<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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
ARTHROCARE 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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(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:
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] 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:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
ARTHROCARE CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1999
TO THE STOCKHOLDERS:
Notice is hereby given that the 1999 Annual Meeting of Stockholders of
ArthroCare Corporation, a Delaware corporation (the "company"), will be held on
Friday, May 21, 1999 at 1:00 p.m., local time, at the company's principal
executive offices located at 595 North Pastoria Avenue, Sunnyvale, California
94086 for the following purposes:
(1) To elect directors of the company.
(2) To confirm the appointment of PricewaterhouseCoopers LLP as the
company's independent accountants for the 1999 fiscal year.
(3) To transact such other business as may properly come before the meeting
or any adjournment thereof.
These matters are more fully described in the Proxy Statement accompanying
this Notice.
Only stockholders of record at the close of business on April 1, 1999 are
entitled to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to sign and
return the enclosed Proxy as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person even if the stockholder has returned a proxy.
By Order of The Board of Directors
Michael A. Baker
President and Chief Executive Officer
Sunnyvale, California
April 23, 1999
IMPORTANT
TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON EVEN
IF YOU RETURNED A PROXY.
<PAGE> 3
ARTHROCARE CORPORATION
------------------------
PROXY STATEMENT
------------------------
1999 ANNUAL MEETING OF STOCKHOLDERS
The enclosed Proxy is solicited on behalf of ArthroCare Corporation, a
Delaware corporation (the "company"), for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held Friday, May 21, 1999 at 1:00
p.m., local time, or at any adjournment thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at the company's principal executive offices located
at 595 North Pastoria Avenue, Sunnyvale, California 94086. The company's
telephone number at that location is (408) 736-0224.
This Proxy Statement is being mailed on or about April 26, 1999 to all
stockholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on April 1, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. The
company has one series of common shares outstanding, designated Common Stock. At
the Record Date, 9,009,083 shares of the company's Common Stock, $0.001 par
value (the "Common Stock"), were issued and outstanding and held of record by
201 stockholders.
VOTING; QUORUM; ABSTENTIONS; AND BROKER NON-VOTES
Each stockholder is entitled to one vote for each share held as of the
Record Date. Stockholders will not be entitled to cumulate their votes in the
election of directors (Proposal One). A plurality of the Votes Cast (see
definition below) at the Annual Meeting is required for the election of
directors (Proposal One). For all other proposals, the affirmative vote of the
majority of the Votes Cast at the Annual Meeting is required for approval.
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock issued and outstanding on the Record
Date and entitled to vote at the Annual Meeting, present in person or
represented by proxy. Shares that are voted "FOR," "AGAINST" or "ABSTAIN" from a
matter are treated as being present at the Annual Meeting for purposes of
establishing a quorum and are also treated as votes eligible to be cast by the
Common Stock, present in person or represented by proxy, at the Annual Meeting
and "entitled to vote on the subject matter" (the "Votes Cast") with respect to
such matter. If a quorum is not present or represented, then either the chairman
of the Annual Meeting or the stockholders entitled to vote at the Annual
Meeting, present in person or represented by proxy, will have the power to
adjourn the Annual Meeting from time to time, without notice other than an
announcement at the Annual Meeting, until a quorum is present. At any adjourned
Annual Meeting at which a quorum is present, any business may be transacted that
might have been transacted at the Annual Meeting as originally notified. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned Annual Meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
adjourned Annual Meeting.
Although there is no definitive statutory or case law authority in Delaware
as to the proper treatment of abstentions, the company believes that abstentions
should be counted for purposes of determining both the presence or absence of a
quorum for the transaction of business and the total number of Votes Cast with
respect to a particular matter. Therefore, in the absence of controlling
precedent to the contrary, the company intends to treat abstentions in this
manner.
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Broker non-votes, however, shall be treated differently. In a 1988 Delaware
case, Berlin v. Emerald Partners, the Delaware Supreme Court held that, while
broker non-votes may be counted for purposes of determining the presence or
absence of a quorum for the transaction of business, broker non-votes should not
be counted for purposes of determining the number of Votes Cast with respect to
the particular proposal on which the broker has expressly not voted.
Consequently, broker non-votes with respect to proposals set forth in this Proxy
Statement will not be considered Votes Cast and, accordingly, will not affect
the determination as to whether the requisite majority of Votes Cast has been
obtained with respect to a particular matter.
Therefore, for purposes of the election of directors (Proposal One),
neither abstentions nor broker non-votes will have any effect on the outcome of
the vote. For all other proposals, abstentions will have the same effect as
votes against these proposals and broker non-votes will not have any effect on
the outcome of the vote.
PROXIES IN THE ACCOMPANYING FORM THAT ARE PROPERLY EXECUTED AND RETURNED
WILL BE VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH THE INSTRUCTIONS ON THE
PROXY. ANY PROPERLY EXECUTED PROXY ON WHICH THERE ARE NO INSTRUCTIONS INDICATED
ABOUT A SPECIFIED PROPOSAL WILL BE VOTED AS FOLLOWS: (I) FOR THE ELECTION OF THE
SEVEN PERSONS NAMED IN THIS PROXY STATEMENT AS THE BOARD OF DIRECTORS' NOMINEES
FOR ELECTION TO THE BOARD OF DIRECTORS; AND (II) FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS AS INDEPENDENT AUDITORS OF THE COMPANY. NO
BUSINESS OTHER THAN THAT SET FORTH IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS IS EXPECTED TO COME BEFORE THE ANNUAL MEETING. SHOULD ANY OTHER
MATTER REQUIRING A VOTE OF STOCKHOLDERS PROPERLY ARISE, THE PERSONS NAMED IN THE
PROXY WILL VOTE THE SHARES THEY REPRESENT AS THE BOARD OF DIRECTORS MAY
RECOMMEND. THE PERSONS NAMED IN THE PROXY MAY ALSO, AT THEIR DISCRETION, VOTE
THE PROXY TO ADJOURN THE ANNUAL MEETING FROM TIME TO TIME.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person.
