SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
THE SPECTRANETICS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] 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:
<PAGE>
THE SPECTRANETICS CORPORATION
96 Talamine Court
Colorado Springs, CO 80907
(719) 633-8333
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 8, 1999
The Annual Meeting of the Shareholders of THE SPECTRANETICS CORPORATION
will be held at the Antlers Adam's Mark Hotel, 4 South Cascade Avenue, Colorado
Springs, Colorado, on Tuesday, June 8, 1999 at 10:00 a.m. for the following
purposes:
1. To elect two (2) members of the Board of Directors to serve three-year
terms until the 2002 Annual Meeting of Shareholders, or until
successors are elected and have been duly qualified.
2. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the current fiscal year.
Only shareholders of record as of the close of business on April 10, 1999,
the record date, will be entitled to notice of and to vote at the Annual Meeting
and any adjournments or postponements thereof.
Shareholders are requested to complete, date, sign and return the enclosed
proxy card in the accompanying postage-paid envelope we have provided as soon as
possible. Shareholders with shares registered directly with the Company's
transfer agent, Norwest Bank, may also vote via the Internet at Internet address
- -- www.eproxy.com/spnc/ -- or they may vote telephonically by calling
1-800-240-6326. Shareholders holding Spectranetics shares with a brokerage firm
or a bank may also be eligible to vote via the Internet or to vote
telephonically by calling the telephone number referenced on their voting form;
these proxy services are provided by ADP Investor Communication Services on
behalf of the brokerage firms and banks. Submitting your proxy with the Proxy
Card or via the Internet or by telephone will not affect your right to vote in
person should you decide to attend the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ JAMES P. MCCLUSKEY
James P. McCluskey
Secretary/Treasurer
Colorado Springs, Colorado
April 30, 1999
[LOGO] Spectranetics
<PAGE>
THE SPECTRANETICS CORPORATION
96 Talamine Court
Colorado Springs, CO 80907
(719) 633-8333
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 8, 1999
PROXY STATEMENT
----------
SOLICITATION OF PROXIES
This Proxy Statement is furnished to shareholders in connection with the
Solicitation of Proxies by the Board of Directors of THE SPECTRANETICS
CORPORATION (the "Company" or "SPNC") for use at the Annual Meeting of
Shareholders of the Company (the "Meeting") to be held at the Antlers Adam's
Mark Hotel, 4 South Cascade Avenue, Colorado Springs, Colorado, on June 8, 1999,
at 10:00 a.m. and at any adjournments or postponements thereof. This Proxy
Statement and Proxy are being mailed to Shareholders on or about May 5, 1999.
The cost of soliciting Proxies is being borne by the Company. In addition
to the mailings, the Company's officers, directors and other regular employees,
without additional compensation, may solicit Proxies by telephone or by oral
communication or by other appropriate means. The Company does not currently
anticipate hiring a firm to solicit proxies. The Company will pay all ordinary
fees related to the preparation of the proxy statement, including legal fees,
printer costs, and mailing costs.
If the enclosed Proxy is properly executed, returned and unrevoked, the
shares represented thereby will be voted in the manner specified. If no
specification is made in an executed Proxy received by the Company, then the
Proxy shall be voted FOR (i) the election of the two (2) nominees to the Board
of Directors listed herein; and (ii) ratification of the appointment of KPMG
Peat Marwick LLP as the Company's independent auditors. A Proxy may be revoked
by a shareholder at any time prior to the exercise thereof by written notice to
the Secretary of the Company, by submission of another Proxy bearing a later
date, or by attending the Meeting and voting in person.
Discretionary authority is provided in the Proxy as to matters not
specifically referred to therein. The Board of Directors is not aware of any
other matters which are likely to be brought before the Meeting. However, if any
such matters properly come before the Meeting, the Proxy holder or holders are
fully authorized to vote thereon in accordance with the Proxy holder's or
holders' judgment and discretion.
RECORD DATE AND VOTING SECURITIES
Only holders of record of the Company's $.001 par value common stock
("Common Stock") outstanding as of the close of business on April 10, 1999, will
be entitled to notice of and to vote on matters presented at the Meeting or any
adjournment or postponement thereof. On April 10, 1999, there were outstanding
22,932,568 shares of Common Stock, which constituted all the outstanding voting
securities of the Company. Each share of Common Stock will be entitled to one
vote on each matter presented at the Meeting, and there is no cumulative voting.
In order to constitute a quorum for the conduct of business at the Meeting, a
majority of the outstanding shares of Common Stock entitled to vote at the
Meeting must be represented at the Meeting. Shares represented by Proxies that
reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee which are represented at the Meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal) will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum.
