SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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ATS MEDICAL, INC.
(Name of Registrant as Specified in its Charter)
------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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[LOGO] ATS MEDICAL, INC.
Dear Fellow Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders of ATS Medical, Inc. (the "Company"), which will be held at the
Minneapolis Club, 729 Second Avenue South, Minneapolis, Minnesota (on the corner
of 8th Street and Second Avenue in downtown Minneapolis) beginning at 3:30 p.m.
on Thursday, April 30, 1998.
This booklet contains your official notice of the 1998 Annual Meeting
and a Proxy Statement that includes information about the matters to be acted
upon at the meeting. Officers and directors of the Company will be on hand to
review the Company's operations and to answer questions and discuss matters that
may properly arise.
I sincerely hope that you will be able to attend our Annual Meeting.
However, whether or not you plan to attend, please complete and return the
enclosed proxy in the accompanying envelope. If you attend the meeting, you may,
if you wish, withdraw any proxy previously given and vote your shares in person.
Sincerely,
/s/ Manuel A. Villafana
Manuel A. Villafana
Chairman of the Board of Directors
and Chief Executive Officer
1998 ANNUAL MEETING OF
SHAREHOLDERS
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
The 1998 Annual Meeting of Shareholders of ATS Medical, Inc. (the
"Company") will be held on Thursday, April 30, 1998 at 3:30 p.m. at the
Minneapolis Club, 729 Second Avenue South, Minneapolis, Minnesota 55402, for the
following purposes:
1. To elect five members to the Board of Directors to hold office for the
ensuing year and until their successors are elected and qualified;
2. To vote on the proposed adoption of the ATS Medical, Inc. 1998
Employee Stock Purchase Plan;
3. To ratify the selection of Ernst & Young LLP as independent auditors
of the Company for the year ending December 31, 1998; and
4. To consider and act upon any other matters that may properly come
before the meeting or any adjournment thereof.
Only holders of record of the common stock of the Company at the close of
business on March 19, 1998 will be entitled to receive notice of and to vote at
the meeting.
Whether or not you plan to attend the meeting in person, you are requested
to complete and return the enclosed proxy in the accompanying envelope. If you
later decide to revoke your proxy, you may do so at any time before it is
exercised.
By Order of the Board of Directors,
/s/ Russell W. Felkey
Russell W. Felkey
Secretary
March 30, 1998
ATS MEDICAL, INC.
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation
of the enclosed proxy by the Board of Directors of ATS Medical, Inc. (the
"Company") for use at the 1998 Annual Meeting of Shareholders to be held on
Thursday, April 30, 1998 at 3:30 p.m. at the Minneapolis Club, 729 Second Avenue
South, Minneapolis, Minnesota 55402, and at any adjournments thereof.
Shareholders who sign and return a proxy may revoke it at any time before it is
voted by giving written notice to the Secretary of the Company. This proxy
statement and the enclosed proxy card are being mailed to shareholders
commencing on or about March 30, 1998.
Proxies that are completed, signed and returned to the Company prior to
the Annual Meeting will be voted as specified. If no direction is given, the
proxy will be voted for the election of the nominees for director named in this
proxy statement and for the management proposals discussed herein and in
accordance with the judgment of the persons named in the proxy as to any other
matters that properly come before the meeting. If a shareholder abstains from
voting as to any matter (or indicates a "withhold vote for" as to directors),
then the shares held by such shareholder shall be deemed present at the Annual
Meeting for purposes of determining a quorum and for purposes of calculating the
vote with respect to such matter, but shall not be deemed to have been voted in
favor of such matter. If a broker returns a "non-vote" proxy, indicating a lack
of authority to vote on such matter, then the shares covered by such non-vote
shall be deemed present at the Annual Meeting for purposes of determining a
quorum but shall not be deemed to be represented at the Annual Meeting for
purposes of calculating the vote with respect to such matters.
PROPOSAL 1 - ELECTION OF DIRECTORS
Five directors have been nominated for election to the Company's Board
of Directors at the 1998 Annual Meeting of Shareholders to hold office for a
term of one year and until their successors are duly elected and qualified
(except in the case of earlier death, resignation or removal). The accompanying
proxy is intended to be voted for the election of nominees for director named
below, unless authority to vote for one or more nominees is withheld as
specified on the proxy card. The affirmative vote of a majority of the shares of
common stock of the Company (the "Common Stock") represented at the Annual
Meeting is required for the election of each director, and cumulative voting is
not permitted. In the event that any nominee becomes unable or unwilling to
serve as a director for any reason, the persons named in the enclosed proxy will
vote for a substitute nominee in accordance with their best judgment. The Board
of Directors has no reason to believe that any nominee will be unable or
unwilling to serve as a director if elected.
Each nominee has furnished to the Company the following information
with respect to his principal occupations or employment during the last five
years, his directorships of other companies subject to the reporting
requirements of the Securities Exchange Act of 1934 or the Investment Company
Act of 1940 and his direct and indirect beneficial ownership of shares of the
Company's Common Stock as of February 1, 1998. Except as otherwise noted below,
each nominee possesses sole voting and investment power with respect to any
shares of Common Stock owned by him, and all shares of Common Stock owned by him
represent less than 1% of the shares outstanding.
MANUEL A. VILLAFANA, 57, is a founder of the Company and has served as
Chief Executive Officer, Chairman of the Board and a Director since the
Company's inception in 1987. From 1983 to
1987, Mr. Villafana served as Chairman of GV Medical, Inc., a company co-founded
by Mr. Villafana to develop, manufacture and market the LASTAC System, a laser
transluminal angioplasty catheter system. From 1976 to 1982, Mr. Villafana
served as President and Chairman of St. Jude Medical, Inc., a company founded by
Mr. Villafana to develop, manufacture and market a pyrolytic carbon bileaflet
mechanical heart valve. From 1972 to 1976, he served as President and Chairman
of Cardiac Pacemakers, Inc., a company founded by Mr. Villafana to develop,
manufacture and market a new generation of lithium powered pacemakers. Mr.
Villafana beneficially owns 745,996 shares of Common Stock (4.2% of the
outstanding), including 73,250 shares issuable upon exercise of currently
exercisable options.
RICHARD W. KRAMP, 52, has served as President, Chief Operating Officer
and a Director of the Company since joining the Company in 1988. Prior to
joining the Company, Mr. Kramp was Vice President of Sales and Marketing for St.
Jude Medical, Inc., where he served in a variety of sales and marketing
capacities from 1978 to 1988. From 1972 to 1976, Mr. Kramp was the Senior Design
Engineer and then Supervisor of Electrical Design for Cardiac Pacemakers, Inc.,
where he designed the first lithium powered demand pacemaker for which he
received a U.S. patent. Mr. Kramp beneficially owns 624,918 shares of Common
Stock (3.5% of the outstanding), including 339,423 shares issuable upon exercise
of currently exercisable options. Mr. Kramp is also a Director of MedAmicus,
Inc.
