<PAGE> 1
UNITED STATES
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:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-12
</TABLE>
THE SPECTRANETICS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] 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.
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<PAGE> 2
THE SPECTRANETICS CORPORATION
96 TALAMINE COURT
COLORADO SPRINGS, CO 80907
(719) 633-8333
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 21, 2000
The Annual Meeting of the Shareholders of THE SPECTRANETICS CORPORATION
will be held at the Hotel Inter-Continental, 111 East 48th Street, New York, New
York, on Wednesday, June 21, 2000 at 10:00 a.m. (EDT) for the following
purposes:
1. To elect two (2) members of the Board of Directors to serve
three-year terms until the 2003 Annual Meeting of Shareholders, or until
successors are elected and have been duly qualified.
2. To approve an amendment to the 1997 Equity Participation Plan to
increase the number of shares authorized for issuance thereunder from
2,500,000 shares to 6,000,000 shares
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the current fiscal year.
4. To approve an amendment to the Company's Employee Stock Purchase
Plan to increase the number of shares reserved for issuance thereunder from
350,000 shares to 850,000 shares and to increase the maximum percentage of
a participant's base compensation which may be used to purchase stock in a
particular purchase period from 5% to 15%.
Only shareholders of record as of the close of business on May 4, 2000, 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/ PAUL C. SAMEK
Paul C. Samek
Vice President Finance, Chief
Financial Officer
Colorado Springs, Colorado
April 28, 2000
SPECTRANETICS LOGO
<PAGE> 3
THE SPECTRANETICS CORPORATION
96 TALAMINE COURT
COLORADO SPRINGS, CO 80907
(719) 633-8333
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 21, 2000
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 Hotel Inter-
Continental, 111 East 48th Street, New York, New York, on June 21, 2000, at
10:00 a.m. (EDT) and at any adjournments or postponements thereof. This Proxy
Statement and Proxy are being mailed to Shareholders on or about May 16, 2000.
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; (ii) approval of an amendment to the 1997 Equity
Participation Plan to increase the number of shares authorized for issuance
thereunder from 2,500,000 shares to 6,000,000 shares; (iii) ratification of the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors; and
(iv) approval of an amendment to the Company's Employee Stock Purchase Plan to
increase the number of shares reserved for issuance thereunder from 350,000
shares to 850,000 shares and to increase the maximum percentage of a
participant's base compensation which may be used to purchase stock in a
particular purchase period from 5% to 15%. 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.
1
<PAGE> 4
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 May 4, 2000, will be
entitled to notice of and to vote on matters presented at the Meeting or any
adjournment or postponement thereof. As of April 10, 2000 there were 23,223,591
shares of Common Stock outstanding. 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, 2000, by (i)
each of SPNC's Directors; and (ii) the Named Executive Officers (as defined on
page 7 hereof); and (iii) all of the current executive officers and Directors of
SPNC as a group. Except as otherwise indicated, SPNC believes that the
beneficial owners of the Common Stock listed below, based solely on information
furnished by such holders, have sole voting and dispositive power with respect
to such shares, subject to community property laws, where applicable. "Percent
Beneficially Owned" is based on shares of Common Stock outstanding on March 31,
2000.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------
NUMBER OF
NAME AND ADDRESS SHARES PERCENTAGE
- ---------------- ----------- ------------
<S> <C> <C>
5% SHAREHOLDERS
Special Situations Fund III, L.P.(1)........................ 794,000 3.4%
Special Situations Private Equity Fund, L.P.(1)............. 506,500 2.2%
Special Situations Cayman Fund, L.P.(1)..................... 300,000 1.3%
As a group.................................................. 1,600,500 6.9%
DIRECTORS AND NAMED EXECUTIVE OFFICERS(2)
Joseph A. Largey(3)......................................... 681,244 2.9%
Gary R. Bang(4)............................................. 107,200 *
Cornelius C. Bond, Jr.(5)................................... 224,908 *
Emile J. Geisenheimer(6).................................... 220,364 *
James A. Lent(7)............................................ 110,000 *
Joseph M. Ruggio, M.D.(8)................................... 78,500 *
John G. Schulte(9).......................................... 75,000 *
Henk Kos(10)................................................ 190,104 *
Lawrence E. Martel(11)...................................... 197,877 *
James P. McCluskey(12)...................................... 132,809 *
Dale T. Muth(13)............................................ 130,613 *
Christopher Reiser, Ph.D(14)................................ 122,441 *
Bruce E. Ross(15)........................................... 96,164 *
All named executive officers and Directors as a group (15
persons)(16).............................................. 2,457,577 9.8%
</TABLE>
- ---------------
* less than 1%
(1) The address of Special Situations Fund III, L.P., Special Situations
Private Equity Fund, L.P. and Special Situations Cayman Fund, L.P. is 153
E. 53rd Street, New York, NY 10022-4611.
(2) 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.
(3) Includes options for 654,744 shares which are exercisable within 60 days of
March 31, 2000.
2
<PAGE> 5
(4) Includes options for 75,000 shares which are exercisable within 60 days of
March 31, 2000.
(5) Includes options for 107,224 shares which are exercisable within 60 days of
March 31, 2000.
(6) Includes options for 200,000 shares which are exercisable within 60 days of
March 31, 2000.
(7) Includes options for 100,000 shares which are exercisable within 60 days of
March 31, 2000.
(8) Includes options for 75,000 shares which are exercisable within 60 days of
March 31, 2000.
(9) Includes options for 75,000 shares which are exercisable within 60 days of
March 31, 2000.
(10) Includes options for 169,062 shares which are exercisable within 60 days of
March 31, 2000.
(11) Includes options for 179,742 shares which are exercisable within 60 days of
March 31, 2000.
(12) Includes options for 7,312 shares which are exercisable within 60 days of
March 31, 2000.
(13) Includes options for 127,638 shares which are exercisable within 60 days of
March 31, 2000.
(14) Includes options for 54,812 shares which are exercisable within 60 days of
March 31, 2000.
(15) Includes options for 61,813 shares which are exercisable within 60 days of
March 31, 2000.
(16) Includes options for 1,976,600 shares which are exercisable within 60 days
of March 31, 2000.
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(1)............... 53 President, Chief Executive Officer and 1997 2000
Director
Gary R. Bang...................... 53 Director 1995 2001
Cornelius C. Bond, Jr. ........... 65 Director 1994 2001
Emile J. Geisenheimer............. 52 Chairman of the Board of Directors 1990 2002
James A. Lent(1).................. 57 Director 1995 2000
Joseph M. Ruggio, M.D. ........... 45 Director 1997 2001
John G. Schulte................... 51 Director 1996 2002
</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.
3
<PAGE> 6
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 9, 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.
BOARD COMMITTEES AND MEETINGS
In 1999, 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. Three
meetings of the Audit Committee were held in 1999. The Board has established a
Compensation Committee, consisting of Messrs. Lent, Bond and Bang, which met two
times in 1999 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 1995. From November 1985 to 1995, Mr. Largey was
Vice President and General Manager of Picker's Healthcare Products Distribution
division. Prior to November 1985, Mr. Largey was employed for 16 years by
Johnson & Johnson in various sales and marketing positions, the most recent of
which was Vice President of Sales and Marketing at Johnson & Johnson
Cardiovascular.
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.
4
<PAGE> 7
James A. Lent has served as a Director of SPNC since November 1995. Mr.
Lent currently serves as a director for several privately held companies. From
November 1998 to September 1999, he 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 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 and Chief Executive
Officer, of Pacific Cardiovascular Associates Medical Group, Inc., a large
cardiovascular professional corporation. He also serves as Chairman and
President 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 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.................... 53 President and Chief Executive Officer
Adrian E. Elfe...................... 55 Vice President, Quality Assurance and Regulatory Affairs
Lawrence E. Martel, Jr.............. 49 Vice President, Operations
Dale T. Muth........................ 46 Vice President, Human Resources
Christopher Reiser, Ph.D............ 45 Vice President, Engineering
Bruce E. Ross....................... 51 Vice President, Sales and Service
Paul C. Samek....................... 47 Vice President, Finance, Chief Financial Officer
</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.
