SCHEDULE 14A INFORMATION
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ATS MEDICAL, INC.
(Name of Registrant as Specified in its Charter)
_______________________________________________
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[LOGO] ATS MEDICAL, INC.
Dear Fellow Shareholder:
You are cordially invited to attend the 1999 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, May 6, 1999.
This booklet contains your official notice of the 1999 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
1999 ANNUAL MEETING OF
SHAREHOLDERS
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
The 1999 Annual Meeting of Shareholders of ATS Medical, Inc. (the
"Company") will be held on Thursday, May 6, 1999 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 ratify the selection of Ernst & Young LLP as independent
auditors of the Company for the year ending December 31, 1999;
and
3. 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, 1999 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, 1999
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 1999 Annual Meeting of Shareholders to be
held on Thursday, May 6, 1999 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, 1999.
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 1999 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
1
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, 1999. 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, 58, 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 764,746 shares of Common Stock (4.3% of the outstanding),
including 92,000 shares issuable upon exercise of currently exercisable options.
RICHARD W. KRAMP, 53, 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 511,365 shares of Common
Stock (3.5% of the outstanding), including 19,854 shares issuable upon exercise
of currently exercisable options. Mr. Kramp is also a Director of MedAmicus,
Inc., a company engaged in the design, development, manufacture and marketing of
medical products for the gynecology, urology and cardiology markets.
DAVID L. BOEHNEN, 52, 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.
2
Mr. Boehnen was elected as a Director of the Company in November of 1997. Mr.
Boehnen beneficially owns 10,500 shares of Common Stock, including 7,500 shares
issuable upon exercise of currently exercisable options.
CHARLES F. CUDDIHY, JR., 72, 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 47,000 shares of Common Stock, including 45,000 shares
issuable upon exercise of currently exercisable options.
A. JAY GRAF, 51, 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 12,500 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 1998. 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 two formal meetings during 1998 and, in addition, adopted one written
action. The Company does not have a standing nominating committee. The Board of
Directors held five meetings during 1998. 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
3
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.
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 1998 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 1998 $231,441 $ 76,607 0 $ 0
Chief Executive Officer 1997 216,300 64,890 15,000 0
1996 216,300 21,630 30,000 0
Richard W. Kramp 1998 189,262 58,861 0 2,500
Chief Oper. Officer 1997 180,250 54,075 15,000 2,375
1996 180,250 18,205 27,500 2,375
Russell W. Felkey 1998 168,000 53,928 0 2,500
Exec. Vice President 1997 160,000 38,000 15,000 2,375
1996 153,383 15,072 30,000 2,375
John H. Jungbauer 1998 129,938 40,411 0 2,500
Chief Financial Officer 1997 123,750 30,938 65,000 2,375
1996 115,532 11,250 30,000 2,375
Frank R. Santiago 1998 126,280 41,730 20,000 1,793
V.P., Sales and Marketing 1997 0 0 0 0
1996 0 0 0 0
- ---------------
(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.
4
COMPENSATION AGREEMENTS
Mr. Villafana continues to serve as Chairman and Chief Executive
Officer of the Company on a full-time basis through December 31, 2000, 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 compensation 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 compensation 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 1998.
Potential Realizable Value
Number of Percentage of At Assumed Annual Rates of
Securities Total Options Stock Price Appreciation
Underlying Granted to Exercise or for Option Term (2)
Options Employees in Base Price Expiration --------------------------
Name Granted (1) 1998 ($/Sh) Date 5% ($) 10% ($)
- ---- ----------- ------------- ----------- ---------- --------------------------
Mr. Villafana 0 0% -- -- -- --
Mr. Kramp 0 0% -- -- -- --
Mr. Felkey 0 0% -- -- -- --
Mr. Jungbauer 0 0% -- -- -- --
Mr. Santiago 20,000 80% $5.875 8/11/08 $73,900 $187,264
- ---------------
(1) 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.
5
STOCK OPTION EXERCISES IN LAST FISCAL YEAR
The following table summarizes stock options exercised during 1998
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, 1998.
