the CEO” below for a discussion of the weighting of CEO compensation). Because the Committee has established aggressive targets for its bonus program, bonuses have been small in recent years and a significant portion of compensation has been in the form of salary.

 

The Compensation Committee does not use fixed percentages to determine the mix of base salary, bonus and long-term incentive components. Instead, it sets cash compensation, including base salaries at levels that are competitive with peer group companies and with the medical device industry. The Compensation Committee then offers annual bonus and long-term incentive opportunities based on factors such as the individual’s position and responsibilities, specific divisional and performance goals tied to the individual’s position and the historic compensation of executive officers in Datascope.

 

In recent years, the Compensation Committee has made two significant changes to its compensation philosophy. First, the Compensation Committee, after consultation with senior management, determined that those members of management who have the ability to have the most meaningful impact on Datascope’s operations and growth should participate in incentive programs. This change was effected in order to provide meaningful potential incentives while assuring that the appropriate portion of earnings is retained for the benefit of Datascope and stockholders. To this end, the breadth of employee participation in Datascope’s incentive programs was reduced (though the participation of the executive officers in these programs was not significantly affected). Second, the Compensation Committee has reduced the number and size of stock option awards in favor of cash bonuses, restricted stock grants and performance-based cash long term incentive plans. For many years, stock options were the principal form of long-term incentives awarded to employees. The Compensation Committee has concluded that stock options are not currently an effective method of promoting

long-term equity ownership in Datascope because option holders have tended to sell the shares underlying the options immediately upon exercise. Recent accounting changes also require the cost of stock options to be expensed, decreasing the relative accounting benefits of stock options as compared to restricted stock awards. In addition, Datascope believes that it can achieve the same benefits by granting fewer restricted shares than options, as well as by using performance-based cash long-term incentive plans, thereby reducing the dilution to stockholders and strengthening the link between pay and long-term performance.

 

Proposed Merger with Getinge

 

Pursuant to the Merger Agreement, Datascope agreed to certain restrictive covenants as to the activities of Datascope and its subsidiaries during the period from the date of the Merger Agreement to the earlier of the Appointment Time and the termination of the Merger Agreement. These covenants provide that, subject to certain exceptions, Datascope will not take certain actions without the prior written consent of Parent, including, among other things: (1) issuing, granting or awarding any right to acquire shares of Common Stock, or any options, warrants, convertible securities or any other rights to acquire or receive any shares of its Common Stock; (2) issuing any additional shares of Common Stock except pursuant to the exercise of stock options or other awards outstanding on the date of the Merger Agreement under Datascope’s plans; (3) increasing the compensation (including increasing any bonus opportunities) or benefits of any of Datascope’s director and officers; (4) paying or granting any pension, severance, termination or retirement benefits not required by any existing plan or agreement, except with respect to such benefits provided to new hires of Datascope in the ordinary course of business; and (5) establishing, amending in any material respect, entering into to terminating any material plan except as reasonably determined by Datascope to be appropriate to comply with applicable laws or as may be provided to new hires consistent with past practice. In light of Datascope’s proposed transaction with Purchaser and Parent, the Compensation Committee has deferred certain decisions with respect to determining compensation for executive officers for Fiscal 2009 until further clarity on the timing for the consummation of the transaction is known. It is anticipated that any compensation decisions, once made, will be made in accordance with the provisions of the Merger Agreement.

 

Elements of Executive Compensation

 

The compensation program for executive officers consists of the following elements of compensation, each described in greater depth below:

 

 

As noted above, a significant portion of executive compensation is determined based on the Compensation Committee’s evaluation of Datascope’s and each executive officer’s annual and long-term performance. Datascope provides few personal benefits to executive officers, such as a monthly allowance for automobile expenses or a company-leased automobile. Datascope also provides change-in-control benefits as a recruitment and retention mechanism. Finally, other than an executive medical plan available to executive officers, executive officers participate in Datascope benefit plans that are offered to all employees, including Datascope’s 401(k) savings plan, health and benefit plans, and are entitled to vacation and paid time off based on Datascope’s general vacation policies.

Base Salary

 

Base salaries are a critical element of executive compensation because they are essential to recruiting and retaining qualified employees and provide executive officers with a base level of monthly income. Base salaries are initially set by the Compensation Committee with management’s input. In determining base salary levels, the Compensation Committee considers the executive officer’s position with Datascope, his or her qualifications and experience, past performance, scope of responsibilities, goals and objectives set for the executive officer and whether or not the base salary would be tax deductible. The Compensation Committee also considers salary levels for similar positions at comparable companies. With regard to hiring executive officers, Datascope competes with many companies that are significantly larger in size and with greater resources, and, therefore, the Compensation Committee seeks to offer competitive base salaries to attract and hire highly qualified executive officers.

 

Thereafter, the Compensation Committee reviews salary levels in the first quarter of each fiscal year and considers potential increases in base salary each year based on its subjective assessment of Datascope’s overall performance over the preceding year, as well as executive officer performance and experience, length of service and changes in responsibilities. As part of its review, the Compensation Committee receives reports from the CEO regarding recommendations in salary adjustments for executive officers. When conducting its review, the Compensation Committee obtains market information from PM&P about compensation levels for executives. In light of Datascope’s proposed transaction with Purchaser and Parent, salaries for executive officers have not been adjusted from their salaries in Fiscal 2008, other than upon Mr. Laudani’s promotion, and PM&P has not been asked to obtain market information for positions other than the CEO and positions similar to Mr. Laudani’s. Also included in the subjective determination is the Compensation Committee’s evaluation of the development and execution of strategic plans, the exercise of leadership and involvement in industry groups. For example, Mr. Laudani represents Datascope in the European Association of Medical Devices Manufacturers, Mr. Barker is a member of the Industrial Design Association of America and Mr. Leschinsky is a member of the American Society for Artificial Internal Organs. The weight given such factors by the Compensation Committee may vary from one executive officer to another.