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.
5
<PAGE> 8
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.
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.
Paul C. Samek joined SPNC in December 1999 as Vice President, Finance and
Chief Financial Officer. Mr. Samek previously held the position of Vice
President, Finance and Chief Financial Officer for Nash Engineering from April
1998 to May 1999 and served as Vice President of Finance and Administration and
Chief Financial Officer for Allsteel Inc. from March 1994 to July 1997. Prior to
this, Mr. Samek held several senior management positions with Deloitte and
Touche, LLP, Concurrent Computer Corporation, Telesciences Transmission Systems,
Inc., and Motorola, Inc.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation paid
by SPNC for the fiscal years ended December 31, 1999, 1998 and 1997 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, 1999, whose total annual salary and bonus exceeded $100,000 or
(iii) up to two additional individuals for whom disclosure would have been
provided pursuant to (ii) above but for the fact that the individual was not
serving as an executive officer of the registrant at the end of the last
completed fiscal year (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- AWARDS
OTHER ANNUAL ------------
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION OPTIONS (#)
- --------------------------- ---- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Joseph A. Largey(1).............. 1999 $260,665 $124,020(2) $ 3,515(3) --
President and Chief Executive 1998 258,936 110,552(4) 41,654(5) 194,324(6)
Officer 1997 201,923 150,000(7) 31,575(8) 575,000
Bruce E. Ross(9)................. 1999 $164,327 $ 68,432(10) $26,616(11) 60,000
Vice President, Sales and
Service 1998 65,577 19,248(12) 14,328(13) 110,563(14)
1997 -- -- -- --
Henk Kos(15)..................... 1999 $181,344 $ -- $48,234(16) 30,000
General Manager, 1998 190,316 -- 43,162(17) --
Spectranetics Int'l, B.V. 1997 181,503 47,839(18) 87,452(19) 60,000
James P. McCluskey(20)........... 1999 $110,000 $102,500(21) $ -- 30,000
Vice President, Finance, Chief 1998 111,528 55,000(22) 18,385(23) 30,000
Financial Officer, Secretary, 1997 100,000 18,824(18) -- --
Treasurer; General Manager,
Polymicro Technologies, Inc.
Christopher Reiser, Ph.D......... 1999 $110,327 $ 39,490(2) -- 30,000
Vice President, Technology and 1998 98,001 36,015(22) -- 30,000
Clinical Research 1997 92,000 12,919(18) -- --
Lawrence E. Martel............... 1999 $102,885 39,490(2) -- 30,000
Vice President, Operations 1998 95,192 -- -- 92,013(24)
1997 95,000 22,232(18) -- --
Dale T. Muth(25)................. 1999 $102,884 37,695(2) -- 30,000
Vice President, Human Resources 1998 93,885 -- 7,500(22) 92,013(23)
1997 22,000 3,385(18) --
</TABLE>
- ---------------
(1) Mr. Largey was appointed to the position of President and Chief Executive
Officer in March 1997.
(2) Incentive compensation bonus paid during 2000 for services rendered in
1999.
(3) Life insurance premiums paid by the Company.
(4) Incentive compensation bonus of $100,000 paid during 1999 for services
rendered in 1998; incentive compensation bonus of $10,552 paid in 1998.
(5) Relocation costs of $38,139; life insurance premiums paid by the Company of
$3,515.
(6) 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.
(7) Incentive compensation bonus of $100,000 paid during 1998 for services
rendered in 1997; signing bonus of $50,000 paid during 1997.
7
<PAGE> 10
(8) Relocation costs of $23,213 paid during 1997; life insurance premiums of
$5,362; auto allowance of $3,000.
(9) Mr. Ross joined the Company in July 1998.
(10) Incentive compensation paid in 1999.
(11) Relocation costs of $20,016; auto allowance of $6,600.
(12) Incentive compensation paid in 1998.
(13) Relocation costs of $11,578; auto allowance of $2,750.
(14) Incentive stock options of 100,000 shares granted in 1998 vesting over a
four-year period; incentive stock options of 10,563 shares granted in 1998
in lieu of a $5,000 salary reduction over a six-month period, vesting over
a six-month period.
(15) Mr. Kos terminated his employment with the Company in 2000. See discussion
of termination agreement within the Compensation Committee report included
herein.
(16) Housing allowance of $24,000; relocation costs of $12,129; auto allowance
of $12,105.
(17) Housing allowance of $33,000; auto allowance of $8,250; relocation costs of
$1,912.
(18) Incentive compensation bonus paid during 1998 for services rendered in
1997.
(19) Relocation costs of $44,452; housing allowance of $24,000; auto allowance
of $19,000.
(20) Mr. McCluskey resigned during 1999. Salary continuance costs were incurred
through December 31, 1999 and will be paid through June 2000. See
discussion of such costs within the Compensation Committee report included
herein.
(21) Incentive compensation bonus of $75,000 paid in 1999 related to the sale of
the Company's subsidiary, Polymicro Technologies, Inc.; incentive
compensation of $27,500 paid during 2000 for services rendered in 1999.
(22) Incentive compensation bonus paid in 1999 for services rendered in 1998.
(23) Represents relocation costs.
(24) Incentive stock options of 51,450 granted in 1999 for services rendered in
1998 in lieu of a bonus of $34,300, vesting over a six-month period;
incentive stock options of 30,000 shares granted in 1998 vesting over a
four-year period; incentive stock options of 10,563 shares granted in 1998
in lieu of a $5,000 salary reduction over a six-month period, vesting over
a six-month period.
(25) Mr. Muth joined the Company in September 1997.
8
<PAGE> 11
GRANTS OF STOCK OPTIONS
The following table sets forth certain information with respect to
individual grants of stock options to the Named Executive Officers during the
year ended December 31, 1999.
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ---------------------------------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS EXERCISE APPRECIATION FOR
GRANTED TO OR BASE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- ---------- ------------ -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Largey............... 28,478(2) 2.93% $3.031 2/11/09 54,284 137,567
Bruce E. Ross.................. 30,000(3) 3.09% $3.031 2/11/09 57,185 144,919
30,000(4) 3.09% $2.813 6/30/09 53,072 134,496
Henk Kos....................... 30,000(5) 3.09% $3.031 2/11/09 57,185 144,919
James P. McCluskey............. 30,000(3) 3.09% $3.031 2/11/09 57,185 144,919
Christopher Reiser, Ph.D. ..... 30,000(3) 3.09% $3.031 2/11/09 57,185 144,919
Lawrence Martel................ 30,000(3) 3.09% $3.031 2/11/09 57,185 144,919
51,450(6) 5.29% $3.031 2/11/09 98,073 248,536
Dale T. Muth................... 30,000(3) 3.09% $3.031 2/11/09 57,185 144,919
51,450(6) 5.29% $3.031 2/11/09 98,073 248,536
</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) Represents incentive stock options granted in 1999 in lieu of an incentive
compensation bonus of $18,985 for services rendered in 1998. Options were
fully vested on August 12, 1999.
(3) Options vest 25% as of February 11, 2000; and 6.25% on the third day of each
calendar quarter thereafter until February 11, 2003.
(4) Options vest 25% as of June 30, 2000, and 6.25% on the third day of each
calendar quarter thereafter until June 30, 2003.
(5) Options vest 25% as of February 11, 2000. The remaining options will not
vest due to termination of Mr. Kos's employment.
