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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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CEPHEID
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![(CEPHEID LETTERHEAD)](https://capedge.com/proxy/DEF 14A/0000950134-05-005548/f06840def0684001.gif)
904 Caribbean Drive
Sunnyvale, CA 94089
(408) 541-4191
Sincerely, | |
/s/John L. Bishop | |
John L. Bishop | |
Chief Executive Officer |
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1. | To elect three (3) Class III directors of Cepheid to serve on the board of directors for a three-year term. Cepheid’s board of directors intends to present the following nominees for election as Class III directors: |
2. | To ratify the appointment of Ernst & Young LLP as independent auditors of Cepheid for the fiscal year ending December 31, 2005. | |
3. | To transact such other business as may properly come before the meeting or any adjournment or postponement thereof. |
By Order of the Board of Directors | |
/s/Joseph H. Smith | |
Joseph H. Smith | |
Secretary |
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Name of Director | Age | Class | Position with Cepheid | Director Since | ||||||||||
John L. Bishop | 60 | I | Chief Executive Officer and Director | 2002 | ||||||||||
Robert J. Easton(2) | 60 | III | Director | 2002 | ||||||||||
Thomas L. Gutshall | 67 | II | Chairman of the Board | 1996 | ||||||||||
Cristina H. Kepner(1)(3) | 58 | II | Director | 1998 | ||||||||||
Dean O. Morton(1)(2) | 73 | I | Director | 1997 | ||||||||||
Mitchell D. Mroz(1)(3) | 60 | III | Director | 2004 | ||||||||||
David H. Persing, M.D., Ph.D.(3) | 49 | II | Director | 2004 | ||||||||||
Kurt Petersen, Ph.D. | 57 | I | Director | 1996 | ||||||||||
Hollings C. Renton(2) | 58 | III | Director | 2000 |
(1) | Current member of the Audit Committee. |
(2) | Current member of the Compensation Committee. |
(3) | Current member of the Nominating and Governance Committee. |
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Number of | Percentage | |||||||
Shares | of Shares | |||||||
Beneficially | Beneficially | |||||||
Beneficial Owner | Owned | Owned | ||||||
Directors and Named Executive Officers | ||||||||
John L. Bishop(1) | 800,000 | 1.9 | % | |||||
Robert J. Easton(2) | 92,410 | * | ||||||
Russel K. Enns(3) | 76,875 | * | ||||||
Thomas L. Gutshall(4) | 1,262,241 | 3.0 | ||||||
Cristina H. Kepner(5) | 138,232 | * | ||||||
Ira Marks(6) | 67,333 | * | ||||||
Dean O. Morton(7) | 173,000 | * | ||||||
Mitchell D. Mroz(8) | 7,000 | * | ||||||
David H. Persing, M.D., Ph.D.(9) | 5,000 | * | ||||||
Kurt Petersen, Ph.D.(10) | 823,257 | 1.9 | ||||||
Hollings C. Renton(11) | 73,000 | * | ||||||
John R. Sluis(12) | 277,500 | * | ||||||
Joseph H. Smith(13) | 123,541 | * | ||||||
All executive officers and directors as a group of 15 persons(14) | 3,919,389 | 8.8 | ||||||
Five Percent Shareholders | ||||||||
Alliance Capital Management(15) | 5,940,325 | 14.0 | % | |||||
Kopp Investment Advisors(16) | 3,857,980 | 9.1 |
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* | Less than one percent. |
(1) | Consists of options to purchase 800,000 shares exercisable within 60 days of March 4, 2005. As of March 4, 2005, 268,750 of the shares issuable upon exercise of these options are unvested. | |
(2) | Consists of options to purchase 30,000 shares exercisable within 60 days of March 4, 2005. As of March 4, 2005, 7,500 of the shares issuable upon exercise of these options are unvested. | |
(3) | Consists of options to purchase 76,875 shares exercisable within 60 days of March 4, 2005. As of March 4, 2005, 11,250 shares issuable upon exercise of these options are unvested. | |
(4) | Consists of options to purchase 250,000 shares exercisable within 60 days of March 4, 2005. As of March 4, 2005, 28,126 of the shares issuable upon exercise of these options are unvested. | |
(5) | Consists of options to purchase 73,000 shares exercisable within 60 days of March 4, 2005. As of March 4, 2005, 7,500 of the shares issuable upon exercise of these options are unvested. | |
