<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
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 Section240.14a-11(c) or
Section240.14a-12
HEARTPORT, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(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:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 7, 2000
------------------------
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
HEARTPORT, INC. (the "Company") which will be held at the Company's
headquarters, 700 Bay Road, Redwood City, California at 1:30 p.m. on June 7,
2000, for the following purposes:
1. To elect two directors to serve for the ensuing three year term or until
their successors are elected and qualified;
2. To ratify the selection of Ernst & Young LLP as independent auditors for
the Company for the fiscal year ending December 31, 2000; and
3. To act upon such other business as may properly come before the meeting
or at any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on April 26, 2000, as
the record date for determining those stockholders who will be entitled to vote
at the meeting. The stock transfer books will not be closed between the record
date and the date of the meeting.
Representation of at least a majority of all outstanding shares of Common
Stock of Heartport, Inc. is required to constitute a quorum. Accordingly, it is
important that your shares be represented at the meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE. You may revoke your proxy at any
time prior to the time it is voted. If you attend the Annual Meeting and vote by
ballot, your proxy will be revoked automatically and only your vote at the
Annual Meeting will be counted.
Sincerely,
Casey M. Tansey
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Redwood City, California
May 3, 2000
<PAGE>
STOCKHOLDERS SHOULD READ THE ENTIRE PROXY STATEMENT
CAREFULLY PRIOR TO RETURNING THEIR PROXIES
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS OF
HEARTPORT, INC.
TO BE HELD JUNE 7, 2000
------------------------
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of HEARTPORT, INC. ("Heartport" or the "Company") of proxies
to be voted at the Annual Meeting of Stockholders which will be held at
1:30 p.m. on June 7, 2000, at the Company's headquarters, 700 Bay Road, Redwood
City, California, or at any adjournments or postponements thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
This Proxy Statement and the proxy card were first mailed to stockholders on or
about May 3, 2000.
VOTING RIGHTS AND SOLICITATION
The close of business on April 26, 2000, was the record date for
stockholders entitled to notice of and to vote at the Annual Meeting. As of that
date, Heartport had 26,328,831 shares of common stock, $.001 par value per share
(the "Common Stock"), issued and outstanding, exclusive of treasury stock. All
of the shares of Common Stock outstanding on the record date are entitled to
vote at the Annual Meeting, and stockholders of record entitled to vote at the
meeting will have one (1) vote for each share so held on the matters to be voted
upon.
Shares of Common Stock represented by proxies in the accompanying form that
are properly executed and returned to Heartport will be voted at the Annual
Meeting of Stockholders in accordance with the stockholders' instructions
contained therein. In the absence of contrary instructions, shares represented
by such proxies will be voted FOR the election of each of the directors as
described herein under "Proposal 1--Election of Directors" and FOR ratification
of the selection of accountants as described herein under
"Proposal 2--Ratification of Selection of Independent Auditors." Management does
not know of any matters to be presented at this Annual Meeting other than those
set forth in this Proxy Statement and in the Notice accompanying this Proxy
Statement. If other matters should properly come before the meeting, the proxy
holders will vote on such matters in accordance with their best judgment. Any
stockholder has the right to revoke his or her proxy at any time before it is
voted.
The entire cost of soliciting proxies will be borne by Heartport. Proxies
will be solicited principally through the use of the mails, but, if deemed
desirable, may be solicited personally or by telephone, telegraph or special
letter by officers and regular Heartport employees for no additional
compensation. Arrangements may be made with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy material to the
beneficial owners of Common Stock, and such persons may be reimbursed for their
expenses.
VOTES REQUIRED
PROPOSAL 1. Directors are elected by a plurality of the affirmative votes
cast by those shares present in person, or represented by proxy, and entitled to
vote at the Annual Meeting. The two nominees for director receiving the highest
number of affirmative votes will be elected. Abstentions and broker non-votes
will not be counted toward a nominee's total. Stockholders may not cumulate
votes in the election of directors.
PROPOSAL 2. Ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending December 31, 2000,
requires the affirmative vote of a majority of those
<PAGE>
shares present in person, or represented by proxy, and cast either affirmatively
or negatively at the Annual Meeting. Abstentions and broker non-votes will not
be counted as having been voted on the proposal.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be considered at the 2001 Annual Meeting
of Stockholders must be received by Heartport no later than December 6, 2000 and
not prior to November 4, 2000 in order to be included. The proposal must be
mailed to the Company's principal executive offices, 700 Bay Road, Redwood City,
California 94063, Attention: Corporate Secretary. Such proposals may be included
in next year's proxy statement if they comply with certain rules and regulations
promulgated by the Securities and Exchange Commission ("SEC") and certain
provisions contained in the Company's Bylaws.