(6) Represents incentive stock options granted in 1999 in lieu of an incentive
compensation bonus of $34,300 for services rendered in 1998. Options were
fully vested on August 12, 1999.
9
<PAGE> 12
STOCK OPTION EXERCISES AND FISCAL YEAR-END STOCK OPTION VALUE
Set forth in the table below is information concerning the value of stock
options held on December 31, 1999 by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF VALUE OF UNEXERCISED,
ACQUIRED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ON VALUE HELD AT FISCAL YEAR END(#) FISCAL YEAR END($)(1)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Largey......... -- -- 547,454 221,870 353,035 134,177
Bruce E. Ross............ -- -- 41,813 128,750 57,220 143,118
Henk Kos................. -- -- 150,625 74,375 119,219 48,289
James P. McCluskey....... -- -- 114,249 51,875 226,624 34,695
Christopher Reiser,
Ph.D. ................. -- -- 40,125 51,875 5,625 34,695
Lawrence Martel.......... -- -- 165,055 51,875 260,262 34,695
Dale T. Muth............. -- -- 107,013 75,000 96,738 57,664
</TABLE>
- ---------------
(1) Amounts are based on the closing price of SPNC's stock, as reported on the
Nasdaq National Market, at December 31, 1999 ($3.875), 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 and to consider prospective salary adjustments. 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 at or
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
10
<PAGE> 13
comparable companies, the Compensation Committee considered salaries and bonuses
in determining the competitiveness of the total compensation package.
ANNUAL INCENTIVE COMPENSATION
The Compensation Committee reviews and approves all bonus payments made to
SPNC's executive officers. Payment of bonuses is determined by both corporate
and individual performance criteria. In 1999 the bonuses for executive officers
were based on meeting performance targets for revenue, net income and cash
usage. These bonuses ranged from approximately 28 percent of base salary for the
executive officers to approximately 47 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 anniversary date of his joining the Company.
Effective February 2000, Mr. Largey's annual base salary was adjusted to
$290,000. 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 1999 was
$124,020. 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 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 became
exercisable on August 12, 1999.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
In January 1997, SPNC entered into an at-will employment agreement with
Henk Kos, the former 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 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. A termination agreement between the Company and Mr. Kos was executed in
February 2000. The termination agreement, which was based on applicable Dutch
law, supercedes the employment contract with Mr. Kos and provided for a lump sum
payment of $335,000 paid in March 2000.
In June 1999, Mr. McCluskey resigned from the Company in conjunction with
the sale of the Company's wholly-owned subsidiary, Polymicro Technologies, Inc.
As part of Mr. McCluskey's severance, he received twelve months of salary
continuation, including benefits, in exchange for specific consultant services.
Mr. McCluskey also was entitled to full vesting of all unvested shares effective
June 17, 2000.
11
<PAGE> 14
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,
1994, to December 31, 1999, 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, 1994, and reinvestment of all dividends).
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SPNC 100.00 215.79 352.63 263.16 236.93 326.32
PEER 100.00 141.72 153.98 83.87 63.66 81.61
NASDAQ Medical 100.00 151.76 142.16 162.86 182.44 221.94
NASDAQ Composite 100.00 141.33 173.89 213.07 300.25 542.43
</TABLE>
12
<PAGE> 15
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).
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.
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 1999, 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 Joseph A. Largey. and James A. Lent expire at this meeting. The Board
of Directors recommends that Joseph A. Largey and James A. Lent be re-elected
for a three-year term to expire at the Company's Annual Meeting in 2003.
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 Joseph A. Largey and James A.
Lent 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.
13
<PAGE> 16
AMENDMENT OF THE 1997 EQUITY PARTICIPATION PLAN
(PROPOSAL NO. 2)
The 1997 Equity Participation Plan of The Spectranetics Corporation (the
"Plan") was adopted by the Board of Directors on April 14, 1997, and approved by
the stockholders of the Company on June 9, 1997. On October 22, 1997, the Board
adopted the First Amendment to the Plan.
On April 25, 2000, the Compensation Committee recommended and the Board
unanimously adopted, subject to stockholder approval, an amendment to the Plan
to increase the number of shares of the Company's Common Stock available for
issuance thereunder from 2,500,000 to 6,000,000 (the "Amendment").
SUMMARY OF PROPOSED CHANGE
The Plan currently permits options to be granted covering up to 2,500,000
shares of Common Stock. The Board proposes to amend the Plan to provide for an
increase in the number of shares of Common Stock reserved for issuance
thereunder from 2,500,000 to 6,000,000. As of April 25, 2000 approximately 99%
of the shares of Common Stock reserved for issuance under the Plan were subject
to outstanding options leaving only approximately 12,000 shares of Common Stock
reserved for issuance under the Plan. The Board believes that the increase in
the number of shares of Common Stock available for issuance as provided in the
Amendment will increase the size of the Plan to a size which is commensurate
with the number of shares of Common Stock that are issued and outstanding,
provide the Compensation Committee with greater flexibility in the
administration of the Plan and is appropriate in light of the growth of the
Company and the resulting addition of new employees who will be subject to the
Plan. The number of shares of Common Stock that are issued and outstanding has
increased from 18,734,142 to 23,037,188 since December 31, 1997. The Company
believes there should be a corresponding change in the number of shares
authorized for issuance pursuant to the Plan. The increase in the number of
shares authorized for issuance as provided in the Plan would represent 15% of
the issued and outstanding shares of Common Stock of the Company as of December
31, 1999.
The principal features of the Plan as proposed to be amended are summarized
below. A copy of the proposed Amendment is set forth in Appendix "A" to this
Proxy Statement. The summary is not intended to be complete and reference should
be made to the Plan as it is proposed to be amended for a complete statement of
its terms and provisions.
General
The principal purposes of the Plan are to provide incentives for officers,
employees and consultants of the Company and its subsidiaries through granting
of options, stock appreciation rights ("SARs") and restricted stock
(collectively, "Awards"), thereby stimulating their personal and active interest
in the Company's development and financial success and inducing them to remain
in the Company's employ. In addition to Awards made to officers, employees and
consultants, the Plan permits the granting of options to the Company's
non-employee directors ("Director Options") pursuant to a formula, as described
in further detail below.
If the Amendment is approved by the Company's stockholders, no more than
6,000,000 shares of Common Stock of the Company would be authorized for issuance
upon exercise of options and SARs or upon vesting of restricted stock awards
under the Plan. The shares available under the Plan upon exercise of options and
SARs and for issuance as restricted stock may be either previously authorized
but unissued shares or treasury shares, and may be equity securities of the
Company other than Common Stock. The Plan provides for appropriate adjustments
in the number and kind of shares subject to the Plan and to outstanding grants
thereunder (including acceleration of vesting in some instances) in the event of
certain corporate transactions, a change in control of the Company or a
recapitalization such as a stock split or stock dividend. If any portion of an
option, SAR or other award terminates or lapses unexercised, or is canceled upon
grant of a new option, SAR or other award (which may be at a higher or lower
exercise price than the option, SAR or other award so canceled), the shares
which were subject to the unexercised portion of such option, SAR or other
award, will continue to be available for issuance under the Plan.
14
<PAGE> 17
Awards Under the Plan to Date
The following table sets forth certain information with respect to Awards
pursuant to the Plan during 1999 to the following groups.
OPTION GRANT INFORMATION(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR OPTION TERM(2)
OPTIONS GRANTED -------------------------
NAME OF GROUP (SHARES) 5%($) 10%($)
- ------------- --------------- ----------- -----------
<S> <C> <C> <C>
All current executive officers as a group............... 421,378 902,877 2,288,067
All non-executive officer directors as a group.......... 75,000 169,056 429,563
All employees (other than executive officers) as a
group................................................. 534,167 1,129,578 2,791,098
</TABLE>
- ---------------
(1) Information regarding each Named Executive Officer is set forth in this
Proxy Statement under "EXECUTIVE COMPENSATION." Future option grants or
other grants to officers, key employees and consultants under the Plan are
made at the discretion of the Compensation Committee and are currently not
determinable. Director Options are granted to the Company's independent
non-employee directors pursuant to the formula set forth in the Plan, as
described below.
