SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE SPECTRANETICS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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THE SPECTRANETICS CORPORATION
96 TALAMINE COURT
COLORADO SPRINGS, CO 80907
(719) 633-8333
------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 14, 1998
The Annual Meeting of the Shareholders of THE SPECTRANETICS
CORPORATION will be held at the Colorado Springs Marriott, 5580 Tech
Center Drive, Colorado Springs, Colorado, on Thursday, May 14, 1998 at
10:00 a.m. for the following purposes:
1. To elect three (3) members of the Board of Directors to serve
three-year terms until the 2001 Annual Meeting of Shareholders, or
until successors are elected and have been duly qualified.
2. To adopt an amendment to the Restated Certificate of
Incorporation to increase the authorized capital stock of the
Company to 65,000,000 shares, 60,000,000 of which shall be common
stock and 5,000,000 of which shall be preferred stock.
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the current fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
Only shareholders of record as of the close of business on March
30, 1998, the record date, will be entitled to notice of and to vote at
the Annual Meeting and any adjournments or postponements thereof.
WE HOPE YOU WILL BE ABLE TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND, PLEASE DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ACCOMPANYING ADDRESSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. SHAREHOLDERS WHO
ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON IF THEY
SO DESIRE.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James P. McCluskey
---------------------------------
James P. McCluskey
Secretary/Treasurer
Colorado Springs, Colorado
April 2, 1998
[LOGO]
THE SPECTRANETICS CORPORATION
96 TALAMINE COURT
COLORADO SPRINGS, CO 80907
(719) 633-8333
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 14, 1998
PROXY STATEMENT
---------------------
SOLICITATION OF PROXIES
This Proxy Statement is furnished to shareholders in connection with the
Solicitation of Proxies by the Board of Directors of THE SPECTRANETICS
CORPORATION (the "Company" or "SPNC") for use at the Annual Meeting of
Shareholders of the Company (the "Meeting") to be held at the Colorado
Springs Marriott, 5830 Tech Center Drive, Colorado Springs, Colorado, on May
14, 1998, at 10:00 a.m. and at any adjournments or postponements thereof.
This Proxy Statement and Proxy are being mailed to Shareholders on or about
April 2, 1998.
The cost of soliciting Proxies is being borne by the Company. In
addition to the mailings, the Company's officers, directors and other regular
employees, without additional compensation, may solicit Proxies by telephone
or by oral communication or by other appropriate means.
If the enclosed Proxy is properly executed, returned and unrevoked, the
shares represented thereby will be voted in the manner specified. If no
specification is made in an executed Proxy received by the Company, then the
Proxy shall be voted FOR (i) the election of the three (3) nominees to the
Board of Directors listed herein; (ii) approval to adopt an amendment to the
Restated Certificate of Incorporation increasing the authorized capital stock
of the Company; and (iii) ratification of the appointment of KPMG Peat
Marwick LLP as the Company's independent auditors. A Proxy may be revoked by
a shareholder at any time prior to the exercise thereof by written notice to
the Secretary of the Company, by submission of another Proxy bearing a later
date, or by attending the Meeting and voting in person.
Discretionary authority is provided in the Proxy as to matters not
specifically referred to therein. The Board of Directors is not aware of any
other matters which are likely to be brought before the Meeting. However, if
any such matters properly come before the Meeting, the Proxy holder or
holders are fully authorized to vote thereon in accordance with the Proxy
holder's or holders' judgment and discretion.
RECORD DATE AND VOTING SECURITIES
Only holders of record of the Company's $.001 par value common stock
("Common Stock") outstanding as of the close of business on March 30, 1998, will
be entitled to notice of and to vote on matters presented at the Meeting or any
adjournment or postponement thereof. On March 30, 1998, there were outstanding
18,777,231 shares of Common Stock, which constituted all the outstanding voting
securities of the Company. Each share of Common Stock will be entitled to one
vote on all matters presented at the Meeting, and there is no cumulative voting.
In order to constitute a quorum for the conduct of business at the Meeting, a
majority of the outstanding shares of Common Stock entitled to vote at the
Meeting must be represented at the Meeting. Shares represented by Proxies that
reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee which are represented at the Meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal) will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum.
-1-
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to the number of shares
of Common Stock of SPNC beneficially owned as of February 28, 1998, by (i)
each of SPNC's Directors; and (ii) the Named Executive Officers (as defined
on page 5 hereof); and (iii) all of the current executive officers and
Directors of SPNC as a group. Except as otherwise indicated, SPNC believes
that the beneficial owners of the Common Stock listed below, based solely on
information furnished by such holders, have sole voting and dispositive power
with respect to such shares, subject to community property laws, where
applicable. "Percent Beneficially Owned" is based on shares of Common Stock
outstanding on February 28, 1998. SPNC did not have any 5% shareholders as
of February 28, 1998.