SOLICITATION
The cost of soliciting proxies will be borne by the company. The company
may retain Norwest Bank Minnesota, N.A., a proxy solicitation firm, to solicit
proxies in connection with the Annual Meeting at an estimated cost of $500. In
addition, the company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may also be solicited
by certain of the company's directors, officers and regular employees, without
additional compensation, personally or by telephone, facsimile or telegram.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholders who intend to present a proposal for inclusion in the
company's proxy materials for the 2000 Annual Meeting of Stockholders must
submit the proposal to the company no later than December 29, 1999.
Additionally, stockholders who intend to present a proposal at the 2000 Annual
Meeting of Stockholders without inclusion of such proposal in the company's
proxy materials for the 2000 Annual Meeting must provide notice of such proposal
to the company no later than December 29, 1999. The company reserves the right
to reject, rule out of order, or take other appropriate action with respect to
any proposal that does not comply with these and other applicable requirements.
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<PAGE> 5
SHARE OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the company
regarding the beneficial ownership of the company's Common Stock as of April 1,
1999 by (i) each of the company's directors, (ii) each executive officer named
in the Summary Compensation Table appearing herein, (iii) all directors and
executive officers of the company as a group, and (iv) each person known by the
company to beneficially own more than 5% of the company's Common Stock:
<TABLE>
<CAPTION>
SHARES APPROXIMATE
BENEFICIALLY PERCENT
NAME AND ADDRESS OWNED(1) OWNED(2)
---------------- ------------ -----------
<S> <C> <C>
Entities affiliated with Institutional Venture Partners 953,892 10.6%
(3).......................................................
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Entities affiliated with InterWest Partners (4)............. 1,263,873 14.0%
(Robert R. Momsen)
3000 Sand Hill Road
Building 3, Suite 225
Menlo Park, CA 94025
Hira V. Thapliyal, Ph.D. (5)................................ 490,024 5.4%
ArthroCare Corporation
595 N. Pastoria Avenue
Sunnyvale, CA 94086
Scudder Kemper Investments, Inc............................. 775,789 8.6%
345 Park Avenue
New York, NY 10154
Philip E. Eggers (6)........................................ 200,250 2.2%
ArthroCare Corporation
595 N. Pastoria Avenue
Sunnyvale, CA 94086
Annette J. Campbell-White (7)............................... 100,823 1.1%
4 Orinda Way
Building D, Suite 150
Orinda, CA 94563 4 Orinda Way
Building D, Suite 150
Orinda, CA 94563
Robert T. Hagan (8)......................................... 128,757 1.4%
ArthroCare Corporation
595 N. Pastoria Avenue
Sunnyvale, CA 94086
Michael A. Baker (9)........................................ 155,412 1.7%
ArthroCare Corporation
595 N. Pastoria Avenue
Sunnyvale, CA 94086
John S. Lewis (10).......................................... 128,560 1.4%
Paragon Venture Partners
3000 Sand Hill Road
Building 1, Suite 275
Menlo Park, CA 94025
C. Raymond Larkin, Jr. (11)................................. 18,770 0.2%
ArthroCare Corporation
595 N. Pastoria Avenue
Sunnyvale, CA 94086
Christine E. Hanni (12)..................................... 30,804 0.3%
ArthroCare Corporation
595 N. Pastoria Avenue
Sunnyvale, CA 94086
All directors and executive officers as a group (9 2,517,273 27.9%
persons)(13)..............................................
</TABLE>
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<PAGE> 6
- ---------------
(1) Except as otherwise indicated in the footnotes to this table and pursuant
to applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
(2) Applicable percentage ownership is based on 9,009,083 shares of Common
Stock outstanding as of April 1, 1999 together with applicable options for
such stockholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission, based on factors including
voting and investment power with respect to shares. Shares of Common Stock
subject to the options currently exercisable, or exercisable within 60 days
of April 1, 1999, are deemed outstanding for computing the percentage
ownership of the person holding such options, but are not deemed
outstanding for computing the percentage ownership of any other person.
(3) Consists of (i) an aggregate of 821,534 shares held by Institutional
Venture Partners V, L.P., Institutional Venture Management V, L.P.,
Institutional Venture Partners VII, L.P., Institutional Venture Management
VII, L.P. and IVP Founders Fund I, L.P. and (ii) an aggregate of 132,335
shares held by certain general partners of such entities.
(4) Includes 1,223,638 shares held by InterWest Partners V, L.P., 7,135 shares
held by InterWest Investors V, L.P., 15,000 shares held by Robert R. Momsen
and 12,100 shares held by InterWest Venture Management Profit Sharing
Retirement Plan fbo Robert R. Momsen. Mr. Momsen , a Director of the
company, is a general partner of InterWest Management Partners V, L.P., the
general partner of InterWest Partners, and general partner of InterWest
Investors V, L.P. and disclaims beneficial ownership of the shares held by
such entities except to the extent of his proportionate partnership
interest therein. Also includes 6,000 shares issuable to Mr. Momsen upon
exercise of stock options exercisable within 60 days of April 1, 1999.