 

See “Compensation of the CEO” below for a discussion of the base salary of the CEO.

 

Salary increases for the executive officers are typically determined in August of each fiscal year and become effective in October for such fiscal year. The Compensation Committee reviews the base salaries of executive officers holding positions of similar levels within the peer group selected by PM&P, as well as the performance of their respective divisions. In light of Datascope’s proposed transaction with Purchaser and Parent, the salaries of the named executive officers have not yet been adjusted from their salaries in Fiscal 2008, although such an increase may occur based on the Committee’s consideration of the performance of the respective divisions that these officers lead. Additionally, PM&P has not been asked to review peer group compensation data (other than for Mr. Laudani) in Fiscal 2008 (for Fiscal 2009).

 

2004 Management Incentive Plan

 

To support Datascope’s goals of rewarding the performance of executive officers and aligning the interest of executive officers with those of Datascope’s stockholders, the Compensation Committee awards cash bonuses to named executive officers under the Datascope Corp. 2004 Management Incentive Plan, which was approved by stockholders in December 2003 (the “ Incentive Plan ”). Awards are based on the attainment of overall corporate and division financial thresholds and targets and certain subjective individual criteria. In the case of Mr. Saper, the threshold and targets are limited to objective financial criteria, historically earnings per share of Datascope. The Compensation Committee has determined that operating results, such as earnings per share, are the best measures of executive performance, because these types of metrics motivate the executive officers to focus their efforts on improving Datascope’s overall performance. To ensure that the objectives of the CEO and senior management are aligned, the corporate financial thresholds and targets use earnings per share as the performance metric and the thresholds and targets are the same for both the CEO and senior management.

The thresholds and targets are generally established within the first 25% of the measurement period by the Compensation Committee. The thresholds, targets and formulas for calculation of whether the thresholds and targets are achieved are submitted by management, which the Compensation Committee considers, adjusts in its discretion and subsequently approves, subject to any adjustments deemed advisable by the Compensation Committee. Bonuses are granted to participants if the thresholds are achieved, and the size of the executive officer’s bonus increases with the level of achievement up to a certain maximum level of bonus. However, the Compensation Committee has the discretion to (i) decrease or eliminate the award payable to any executive (such as Mr. Saper) who is covered by Section 162(m) of the Internal Revenue Code (the “ Code ”), or (ii) increase, decrease or eliminate the award payable to any executive officer to reflect the individual performance and contribution of, and other factors relating to, such executive officer. At the end of the fiscal year, the Compensation Committee reviews Datascope’s performance to determine whether the thresholds and targets have been met and ensures that the Incentive Plan is appropriately administered. The Compensation Committee determines in its discretion whether and how much cash bonus to pay each executive officer based on its review of company and individual performance. As a result of the pending acquisition of Datascope, the Compensation Committee has not yet determined thresholds, targets and formulas for Fiscal 2009.

 

If the overall performance targets are not met in any given measurement period, the Compensation Committee, in consultation with the CEO, has the discretionary authority to approve bonus awards outside of the 2004 Management Incentive Plan for executive officers who have made substantial contributions during such period. The aggregate amounts of these discretionary bonus awards are typically lower than the amounts that would have been granted to officers if Datascope had met its performance targets. Depending on the Compensation Committee’s assessment, bonuses may be equal to, more or less than the previously established target amounts.

 

Performance targets are based on the operating results of Datascope’s core business and generally exclude special items of income and expense that, in the judgment of the Compensation Committee, are less relevant to the creation of long-term value for Datascope’s stockholders. The Compensation Committee establishes targets at levels that it believes would require superior performance from each executive officer.

 

In Fiscal 2008, Datascope met its performance targets and bonuses were awarded pursuant to the Incentive Plan. In Fiscal 2008, Datascope recognized gains in connection with the sale of the Patient Monitoring business that would have resulted in maximum bonuses being paid. The Compensation Committee adjusted the targets for Fiscal 2008 to eliminate these gains and to reflect the changes in Datascope’s operations resulting from the sale of the Patient Monitoring business during Fiscal 2008. Based on Fiscal 2008 performance, the following named executive officers were granted bonuses: Lawrence Saper $496,495, Antonino Laudani $250,000, Henry A. Scaramelli $85,000, and Boris Leschinsky $65,000. These bonuses were awarded based on the superior performance of the respective divisions as well as the overall performance of Datascope. Mr. Laudani’s bonus was awarded based on his compensation plan when he assumed the position of Chief Operating Officer in October 2007. All awards for executive officers are recommended by management and individually reviewed and approved by the Compensation Committee.

 

Based on its evaluation of individual performance, the Compensation Committee also reviewed and approved certain bonuses in addition to those awarded under the Incentive Plan for two named executive officers. Mr. Laudani also received a bonus of $189,240 related to the sale of the Patient Monitoring business and a bonus of $52,608 paid in Fiscal 2008 based on commercial results of Datascope’s Europe, Middle East and Africa business. Mr. Scaramelli also received a discretionary bonus of $91,000 in recognition of the additional work required during the sale of the Patient Monitoring business.