The following table sets forth certain information as to the number of shares of
Common Stock of SPNC beneficially owned as of March 31, 1999, by (i) each of
SPNC's Directors; and (ii) the Named Executive Officers (as defined on page 6
hereof); and (iii) all of the current executive officers and Directors of SPNC
as a group. Except as otherwise
-1-
<PAGE>
indicated, SPNC believes that the beneficial owners of the Common Stock listed
below, based solely on information furnished by such holders, have sole voting
and dispositive power with respect to such shares, subject to community property
laws, where applicable. "Percent Beneficially Owned" is based on shares of
Common Stock outstanding on March 31, 1999.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
Shares Beneficially Owned
Number of
Name and address Shares Percentage
- --------------------------------------------------------------------------------
5% Shareholders
- ----------------------------------------------
Pequot Private Equity Fund, L.P. 1,331,400 5.8%
Pequot Offshore Private Equity Fund, Inc. 168,600 *
As a group 1,500,000 6.5%
500 Nyala Farm Road
Westport, CT 06880
Special Situations Fund III, L.P. 750,000 3.3%
Special Situations Private Equity Fund, L.P. 450,000 2.0%
Special Situations Cayman Fund, L.P. 300,000 1.3%
As a group 1,500,000 6.5%
153 E 53rd Street
New York, NY 10022-4611
Directors and Named Executive Officers(1)
- -----------------------------------------
Joseph A. Largey(2) 465,270 2.0%
Gary R. Bang(3) 82,200 *
Cornelius C. Bond, Jr.(4) 207,908 *
Emile J. Geisenheimer(5) 200,364 *
James A. Lent(6) 85,000 *
Joseph M. Ruggio, M.D.(7) 53,500 *
John G. Schulte(8) 50,000 *
Adrian E. Elfe(9) 80,353 *
Henk Kos(10) 144,479 *
James P. McCluskey(11) 109,684 *
Christopher Reiser, Ph.D(12) 99,316 *
All current executive officers and 1,767,637 7.7%
Directors as a group (14 persons)(13)
- ----------
* less than 1%
- --------------------------------------------------------------------------------
- ----------
(1) The address of each of the Directors and the Named Executive Officers
listed herein is c/o The Spectranetics Corporation, 96 Talamine Court,
Colorado Springs, CO 80907.
(2) Includes options for 438,770 shares which are exercisable within 60 days of
March 31, 1999.
(3) Includes options for 50,000 shares which are exercisable within 60 days of
March 31, 1999.
(4) Includes options for 90,224 shares which are exercisable within 60 days of
March 31, 1999.
(5) Includes options for 180,000 shares which are exercisable within 60 days of
March 31, 1999.
(6) Includes options for 75,000 shares which are exercisable within 60 days of
March 31, 1999.
(7) Includes options for 50,000 shares which are exercisable within 60 days of
March 31, 1999.
(8) Includes options for 50,000 shares which are exercisable within 60 days of
March 31, 1999.
-2-
<PAGE>
(9) Includes options for 79,353 shares which are exercisable within 60 days of
March 31, 1999.
(10) Includes options for 123,437 shares which are exercisable within 60 days of
March 31, 1999.
(11) Includes options for 105,811 shares which are exercisable within 60 days of
March 31, 1999.
(12) Includes options for 31,687 shares which are exercisable within 60 days of
March 31, 1999.
(13) Includes options for 1,434,325 shares which are exercisable within 60 days
of March 31, 1999.
BOARD OF DIRECTORS
The following table lists the members of the Board of Directors of SPNC,
their ages, their positions and offices with the Company, the year first elected
as a director, and the expiration of their current term.
<TABLE>
<CAPTION>
Director Term
Name Age Positions with the Company Since Expires
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joseph A. Largey 52 President, Chief Executive Officer and 1997 2000
Director
Gary R. Bang 52 Director 1995 2001
Cornelius C. Bond, Jr. 64 Director 1994 2001
Emile J. Geisenheimer (1) 51 Chairman of the Board of Directors 1990 1999
James A. Lent 56 Director 1995 2000
Joseph M. Ruggio, M.D. 44 Director 1997 2001
John G. Schulte(1) 50 Director 1996 1999
</TABLE>
- ----------
(1) Recommended for re-election to the Board for a three-year term.
The Board of Directors is divided into three classes, designated Class I,
Class II and Class III. Each class shall consist, as nearly as may be possible,
of one-third of the total number of directors constituting the entire Board of
Directors. At each annual meeting only directors of the class whose term is
expiring will be voted upon, and upon election each such director will serve a
three-year term. The Board of Directors may determine from time to time the size
of the Board of Directors, but in no event can it determine to have a Board
consisting of not less than four nor more than eight directors. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as near equal as
possible, and any additional directors of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director will hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and qualified, subject,
however, to prior death, resignation, retirement, disqualification or removal
from office.
The Company is not aware of any family relationships among any of the
directors and executive officers of the Company.
DIRECTOR COMPENSATION
Currently, non-employee Directors are eligible to participate in the
Company's 1997 Equity Participation Plan (the "Plan"), which was approved by
shareholders on June 10, 1997. The Plan provides that any newly elected
non-employee Director will be granted a non-qualified stock option to purchase
75,000 shares of Common Stock at the then fair market value, which vests equally
over a three-year period. On every third anniversary of each grant, for so long
as each non-employee Director remains on the Board, he or she will receive an
option to purchase 75,000 shares of Common Stock at the then fair market value,
which vests equally over three years. The exercise price is equal to the closing
price of the stock as traded on the Nasdaq National Market on the date of grant.
Non-employee Directors receive $2,500 for each Board meeting attended in
person and $1,000 for meetings attended by telephone. Board members are
reimbursed for expenses associated with their attendance at Board meetings and
committee meetings. Board members also receive $2,500 per day when serving as a
consultant to the Company. The Chairman of the Board receives a retainer of
$10,000 per month for consulting services rendered to the Company.
-3-
<PAGE>
BOARD COMMITTEES AND MEETINGS
In 1998, the Board of Directors met seven times and executed one unanimous
written consent. No Director, except for Mr. Lent, attended fewer than 75% of
the Board meetings. The Company has established an Audit Committee comprised of
Messrs. Bond, Lent and Schulte to periodically review the services rendered by
independent auditors and to analyze accounting procedures of the Company. No
meetings of the Audit Committee were held in 1998. The Board has established a
Compensation Committee, consisting of Messrs. Lent, Bond and Bang, which met
four times in 1998 to review and approve the Company's compensation and benefit
plans. The Compensation Committee also approves stock option grants to executive
officers of the Company.
BUSINESS EXPERIENCE OF DIRECTORS
Joseph A. Largey joined SPNC in March 1997 as President, Chief Executive
Officer and a Director. Prior to joining SPNC, he served as Executive Vice
President for the International Division of Picker International, Inc., a
subsidiary of G.E.C. plc, since November 1985.
Gary R. Bang has served as a Director of SPNC since November 1995. Since
May 1997, when Target Therapeutics, Inc. was sold to Boston Scientific
Corporation, Mr. Bang has managed his private investments and pursued various
personal interests. From May 1993 to April 1997, he served as President, Chief
Executive Officer and a Director of Target Therapeutics, Inc., a medical device
company specializing in the treatment of vascular diseases of the brain. From
1973 to April 1993, Mr. Bang held various positions with Baxter International,
the most recent of which was President of the Pharmaseal Surgical Division.
Cornelius C. Bond, Jr. has served as a Director of SPNC since June 1994. He
served as a member of the Board of Directors for Advanced Interventional
Systems, Inc. ("LAIS") from 1986 until June 1994 when LAIS merged into SPNC. Mr.
Bond has been a general partner of NEA Partners III, Limited Partnership, a
venture capital firm, since 1981, and is a director of several privately-held
companies.
Emile J. Geisenheimer has served as a Director of SPNC since April 1990 and
was appointed Chairman of the Board in June 1996. He has served as President of
Madison Investment Partners, Inc., a private equity investment firm, since
January 1995. Prior to forming Madison Investment Partners, he was general
partner of Nazem and Company, a venture capital management firm, from November
1989 to January 1995.
James A. Lent has served as a Director of SPNC since November 1995. Since
November of 1998 he has served as Company Group Chairman of Johnson & Johnson
(DePuy Franchise). Previously, Mr. Lent served as Chairman, .Chief Executive
Officer, and Director of DePuy, Inc., an orthopedic supply company from May of
1995 until November 1998. He served as President and Chief Executive Officer of
DePuy, Inc. from January 1985 to May 1995.
Joseph M. Ruggio, M.D. has served as a Director of SPNC since February
1997. Since June 1994, Dr. Ruggio has served as President, Chief Executive
Officer, and Director of Pacific Cardiovascular Associates Medical Group, Inc.,
a large cardiovascular professional corporation. He also serves as President,
Chief Executive Officer, and Director of Via Vitae, a cardiovascular disease
management company, which was founded in February 1996. Dr. Ruggio serves as
founder and Chairman of UltiMed, Inc., a cardiovascular medical services
organization, which was founded in July 1995. From August 1985 to December 1995,
Dr. Ruggio served as Chairman of the Department of Cardiology and Director of
Invasive Interventional Cardiology for FHP, Inc.
John G. Schulte has served as a Director of SPNC since August 1996. In
November, 1998, Mr. Schulte was appointed President and Chief Executive Officer
of Somnus Medical Technologies, Inc., a medical device company specializing in
the design, development, manufacturing and marketing of minimally invasive
medical devices for the treatment of upper airway disorders. Previously, Mr.
Schulte was appointed President of the Surgical Products Division of Genzyme
Corporation, a medical device company specializing in anti-adhesion products for
general surgery and cardiovascular medical devices and instruments. From
November 1996 to June 1997, he served as Senior Vice President and General
Manager of the International and Peripheral Division of Target Therapeutics,
Inc., a medical device company specializing in the treatment of vascular
diseases of the brain. From January 1992 to
-4-
<PAGE>
July 1996, Mr. Schulte served as President of three separate divisions of C. R.
Bard, Inc., a medical device company specializing in invasive diagnostic
cardiology.
EXECUTIVE OFFICERS
The current executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Office
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Joseph A. Largey 52 President and Chief Executive Officer
Adrian E. Elfe 54 Vice President, Quality Assurance and Regulatory Affairs
Henk Kos 54 Vice President of Marketing, European and Asian Sales
and Service
Lawrence E. Martel, Jr. 48 Vice President, Operations
James P. McCluskey 46 Vice President, Finance, Chief Financial Officer,
Secretary and Treasurer; General Manager of
Polymicro Technologies, Inc.