(2) 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%.
The closing price of the Common Stock on April 26, 2000 was $5.00 per
share.
Administration
The Compensation Committee of the Board or another committee thereof (the
"Committee") will administer the Plan with respect to grants to employees or
consultants of the Company and the full Board will administer the Plan with
respect to Director Options. The Committee will consist solely of two or more
members of the Board, each of whom is a "non-employee director" for purposes of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended ("Rule 16b-3")
and an "outside director" for the purposes of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). Subject to the terms and
conditions of the Plan, the Board or Committee has the authority to select from
among the eligible employees and consultants the individuals to whom Awards are
to be made and to determine the number of shares to be subject thereto and the
terms and conditions thereof. The Committee (and the Board) are also authorized
to adopt, amend and rescind rules relating to the administration of the Plan.
Eligibility
Options, SARs and restricted stock under the Plan may be granted to
individuals who are then officers or other employees of the Company or any of
its present or future subsidiaries. Such Awards also may be granted to
consultants of the Company selected by the Board or Committee for participation
in the Plan. Approximately 165 officers and other employees are eligible to
participate in the Plan. Non-employee directors of the Company may be granted
Director Options by the Board.
15
<PAGE> 18
Awards Under the Plan
The Plan provides that the Committee may grant or issue stock options, SARs
and restricted stock, or any combination thereof. Each Award will be set forth
in a separate agreement with the person receiving the Award and will indicate
the type, terms and conditions of the Award.
Nonqualified Stock Options ("NQSOs") will provide for the right to purchase
Common Stock at a specified price which, except with respect to NQSOs intended
to qualify as performance-based compensation under Section 162(m) of the Code,
may be less than fair market value on the date of grant (but not less than par
value), and usually will become exercisable (in the discretion of the Board or
Committee) in one or more installments after the grant date, subject to the
participant's continued employment with the Company and/or subject to the
satisfaction of individual or Company performance targets established by the
Board or Committee. NQSOs may be granted for any term specified by the Board or
Committee.
Director Options are NQSOs granted by the Board to non-employee directors
of the Company pursuant to a formula. Under such formula, each person who
becomes a non-employee director on or after the date of this Plan shall be
granted on the date of his election or appointment as director an option to
purchase 75,000 shares of Common Stock. Each non-employee director who has (i)
received a grant pursuant to the Plan or pursuant to the Company's Stock Option
Plan For Outside Directors (adopted by the Board on April 9, 1995) and (ii)
served at least three years as a non-employee director shall be granted on the
third anniversary of the date of such grant, and each third anniversary
thereafter (so long as he is a non-employee director at the close of business of
such date), an option to purchase an additional 75,000 shares of Common Stock.
The exercise price of Director Options shall equal 100% of fair market value of
a share of Common Stock on the grant date. Options granted to non-employee
directors shall become exercisable on the following schedule: Beginning on the
first anniversary of the date of grant, up to 33% of the shares covered by the
option; beginning on the second anniversary of the date of grant, up to 66% of
such shares; and beginning on the third anniversary of the date of grant, and
thereafter until the earlier of expiration of the option's term or termination
of the option in accordance with the Plan, up to 100% of such shares. The
options will vest earlier upon the death or disability of such non-employee
Director, upon an unsuccessful attempt by such non-employee Director to win
re-election to the Board after nomination for election at the recommendation of
the Board or upon the occurrence of certain corporate transactions or events
involving a change in control of the Company, as more specifically provided in
the Plan. If a non-employee director ceases to be a director of the company for
any reason other than death, disability, retirement from the Board or failure to
be re-elected as a director following his or her nomination by the Board of
Directors for re-election, he or she will have one year in which to exercise
those options which have vested as of their termination as a director. If a
non-employee director retires from the Board, he or she will have three years in
which to exercise those options which have vested as of his or her retirement as
a director. If a non-employee director ceases to be a director of the Company
for reason of death, disability or failure to be re-elected as a director
following his or her nomination by the Board of Directors for re-election, he or
she will have three years to exercise 100% of the options previously granted to
him or her under the Plan.
Incentive Stock Options ("ISOs"), if granted, will be designed to comply
with the provisions of the Code and will be subject to certain restrictions
contained in the Code. Among such restrictions, ISOs must have an exercise price
not less than the fair market value of a share of Common Stock on the date of
grant, may be granted to employees only, must expire within a specified period
of time following the Optionee's termination of employment, and must be
exercised within the ten years after the date of grant; however, they may be
subsequently modified to disqualify them from treatment as ISOs. In the case of
an ISO granted to an individual who owns (or is deemed to own) at least 10% of
the total combined voting power of all classes of stock of the Company, the Plan
provides that the exercise price must be at least 110% of the fair market value
of a share of Common Stock on the date of grant and the ISO must expire upon the
fifth anniversary of the date of its grant.
Restricted Stock may be sold to participants at various prices (but not
below par value) and made subject to such restrictions as may be determined by
the Board or Committee. Typically, restricted stock may be repurchased by the
Company at the original purchase price if the conditions or restrictions are not
met. In
16
<PAGE> 19
general, restricted stock may not be sold, or otherwise transferred or
hypothecated, until restrictions are removed or expire. Purchasers of restricted
stock, unlike recipients of options, will have voting rights and will receive
dividends prior to the time when the restrictions lapse.
Stock Appreciation Rights may be granted in connection with stock options
or other Awards, or separately. SARs granted by the Board or Committee in
connection with stock options or other awards typically will provide for
payments to the holder based upon increases in the price of the Company's Common
Stock over the exercise price of the related option or other Awards, but
alternatively may be based upon criteria such as book value. Except as required
by Section 162(m) of the Code with respect to a SAR intended to qualify as
performance-based compensation as described in Section 162(m) of the Code, there
are no restrictions specified in the Plan on the exercise of SARs or the amount
of gain realizable therefrom, although restrictions may be imposed by the Board
or Committee in the SAR agreements. The Board or Committee may elect to pay SARs
in cash or in Common Stock or in a combination of both.
Payment for Shares
The exercise or purchase price for all options, SAR and restricted stock
together with any applicable tax required to be withheld, must be paid in full
in cash at the time of exercise or purchase or may, with the approval of the
Committee, be paid in whole or in part in Common Stock owned by the optionee (or
issuable upon exercise of the option) and having a fair market value on the date
of exercise equal to the aggregate exercise price of the shares to be purchased.
The Committee may also provide, in the terms of an option or other right, that
the purchase price may be payable within thirty days after the date of exercise.
The Committee may also authorize other lawful consideration to be applied to the
exercise or purchase price of an award. This may also include services rendered,
or the difference between the exercise price of presently-exercisable options
and the fair market value of the Common Stock covered by such options on the
date of exercise.
Amendment and Termination
Amendments to the Plan to increase the number of shares of Common Stock as
to which options, SARs and restricted stock may be granted (except for
adjustments resulting from stock splits and the like) require the approval of
the Company's stockholders. In all other respects, the Plan can be amended,
modified, suspended or terminated by the Committee, unless such action would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule. Amendments of the Plan will not, without the consent of the
participant, affect such person's rights under an award previously granted,
unless the award itself otherwise expressly so provides. No options or other
awards under the Plan may be granted or awarded after June 9, 2007.
Miscellaneous Provisions
The Plan specifies that the Company may make loans to Plan participants to
enable them to exercise options, purchase shares or realize the benefits of
other awards granted under the Plan. The terms and conditions of such loans, if
any are made, are to be set by the Committee.