(5) Includes an aggregate of 200,000 shares held in trust for Dr. Thapliyal's
minor children, over which Dr. Thapliyal does not hold voting or
dispositive control, and 3,333 shares issuable to Dr. Thapliyal upon
exercise of stock options exercisable within 60 days of April 1, 1999.
(6) Consists of 186,250 shares held by Mr. Eggers and 14,000 shares held in
trust for Mr. Eggers' daughter over which Mr. Eggers holds voting and
dispositive control.
(7) Consists of 84,823 shares held by Annette J. Campbell-White, 10,000 shares
held by Delaware Charter Guarantee & Trust Co. Cust. MedVenture Partners
fbo Annette J. Campbell-White Profit Sharing Plan and 6,000 shares issuable
upon exercise of stock options exercisable within 60 days of April 1, 1999.
(8) Consists of 117,301 shares held by Robert T. Hagan and Barbara Hagan as
joint tenants over which Mr. Hagan and Ms. Hagan hold voting and
dispositive control and 11,456 shares issuable to Mr. Hagan upon exercise
of stock options exercisable within 60 days of April 1, 1999.
(9) Consists of 19,733 shares held by Michael A. Baker, and 135,679 shares
issuable to Mr. Baker upon exercise of stock options exercisable within 60
days of April 1, 1999.
(10) Consists of 107,560 shares held by John S. Lewis, 10,000 shares held by
John S. Lewis IRA Charles Schwab & Co. Inc., 5,000 shares which are held by
the Lewis Family Partnership, and 6,000 shares issuable to Mr. Lewis upon
exercise of stock options exercisable within 60 days of April 1, 1999.
(11) Consists of 18,770 shares issuable to Mr. Larkin upon exercise of stock
options exercisable within 60 days of April 1, 1999.
(12) Consists of 3,931 shares held by Christine E. Hanni and 26,873 shares
issuable to Ms. Hanni upon exercise of stock options exercisable within 60
days of April 1, 1999.
(13) See footnotes (2) through (12) above.
4
<PAGE> 7
PROPOSAL NO. 1: ELECTION OF DIRECTORS
NOMINEES
A Board of seven directors will be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the seven nominees named below, all of whom are presently directors of the
company. If any nominee is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. It is not
expected that any nominee will be unable to or will decline to serve as a
director. If stockholders nominate additional persons for election as directors,
the proxy holder will vote all proxies received by him to assure the election of
as many of the Board of Directors' nominees as possible, with the proxy holder
making any required selection of specific nominees to be voted for. The term of
office of each person elected as a director will continue until the next Annual
Meeting of Stockholders or until that person's successor has been elected.
The names of the nominees, and certain information about them, are set
forth below.
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION
--------------- --- ---------------------------------------
<S> <C> <C>
Michael A. Baker 40 President and Chief Executive Officer
of the company
Annette J. Campbell-White 52 Managing General Partner, MedVenture
Associates
Philip E. Eggers 58 President, Eggers & Associates
C. Raymond Larkin, Jr. 50 Principal 3x NELL L.L.C.
John S. Lewis 53 General Partner of Paragon Venture
Partners
Robert R. Momsen 52 General Partner, InterWest Partners
Hira V. Thapliyal, Ph.D. 50 Retired
</TABLE>
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years. There are no
family relationships among any directors or executive officers of the company.
Michael A. Baker, has served as President, Chief Executive Officer and a
Director of the company since July 1997. From 1989 to 1997, Mr. Baker held
several positions in planning, corporate development and senior management at
Medtronic, Inc. a multi-billion medical technology company specializing in
implantable and invasive therapies. His most recent position at Medtronic, Inc.,
was Vice President, General Manager of Medtronic's Coronary Vascular Division.
From 1988 to 1989, Mr. Baker was a management consultant at The Carroll Group.
From 1986 to 1988, Mr. Baker was a Corporate Development Officer at American
National Bank & Trust Co. Prior to joining American National Bank & Trust Co.,
Mr. Baker served in the United States Army from 1981 to 1986. Mr. Baker holds a
bachelor degree from the United States Military Academy at West Point and an
M.B.A. from the University of Chicago.
Annette J. Campbell-White joined the company in May 1993 as a Director.
Since 1986, Ms. Campbell-White has been the Managing General Partner of
MedVenture Associates, a venture capital firm which invests primarily in medical
device companies. From July 1992 to July 1994, Ms. Campbell-White was a general
partner of Paragon Venture Partners II, a venture capital partnership. Ms.
Campbell-White has a B.Sc. degree in Chemical Engineering and an M.Sc. degree in
Physical Chemistry each from the University of Cape Town, South Africa. Ms.
Campbell-White serves on the Board of Directors of several privately held
companies.
Philip E. Eggers, a founder of the company, has served as a consultant and
a Director of the company since its inception. Since 1984, Mr. Eggers has run
Eggers & Associates, a consulting firm to medical device companies. Mr. Eggers
is the principal inventor on numerous patents and has directed research and
development programs for a wide range of surgical instruments and patient
monitoring devices, such as hemostatic surgical scalpels, bipolar scissors,
bipolar endoscopic scissors, and continuous cardiac output
5
<PAGE> 8
monitoring systems. Mr. Eggers holds an M.Sc. degree in Physics and an M.B.A.
degree from Ohio State University.