DAVID L. BOEHNEN, 51, is Executive Vice President of SUPERVALU INC.
("SUPERVALU"), a food distribution company and food retailer. Mr. Boehnen served
as Senior Vice President, Law and External Relations of SUPERVALU from April
1991 to June 1997. Mr. Boehnen was elected as a Director of the Company in
November of 1997. As of February 1, 1998, Mr. Boehnen was not the beneficial
owner of any shares of Common Stock.
CHARLES F. CUDDIHY, JR., 71, was Executive Vice President-Corporate
Marketing of Medtronic, Inc., a medical products company, where he was employed
from 1967 through 1984. Mr. Cuddihy served as Managing Director of Trident
Medical International, an international trading company, from May 1991 to April
1992. From January 1989 to October 1990, Mr. Cuddihy was President and Chief
Executive Officer of Cherne Medical, Inc., a cardiovascular products company.
Mr. Cuddihy has served as a Director of the Company since 1991. Mr. Cuddihy
beneficially owns 44,500 shares of Common Stock, including 42,500 shares
issuable upon exercise of currently exercisable options.
A. JAY GRAF, 50, is a Vice President of Guidant Corporation, a medical
products company, and President of its Cardiac Rhythm Management group, which
includes business activities of Cardiac Pacemakers ("CPI") and Heart Rhythm
Technologies. Since 1992, Mr. Graf has served as President of CPI. Prior
thereto, he served as CPI's Executive Vice President and Chief Operating
Officer. Mr. Graf was elected to the Board of Directors during 1995. Mr. Graf
beneficially owns 10,000 shares of Common Stock, all of which are issuable upon
exercisable options.
COMMITTEES OF THE BOARD OF DIRECTORS AND ATTENDANCE
The Company has an Audit Committee whose functions are to review and
monitor accounting policies and control procedures of the Company, including
recommending the engagement of independent auditors and reviewing the scope of
the audit. The Audit Committee, on which Messrs. Cuddihy and Graf serve, held
one meeting during 1997. The Company also has a Compensation Committee which
reviews and establishes compensation levels for each of the Company's officers,
as well as jointly administers the Company's stock plans with the Board of
Directors. The Compensation Committee, on which Messrs. Cuddihy and Graf serve,
held one formal meeting during 1997 and, in addition, adopted one written
action. The Company does not have a standing nominating committee. The Board of
Directors held four meetings during 1997. Each Director attended at least 75% of
the meetings of the Board and all meetings of each committee of which he was a
member.
COMPENSATION OF DIRECTORS
The Directors of the Company do not receive any cash compensation for
their services on the Board of Directors. Upon their initial election to the
Board of Directors, each outside Director receives an option to purchase 5,000
shares of Common Stock at the fair market value on the date of election under
the 1987 Stock Option and Stock Award Plan (the "Plan"). Upon each reelection,
each outside Director receives an option to purchase 2,500 shares of Common
Stock at the fair market value on the date of reelection under the Plan.
Effective January 1, 1994, the Company entered into a consulting
agreement with Mr. Cuddihy. In exchange for Mr. Cuddihy's consulting services
throughout 1997, the Company paid Mr. Cuddihy a fee of $25,000 per year. This
agreement expired on December 31, 1997, and will not be extended by the mutual
consent of the parties.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for
each of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the other executive officers of the Company whose
salary and bonus earned in 1997 exceeded $100,000:
Long-Term
Name and Annual Compensation Compensation Shares All Other
Principal Position Year Salary Bonus Underlying Options(1) Compensation(2)
- ------------------------- ---- -------- -------- ---------------------------- ---------------
Manuel A. Villafana 1997 $ 216,300 $64,890 15,000 $ 0
Chief Executive Officer 1996 $ 216,300 $21,630 30,000 0
1995 204,667 0 0 0
Richard W. Kramp 1997 180,250 54,075 15,000 2,375
Chief Oper. Officer 1996 184,349 18,205 27,500 2,375
1995 176,325 0 0 2,310
Russell W. Felkey 1997 160,000 38,000 15,000 2,375
Exec. Vice President 1996 153,383 15,072 30,000 2,375
1995 148,714 0 0 2,310
John H. Jungbauer 1997 123,750 30,938 65,000 2,375
Chief Financial Officer 1996 115,532 11,250 30,000 2,375
1995 111,432 0 0 2,310
- ----------------------------
(1) All stock options were granted with an exercise price per share at least
equal to the fair market value of the Common Stock on the date of grant.
(2) Consists of matching contributions to the ATS Medical 401(k) Plan, which is
generally available to all employees.
COMPENSATION AGREEMENTS
Mr. Villafana continues to serve as Chairman and Chief Executive
Officer of the Company on a full- time basis through December 31, 2,000,
pursuant to an agreement dated January 26, 1995 and extended in March 1998.
Under the agreement, Mr. Villafana may engage in outside consulting activities,
provided he continues to devote substantially his full-time efforts to the
Company. Mr. Villafana's base salary under the agreement is determined by the
Compensation Committee. Mr. Villafana also is eligible to receive bonuses as and
when determined by the Compensation Committee. Mr. Villafana has agreed not to
compete with the Company during the term of the agreement and for a period of
two years following his termination of services to the Company. In exchange, the
Company has agreed to continue Mr. Villafana's monthly salary during the period
of non-competition restriction.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes option grants made by the Company to
each of its executive officers in 1997.
Potential Realizable Value
Number of Percentage of At Assumed Annual Rates of Stock
Securities Total Options Price Appreciation for
Underlying Granted to Exercise or Option Term (2)
Options Employees in Base Price Expiration --------------------------------
Name Granted (#) (1) 1997 ($/Sh) Date 5% ($) 10% ($)
- ----------------- --------------- ---- ------ ---- ----------- -------
Mr. Villafana 15,000 (3) 4.59 % $ 5.0625 12/15/07 $ 47,757 $ 121,025
Mr. Kramp 15,000 (3) 4.59 % 5.0625 12/15/07 47,757 121,025
Mr. Felkey 15,000 (3) 4.59 % 5.0625 12/15/07 47,757 121,025
Mr. Jungbauer 50,000 (4) 15.29 % 7.7500 01/06/07 291,453 738,600
15,000 (3) 4.59 % 5.0625 12/15/07 47,757 121,025
- -----------------------------
(1) Unless otherwise indicated, all the options vest in annual cumulative 25%
installments beginning one year from the date of grant.
(2) These amounts represent certain assumed annual rates of appreciation only.
Potential realizable value is calculated assuming 5% and 10% appreciation
in the price of the Common Stock from the date of grant. ACTUAL GAINS, IF
ANY, ON STOCK OPTION EXERCISES ARE DEPENDENT ON THE FUTURE PERFORMANCE OF
THE COMMON STOCK, AND OVERALL STOCK MARKET CONDITIONS. THE AMOUNTS
REFLECTED IN THIS TABLE MAY NOT NECESSARILY BE ACHIEVED.