Number of Shares Value of Unexercised
Underlying Unexercised In-The-Money Options
Shares Options at End of 1998 at End of 1998 (1)
Acquired Value --------------------------- ---------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ---------- ----------- ------------- ----------- -------------
Mr. Villafana 0 $ 0 88,250 26,250 $241,828 $21,797
Mr. Kramp 336,444 2,051,773 16,729 25,000 9,366 21,797
Mr. Felkey 0 0 121,750 26,250 499,266 21,797
Mr. Jungbauer 0 0 94,250 63,750 219,891 21,797
Mr. Santiago 0 0 6,875 40,625 9,570 51,211
- ---------------
(1) Value represents the difference between the last sale price of the Common
Stock on December 31, 1998, 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 1998 and the employment of the five executive officers named in the
Summary Compensation Table had been immediately terminated, then Messrs.
Villafana, Kramp, Felkey, Jungbauer and Santiago would have been entitled to
receive, pursuant to the terms of the Agreements, lump sum payments upon
termination of $673,714, $581,855, $499,366, $379,194 and $396,000,
respectively.
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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 the 1998 Employee Stock Purchase Plan (the "Purchase Plan").
The Compensation Committee is composed entirely of outside directors
of the Company. During 1998, the Board elected Messrs. Cuddihy and Graf to serve
on the Compensation Committee. 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 have depended upon the performance of the
Company and the individual executive. The Committee generally makes a
determination as to salaries for the current calendar and reviews bonuses to be
awarded for the prior year at the end of the calendar year or at the beginning
of the following year.
7
In 1998, the Compensation Committee decided to formalize and
increase the performance-based component of the Company's bonus program to the
Company's executive employees by implementing the Management Incentive
Compensation Plan (the "MICP"). In particular, bonuses to be granted to
executive employees pursuant to the MICP were tied to a grid representing
year-over-year increases in sales and operating income. The Compensation
Committee and each executive officer also develop annual individual objectives
which would allow for an additional 1% of salary bonus for each objective
completed, for up to a total of 5% salary bonus.
In addition, the Compensation Committee, in consultation with the
Chief Executive Officer, generally grants stock options to its executive
officers on an annual basis 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, matching contributions to the Company's 401(k) program and
discounting the purchase of a certain number of shares of the Company's Common
Stock pursuant to the Stock Purchase Plan.
The Compensation Committee took the following actions with respect
to executive compensation for 1998:
o At a meeting held January 26, 1998, as part of its effort to
formalize and increase the performance-based component of
executive compensation, the Compensation Committee implemented
the Company's MICP.
o Each executive officer earned a bonus of 28.3% of 1998 salary
plus from 3 to 5% of 1998 salary bonus for completion of
individual objectives. When considering granting these
bonuses, the Committee looked primarily at the Company's
revenue and operating income increase in 1998 over 1997.
o In June of 1998, Mr. Santiago was named Vice President of
Sales and Marketing of the Company. Mr. Santiago was granted
an option to acquire 20,000 shares of the
8
Company's common stock in recognition of his new
responsibilities and in an attempt to align his interests with
the interests of the shareholders by tying a substantial
portion of his future compensation to the Company's stock
performance. The stock option vests incrementally over four
years, which also provides an incentive for continued
employment with the Company.
In 1999, the Committee intends to continue to place an 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 operating income during 1999 as the primary
criteria for determining the size of bonuses to be paid to executive officers
for 1999. Finally, although the Committee did not grant any stock options to the
Company's executive officers in 1998 (other than to Mr. Santiago), the Committee
will use stock options as part of executive compensation in 1999 to provide
additional performance incentives.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
During 1998, the Compensation Committee reviewed the Company's and
Mr. Villafana's performance in order to establish Mr. Villafana's compensation.
Mr. Villafana received a salary increase in 1998 over 1997 of 7% and a salary
increase in 1999 over 1998 of 5%. In addition, Mr. Villafana received a bonus
consisting of 33.1% of his 1998 annual salary. 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.
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 1999.
Charles F. Cuddihy, Jr.