C. Raymond Larkin, Jr. became a Director of the company in April 1996. From
1983 to March 1998, he held various executive positions with Nellcor
Incorporated, a medical products company, for which he served as President and
Chief Executive Officer from 1989 until August 1995 when he became President and
Chief Executive Officer of Nellcor Puritan Bennett Incorporated upon the merger
of Nellcor Incorporated with Puritan-Bennett Corporation. Since July 1998 Mr.
Larkin has been a principal of 3x NELL, a company which invests in and provides
consulting services to the medical device, biotechnology and pharmaceutical
industries. Mr. Larkin is also a director of Neuromedical Systems, Inc. and
Hangar Orthopedics M.D. He holds a B.S. degree from LaSalle University.
John S. Lewis joined the company in May 1993 as a Director. Mr. Lewis has
been a Managing Director of Pacific Venture Group since September 1995, and
General Partner of Paragon Venture Partners since June 1983, both venture
capital partnerships. Mr. Lewis currently serves on the Board of Directors of
several private companies. He holds a B.S. degree in Mechanical Engineering from
University of California at Berkeley and an M.B.A. degree from Harvard
University.
Robert R. Momsen joined the company in January 1994 as a Director. Since
1982, he has been General Partner of InterWest Partners, a venture capital firm
which invests primarily in life sciences companies. Prior to 1981, Mr. Momsen
served as General Manager and Chief Financial Officer for Life Instruments
Corporation, a medical imaging company which he co-founded. Mr. Momsen is also a
director of COR Therapeutics, Inc., Coulter Pharmaceuticals, Inc., First Medical
Inc., Innovasive Devices, Inc., Integ, Inc., Urologix, Progenitor, Inc. and
several private companies. Mr. Momsen holds an M.B.A. degree from Stanford
University.
Hira V. Thapliyal, Ph.D., a founder of the company, served as Chief
Technical Officer from July 1997 through October 1998 and from May 1993 to July
1997, served as President, Chief Executive Officer and has been a Director of
the company since its inception. From 1989 to 1993, Dr. Thapliyal was President
and Chief Executive Officer of MicroBionics, Inc., a privately-held company
developing an in-vivo continuous blood gas monitor. In 1986, Dr. Thapliyal
co-founded Cardiovascular Imaging Systems, Inc. ("CVIS") and served as its
President until 1988. CVIS develops and markets catheters for ultrasonic
intraluminal imaging of human arteries. From 1984 to 1986, Dr. Thapliyal was
Vice President, Engineering of Devices for Vascular Interventions, Inc., a
leader in marketing arthrectomy systems for treatment of atherosclerotic
disease. Dr. Thapliyal holds an M.S. degree in Electrical Engineering from the
University of Idaho and a Ph.D. in Materials Science & Engineering from Cornell
University.
VOTE REQUIRED
The seven nominees receiving the highest number of affirmative votes of the
Votes Cast shall be elected as directors of the company for the ensuing year.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE NOMINEES.
BOARD MEETINGS, COMMITTEES
The Board of Directors of the company held six meetings during the Last
Fiscal Year. The Board of Directors has an Audit Committee, a Compensation
Committee and a Nominating Committee. From time to time, the Board has created
various ad hoc committees for special purposes. No such committee is currently
functioning.
During the Last Fiscal Year, the Audit Committee consisted of directors
Lewis and Momsen. The Audit Committee is responsible for reviewing the results
and scope of the audit and other services provided by the company's independent
auditors. The Audit Committee held two meetings during which they reviewed and
6
<PAGE> 9
discussed financial presentations and related matters regarding Fiscal 1998. The
Audit Committee also met with the company's independent auditors to discuss the
audit for the Last Fiscal Year.
During the Last Fiscal Year, the Compensation Committee consisted of
directors Campbell-White and Momsen. The Compensation Committee reviews and
makes decisions concerning salaries and incentive compensation for officers and
employees of the company. The responsibilities of the Compensation Committee
were executed primarily by the Board of Directors during the first half of the
Last Fiscal Year. The Compensation Committee held three meetings during the Last
Fiscal Year during which they discussed and reviewed compensation matters.
In January 1999, a Nominating Committee was formed consisting of directors
Larkin, Momsen and Thapliyal. The Nominating Committee will propose a slate of
directors for election by the stockholders at each annual meeting and candidates
to fill any vacancies on the Board of Directors.
No director serving in the Last Fiscal Year attended fewer than 75% of the
aggregate number of meetings of the Board of Directors and meetings of the
committees of the Board on which he or she serves.
DIRECTOR COMPENSATION
Directors currently receive no cash fees for services provided in that
capacity but are reimbursed for out-of-pocket expenses they incur in connection
with their attendance at meetings of the Board of Directors and committees of
the Board of Directors. On May 21, 1999, each Outside Director who is re-elected
at the Annual Meeting will be granted an option to purchase 3,000 shares of the
company's Common Stock at an exercise price per share equal to the closing price
of one share of the company's Common Stock on the day before the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the Last Fiscal Year, directors Campbell-White and Momsen served as
members of the Compensation Committee of the Board of Directors. No member of
the Compensation Committee was or is an officer or employee of the company or
any of its subsidiaries. In addition, during the Last Fiscal Year, no officer of
the company had an "interlock" relationship, as that term is defined by the SEC,
to report.
SECTION 16(A) REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the company's directors and officers and persons who
own more than 10% of a registered class of the company's equity securities, to
file reports of ownership and reports of changes in the ownership with the
Securities and Exchange Commission (the "SEC"). 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 the copies of such forms submitted to it
during the year ended January 2, 1999 (the "Last Fiscal Year"), the company
believes that, during the Last Fiscal Year, its director and officers Terry
Hagen, Christine Hanni and Alan Weinstein each failed to timely file one Form 4
disclosing shares of the company common stock acquired.
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<PAGE> 10
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by the company's
Chief Executive Officer and each of the other most highly compensated executive
officers of the company whose total annual salary and bonus exceeded $100,000
for the three fiscal years ended December 28, 1996, January 3, 1998 and January
2, 1999 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
---------------------------------------- -----------------------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
FISCAL OTHER ANNUAL AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) COMPENSATION ($) (# OF SHARES) ($)
- --------------------------- ------ ---------- ------------ ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael A. Baker 1998 $274,006 $84,130 $19,600(2) $70,000 30,000(3) --
President and Chief 1997 115,347 70,000 -- -- 300,000(4) $135,042(5)
Executive Officer 1996 -- -- -- -- -- --
Hira V. Thapliyal 1998 $142,404 $45,000 10,000(7)
Chief Technical 1997 218,089 91,000 --
Officer (6) 1996 194,412 41,000 --
Robert T. Hagan 1998 $178,896 $53,000 20,000(8)
Vice President, 1997 155,002 50,000 10,000(9)
Manufacturing 1996 131,659 30,000 --
Christine E. Hanni 1998 $128,194 $18,562 $28,000 85,000(10)
Vice President, Finance 1997 -- -- -- --
and Chief Financial 1996 -- -- -- --
Officer
Allan Weinstein 1998 $173,176 $ -- 20,000
Vice President, Sales and 1997 154,235 50,000 10,000(9)
Marketing (11) 1996 121,791 24,000 10,000(12)
</TABLE>
- ---------------
(1) Except as otherwise noted, all bonuses were earned by the named officer in
the fiscal year indicated and paid to the named officer in the subsequent
year.
(2) Consists of reimbursement for the payment of taxes.
(3) On January 15, 1998 and on August 11, 1998, the company granted to Mr.
Baker an option to purchase 10,000 and 20,000 shares, respectively, of the
company's Common Stock at an exercise price of $11.125 and $17.625,
respectively, per share, the closing price of one share of the company's
Common Stock on the day before the date of grant. One forty-eighth (1/48)
of the total number of shares subject to these options became exercisable
on February 15, 1998 and on September 11, 1998, respectively, and an
additional one forty-eighth (1/48) of the total number of shares subject to
these options are exercisable at the end of each full month thereafter
until all such shares are exercisable, based upon Mr. Baker's continued
employment by the corporation.
(4) On June 25, 1997, the company granted to Mr. Baker an option to purchase
300,000 shares of the company's Common Stock at an exercise price of $8.25
per share, the closing price of one share of the company's Common Stock on
the day before the date of grant. One forty-eighth (1/48) of the total
number of shares subject to these options became exercisable on August 1,
1997 and an additional one forty-eighth (1/48) of the total number of
shares subject to these options are exercisable at the end of each full
month thereafter until all such shares are exercisable, based upon Mr.
Baker's continued employment by the corporation.
(5) Consists of one-time reimbursements of expenses paid by the company to or
on behalf of Mr. Baker.
8
<PAGE> 11
(6) Mr. Thapliyal resigned from the position of Chief Technical Officer in
October 1998 and remained a Director of the company.
(7) On January 15, 1998, the company granted to Mr. Thapliyal an option to
purchase 10,000 shares of the company's Common Stock at an exercise price
of $11.125 per share, the closing price of one share of the company's
Common Stock on the day before the date of grant. One forty-eighth (1/48)
of the total number of shares subject to these options became exercisable
on February 15, 1998, and an additional one forty-eighth (1/48) of the
total number of shares subject to these options are exercisable at the end
of each full month thereafter until all such shares are exercisable, based
upon Mr. Thapliyal's continued service to the corporation.
(8) On January 15, 1998 and on August 11, 1998, the company granted to Mr.
Hagan an option to purchase 10,000 shares of the company's Common Stock at
an exercise price of $11.125 per share and $17.625 per share, respectively,
the closing price of one share of the company's Common Stock on the day
before the date of each grant. One forty-eighth (1/48) of the total number
of shares subject to these options became exercisable on February 15, 1998
and on September 11, 1998, respectively, and an additional one forty-eighth
(1/48) of the total number of shares subject to these options are
exercisable at the end of each full month thereafter until all such shares
are exercisable, based upon Mr. Hagan's continued employment by the
corporation.
(9) On January 10, 1997, the company granted to Robert T. Hagan and Allan
Weinstein an option to purchase 10,000 shares of the company's Common Stock
at an exercise price of $7.375 per share, the closing price of one share of
the company's Common Stock on the day before the date of grant. One
forty-eighth (1/48) of the total number of shares subject to these options
became exercisable on January 31, 1997 and an additional one forty-eighth
(1/48) of the total number of shares subject to these options are
exercisable at the end of each full month thereafter until all such shares
are exercisable, based upon such individual's continued employment by the
corporation.