(3) Stock options granted to employees on December 15, 1997.
(4) Stock options granted to employees on January 6, 1997. This stock option
vests in annual cumulative 25% installments beginning on the grant date and
continuing on each of the following three anniversaries from the grant
date.
STOCK OPTION EXERCISES IN LAST FISCAL YEAR
The following table summarizes stock options exercised during 1997 by the
Chief Executive Officer and the other executive officers named in the Summary
Compensation Table, and the estimated values of the options held by such persons
at December 31, 1997.
Number of Shares Value of Unexercised
Underlying Unexercised In-The-Money Options
Shares Options at End of 1997 at End of 1997 (1)
Acquired Value --------------------------- ----------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
Mr. Villafana 0 $ 0 69,500 45,000 $ 96,844 $ 13,583
Mr. Kramp 14,827 75,000 336,298 41,875 1,496,431 11,630
Mr. Felkey 0 0 105,500 42,500 297,451 9,677
Mr. Jungbauer 0 0 66,750 91,250 92,549 7,725
- ----------------------
(1) Value represents the difference between the last sale price of the Common
Stock on December 31, 1997, and the exercise price of the options.
CHANGE IN CONTROL AGREEMENTS
The Company has entered into agreements with its officers providing for the
payment of certain benefits to the officers if their employment terminates
following a "change in control" of the Company. The Agreements provide for
benefits if an officer's employment is terminated within 24 months following a
change in control unless such termination was by the Company for cause, by the
officer other than for "good reason," or because of the officer's death. "Good
reason" is defined as the termination of employment as a result of either a
diminishment in the officer's responsibilities, a reduction in salary or
benefits, a relocation of the Company's office of more than 35 miles or any
reason during the sixth month following a change in control. A "change in
control" is generally defined as an acquisition of more than 20% of the
outstanding Common Stock by any person or group, the merger or sale of the
Company or the replacement of a majority of the Company's Board of Directors
with directors not recommended by the existing Board of Directors. The
Agreements provide for lump sum payments following termination in amounts equal
to three times the sum of the officer's base salary and any annual target bonus
potential, as limited by Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"). If there had been a change in control of the Company as of
the end of 1997 and the employment of the four executive officers named in the
Summary Compensation Table had been immediately terminated, then Messrs.
Villafana, Kramp, Felkey and Jungbauer would have been entitled to receive,
pursuant to the terms of the Agreements, lump sum payments upon termination of
$612,488, $518,919, $449,714 and $335,181, respectively.
REPORT OF THE COMPENSATION COMMITTEE
CONCERNING EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Committee is responsible for setting the compensation
and benefits of the Company's executive officers, including the Chief Executive
Officer, on behalf of the Board of Directors and the shareholders. The
Compensation Committee also oversees the operation of the ATS Medical, Inc. 1987
Stock Option and Stock Award Plan (the "Stock Option Plan") and, if adopted by
the shareholders at the 1998 Annual Meeting, the Compensation Committee will
also administer the Stock Purchase Plan (as defined below).
The Compensation Committee is composed entirely of outside directors of
the Company. During 1997, the Board elected Messrs. Cuddihy and Graf and James
F. Lyons to serve on the Compensation Committee. In November 1997, Mr. Lyons
resigned as a member of the Board of Directors and as a Compensation Committee
member. Mr. Cuddihy is Chairman of the Committee.
The basic objective of the Compensation Committee is to establish a
compensation package which is appropriate for each officer's scale of
responsibility and performance, commensurate with the marketplace compensation
for executives of companies of similar size as the Company, and to attract,
motivate and retain executives of the necessary caliber. The Committee intends
to achieve these objectives by giving executives the opportunity for equity
ownership in the Company through stock options and by awarding bonuses tied to
individual and Company performance as significant elements of the executive
compensation package.
COMPENSATION CRITERIA
In determining each executive compensation package, the Compensation
Committee reviews the compensation of each executive and the individual
achievements and performance of each such executive during the year. Beginning
in 1997, the Committee also began to use more objective criteria, such as salary
survey data of companies of similar size and technology as the Company, in
determining executive salaries. The financial performance and accomplishments of
the Company during the year are also factors in the Committee's determination of
executive compensation. In line with the Compensation Committee's goal of tying
compensation with performance, executives' salaries are generally increased only
to keep up with estimated cost-of-living expenses, while bonuses vary
substantially from year to year and are dependent primarily on the performance
of the Company and the individual executive. The Committee generally makes a
determination as to salaries for the current calendar and bonuses to be awarded
for the prior year at the end of the calendar year or at the beginning of the
following year.
In addition, the Compensation Committee, in consultation with the Chief
Executive Officer, annually grants stock options to its executive officers to
maintain and increase the executives' incentive to continue their long-term
employment with the Company. The Compensation Committee may also approve special
grants to certain executives to reward their individual performance. The overall
compensation package may also be varied if the Committee feels that it is
necessary to maintain the Company's executive compensation in line with
companies similar in size and technology to the Company.
EXECUTIVE COMPENSATION PACKAGE
The primary components of the executive compensation package are
salary, bonuses and stock option grants. The Company also currently maintains a
variety of employee benefits in which its executive officers may participate,
including health benefits, automobile and car phone allowances, disability
insurance and matching contributions to the Company's 401(k) program.
The Compensation Committee took the following actions with respect to
executive compensation for 1997:
o At a meeting held February 6, 1997, as part of its effort to
increase the performance-based component of executive
compensation, the Compensation Committee maintained the
salaries of Mr. Villafana and Mr. Kramp for 1997 in line with
1996 levels, at $216,300 and $184,349 respectively, and
granted moderate salary increases to Mr. Felkey (from $153,383
to $160,000) and Mr. Jungbauer (from $115,750 to $123,750).
o In December of 1997, the Compensation Committee granted to
each of Mr. Villafana and Mr. Kramp a bonus of 30% of their
base salary and to each of Mr. Felkey and Mr. Jungbauer a 25%
bonus. When considering granting these bonuses, the Committee
looked at the overall performance of the Company, including,
among other factors, the Company's 22% revenue increase in
1997 over 1996.
o Also in December of 1997, grants of stock options were made to
each executive (and to each employee) in an attempt to
correlate the officers' interests with the shareholders'
interest by tying a substantial portion of the officers'
future compensation to the Company's stock price. Each of the
executives received options for the purchase of 15,000 shares
of Common Stock. The stock options vest in increments over
four years, thus providing an additional incentive for
continued employment of the officer with the Company. In
addition to this option grant, the Compensation Committee
granted an option for 50,000 shares of Common Stock to Mr.
Jungbauer in January 1997 in recognition of his contribution
as an officer of the Company and to provide him an incentive
package in the form of stock options commensurate with that of
other officers of the Company. The option to Mr. Jungbauer has
an exercise price of $7.75, the fair market value of the
Common Stock on the grant date of the option.