 

Long-Term Incentive Plan

 

The Long-Term Incentive Plan, approved by the Datascope Board on September 12, 2006 (the “ Long-Term Incentive Plan ”), allows for cash awards to designated executives and senior managers whose positions enable them to manage, invest, develop or negotiate opportunities that contribute directly to the growth of Datascope’s earnings. Datascope and the Compensation Committee believe that this plan appropriately rewards executive officers who contribute to the strategic growth, financial strength and long-term success of Datascope. The initial

implementation of the plan measures results from Datascope’s fiscal years 2007 through 2009. An additional three-year award measures results from Datascope’s fiscal years 2008 through 2010. Although a new three-year measurement period will generally commence in each subsequent year thereafter, in light of Datascope’s proposed transaction with Purchaser and Parent, the Datascope Board has not yet approved a Long-Term Incentive Plan for fiscal years 2009 through 2011. Datascope’s performance objectives under the Long-Term Incentive Plan for the three-year period ending June 30, 2009 and the three-year period ending June 30, 2010 are specified levels for the compound annual growth rate (“ CAGR ”) of consolidated net earnings, excluding special items. The Long-Term Incentive Plan specifies threshold, target and maximum levels of CAGR that will determine the cash amount payable under the plan. The Compensation Committee assigned participants a target amount, a percentage of base pay used to calculate benefits under the plan, which ranged from 30% to 40% of base pay. Under the Long-Term Incentive Plan, a participant can receive from 0% to 200% of the applicable target amount, depending on Datascope’s actual CAGR of consolidated net earnings, excluding special items. To date, the CEO has not participated in the Long-Term Incentive Plan. Each of the other named executive officers participates in the Long-Term Incentive Plan for the three-year period ending June 30, 2009 and the three-year period ending June 30, 2010.

 

Equity Compensation

 

The Compensation Committee believes that, in addition to compensating executive officers for the long-term performance of Datascope, the periodic grant of equity-based compensation helps align the interest of the executive officers with those of Datascope’s stockholders, thereby ensuring that such officers have a continuing stake in our long-term success.

 

The Datascope Corp. 2005 Equity Incentive Plan (the “ 2005 Equity Incentive Plan ”) allows for awards to executives, certain types of which are based on the attainment of performance objectives specified in the grant. The performance objectives may be based on company-wide objectives or objectives that are related to the performance of the executive or the department or function within Datascope in which the executive is employed. These objectives may be measured on an absolute basis or a relative basis, which is measured in relation to a group of peer companies or a financial market index. These grants may specify a minimum level below which no payment will be made and may set forth a formula for determining the amount of any payment to be made if performance is above the minimum acceptable level. The Compensation Committee may also grant stock appreciation rights, restricted shares, deferred shares and stock options under the 2005 Equity Incentive Plan. In light of Datascope’s proposed transaction with Purchaser and Parent and pursuant to the terms of the Merger Agreement, Datascope has agreed not to make new equity awards pending the consummation of the Merger.

 

Datascope has recently used restricted stock rather than stock options as an equity incentive. When restricted stock or stock options are granted, they are generally granted at regularly scheduled meetings of the Compensation Committee. A grant of 30,000 shares of restricted stock was made to Mr. Laudani in August 2007 in recognition of his performance as Vice President and Group President, Cardiac Assist and InterVascular, which position he had assumed in June 2007. A grant of 10,000 shares of restricted stock was made to Mr. Scaramelli in August 2007 in recognition of his promotion to Vice President, Finance and Chief Financial Officer in August 2007. Datascope does not have a program, plan or practice to time option grants in coordination with the release of material, non-public information, nor does Datascope plan to time, nor has it timed, its release of material, non-public information for the purpose of affecting the value of executive compensation.

 

Change-in-Control Benefits

 

When a change-in-control is contemplated, named executive officers may face an uncertain future with Datascope after a change-in-control of Datascope. Datascope has entered into certain change-in-control agreements in order to diminish the extent to which the possibility of a change-in-control would otherwise distract these employees and allow the executive officers to provide effective management and continuity during a period in which a change-in-control is contemplated. The material terms of Datascope’s

change-in-control benefits are described in the narrative section under the caption “Potential Payments Upon Termination or Change-in-Control”.

 

Perquisites

 

In 2008, Datascope provided executive officers with perquisites and other personal benefits that the Compensation Committee believed to be reasonable and consistent with the objective of allowing Datascope to attract and retain highly qualified officers. The cost to Datascope of the perquisites received by our named executive officers in Fiscal 2008 is included in the Summary Compensation Table below and described in the respective footnotes.

 

Named executive officers have the option of receiving a monthly allowance for expenses related to their automobiles or receiving a company-leased automobile. The value of this perquisite is included in the Summary Compensation Table below. We believe that this type of perquisite is important as part of a total compensation package when recruiting executive officers.

 

Datascope reimburses Mr. Saper for the cost of annual country club membership dues. Datascope provides an automobile and a driver for use by Mr. Saper for business purposes. Datascope paid for the costs of tax and estate planning advice received by Mr. Saper in Fiscal 2007 and the Committee discontinued this perquisite for Fiscal 2008.