(10) On January 15, 1998, the company granted to Ms. Hanni an option to purchase
75,000 shares of the company's Common Stock at an exercise price of $11.125
per share, the closing price of one share of the company's Common Stock on
the day before the date of grant. One-fourth (1/4) of the shares subject to
the option became exercisable on the one year anniversary of the effective
date of her employment and 1/48 of the shares will continue to vest at the
end of each full month thereafter until all the shares are vested, based
upon Ms. Hanni's continued employment by the company. On August 11, 1998
the company granted to Ms. Hanni an option to purchase 10,000 shares of the
company's Common Stock at an exercise price of $17.625 per share, the
closing price of one share of the company's Common Stock on the day before
the date of grant. One forty-eighth (1/48) of the total number of shares
subject to these options became exercisable on September 11, 1998, and an
additional one forty-eighth (1/48) of the total number of shares subject to
these options are exercisable at the end of each full month thereafter
until all such shares are exercisable, based upon Ms. Hanni's continued
employment by the corporation.
(11) Mr. Weinstein resigned from the position of Vice President, Sales and
Marketing in February, 1999.
(12) Of the shares subject to the option, 12/48 of the total number of shares
subject to the option became exercisable on December 12, 1996 and an
additional 1/48 of the total number of shares subject to the option became
exercisable at the end of each full month thereafter.
(13) On March 1, 1999, the company entered into a stock bonus agreement with
each of Mr. Baker and Ms. Hanni to purchase shares of the company's Common
Stock as a bonus in lieu of a portion of their cash bonus payment, at a
purchase price of $14.00 per share
9
<PAGE> 12
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants made in the Last
Fiscal Year to the Named Executive Officers. No SARs were granted.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
OPTIONS ASSUMED ANNUAL RATES OF
NUMBER OF GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(3)
OPTIONS IN FISCAL PRICE PER EXPIRATION -------------------------------
NAME GRANTED YEAR(1) SHARE(2) DATE 0% 5% 10%
---- ---------- ---------- --------- ---------- --- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael A. Baker 10,000 1.64 $11.125 1/15/08 0 63,856 167,577
20,000 3.27 17.625 8/11/08 0 221,685 561,794
Hira V. Thapliyal 10,000 1.64 11.125 1/15/08 0 63,856 167,577
Robert T. Hagan 10,000 1.64 11.125 1/15/08 0 63,856 167,577
10,000 1.64 17.625 8/11/08 0 110,843 280,897
Christine E. Hanni 75,000 12.28 11.125 1/15/08 0 478,021 1,256,830
10,000 1.64 17.625 8/11/08 0 110,843 280,897
Allan Weinstein 10,000 1.64 11.125 1/15/08 0 63,856 167,577
10,000 1.64 17.625 8/11/08 0 110,843 280,897
</TABLE>
- ---------------
(1) Based on an aggregate of 610,950 options granted by the company in the Last
Fiscal Year to employees and non-employee directors of and consultants to
the company, including options granted to the Named Executive Officers.
(2) Options are granted at an exercise price equal to the closing market price
per share on the day before the date of grant.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated assuming that the fair
market value of the company's Common Stock on the date of grant appreciates
at the indicated annual rate compounded annually for the entire term of the
option and that the option is exercised and sold on the last day of its term
for the appreciated stock price. These numbers are calculated based on the
requirements promulgated by the Securities and Exchange Commission and do
not reflect the company's estimate of future stock price growth.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table provides information on option exercises in the Last
Fiscal Year by the Named Executive Officers and the number and value of such
officer's unexercised options at January 2, 1999. No SARs have been granted.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS AT
SHARES VALUE AT JANUARY 2, 1999 (#) JANUARY 2, 1999 ($) (2)
ACQUIRED ON REALIZED --------------------------- -----------------------------
NAME EXERCISE (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Baker 8,900 $76,762 107,555 213,545 $1,349,120.88 $2,528,654.13
Hira V. Thapliyal -- 2,291 7,709 22,623.63 76,126.38
Robert T. Hagan -- 8,123 21,877 93,546.38 175,203.63
Christine E. Hanni -- 833 84,167 2,811.38 771,563.63
Allan Weinstein 15,622 24,378 183,534.38 205,215.63
</TABLE>
- ---------------
(1) Based upon a fair market value of one share of the company's Common Stock on
the date that the option was exercised, less the exercise price per share
multiplied by the number of shares received upon exercise of the option.
(2) Based upon a fair market value of $21.00 per share as of January 2, 1999
minus the exercise price per share multiplied by the number of shares
underlying the option.
10
<PAGE> 13
The company has not established any long-term incentive plans or defined
benefit or actuarial plans covering any of the Named Executive Officers.
REPORT OF THE COMPENSATION COMMITTEE
The following report is provided to stockholders by the members of the
Compensation Committee of the Board of Directors.
In addition to executive compensation matters, the Compensation Committee
is responsible for making recommendations to the Board of Directors concerning
salaries and incentive compensation for employees of and consultants to the
company. The Compensation Committee also has the authority and power to grant
stock options to the company's employees and consultants.
The goal of the company's compensation policies is to align executive
compensation with business objectives, corporate performance, market
compensation levels, and to attract and retain executives who contribute to the
long-term success and value of the company. The company endeavors to achieve its
compensation goals through the implementation of policies that are based on the
following principles:
- The company pays competitively for experienced, highly-skilled
executives:
The company operates in a competitive and rapidly changing industry.
Executive base compensation is targeted to the median salary paid to
comparable executives in companies of similar size, location, and with
comparable responsibilities. The individual executive's salary is adjusted
annually based on individual performance, corporate performance, and the
relative compensation of the individual compared to the comparable medians.