In consideration of receipt of an option, SAR or right to receive
restricted stock, the employee or consultant must agree in the written agreement
embodying such award to remain in the employ of, or to continue as a consultant
for, the Company or a subsidiary of the Company for at least one year after the
award is granted.
The dates on which Awards under the Plan first become exercisable and on
which they expire will be set forth in individual options or other agreements
setting forth the terms of the Awards. Such agreements generally will provide
that Awards expire upon termination of the optionee's status as an employee or
consultant, although the Committee may provide that such options continue to be
exercisable following a termination without cause, or following a change in
control of the Company, or because of the grantee's retirement, death,
disability or otherwise. Similarly, restricted stock granted under the Plan
which has not vested generally will be subject to repurchase by the Company in
the event of the grantee's termination of
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employment or consultancy, although the Committee may make exceptions, based on
the reason for termination or on other factors, in the terms of an individual
restricted stock agreement.
No Award granted under the Plan may be assigned or transferred by the
grantee, except by will or the laws of intestate succession, although the shares
underlying such rights may be transferred if all applicable restrictions have
lapsed. During the lifetime of the holder of any Award, the Award may be
exercised only by the holder.
The Company requires participants to discharge withholding tax obligations
in connection with the exercise of any option or SAR granted under the Plan, or
the lapse of restrictions on restricted stock, as a condition to the issuance or
delivery of stock or payment of other compensation pursuant thereto. Shares held
by or to be issued to a participant may also be used to discharge tax
withholding obligations related to exercise of options or receipt of other
awards, subject to the discretion of the Committee to disapprove such use. In
addition, the Committee may grant to employees a cash bonus in the amount of any
tax related to awards.
Securities Laws and Federal Income Taxes
Securities Laws. The Plan is intended to conform to the extent necessary
with all provisions of the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act") and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder, including
without limitation Rule 16b-3. The Plan will be administered, and options will
be granted and may be exercised, only in such a manner as to conform to such
laws, rules and regulations. To the extent permitted by applicable law, the Plan
and options granted thereunder shall be deemed amended to the extent necessary
to conform to such laws, rules and regulations.
General Federal Tax Consequences. The tax consequences of the Plan under
current federal law are summarized in the following discussion which deals with
the general tax principles applicable to the Plan, and is intended for general
information only. In addition, the tax consequences described below are subject
to the limitation of Section 162(m) of the Code, as discussed in further detail
below. Alternative minimum tax and state and local income taxes are not
discussed, and may vary depending on individual circumstances and from locality
to locality.
Nonqualified Stock Options. For Federal income tax purposes, the recipient
of NQSOs granted under the Plan will not have taxable income upon the grant of
the option, nor will the Company then be entitled to any deduction. Generally,
upon exercise of NQSOs the optionee will realize ordinary income, and the
Company will be entitled to a deduction, in an amount equal to the difference
between the option exercise price and the fair market value of the stock at the
date of exercise. An optionee's basis for the stock for purposes of determining
his gain or loss on his subsequent disposition of the shares generally will be
the fair market value of the stock on the date of exercise of the NQSO.
Incentive Stock Options. There is no taxable income to an employee when an
ISO is granted to him or when that option is exercised; however, the amount by
which the fair market value of the shares at the time of exercise exceeds the
option price will be an "item of tax preference" for the optionee. Gain realized
by an optionee upon sale of stock issued on exercise of an ISO is taxable at
capital gains rates, and no tax deduction is available to the Company, unless
the optionee disposes of the shares within two years after the date of grant of
the option or within one year of the date the shares were transferred to the
optionee. In such event the difference between the option exercise price and the
fair market value of the shares on the date of the option's exercise will be
taxed at ordinary income rates, and the Company will be entitled to a deduction
to the extent the employee must recognize ordinary income. An ISO exercised more
than three months after an optionee's retirement from employment, other than by
reason of death or disability, will be taxed as an NQSO, with the optionee
deemed to have received income upon such exercise taxable at ordinary income
rates. The Company will be entitled to a tax deduction equal to the ordinary
income, if any, realized by the optionee.
Stock Appreciation Rights. No taxable income is realized upon the receipt
of an SAR, but upon exercise of the SAR the fair market value of the shares (or
cash in lieu of shares) received must be treated as compensation taxable as
ordinary income to the recipient in the year of such exercise. The Company will
be
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entitled to a deduction for compensation paid in the same amount which the
recipient realized as ordinary income.
Restricted Stock. An employee to whom restricted stock is issued will not
have taxable income upon issuance and the Company will not then be entitled to a
deduction, unless in the case of restricted stock an election is made under
Section 83(b) of the Code. However, when restrictions on shares of restricted
stock lapse, such that the shares are no longer subject to repurchase by the
Company, the employee will realize ordinary income and the Company will be
entitled to a deduction in an amount equal to the fair market value of the
shares at the date such restrictions lapse, less the purchase price therefor. If
an election is made under Section 83(b) with respect to restricted stock, the
employee will realize ordinary income at the date of issuance equal to the
difference between the fair market value of the shares at that date less the
purchase price therefor and the Company will be entitled to a deduction in the
same amount.
Section 162(m) Limitation. In general, under Section 162(m) of the Code
("Section 162(m)"), income tax deductions of publicly-held corporations may be
limited to the extent total compensation (including base salary, annual bonus,
stock option exercises and non-qualified benefits paid) for certain executive
officers exceeds $1 million (less the amount of any "excess parachute payments"
as defined in Section 280G of the Code) in any one year. However, under Section
162(m), the deduction limit does not apply to certain "performance-based
compensation" established by an independent compensation committee which is
adequately disclosed to, and approved by, stockholders. In particular, stock
options and SARs will satisfy the "performance-based compensation" exception if
the awards are made by a qualifying compensation committee, the plan sets the
maximum number of shares that can be granted to any person within a specified
period and the compensation is based solely on an increase in the stock price
after the grant date (i.e., the option exercise price is equal to or greater
than the fair market value of the stock subject to the award on the grant date).
The Company generally intends to cause the Plan to be in compliance with
the requirements of the performance-based compensation exclusion under Section
162(m), including option pricing requirements and requirements governing the
administration of the Plan, so that the deductibility of compensation paid to
top executives thereunder is not expected to be disallowed.
Shareholder Vote
Approval of the Plan will require the affirmative vote of the holders of a
majority of the shares of the Common Stock represented and voting in person or
by Proxy at the Meeting, assuming a quorum is present. Abstentions as to this
Proposal No. 2 will be treated as votes against Proposal No. 2. Broker
non-votes, however, will be treated as unvoted for purposes of determining
approval of Proposal No. 2 and will not be counted as votes for or against
Proposal No. 2. Properly executed, unrevoked Proxies will be voted FOR Proposal
No. 2 unless a vote against Proposal No. 2 or abstention is specifically
indicated in the Proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
PLAN AMENDMENT.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 3)
Action is to be taken by the shareholders at the Meeting with respect to
the ratification of the selection by the Company's Board of Directors, upon
recommendation of the Audit Committee, of KPMG Peat Marwick LLP to be the
independent auditors of the Company for the fiscal year ended December 31, 2000.
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. The ratification of the independent auditors for the Company for the
current year will require the affirmative vote of the holders of a majority of
the shares of Common Stock represented and voting in person or by Proxy at the
Meeting.
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.
AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN ("ESPP")
(PROPOSAL NO. 4)
The Spectranetics Corporation ESPP was adopted by the Board of Directors on
September 15, 1992, and approved by the stockholders of the Company on September
15, 1993. The First Amendment to the ESPP was approved by the Board of Directors
on December 29, 1994, and approved by the stockholders on June 12, 1995.