SHARES BENEFICIALLY OWNED
---------------------------------
PERCENTAGE
NUMBER OF BENEFICIALLY
NAME AND ADDRESS SHARES OWNED
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DIRECTORS AND NAMED EXECUTIVE OFFICERS (1)
Gary R. Bang (2) 32,200 *
Cornelius C. Bond, Jr. (3) 57,908 *
Emile J. Geisenheimer (4) 170,364 *
Joseph A. Largey (5) 196,928 1.0%
James A. Lent (6) 35,000 *
Joseph M. Ruggio, M.D.(7) 28,500 *
John G. Schulte(8) 25,000 *
Henk Kos (9) 92,604 *
James P. McCluskey (10) 95,934 *
Lawrence E. Martel, Jr. (11) 94,206 *
Adrian E. Elfe (12) 87,603 *
All current executive officers and
Directors as a group (13 persons) (13) 995,762 5.1%
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* less than 1%
(1) The address of each of the Directors and the Named Executive Officers
listed herein is c/o The Spectranetics Corporation, 96 Talamine Court,
Colorado Springs, CO 80907.
(2) Includes options for 25,000 shares which are exercisable within 60 days
of February 28, 1998.
(3) Includes options for 40,224 shares which are exercisable within 60 days
of February 28, 1998.
(4) Includes options for 160,000 shares which are exercisable within 60
days of February 28, 1998.
(5) Includes options for 185,428 shares which are exercisable within 60
days of February 28, 1998.
(6) Includes options for 25,000 shares which are exercisable within 60 days
of February 28, 1998.
(7) Includes options for 25,000 shares which are exercisable within 60 days
of February 28, 1998.
(8) Includes options for 25,000 shares which are exercisable within 60 days
of February 28, 1998.
(9) Includes options for 71,562 shares which are exercisable within 60 days
of February 28, 1998.
(10) Includes options for 92,061 shares which are exercisable within 60 days
of February 28, 1998.
(11) Includes options for 82,071 shares which are exercisable within 60 days
of February 28, 1998.
(12) Includes options for 75,603 shares which are exercisable within 60 days
of February 28, 1998.
(13) Includes options for 824,886 shares which are exercisable within 60
days of February 28, 1998.
-2-
BOARD OF DIRECTORS
The following table lists the members of the Board of Directors of SPNC,
their ages, their positions and offices with the Company, the year first elected
as a director, and the expiration of their current term.
POSITIONS WITH THE DIRECTOR TERM
NAME AGE COMPANY SINCE EXPIRES
- -------------------------------------------------------------------------------
Joseph A. Largey 51 President, Chief Executive 1997 2000
Officer and Director
Gary R. Bang(1) 51 Director 1995 1998
Cornelius C. Bond, Jr.(1) 63 Director 1994 1998
Emile J. Geisenheimer 50 Chairman of the Board of 1990 1999
Directors
James A. Lent 55 Director 1995 2000
Joseph M. Ruggio, M.D(1) 43 Director 1997 1998
John G. Schulte 49 Director 1996 1999
- -------------------
(1) Recommended for re-election to the Board for a three-year term.
The Board of Directors is divided into three classes, designated Class I,
Class II and Class III. Each class shall consist, as nearly as may be possible,
of one-third of the total number of directors constituting the entire Board of
Directors. At each annual meeting only directors of the class whose term is
expiring will be voted upon, and upon election each such director will serve a
three-year term. The Board of Directors may determine from time to time the
size of the Board of Directors, but in no event can it determine to have a Board
consisting of not less than four nor more than eight directors. If the number
of directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as near equal as
possible, and any additional directors of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director will hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and qualified, subject,
however, to prior death, resignation, retirement, disqualification or removal
from office.
The Company is not aware of any family relationships among any of the
directors and executive officers of the Company.
DIRECTORS COMPENSATION
Currently, non-employee Directors are eligible to participate in the
Company's 1997 Equity Participation Plan (the "Plan"), which was approved by
shareholders on June 10, 1997. The Plan provides that any newly elected
non-employee Director will be granted a non-qualified stock option to purchase
75,000 shares of Common Stock at the then fair market value, which vests equally
over a three-year period. On every third anniversary of each grant, for so long
as each non-employee Director remains on the Board, he or she will receive an
option to purchase 75,000 shares of Common Stock at the then fair market value,
which vests equally over three years. The exercise price is equal to the closing
price of the stock as traded on the Nasdaq National Market on the date of grant.