Dale T. Muth 45 Vice President, Human Resources
Christopher Reiser, Ph.D. 44 Vice President, Engineering
Bruce E. Ross 50 Vice President, Sales and Service of the Americas
</TABLE>
Each executive officer of the Company serves at the discretion of the Board
of Directors. The Company is not aware of any family relationships among any of
the directors and executive officers of the Company. Biographical information
regarding Mr. Largey is set forth under the heading "BUSINESS EXPERIENCE OF
DIRECTORS."
Adrian E. Elfe was appointed Vice President, Quality Assurance and
Regulatory Affairs in November 1996. He served as Director of Quality Assurance
and Regulatory Compliance since first employed by SPNC in April 1990. Prior to
joining SPNC, Mr. Elfe directed quality system planning and implementation for
nine different companies.
Henk Kos was appointed as Vice President of Marketing, European and Asian
Sales and Service for Spectranetics in 1998. He was appointed as Vice President,
Sales and Marketing in January 1997. Prior to that time, Mr. Kos served as the
General Manager of Spectranetics International, B.V. in the Netherlands since
first employed by SPNC in January 1993. Prior to joining SPNC, Mr. Kos was an
independent consultant.
Lawrence E. Martel, Jr. was appointed Vice President, Operations of SPNC in
August 1994 and served as Director of Operations since first employed by SPNC in
January 1993. Prior to that time, he served nine years as Vice President of
Operations with Mountain Medical Equipment, Inc., a manufacturer of respiratory
medical devices for use in the home health care and health institutional
markets.
James P. McCluskey was appointed Chief Financial Officer of SPNC in June
1995. He was appointed Secretary and Treasurer of SPNC in June 1994. In May
1998, he assumed, in addition to his CFO duties, the General Manager
responsibilities for the Company's Polymicro subsidiary. In August 1994, he was
named Vice President, Finance of SPNC. From January 1992 to August 1994, he
served as Corporate Controller for SPNC. He joined SPNC in January 1991 as the
Financial Reporting Manager.
Dale T. Muth was appointed as Vice President, Human Resources in May 1998.
Prior to joining Spectranetics in September 1998 as Director of Human Resources,
he served as the principal partner of a human resources consulting firm since
1993. Prior to that time, Mr. Muth served as Director of Human Resources at
Mountain Medical Equipment, Inc. for eight years.
Christopher Reiser, Ph.D. was appointed Vice President, Engineering in
November 1997. Prior to that time, he served as Director of Engineering of SPNC
since December 1993. Dr. Reiser joined SPNC in December 1992 as Manager of Laser
Product Development. From January 1989 to October 1992, he served as Director of
Technology at Cymer Laser Technologies, a manufacturer of excimer laser systems
for the semiconductor industry.
-5-
<PAGE>
Bruce E. Ross joined Spectranetics in July 1998 as Vice President, Sales
and Service of the Americas. Mr. Ross came to Spectranetics from Picker
International, Cleveland, Ohio, where he was serving as Vice President and
General Manager of Picker International (Europe), Inc. Prior to that position,
Mr. Ross served as President of Picker International Canada, Inc. He spent a
total of 10 years with Picker developing successful sales strategies that
increased business unit revenues and profitability. Previous to his experience
at Picker, Mr. Ross served as Vice President of Sales and Marketing at Nicolet
Biomedical, Inc.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation paid
by SPNC for the fiscal years ended December 31, 1998, 1997 and 1996 to those
persons who were either (i) the Chief Executive Officer of the Company during
the last completed fiscal year or (ii) one of the other four most highly
compensated executive officers who were serving as executive officers on
December 31, 1998, whose total annual salary and bonus exceeded $100,000 (the
"Named Executive Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------- ------------
Other Annual
Name and Principal Position Year Salary ($) Bonus ($) Compensation Options (#)
- ------------------------------------------------------------------------------------------------------------ ------------
<S> <C> <C> <C> <C> <C>
Joseph A. Largey(1) 1998 $258,936 $110,552(2) $ 41,654(3) 194,324(4)
President and Chief 1997 201,923 150,000(5) 31,575(6) 575,000
Executive Officer 1996 -- -- -- --
Henk Kos 1998 $190,316 $ -- $ 43,162(7) --
Vice President of Marketing, 1997 181,503 47,839(8) 87,452(9) 60,000
European and Asian Sales and 1996 181,650 12,500(10) 31,000(11) 85,000
Service
James P. McCluskey 1998 $111,528 $ 55,000(12) $ 18,385(13) 30,000
Vice President, Finance, 1997 100,000 18,824(8) -- --
Chief Financial Officer, 1996 94,462 12,725(10) -- 25,000
Secretary, Treasurer; General
Manager, Polymicro
Technologies, Inc.
Adrian E. Elfe 1998 $ 95,000 $ 32,585(12) -- 10,000
Vice President, Regulatory 1997 93,306 13,340(8) -- --
Affairs/Quality Assurance 1996 83,277 8,075(10) -- 5,000
Christopher Reiser, Ph.D 1998 $ 98,001 36,015(12) -- 30,000
Vice President, Technology 1997 92,000 12,919(8) -- --
and Clinical Research 1996 86,615 13,740(10) -- 25,000
</TABLE>
- ----------
(1) Mr. Largey was appointed to the position of President and Chief Executive
Officer in March 1997.