On April 25, 2000, the Compensation Committee recommended and the Board
unanimously adopted, subject to stockholder approval, an amendment to the ESPP
to (i) increase the number of shares of the Company's common stock which may be
sold to employees under the ESPP from 350,000 to 850,000, and (ii) increase the
maximum percentage of a participant's base compensation which may used to
purchase stock in a particular purchase period under the ESPP from 5% to 15%
(the "ESPP Amendment").
SUMMARY OF PROPOSED CHANGES
The ESPP currently permits the sale of up to 350,000 shares of the
Company's common stock to employees under the ESPP, and allows participants to
designate a maximum of 5% of their base compensation for purchases of stock
under the ESPP. The Board proposes to amend the ESPP to provide for (i) an
increase in the number of shares of the Company's common stock which may be sold
to employees under the ESPP from 350,000 to 850,000, and (ii) an increase in the
maximum percentage of a participant's base compensation which may used to
purchase stock in a particular purchase period under the ESPP from 5% to 15%.
As of April 25, 2000 approximately 86% of the shares of Common Stock
permitted to be sold under the ESPP had been purchased, leaving only
approximately 47,600 shares of Common Stock available for sale under the ESPP.
The Board believes that the increase in the number of shares of Common Stock
available for issuance as provided in the ESPP Amendment will increase the size
of the ESPP to a size which is commensurate with the number of shares of Common
Stock that are issued and outstanding, provide the Compensation Committee with
greater flexibility in the administration of the ESPP and is appropriate in
light of the growth of the Company and the resulting addition of new employees
who are eligible to participate in the ESPP. The number of shares of Common
Stock that are issued and outstanding has increased from 18,281,779 to
23,037,188 since December 31, 1994. The Company believes there should be a
corresponding change in the number of shares authorized for sale under the ESPP.
The increase in the number of shares authorized for sale under the ESPP would
represent 2% of the issued and outstanding shares of Common Stock of the Company
as of December 31, 1999.
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The Board believes that the increase in the maximum percentage of a
participant's base compensation which may used to purchase stock under the ESPP
will encourage participants to increase their ownership interest in the Company,
thereby further enhancing their personal interest in the Company's continued
success.
The principal features of the ESPP as proposed to be amended are summarized
below. A copy of the proposed ESPP Amendment is set forth in Appendix "B" to
this Proxy Statement. The summary is not intended to be complete and reference
should be made to the ESPP as it is proposed to be amended for a complete
statement of its terms and provisions.
General
The principal purpose of the ESPP is to provide eligible employees of the
Company and its participating subsidiaries the opportunity to acquire the Common
Stock of the Company under a preferred arrangement in accordance with Section
423 of the Internal Revenue Code of 1986 (the "Code"). The ESPP is designed to
facilitate the employees' ability to acquire Common Stock thereby enhancing the
personal interest of those employees in the continued success of the Company.
Administration
The ESPP will be administered by a committee (the "Committee") appointed by
the Company's Board of Directors. The Committee will be comprised of certain
members of the Board. The Committee will have full authority to administer the
ESPP, including authority to interpret and construe any provision of the ESPP
and to adopt such rules and regulations for administering the ESPP as it may
deem necessary in order to comply with the requirements of Section 423 of the
Code. The Committee may delegate to an agent or agents any of its
responsibilities under the ESPP except its responsibilities to establish the
number of shares available for purchase by employees during any purchase period,
the maximum and minimum percentage of base compensation to be paid by any single
employee for the purchase of stock during any of the purchase periods, and its
authority to construe and interpret the provisions of the ESPP. Committee
members are selected, and subject to removal, by the Board. The Board has
appointed its Compensation Committee to act as the Committee for the ESPP and to
administer the ESPP.
Shares Available Under the ESPP
The ESPP provides for the purchase by participants of the Company's Common
Stock. If the ESPP Amendment is approved by the Company's stockholders, up to
850,000 shares of Common Stock will be available for sale under the ESPP. In
order to have shares available for sale under the ESPP, the Company may
repurchase shares of Common Stock on the open market or otherwise. The maximum
number of shares which may be sold to employees during any single purchase
period will be established by the Committee prior to the beginning of the
purchase period.
In the event any change is made to the Common Stock purchasable under the
ESPP (whether by reason of merger, consolidation, reorganization,
recapitalization, stock dividend in excess of 10% at any single time, stock
split, combination of shares, exchange of shares, changes in corporate structure
or otherwise), then appropriate adjustments will be made to the maximum number
of shares purchasable under the ESPP, the maximum number of shares purchasable
under any right to purchase stock outstanding under the ESPP, and the number of
shares and price per share of stock subject to rights to purchase stock
outstanding under the ESPP.
Purchase Period
Commencing on January 1, 1995, the ESPP provides for two six-month purchase
periods per year. Unless otherwise determined by the Committee, a purchase
period will commence on the first day of each succeeding calendar six-month
period and will terminate on the last day of each such six-month period. The
Committee has the discretion to establish purchase periods with differing
commencement dates and durations.
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Eligibility
Every employee of the Company or a participating subsidiary who, on the
commencement date of the purchase period, has been employed by the Company for
at least sixty days, and is employed on a basis which customarily requires not
less than 20 hours of service per calendar week and not less than five months of
service per calendar year is eligible to participate in the ESPP during a
purchase period.
An eligible employee may become a participant in the ESPP for a particular
purchase period by completing the enrollment forms prescribed by the Committee
(including a purchase agreement and a payroll deduction authorization) and
filing such forms prior to the commencement date of the purchase period with the
Company's Chief Financial Officer, unless otherwise designated by the Committee.
Enrollment forms will be accepted from individuals who are and have been on the
active payroll of the Company or a participating subsidiary for at least sixty
days on the date the enrollment forms are filed, unless the individual is
temporarily off the payroll by reason of illness, vacation, jury duty or other
employer-approved absence.
Purchase of Common Stock
The purchase price per share of Common Stock purchased by participants
under the ESPP will be equal to 85 percent of the fair market value of a share
of Common Stock on the commencement date of the purchase period. The fair market
value per share of Common Stock on any date will be the closing sales price as
quoted by the NASDAQ National Market System, or if the Common Stock is listed on
a national stock exchange, the officially-quoted closing sales price on such
exchange on the date in question.
If the fair market value of a share of Common Stock on the last day of the
purchase period is less than the fair market value on the commencement date, the
purchase price per share under the ESPP will be reduced to 85 percent of the
fair market value of such shares on the last day of the purchase period. The
whole number of shares each participant is then able to purchase will be
determined by dividing the sum previously collected by the reduced purchase
price per share. In no event will any right to purchase shares under the ESPP be
exercised for more than the specified purchase limit established by the
Committee for the purchase period, and any amounts previously collected which
would cause such limit to be exceeded will be refunded.
Each participant will have the right to purchase the number of shares of
Common Stock which have a total purchase price equal to a percentage of his or
her "Base Compensation" as the participant designates in the enrollment forms.
For purposes of the ESPP, Base Compensation is defined as the participant's base
salary or wages payable during a given purchase period, including commissions,
overtime pay and shift premiums, but excluding bonuses and other incentive
payments. Each participant must designate a whole percentage of Base
Compensation to be applied uniformly against each pay period during the purchase
period. The minimum percentage of Base Compensation which may be designated by a
participant is 2% and, if the ESPP Amendment is approved by the Company's
stockholders, the maximum percentage of Base Compensation will be 15%.
No right to purchase shares under the ESPP will be granted to an employee
if the employee would, immediately after the grant, own stock possessing 5% or
more of the total combined voting power or value of all classes of stock of the
Company or any of its subsidiaries.
The Committee may from time to time and at its discretion revise or alter
any allowed minimum or maximum percentages of Base Compensation.