(6) | Consists of options to purchase 65,833 shares exercisable within 60 days of March 4, 2005. | |
(7) | Includes 77,500 shares held of record by MDLC Partners, a California Limited partnership, of which Mr. Morton is the general partner. Mr. Morton also has options to purchase 25,000 shares. As of March 4, 2005, 7,500 of the shares issuable upon exercise of these options are unvested. | |
(8) | Consists of options to purchase 5,000 shares exercisable within 60 days of March 4, 2005. As of March 4, 2005, 5,000 of the shares issuable upon exercise of these options are unvested. | |
(9) | Consists of options to purchase 5,000 shares exercisable within 60 days of March 4, 2005. As of March 4, 2005, 5,000 of the shares issuable upon exercise of these options are unvested. |
(10) | Consists of options to purchase 215,000 shares exercisable within 60 days of March 4, 2005. As of March 4, 2005, 43,126 of the shares issuable upon exercise of these options are unvested. |
(11) | Consists of options to purchase 73,000 shares exercisable within 60 days of March 4, 2005. As of March 4, 2005, 7,500 of the shares issuable upon exercise of these options are unvested. |
(12) | Consists of options to purchase 277,500 shares exercisable within 60 days of March 4, 2005. As of March 4, 2005, 108,568 of the shares issuable upon exercise of these options are unvested. |
(13) | Consists of options to purchase 123,541 shares exercisable within 60 days of March 4, 2005. As of March 4, 2005, 14,166 of the shares issuable upon the exercise of these options are unvested. |
(14) | Includes options to purchase 2,019,749 shares exercisable within 60 days of March 4, 2005. As of March 4, 2005, 513,986 of the shares issuable upon the exercise of these options are unvested. |
(15) | Based on a Schedule 13G/ A filed February 14, 2005. According to the schedule of these shares, 5,637,845 are held by Alliance Capital Management, L.P. on behalf of client discretionary accounts, and 302,480 are held by AXA Equitable Life Insurance Company. Both of these entities are direct or indirect subsidiaries of AXA Financial, Inc., AXA and the Mutuelles AXA. Alliance Capital Management’s address is 26, rue Drouot, 75009 Paris, France. |
(16) | Based on a Schedule 13G/ A filed January 21, 2005. According to the schedule of these shares, 3,557,980 are held by Kopp Investment Advisors and 320,000 are held by LeRoy C. Kopp, who controls Kopp Investment Advisors through two holding companies. According to this Schedule, 3,667,980 shares are held in fiduciary or representative capacity, with no person individually having an interest that relates to more than 5% of the common stock. Kopp Investment Advisors’ address is 7701 France Avenue South, Suite 500, Edina, Minnesota 55435. |
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Summary Compensation Table |
Long Term | |||||||||||||||||||||||||
Compensation | |||||||||||||||||||||||||
Awards | |||||||||||||||||||||||||
Annual Compensation | |||||||||||||||||||||||||
Number of | |||||||||||||||||||||||||
Other Annual | Securities | All Other | |||||||||||||||||||||||
Name and Position | Year | Salary | Bonus | Compensation(1) | Underlying Options | Compensation(2) | |||||||||||||||||||
John L. Bishop(3) | 2004 | $ | 330,270 | $ | 116,000 | $ | 42,383 | 200,000 | $ | 1,980 | |||||||||||||||
Chief Executive Officer | 2003 | 310,000 | 58,125 | 63,105 | — | 1,340 | |||||||||||||||||||
2002 | 215,808 | 77,500 | 34,370 | 750,000 | 932 | ||||||||||||||||||||
Russel K. Enns(4) | 2004 | 207,846 | — | — | 20,000 | 815 | |||||||||||||||||||
Sr. Vice President, Regulatory | 2003 | 110,769 | — | 95,767 | 150,000 | 446 | |||||||||||||||||||
and Clinical Affairs | 2002 | — | — | — | — | — | |||||||||||||||||||
Ira Marks(5) | 2004 | 227,274 | 28,500 | — | — | 913 | |||||||||||||||||||
Vice President, Worldwide | 2003 | 64,903 | 17,631 | 104,602 | 200,000 | 149 | |||||||||||||||||||
Sales and Marketing | 2002 | — | — | — | — | — | |||||||||||||||||||
John R. Sluis(6) | 2004 | 241,346 | — | 46,019 | 50,000 | 987 | |||||||||||||||||||