In 1998, the Committee intends to continue to place more emphasis on
objective factors and performance in determining executive compensation,
including maintaining the compensation of the Company's officers at industry
levels, as reflected in surveys of compensation practices in corporations of
comparable size and technology. In addition, the Committee intends to use growth
in the Company's gross revenue and pre-tax earnings during 1998 as the primary
criteria for determining the size of bonuses to be paid to executive officers
for 1998.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
During 1997, the Compensation Committee reviewed the Company's and Mr.
Villafana's performance in order to establish Mr. Villafana's compensation. Mr.
Villafana did not receive a salary increase in 1997 but received a bonus
consisting of 30% of his 1997 annual salary, an increase over the 10% bonus
received in the prior year. The bonus was based primarily on the Company's 1997
performance. In addition, Mr. Villafana received options for 15,000 shares of
Common Stock pursuant to the Company's Stock Option Plan. The number of options
granted to Mr. Villafana was in line with the grants given to the other top
Company executives. The Committee's performance review of Mr. Villafana
addressed major areas of accomplishment for the Company.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Code generally limits the corporate deduction for
compensation paid to executive officers to $1.0 million, unless the compensation
qualifies as a"performance-based compensation" under the Code. In 1997, the
Committee reviewed the need to qualify the compensation paid to its executive
officers for deductibility under Section 162(m) of the Code and concluded that
it is in the best interest of the
Company and its shareholders to qualify the compensation resulting from stock
options exercised pursuant to the Stock Option Plan as performance-based under
the Code. Accordingly, the Board of Directors proposed and the shareholders of
the Company approved an amendment to the Stock Option Plan at the 1997 Annual
Meeting to bring the Stock Option Plan within Section 162(m). As a result,
compensation resulting from stock options granted under the Stock Option Plan
will not be counted toward the $1.0 million of deductible compensation under
Section 162(m). The Committee does not believe that the annual compensation for
Section 162(m) purposes of any of the Company's executive officers will exceed
$1.0 million in fiscal 1998.
Charles F. Cuddihy, Jr.
A. Jay Graf
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and all persons who beneficially own
more than 10% of the outstanding shares of the Company's Common Stock to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of such Common Stock. Directors, executive
officers and 10% or more beneficial owners are also required to furnish the
Company with copies of all Section 16(a) reports they file. Based solely on a
review of the copies of such forms furnished to the Company, the Company
believes that all Section 16(a) filing requirements applicable to its executive
officers, directors and 10% shareholders were complied with, except that the
statement of initial beneficial ownership on Form 3 was not filed on a timely
basis after Mr. Boehnen was elected Director of the Company in November 1997.
Mr. Boehnen's statement on Form 3 was subsequently filed.
COMPARATIVE STOCK PERFORMANCE GROWTH
The graph below compares the cumulative total shareholder return on the
Common Stock since December 31, 1992 with the cumulative return of the Standard
& Poor's 500 Stock Index and the Value Line Medical Suppliers Index over the
same period (assuming the investment of $100 in each vehicle on December 31,
1992 and reinvestment of all dividends).
1992 1993 1994 1995 1996 1997
- ------------------------------ ------- ------- ------- ------- ------- -------
ATS Medical, Inc. $100.00 $ 72.58 $ 53.23 $119.35 $100.00 $ 66.94
- ------------------------------ ------- ------- ------- ------- ------- -------
Standards & Poor's 500 $100.00 $110.09 $111.85 $153.80 $189.56 $252.82
- ------------------------------ ------- ------- ------- ------- ------- -------
Value Line Med. Supply $100.00 $ 95.11 $118.27 $183.49 $230.72 $340.96
- ------------------------------ ------- ------- ------- ------- ------- -------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth security ownership information
pertaining to persons known by the Company to beneficially own more than 5% of
the Company's Common Stock, the executive officers named in the Summary
Compensation Table and all directors and executive officers of the Company as a
group as of February 1, 1998.
Common Stock Beneficially Owned
-------------------------------
Name and Address of Number of Percent of
Beneficial Owner (1) Shares Outstanding (2)
- -------------------- ---------- ---------------
ITOCHU Corporation (3) 1,568,940 8.9%
5-1, Kita-Aoyama 2-Chome
Minato, Tokyo 107-77, Japan
Manuel A. Villafana (4) 745,996 4.2%
Richard W. Kramp (4) 624,918 3.5%
Russell W. Felkey (4) 109,250 *
John H. Jungbauer (4) 86,000 *
All directors and executive officers as 1,620,664 8.9%
group (seven persons) (4)
- ------------------------
* Less than 1%
(1) The business address of the executive officers of the Company is 3905
Annapolis Lane, Suite 105, Minneapolis, MN 55447.
(2) The ownership percentage for each person or entity is calculated based
on the number of shares outstanding as of February 1, 1998.
(3) The number of shares owned is based on an amended Schedule 13D filed by
ITOCHU Corporation ("ITOCHU") on November 28, 1997. The Schedule 13D
indicates that ITOCHU has sole voting power and direct ownership of
784,470 shares and shared voting power and beneficial ownership of
another 784,470 shares. ITOCHU owns the latter group of shares
indirectly through its wholly owned subsidiary Century Medical, Inc.
(4) Includes the following shares that may be acquired within 60 days
through the exercise of stock options: Mr. Villafana, 73,250; Mr.
Kramp, 339,423; Mr. Felkey, 109,250; Mr. Jungbauer, 83,000; and all
executive officers and directors as a group, 657,423.
PROPOSAL 2-
ADOPTION OF THE ATS MEDICAL, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
On January 28, 1998, the Board of Directors adopted the ATS Medical,
Inc. 1998 Employee Stock Purchase Plan (the "Stock Purchase Plan"), subject to
shareholder approval, pursuant to which 200,000 shares of Common Stock would be
reserved for issuance under the Stock Purchase Plan. The purpose of the Stock
Purchase Plan is to give employees a stronger incentive to work for the
continued success of the Company by allowing them to purchase, through payroll
deductions, shares of the Company's Common Stock. The following summary
description of the Stock Purchase Plan is qualified in its entirety by reference
to the full text of the Stock Purchase Plan, which is attached to this Proxy
Statement as Exhibit A.
SUMMARY OF THE STOCK PURCHASE PLAN
The Stock Purchase Plan provides for the purchase of shares of the
Company's Common Stock by eligible employees of the Company through payroll
deductions of 1% to 10% of an employee's current compensation. As of March 13,
1998, the closing price per share of the Company's Common Stock reported on the
Nasdaq National Market was $6.5625. The Stock Purchase Plan is intended to
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code").
The Stock Purchase Plan is administered by the Compensation Committee
of the Board of Directors, which also interprets the Stock Purchase Plan.