Allocation of Available Shares
Should the total number of shares of Common Stock designated by all
participants for purchase during a particular purchase period exceed the number
of shares available under the ESPP for that period, the Committee will make a
pro rata allocation of the available shares and will notify each participant.
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Payment for Shares
Each participant will make payments towards the purchase of shares by means
of payroll deductions. The payroll deductions will commence on the first pay
period of a purchase period and end on the last pay period of the purchase
period.
Termination of Right to Purchase
A participant may, at any time prior to the last day of the purchase
period, terminate his or her right to purchase stock by notifying the Committee
in writing. Any amounts deducted from the participant's pay or otherwise
collected by reasons of his or her participation will be refunded, without
interest, and no further amounts will be deducted. Once a participant terminates
his or her right to purchase, participation may not resume during that purchase
period.
Reduction or Increase of Base Compensation Percentage
A participant may reduce or increase his or her Base Compensation
percentage once and only once during a purchase period by notifying the
Committee in writing. The reduction or increase will only apply to future pay
periods and, in the case of a reduction, no refund of past collections will be
made.
Termination of Employment
If a participant ceases to be an employee of the Company or a participating
subsidiary for any reason (including death or retirement) during a purchase
period, the participant or his or her personal representative may either receive
a stock certificate for the number of shares paid for during the purchase period
up to the date of termination, or receive a cash refund of all sums previously
collected during the purchase period. A participant has 30 days from the date of
termination to make this election, but in no event later than the last date of
the purchase period. If no election is made, the Company will refund all sums
collected.
Exercise
A participant's right to purchase Common Stock under the ESPP will be
automatically exercised on the last day of the purchase period. As soon as
practicable after the date of exercise, the participant will be issued a stock
certificate for the number of shares purchased. Only one certificate will be
issued per participant with respect to each exercise of a right to purchase
shares under the ESPP.
No Rights as Stockholder
A participant in the ESPP will not have any rights as a stockholder with
respect to shares subject to a right to purchase stock granted him under the
ESPP until the right to purchase is exercised. No adjustments will be made for
dividends, distributions or other rights for which the record date is prior to
the date of exercise.
Assignability
No right to purchase stock granted under the ESPP is assignable or
transferable by a participant other than by will or by the laws of the descent
and distribution, and during the lifetime of the participant, rights to purchase
stock are exercisable only by the participant.
Accrual Limitations
No participant in the ESPP will be entitled to accrue rights to purchase
stock under the ESPP which, when aggregated with purchase rights accruable by
him under other qualified employee stock plans (within the meaning of Section
423 of the Code) of the Company or its subsidiary corporations, would permit the
participant to purchase more than $25,000 worth of Common Stock (determined on
the basis of the fair market value of such Common Stock on the date the
participant accrues purchase rights under the ESPP) for each calendar year such
purchase rights are at any time outstanding.
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Merger or Liquidation of the Company
In the event that the Company or its stockholders enter into an agreement
to dispose of all or substantially all of the assets or outstanding capital
stock of the Company by means of sale, merger, reorganization or liquidation,
each participant in the ESPP may either (i) receive a stock certificate for the
number of shares of Common Stock paid for pursuant to payroll deductions made on
behalf of the participant during the purchase period up to the day prior to the
date of such transaction; or (ii) receive a cash refund of all sums previously
collected from the participant during the purchase period.
Interest
No interest will be paid on any monies refunded to participants pursuant to
the provisions of the ESPP.
Withholding
The Company may withhold any taxes required by any law or regulation of any
governmental authority, whether federal, state or local, in connection with the
purchase of stock under the ESPP or the sale of such stock that is not held for
more than two years after the beginning of the purchase period during which the
stock was purchased. Such withholding may include all or any portion of any
payment or other compensation payable to the participant, unless the participant
reimburses the Company for such amount.
Amendment and Termination
The Board may from time to time alter, amend, suspend or discontinue the
ESPP, provided that no such action may adversely affect rights and obligations
with respect to rights to purchase stock at the time outstanding under the ESPP.
In addition, no such action of the Board may, without the approval of the
stockholders of the Company, increase the number of shares subject to the ESPP
or the maximum number of shares for which a right to purchase stock under the
ESPP may be exercised (unless necessary to effect the adjustments required due
to changes in capital structure), extend the term of the ESPP, alter the per
share purchase price formula so as to reduce the purchase price per share
specified in the ESPP, otherwise materially increase the benefits accruing to
participants under the ESPP or materially modify the requirements for
eligibility to participate in the ESPP. Furthermore, the ESPP may not, without
the approval of the stockholders of the Company, be amended in any manner which
will cause the ESPP to fail to meet the requirements of an "employee stock
purchase plan" under Section 423 of the Code.
Federal Income Taxes
General Federal Tax Consequences. The following discussion summarizes
certain United States federal income tax consequences of an employee's
participation in the ESPP and is not intended to be a complete description of
the tax consequences. The summary deals with the general tax principles
applicable to the ESPP under current law, without regard to particular
circumstances that may apply to individual participants in the ESPP, and is
intended for general information only. Alternative minimum tax, Federal
employment taxes, and state and local income taxes are not discussed, and may
vary depending on individual circumstances and from locality to locality.
Time of Purchase. For Federal income tax purposes, amounts deducted from a
participant's paychecks in order to purchase shares under the ESPP are taxable
to the participant as ordinary compensation income. The purchase of shares under
the ESPP, however, is not itself a taxable event even though the participant
pays less than market price for the shares (i.e., the compensation consisting of
the difference between the market price and the purchase price is not taxable at
the time of purchase)
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Sale of Shares Purchased Under the ESPP.
If a participant sells shares purchased under the ESPP more than two years
after the beginning of the purchase period during which he or she purchased the
shares under the ESPP:
- any gain up to the amount of the 15% discount from market price on the
first day of the purchase period will be taxable as ordinary income, and
any further gain will be taxable as capital gain, and
- any loss will be treated as a capital loss.
If a participant sells shares purchased under the ESPP within two years
after the beginning of the purchase period during which he or she purchased the
shares under the ESPP:
- the difference between the purchase price and the value of the stock on
the date of the purchase will be taxable as ordinary income in the year
of sale (regardless of the market price of the shares at the time of
sale), and any gain above the amount of the value of the stock on the
date of the purchase will be taxable as a capital gain, and
- any loss, after inclusion in the participant's tax basis of the amount
treated as ordinary income as described above, will be treated as a
capital loss.
If the participant sells or disposes of shares purchased under the ESPP
within two years after the beginning of the purchase period during which he or
she purchased the shares under the ESPP, the Company generally will be entitled
to a deduction on its income tax return for the full amount of the ordinary
income recognized by the participant from fair market value on the date of
purchase. In all other cases no deduction is allowed to the Company.
Disposition by Gift. Generally, if a participant makes a gift of his or her
shares, the participant will recognize the same amount of ordinary income had he
or she sold the shares at such time.
Death of a Participant. Upon the death of a participant prior to disposing
of shares purchased under the ESPP, the tax return for the year ending upon
participant's death must include, as ordinary income, the amount of ordinary
income the decedent would have recognized had he or she sold such shares after
satisfying the two year period described above.
Shareholder Vote
Approval of the ESPP Amendment will require the affirmative vote of the
holders of a majority of the shares of the Common Stock represented and voting
in person or by proxy at the Meeting, assuming a quorum is present. Abstentions
as to this Proposal No. 4 will be treated as votes against Proposal No. 4.
Broker non-votes, however, will be treated as unvoted for purposes of
determining approval of Proposal No. 4 and will not be counted as votes for or
against Proposal No. 4. Properly executed, unrevoked Proxies will be voted FOR
Proposal No. 4 unless a vote against Proposal No. 4 or abstention is
specifically indicated in the Proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
ESPP AMENDMENT.
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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 20, 2000. 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. Submitting a 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. 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.