A. Jay Graf
9
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. Santiago became an executive officer of the Company in June
1998, and Mr. Santiago also did not file a Form 4 on a timely basis to report
his purchase of 1,000 shares of Common Stock in August 1998. These transactions
were reported on Form 3 and Form 5 respectively, filed in February 1999.
10
COMPARATIVE STOCK PERFORMANCE GROWTH
The graph below compares the cumulative total shareholder return on
the Common Stock since December 31, 1993 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, 1993 and reinvestment of all dividends).
[PLOT POINT GRAPH]
Name 1993 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------------------------------
ATS MED INC 100.00 73.33 164.44 137.78 92.23 124.44
Standard & Poors 500 100.00 101.60 139.71 172.18 229.65 294.87
NASDAQ Medical Dev/Ins/Sup 100.00 106.36 161.41 151.19 173.21 195.82
Medical Suppliers 100.00 124.34 192.92 242.57 358.47 506.85
Starting in 1999, the Company began to compare the performance of
its common stock with the Nasdaq Medical Index (the "Nasdaq Index") instead of
the Medical Suppliers Index which it has used in the past. The Company decided
to change indexes because it believes that the Nasdaq Index tracks the
performance of companies which are more similar to the Company in size and
products offered than the companies tracked by the Medical Supplies Index.
11
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, 1999.
Common Stock Beneficially Owned
--------------------------------------------
Beneficial Owner Number of Shares Percent of Outstanding (2)
- ---------------- ---------------- --------------------------
Awad Asset Management, Inc. (2) 2,071,992 11.6%
250 Park Avenue, 2nd Floor
New York, NY 10177
ITOCHU Corporation (3) 1,568,940 8.8%
5-1, Kita-Aoyama 2-Chome
Minato, Tokyo 107-77, Japan
Manuel A. Villafana (4) 764,746 4.3%
Richard W. Kramp (4) 511,365 2.9%
Russell W. Felkey (4) 125,728 *
John H. Jungbauer (4) 114,729 *
Frank R. Santiago (4) 7,875 *
All directors and executive officers 1,598,443 8.7%
as group (eight persons) (4)
- ---------------
* Less than 1%
(1) The ownership percentage for each person or entity is calculated based on
the number of shares outstanding as of February 1, 1999.
(2) The number of shares owned is based on a Schedule 13G filed by Awad Asset
Management, Inc. ("Awad") on February 12, 1999. The Schedule 13G indicates
that Awad has sole voting power and direct ownership of 2,071,992 shares.
Awad filed the Schedule 13G as an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940.
(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 and investment power over 784,470
shares and shared voting and investment power over 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, 92,000; Mr. Kramp, 19,854;
Mr. Felkey, 125,500; Mr. Jungbauer, 110,500; Mr. Santiago, 6,875; and all
executive officers and directors as a group, 419,729.
12
PROPOSAL 2 -
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, 1999 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 1999 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, 1999, the Company had outstanding 17,838,679 shares of
Common Stock. Each holder of record of Common Stock as of the close of business
on March 19, 1999 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 2000 ANNUAL MEETING
Any proposal by a shareholder to be presented at the 2000 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, 1999. In addition,
the form of Proxy issued with this Proxy Statement will confer discretionary
authority to vote for or against any proposal made by a shareholder at the 1999
Annual Meeting of Shareholders and which is not included in this Proxy
Statement. However, under the rules of the Securities and Exchange Commission,
such discretionary authority may not be exercised if the shareholder proponent
has given the Secretary of the Company notice of such proposal prior to February
15, 2000, and certain other conditions provided for in the Commission's rules
have been satisfied.
13
GENERAL
The Board of Directors of the Company does not know of any other
business to come before the 1999 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 judgment.
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, 1999
14
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, 1999, appoints John H. Jungbauer 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 1999 Annual Meeting of Shareholders of
ATS Medical, Inc., to be held on May 6, 1999 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. RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED AND TO BE SIGNED AND DATED ON THE OTHER SIDE)
3. 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 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:_________________________________, 1999
____________________________________________
SIGNATURE
____________________________________________
SIGNATURE (IF HELD JOINTLY)
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE