<PAGE> 1
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 [ ]
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-11(c) or Rule 14a-12
</TABLE>
Eclipse Surgical Technologies, Inc.
- --------------------------------------------------------------------------------
(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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
ECLIPSE SURGICAL TECHNOLOGIES, INC.
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, JUNE 30, 1999
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Eclipse
Surgical Technologies, Inc., a California corporation (the "Company"), will be
held on Wednesday, June 30, 1999, at 9:00 a.m. local time, at the Company's
principal executive offices at 1049 Kiel Court, Sunnyvale, California 94089 for
the following purposes:
1. To elect seven (7) directors to serve until the next Annual Meeting of
Shareholders or until their successors are elected and qualified.
2. To approve an amendment to the Stock Option Plan to increase the number
of shares of common stock reserved for issuance thereunder by 1,100,000
shares.
3. To approve an amendment to the 1996 Employee Stock Purchase Plan to
increase the number of shares of common stock reserved for issuance
thereunder by 150,000 shares.
4. To approve an amendment to the Director Stock Option Plan to increase
the number of shares of common stock reserved for issuance thereunder by
125,000 shares.
5. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for the fiscal year ending December 31, 1999.
6. To transact such other business as may properly come before the meeting,
including any motion to adjourn to a later date to permit further
solicitation of proxies, if necessary, or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only shareholders of record at the close of
business on May 14, 1999, are entitled to notice of and to vote at the meeting
and any adjournment thereof.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Shareholders attending the
meeting may vote in person even if they have returned a Proxy.
Sincerely,
Susan J. Skaer
Secretary
Sunnyvale, California
May 28, 1999
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE.
<PAGE> 3
ECLIPSE SURGICAL TECHNOLOGIES, INC.
------------------------
PROXY STATEMENT FOR 1999
ANNUAL MEETING OF SHAREHOLDERS
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of ECLIPSE SURGICAL TECHNOLOGIES, INC., a California corporation (the
"Company"), for use at the Annual Meeting of Shareholders (the "Annual Meeting")
to be held Wednesday, June 30, 1999, at 9:00 a.m. local time, or at any
adjournment thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. The Annual Meeting will be held at the
Company's principal executive offices at 1049 Kiel Court, Sunnyvale, California
94089. The telephone number of the Company's office is (408) 548-2100.
The Company's Annual Report to Shareholders for the year ended December 31,
1998, including financial statements, were first mailed on or about April 30,
1999 and these proxy solicitation materials were first mailed on or about June
1, 1999, to all shareholders entitled to vote at the meeting.
RECORD DATE AND VOTING SECURITIES
Only shareholders of record at the close of business on May 14, 1999 (the
"Record Date") are entitled to notice of and to vote at the meeting. The Company
has one series of Common Shares outstanding, designated Common Stock, no par
value. At the Record Date, 28,262,340 shares of the Company's Common Stock were
issued and outstanding and held of record by 251 registered shareholders.
VOTING AND REVOCABILITY OF PROXIES
Each shareholder is entitled to one vote for each share of Common Stock
held on the Record Date. Every shareholder voting for the election of directors
(Proposal One) may cumulate votes and give one candidate a number of votes equal
to the number of directors to be elected multiplied by the number of shares that
the shareholder is entitled to vote, or distribute votes on the same principle
among as many candidates as the shareholder may select. However, votes cannot be
cast for more than seven (7) candidates. However, no shareholder is entitled to
cumulate votes for a particular candidate unless that candidate's name has been
placed in nomination prior to the voting and the shareholder, or any other
shareholder, has given notice at the meeting, before the voting, of his
intention to cumulate votes. On all other matters, each share of Common Stock
has one vote. A quorum, representing the holders of a majority of the
outstanding shares of Common Stock on the Record Date, must be present or
represented for the transaction of business at the Annual Meeting. Abstentions
and broker nonvotes will be counted in establishing the quorum.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by (a) delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or (b) attending the meeting and voting in person.