(2) Incentive compensation bonus of $100,000 paid during 1999 for services
rendered in 1998; incentive compensation bonus of $10,552 paid in 1998.
(3) Relocation costs of $38,138; life insurance premiums paid by the Company of
$3,515.
(4) Incentive stock options of 150,000 shares granted in 1998 vesting over a
three year period; incentive stock options of 15,846 shares granted in 1998
in lieu of a $7,500 salary reduction over a six-month period, vesting over
a six-month period; incentive stock options of 28,478 shares granted in
1999 in lieu of $18,985 bonus for services rendered in 1998, vesting over a
six-month period.
(5) Incentive compensation bonus of $100,000 paid during 1998 for services
rendered in 1997; signing bonus of $50,000 paid during 1997.
-6-
<PAGE>
(6) Relocation reimbursement of $23,213 paid during 1997; life insurance of
$5,362; auto allowance of $3,000.
(7) Housing allowance of $33,000; auto allowance of $8,250; relocation costs of
$1,912.
(8) Incentive compensation bonus paid during 1998 for services rendered in
1997.
(9) Relocation reimbursement of $44,452 paid during 1997; housing allowance of
$24,000; and auto allowance of $19,000.
(10) Incentive compensation paid during 1997 for services rendered in 1996.
(11) Includes lease payments on automobile.
(12) Incentive compensation paid during 1999 for services rendered in 1998.
(13) Includes relocation costs.
GRANTS OF STOCK OPTIONS
The following table sets forth certain information with respect to
individual grants of stock options to the Named Executive Officers during the
year ended December 31, 1998.
Options Granted In Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
- --------------------------------------------------------------------------------------- Value at Assumed Annual
% of Total Rates of Stock Price
Options Exercise Appreciation for
Granted to of Base Option Term(1)
Options Employees in Price Expiration -----------------------
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Largey(2) 150,000(3) 13.33% $3.125 3/03/08 294,794 747,067
15,846(4) 1.41% $2.156 10/20/08 21,486 54,449
Adrian E. Elfe 10,000(5) .89% $3.375 5/14/08 21,225 53,789
James P. McCluskey 30,000(5) 2.67% $3.375 5/14/08 63,676 161,366
Christopher Reiser, Ph.D. 30,000(5) 2.67% $3.375 5/14/08 63,676 161,366
</TABLE>
- ----------
(1) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only. Potential gains are net of the exercise price, but
before taxes associated with the exercise. Amounts represent hypothetical
gains that could be achieved for the respective options if exercised at the
end of the option term. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with the rules of the Securities
and Exchange Commission and do not represent the Company's estimate or
projection of the future Common Stock price. Actual gains, if any, on
option exercises are dependent upon the future financial performance of the
Company, overall market conditions and the option holders' continued
employment through the vesting period. This table does not take into
account any appreciation in the price of the Common Stock from the date of
grant to the date of this Proxy Statement other than the columns reflecting
assumed rates of appreciation of 5% and 10%.
(2) Does not include incentive stock options for 28,478 shares granted in 1999
in lieu of an incentive compensation bonus of $18,985 for services rendered
in 1998.
(3) Includes 50,000 shares vested on March 3, 1998; 50,000 shares vested on
March 3, 1999; and 50,000 shares vested on March 3, 2000.
(4) Options were granted in lieu of a $7,500 salary reduction over a six-month
period. Options vest on April 21, 1999.
(5) Options vest 25% as of May 14, 1999; and 6.25% on the third day of each
calendar quarter thereafter until May 14, 2002.
-7-
<PAGE>
STOCK OPTION EXERCISES AND FISCAL YEAR-END STOCK OPTION VALUE
Set forth in the table below is information concerning the value of stock
options held on December 31, 1998 by the Named Executive Officers.
Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Shares Number Of Value of Unexercised,
Acquired Unexercised Options In-the-Money Options at
on Value Held at Fiscal Year End (#) Fiscal Year End ($)(1)
Exercise Realized ---------------------------------------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Largey -- -- 315,634 425,212 -- 10,411
Henk Kos -- -- 114,375 80,625 52,518 --
Adrian Elfe -- -- 76,541 11,875 104,397 --
James P. McCluskey -- -- 96,749 39,375 140,155 --
Christopher Reiser, Ph.D. -- -- 22,625 39,375 -- --
</TABLE>
(1) Amounts are based on the closing price of SPNC's stock, as reported on the
Nasdaq National Market, at December 31, 1998 ($2.813), minus the exercise
price of the option, multiplied by the number of shares to which the option
relates.
COMPENSATION COMMITTEE REPORT
Decisions with regard to the compensation of SPNC's executive officers,
including the Named Executive Officers, are generally made by a three-member
Compensation Committee of the Board. Each member of the Committee is a
non-employee Director. Decisions about awards under certain of SPNC's
stock-based compensation plans are made by the Committee and reported to the
Board. All other decisions by the Committee relating to compensation of SPNC's
executive officers are reviewed by the Board. Generally, the Committee meets in
February following the end of a particular fiscal year to consider bonus
compensation; a meeting is held in June to consider prospective salary
adjustments to become effective on July 1. In addition, the Committee meets on
an as-needed basis throughout the year.