 

Compensation of the CEO

 

The compensation arrangement with Mr. Saper reflects what the Compensation Committee believes to be his unique history with, role in, and contribution to, Datascope. Mr. Saper founded Datascope and continues to be its largest stockholder. He is responsible for, or has contributed to the development of, most of Datascope’s principal products, for which Mr. Saper neither receives royalties nor special compensation. As is discussed in greater detail below, because of his age and length of service with Datascope, if Mr. Saper elected to retire, his fully vested retirement benefits would substantially exceed his compensation. Datascope has entered into an employment agreement with Mr. Saper, dated as of July 1, 1996 (as amended, the “ Saper Employment Agreement ”). The Saper Employment Agreement is for a term of five years and automatically renews unless either party gives notice of intent not to continue to extend the term. The Saper Employment Agreement provides for an annual base salary and increases to the base salary as determined by the Datascope Board or the Compensation Committee. On September 22, 1999, the Compensation Committee determined to set Mr. Saper’s annual base salary at $1,000,000, and the Compensation Committee has maintained Mr. Saper’s annual base salary at this level. In consultation with PM&P, the Compensation Committee determined that the total compensation package provided an appropriate value for Mr. Saper’s contribution to, and role in, Datascope. Mr. Saper’s total compensation is heavily weighted toward salary and annual bonuses when, and if, earned under the Incentive Plan because the Compensation Committee determined that Mr. Saper’s significant stock ownership in Datascope creates compelling long-term incentives, rendering other long-term incentives unnecessary. Mr. Saper was not granted a bonus in connection with the sale of the Patient Monitoring business and is not expected to be granted a bonus in connection with the Merger.

 

Mr. Saper’s compensation for Fiscal 2008 was determined pursuant to the Saper Employment Agreement. Also under the Saper Employment Agreement, Mr. Saper will be required to pay Datascope $260,000, which represents the amount that Datascope advanced to Mr. Saper in March 2002 for payment of a membership deposit to a country club, upon the termination of Mr. Saper’s membership in the country club or, if earlier, upon the termination of Mr. Saper’s employment with the Corporation; this amount may be offset against amounts that Datascope owes to Mr. Saper and any imputed interest on such advance is treated as compensation. Mr. Saper may terminate the Saper Employment Agreement for good reason, including a significant breach by the Corporation of its obligations thereunder or certain changes in control of the Corporation.

 

The overall compensation included in the employment agreement paid to Mr. Saper was determined in a manner the Compensation Committee believes is reflective of Datascope’s operating results, the growth in Datascope’s business and the value of Datascope’s equity, and recognizes the key role in, and contributions of Mr. Saper to, the success of Datascope and its performance.

Mr. Saper is also entitled to certain retirement benefits. See “Potential Payments upon Termination or Change-in-Control.” Since Mr. Saper has not historically received long-term incentive compensation, the Compensation Committee believes that it is appropriate for Mr. Saper to receive retirement benefits, which it considers another form of compensation, in light of his role and contributions to Datascope. Mr. Saper’s retirement benefits were established by the Compensation Committee on May 20, 1997 and the Compensation Committee has not made any increases to the retirement benefits since that time.

 

Financial Restatement

 

It is the Datascope Board’s policy that the Compensation Committee will, to the extent permitted by applicable law, have the sole and absolute authority to make retroactive adjustments to any cash or equity-based incentive compensation paid to executive officers and certain other officers where the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement. Where applicable, Datascope will seek to recover any amount determined to have been inappropriately received by the individual executive officer.

 

Tax and Accounting Considerations

 

Datascope generally seeks to maximize the deductibility for tax purposes of all elements of compensation. Section 162(m) of the Code generally disallows a tax deduction for compensation over $1,000,000 paid to Datascope’s CEO and certain other highly compensated executive officers. Qualifying performance-based compensation will not be subject to the deduction limit if certain requirements are met. The Incentive Plan was approved by stockholders and contains the provisions necessary so that amounts payable to Mr. Saper and the named executive officers under the Incentive Plan will not be subject to the deduction limitations of Section 162(m) of the Code. The Compensation Committee reviews compensation plans in light of applicable tax provisions and may recommend amendments to compensation plans to maximize tax deductibility. However, the Compensation Committee may approve compensation that does not qualify for deductibility when the Compensation Committee deems it to be in the best interests of Datascope and its stockholders.

 

The Compensation Committee also considers the effect of certain accounting rules on the various compensation programs that it offers to executive officers. The Committee balances potential accounting effects with the flexibility it needs to retain in order to take any compensation actions that it determines are in the best interests of Datascope and its stockholders.

 

Compensation Committee Report

 

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on its review and discussion with management, the Compensation Committee has recommended to the Datascope Board that the Compensation Discussion and Analysis be included in this Information Statement.

 

Compensation Committee:

 

Alan Abramson, Chairperson

Robert E. Klatell

James J. Loughlin

 

SUMMARY COMPENSATION TABLE

 

The following table sets forth for Fiscal 2007 and Fiscal 2008, the compensation paid to or earned by (i) our principal executive officer, (ii) our principal financial officer, (iii) the other three most highly compensated executive officers of Datascope who were serving as executive officers as of June 30, 2008 and (iv) an executive officer who left Datascope during Fiscal 2008 who was among the most highly compensated executive employees in Fiscal 2008 (collectively, the “ Named Executive Officers ”):

 

 

 

 

 

GRANTS OF PLAN-BASED AWARDS

 

The following table provides information regarding option awards to the Named Executive Officers during fiscal year 2008.

 

 

 

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

 

The following table provides information regarding the equity awards held by the Named Executive Officers that are outstanding as of June 30, 2008.

 

 

 

 

OPTION EXERCISES AND STOCK VESTED

 

The following table provides additional information regarding the value realized by the Named Executive Officers on option award exercises and stock award vesting during the Fiscal 2008.

 

 

PENSION BENEFITS

 

The following table summarizes pension benefits of the Named Executive Officers.