Employees of the Company, other than those employees whose customary employment
is less than 20 hours weekly or who have not completed at least one month of
service, are eligible to participate in the Stock Purchase Plan. In addition, an
employee who immediately after receiving a right to purchase shares would own,
directly or indirectly, stock equal to 5% or more of the total combined voting
power or value of all of the capital stock of the Company or all of its
affiliates will not be eligible to participate in the Stock Purchase Plan. The
Stock Purchase Plan will terminate if and when all the shares of the Common
Stock provided for in the Stock Purchase Plan have been sold. The Board of
Directors has reserved 200,000 shares of the Common Stock for issuance under the
Stock Purchase Plan.
Under the Stock Purchase Plan, there are four three-month purchase
periods each year (each a "Purchase Period"). If the Stock Purchase Plan is
approved by the shareholders, the first Purchase Period in 1998 would begin on
the first business day of May and end on the last business day in July. New
Purchase Periods would begin on the first day of August 1998, November 1998 and
February 1999, respectively. On the last business day of each Purchase Period,
each participant receives the right to (i) purchase up to as many whole shares
of the Common Stock as could be purchased with the balance in that participant's
stock purchase account as of that date, and (ii) withdraw all of the remaining
accumulated payroll deductions from such participant's account, provided that on
the last day of each Purchase Period, no cash can remain in a participant's
account. The exercise price for rights granted under the Stock Purchase Plan is
the lesser of 85% of the fair market value of the Common Stock on (i) the first
business day of the Purchase Period or (ii) the last business day of the
Purchase Period. No participant may purchase stock at a rate exceeding $25,000
in fair market value of such stock (determined at the beginning of each Purchase
Period) for each calendar year under the Stock Purchase Plan and all other stock
purchase plans that qualify under Section 423 of the Code of the Company and its
affiliates.
The Stock Purchase Plan will terminate automatically when all of the
shares of Common Stock have been sold. The Board of Directors may amend or
discontinue the Stock Purchase Plan at any time. In the absence of shareholder
approval, however, no amendment or discontinuation of the Stock Purchase Plan
shall be made that: (i) absent such shareholder approval, would cause Rule 16b-3
under the Securities Act of 1934, as amended, to become unavailable with respect
to the Stock Purchase Plan, (ii)
increases the number of shares of Common Stock available for issuance under the
Stock Purchase Plan (other than for certain adjustments in the number of
outstanding shares of Common Stock and certain corporate transactions described
in the Stock Purchase Plan) (iii) require shareholder approval under the rules
or regulations of the National Association of Securities Dealers or the Nasdaq
National Market, or (iv) permit the issuance of Common Stock before payment
therefor in full.
TAX MATTERS
The Stock Purchase Plan and the right of participants to make purchases
thereunder are intended to qualify under the provisions of Sections 421 and 423
of the Code. Payroll deductions under the Stock Purchase Plan will be taxable to
a participant as compensation for the year in which such amounts would otherwise
have been paid to the participant. No income will be taxable to a participant at
the time of grant of the option or purchase of shares. A participant may become
liable for tax upon disposition of the shares acquired as summarized below.
If the shares are sold or disposed of (including by way of gift) at
least two years after the date of the beginning of the offering period (the
"date of option grant") and at least one year after the date such shares are
purchased (the "date of option exercise"), in this event, the lesser of (a) the
excess of the fair market value of the shares at the time of such disposition
over the purchase price of the shares subject to the option (the "option price")
or (b) the excess of the fair market value of the shares at the time the option
was granted over an amount equal to what the option price would have been if it
had been computed as of the date of option grant, will be treated as ordinary
income to the participant. Any further gain upon such disposition will be
treated as capital gain. Any such capital gain would be taxed at long-term rates
if the stock is held for more than 18 months and at mid-term rates if held more
than 12 but not more than 18 months. If the shares are sold and the sales price
is less than the option price, there is no ordinary income and the participant
has a capital loss for the difference.
In the event that the shares are sold or disposed of (including by way
of gift or by exchange in connection with the exercise of an incentive stock
option) before the expiration of the holding periods described above, the excess
of the fair market value of the shares on the date of option exercise over the
option price will be treated as ordinary income to the participant. This excess
will constitute ordinary income in the year of sale or other disposition even if
no gain is realized on the sale or a gratuitous transfer of the shares is made.
The balance of any gain will be treated as capital gain. Even if the shares are
sold for less than their fair market value on the date of option exercise, the
same amount of ordinary income is attributed to a participant and a capital loss
is recognized equal to the difference between the sales price and the value of
the shares on such date of option exercise. The Company ordinarily will be
allowed a tax deduction at the time and in the amount of the ordinary income
recognized by the participant, but may also be required to withhold income tax
upon such amount or report such amount to the Internal Revenue Service.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION OF
THE COMPANY'S 1998 EMPLOYEE STOCK PURCHASE PLAN. The affirmative vote of a
majority of the outstanding shares of the Common Stock entitled to vote and
present in person or by proxy at the Annual Meeting will be required to adopt
the Stock Purchase Plan. Proxies will be voted in favor of the proposal unless
otherwise specified.
PROPOSAL 3-
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, based upon the recommendation of its Audit
Committee, has appointed Ernst & Young LLP as independent auditors to examine
the financial statements of the Company for the current fiscal year ending
December 31, 1998 and to perform other appropriate accounting services. Ernst &
Young LLP has served as independent auditors of the Company since its inception
and has no relationship with the
Company other than that arising from their employment as independent auditors.
Representatives of Ernst & Young LLP will be present at the 1998 Annual Meeting
of Shareholders, will have an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS. The affirmative vote of
a majority of the outstanding shares of the Company's Common Stock entitled to
vote and present in person or by proxy at the Annual Meeting will be required to
ratify the appointment. Proxies will be voted in favor of the ratification of
the appointment unless otherwise specified.
SHARES OUTSTANDING AND VOTING RIGHTS
On March 19, 1998, the Company had outstanding 17,761,450 shares of
Common Stock. Each holder of record of Common Stock as of the close of business
on March 19, 1998 will be entitled to one vote on all matters being presented at
the meeting for each share of Common Stock held on such date.
PROPOSALS FOR THE 1999 ANNUAL MEETING
Any proposal by a shareholder to be presented at the 1999 Annual
Meeting of Shareholders must be received at the Company's principal executive
officers, 3905 Annapolis Lane, Suite 105, Minneapolis, Minnesota 55447,
Attention: Corporate Secretary, no later than November 27, 1998.
GENERAL
The Board of Directors of the Company does not know of any other
business to come before the 1998 Annual Meeting of Shareholders. If any other
matters are properly brought before the meeting, however, the persons named in
the accompanying proxy will vote in accordance with their best judgement.
Expenses in connection with this solicitation of proxies will be paid
by the Company. Proxies are being solicited primarily by mail, but, in addition,
officers and employees of the Company, who will receive no extra compensation
for their services, may solicit proxies by telephone or personal calls. The
Company also will request that brokers or other nominees who hold shares of
Common Stock in their names for the benefit of others forward proxy materials
to, and obtain voting instructions from, the beneficial owners of such stock at
the Company's expense.