SOLICITATION EXPENSES
This solicitation of proxies is made by the Company and all related costs
will be borne by the Company. The Company may reimburse brokerage firms and
other persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to those beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers and regular employees,
without additional compensation, personally, by telephone or by telegram. Except
as described above, the Company does not presently intend to solicit proxies
other than by mail.
1
<PAGE> 4
DEADLINE FOR SHAREHOLDER PROPOSALS
The Company currently intends to hold its 2000 Annual Meeting of
Shareholders in mid-May 2000 and to mail Proxy Statements relating to such
meeting in mid-April 2000. Shareholder proposals that are intended to be
presented at the Company's 2000 Annual Meeting must be received by the Company
no later than January 27, 2000, to be considered for inclusion in the proxy
statement and form of proxy relating to that meeting. Such shareholder proposals
should be submitted to Eclipse Surgical Technologies, Inc. at 1049 Kiel Court,
Sunnyvale, California 94089, Attention: Secretary. Shareholder proposals related
to the Company's 2000 Annual Meeting of Shareholders, but submitted outside the
processes of Rule 14a-8 under the Securities Exchange Act of 1934, must be
received by the Company prior to March 13, 2000 in order to withhold authority
of management proxies to use their discretionary voting authority with respect
to any such proposal.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
The Company currently has seven directors. A board of seven (7) directors
is to be elected at the Annual Meeting. Unless otherwise instructed, the proxy
holders will vote the proxies received by them for the Company's seven (7)
nominees named below, all of whom are presently directors of the Company. If any
nominee of the Company is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for any nominee who is
designated by the present Board to fill the vacancy. The Company is not aware of
any nominee who will be unable or who will decline to serve as a director. If
additional individuals are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner (in
accordance with cumulative voting) that will assure the election of as many of
the nominees listed below as possible. In that event, the specific nominees to
be voted for will be determined by the proxy holders. The term of office for
each person elected as a director will continue until the next Annual Meeting of
Shareholders or until a successor has been duly elected and qualified.
VOTE REQUIRED
If a quorum is present and voting, the seven (7) nominees receiving the
highest number of affirmative votes will be elected to the Board. Abstentions
and broker nonvotes are not counted in the election of directors.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Douglas Murphy-Chutorian, M.D................ 44 Chairman of the Board
Allen W. Hill(1)............................. 49 President, Chief Executive Officer and Director
Jack M. Gill, Ph.D.(1)....................... 63 Director
Alan L. Kaganov, Sc.D........................ 60 Director
Robert L. Mortensen(2)(3).................... 65 Director
Robert C. Strauss(1)(2)...................... 58 Director
Iain M. Watson(2)(3)......................... 43 Director
</TABLE>
- ---------------
(1) Joined the Board in March 1999 upon the closing of the merger of a
wholly-owned subsidiary of the Company with and into CardioGenesis
Corporation ("CardioGenesis") in which CardioGenesis survived the
transaction as a wholly-owned subsidiary of the Company.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
2
<PAGE> 5
All directors hold office until the next annual meeting of shareholders or
until their successors have been elected and qualified. Officers serve at the
discretion of the Board and are appointed annually. There are no family
relationships between the directors or officers of the Company.
Douglas Murphy-Chutorian, M.D. has been Chairman of the Board of the
Company since June 1989, He also served as the Company's Chief Executive Officer
from June 1989 to March 1999. Dr. Murphy-Chutorian was also Chairman of the
Board of Atlantis Catheter Company, Inc. ("Atlantis") from November 1993 to
March 1996 when Atlantis was acquired by Biocompatibles International p1c. Dr.
Murphy-Chutorian is an interventional cardiologist and served as a Clinical
Assistant Professor in the Department of Cardiology and Cardiovascular Medicine
at Albert Einstein College of Medicine (Montefiore Division) and Stanford
University Medical Center from 1986 through July 1990. He is currently a member
of the voluntary clinical staff of Stanford University Medical Center and of
Montefiore Medical Center. Dr. Murphy-Chutorian received his M.D. degree from
the College of Physicians and Surgeons, Columbia University, completed his
residency at New York University/Bellevue Hospital and completed his cardiology
training at Stanford University Medical Center.
Allen W. Hill has served as President, Chief Operating Officer and a
director of the Company since March 1999. From July 1995 to March 1999, Mr. Hill
served as President, Chief Executive Officer and a director of CardioGenesis
Corporation. From February 1990 to May 1995, Mr. Hill served as President, Chief
Executive Officer and a director of Cyberonics, Inc., a medical device company.
Mr. Hill received his B. S. degree in Marketing from Oklahoma State University.
Jack M. Gill, Ph.D. has been a director of the Company since March 1999.
Dr. Gill formerly served as Chairman of the Board of Directors of CardioGenesis
Corporation from November 1993 to March 1999. Dr. Gill is a founding general
partner of Vanguard Venture Partners and has served in such capacity since 1981.
Dr. Gill is a director of a number of privately held medical device companies.
Dr. Gill received his B. S. degree in Engineering from Lamar University and his
Ph.D. in Organic Chemistry from Indiana University.
Alan L. Kaganov, Sc.D. has been a director of the Company since January
1997. Since July 1996, Dr. Kaganov has been a Venture Partner at U.S. Venture
Partners. From May 1993 to June 1996 Dr. Kaganov was Vice President of Business
Development and Strategic Planning at Boston Scientific Corporation. From June
1991 until December 1992 he was President and CEO of EP Technologies, a
catheter-based electrophysiology company. Dr. Kaganov has a Masters and
Doctorate of Science in biomedical engineering from Columbia University and an
M.B.A. from New York University.
Robert L. Mortensen has been a director of the Company since April 1992.
Since 1984, Mr. Mortensen has been either President or Chairman of the Board and
a director of Lightwave Electronics Corporation, a solid-state laser company
that he founded. He holds an M.B.A. from Harvard University.
Robert C. Strauss has been a director of the Company since March 1999. Mr.
Strauss formerly served on the Board of Directors of CardioGenesis Corporation
from December 1997 to March 1999. Mr. Strauss has been President and Chief
Executive Officer of Noven Pharmaceuticals, Inc. (pharmaceuticals) since
December 1997. From March 1997 to July 1997, Mr. Strauss served as President,
Chief Operating Officer and Director of IVAX Corporation (pharmaceuticals). From
1983 to 1997, he served in various executive positions with Cordis Corporation
(medical devices), most recently as its Chairman of the Board, President and
Chief Executive Officer. Mr. Strauss serves on the Board of Trustees for the
University of Miami and holds positions on the Board of Directors of Columbia
Laboratories, Inc. (pharmaceuticals) and American Bankers Insurance Group, Inc.
(insurance). Mr. Strauss received his B. S. degree in Engineering Physics from
the University of Illinois and his M. S. degree in Physics from the University
of Idaho.
Iain M. Watson has been a director of the Company since April 1992. Since
September 1993, Mr. Watson has been President of HAL Investments, Inc., an
investment company. From 1980 to September 1993, Mr. Watson held various
positions with the Boston Consulting Group, a management consulting firm. Mr.
Watson holds an M.B.A. from Harvard University.
3
<PAGE> 6
BOARD MEETINGS AND COMMITTEES
The Board held a total of seven meetings during fiscal 1998. All directors
attended all seven meetings of the Board and its committees. The Board has an
Audit Committee and a Compensation Committee. The Board has no nominating
committee or any committee performing such functions.
The Audit Committee, which consisted of Robert L. Mortensen and Iain M.
Watson during fiscal 1998, is responsible for overseeing the Company's
independent accountants and reviewing the Company's internal financial
procedures and controls. The Audit Committee met one time during fiscal 1998.
The Compensation Committee, which consisted of Robert L. Mortensen and Iain
M. Watson during fiscal 1998, is responsible for determining salaries,
incentives and other forms of compensation for directors, officers and other
employees of the Company. The Compensation Committee also administers various of
the Company's incentive compensation and benefit plans. The Compensation
Committee met one time during fiscal 1998.