Executive Officer Compensation Policies
The Committee's executive compensation policies are designed to provide
competitive levels of compensation that integrate pay with SPNC's performance,
recognize individual initiative and achievements, and assist SPNC in attracting
and retaining qualified executives. The Committee relies in large part on
independent compensation studies for the determination of competitive
compensation.
In order to implement these objectives, SPNC has developed a
straightforward compensation approach. In general, SPNC compensates its
executive officers through a combination of base salary, annual incentive
compensation in the form of cash bonuses, and long-term incentive compensation
in the form of stock options. In addition, executive officers participate in
benefit plans, including medical, dental, stock purchase and 401(k), that are
available generally to SPNC's employees.
Base Salary
Base salary levels for SPNC's executive officers are set generally to be
slightly below the market level in relation to the salary levels of executive
officers in other companies within the medical device industry or other
companies of comparable size, taking into consideration the position's
complexity, responsibility and need for special expertise. In reviewing salaries
in individual cases the Compensation Committee also takes into account
individual experience and performance. In establishing the salary levels against
the range of comparable companies, the Compensation Committee considered
salaries and bonuses in determining the competitiveness of the total
compensation package.
-8-
<PAGE>
Annual Incentive Compensation
The Compensation Committee reviews and approves all bonus payments made to
SPNC's executive officers. Payment of bonuses is determined by both corporate
and individual performance criteria. In 1998 the bonuses for executive officers
were based on meeting performance targets for revenue, net income and cash
usage. These bonuses ranged from approximately 34 percent of base salary for the
executive officers to approximately 45 percent for the president and chief
executive officer.
Long-term Incentive Compensation
SPNC provides long-term incentive compensation through its stock option
plan. The number of shares covered by any grant is generally determined by the
position, the executive officer's salary at the time of grant, amounts granted
in previous years, and the then current stock price. In special cases, however,
grants may be made to reflect increased responsibilities or reward extraordinary
performance.
Compensation Paid to the Chief Executive Officer
The Board established Mr. Largey's compensation package based upon the
general factors discussed above and upon an evaluation of compensation paid to
chief executive officers at comparable public companies and other companies in
SPNC's industry. Mr. Largey's compensation package includes base salary, an
annual bonus incentive program, an initial stock option grant plus additional
grants annually to be issued on the anniverary date of his joining the Company.
Effective July 1, 1999, Mr. Largey received an annual base salary of
$265,000. Mr. Largey is eligible for bonus compensation up to 65% of his base
salary based on the attainment of performance targets for revenue, net income,
and cash flow. Mr. Largey's actual cash bonus compensation for 1998 was $110,552
(of which $100,000 was paid in 1999). In 1998, the Compensation Committee
awarded Mr. Largey options to purchase 150,000 shares of common stock. Of the
150,000 options, 50,000 became exercisable on March 3, 1998, 50,000 will become
exercisable on March 3, 1999 and 50,000 will become exercisable on March 3,
2000. In the event Mr. Largey is terminated by the Company without cause, he
will be provided 12 months' severance compensation.
Mr. Largey elected to reduce his base salary during 1998 over a six-month
period. In lieu of the reduction in base salary, he received options to purchase
15,486 shares of common stock, which become exercisable on April 21, 1999. He
also elected to reduce his cash bonus compensation earned in 1998 by $18,985. In
lieu of this cash bonus, Mr. Largey received stock options in February 1999 to
purchase 28,478 shares of common stock, which become exercisable on August 12,
1999.
Employment Contracts and Change of Control Arrangements
In January 1997, SPNC entered into an at-will employment agreement with
Henk Kos, who is currently Vice President of Marketing, European and Asian Sales
and Service of SPNC. The agreement provides that SPNC will give six months'
prior notice of intent to terminate the agreement. Pursuant to the agreement,
SPNC agreed to pay Mr. Kos a fixed salary, monthly auto allowance, registration
and other automobile expenses, and reimbursement for mileage and telephone
expenses. Mr. Kos is also eligible to participate in SPNC's annual incentive
compensation, stock option, pension, health insurance and employee stock
purchase plans. If Mr. Kos becomes unable to perform services for SPNC for 30
days or more due to illness or other disability, SPNC agreed to supplement Mr.
Kos' social benefits in an amount equal to up to 100% of his after-tax salary
for a period of one year. SPNC also agreed to provide disability insurance for
Mr. Kos pursuant to SPNC's disability plan following this one-year period. The
agreement contains certain confidentiality and non-compete provisions. Mr. Kos
also agreed not to solicit SPNC's employees, directors, consultants, independent
contractors, clients or customers other than on behalf of SPNC during the term
of and for a period of one year following his employment with SPNC. Upon SPNC's
termination of the agreement without cause or due to merger or other
reorganization, SPNC agreed to pay one year of severance (including base salary,
benefits, allowances and reimbursements) to Mr. Kos and to cover Mr. Kos'
relocation expenses. Mr. Kos would continue to be subject to the non-compete and
non-solicitation provisions of the agreement during this one-year period.