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL 1
ELECTION OF DIRECTORS
The Company currently has authorized seven directors. In accordance with the
terms of the Company's Certificate of Incorporation, the Board of Directors is
divided into three classes: Class I, whose term will expire at the 2000 Annual
Meeting; Class II, whose term will expire at the 2001 Annual Meeting; and
Class III, whose term will expire at the 2002 Annual Meeting. At the 2000 Annual
Meeting, two directors will be elected to serve until the Annual Meeting to be
held in 2003 or until their respective successors are elected and qualified. The
Board of Directors has selected two nominees as the nominees for Class I. The
nominees for the Board of Directors are all currently directors of the Company
and are set forth below. The proxy holders intend to vote all proxies received
by them in the accompanying form for the nominees for director listed below. In
the event 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. In the event
that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them for the nominees listed
below. As of the date of this Proxy Statement, the Board of Directors is not
aware of any nominee who is unable or will decline to serve as a director.
NOMINEES FOR TERM ENDING IN 2003
Set forth below is information regarding the nominees, including their ages,
the period during which they have served as directors, and information furnished
by them as to principal occupations and directorships held by them in
corporations whose shares are publicly registered.
<TABLE>
<CAPTION>
DIRECTOR
NAME SINCE AGE
- ---- -------- --------
<S> <C> <C>
Frank M. Fischer............................................ 1998* 58
Casey M. Tansey............................................. 1999 42
</TABLE>
- ------------------------
* Mr. Fischer was previously a director of the Company from October 1992 until
May 1997.
FRANK M. FISCHER has been Chairman of the Board of Directors of the Company
since June 1999 and a director since May 1998. He was the Company's Chief
Executive Officer from June 1999 to September 1999 and was President and Chief
Executive Officer of the Company from May 1998 to June 1999. Mr. Fischer was
also a director of the Company from October 1992 until May 1997. Mr. Fischer was
the President and Chief Executive Officer and a director of Ventritex, Inc., a
manufacturer of implantable cardiac defibrillators from 1987 until 1997. From
May 1977 until joining Ventritex, Mr. Fischer held various positions with Cordis
Corporation, a manufacturer of medical products, serving most recently as
President of the Implantable Products Division. Mr. Fischer holds an M.S. in
Management from Rensselaer Polytechnic Institute.
2
<PAGE>
CASEY M. TANSEY has been President and Chief Executive Officer and a
director of the Company since September 1999. Prior to that, he was the
Company's President and Chief Operating Officer from June 1999 to
September 1999, Senior Vice President, Sales and Marketing from January 1998 to
June 1999 and Vice President, Sales and Marketing from December 1995 to
January 1998. From 1988 until joining the Company in 1995, Mr. Tansey served in
various capacities with the Edwards C.V.S. Division of Baxter. Mr. Tansey's most
recent position at Baxter/Edwards was Vice President, North American Sales.
Mr. Tansey earned a B.S. in Business Administration and an M.B.A. from the
College of Notre Dame.
CONTINUING DIRECTORS
Set forth below is information regarding the continuing directors of the
Company, including their ages, the period in which they have served as
directors, and information furnished by them as to principal occupations and
directorships held by them in corporations whose shares are publicly registered.
<TABLE>
<CAPTION>
DIRECTOR
NAME SINCE AGE
- ---- -------- --------
<S> <C> <C>
Robert V. Gunderson, Jr..................................... 1995 48
Joseph S. Lacob............................................. 1992 44
Wesley D. Sterman, M.D...................................... 1991 39
John H. Stevens, M.D........................................ 1991 39
Steven C. Wheelwright, Ph.D................................. 1995 56
</TABLE>
ROBERT V. GUNDERSON, JR. has been a director of the Company since May, 1995.
Mr. Gunderson has been a partner of the law firm of Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP, since its formation in September 1995.
From May 1988 until September 1995, Mr. Gunderson was a partner of the law firm
of Brobeck, Phleger & Harrison, LLP. Mr. Gunderson holds an M.A. from Stanford
University, an M.B.A. in finance from the Wharton School, University of
Pennsylvania and a J.D. from the University of Chicago.
JOSEPH S. LACOB has been a director of the Company since April 1992.
Mr. Lacob is a general partner of Kleiner Perkins Caufield & Byers ("Kleiner
Perkins"), a venture capital firm he joined in 1987. Prior to joining Kleiner
Perkins, he was Marketing Manager for Cetus Corporation, a biotechnology
company. Mr. Lacob is a director of Corixa Corporation, Pharmacyclics, Inc.,
Sportsline USA, Inc., and several privately held companies. Mr. Lacob holds a
B.S. in Biochemistry from the University of California at Irvine, a Masters in
Public Health from the University of California at Los Angeles, and an M.B.A.
from the Graduate School of Business at Stanford University.
WESLEY D. STERMAN, M.D. founded the Company with Dr. Stevens in May 1991,
and has served as a director since that time. Dr. Sterman was Chairman of the
Board of Directors from May 1998 to June 1999 and was the Company's President
and Chief Executive Officer from May 1991 until May 1998. Prior to founding the
Company, Dr. Sterman was founder, President and Chief Executive Officer of
EndoVascular Technologies, Inc., a medical device manufacturer, from July 1989
to September 1991. Dr. Sterman has B.S. degrees both in Biology and in Chemistry
from Stanford University. Dr. Sterman received an M.D. from the Stanford
University School of Medicine and an M.B.A. from the Graduate School of Business
at Stanford University, where he was an Arjay Miller Scholar.
JOHN H. STEVENS, M.D. founded the Company with Dr. Sterman in May 1991, and
has been a director of the Company since that time. Dr. Stevens was Heartport's
Chief Technology Officer from July 1997 to December 31, 1998. From August 1996
until July 1997 Dr. Stevens was Assistant Professor of Cardiothoracic Surgery at
Stanford University School of Medicine and prior to that he served as Chief
Resident of the Department of Cardiothoracic Surgery at Stanford, and as Senior
Registrar in Cardiothoracic Surgery at the Great Ormond Street Hospital for Sick
Children in London, England from July 1995 to March 1996. Dr. Stevens earned
B.U.S. and B.S. degrees in Communications and Psychology from the University of
Utah and an M.D. from Stanford University.
3
<PAGE>
STEVEN C. WHEELWRIGHT, PH.D. has been a director of the Company since
January 1995. Dr. Wheelwright currently serves as a senior associate dean at the
Graduate School of Business, Harvard University, where he has been a professor
since July 1988. Dr. Wheelwright also served as a professor of the Graduate
School of Business, Harvard University, from August 1985 to August 1986. From
August 1986 to August 1988, Dr. Wheelwright served as a professor at the
Graduate School of Business at Stanford University. Dr. Wheelwright is also a
member of the Board of Directors of Quantum Corporation, a mass storage device
company, Franklin Covey, an organizational tools company, and Millennium
Pharmaceuticals, a biotechnology company.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1999, the Board of Directors of
the Company held a total of five (5) meetings. During this period, each director
attended or participated in at least 75% of the aggregate of (i) the total
number of meetings of the Board and (ii) the total number of meetings held by
all committees of the Board on which he was a member.
The Board of Directors has an Audit Committee and a Compensation Committee.
There is no nominating committee or committee performing the functions of such
committee. The Audit Committee meets with the Company's financial management and
its independent accountants at various times during each year and reviews
internal control conditions, audit plans and results, and financial reporting
procedures. This Committee, consisting of Messrs. Gunderson and Lacob and
Dr. Wheelwright, held three (3) meetings during fiscal 1999. The Compensation
Committee reviews and approves the Company's compensation arrangements for
management. This Committee, consisting of Drs. Stevens and Wheelwright, held two
(2) meetings during fiscal 1999.
DIRECTOR COMPENSATION
The Company's directors receive no cash compensation for any meetings that
they attend. However, each of the Company's directors, in exchange for his
services as a director, was granted stock options to purchase shares of Common
Stock. The Company's directors were granted the following options to purchase
shares of Common Stock in April, 1995, at an exercise price of $0.375 per share:
Dr. Wesley D. Sterman and Dr. John H. Stevens were granted options to purchase
640,000 shares and 192,000 shares, respectively; each of the options are
immediately exercisable and the shares vest monthly over a five year period
beginning from the fifth anniversary of the date of hire or the date the
individual became a director, as applicable. Each of the Company's outside
directors was granted options to purchase 80,000 shares on April 1, 1995 at an
exercise price of $0.375 per share. Each director except Joseph S. Lacob has
exercised in full his respective option grant. All of the foregoing options
granted to the directors are immediately exercisable and the director vests in
the shares monthly over a five year period. In addition, the Company's 1996
Stock Option Plan provides for automatic grants to non-employee directors. On
May 7, 1999, the date of the Company's 1999 Annual Meeting of Stockholders, each
of the Company's directors, except for Mr. Fischer, Dr. Sterman and
Dr. Stevens, was automatically granted a non-statutory stock option to purchase
6,400 shares of Common Stock at an exercise price of $3.875 per share, all of
which become exercisable on May 7, 2003. On June 7, 2000, the date of the
Company's 2000 Annual Meeting of Stockholders, each of the Company's directors,
except for Mr. Tansey, Mr. Fischer, Dr. Sterman and Dr. Stevens, will
automatically be granted a non-statutory stock option to purchase 6,400 shares
of Common Stock at an exercise price per share equal to the fair market value on
that date.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders vote FOR the
election of each of the above nominees.
4
<PAGE>
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as independent auditors for the Company
for the fiscal year ended December 31, 1999. The Board of Directors desires the
firm to continue in this capacity for the current fiscal year. Accordingly, a
resolution will be presented to the meeting to ratify the selection of Ernst &
Young LLP by the Board of Directors as the Company's independent auditors to
audit the accounts and records of the Company for the fiscal year ending
December 31, 2000, and to perform other appropriate services. In the event that
stockholders fail to ratify the selection of Ernst & Young LLP, the Board of
Directors would reconsider such selection. Even if the selection is ratified,
the Board of Directors in its discretion may direct the appointment of a
different independent auditing firm at any time during the year if the Board of
Directors believes that such a change would be in the best interests of the
Company and its stockholders.