 

 

 

 

Potential Payments Upon Termination or Change-in-Control

 

Each of Datascope’s executive officers, other than Mr. Saper, is currently a party to an agreement with Datascope which, in general, provides that if such executive officer’s employment is terminated in connection with a change-in-control of Datascope, such officer may be entitled to receive severance payments and other benefits. Mr. Saper is party to an employment agreement with Datascope that may entitle Mr. Saper to payments and other benefits in the event of the termination of his employment. The material provisions of these agreements that relate to potential payments in connection with a change-in-control of Datascope, including the approximate amount of such payments, are described in detail below. For purposes of determining the potential payments, January 31, 2009 was used as the hypothetical date upon which the change-in-control event occurs; however the actual date could be earlier or later, which would affect the amount of payments to be made. January 31, 2009 was used instead of June 30, 2008 (the end of Datascope’s fiscal year) because the approximate amount of payments to be made in the event of a change-in-control as of January 31, 2009, is a more accurate reflection of Datascope’s costs in light of the Offer and proposed Merger.

Lawrence Saper .   Datascope and Mr. Saper executed an employment agreement on July 1, 1996, which has subsequently been amended. The term of Mr. Saper’s employment is for a period of five years and automatically renews each day for an additional day so there is always five years remaining in his employment term. This agreement may entitle Mr. Saper to payment, if Datascope terminates Mr. Saper’s employment without “cause” (as defined in his employment agreement) or if Mr. Saper terminates his employment for “good reason” (as defined in his employment agreement). The consummation of this Offer will constitute “good reason” under the agreement. Upon such a termination, Mr. Saper may be entitled to receive his bonus compensation accrued through the date of termination and a lump-sum cash payment equal to the present value of the product of (i) the sum of the weighted average for the three years prior to such termination of (A) his annual base salary over such three-year period and (B) all bonus compensation paid or payable to him over such three-year period, multiplied by (ii) five. If Mr. Saper’s employment is terminated by Datascope without “cause” or by Mr. Saper for “good reason” on January 31, 2009, then this payment will equal approximately $5,747,118. Upon such a termination of employment, Mr. Saper is also entitled to receive the retirement benefits described below.

 

In addition to the payments described related to certain termination events in the preceding paragraph, upon any termination without “cause,” including retirement, Mr. Saper is entitled to receive compensation for all benefits which he would have received under Datascope’s employee benefit plans for the full five year remaining term of employment. If Mr. Saper’s employment is terminated by Datascope in breach of his employment agreement on January 31, 2009, Mr. Saper will receive approximately $765,523 in connection with the payments described in this paragraph.

 

Following any termination of his employment, Mr. Saper and his spouse at the time of such termination will also receive reimbursement for all medical expenses incurred by them during their lifetime that are not covered by Medicare. If Mr. Saper’s employment is terminated on January 31, 2009, the actuarial present value of the benefits described in this paragraph will be approximately $229,129.

 

In addition to the benefits described in the preceding paragraphs, upon Mr. Saper’s termination of employment, Mr. Saper will receive, on a monthly basis for the remainder of his life, the greater of (1) the “retirement benefit” (as defined in his employment agreement) payable under the supplemental executive retirement program (excluding all benefits payable under Datascope’s qualified pension plan) and (2) the “minimum retirement benefit” (as defined in his employment agreement). If Mr. Saper’s employment is terminated on January 31, 2009, the actuarial present value of this benefit will be approximately $17,318,387. In addition, in the event of Mr. Saper’s death, a trust created for the benefit of Mr. Saper’s spouse and children will receive $10,000,000 pursuant to a split dollar agreement between Mr. Saper, Datascope and the trust. In addition, Datascope will, for a period of five years after a termination of Mr. Saper’s employment in breach of his employment agreement, reimburse Mr. Saper for a portion of the premiums under such split dollar agreement, as well as taxes incurred by Mr. Saper in connection with such split dollar agreement. If Mr. Saper’s employment is terminated on January 31, 2009, the actuarial present value of these benefits will be approximately $3,575,377.

 

Upon the Effective Time, Mr. Saper will also be entitled to receive a payment in exchange for the cancellation of his then outstanding options, as set forth in the table on page 24.

 

Other Executive Officers .   Datascope has entered into an executive severance agreement with certain executive officers of Datascope including each of Messrs. Adelman, Barker, Cathcart, Krauskopf, Laudani, Leschinsky and Scaramelli. Each of these agreements have substantially similar terms and provide that, if any such executive officer’s employment is terminated within two years following the occurrence of a “change-in-control” (as defined in the severance agreement), either by Datascope without “cause” (as defined in the severance agreement) or by the executive officer following an event constituting a “constructive dismissal” (as defined in the severance agreement), then such executive officer may be entitled to receive, in a lump-sum cash payment within thirty days after such termination, the following: (I) a payment equal to the product of (A) 2.99 and (B) the sum of (i) the executive’s base salary then in effect and (ii) the greater of (a) the amount of the bonus payable to the executive for the fiscal year preceding the fiscal year in which the “notice of termination” (as defined in the severance agreement) is provided or (b) the average of the bonuses

payable to the executive in each of the three fiscal years (or such shorter number of fiscal years during which the executive was employed) preceding the fiscal year in which the “notice of termination” was provided, (II) a pro-rated bonus based on the number of days elapsed in the fiscal year of termination, assuming 100% of the targeted performance under any relevant performance metric, and (III) the value of any long-term performance plan awards at the end of the month preceding termination on the basis of an equitable pro-rating of the performance period, performance targets and award amount. The payments described in the preceding sentence are referred to herein as the “Severance Payments.” The consummation of the Offer is expected to constitute a “change-in-control” under each of the executive severance agreements. The approximate value of the Severance Payments that each executive could receive upon a termination of employment following the Offer is set forth in the table below.