Non-employee Directors receive $2,500 for each Board meeting attended in
person and $1,000 for meetings attended by telephone. Board members are
reimbursed for expenses associated with their attendance at Board meetings and
committee meetings. Board members also receive $2,500 per day when serving as a
consultant to the Company. The Chairman of the Board receives a retainer of
$10,000 per month for consulting services rendered to the Company.
-3-
BOARD COMMITTEES AND MEETINGS
In 1997, the Board of Directors met seven times and executed two unanimous
written consents. No Director attended fewer than 75% of the Board meetings.
The Company has established an Audit Committee comprised of Messrs. Bond, Lent
and Schulte who met one time in 1997 to review the services rendered by
independent auditors and to analyze accounting procedures of the Company. The
Board has established a Compensation Committee, consisting of Messrs. Lent, Bond
and Bang, which met four times in 1997 to review and approve the Company's
compensation and benefit plans. The Compensation Committee also approves stock
option grants to Company employees.
BUSINESS EXPERIENCE OF DIRECTORS
Joseph A. Largey joined SPNC in March 1997 as President, Chief Executive
Officer and a Director. Prior to joining SPNC, he served as executive vice
president for the International Division of Picker International, Inc., a
subsidiary of G.E.C. plc. since November 1985.
Gary R. Bang has served as a Director of SPNC since November 1995. Since
May 1997, when Target Therapeutics, Inc. was sold to Boston Scientific
Corporation, Mr. Bang has managed his private investments and pursued various
personal interests. From May 1993 to April 1997, he served as president, chief
executive officer and a director of Target Therapeutics, Inc., a medical device
company specializing in the treatment of vascular diseases of the brain. From
1973 to April 1993, Mr. Bang held various positions with Baxter International,
the most recent of which was president of the Pharmaseal Surgical Division.
Cornelius C. Bond, Jr. has served as a Director of SPNC since June 1994.
He served as a member of the Board of Directors for Advanced Interventional
Systems, Inc. ("LAIS") from 1986 until June 1994 when LAIS merged into SPNC.
Mr. Bond has been a general partner of NEA Partners III, Limited Partnership, a
venture capital firm, since 1981, and is a director of several privately-held
companies.
Emile J. Geisenheimer has served as a Director of SPNC since April 1990 and
was appointed Chairman of the Board in June 1996. He has served as president of
Madison Investment Partners, Inc., a private equity investment firm, since
January 1995. Prior to forming Madison Investment Partners, he was general
partner of Nazem and Company, a venture capital management firm, from November
1989 to January 1995.
James A. Lent has served as a Director of SPNC since November 1995. Since
May 1995, Mr. Lent has served as chairman, chief executive officer, and director
of DePuy, Inc., an orthopedic supply company, which is a wholly-owned subsidiary
of Corange Ltd. He served as president and chief executive officer of DePuy,
Inc. from January 1985 to May 1995.
Joseph M. Ruggio, M.D. has served as a Director of SPNC since February
1997. Since June 1994, Dr. Ruggio has served as president, chief executive
officer, and director of Pacific Cardiovascular Associates Medical Group, Inc.,
a large cardiovascular professional corporation. He also serves as president,
chief executive officer, and director of Via Vitae, a cardiovascular disease
management company, which was founded in February 1996. Dr. Ruggio serves as
founder and chairman of UltiMed, Inc., a cardiovascular medical services
organization, which was founded in July 1995. From August 1985 to December
1995, Dr. Ruggio served as Chairman of the Department of Cardiology and Director
of Invasive Interventional Cardiology for FHP, Inc.
John G. Schulte has served as a Director of SPNC since August 1996. In
July 1997, Mr. Schulte was appointed president of the Surgical Products Division
of Genzyme Corporation, a medical device company specializing in anti-adhesion
products for general surgery and cardiovascular medical devices and instruments.
From November 1996 to June 1997, he served as senior vice president and general
manager of the International and Peripheral Division of Target Therapeutics,
Inc., a medical device company specializing in the treatment of vascular
diseases of the brain. From January 1992 to July 1996, Mr. Schulte served as
president of three separate divisions of C. R. Bard, Inc., a medical device
company specializing in invasive diagnostic cardiology.