- The company rewards executives for superior performance:
The Committee believes that a substantial portion of each executive's
compensation should be in the form of bonuses. Executive bonuses are based
on a combination of individual performance and the attainment of corporate
goals. Individual performance goals are based on specific objectives which
must be met in order for the company to achieve its corporate goals. In
order to attract and retain executives who are qualified to excel in the
medical device industry, the company awards higher bonuses based on
performance in excess of the corporate goals.
- The company strives to align long-term stockholder and executive
interests:
In order to align the long-term interests of executives with those of
stockholders, the company grants all employees, and particularly
executives, options to purchase stock. Options are granted at the closing
price of one share of the company's Common Stock on the day before the date
of grant and will provide value only when the price of the Common Stock
increases above the exercise price. Options are subject to vesting
provisions designed to encourage executives to remain employed by the
company. Additional options are granted from time to time based on
individual performance and the prior level of grants.
COMPENSATION OF MICHAEL BAKER, PRESIDENT AND CHIEF EXECUTIVE OFFICER
During 1998, the compensation of Mr. Baker was determined by applying the
same criteria discussed at the beginning of this report used to determine
compensation and bonuses for all executive officers. Mr. Baker's compensation
for 1998 is set forth in the Summary Compensation Table appearing on page 8.
SUMMARY
The Committee believes that the company's compensation policy as practiced
to date by the Committee and the Board has been successful in attracting and
retaining qualified employees and in tying compensation directly to corporate
performance relative to corporate goals. The company's compensation policy will
evolve over time as the company attempts to achieve the many short-term goals it
faces while maintaining its focus
11
<PAGE> 14
on building long-term stockholder value through technological leadership and
development and expansion of the market for the company's products.
Respectfully submitted,
Annette J. Campbell-White
Robert R. Momsen
The foregoing Compensation Committee Report shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, except to the
extent the company specifically incorporates it by reference into such filing.
12
<PAGE> 15
PERFORMANCE GRAPH
The following graph shows a comparison of total stockholder return for
holders of the company's Common Stock from February 5, 1996, the date of the
company's initial public offering, through January 2, 1999 compared with the
Nasdaq Stock Market, U.S. Index, the Hambrecht & Quist Healthcare Index
(excluding Biotechnology) and the Nasdaq Health Services Index. This graph is
presented pursuant to SEC rules. The company believes that while total
stockholder return can be an important indicator of corporate performance, the
stock prices of medical device stocks like that of the company are subject to a
number of market-related factors other than company performance, such as
competitive announcements, mergers and acquisitions in the industry, the general
state of the economy, and the performance of other medical device and small-cap
stocks.
<TABLE>
<CAPTION>
ARTHROCARE NASDAQ STOCK NASDAQ HEALTH HAMBRECHT &
CORPORATION MARKET (U.S.) SERVICES QUIST
----------- ------------- ------------- HEALTHCARE-
EXCLUDING
BIOTECHNOLOGY
-------------
<S> <C> <C> <C> <C>
'2/5/96' 100.00 100.00 100.00 100.00
'3/96' 157.00 104.00 100.00 100.00
'6/96' 129.00 113.00 109.00 94.00
'9/96' 70.00 117.00 108.00 103.00
'12/96' 52.00 122.00 96.00 104.00
'3/97' 46.00 116.00 89.00 99.00
'6/97' 67.00 137.00 100.00 118.00
'9/97' 92.00 160.00 109.00 124.00
'12/97' 94.00 150.00 98.00 124.00
'3/98' 106.00 175.00 107.00 141.00
'6/98' 119.00 180.00 97.00 143.00
'9/98' 90.00 163.00 74.00 126.00
'12/98' 155.00 211.00 84.00 150.00
</TABLE>
- ---------------
* $100 invested on 2/05/96 in stock or on 1/31/96 in index -- including
reinvestment of dividends. Fiscal year ending December 31 (the company's last
fiscal year ended January 2, 1999).
The information contained in the Stock Performance Graph shall not be
deemed to be "soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
except to the extent the company specifically incorporates it by reference into
such filing.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
During 1998 the company entered into Continuity Agreements with the Chief
Executive Officer and all other executive officers of the company. The
Continuity Agreements provide certain compensation and benefits in the event of
a Change of Control of the company. A Change of Control is defined as (i) a
change of beneficial ownership of at least 15% of the voting power of the
company without the approval of the Board, (ii) a merger or sale of the company
whereby the company does not maintain at least 50% of the voting power of the
surviving company, (iii) the approval by the shareholders of the company of a
plan of complete liquidation of the company or an agreement for the sale or
disposition of all or substantially all of the company's assets, or (iv) a
change in the composition of the Board such that at least 50% of the members are
13
<PAGE> 16
not incumbents or elected by incumbent directors. In the event of a Change of
Control the Continuity Agreements provide for accelerated vesting of 50% of the
then-current unvested and outstanding stock options of each executive officer.
In the event of a hostile takeover the vesting is accelerated as to 100% of the
outstanding unvested options of the executive officer. Further, in the event of
an involuntary termination of employment of an executive officer within 24
months of a change of control, certain severance benefits will be provided.
These benefits include 24 months of continued monthly compensation (36 months
for the Chief Executive Officer), continued medical benefits during the
severance period and immediate vesting of all outstanding and unvested stock
options.