Your cooperation in giving this matter your immediate attention and in
returning your proxy promptly will be appreciated.
By Order of the Board of Directors,
/s/ Russell W. Felkey
Russell W. Felkey
Secretary
March 30, 1998
EXHIBIT A
ATS MEDICAL, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I. INTRODUCTION
Section 1.01 Purpose. The purpose of the ATS Medical, Inc.
Employee Stock Purchase Plan (the "Plan") is to provide employees of ATS
Medical, Inc., a Minnesota corporation (the "Company"), and its Affiliates with
an opportunity to share in the ownership of the Company by providing them with a
convenient means for regular and systematic purchases of the Company's Common
Stock and, thus, to develop a stronger incentive to work for the continued
success of the Company.
Section 1.02 Rules of Interpretation. It is intended that the
Plan be an "employee stock purchase plan" as defined in Section 423(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations
promulgated thereunder. Accordingly, the Plan shall be interpreted and
administered in a manner consistent therewith if so approved. All Participants
in the Plan will have the same rights and privileges consistent with the
provisions of the Plan.
Section 1.03 Definitions. For purposes of the Plan, the
following terms will have the meanings set forth below:
(a) "Acceleration Date" means the earlier of the date of
shareholder approval or approval by the Company's Board of Directors of
(i) any consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which shares
of Company Common Stock would be converted into cash, securities or
other property, other than a merger of the Company in which
shareholders of the Company immediately prior to the merger have the
same proportionate ownership of stock in the surviving corporation
immediately after the merger; (ii) any sale, exchange or other transfer
(in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company; or (iii) any plan of
liquidation or dissolution of the Company.
(b) "Affiliate" means any subsidiary corporation of the
Company, as defined in Section 424(f) of the Code, whether now or
hereafter acquired or established.
(c) "Committee" means the committee described in Section
10.01.
(d) "Company" means ATS Medical, Inc., a Minnesota
corporation, and its successors by merger or consolidation as
contemplated by Article XI herein.
(e) "Current Compensation" means all regular wage, salary and
commission payments paid by the Company to a Participant in accordance
with the terms of his or her employment, but excluding annual bonus
payments and all other forms of special compensation.
(f) "Fair Market Value" as of a given date means such value of
the Common Stock as reasonably determined by the Committee, but shall
not be less than (i) the closing price of the Common Stock as reported
for composite transactions if the Common Stock is then traded on a
national securities exchange, or (ii) the average of the closing
representative bid and asked prices of the Common Stock as reported on
the Nasdaq National Market System on the date as of which the
fair market value is being determined. If on the date of grant of any
option hereunder the Common Stock is not traded on an established
securities market, the Committee shall make a good faith attempt to
satisfy the requirements of this Section 1.03 and in connection
therewith shall take such action as it deems necessary or advisable.
(g) "Participant" means a Permanent Full-Time Employee who is
eligible to participate in the Plan under Section 2.01 and who has
elected to participate in the Plan.
(h) "Participating Affiliate" means an Affiliate which has
been designated by the Committee in advance of the Purchase Period in
question as a corporation whose eligible Permanent Full-Time Employees
may participate in the Plan.
(i) "Permanent Full-Time Employee" means an employee of the
Company or a Participating Affiliate as of the first day of a Purchase
Period, including an officer or director who is also an employee, but
excluding (i) an employee whose customary employment is less than
twenty (20) hours per week and (ii) an employee who has been employed
by the Company for less than thirty (30) days.
(j) "Plan" means the ATS Medical, Inc. 1998 Employee Stock
Purchase Plan, as amended, the provisions of which are set forth
herein.
(k) "Purchase Period" means the approximate three-month
periods beginning (i) on the first business day in May and ending on
the last business day in July of each year; (ii) on the first business
day in August and ending on the last business day in October of each
year; (iii) on the first business day in November of one year and
ending on the last business day in January of the following year; and
(iv) on the first business day in February and ending on the last
business day in April of each year; provided, however, that the initial
Purchase Period will commence on May 3, 1998 and will terminate on the
last business day in July 1998, and provided further that the then
current Purchase Period will end upon the occurrence of an Acceleration
Date.
(l) "Common Stock" means the Company's Common Stock, $.01 par
value, as such stock may be adjusted for changes in the stock or the
Company as contemplated by Article XI herein.
(m) "Stock Purchase Account" means the account maintained on
the books and records of the Company recording the amount received from
each Participant through payroll deductions made under the Plan and
from the Company through matching contributions.
ARTICLE II. ELIGIBILITY AND PARTICIPATION
Section 2.01 Eligible Employees. All Permanent Full-Time
Employees shall be eligible to participate in the Plan beginning on the first
day of the first Purchase Period to commence after such person becomes a
Permanent Full-Time Employee. Subject to the provisions of Article VI, each such
employee will continue to be eligible to participate in the Plan so long as such
employee remains a Permanent Full-Time Employee.
Section 2.02 Election to Participate. An eligible Permanent
Full-Time Employee may elect to participate in the Plan for a given Purchase
Period by filing with the Company, in advance of that Purchase Period and in
accordance with such terms and conditions as the Committee in its sole
discretion may impose, a form provided by the Company for such purpose (which
authorizes regular payroll deductions from Current Compensation beginning with
the first payday in that Purchase Period and continuing until the employee
withdraws from the Plan or ceases to be eligible to participate in the Plan).
Section 2.03 Limits on Stock Purchase. No employee shall be
granted any right to purchase Common Stock hereunder if such employee,
immediately after such a right to purchase is granted, would own, directly or
indirectly, within the meaning of Section 423(b)(3) and Section 424(d) of the
Code, Common Stock possessing 5% or more of the total combined voting power or
value of all the classes of the capital stock of the Company or of all
Affiliates.
Section 2.04 Voluntary Participation. Participation in the
Plan on the part of a Participant is voluntary and such participation is not a
condition of employment nor does participation in the Plan entitle a Participant
to be retained as an employee.
ARTICLE III. PAYROLL DEDUCTIONS
AND STOCK PURCHASE ACCOUNT
Section 3.01 Deduction from Pay. The form described in Section
2.02 will permit a Participant to elect payroll deductions of any multiple of
1%, but not less than 1% or more than 10% of such Participant's Current
Compensation for each pay period, subject to such other limitations as the
Committee in its sole discretion may impose. A Participant may cease making
payroll deductions at any time, subject to such limitations as the Committee in
its sole discretion may impose. In the event that during a Purchase Period the
entire credit balance in a Participant's Stock Purchase Account exceeds the
product of (i) 85% of the Fair Market Value of the Common Stock on the first
business day of that Purchase Period, and (ii) 10,000 then payroll deductions
for such Participant shall automatically cease, and shall resume on the first
pay period of the next Purchase Period.
Section 3.02 Credit to Account. Payroll deductions will be
credited to the Participant's Stock Purchase Account on each payday.
Section 3.03 Interest. No interest will be paid upon payroll
deductions or on any amount credited to, or on deposit in, a Participant's Stock
Purchase Account.
Section 3.04 Nature of Account. The Stock Purchase Account is
established solely for accounting purposes, and all amounts credited to the
Stock Purchase Account will remain part of the general assets of the Company or
the Participating Affiliate (as the case may be).
Section 3.05 No Additional Contributions. A Participant may
not make any payment into the Stock Purchase Account other than the payroll
deductions made pursuant to the Plan.
ARTICLE IV. RIGHT TO PURCHASE SHARES
Section 4.01 Number of Shares. Each Participant will have the
right to purchase on the last business day of the Purchase Period up to the
largest number of whole shares of Common Stock that can be purchased at the
price specified in Section 4.02 with up to the entire credit balance in the
Participant's Stock Purchase Account, subject to the limitations that (i) no
more than 10,000 shares of Common Stock may be purchased under the Plan by any
one Participant for a given Purchase Period, (ii) in accordance with Section
423(b)(8) of the Code, no more than $25,000 in Fair Market Value (determined at
the beginning of each Purchase Period) of Common Stock and other stock may be
purchased under the Plan and all other employee stock purchase plans (if any) of
the Company and the Affiliates by any one Participant for any calendar year and
(iii) the Committee may reasonably impose. If the purchases for all Participants
would otherwise cause the aggregate number of shares of Common Stock to be sold
under the Plan to exceed the number specified in Section 10.03, each Participant
shall be allocated a pro rata portion of the Common Stock to be sold.
Section 4.02 Purchase Price. Except as provided in Section
6.03, the purchase price for any Purchase Period shall be the lesser of (i) 85%
of the Fair Market Value of the Common Stock on the first business day of that
Purchase Period or (ii) 85% of the Fair Market Value of the Common Stock on the
last business day of that Purchase Period, in each case rounded up to the next
higher full cent.
ARTICLE V. EXERCISE OF RIGHT
Section 5.01 Purchase of Stock. On the last business day of a
Purchase Period, the entire credit balance in each Participant's Stock Purchase
Account will be used to purchase the largest number of whole shares of Common
Stock purchasable with such amount (subject to the limitations of Section 4.01),
unless the Participant has filed with the Company, in advance of that date and
subject to such terms and conditions as the Committee in its sole discretion may
impose, a form provided by the Company which requests the distribution of part
or all of the credit balance in cash.
Section 5.02 Cash Distributions. Any amount remaining in a
Participant's Stock Purchase Account after the last business day of a Purchase
Period will be paid to the Participant in cash within thirty (30) days after the
end of that Purchase Period.
Section 5.03 Notice of Acceleration Date. The Company shall
use its best efforts to notify each Participant in writing at least ten days
prior to any Acceleration Date that the then current Purchase Period will end on
such Acceleration Date.
ARTICLE VI. WITHDRAWAL FROM PLAN; SALE OF STOCK
Section 6.01 Voluntary Withdrawal. A Participant may, in
accordance with such terms and conditions as the Committee in its sole
discretion may impose, withdraw from the Plan and cease making payroll
deductions by filing with the Company a form provided for this purpose. In such
event, the entire credit balance in the Participant's Stock Purchase Account
will be paid to the Participant in cash within thirty (30) days. A Participant
who withdraws from the Plan will not be eligible to reenter the Plan until the
beginning of the next Purchase Period following the date of such withdrawal.
Section 6.02 Death. Subject to such terms and conditions as
the Committee in its sole discretion may impose, upon the death of a
Participant, no further amounts shall be credited to the Participant's Stock
Purchase Account. Thereafter, on the last business day of the Purchase Period
during which such Participant's death occurred and in accordance with Section
5.01, the entire credit balance in such Participant's Stock Purchase Account
will be used to purchase Common Stock, unless such Participant's estate has
filed with the Company, in advance of that day and subject to such terms and
conditions as the Committee in its sole discretion may impose, a form provided
by the Company which elects to have the entire credit balance in such
Participant's Stock Account distributed in cash within thirty (30) days after
the end of that Purchase Period or at such earlier time as the Committee in its
sole discretion may decide. Each Participant, however, may designate one or more
beneficiaries who, upon death, are to receive the Common Stock or the amount
that otherwise would have been distributed or paid to the Participant's estate
and may change or revoke any such designation from time to time. No such
designation, change or revocation will be effective unless made by the
Participant in writing and filed with the Company during the Participant's
lifetime. Unless the Participant has otherwise specified the beneficiary
designation, the beneficiary or beneficiaries so designated will become fixed as
of the date of the death of the Participant so that, if a beneficiary survives
the Participant but dies before the receipt of the payment due such beneficiary,
the payment will be made to such beneficiary's estate.
Section 6.03 Termination of Employment. Subject to such terms
and conditions as the Committee in its sole discretion may impose, upon a
Participant's normal or early retirement with the consent of the Company under
any pension or retirement plan of the Company or Participating Affiliate, no
further amounts shall be credited to the Participant's Stock Purchase Account.
Thereafter, on the last business day of the Purchase Period during which such
Participant's approved retirement occurred and in accordance with Section 5.01,
the entire credit balance in such Participant's Stock Purchase Account will be
used to purchase Common Stock at the Fair Market Value of the Common Stock on
such date, unless such Participant has filed with the Company, in advance of
that day and subject to such terms and conditions as the Committee in its sole
discretion may impose, a form provided by the Company which elects to receive
the entire credit balance in such Participant's Stock Purchase Account in cash
within thirty (30) days after the end of that Purchase Period, provided that
such Participant shall have no right to purchase Common Stock in the event that
the last day of such a Purchase Period occurs more than three months following
the termination of such Participant's employment with the Company by reason of
such an approved retirement. In the event of any other termination of employment
(other than death) with the Company or a Participating Affiliate, participation
in the Plan will cease on the date the Participant ceases to be a Permanent
Full-Time Employee for any reason. In such event, the entire credit balance in
such Participant's Stock Purchase Account will be paid to the Participant in
cash within thirty (30) days. For purposes of this Section 6.03, a transfer of
employment to any Affiliate, or a leave of absence which has been approved by
the Committee, will not be deemed a termination of employment as a Permanent
Full-Time Employee.
ARTICLE VII. NONTRANSFERABILITY
Section 7.01 Nontransferable Right to Purchase. The right to
purchase Common Stock hereunder may not be assigned, transferred, pledged or
hypothecated (whether by operation of law or otherwise), except as provided in
Section 6.02, and will not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge, hypothecation or other
disposition or levy of attachment or similar process upon the right to purchase
will be null and void and without effect.