A representative of Ernst & Young LLP will be present at the Annual Meeting
to respond to appropriate questions and to make a statement if such
representative desires to do so.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders vote FOR the
ratification of the selection of Ernst & Young LLP to serve as the Company's
independent auditors for the fiscal year ending December 31, 2000.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1999, certain information
with respect to shares beneficially owned by (i) each person who is known by the
Company to be the beneficial owner of more than five percent of the Company's
outstanding shares of Common Stock, (ii) each of the Company's directors and the
executive officers named in the Summary Compensation Table and (iii) all current
directors and executive officers as a group. Beneficial ownership has been
determined in accordance with Rule 13d-3 under the Securities Exchange Act of
1934, as amended. Under this rule, certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share the
power to vote or the power to dispose of the shares). In addition, shares are
deemed to be beneficially owned by a person if the person has the right to
acquire shares (for example, upon exercise of an option or warrant) within sixty
(60) days of the date as of which the information is provided; in computing the
percentage ownership of any person, the amount of shares is deemed to include
the amount of shares beneficially owned by such person (and only such person) by
reason of such acquisition rights. As a result, the
5
<PAGE>
percentage of outstanding shares of any person as shown in the following table
does not necessarily reflect the person's actual voting power at any particular
date.
<TABLE>
<CAPTION>
APPROXIMATE
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME OWNED OWNED(1)
- ---- ------------ ------------
<S> <C> <C>
Kleiner Perkins Caufield & Byers(2)......................... 1,820,000 7.14%
2750 Sand Hill Road
Menlo Park, CA 94025
Frank M. Fischer(3)......................................... 839,292 3.29%
Robert V. Gunderson, Jr..................................... 163,100 *
Joseph S. Lacob(2)(4)....................................... 2,164,838 8.49%
Wesley D. Sterman, M.D...................................... 3,205,492 12.57%
John H. Stevens, M.D.(5).................................... 2,290,456 8.98%
Casey M. Tansey(6).......................................... 443,532 1.74%
Steven C. Wheelwright, Ph.D................................. 86,946 *
Christopher A. Hubbard(7)................................... 154,694 *
Steven E. Johnson(8)........................................ 577,133 2.26%
Lawrence C. Siegel, M.D.(9)................................. 446,296 1.75%
Bradford J. Shafer.......................................... 0 *
All current directors and executive officers as a group (11
persons)(10).............................................. 12,367,458 48.51%
</TABLE>
- ------------------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Percentage of ownership is based on 25,492,416 shares of Common Stock
outstanding on December 31, 1999. The number of shares of Common Stock
beneficially owned includes the shares issuable pursuant to stock options
that are exercisable within 60 days of December 31, 1999. Shares issuable
pursuant to stock options are deemed outstanding for computing the
percentage of the person holding such options but are not outstanding for
computing the percentage of any other person. Except as 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. To the Company's knowledge, the
entities 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) Includes 1,820,000 shares of Common Stock owned by Kleiner Perkins
Caufield & Byers VI, L.P. ("KPCB VI"). Mr. Lacob, a director of the
Company, is a general partner of Kleiner Perkins Caufield & Byers VI
Associates, L.P. ("KPCB VI Associates"), which is a general partner of KPCB
VI. Mr. Lacob disclaims beneficial ownership of shares held by KPCB VI and
KPCB VI Associates, except for his pecuniary interest therein.
(3) Includes options immediately exercisable, or exercisable within 60 days of
December 31, 1999, for 578,125 shares of Common Stock.
(4) Includes options immediately exercisable for 80,000 shares of Common Stock.
(5) Includes options immediately exercisable, or exercisable within 60 days of
December 31, 1999, for 85,906 shares of Common Stock.
(6) Includes options immediately exercisable, or exercisable within 60 days of
December 31, 1999, for 150,000 shares of Common Stock.
(7) Includes options immediately exercisable, or exercisable within 60 days of
December 31, 1999, for 153,470 shares of Common Stock.
6
<PAGE>
(8) Includes options immediately exercisable, or exercisable within 60 days of
December 31, 1999, for 35,000 shares of Common Stock.
(9) Includes options immediately exercisable, or exercisable within 60 days of
December 31, 1999, for 266,250 shares of Common Stock.
(10) Includes options immediately exercisable, or exercisable within 60 days of
December 31, 1999, for 1,367,501 shares of Common Stock.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission (the "SEC") initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater-than-ten-percent beneficial
owners are required by SEC regulations to furnish the Company with copies of all
Section 16(a) reports they file.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that there was compliance for the fiscal year ended
December 31, 1999, with all Section 16(a) filing requirements applicable to the
Company's officers, directors and greater-than-ten-percent beneficial owners.
7
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned for services rendered
in all capacities to the Company and its subsidiaries for the three fiscal years
ended December 31, 1999 by each of the individuals who served as the Company's
Chief Executive Officer and each of the Company's four other highest-paid
individuals who were serving as executive officers at the end of 1999 (the
"Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS(2)
ANNUAL COMPENSATION ------------
-------------------- SECURITIES
FISCAL SALARY UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($)(1) BONUS ($) OPTIONS(#) COMPENSATION
- --------------------------- -------- -------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Casey M. Tansey........................ 1999 237,224 115,000 600,000 0
President, Chief Executive 1998 198,013 60,000 0 0
Officer and Director 1997 181,609 55,492 0 0
Frank M. Fischer....................... 1999 292,939 0 0 0
Chairman of the Board 1998(3) 218,077 100,000 1,000,000 0
of Directors (former President and 1997 0 0 0 0
Chief Executive Officer)
Christopher A. Hubbard................. 1999 264,421 58,000 350,000 0
Vice President, Sales 1998 275,065 48,975 119,800(4) 0
1997 251,218 65,000 25,000(5) 0
Steven E. Johnson...................... 1999 219,200 48,000 140,000 0
Senior Vice President, Operations 1998 199,950 40,000 0 0
1997 182,244 35,000 0 0
Lawrence C. Siegel, M.D................ 1999 241,129 76,000 400,000 0
Chief Technical Officer 1998 213,832 40,000 300,000(6) 0
1997 197,577 25,000 0 0
Bradford J. Shafer..................... 1999 245,727 0 0 0
Former General Counsel and Secretary 1998 215,920 32,675 350,000(6) 0
1997 199,199 25,195 0 0
</TABLE>
- ------------------------
(1) Salary includes amounts deferred under the Company's 401(k) Plan.
(2) No restricted stock grants were made to the Named Officers during the fiscal
year.
(3) Mr. Fischer became President and Chief Executive Officer on May 7, 1998 and
the amount of compensation indicated reflects what he received from that
date.
(4) Amount includes options for 69,800 shares that were granted upon
cancellation of an identical number of options previously granted to the
employee in 1996 through February 1998.
(5) These options were cancelled in 1998.
(6) These options were granted upon cancellation of an identical number of
options previously granted to the employee in 1996.
8
<PAGE>
STOCK OPTIONS
The following table contains information concerning the stock option grants
made to each of the Named Officers for the year ended December 31, 1999:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------ ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN OR BASE EXPIRATION --------------------
NAME GRANTED (#)(1) FISCAL YEAR PRICE ($/SH)(2) DATE 5%($) 10%($)
- ---- -------------- ------------ --------------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Casey M. Tansey................. 500,000 16.3% 1.88 7/29/09 589,589 1,494,134
100,000 3.3% 2.19 9/16/09 137,571 348,631
Frank M. Fischer................ 0 -- -- -- -- --
Christopher A. Hubbard.......... 150,000 4.9% 1.88 7/29/09 176,877 448,240
200,000 6.5% 3.44 11/23/09 432,365 1,095,698
Steven E. Johnson............... 140,000 4.6% 1.88 7/29/09 165,085 418,357
Lawrence C. Siegel, M.D......... 200,000 6.5% 1.88 7/29/09 235,835 597,653
200,000 6.5% 3.44 11/23/09 432,365 1,095,698
Bradford J. Shafer.............. 0 -- -- -- -- --
</TABLE>
- ------------------------
(1) The option will become fully exercisable and any unvested option shares will
vest immediately upon an acquisition of the Company by merger or asset sale
unless assumed or replaced by the acquiring entity. Options which are
assumed or replaced in the transaction and do not otherwise accelerate at
that time shall automatically accelerate (and unvested option shares which
do not otherwise vest at that time shall automatically vest) in the event
the optionee's service terminates by reason of an involuntary or
constructive termination within 12 months following the transaction as if
the optionee's service continued for an additional twelve months. Each
option has a maximum term of ten years, subject to earlier termination in
the event of the optionee's cessation of providing services to the Company.
(2) The exercise price may be paid in cash, in shares of Common Stock valued at
fair market value on the exercise date, or through a cashless exercise
procedure involving a same-day sale of the purchased shares.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the ten
year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the Common Stock appreciates over
the option term, no value will be realized from the option grants made to
the executive officers.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning option holdings for
the year ended December 31, 1999, with respect to each of the Named Officers. No
options were exercised by the Named Officers during the 1999 fiscal year. No
stock appreciation rights were exercised during such year or were outstanding at
the end of that year.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS AT
OPTIONS AT FY-END(#) FY-END($)(1)
--------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Casey M. Tansey................................ 150,000 450,000 423,438 1,270,313
Frank M. Fischer............................... 546,875 453,125 0 0
Christopher A. Hubbard......................... 149,729 320,071 173,438 531,563
Steven E. Johnson.............................. 35,000 105,000 100,625 301,875
Lawrence C. Siegel, M.D........................ 253,750 446,250 209,375 628,125
Bradford J. Shafer............................. 0 0 0 0
</TABLE>
- ------------------------
(1) Based on the fair market value of the Common Stock at year-end ($4.75 per
share) less the exercise price payable for such shares.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors was formed in
February, 1996, and the members of the Compensation Committee are Dr. Stevens
and Dr. Wheelwright. None of these individuals was at any time during the year
ended December 31, 1999, an officer or employee of the Company. Dr. Stevens was
the Company's Chief Technology Officer from July 1997 until December 31, 1998.
No member of the Compensation Committee of the Company serves as a member of the
board of directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
CHANGE IN CONTROL ARRANGEMENTS
The Company has agreed to provide Casey M. Tansey, its President and Chief
Executive Officer, a severance payment equal to 2 years of salary plus 200% of
Mr. Tansey's target bonus should he be involuntarily terminated within
12 months following a change of control of the Company. The failure to retain
Mr. Tansey as President and Chief Executive Officer of the company surviving the
change of control transaction will be considered an involuntary termination
under the agreement. Mr. Tansey will also be entitled to accelerated vesting of
his stock options as if he had remained an employee of the Company for an
additional twelve months should he be involuntarily terminated within 12 months
following a change of control of the Company.