-9-
<PAGE>
Certain Tax Considerations
During 1995, the Internal Revenue Code of 1986 (the "Code") was amended to
include a provision which denies a deduction to any publicly-held corporation
for compensation paid to any "covered employee" (defined as the Chief Executive
Officer and the corporation's other four most highly compensated officers, as of
the end of a taxable year) to the extent that the compensation exceeds $1
million in any taxable year of the corporation beginning after 1993.
Compensation which is payable pursuant to written binding agreements entered
into before February 18, 1993, and compensation which constitutes
"performance-based compensation" is excludable in applying the $1 million limit.
It is SPNC's policy to qualify compensation paid to its top executives, in a
manner consistent with SPNC's compensation policies, for deductibility under the
new law in order to maximize SPNC's income tax deductions.
Gary R. Bang
Cornelius C. Bond, Jr.
James A. Lent
Stock Price Performance Graph
The Stock Price Performance Graph set forth below compares the cumulative
total shareholder return on SPNC Common Stock for the period from December 31,
1993, to December 31, 1998, with the cumulative total return on the Nasdaq
Composite Index, a sub-index of the NASDAQ Composite Index and a peer group
index over the same period (assuming the investment of $100 in SPNC Common
Stock, the Nasdaq Composite Index, a sub-index of the NASDAQ Composite Index and
the peer group index on December 31, 1993, and reinvestment of all dividends).
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SPNC 100.00 70.37 151.85 248.15 185.19 166.73
PEER 100.00 111.24 157.66 171.29 93.30 70.81
NASDAQ Medical 100.00 106.36 161.41 151.19 173.21 195.83
NASDAQ Composite 100.00 97.75 138.24 170.03 208.65 292.80
</TABLE>
The peer group selected by SPNC is as follows: InnerDyne Inc. (IDYN);
Laserscope Inc. (LSCP); LaserSight Inc. (LASE); Merit Medical Systems, Inc.
(MMSI); PLC Systems, Inc. (PLC), which replaced Quest Medical Inc. (QMED).
In 1998, QMED sold a substantial portion of its medical product lines and
it ceased to be comparable to our business.
The NASDAQ index used is entitled "NASDAQ Medical Devices, Instruments and
Supplies, Manufacturers and Distributors Stocks" (NASDAQ Medical). This is
a sub-index of the broad-based NASDAQ Composite Index. The Company believes
it to be a better index for comparison purposes since the stocks within
this index are more representative of our business. In prior years, the
-10-
<PAGE>
broad-based NASDAQ index (NASDAQ Composite) has been used and is shown in
the graph for comparative purposes.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
10% of a registered class of the Company's equity securities, to file initial
reports of ownership and reports of changes in ownership with the Securities and
Exchange Commission (the "SEC") and the National Association of Securities
Dealers ("NASD"). Such persons are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of such forms received by it with
respect to fiscal 1998, or written representations from certain reporting
persons, the Company believes that all of its directors and executive officers
and persons who own more than 10% of the Common Stock have complied with the
reporting requirements of Section 16(a).
ELECTION OF DIRECTORS
(Proposal No. 1)
The current number of members of the Board of Directors is seven (7). The
terms of Emile J. Geisenheimer and John G. Schulte expire at this meeting. The
Board of Directors recommends that Emile J. Geisenheimer and John G. Schulte be
re-elected for a three-year term to expire at the Company's Annual Meeting in
2002.
The nominees have expressed their willingness to serve, but if because of
circumstances not contemplated the nominees are not available for election, the
Proxy holders named in the enclosed Proxy form intend to vote for such other
person or persons as management may nominate. If Emile J. Geisenheimer and John
G. Schulte are re-elected to serve on the Board of Directors, there would remain
one (1) vacancy which may or may not be filled by the Board of Directors in the
exercise of its discretion. Information with respect to each nominee is set
forth in the section entitled "BUSINESS EXPERIENCE OF DIRECTORS."
Vote and Recommendation
Directors will be elected by a favorable vote of a plurality of the shares
of Common Stock present and entitled to vote, in person or by proxy, at the
Annual Meeting. Abstentions as to the election of directors will not affect the
election of the candidates receiving the plurality of votes. Unless instructed
to the contrary, the shares represented by the proxies will be voted FOR the
election of the two nominees named above as directors. Although it is
anticipated that each nominee will be able to serve as a director, should any
nominee become unavailable to serve, the proxies will be voted for such other
person or persons as may be designated by the Board.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF THE TWO PERSONS NOMINATED AS DIRECTORS.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal No. 2)
Action is to be taken by the shareholders at the Meeting with respect to
the ratification of the selection by the Company's Board of Directors, upon
recommendation of the Audit Committee, of KPMG Peat Marwick LLP to be the
independent auditors of the Company for the fiscal year ended December 31, 1999.
KPMG Peat Marwick LLP has served as the Company's independent auditors since
January 1985. KPMG Peat Marwick LLP does not have and has not had at any time
any connection with the Company in the capacity of promoter, underwriter, voting
trustee, director, officer or employee. Neither the Company, nor any officer,
director, or associate of the Company, has any interest in KPMG Peat Marwick
LLP.
-11-
<PAGE>
A representative of KPMG Peat Marwick LLP will be present at the Meeting
and will have the opportunity to make a statement if he so desires and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF SUCH
APPOINTMENT.