-4-
EXECUTIVE OFFICERS
The current executive officers of the Company are as follows:
NAME AGE OFFICE
- ----------------------- ---- ------------------------------------
Joseph A. Largey 51 President and Chief Executive Officer
Henk Kos 53 Vice President, Sales and Marketing
Lawrence E. Martel, Jr. 47 Vice President, Operations
James P. McCluskey 45 Vice President, Finance, Chief
Financial Officer, Secretary and
Treasurer
Adrian E. Elfe 53 Vice President, Quality Assurance/
Regulatory Affairs
Christopher Reiser 43 Vice President, Engineering
Each executive officer of the Company serves at the discretion of the Board
of Directors. The Company is not aware of any family relationships among any of
the directors and executive officers of the Company. Biographical information
regarding Mr. Largey is set forth under the heading "BUSINESS EXPERIENCE OF
DIRECTORS."
Adrian E. Elfe was appointed Vice President, Quality Assurance and
Regulatory Affairs in November 1996. He served as Director of Quality Assurance
and Regulatory Compliance since first employed by SPNC in April 1990. Prior to
joining SPNC, Mr. Elfe directed quality system planning and implementation for
nine different companies.
Henk Kos was appointed as Vice President, Sales and Marketing in February
1997. Prior to that time, Mr. Kos served as the General Manager of
Spectranetics International, B.V. in the Netherlands since first employed by
SPNC in January 1993. Prior to joining SPNC, Mr. Kos was an independent
consultant.
Lawrence E. Martel, Jr. was appointed Vice President, Operations of SPNC in
August 1994 and served as director of operations since first employed by SPNC in
January 1993. Prior to that time, he served nine years as vice president of
operations with Mountain Medical Equipment, Inc., a manufacturer of respiratory
medical devices for use in the home health care and health institutional
markets.
James P. McCluskey was appointed Chief Financial Officer of SPNC in June
1995. He was appointed Secretary and Treasurer of SPNC in June 1994. In August
1994, he was named Vice President, Finance of SPNC. From January 1992 to August
1994, he served as corporate controller for SPNC. He joined SPNC in January
1991 as the financial reporting manager.
Christopher Reiser, Ph.D was appointed Vice President, Engineering in
November 1997. Prior to that time, he served as Director of Engineering of SPNC
since December 1993. Dr. Reiser joined SPNC in December 1992 as Manager of
Laser Product Development. From January 1989 to October 1992, he served as
director of technology at Cymer Laser Technologies, a manufacturer of excimer
laser systems for the semiconductor industry.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation paid
by SPNC for the fiscal years ended December 31, 1997, 1996 and 1995 to those
persons who were either (i) the Chief Executive Officer of the Company during
the last completed fiscal year or (ii) one of the other four most highly
compensated executive officers who were serving as executive officers on
December 31, 1997, whose total annual salary and bonus exceeded $100,000 (the
"Named Executive Officers"):
-5-
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- -------------
NAME AND PRINCIPAL OTHER ANNUAL
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION OPTIONS (#)
- ------------------------------------------------------------------- -------------
Joseph A. Largey(1) 1997 $201,923 $150,000(2) $31,5753 575,000
President and Chief 1996 ---- ---- ---- ----
Executive Officer 1995 ---- ---- ---- ----
E. Wyatt Cannady(4) 1997 $115,337 $ ---- ---- ----
1996 175,000 17,775(6) ---- ----
1995 175,000 ---- ---- 100,000
Henk Kos 1997 $181,503 $ 47,839(5) $87,452(7) 60,000
Vice President, Sales 1996 181,650 12,500(6) 31,000(8) 85,000
and Marketing 1995 186,126 ---- 30,000(8) ----
James P. McCluskey 1997 $100,000 $ 18,824(5) ---- ----
Vice President, 1996 94,462 12,725(6) ---- 25,000
Finance, Chief Financial 1995 87,885 ---- ---- ----
Officer, Secretary,
Treasurer
Lawrence E. Martel, Jr. 1997 $95,000 $ 22,232(5) ---- ----
Vice President, 1996 87,769 11,835(6) ---- 25,000
Operations 1995 80,000 ---- ---- ----
Adrian E. Elfe 1997 $93,306 $ 13,340(5) ---- ----
Vice President, 1996 83,277 8,075(6) ---- 5,000
Regulatory Affairs/ 1995 82,200 ---- ---- ----
Quality Assurance
(1) Mr. Largey was appointed to the position of President and Chief Executive
Officer in March 1997.
(2) Incentive compensation bonus of $100,000 paid during 1998 for services
rendered in 1997; and signing bonus of $50,000 paid during 1997.