The Company has agreed to provide Dr. Lawrence C. Siegel, its Chief
Technical Officer, with severance payments of twelve months of salary and
vesting of his stock options as if his service continued for an additional
twelve months should there be an involuntary termination of his employment
without cause.
Each of the executive officers of the Company is eligible to participate in
the Company's Change in Control Severance Plan. To the extent that any of the
executive officers has other severance arrangements with the Company, such
executive officers shall be paid the benefits provided under the Severance Plan
or their existing severance arrangements, whichever provides a greater benefit.
Under the Change in Control Severance Plan, in the event that an officer is
involuntarily terminated within twenty-four months following certain changes in
control, such officer shall receive severance benefits equal to twenty-four
months of salary plus a bonus equal to 200% of such officer's target bonus.
Under the terms of the 1996 Stock Option Plan, each outstanding option will
accelerate upon a Corporate Transaction unless the option is assumed in
connection with certain change of control situations (a "Corporate
Transaction"). Unvested shares purchased under options granted prior to the
initial public
10
<PAGE>
offering, including shares held by Mr. Tansey and Mr. Johnson, also provide that
the vesting of the shares will accelerate upon a Corporate Transaction unless
the Company's repurchase right is assigned in connection with the Corporate
Transaction. In addition, upon an involuntary termination of the optionee's
service within twelve months following a Corporate Transaction, the
exercisability of the option and the vesting of shares will accelerate with
respect to that number of shares as if the optionee's service continued for an
additional twelve months following the involuntary termination, unless otherwise
provided in the individual's employment agreement.
The Compensation Committee has the authority under the 1996 Stock Option
Plan to provide for the acceleration of vesting of the shares of Common Stock
subject to the outstanding options held by any executive officer or other
employee under that Plan at any time, including in connection with Corporate
Transactions or a hostile take-over of the Company, which may or may not be
conditioned on his employment being terminated (whether involuntarily or through
a forced resignation).
OTHER ARRANGEMENTS
On May 7, 1998 the Company entered into an agreement with Wesley D. Sterman,
M.D., its then President and Chief Executive Officer, pursuant to which
Dr. Sterman resigned as President and Chief Executive Officer and became
Chairman of the Board of Directors. Under the agreement and while Dr. Sterman's
service as a director continues, the Company will provide Dr. Sterman with the
benefits of the Company's Change in Control Severance Plan as if he were still
President and Chief Executive Officer. In addition, if the Company agrees to any
severance, change in control or similar package with any other executive officer
that is more beneficial to such officer than that provided to Dr. Sterman, he
will be entitled to a comparable arrangement in lieu of that provided under the
Change in Control Severance Plan. Dr. Sterman will continue to vest in his
outstanding 640,000 shares of the Company's Common Stock acquired through
exercise of a stock option while his service to the Company continues.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Company's Board of Directors (the
"Committee") is responsible for establishing policies and programs for
compensating Heartport's executive officers. Each year, the Committee determines
the base salary payable to the Chief Executive Officer ("CEO") and all other
executive officers, and approves the incentive bonus program for the CEO and
other executive officers. In addition, the Committee administers the Company's
1996 Stock Option Plan and Employee Stock Purchase Plan. The Committee has the
exclusive authority to grant stock options to the Company's officers. For fiscal
1999, the Committee considered both qualitative and quantitative factors in
determining executive officer compensation levels, including
commercially-prepared surveys of comparable companies.
COMPENSATION POLICY AND PHILOSOPHY
The Committee's policy is to develop executive compensation packages that
attract, retain and motivate highly effective executives. Compensation programs
are designed to reward the achievement of both short-term and long-term
objectives of the Company and to align the executives' interests with those of
the Company's stockholders. It is the Committee's objective to have a
substantial portion of each officer's compensation contingent upon the Company's
performance, as well as upon his or her own level of performance. Accordingly,
each executive officer's compensation package consists of three major
components: (i) base salary, (ii) annual cash incentive compensation, and
(iii) long-term stock-based incentive awards.
BASE SALARY
The base salary for each executive officer is set by reviewing the pay
practices of companies that compete with the Company for executive talent, and
by evaluating each individual's performance and
11
<PAGE>
contribution. The Committee believes that the Company's most direct competitors
for executive talent are not necessarily all of the companies that the Company
would use in a comparison of stockholder returns. Therefore, the compensation
comparison group is not the same as the industry group in the index used in the
Stock Performance Graph, below.
ANNUAL CASH INCENTIVE COMPENSATION
Each executive officer has an annual bonus target. The total bonus pool for
executive officers is determined based on the Company's achievement of goals.
For fiscal 1999, the corporate-level goals were comprised primarily of the
following equally-weighted components: (i) revenue; (ii) gross margin
improvement; (iii) operating expense reduction; and (iv) completion and
commercial release of new products. The Company achieved the majority of its
performance targets in 1999. Actual bonuses paid reflect both the achievement of
corporate goals and the individual's specific functional objectives, with
greater weight being given to the achievement of corporate goals. The weighting
of corporate goals vs. individual objectives was consistent among all executive
officers. Actual bonuses for the Named Officers are listed in the Summary
Compensation Table.