Sr. Vice President, Finance | 2003 | 225,000 | — | 68,837 | — | 903 | |||||||||||||||||||
and Chief Financial Officer | 2002 | 100,385 | — | 19,414 | 265,000 | 1,361 | |||||||||||||||||||
Joseph H. Smith(7) | 2004 | 263,077 | — | — | 15,000 | 1,688 | |||||||||||||||||||
Sr. Vice President, Legal/ | 2003 | 138,942 | — | — | 250,000 | 546 | |||||||||||||||||||
Business Development and | 2002 | — | — | — | — | — | |||||||||||||||||||
General Counsel |
(1) | Consists of reimbursement of relocation and commuting expenses. |
(2) | Consists of value of employee life insurance and health insurance. |
(3) | Mr. Bishop joined us in April 2002. |
(4) | Mr. Enns joined us in June 2003. |
(5) | Mr. Marks joined us in September 2003 and resigned in February 2005. |
(6) | Mr. Sluis joined us in July 2002. |
(7) | Mr. Smith joined us in June 2003. |
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Individual Grants | ||||||||||||||||||||||||
% of Total | Potential Realizable Value | |||||||||||||||||||||||
Number of | Options | at Assumed Annual Rates | ||||||||||||||||||||||
Securities | Granted to | Exercise | of Stock Price Appreciation | |||||||||||||||||||||
Underlying | Employees | Price | for Option Terms | |||||||||||||||||||||
Options | in Fiscal | Per | Expiration | |||||||||||||||||||||
Name | Granted | Year | Share | Date | 5% | 10% | ||||||||||||||||||
John L. Bishop(1) | 200,000 | 12.61 | % | $ | 7.35 | 4/29/2014 | $ | 924,475 | $ | 2,342,801 | ||||||||||||||
Russel K. Enns(2) | 20,000 | 1.26 | 7.35 | 4/29/2014 | 92,448 | 234,280 | ||||||||||||||||||
Ira Marks | — | — | — | — | — | — | ||||||||||||||||||
John R. Sluis(3) | 50,000 | 3.15 | 7.35 | 4/29/2014 | 231,119 | 585,700 | ||||||||||||||||||
Joseph H. Smith(4) | 15,000 | 0.95 | 7.35 | 4/29/2014 | 69,335 | 175,710 |
(1) | As of March 4, 2005, all of the shares issuable upon exercise of Mr. Bishop’s option are unvested. |
(2) | As of March 4, 2005, all of the shares issuable upon exercise of Mr. Enns’s option are unvested. |
(3) | As of March 4, 2005, all of the shares issuable upon exercise of Mr. Sluis’s option are unvested. |
(4) | As of March 4, 2005, all of the shares issuable upon exercise of Mr. Smith’s option are unvested. |
Number of Securities | Value of Unexercised In-the | |||||||||||||||||||||||
Underlying Unexercised | Money Options at | |||||||||||||||||||||||
Shares | Options at Fiscal Year-End | Fiscal Year-End(1) | ||||||||||||||||||||||
Acquired on | Value | |||||||||||||||||||||||
Name | Exercise | Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
John L. Bishop(2) | — | $ | — | 750,000 | 200,000 | $ | 4,747,500 | $ | 518,000 | |||||||||||||||
Russel K. Enns(3) | — | — | 56,250 | 113,750 | 316,688 | 579,613 | ||||||||||||||||||
Ira Marks(4) | — | — | 62,500 | 137,500 | 286,875 | 631,125 | ||||||||||||||||||
John R. Sluis(5) | — | — | 265,000 | 50,000 | 1,497,250 | 129,500 | ||||||||||||||||||
Joseph H. Smith(6) | — | — | 93,750 | 171,250 | 528,750 | 920,100 |
(1) | These values have been calculated on the basis of the fair market value of our common stock on December 31, 2004, $9.94, less the applicable exercise price per share, multiplied by the number of shares underlying the options. |
(2) | As of March 4, 2005, 418,750 of the shares issuable upon exercise of Mr. Bishop’s option are unvested. |
(3) | As of March 4, 2005, 104,375 of the shares issuable upon exercise of Mr. Enns’ options are unvested. |
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(4) | As of March 4, 2005, 129,167 of the shares issuable upon exercise of Mr. Marks’ options are unvested, these shares were subsequently cancelled following the resignation of Mr. Marks. |
(5) | As of March 4, 2005, 146,068 of the shares issuable upon exercise of Mr. Sluis’ option are unvested. |
(6) | As of March 4, 2005, 155,625 of the shares issuable upon exercise of Mr. Smith’s option are unvested. |
Number of Securities | |||||||||||||
Number of Securities | Remaining Available for | ||||||||||||
to Be Issued upon | Weighted-Average | Future Issuance under | |||||||||||