(3) Relocation reimbursement of $23,213 paid during 1997; life insurance of
$5,362, and auto allowance of $3,000.
(4) Mr. Cannady resigned as Chief Executive Officer of SPNC in February 1997.
(5) Incentive compensation bonus paid during 1998 for services rendered in 1997.
(6) Incentive compensation bonus paid during 1997 for services rendered in 1996.
(7) Relocation reimbursement of $44,452 paid during 1997; housing allowance of
$24,000; and auto allowance of $19,000.
(8) Includes lease payments on automobile.
-6-
GRANTS OF STOCK OPTIONS
The following table sets forth certain information with respect to
individual grants of stock options to the Named Executive Officers during the
year ended December 31, 1997.
OPTIONS GRANTED IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL
- -------------------------------------------------------------- REALIZABLE
VALUE AT ASSUMED
ANNUAL
% OF TOTAL RATES OF STOCK PRICE
OPTIONS EXERCISE APPRECIATION FOR
GRANTED TO OR BASE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR ($/Sh) DATE 5% ($) 10% ($)
- ------------------------------------------------------------------------------------
Joseph A. Largey 575,000(2) 63.72% $3.3125 3/03/07 1,197,848 3,035,581
Henk Kos 60,000(3) 6.65% $3.0000 8/05/07 113,201 286,874
(1) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates
of appreciation only. Potential gains are net of the exercise price, but
before taxes associated with the exercise. Amounts represent hypothetical
gains that could be achieved for the respective options if exercised at
the end of the option term. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with the rules of the Securities
and Exchange Commission and do not represent the Company's estimate or
projection of the future Common Stock price. Actual gains, if any, on
option exercises are dependent upon the future financial performance of
the Company, overall market conditions and the option holders' continued
employment through the vesting period. This table does not take into
account any appreciation in the price of the Common Stock from the date of
grant to the date of this Proxy Statement other than the columns
reflecting assumed rates of appreciation of 5% and 10%.
(2) Includes 25,000 shares vested on March 3, 1997; 137,512 shares vested on
March 3, 1998, and 11,458 shares to vest on the third day of each month
thereafter.
(3) Options vest 25% as of August 5, 1998, and 6.25% on the third day of each
month thereafter.
-7-
STOCK OPTION EXERCISES AND FISCAL YEAR-END STOCK OPTION VALUE
Set forth in the table below is information concerning the value of stock
options held on December 31, 1997 by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
SHARES NUMBER OF VALUE OF UNEXERCISED,
ACQUIREZD UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ON VALUE HELD AT FISCAL YEAR END (#) FISCAL YEAR END ($)(1)
EXERCISE REALIZED ------------------------------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------
Joseph A. Largey ---- ---- 25,000 550,000 ---- ----
James P. McCluskey ---- ---- 90,499 15,625 $161,546 ----
Henk Kos ---- ---- 67,812 127,188 50,661 $17,332
Lawrence E. Martel, Jr. 6,783 $12,439 85,292 15,625 154,317 ----
Adrian E. Elfe ---- ---- 75,291 3,125 120,695 ----
E. Wyatt Cannady ---- ---- 300,000 ---- 638,325 ----
(1) Amounts are based on the closing price of SPNC's stock, as reported on the
Nasdaq National Market, at December 31, 1997 ($3.125), minus the exercise
price of the option, multiplied by the number of shares to which the option
relates.
COMPENSATION COMMITTEE REPORT
Decisions with regard to the compensation of SPNC's executive officers,
including the Named Executive Officers, are generally made by a three-member
Compensation Committee of the Board. Each member of the Committee is a
non-employee Director. Decisions about awards under certain of SPNC's
stock-based compensation plans are made by the Committee and reported to the
Board. All other decisions by the Committee relating to compensation of SPNC's
executive officers are reviewed by the Board. Generally, the Committee meets
in January following the end of a particular fiscal year to consider prospective
calendar-year salary adjustments, as well as to consider bonus compensation for
above-average performance of executive officers during the prior calendar year.
In addition, the Committee meets on an as-needed basis before Board meetings.
EXECUTIVE OFFICER COMPENSATION POLICIES
The Committee's executive compensation policies are designed to provide
competitive levels of compensation that integrate pay with SPNC's performance,
recognize individual initiative and achievements, and assist SPNC in attracting
and retaining qualified executives. The Committee relies in large part on
independent compensation studies for the determination of competitive
compensation.