OTHER MATTERS
Voting via the Internet or by Telephone
Shares Registered Directly in the Name of the Shareholder. Shareholders
with shares registered directly with our transfer agent, Norwest Bank, may vote
telephonically by calling 1-800-240-6326 or you may vote via the Internet at the
following address on the World Wide Web:
www.eproxy.com/spnc/
Shares Registered in the Name of a Brokerage Firm or Bank A number of
brokerage firms and banks are participating in a program provided through ADP
Investor Communication Services that offers telephone and Internet voting
options. This program is different than the program provided by Norwest Bank for
shares registered in the name of the shareholder. If your shares are held in an
account at a brokerage firm or bank participating in the ADP program, you may
vote those shares telephonically by calling the telephone number referenced on
your voting form. Votes submitted via the Internet through the ADP program must
be received by 12:00 p.m. midnight (EDT) on June 7, 1999. The giving of such
proxy will not affect your right to vote in person should you decide to attend
the Annual Meeting.
The telephone and Internet voting procedures are designed to authenticate
shareholders' identities, to allow shareholders to give their voting
instructions and to confirm that shareholders' instructions have been recorded
properly. The Company has been advised by counsel that the telephone and
Internet voting procedures that have been made available through Norwest Bank
and ADP Investor Communication Services are consistent with the requirements of
applicable state law. Shareholders voting via the Internet through either
Norwest Bank or ADP Investor Communication Services should understand that there
may be costs associated with electronic access, such as usage charges from
Internet access providers and telephone companies, that must be borne by the
shareholder.
The Board of Directors knows of no other matters, other than the matters
set forth in this Proxy Statement to be considered at the Meeting. If, however,
any other matters properly come before the Meeting or any adjournment or
adjournments thereof, the persons named in the accompanying Proxy will vote such
Proxy in accordance with their best judgment on any such matter. The persons
named in the accompanying Proxy will also, if in their judgment it is deemed to
be advisable, vote to adjourn the Meeting from time to time.
-12-
<PAGE>
DATE OF RECEIPT OF SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the Proxy Statement for the 2000
Annual Meeting of Shareholders must be received at the principal executive
offices of the Company on or before December 15, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James P. McCluskey
James P. McCluskey
Secretary/Treasurer
Dated April 30, 1999
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE
UNITED STATES. A PROMPT RETURN OF YOUR PROXY WILL BE APPRECIATED, AS IT WILL
SAVE THE EXPENSE OF FURTHER MAILING.
-13-
<PAGE>
-------------------------
COMPANY #
CONTROL #
-------------------------
There are three ways to vote your Proxy
Your telephone or internet vote authorized the Named Proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE - TOLL FREE - 1-800-240-8326 - QUICK *** EASY *** IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which is located above.
o Follow the simple instructions the Voice provides you.
VOTE BY INTERNET - http://www.eproxy.com/spnc - QUICK *** EASY *** IMMEDIATE
o Use the internet to vote your proxy 24 hours a day, 7 days a week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number, which are located above, to obtain your records and create
an electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy cared and return it in the postage-paid envelope
we've provided or return it to The Spectranetics Corporation, c/o Shareowner
Services, P.O. Box 84873, St. Paul, MN 55184-0673.
If you vote by Phone or Internet, Please do not mail your Proxy Card
Please detach here
The Board of Directors Recommends a Vote FOR Items 1 and 2.
<TABLE>
<CAPTION>
1. Election of directors:
<S> <C> <C> <C>
01 Emile J. Geisenheimer 02 John G. Schultz |_| Vote FOR |_| Vote WITHHELD
all nominees from all nominees
(Instructions: To withhold authority to vote for ------------------------------------------
any indicated nominee, write the number(s) of
the nominee(s) in the box provided to the right. ------------------------------------------
2. To ratify the appointment of KPMG Peat Marwick |_| For |_| Against |_| Abstain
LLP as independent auditors for the current year.
</TABLE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box |_|
Indicate changes below: Dated:____________________________, 1999
----------------------------------------
----------------------------------------
Signature(s) in Box
(if there are co-owners both must sign)
Please sign exactly as your name(s)
appear in Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc., should
include title and authority.
Corporations should provide full name of
corporation and title of authorized
officer signing the proxy.
<PAGE>
The Spectranetics Corporation
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, June 8, 1999
10:00 a.m.
Antler's Adams Mark Hotel
4 South Cascade Avenue
Colorado Springs, Colorado 80903
Spectranetics The Spectranetics Corporation
96 Talamine Court, Colorado Springs, CO 80907-5186 proxy
- --------------------------------------------------------------------------------
This proxy is solicited by the Board of Directors for use at the Annual Meeting
on June 8, 1999.
The shares of stock you hold in your account will be voted as you specify on the
reverse.
If no choice is specified, the proxy will be voted "FOR" items 1 and 2.
By signing the proxy, you revoke all prior proxies and appoint Joseph A. Largey
and James P. McCluskey, and each of them, with full power of substitution, to
vote your shares on the matters shown on the reverse side and any other matters
which may come before the Annual Meeting to be held on June 8, 1999 and all
adjournments.
See reverse for voting instructions