CERTAIN TRANSACTIONS
On May 20, 1993, the company and Eggers & Associates, Inc., ("E&A") a
corporation wholly owned by Mr. Eggers, entered into a consulting agreement,
which was amended on March 31, 1995, whereby E&A was to perform research related
to the development of a control system, a hand-held instrument and a method for
the ablation, cutting and reshaping of selected tissues during a broad range of
medical procedures. Since that time the company has, from time to time, modified
the research objectives to include other projects. During the fiscal year ended
January 2, 1999, the company paid E&A approximately $391,000 for consulting
services and for other labor and expenses.
In January 1995, the company and Allan Weinstein, the company's former Vice
President, Sales and Marketing, entered into a loan agreement in the amount of
$120,000 pursuant to a provision in the officer's employment agreement. The
resulting promissory note bears interest at 6% per annum and is due on the
earlier of January 31, 1999 or termination of employment. In December 1998, the
officer paid the note in full. In February 1995, the company agreed to loan this
officer up to an additional $144,000 in monthly increments of $3,000 at 6% per
annum. In December 1997, the company amended this officer's employment agreement
to terminate the increments effective January 31, 1998 and forgive 10% of the
principal and interest at the end of each fiscal year in which the officer is
employed by the company and in which the company meets certain performance
targets. During each fiscal year 1998 and 1997, $11,000 of principal and
interest was forgiven. At January 2, 1999, $99,000 of principal and interest was
outstanding on this note. Both aforementioned notes are secured by shares of the
company's common stock and a mortgage on the officer's residence and as of
February 1999 have been paid in full.
On July 18, 1995, the company and Robert T. Hagan, the company's Vice
President, Manufacturing, entered into an employment agreement which, in
addition to his annual salary of $130,000, provided for Mr. Hagan's purchase of
90,000 shares of the company's Common Stock at a purchase price of $0.80 per
share, with payment in the form of a promissory note due on August 1, 1999 or
upon termination of employment pursuant to a restricted stock purchase and
security agreement.
On June 20, 1997, the company and Michael Baker, the company's President
and Chief Executive Officer, entered into an employment offer letter, which, in
addition to an annual salary and bonus, benefits and vacation time, provided for
a loan by the company in the principal amount of $500,000 in connection with Mr.
Baker's purchase of a home. In January 1999, the company forgave $39,000 of Mr.
Baker's relocation loan including taxes thereon.
14
<PAGE> 17
PROPOSAL NO. 2:
CONFIRMATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP, independent
accountants, to audit the financial statements of the company for the 1999
fiscal year ending January 1, 2000 and recommends that the stockholders confirm
such selection. This firm has audited the company's financial statements since
the company's inception. In the event of a negative vote, the Board of Directors
will reconsider its selection. Representatives of PricewaterhouseCoopers LLP are
expected to be present at the Annual Meeting with the opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
VOTE REQUIRED
The affirmative vote of the majority of the Votes Cast will be required to
ratify the appointment of PricewaterhouseCoopers LLP as the company's
independent auditors for the 1999 fiscal year ending January 1, 2000.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE 1999 FISCAL YEAR ENDING JANUARY 1, 2000.
OTHER MATTERS
The company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, the persons named in the
accompanying form of proxy will vote the shares represented by proxy as the
Board may recommend or as the proxy holders, acting in their sole discretion,
may determine.
THE COMPANY WILL MAIL WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN
REQUEST A COPY OF THE COMPANY'S ANNUAL REPORT AND REPORT ON FORM 10-K FOR THE
YEAR ENDED JANUARY 2, 1999, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND A
LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO STOCKHOLDER RELATIONS, ARTHROCARE
CORPORATION, 595 NORTH PASTORIA AVENUE, SUNNYVALE, CALIFORNIA 94086.
THE BOARD OF DIRECTORS
Dated: April 23, 1999
15
<PAGE> 18
PROXY ARTHROCARE CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1999
The undersigned, revoking all prior proxies, hereby appoints Michael A.
Baker and Christine E. Hanni, and either of them, as proxy or proxies, with full
power of substitution and revocation, to vote all shares of common stock of
ArthroCare Corporation (the "company") of record in the name of the undersigned
at the close of business on April 1, 1999, at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held on Friday, May 21, 1999, or at any adjournment
thereof, upon the following matters:
1. Election of the following directors: Michael A. Baker, Hira V. Thapliyal,
Ph.D., Philip E. Eggers, Annette J. Campbell-White, C. Raymond Larkin, Jr.,
John S. Lewis, Robert R. Momsen
[ ] FOR ALL NOMINEES [ ] WITHHOLD FOR ALL NOMINEES
FOR ALL NOMINEES EXCEPT THE FOLLOWING:
(Mark no box and write the name(s) of the nominee(s) withheld in the space
provided below.)
2. Ratification of appointment of PricewaterhouseCoopers LLP as Independent
accountants for the 1999 fiscal year.
[ ] For [ ] Against [ ] Abstain
3. In their discretion, the Proxies are authorized to vote upon such matters as
may properly come before the Annual Meeting, or any adjournment thereof.
[ ] For [ ] Against [ ] Abstain
- --------------------------------------------------------------------------------
(continued on reverse side)
Please mark, date, sign and mail this proxy promptly in the enclosed envelope.
THIS PROXY WHEN PROPERLY EXECUTED
WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR
PROPOSALS 1 AND 2.
Please sign your name exactly as
it appears below. In the case of
shares owned in joint tenancy or
as tenants in common, all should
sign. Fiduciaries should indicate
their title and authority.
Dated: , 1999.
----------------------------------
----------------------------------
----------------------------------
----------------------------------
Signature(s)