PROPOSAL TWO
AMENDMENT TO THE STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES
RESERVED FOR ISSUANCE BY 1,100,000
INCREASE OF 1,100,000 SHARES
The Company's Stock Option Plan as amended and restated in April 1996 (the
"Option Plan") was approved by the Board of Directors and the shareholders in
April 1996. A total of 4,000,000 shares of Common Stock are currently reserved
for issuance under the Option Plan. In May 1999, the Board of Directors approved
a further increase of 1,100,000 shares issuable under the Option Plan, which, if
approved, by the shareholders would increase the total shares reserved for
issuance under the Option Plan since its inception to 5,100,000 shares. The
Option Plan terminates on March 31, 2006. A summary of the principal terms of
the Option Plan is located in Appendix A to this Proxy Statement.
The Board believes the requested increase in the shares reserved for
issuance under the Option Plan is in the best interests of the Company. The
Board believes that the increase will provide an adequate reserve of shares
available for issuance under the Option Plan, which is necessary to enable the
Company to compete successfully with other companies in attracting and retaining
valuable employees. The competition for employees has increased significantly
and the Company needs the increase in share reserve to be able to provide
options to its ever increasing number of employees in order to expand its
operations.
As of April 30, 1999, options to purchase 2,392,475 shares of Common Stock
were unexercised and outstanding under the Option Plan. As of April 30, 1999,
329,778 shares remained available for future option grants under the Option
Plan, excluding the proposed increase of 1,100,000 shares. The aggregate market
value of the unexercised and outstanding options to purchase 2,392,475 shares of
Common Stock under the Option Plan at April 30, 1999 was $21,383,942 based on a
closing price of $8.938 on the Nasdaq National Market on that date. See "Amended
and New Plan Benefits" below for certain information with respect to options
granted under the Option Plan in 1998.
VOTE REQUIRED
The affirmative vote of a majority of the shares of the Common Stock
present or represented and entitled to vote at the Annual Meeting is required
for approval of this Proposal.
RECOMMENDATION
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO THE
OPTION PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY
1,100,000.
4
<PAGE> 7
PROPOSAL THREE
AMENDMENT TO THE 1996 EMPLOYEE STOCK PURCHASE PLAN TO INCREASE
THE NUMBER OF SHARES RESERVED FOR ISSUANCE BY 150,000
INCREASE OF 150,000 SHARES
The Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
approved by the Board of Directors and by the shareholders in April 1996. A
total of 250,000 shares of Common Stock are currently reserved for issuance
under the Purchase Plan. In May 1999, the Board of Directors approved a further
increase of 150,000 shares issuable under the Purchase Plan, which, if approved,
by the shareholders would increase the total shares reserved for issuance under
the Purchase Plan since its inception to 400,000 shares. The Purchase Plan
terminates in April 2006. A summary of the principal terms of the Purchase Plan
is located in Appendix B to this Proxy Statement.
The Purchase Plan, which is intended to qualify under Section 423 of the
Code, permits eligible employees to purchase Common Stock through payroll
deductions at a price equal to 85% of the fair market value of the Common Stock
at the beginning or at the end of each offering period, whichever is lower.
Qualified employees are eligible to participate at the beginning of the first
day of an offering period after their first full calendar month of full time
employment. As of April 30, 1999, a total of 126,868 shares of Common Stock had
been purchased under the Purchase Plan and 123,132 shares remained available for
future purchase under the Purchase Plan. See "Amended and New Plan Benefits"
below for certain information with respect to participation in the Purchase Plan
in 1998.
The Purchase Plan is voluntary and encourages and motivates employees
("employees" or "participants") to participate in the Company's future through
direct stock ownership. The Board believes that the availability of sufficient
number of shares available for issuance under the Purchase Plan is integral to
attract, retain and motivate qualified employees fundamental to the success of
the Company. Subject to shareholder approval the Board has amended the Purchase
Plan to increase the number of shares reserved for issuance under the Purchase
Plan from 250,000 shares to 400,000 shares.