Exercise of | Price of | Equity Compensation Plans | |||||||||||
Outstanding Options, | Outstanding Options, | (Excluding Securities | |||||||||||
Plan Category | Warrants and Rights | Warrants and Rights | Reflected in Column (a)) | ||||||||||
(a) | (b) | (c) | |||||||||||
Equity Compensation plans approved by the shareholders(1) | 5,597,564 | $ | 5.54 | 768,955 | |||||||||
Equity compensation plans not approved by the shareholders | — | N/A | — | ||||||||||
Total | 5,597,564 | 768,955 |
(1) | Includes our 1997 Stock Option Plan, our 2000 Employee Stock Purchase Plan and our 2000 Non-Employee Directors’ Stock Option Plan. |
• | a failure to perform his duties after notice and an opportunity to cure; | |
• | misconduct injurious to us; |
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• | a conviction of, or a guilty or no contest plea to, a felony charge; | |
• | acts of fraud against us, misappropriation of our property or dishonesty affecting our business or affairs; or | |
• | a breach of any agreement with us, including those regarding confidentiality and proprietary information: or | |
• | a failure or refusal to carry out the reasonable directives of Cepheid, following notice and an opportunity to cure. |
• | a specified reduction in his responsibilities, salary or target bonus; | |
• | our material breach of his employment agreement; | |
• | a forced relocation of his primary workplace; or | |
• | the failure of any successor of Cepheid to assume his employment agreement. |
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• | failure to perform any reasonable and lawful duty of his position or failure to follow the lawful written directions of the Chief Executive Officer; | |
• | commission of an act that constitutes misconduct and is injurious to the company or any subsidiary; | |
• | conviction of, or pleading “guilty” or “no contest” to, a felony under the laws of the United States or any state thereof; | |
• | committing an act of fraud against, or the misappropriation of property belonging to, the company or any subsidiary; | |
• | commission of an act of dishonesty in connection with his responsibilities as an employee and affecting the business or affairs of the company; | |
• | breach of any confidentiality, proprietary information or other agreement with the company or any subsidiary; or | |
• | failure or refusal to carry out the reasonable directives of the company. |
Introduction |
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General Compensation Policy |
Fiscal 2004 Executive Compensation |
Chief Executive Officer Compensation |
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Non-Executive Compensation |
Compliance with Internal Revenue Code Section 162(m) |
Conclusion |
COMPENSATION COMMITTEE | |
Robert J. Easton | |
Dean O. Morton | |
Hollings C. Renton |
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Company Stock Price Performance |
![(PERFORMANCE CHART)](https://capedge.com/proxy/DEF 14A/0000950134-05-005548/f06840def0684000.gif)
Total Return Analysis | 6/21/2000 | 12/29/2000 | 12/31/2001 | 12/31/2002 | 12/31/2003 | 12/31/2004 | |||||||||||||||||||||||||
Cepheid | $ | 100.00 | $ | 91.22 | $ | 46.16 | $ | 56.54 | $ | 108.43 | $ | 107.46 | |||||||||||||||||||
NASDAQ Biotechnology | $ | 100.00 | $ | 92.51 | $ | 75.45 | $ | 43.20 | $ | 62.38 | $ | 65.55 | |||||||||||||||||||
NASDAQ Composite | $ | 100.00 | $ | 64.25 | $ | 53.56 | $ | 36.07 | $ | 52.18 | $ | 56.57 | |||||||||||||||||||
• | monitor the integrity of Cepheid’s financial statements; |
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• | monitor the periodic reviews of Cepheid’s accounting and financial reporting process and systems of internal control that are conducted by Cepheid’s independent auditors and Cepheid’s financial and senior management; | |
• | review and evaluate the independence and performance of Cepheid’s independent auditors, approve all audit and non-audit services to be performed by the auditors and appoint, oversee and compensate Cepheid’s independent auditors; and | |