 

Following a termination of employment described in the preceding paragraph and for a period of two years thereafter, each such executive officer (and his dependents) may be entitled to receive (a) medical and health benefits at the levels of such benefits in effect prior to such termination and (b) a monthly payment equal to the economic value of the pension, retirement, life insurance, accident, disability, welfare, savings, and compensation benefits at the levels of such benefits in effect prior to such termination. The benefits described in this paragraph are referred to herein as the “Plan Benefits.” The approximate value of the Plan Benefits that each executive could receive upon a termination of employment following the Offer is set forth in the table below.

 

Additionally, under the terms of each executive severance agreement, if an executive would be subject to the excise tax imposed under Section 4999 of the Code, then Datascope will reduce the total payments (collectively, the “ Parachute Payments ”) to such executive by the amount necessary to make such payments $1.00 below the safe harbor amount under Section 280G of the Code, but only if the total Parachute Payments exceed the safe harbor by less than $100,000. However, if the total Parachute Payments exceed the safe harbor by at least $100,000, then Datascope will pay to the executive an amount such that the executive will be in the same position as if no excise taxes under Section 4999 of the Code had been imposed. The payment described in the preceding sentence is referred to herein as the “ Gross-Up Payment .” The approximate value of the Gross-Up Payment that each executive could receive upon a termination of employment following the Offer is set forth in the table below.

 

In addition to the payments described above, certain of the executive officers may receive additional payments in connection with the Offer. Mr. Leschinsky previously received a relocation loan from Datascope, the repayment of which may be forgiven in the event of his termination of employment. Additionally, Messrs. Scaramelli and Leschinsky are parties to restrictive covenant agreements which provide that the executive will not solicit Datascope employees or compete against Datascope during the one-year period following such executive’s termination of employment. During this restrictive covenant period, Datascope will provide the executive with one year of base salary continuation, provided such executive does not violate the non-compete or non-solicitation or other provisions of the restrictive covenant agreement. Any payments under these agreements will be paid in accordance with Datascope’s normal payroll practices and such payments may be terminated if the executive obtains employment during the restrictive covenant period. The approximate value of these payments (calculated without reference to any potential offset) is set forth in the table below.

The following table sets forth the approximate value of the payments that Messrs. Adelman, Barker, Cathcart, Krauskopf, Laudani, Leschinsky and Scaramelli could receive assuming the Offer is consummated (and constitutes a “change-in-control” under their severance agreements) and their employment is terminated either without “cause” or as the result of a “constructive dismissal” on January 31, 2009.

 

 

 

 

In addition to the payments described above, at the effective time of the Meger (i.e. upon the termination of the Merger), each outstanding and unvested option held by each executive will vest in full and will be cancelled in exchange for a payment equal to the product of (1) the excess, if any, of the Offer Price over the exercise price per share of such option, multiplied by (2) the total number of shares of Common Stock underlying such option. Each share of restricted stock held by the executive will vest in full and become free from any forfeiture restrictions at the effective time of the Merger. The approximate value of the cash payments that each executive will receive in exchange for the cancellation of such options (assuming that each such officer does not otherwise exercise any outstanding and vested Options prior to the consummation of the Offer) and the removal of forfeiture restrictions on shares of restricted stock is set forth in the table below. This information is based on the officers’ options and restricted stock ownership as of September 12, 2008 and such amounts are pre-tax amounts.

 

 

Grantor Trust .   Under the terms of the Grantor Trust Agreement, dated as of September 4, 2001, by and between Datascope and Wachovia Bank, N.A., and certain other related agreements between Datascope and the executive officers, certain of the amounts described above were required to be funded and contributed to the Grantor Trust within thirty days after the occurrence of a “potential change-in-control” and “change-in-control” (as both terms are defined in the Grantor Trust Agreement). No additional compensation

or benefits are provided to the executive officers under the Grantor Trust. Amounts contributed to the Grantor Trust are merely used to satisfy certain amounts due to the executive officers (and certain other current and former employees), which were contingent upon the change-in-control and/or the termination of such individual’s employment with Datascope. The approval by the Board and the execution of the Merger Agreement constituted a “potential change-in-control;” accordingly within thirty days after the execution of the Merger Agreement, Datascope was required to contribute to the Grantor Trust an amount equal to the total payments the executive officers (and certain other current and former employees) could have been entitled to receive, assuming that the change-in-control event (and other events upon which payment of such amount was contingent) had occurred on the first business day of the calendar year. Accordingly, Datascope contributed $45,182,103 to the Grantor Trust on October 15, 2008. Under the terms of the Grantor Trust Agreement, after the occurrence of a “change-in-control,” such as the consummation of the Offer, the funding of the Grantor Trust must be recalculated annually to ensure sufficient funding is available to provide any required, remaining change-in-control or termination benefits or payments left to be provided to the executive officers.

 

Loan to Officer .   On June 9, 2000, Boris Leschinsky, Vice President of Technology, received a loan from Datascope with a principal amount of $200,000. The promissory note requires annual payments of $20,000 plus interest, based on an annual rate of 8% with the final payment due on June 8, 2010. The current principal balance is $40,000. The largest aggregated amount outstanding at any time during the fiscal year ended June 30, 2008 was $64,800 and the amount outstanding as of September 12, 2008 was $40,833. In the event that Mr. Leschinsky’s employment is terminated due to a change of control of Datascope occurring before June 9, 2010, then the balance of the note will be forgiven.