VOTE REQUIRED
The affirmative vote of a majority of the shares of the Common Stock
present or represented and entitled to vote at the Annual Meeting is required
for approval of this Proposal.
RECOMMENDATION
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO THE 1996
EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCE UNDER THE PURCHASE PLAN BY 150,000 SHARES.
PROPOSAL FOUR
AMENDMENT TO THE 1996 DIRECTOR STOCK OPTION PLAN TO INCREASE
THE NUMBER OF SHARES RESERVED FOR ISSUANCE BY 125,000
INCREASE OF 125,000 SHARES
The Company's Director Stock Option Plan (the "Director Plan") was approved
by the Board of Directors and by the shareholders in April 1996. A total of
200,000 shares of Common Stock are currently reserved for issuance under the
Director Plan. In May 1999, the Board of Directors approved a further increase
of 125,000 shares issuable under the Director Plan, which, if approved, by the
shareholders would increase the total shares reserved for issuance under the
Director Plan since its inception to 325,000 shares. The Director Plan
terminates in March 2006. A summary of the principal terms of the Director Plan
is located in Appendix C to this Proxy Statement.
5
<PAGE> 8
The Board believes that the availability of an adequate number of shares
reserved for issuance under the Company's Director Plan is an important factor
in attracting and retaining experienced and qualified persons to serve on the
Company's Board of Directors. The Board also believes that the Director Plan
works to align the financial interests of the Board members with those of the
Company's shareholders. Therefore, subject to shareholder approval, the Board
has amended the Director Plan to increase the number of shares reserved for
issuance under the Director Plan by 125,000 shares.
Under the Director Plan, each new nonemployee director automatically
receives a nonstatutory stock option to purchase 22,500 shares of the Company's
Common Stock upon becoming a nonemployee director (a "First Option"). Each
nonemployee director is also automatically granted a nonstatutory option to
purchase 7,500 shares of Common Stock upon reelection annually to the Board of
Directors (an "Subsequent Option"). Under the Director Plan, options are first
exercisable one (1) year after the date of grant (the "Initial Exercise Date"),
and, unless otherwise specified by the Board, one-third ( 1/3) of the First
Option and each Subsequent Option vests upon the Initial Exercise Date, with the
balance of such grants vesting and becoming exercisable yearly in equal amounts
over a two (2) year period from the Initial Exercise Date.
As of April 30, 1999, under the Director Plan, options to purchase 127,500
shares of Common Stock were outstanding and no options had been exercised. The
aggregate market value of the unexercised and outstanding options to purchase
127,500 shares of Common Stock under the Director Plan was $1,139,595 based on a
closing price of $8.938 on the Nasdaq National Market on April 30, 1999. See
"Amended and New Plan Benefits" below for certain information with respect to
options granted under the Director Plan in 1998.
VOTE REQUIRED
The affirmative vote of a majority of the shares of the Common Stock
present or represented and entitled to vote at the Annual Meeting is required
for approval of this Proposal.
RECOMMENDATION
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO THE
DIRECTOR STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCE UNDER THE DIRECTOR PLAN BY 125,000.