• | hire the independent auditors, evaluate the independent auditors and, where appropriate, replace the independent auditors. |
• | reviewed and discussed the audited financial statements with Cepheid’s management; | |
• | discussed with Ernst & Young LLP, Cepheid’s independent auditors, the matters required to be discussed by Statement of Auditing Standards No. 61, Communication with Audit Committees, as amended by Statement of Auditing Standards No. 90, Audit Committee Communications; | |
• | reviewed the written disclosures and the letter from Ernst & Young LLP required by the Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, discussed with the auditors their independence from Cepheid, and concluded that the non-audit services performed by Ernst & Young LLP are compatible with maintaining their independence; | |
• | based on the foregoing reviews and discussions, recommended to the board of directors that the audited financial statements be included in Cepheid’s 2004 Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed with the Securities and Exchange Commission; and | |
• | instructed the independent auditors that the audit committee expects to be advised if there are any subjects that require special attention. |
AUDIT COMMITTEE | |
Cristina H. Kepner | |
Dean O. Morton | |
Mitchell D. Mroz |
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2004 | 2003 | |||||||
Audit Fees | $ | 772,810 | $ | 257,118 | ||||
Audit-Related Fees | 30,500 | 1,000 | ||||||
Tax Fees | 15,000 | 15,000 | ||||||
All Other Fees | 1,500 | 1,500 |
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PROXY
CEPHEID
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
March 28, 2005
The undersigned shareholder of Cepheid hereby appoints John L. Bishop and John R. Sluis, and each of them with full power of substitution to each, the true and lawful attorneys, agents and proxyholders of the undersigned, and hereby authorizes them to represent and vote, as specified herein, all of the shares of common stock of Cepheid held of record by the undersigned on March 4, 2005, at the annual meeting of shareholders of Cepheid to be held on April 28, 2005 (the “Annual Meeting”) at 1:00 p.m. at Cepheid’s principal executive offices, 904 Caribbean Drive Sunnyvale, California 94089 and any adjournments or postponements thereof.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
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þ Please mark votes as in this example
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED. IN THE ABSENCE OF DIRECTION, THE SHARES WILL BE VOTED FOR THE PROPOSALS.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF SHAREHOLDERS RELATING TO THE ANNUAL MEETING.
1. | To elect three Class III directors of Cepheid to serve on the board of directors for a three-year term. The board of directors intends to present the following nominees for election as directors: |
Vote FOR all the nominees (except as directed to the contrary) o | ||||
Vote WITHHELD from all nominees o |
Robert J. Easton
Hollings C. Renton
Mitchell D. Mroz
INSTRUCTIONS: To withhold vote for any individual nominee, write the nominee’s name in the space provided below:
2. | To ratify the appointment of Ernst & Young LLP as independent auditors of Cepheid for the fiscal year ending December 31, 2005. |
For o | Against o | Abstain o |
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFTo
Please sign exactly as name appears hereon. Joint owners should each sign. Trustees and others acting in a representative capacity should indicate the capacity in which they sign and give their full title. If a corporation, please have an authorized officer sign and indicate the full corporate name. If a partnership, please sign in partnership name by an authorized person.
MARK HERE IF YOU PLAN ON ATTENDING THE SHAREHOLDER MEETINGo
Please mark, sign and date this proxy and return it promptly whether you plan to attend the meeting or not. If you do attend, you may vote in person if you desire.
Signature: | Date: | Signature: | Date: | |||||||||||
Print Name: | Print Name: | |||||