In order to implement these objectives, SPNC has developed a
straightforward compensation approach. In general, SPNC compensates its
executive officers through a combination of base salary, annual incentive
compensation in the form of cash bonuses, and long-term incentive compensation
in the form of stock options. In addition, executive officers participate in
benefit plans, including medical, dental, stock purchase and 401-K, that are
available generally to SPNC's employees.
BASE SALARY
Base salary levels for SPNC's executive officers are set generally to be
competitive and targeted at the median range in relation to the salary levels of
executive officers in other companies within the medical device industry or
other companies of comparable size, taking into consideration the position's
complexity, responsibility and need for special expertise. In reviewing
salaries in individual cases the Compensation Committee also takes into account
individual experience and performance. In establishing the salary levels
against the range of
-8-
comparable companies, the Compensation Committee considered only salaries and
did not consider the competitiveness of the total compensation package.
ANNUAL INCENTIVE COMPENSATION
The Compensation Committee reviews and approves all bonus payments made to
SPNC's executive officers. Payment of bonuses is determined by both corporate
and individual performance criteria. In 1997 the bonuses for executive officers
were based on meeting performance targets for revenue, net income and cash
usage. These bonuses ranged from 14 percent to 25 percent for the executive
officers and up to 50 percent for the president and chief executive officer.
LONG-TERM INCENTIVE COMPENSATION
SPNC provides long-term incentive compensation through its stock option
plan. The number of shares covered by any grant is generally determined by the
position, the executive officer's salary at the time of grant, amounts granted
in previous years, and the then current stock price. In special cases, however,
grants may be made to reflect increased responsibilities or reward extraordinary
performance.
COMPENSATION PAID TO THE CHIEF EXECUTIVE OFFICER
Effective March 3, 1997, Joseph A. Largey was named President and Chief
Executive Officer of the Company. The Board established Mr. Largey's
compensation package based upon the general factors discussed above and upon an
evaluation of compensation paid to chief executive officers at comparable public
companies and other companies in SPNC's industry. Mr. Largey's compensation
package includes base salary, an annual bonus incentive program, an initial
stock option grant plus additional grants annually to be issued on the
anniverary date of his joining the Company. Mr. Largey also received a signing
bonus and an additional stock option to compensate him for the loss of a bonus
at his previous employer. The Company will pay for Mr. Largey's relocation to
Colorado Springs, Colorado. In the event Mr. Largey is terminated by the
Company without cause, he will be provided 12 months' severance compensation.
Pursuant to the terms of the offer letter dated January 15, 1997, between
Joseph A. Largey and The Spectranetics Corporation, Mr. Largey received a base
salary of $250,000 and a bonus opportunity of up to $100,000, of which $75,000
was guaranteed. In addition, a $50,000 signing bonus was paid due to a loss of
a bonus at Mr. Largey's previous employer. SPNC granted Mr. Largey a stock
option to purchase 575,000 shares at date of hire with a vesting rate of: 25,000
shares vesting on March 3, 1997; 137,512 shares vesting on March 3, 1998; and
11,458 shares vesting on the third day of each month thereafter. In the event
Mr. Largey is terminated by the Company without cause, he will be provided 12
months' severance compensation.
CERTAIN TAX CONSIDERATIONS
During 1995, the Internal Revenue Code of 1986 (the "Code") was amended to
include a provision which denies a deduction to any publicly-held corporation
for compensation paid to any "covered employee" (defined as the Chief Executive
Officer and the corporation's other four most highly compensated officers, as of
the end of a taxable year) to the extent that the compensation exceeds $1
million in any taxable year of the corporation beginning after 1993.
Compensation which is payable pursuant to written binding agreements entered
into before February 18, 1993, and compensation which constitutes
"performance-based compensation" is excludable in applying the $1 million limit.
It is SPNC's policy to qualify compensation paid to its top executives, in a
manner consistent with SPNC's compensation policies, for deductibility under the
new law in order to maximize SPNC's income tax deductions.
Gary R. Bang
Cornelius C. Bond, Jr.
James A. Lent
-9-
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph set forth below compares the cumulative
total shareholder return on SPNC Common Stock for the period from December 31,
1992, to December 31, 1997, with the cumulative total return on the Nasdaq
Composite Index and a peer group index over the same period (assuming the
investment of $100 in SPNC Common Stock, the Nasdaq Composite Index and the peer
group index on December 31, 1992, and reinvestment of all dividends).