6
<PAGE> 9
AMENDED AND NEW PLAN BENEFITS
The following table sets forth, as to the executive officers named under
"Executive Compensation Summary Compensation Table" below, all executive
officers as of March 1, 1999 as a group, all directors as of March 1, 1999 who
are not executive officers as a group and all other employees as of March 1,
1999 as a group the following information regarding benefits received or
allocated to the persons and groups set forth below for the last completed
fiscal year: (a) with respect to the Option Plan: (i) the market value of the
shares of Common Stock underlying such options as of March 1, 1999 based on a
closing price of $10.938 on the Nasdaq National Market on that date, minus the
exercise price of such shares; and (ii) the number of shares of the Company's
Common Stock subject to options granted during the fiscal year ended December
31, 1998 under the Option Plan; (b) with respect to the Purchase Plan: (i) the
market value of the shares of Common Stock issued as of March 1, 1999 based on a
closing price of $10.938 on the Nasdaq National Market on that date, minus the
purchase price of such shares; and (ii) the number of shares of the Company's
Common Stock issued under the Purchase Plan during the fiscal year ended
December 31, 1998; and (c) with respect to the Director Plan: (i) the market
value of the shares of Common Stock underlying such options as of March 1, 1999
based on a closing price of $10.938 on the Nasdaq National Market on that date,
minus the exercise price of such shares; and (ii) the number of shares of the
Company's Common Stock subject to options granted under the Director Plan during
fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
STOCK 1996 EMPLOYEE DIRECTORS
OPTION PLAN STOCK PURCHASE PLAN STOCK OPTION PLAN
------------------------- ---------------------------- --------------------------
NUMBER OF NUMBER OF
NAME OF INDIVIDUAL SHARES SUBJECT SHARES SUBJECT
OR IDENTITY OF DOLLAR TO OPTIONS DOLLAR NUMBER OF DOLLAR TO OPTIONS
GROUP OR POSITION VALUE($) GRANTED(#) VALUES($) SHARES ISSUED(#) VALUES($) GRANTED(#)
------------------ -------- -------------- --------- ---------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Douglas Murphy-Chutorian,
M.D. ....................... $202,900 50,000 -- -- -- --
Chairman of the Board and
Chief Executive Officer(1)
Richard L. Mueller, Jr. ...... $202,900 50,000 -- -- -- --
President and Chief
Operating Officer(1)
Linda Fenney, M.D. ........... $ 39,976 9,999 $ 6,889 1,755 -- --
Vice President, Medical
Affairs(1)
Vurnetha R. Bitoy............. $101,450 25,000 $ 4,833 1,127 -- --
Vice President, Sales and
Marketing
William E. Picht.............. $ 75,870 15,000 $ 1,052 268 -- --
Vice President, Operations
Alan L. Kaganov, Sc.D......... -- -- -- -- $30,473 7,500
Director
Robert Mortensen.............. -- -- -- -- 0 7,500
Director
Iain Watson................... -- -- -- -- 0 7,500
Director
All current executive officers
as a group.................. $623,096 149,999 $ 12,774 3,150 -- --
All current directors who are
not executive officers as a
group....................... -- -- -- -- $30,473 22,500
All other employees as a
group....................... $577,551 197,251 $255,917 60,529 -- --
</TABLE>
- ---------------
(1) As of March 17, 1999, Dr. Murphy-Chutorian is no longer the Chief Executive
Officer and Mr. Mueller and Dr. Fenney are no longer employees of the
Company.
7
<PAGE> 10
PROPOSAL FIVE
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board has selected PricewaterhouseCoopers LLP, independent accountants,
to audit the consolidated financial statements of the Company for the fiscal
year ending December 31, 1999, and recommends that shareholders vote for
ratification of that appointment. Notwithstanding this selection, the Board, in
its discretion, may direct the appointment of new independent accountants at any
time during the year, if the Board feels that such a change would be in the best
interest of the Company and its shareholders. If there is a negative vote on
ratification, the Board will reconsider its selection.
PricewaterhouseCoopers LLP has audited the Company's financial statements
annually since 1989. Representatives of PricewaterhouseCoopers LLP are expected
to be present at the meeting with the opportunity to make a statement if they
desire to do so. They are also expected to be available to respond to
appropriate questions.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the votes cast is required to ratify
the Board's selection. In addition, the affirmative votes must represent at
least a majority of the required quorum. If the shareholders reject the
nomination, the Board will reconsider its selection.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS.
8
<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information regarding
the compensation of the Chief Executive Officer and each of the four other most
highly compensated officers of the Company (each, a "Named Executive Officer")
for services rendered in all capacities to the Company for the fiscal years
ended December 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
FISCAL -------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS COMPENSATION(1)
--------------------------- ------ --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Douglas Murphy-Chutorian, M.D.(2)... 1998 $295,190 $100,000 50,000 $7,236
Chairman of the Board and Chief 1997 267,099 22,119 -- 5,905
Executive Officer 1996 228,552 33,746 -- 830
Richard L. Mueller, Jr.(2).......... 1998 232,275 50,000 50,000 1,831
President and Chief Operating
Officer 1997 193,327 15,166 -- 1,257
1996 163,423 22,263 -- 648
Linda Fenney, M.D.(2)............... 1998 190,552 39,892 9,999 151
Vice President, Medical Affairs 1997 176,554 13,964 20,000 32
1996 133,340 18,063 -- 767
Vurnetha R. Bitoy(3)................ 1998 188,282 16,945 25,000 --
Vice President, Sales and
Marketing 1997 75,000 4,800 50,000 --
1996 -- -- -- --
William E. Picht.................... 1998 181,500 16,335 15,000 745
Vice President, Operations 1997 170,373 21,120 -- 248
1996 56,814 7,599 75,000 --
</TABLE>
- ---------------
(1) Life Insurance Premiums.
(2) As of March 1999, upon the closing of the merger with CardioGenesis, Dr.
Murphy-Chutorian is no longer the Chief Executive Officer of the Corporation
and Mr. Mueller and Dr. Fenney are no longer employees of the Company.
(3) Ms. Bitoy joined the Company in 1997.
9
<PAGE> 12
OPTION GRANTS IN FISCAL YEAR 1998
The following tables set forth information regarding stock options granted
to and exercised by the Named Executive Officers during the Company's fiscal
year ended December 31, 1998, the last day of the Company's 1998 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
---- ---------- ------------ --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Douglas Murphy-Chutorian, M.D. ... 50,000 14.40% $6.88 02/09/03 $216,340 $892,247
Richard L. Mueller, Jr.(3)........ 50,000 14.40% $6.88 02/09/09 216,340 892,247
Linda Fenney, M.D.(4)............. 9,999 2.88% $6.94 03/02/09 43,641 179,988
Vurnetha R. Bitoy................. 25,000 7.20% $6.88 02/09/09 108,170 446,124
William E. Picht.................. 15,000 4.32% $5.88 01/01/09 55,469 228,768
</TABLE>
- ---------------
(1) Each of these options was granted pursuant to the Company's Option Plan.
(2) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), shown are the hypothetical gains or "option spreads" that
would exist for the respective options. These gains are based on assumed
rates of annual compounded stock price appreciation of 5% and 10% from the
date the option was granted over the full option term. The 5% and 10%
assumed rates of appreciation are mandated by the rules of the Commission
and do not represent the Company's estimate or projection of future
increases in the price of its Common Stock.
OPTIONS OUTSTANDING IN FISCAL YEAR 1998
The following table sets forth certain information for the year ended
December 31, 1998 concerning exercised, exercisable and unexercisable stock
options held by each of the Named Executive Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTIONS
-------------------------------------------------------------------------------
NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ON VALUE --------------------------- ---------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas Murphy-Chutorian,
M.D. ......................... -- -- 20,835 29,165 $ 9,126 $12,774
Richard L. Mueller, Jr.......... -- -- 770,837 29,163 4,241,377 12,773
Linda Fenney, M.D. ............. -- -- 77,277 17,223 363,974 3,755
Vurnetha R. Bitoy............... -- -- 22,223 52,777 -- 10,950
William E. Picht................ -- -- 62,501 27,499 8,989 12,581
</TABLE>
- ---------------
(1) The value for an "in the money" option represents the difference between the
exercise price of such option as determined by Eclipse's Board of Directors
and the fair market value of Eclipse's Common Stock at December 31, 1998
($7.313), multiplied by the total number of shares subject to the option.
10
<PAGE> 13
DIRECTOR COMPENSATION
Directors who are not compensated as employees or consultants to the
Company receive a retainer of $10,000 per year for serving on the Board of
Directors, plus fees of $1,500 per board meeting and $1,500 per committee
meeting, provided such committee meeting does not occur on the same day as a
board meeting.