 

NON-EMPLOYEE DIRECTOR COMPENSATION

 

Datascope’s current non-employee director compensation program became effective on July 1, 2006. Effective January 1, 2007, the annual retainer for each non-employee director of Datascope was increased to $25,000. Payment of the annual retainer occurs at the beginning of the next succeeding calendar year. A director may elect to receive deferred stock units or restricted stock pursuant to the 2005 Equity Incentive Plan in lieu of the annual cash retainer; provided , however , that pursuant to the Merger Agreement, Datascope agreed not to issue any additional deferred stock units or restricted stock pending consummation of the Offer and the Merger. The first awards pursuant to such elections were granted on January 1, 2007 in lieu of annual retainer fees for the 2007 calendar year. If elected, deferred stock units vest pro-rata over the twelve-month period following the grant date, becoming fully vested on the first anniversary of the grant date, and are paid either on the first business day on or after an anniversary of the grant date or on the first business day of the calendar year following the director’s termination of service as a director, at the election of the director. Restricted stock vests in monthly installments over the twelve-month period following the grant date, becoming fully vested on the first anniversary of the grant date.

 

Beginning January 1, 2007, each director (except Mr. Saper) also receives restricted shares worth $70,000, with one-year vesting restrictions, pursuant to the 2005 Equity Incentive Plan. A director may elect to defer receipt of compensation, in which case the award will be paid entirely in restricted stock units.

 

In addition to the annual retainer described above, the chairman of the Audit Committee receives an annual retainer of $10,000, each chairman of the Compensation Committee and the Nominating Committee receives an annual retainer of $7,500 and each member (other than the chairman) of the Audit Committee, Compensation Committee and Nominating Committee receives an annual retainer of $3,000. Each non-employee director of Datascope also receives a fee of $2,000 for each meeting of the Datascope Board which such director attended in person, $1,000 for each meeting of the Datascope Board for each telephonic meeting of the Datascope Board, $1,000 for each committee meeting which such director attended in person and $500 for each telephonic committee meeting. In Fiscal 2008, Mr. Loughlin was named as Lead Director and was granted an additional $15,000 per year compensation for his service in that role.

 

From time to time, Datascope has granted options to directors to purchase shares of Common Stock. These options remain exercisable in full until the earlier of ten years after the date of grant or the termination of status as a director of Datascope, and are not transferable except that each of the options may be exercised

by an executor or administrator within one year after an optionee’s death or disability but not beyond the option’s normal expiration date. Each option provides that the optionee may pay for any shares acquired pursuant to the exercise of such option by cash or check or by transfer to Datascope of a number of shares of Common Stock with an aggregate market value equal to the aggregate option exercise price. Such options do not qualify as incentive stock options under the Code. For federal income tax purposes, an optionee will realize taxable income on the date of exercise of an option, and Datascope will then be allowed a deduction from income, equal to the excess of (a) the aggregate market value, on the date of exercise, of the shares so acquired over (b) the aggregate option exercise price for such shares.

 

Transactions with respect to stock options granted to directors who are officers of Datascope pursuant to the 1981 Stock Option Plan, the 1995 Stock Option Plan, the 2005 Equity Incentive Plan and with respect to certain director options which have been approved by the stockholders of Datascope are exempt from the short-swing trading liability provisions of Section 16(b) of the Exchange Act, pursuant to Rule 16b-3 of the Exchange Act. The 1981 Stock Option Plan and the 1995 Stock Option Plan do not cover grants to directors who are not employees or officers of Datascope. The Datascope Corp. 2005 Equity Incentive Plan covers grants to directors who are not employees or officers of Datascope.

 

Mr. Altschiller has been engaged as a consultant to Datascope since September 1998, providing advice and counsel in the area of advertising. In consideration for these services, Datascope paid Mr. Altschiller a consulting fee of $200,000 during Fiscal 2008.

 

2008 Director Compensation Table

 

The following table shows compensation for Fiscal 2008 for our non-employee directors.

 

 

 

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Transactions with Related Persons

 

Adam Saper, the son of Lawrence Saper, Chairman of the Board of Directors and CEO, was employed by Datascope and held the title of Director of Business Development, Patient Monitoring Division, until the termination of his employment from Datascope on June 30, 2008. During Fiscal 2008, Datascope paid Adam Saper $171,018 in base salary. He was not awarded a bonus in Fiscal 2008. Pursuant to an Agreement and Release between Datascope and Adam Saper, he will receive severance payments for 13 weeks totaling $43,139.

 

On June 9, 2000, Boris Leschinsky, Vice President of Technology, received a loan from Datascope with a principal amount of $200,000. The promissory note requires annual payments of $20,000 plus interest, based on an annual rate of 8% with the final payment due on June 8, 2010. The current principal balance is $40,000. The largest aggregated amount outstanding at any time during Fiscal 2008 was $64,800 and the amount outstanding as of September 12, 2008 was $40,833. In the event that Mr. Leschinsky’s employment is terminated due to a change of control of Datascope occurring before June 9, 2010, then the balance of the note will be forgiven.

 

See “Non-Employee Director Compensation ” for disclosure of compensation payable to Mr. Altschiller.