[GRAPH]
- --------------------------------------------------------------------------------
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- --------------------------------------------------------------------------------
>
SPNC 100.00 22.88 18.10 34.75 58.78 42.37
- --------------------------------------------------------------------------------
PEER 100.00 70.32 83.04 98.76 84.81 65.55
- --------------------------------------------------------------------------------
NASDAQ 100.00 114.80 112.21 158.70 195.19 239.53
- --------------------------------------------------------------------------------
The peer group selected by SPNC is as follows: InnerDyne Inc. (IDYN);
Laserscope Inc. (LSCP); LaserSight Inc. (LASE); Merit Medical Systems Inc.
(MMSI); Quest Medical Inc. (QMED).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
10% of a registered class of the Company's equity securities, to file initial
reports of ownership and reports of changes in ownership with the Securities and
Exchange Commission (the "SEC") and the National Association of Securities
Dealers ("NASD"). Such persons are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of such forms received by it with
respect to fiscal 1997, or written representations from certain reporting
persons, the Company believes that all of its directors and executive officers
and persons who own more than 10% of the Common Stock have complied with the
reporting requirements of Section 16(a).
-10-
ELECTION OF DIRECTORS
(Proposal No. 1)
The current number of members of the Board of Directors is seven (7). The
terms of Gary R. Bang, Cornelius C. Bond, Jr., and Joseph M. Ruggio, M.D. expire
at this meeting. The Board of Directors recommends that Gary R. Bang, Cornelius
C. Bond, Jr., and Joseph M. Ruggio, M.D. be re-elected for a three-year term to
expire at the Company's Annual Meeting in 2001.
The nominees have expressed their willingness to serve, but if because of
circumstances not contemplated the nominees are not available for election, the
Proxy holders named in the enclosed Proxy form intend to vote for such other
person or persons as management may nominate. If Gary R. Bang, Cornelius C.
Bond, Jr., and Joseph M. Ruggio, M.D. are re-elected to serve on the Board of
Directors, there would remain one (1) vacancy which may or may not be filled by
the Board of Directors in the exercise of its discretion. Information with
respect to each nominee is set forth in the section entitled "BUSINESS
EXPERIENCE OF DIRECTORS."
VOTE AND RECOMMENDATION
Directors will be elected by a favorable vote of a plurality of the shares
of Common Stock present and entitled to vote, in person or by proxy, at the
Annual Meeting. Abstentions as to the election of directors will not affect the
election of the candidates receiving the plurality of votes. Unless instructed
to the contrary, the shares represented by the proxies will be voted FOR the
election of the three nominees named above as directors. Although it is
anticipated that each nominee will be able to serve as a director, should any
nominee become unavailable to serve, the proxies will be voted for such other
person or persons as may be designated by the Board.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF THE THREE PERSONS NOMINATED AS DIRECTORS.
ADOPTION OF AN AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION
(Proposal No. 2)
Presently, the Company's authorized capital stock consists of 25,000,000
shares of Common Stock, par value $.001 per share, and 5,000,000 shares of
Preferred Stock, par value $.001 per share. As of the Record Date, (i) the
Company had outstanding 18,760,721 shares of Common Stock, and (ii) a total of
2,505,359 shares of Common Stock were reserved for issuance upon the exercise of
options granted pursuant to employee and non-employee director stock option and
stock purchase plans and programs.
In March of 1998, the Board of Directors of the Company authorized an
amendment to Article IV, Section I of the Restated Certificate of Incorporation
to increase the authorized number of shares of Common Stock from 25,000,000 to
60,000,000, thereby increasing the total authorized number of shares of all
classes of capital stock from 30,000,000 to 65,000,000, subject to shareholder
approval.
The increase in authorized shares of Common Stock is recommended by the
Board of Directors in order to provide a sufficient reserve of such shares for
the future growth and needs of the Company. If approved by the shareholders of
the Company, such additional authorized Shares would be available for future
issuance for various corporate purposes at the discretion of the Board of
Directors and without further authorization by the shareholders (subject to the
requirements of the Nasdaq National Market). Such purposes might include,
without limitation, the issuance and sale of Common Stock (i) as part or all of
the consideration required to be paid for the acquisition of ongoing businesses
or other assets, (ii) in public or private offerings as a means of obtaining
additional capital to strengthen the Company and expand its business, (iii) to
satisfy any current or future obligation of the Company, (iv) in connection with
the exercise of options, warrants, rights, or the conversation of convertible
securities of the Company, (v) in public or private exchange offers for other
securities of the Company, (vi) as part or all of the consideration to repay or
retire any debt of the Company, (vii) in connection with stock splits and
dividends, or (viii) with respect to existing or new benefit, option or stock
ownership plans or employment agreements. The proposed increase in the number
of authorized shares of Common Stock will not change the number of shares of
-11-
stock outstanding or the rights of the holders of such stock. Shareholders do
not have preemptive rights to acquire the common stock authorized by this
amendment.