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DATE OF RECEIPT OF SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the Proxy Statement for the 2001
Annual Meeting of Shareholders must be received at the principal executive
offices of the Company on or before December 15, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ PAUL C. SAMEK
------------------------------------
Paul C. Samek
Vice President Finance, Chief
Financial Officer
Dated April 28, 2000
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.
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APPENDIX "A"
SECOND AMENDMENT TO THE 1997 EQUITY PARTICIPATION PLAN
OF THE SPECTRANETICS CORPORATION
This Second Amendment to the 1997 Equity Participation Plan of The
Spectranetics Corporation (the "Amendment") is adopted by the Board of Directors
of The Spectranetics Corporation, a Delaware corporation (the "Company"),
effective as of June 21, 2000.
RECITALS
I. The Company's 1997 Equity Participation Plan (the "Plan") was adopted by
the Board of Directors (the "Board") on April 14, 1997, and approved by the
stockholders on June 9, 1997, and became effective as of June 9, 1997. The
Company's First Amendment to the Plan was approved by the Board on October 22,
1997.
II. The Board of Directors of the Company desires to amend the Plan to
increase the number of shares of the Company's common stock available for
issuance thereunder from 2,500,000 to 6,000,000.
III. Section 2.1 of the Plan sets forth the provisions relating to the
number of shares subject to the Plan.
IV. Effective as of April 25, 2000, the Board of Directors unanimously
adopted the Amendment in the form given below.
AMENDMENT
A. Section 2.1 is hereby amended in its entirety to read as follows:
"2.1 Shares Subject to Plan. The shares of stock subject to Options,
awards of Restricted Stock or Stock Appreciation Rights shall be Common
Stock, initially shares of the Company's Common Stock, par value $.001 per
share. The aggregate number of such shares which may be issued upon
exercise of such options or rights or upon any such awards under the Plan
shall not exceed Six Million (6,000,000). The shares of Common Stock
issuable upon exercise of such options or rights or upon any such awards
may be either previously authorized but unissued shares or treasury
shares."
The undersigned, Guy A. Childs, Assistant Secretary of the Company, hereby
certifies that the Board of Directors of the Company adopted the foregoing
Amendment as stated in Recital IV above.
Executed at Colorado Springs, Colorado this 25th day of April, 2000.
/s/ GUY A. CHILDS
------------------------------------
Guy A. Childs, Assistant Secretary
A-1
<PAGE> 31
APPENDIX "B"
SECOND AMENDMENT TO THE SPECTRANETICS CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
This Second Amendment to The Spectranetics Corporation Employee Stock
Purchase Plan (the "Amendment") is adopted by the Board of Directors of The
Spectranetics Corporation, a Delaware corporation (the "Company"), effective as
of June 21, 2000.
RECITALS
I. The Company's Employee Stock Purchase Plan (the "Plan") was adopted by
the Board of Directors of the Company (the "Board") on September 15, 1992, and
approved by the stockholders on September 15, 1993. The Company's First
Amendment to the Plan was approved by the Board on December 29, 1994, and
approved by the stockholders on June 12, 1995.
II. The Board desires to amend the Plan to (i) increase the number of
shares of the Company's common stock which may be sold to employees thereunder
from 350,000 to 850,000, and (ii) increase the maximum percentage of a
participant's base compensation which may used to purchase stock in a particular
purchase period from 5% to 15%.
III. Effective as of April 25, 2000, the Board of Directors unanimously
adopted the Amendment in the form given below, subject to approval of the
Amendment by the Company's stockholders.
AMENDMENT
A. Section V(a) of the Plan is hereby amended and restated in its entirety
to read as follows:
"(a) Common Stock. The stock which is purchasable by Participants
shall be the Company's authorized but unissued or reacquired Common Stock,
par value $.001 per share (the "Common Stock"). In order to have shares
available for sale under the Plan, the Company may repurchase shares of
Common Stock on the open market or otherwise. The maximum number of shares
which may be sold to employees during any single purchase period shall be
established by the Committee prior to the beginning of the purchase period,
provided however, that the total number of shares which may be sold to
employees throughout the entire duration of the Plan shall not exceed
850,000 shares (subject to adjustment under subparagraph (b) below)."
B. Section VI(c)(i) of the Plan is hereby amended and restated in its
entirety to read as follows:
"(i) The maximum percentage of a Participant's Base Compensation which
may be paid for the purchase of stock in a particular purchase period shall
be fifteen percent (15%); provided, however, that the Committee may
establish prior to the beginning of the purchase period a maximum number of
shares (subject to adjustment under Section V(b)) that may be purchased
during the purchase period by each Participant."
C. This Amendment shall be and is hereby incorporated in and forms a part
of the Plan.
D. All other terms and provisions of the Plan shall remain unchanged except
as specifically modified herein.
E. The Plan, as amended by this Amendment, is hereby ratified and
confirmed.
B-1
<PAGE> 32
The undersigned, Guy A. Childs, Assistant Secretary, hereby certifies that
the Board of Directors of the Company adopted the foregoing Amendment as stated
in Recital III above.
Executed at Colorado Springs, Colorado this 25th day of April 2000.
/s/ GUY A. CHILDS
------------------------------------
Guy A. Childs, Assistant Secretary
B-2
<PAGE> 33
<TABLE>
<S> <C> <C>
THERE ARE THERE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR COMPANY #
SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR CONTROL #
PROXY CARD.
VOTE BY PHONE - TOLL FREE - 1-800-240-6326 - QUICK *** EASY *** IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week, until 12:00 p.m. on
June 20, 2000.
o You will be prompted to enter your 3-digit Company Number and your 7-digit Control Number which are 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, until 12:00 p.m. on June 20, 2000.
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 card and return it in the postage-paid envelope we've provided or return it to
Spectranetics, c/o Shareowner Services(TM), P.O Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4
1. Election of directors: 01 Joseph A. Largey 02 James A. Lent [ ] Vote FOR [ ] Vote WITHHELD
all nominees from all nominees
(except as marked)
(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.)
Please fold here
- ----------------------------------------------------------------------------------------------------------------------------
2. To approve an amendment to the 1997 Equity Participation Plan to
increase the number of shares authorized for issuance thereunder from
2,500,000 shares to 6,000,000 shares. [ ] For [ ] Against [ ] Abstain
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the current fiscal year. [ ] For [ ] Against [ ] Abstain
4. To approve an amendment to the Company's Employee Stock Purchase
Plan to increase the number of shares reserved for issuance thereunder
from 350,000 shares to 850,000 shares and to increase the maximum
percentage of a participant's base compensation which may be used to
purchase stock in a particular period from 5% to 15%. [ ] For [ ] Against [ ] Abstain
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 [ ] Date
Indicate changes below; ----------------------
[ ]
Signature(s) in Box
Please sign exactly as your name(s) appear on Proxy.
If held in joint tenancy, all persons must sign.
Trustees, administrators, etc., should include title
and authority. Corporations should provide full name
of name of corporation and title of authorized officer
signing the proxy.
</TABLE>
<PAGE> 34
THE SPECTRANETICS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, JUNE 21, 2000
10:00 A.M. (EDT)
HOTEL INTER-CONTINENTAL
111 EAST 48TH STREET
NEW YORK, NEW YORK
- --------------------------------------------------------------------------------
THE SPECTRANETICS CORPORATION
96 TALAMINE COURT
COLORADO SPRINGS, CO 80907 PROXY
-----------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE
ANNUAL MEETING ON JUNE 21, 2000.
The shares of stock you hold in your account will be voted as you
specify on the reverse side.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS
1, 2, 3, AND 4.
By signing the proxy, you revoke all prior proxies and appoint
Joseph A. Largey and Paul C. Samek, 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 and all adjournments.
See reverse for voting instructions.