 

Review of Transactions with Related Persons

 

The Audit Committee of the Datascope Board reviews and approves all transactions with related parties, including (i) transactions involving potential conflicts of interest with corporate officers and directors, (ii) transactions involving any immediate family members of any corporate officers and directors and (iii) any other related party transactions. This responsibility of the Audit Committee is set forth in writing in the charter of the Audit Committee. Based upon its consideration of all relevant facts and circumstances, the Audit Committee determines whether such transaction is in the best interests of Datascope and whether or not to approve such transaction. The Compensation Committee of the Datascope Board reviews and approves all compensation-related matters regarding Adam Saper.

 

REPORT OF THE AUDIT COMMITTEE

 

The Audit Committee is comprised of David R. Dantzker, M.D., Robert E. Klatell, James J. Loughlin and William W. Wyman. Mr. Loughlin serves as Chairperson of the Audit Committee. Each of the members of the audit committee is “independent” as defined under applicable National Association of Securities Dealers, Inc.’s listing standards and is financially literate as that qualification is interpreted by the Datascope Board. In addition, at least one member of the Audit Committee has accounting or related financial management experience, as the Datascope Board interprets that qualification. The Datascope Board has adopted a written charter with respect to the Audit Committee’s roles and responsibilities.

 

The Audit Committee’s primary duties and responsibilities are to (1) monitor the integrity of Datascope’s financial reporting process and systems of internal controls regarding finance, accounting, and legal compliance, (2) monitor the independence and performance of Datascope’s independent registered public accounting firm and (3) provide an avenue of communication among the independent registered public accounting firm, management, and the Datascope Board.

 

It is the responsibility of the independent registered public accounting firm to audit Datascope’s consolidated financial statements. The Audit Committee does not provide any expert or other special assurance as to Datascope’s financial statements or any expert or professional certification as to the work of Datascope’s independent registered public accounting firm. The Audit Committee has the sole authority to appoint or replace the independent registered public accounting firm.

 

In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed Datascope’s audited financial statements with its management and Deloitte & Touche LLP, its independent registered public accounting firm. The Audit Committee also discussed with Deloitte & Touche LLP the matters required to be discussed by Statement on Auditing Standards No. 61 (Communications with Audit Committees) as amended by Statement on Auditing Standards No. 90 (Audit Committee Communications) and as adopted by the Public Company Accounting Oversight Board (United States) (“PCAOB”). This included a discussion of the independent registered public accounting firm’s judgments as to the quality, not just the acceptability, of Datascope’s accounting principles, and such other matters that PCAOB standards require to be discussed with the Audit Committee. The Audit Committee also received the written disclosures and the letter from Deloitte & Touche LLP required by Independence Standards Board Standard No. 1 (Independence Discussion with Audit Committee), as adopted by the PCAOB, and the Audit Committee discussed the independence of Deloitte & Touche LLP with that firm.

 

Based on the Audit Committee’s review and discussions noted above, the Audit Committee recommended to the Datascope Board, and the Datascope Board approved, the audited financial statements to be included in Datascope’s Annual Report on Form 10-K for the fiscal year ended June 30, 2008 for filing with the Securities and Exchange Commission.

 

Audit Committee

 

David R. Dantzker, M.D.

Robert E. Klatell

James J. Loughlin, Chairperson

William W. Wyman

 

COMPANY STOCK PERFORMANCE

 

The following graph compares the cumulative total stockholder return on Common Stock with the cumulative total return of the Standard & Poor’s 500 Stock Index and the Standard & Poor’s Health Care Equipment Index for the five year period commencing July 1, 2003 and each subsequent June 30 through June 30, 2008. The graph assumes that the value of the investment in Common Stock was $100 on July 1, 2003 and that all dividends were reinvested.

 

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

 

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires Datascope’s directors and executive officers and persons who beneficially own more than 10% of a registered class of Datascope’s equity securities (“ Reporting Persons ”) to file reports of ownership and changes in ownership with the Securities and Exchange Commission on a timely basis. Reporting Persons are required to furnish Datascope with copies of all such forms that they file. Based solely on its review of such forms, Datascope believes that all filing requirements applicable to Reporting Persons during and with respect to fiscal year 2008 were complied with on a timely basis other than as follows: (i) on September 11, 2007, Antonino Laudani filed a late Form 4 reporting the grant of 30,000 restricted stock shares on August 22, 2007; (ii) on September 11, 2007, Henry Saramelli filed a late Form 4 reporting the grant of 10,000 restricted stock shares on August 22, 2007; (iii) on January 9, 2008, David Dantzker filed a late Form 4 reporting the receipt of 689 deferred shares that were granted on January 3, 2008; and (iv) on September 18, 2008, Timothy Krauskopf filed a late Form 4 reporting the issuance, on August 4, 2007, of 214 shares of Common Stock in his 401(k) plan and the subsequent sale, on October 4, 2007, of 220 shares of Common Stock.

 

 

SCHEDULE A

 

DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER

 

The following table sets forth the name, age, present principal occupation or employment and material occupations, positions, offices or employment for the past five years of the directors and executive officers of Purchaser whom Purchaser has identified as the candidates to be Purchaser’s Designees. Unless otherwise indicated below, (1) each individual has held his positions for more than the past five years and (2) the business address of each person is DaVinci Merger Sub, Inc. c/o Getinge AB Ekebergsvagen 26, Getinge, Sweden SE-310 44. In the event that additional Purchaser’s Designees are required in order to constitute a majority of the Datascope Board, such additional Purchaser’s Designees will be selected by Purchaser from among the directors and executive officers of Parent contained in Schedule I of the Offer to Purchase, which is incorporated by reference herein.

 

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