Although the Board of Directors will issue Common Stock only when it
considers such issuance to be in the best interest of the Company, the issuance
of additional shares of Common Stock may have, among others, a dilutive effect
on earnings per share of Common Stock and on the equity and voting rights of
holders of shares of Common Stock. The Board of Directors, however, believes
that the benefits of providing the flexibility to issue shares without delay for
any business purpose outweigh these possible disadvantages.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the Company's Common
Stock present or represented at the Annual Meeting voting as a single class is
required to approve the amendment. Abstentions as to this proposal will have
the same effect as votes against such proposal. Broker non-votes, however, will
be treated as unvoted for purposes of determining approval of such proposal and
will not be counted as votes for or against such proposal. Properly executed,
unrevoked proxies will be voted FOR the Proposal unless a vote against the
Proposal or abstention is specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF THE AMENDMENT TO
THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal No. 3)
Action is to be taken by the shareholders at the Meeting with respect to
the ratification of the selection by the Company's Board of Directors, upon
recommendation of the Audit Committee, of KPMG Peat Marwick LLP to be the
independent auditors of the Company for the fiscal year ended December 31, 1998.
KPMG Peat Marwick LLP has served as the Company's independent auditors since
January 1985. KPMG Peat Marwick LLP does not have and has not had at any time
any connection with the Company in the capacity of promoter, underwriter, voting
trustee, director, officer or employee. Neither the Company, nor any officer,
director, or associate of the Company, has any interest in KPMG Peat Marwick
LLP.
A representative of KPMG Peat Marwick LLP will be present at the Meeting
and will have the opportunity to make a statement if he so desires and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF SUCH
APPOINTMENT.
OTHER MATTERS
The Board of Directors knows of no other matters, other than the matters
set forth in this Proxy Statement to be considered at the Meeting. If, however,
any other matters properly come before the Meeting or any adjournment or
adjournments thereof, the persons named in the accompanying Proxy will vote such
Proxy in accordance with their best judgment on any such matter. The persons
named in the accompanying Proxy will also, if in their judgment it is deemed to
be advisable, vote to adjourn the Meeting from time to time.
-12-
DATE OF RECEIPT OF SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the Proxy Statement for the 1999
Annual Meeting of Shareholders must be received at the principal executive
offices of the Company on or before December 15, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James P. McCluskey
James P. McCluskey
Secretary/Treasurer
Dated April 2, 1998
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE
UNITED STATES. A PROMPT RETURN OF YOUR PROXY WILL BE APPRECIATED, AS IT WILL
SAVE THE EXPENSE OF FURTHER MAILING.
-13-
Spectranetics
96 Talamine Court
Colorado Springs, CO 80907
1. Election of Directors
/ / FOR the nominees listed below
(except as marked to the contrary below).
/ / WITHHOLD AUTHORITY to vote for the
nominees listed below
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph A. Largey and James P. McCluskey, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of The Spectranetics Corporation held of record by the
undersigned on March 30, 1998, or with respect to which the undersigned is
otherwise entitled to vote or act, at the Annual Meeting of Shareholders to be
held on May 14, 1998, or any adjournment thereof.
Gary R. Bang,Cornelius C. Bond, Jr., and Joseph M. Ruggio, M.D.
- ------------------------------------------------------------------------------
2. Proposal to adopt an amendment to the Restated Certificate of Incorporation
to increase the authorized capital stock of the Company to 65,000,000
shares, 60,000,000 of which shall be common stock and 5,000,000 of which
shall be preferred stock.
/ / FOR / / AGAINST / / ABSTAIN
3. Proposal to ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the current fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the Proxies are authorized to vote upon such business as
may properly come before the meeting or any adjournment thereof, upon matters
incident to the conduct of the meeting and upon the election of substituted
nominees for Director designated by the Board of Directors if any of the persons
named in Proposal 1 above is unable to serve as a Director.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR PROPOSALS 1, 2
AND 3.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN. IN THE
ABSENCE OF INSTRUCTIONS, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
Receipt of Notice of the Annual Meeting of Shareholders and the accompanying
Proxy Statement is hereby acknowledged. Please sign exactly as name appears
below. When shares are held by joint tenants, both should sign. When signing
as attorney, as executor, administrator, trustee, or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Dated: ______________________________________, 1998
___________________________________________________
Signature of Shareholder
___________________________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.