Section 7.02 Nontransferable Account. Except as provided in
Section 6.02, the amounts credited to a Stock Purchase Account may not be
assigned, transferred, pledged or hypothecated in any way, and any attempted
assignment, transfer, pledge, hypothecation or other disposition of such amounts
will be null and void and without effect.
ARTICLE VIII. STOCK CERTIFICATES
Section 8.01 Delivery. Promptly after the last day of each
Purchase Period and subject to such terms and conditions as the Committee in its
sole discretion may impose, the Company will cause to be delivered to or for the
benefit of the Participant a certificate representing the Common Stock purchased
on the last business day of such Purchase Period.
Section 8.02 Securities Laws. The Company shall not be
required to issue or deliver any certificate representing Common Stock prior to
registration under the Securities Act of 1933, as amended, or registration or
qualification under any state law if such registration is required. The Company
shall use its best efforts to accomplish such registration (if and to the extent
required) not later than a reasonable time following the Purchase Period, and
delivery of certificates may be deferred until such registration is
accomplished.
Section 8.03 Completion of Purchase. A Participant shall have
no interest in the Common Stock purchased until a certificate representing the
same is issued to or for the benefit of the Participant.
Section 8.04 Form of Ownership. The certificates representing
Common Stock issued under the Plan will be registered in the name of the
Participant or jointly in the name of the Participant and another person, as the
Participant may direct on a form provided by the Company.
ARTICLE IX. EFFECTIVE DATE, AMENDMENT AND
TERMINATION OF PLAN
Section 9.01 Effective Date. The Plan was approved by the
Board of Directors on January 28, 1998 and shall be approved by the shareholders
of the Company within twelve (12) months thereof.
Section 9.02 Plan Commencement. The initial Purchase Period
under the Plan will commence on May 3, 1998. Thereafter, each succeeding
Purchase Period will commence and terminate in accordance with Section 1.03(k).
Section 9.03 Powers of Board. The Board of Directors may amend
or discontinue the Plan at any time. No amendment or discontinuation of the
Plan, however, shall without shareholder approval be made that: (i) absent such
shareholder approval, would cause Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Act") to become unavailable with respect to the Plan,
(ii) requires shareholder approval under any rules or regulations of the
National Association of Securities Dealers, Inc. or any securities exchange that
are applicable to the Company, (iii) permit the issuance of Common Stock
before payment therefor in full or (iv) other than as provided in Article XI,
increases the number of shares of Common Stock available for issuance under the
Plan.
Section 9.04 Automatic Termination. The Plan shall
automatically terminate when all of the shares of Common Stock provided for in
Section 10.03 have been sold.
ARTICLE X. ADMINISTRATION
Section 10.01 The Committee. The Plan shall be administered by
a committee (the "Committee") of two or more directors of the Company, each of
whom shall be a "Non-Employee Director" within the meaning of Rule 16b-3 under
the Act. The members of the Committee shall be appointed by and serve at the
pleasure of the Board of Directors.
Section 10.02 Powers of Committee. Subject to the provisions
of the Plan, the Committee shall have full authority to administer the Plan,
including authority to interpret and construe any provision of the Plan, to
establish deadlines by which the various administrative forms must be received
in order to be effective, and to adopt such other rules and regulations for
administering the Plan as it may deem appropriate. The Committee shall have full
and complete authority to determine whether all or any part of the Common Stock
acquired pursuant to the Plan shall be subject to restrictions on the
transferability thereof or any other restrictions affecting in any manner a
Participant's rights with respect thereto but any such restrictions shall be
contained in the form by which a Participant elects to participate in the Plan
pursuant to Section 2.02. Decisions of the Committee will be final and binding
on all parties who have an interest in the Plan.
Section 10.03 Stock to be Sold. The Common Stock to be issued
and sold under the Plan may be treasury shares or authorized but unissued
shares, or the Company may purchase Common Stock in the market for sale under
the Plan. Except as provided in Section 11.01, the aggregate number of shares of
Common Stock to be sold under the Plan will not exceed 200,000 shares.
Section 10.04 Notices. Notices to the Committee should be
addressed as follows:
ATS Medical Inc.
Attn: John H. Jungbauer
Chief Financial Officer
3905 Annapolis Lane
Minneapolis, Minnesota, 55447
ARTICLE XI. ADJUSTMENT FOR CHANGES
IN STOCK OR COMPANY
Section 11.01 Stock Dividend or Reclassification. If the
outstanding shares of Common Stock are increased, decreased, changed into or
exchanged for a different number or kind of securities of the Company, or shares
of a different par value or without par value, through reorganization,
recapitalization, reclassification, stock dividend, stock split, amendment to
the Company's Articles of Incorporation, reverse stock split or otherwise, an
appropriate adjustment shall be made in the maximum numbers and kind of
securities to be purchased under the Plan with a corresponding adjustment in the
purchase price to be paid therefor.
Section 11.02 Merger or Consolidation. If the Company is
merged into or consolidated with one or more corporations during the term of the
Plan, appropriate adjustments will be made to give effect thereto on an
equitable basis in terms of issuance of shares of the corporation surviving the
merger or of the consolidated corporation, as the case may be.
ARTICLE XII. APPLICABLE LAW
Rights to purchase Common Stock granted under the Plan shall
be construed and shall take effect in accordance with the laws of the State of
Minnesota.
ATS MEDICAL, INC.
3905 Annapolis Lane
Minneapolis, Minnesota 55447
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the Notice of Annual Meeting and
Proxy Statement dated March 30, 1998, appoints Manuel A. Villafana and Russell
W. Felkey proxies (each with the power to act alone and with the power of
substitution and revocation) to represent the undersigned and to vote, as
designated below, all shares of common stock of ATS Medical, Inc. which the
undersigned is entitled to vote at the 1998 Annual Meeting of Shareholders of
ATS Medical, Inc., to be held on April 30, 1998 at the Minneapolis Club, 729
Second Avenue South, Minneapolis, Minnesota at 3:30 p.m. and any adjournment
thereof.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for the nominees indicated below
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY NOMINEE, STRIKE A LINE THROUGH
THE NOMINEE'S NAME IN THE LIST BELOW.)
Manuel A. Villafana, Richard W. Kramp,
Charles F. Cuddihy, Jr., A. Jay Graf, David L. Boehnen
2. TO APPROVE THE ATS MEDICAL, INC. 1998 EMPLOYEE STOCK PURCHASE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED AND TO BE SIGNED AND DATED ON THE OTHER SIDE)
(CONTINUED FROM THE OTHER SIDE)
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
AND ANY ADJOURNMENT THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 AND IN THE DISCRETION OF THE NAMED
PROXIES ON ALL OTHER MATTERS.
Please sign exactly as your name appears hereon. Jointly owned shares
will be voted as directed if one owner signs unless another owner instructs to
the contrary, in which case the shares will not be voted. If signing in a
representative capacity, please indicate title and authority.
Date: __________________, 1998
______________________________
Signature
______________________________
Signature (if held jointly)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.