LONG-TERM STOCK-BASED INCENTIVE AWARDS
Generally, a significant option grant is made in the year that an executive
officer commences employment or an employee is promoted to an executive officer
position. The size of each grant is set at a level that the Committee deems
appropriate to create a meaningful opportunity for stock ownership based upon
the individual's position and responsibilities with the Company. Each grant
allows the officer to acquire shares of Common Stock at a fixed price per share
(generally the market price on the grant date) over a specified period of time.
The vesting schedules are designed to encourage the executives to remain with
the Company and to focus on longer-term results.
CEO COMPENSATION
During fiscal 1999 the Company promoted Mr. Tansey to the role of President
and Chief Executive Officer. Mr. Tansey's annual base salary of $280,000 was
established by the Committee in September 1999 with consideration of base
salaries paid to chief executive officers of comparable companies and in
recognition of the challenges he faced with regard to leading the Company's
business. The Committee also made significant option grants to Mr. Tansey in
connection with the negotiation of his employment arrangement.
The annual base salary for Mr. Fischer, the Company's President and Chief
Executive Officer until July 1999 and Chief Executive Officer until
September 1999, was determined by the Committee based on Mr. Fischer's
performance in 1998, his substantial experience as chief executive of another
public medical device company in the cardiovascular field, and in recognition of
the challenges he faced with regard to leading the Company's business.
TAX LIMITATION
Under the Federal tax laws, a publicly-held company such as the Company is
not allowed a Federal income tax deduction for compensation paid to certain
executive officers to the extent that compensation exceeds $1 million per
officer in any year. In order to qualify option grants under the Company's 1996
Stock Option Plan ("1996 Plan") for an exemption available to performance-based
compensation, the stockholders have approved certain provisions of the 1996
Plan, including a limit on the maximum number of shares of Common Stock for
which any one participant may be granted stock options each calendar year over
the term of the 1996 Plan. Accordingly, any compensation deemed paid to an
executive officer when he exercises an outstanding option under the 1996 Plan
with an exercise price equal to the fair market value of the option shares on
the grant date will qualify as performance-based compensation that will not
12
<PAGE>
be subject to the $1 million limitation. Since it is not expected that the cash
compensation to be paid to the Company's executive officers for the 2000 fiscal
year will exceed the $1 million limit per officer, the Committee will defer any
decision on whether to limit the dollar amount of the cash compensation payable
to the Company's executive officers to the $1 million limit.
Compensation Committee
John H. Stevens, M.D.
Steven C. Wheelwright, Ph.D.
13
<PAGE>
STOCK PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder return
on the Company's Common Stock between April 25, 1996 (the date the Company's
initial public offering commenced) and December 31, 1999 with the cumulative
total return of (i) the CRSP Total Return Index for The Nasdaq Stock Market
(U.S. Companies) (the "Nasdaq Stock Market-U.S. Index") and (ii) the Hambrecht
and Quist Healthcare Index (the "H&Q Healthcare Index"), over the same period.
This graph assumes the investment of $100.00 on April 25, 1996 in the Company's
Common Stock, the Nasdaq Stock Market-U.S. Index and the H&Q Healthcare Index,
and assumes the reinvestment of dividends, if any.
The comparisons shown in the graph below are based upon historical data. The
Company cautions that the stock price performance shown in the graph below is
not indicative of, nor intended to forecast, the potential future performance of
the Company's Common Stock. Information used in the graph was obtained from
Research Data Group, Inc., a source believed to be reliable, but the Company is
not responsible for any errors or omissions in such information.
COMPARISON OF 44 MONTH CUMULATIVE TOTAL RETURN AMONG HEARTPORT, INC.,
THE NASDAQ STOCK MARKET n U.S. INDEX, AND THE H&Q HEALTHCARE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NASDAQ STOCK HAMBRECHT &
<S> <C> <C> <C>
HEARTPORT, INC. MARKET (U.S.) QUIST HEALTHCARE
4/25/1996 $100.00 $100.00 $100.00
6/96 $144.05 $100.42 $95.76
9/96 $123.81 $104.01 $103.77
12/96 $108.93 $109.14 $103.08
3/97 $116.67 $103.22 $98.85
6/97 $83.93 $122.14 $115.07
9/97 $116.67 $142.80 $121.36
12/97 $97.02 $133.73 $119.47
3/98 $52.38 $156.51 $136.15
6/98 $31.25 $160.80 $136.69
9/98 $14.88 $145.10 $124.60
12/98 $27.98 $188.56 $151.77
3/99 $22.92 $211.43 $150.29
6/99 $11.31 $231.36 $155.45
9/99 $21.73 $236.91 $144.74
12/99 $22.62 $349.53 $168.98
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate this Proxy
Statement or future filings made by the Company under those statutes, the
Compensation Committee Report and Stock Performance Graph shall not be deemed
filed with the Securities and Exchange Commission and shall not be deemed
incorporated by reference into any of those prior filings or into any future
filings made by the Company under those statutes.
14
<PAGE>
CERTAIN TRANSACTIONS
INDEMNIFICATION
The Company's Certificate of Incorporation limits the liability of its
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except to the extent otherwise required by the Delaware General
Corporation Law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the fullest extent permitted by Delaware law, including in
circumstances in which indemnification is otherwise discretionary under Delaware
law. The Company has also entered into indemnification agreements with its
officers and directors containing provisions that may require the Company, among
other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers (other than liabilities arising from willful misconduct of a culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified, and to obtain directors' and
officers' insurance if available on reasonable terms.
LOANS TO EMPLOYEES
The Company extended a loan to Mr. Johnson on September 1, 1995, and
extended loans to Mr. Tansey on December 28, 1995, in connection with the
acquisition of shares of the Company's Common Stock pursuant to the exercise of
stock options. Each of the loans is full recourse and is secured by the shares
of Common Stock purchased with the proceeds of the loans. The following table
sets forth information with respect to loans extended to the officers by the
Company in excess of $60,000.
<TABLE>
<CAPTION>
INDEBTEDNESS
NO. OF SHARES PER SHARE AS OF INTEREST MATURITY
NAME PURCHASED (#) PRICE ($) PRINCIPAL ($) 12/31/99* ($) RATE (%) DATE
- ---- ------------- --------- ------------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Steven E. Johnson................ 176,000 0.375 66,000 85,875 6.18 8/23/04
Casey M. Tansey.................. 208,000 0.781 162,500 209,475 6.02 12/11/00
120,000 0.781 93,750 120,851 6.45 12/11/05
</TABLE>
- ------------------------
* The amount of indebtedness disclosed in this column also represents the
largest aggregate indebtedness outstanding at any time during the fiscal
year.
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 1999, has been mailed concurrently with this Proxy Statement to all
stockholders entitled to notice of and to vote at the Annual Meeting.
FORM 10-K
The Company filed an Annual Report on Form 10-K with the SEC. Stockholders
may obtain a copy of this report, as amended, without charge, by writing to the
Company's executive offices at 700 Bay Road, Redwood City, California 94063,
Attention: Investor Relations.
OTHER MATTERS
Management does not know of any matters to be presented at this Annual
Meeting other than those set forth herein and in the Notice accompanying this
Proxy Statement.
THE BOARD OF DIRECTORS
OF HEARTPORT, INC.
May 3, 2000
Redwood City, California
15
<PAGE>
1509-NP00
<PAGE>
PROXY
[HEARTPORT LOGO]
ANNUAL MEETING OF STOCKHOLDERS
JUNE 7, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints CASEY M. TANSEY and JEFFREY T. GRAINGER,
and each or either of them, as Proxies of the undersigned, with full power of
substitution, and hereby authorizes them to represent and to vote, as
designated in this proxy, all of the shares of Common Stock of HEARTPORT,
INC., held of record by the undersigned on April 26, 2000, at the Annual
Meeting of Stockholders of Heartport, Inc. to be held June 7, 2000, or at any
adjournments or postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NUMBERS 1 AND 2.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED ON THE REVERSE
SIDE. THIS PROXY WILL BE VOTED "FOR" PROPOSAL NUMBERS 1 AND 2 IF NO
SPECIFICATION IS MADE.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE>
HEARTPORT, INC.
c/o Equiserve
P.O. Box 8040
Boston, MA 02266-8040
[HEARTPORT LOGO]
DEAR STOCKHOLDER:
HEARTPORT, INC. CORDIALLY INVITES YOU TO ATTEND THE 2000 ANNUAL MEETING OF
STOCKHOLDERS. THE MEETING WILL TAKE PLACE AT 1:30 P.M. ON JUNE 7, 2000 AT
THE COMPANY'S OFFICES IN REDWOOD CITY, CALIFORNIA.
EVEN IF YOU ARE ABLE TO ATTEND THE MEETING, PLEASE REVIEW THE ENCLOSED
MATERIAL AND CAST YOUR VOTES BELOW.
YOUR VOTE IS IMPORTANT TO US. PLEASE MARK THE BOXES ON THE PROXY CARD TO
INDICATE HOW YOUR SHARES WILL BE VOTED. THEN SIGN THE CARD, DETACH IT, AND
RETURN YOUR PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
THANK YOU FOR YOUR PROMPT CONSIDERATION OF THESE MATTERS.
HEARTPORT, INC.
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE.
<TABLE>
<S> <C>
1. Election of Directors. 2. Ratification of selection of FOR AGAINST ABSTAIN
independent auditors. / / / / / /
NOMINEES: Frank M. Fischer, Casey M. Tansey
3. In their discretion, the proxies are authorized to
FOR WITHHELD vote upon such other matters as may properly
/ / / / come before the meeting.
/ / MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
---------------------------------------
For all nominees, except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
</TABLE>
Please sign exactly as your name(s) is (are) shown
on the share certificate to which the Proxy applies.
When shares are held by joint tenants, both should
sign. When signing as an attorney, 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.
Signature:________________ Date:_______ Signature:________________ Date:________