The Company also has a Director Stock Option Plan for non-employee
directors. In fiscal 1998, Directors Iain M. Watson, Robert L. Mortensen and
Alan L. Kaganov were each granted an option to purchase an aggregate of 7,500
shares of Common Stock of the Company pursuant to such plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity securities
to file reports of "ownership and changes in ownership with the Securities and
Exchange Commission ("SEC") and the National Association of Securities Dealers,
Inc. Executive officers, directors and greater-than-ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely in its review of the copies of such forms
received by it or written representations from certain reporting persons, the
Company believes that, with respect to 1998, all executive officers, directors
and ten percent shareholders of the Company complied with all applicable filing
requirements, except for the following: Alan Kaganov, a director of the Company
filed a Form 5 approximately one month late to report the grant of options to
purchase 52,500 shares of Common Stock of the Company on December 12, 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently consists of
Messrs. Mortensen and Watson. No member of the Compensation Committee has a
relationship that would constitute an interlocking relationship with executive
officers or directors of another entity.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The following is the Report of the Compensation Committee of the Company,
describing the compensation policies and rationale applicable to the Company's
executive officers with respect to the compensation paid to such executive
officers for the year ended December 31, 1998. The information contained in the
report shall not be deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission, nor shall such information be incorporated
by reference into any future filing under the Securities Act of 1933, as amended
(the "Securities Act") or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except to the extent that the Company specifically incorporates
it by reference into such filing.
TO: Board of Directors
The Compensation Committee (the "Committee") of the Board reviews and
approves Eclipse's executive compensation policies. The Committee administers
Eclipse's various incentive plans, including the Stock Option Plan and the
Employee Stock Purchase Plan, sets compensation policies applicable to Eclipse's
executive officers and evaluates the performance of Eclipse's executive
officers. The compensation levels of Eclipse's executive officers for the fiscal
year ended December 31, 1998, including base salary levels, potential bonuses
and stock option grants were determined by the Committee at the beginning of the
fiscal year. The following is a report of the Committee describing compensation
policies and rationale applicable with respect to the compensation paid to
Eclipse's executive officers for the fiscal year ended December 31, 1998.
The members of the Compensation Committee of the Board of Directors are
Messrs. Mortensen and Watson, neither of whom is an employee of Eclipse.
11
<PAGE> 14
Compensation Philosophy
Eclipse's executive compensation programs are designed to attract, motivate
and retain executives who will contribute significantly to the long-term success
of Eclipse and the enhancement of stockholder value. In addition to base salary,
certain elements of total compensation are payable in the form of variable
incentive plans tied to the performance of Eclipse and the individual, and in
the equity-based plans designed to closely align executive and stockholder
interests.
Base Salary
Base salary for executives, including that of the chief executive officer,
is set according to the responsibilities of the position, the specific skills
and experience of the individual and the competitive market for executive
talent. In order to evaluate the competitive position of Eclipse's salary
structure, the Committee makes reference to compensation surveys of comparable
companies in the high-technology sector, Eclipse's industry and its geographic
location. Executive salary levels are set to approximate average rates, with the
intent that superior performance under incentive bonus plans will enable the
executive to elevate his total cash compensation levels that are above average
of comparable companies. The Committee reviews salaries annually and adjusts
them as appropriate to reflect changes in market conditions and individual
performance and responsibilities.
Stock Option Plan
The Committee believes that Eclipse's Stock Option Plan (the "Option Plan")
is an essential tool to link the long-term interests of stockholders and
employees, especially executive management, and serves to motivate executives to
make decisions that will, in the long run, give the best returns to
stockholders. Stock options are generally granted when an executive joins
Eclipse, with subsequent grants also taking into account the individual's
performance and the vesting status of previously granted options. These options
typically vest over a three year period and are granted at an exercise price
equal to the fair market value of Eclipse's Common Stock at the date of grant.
The size of initial option grants is based upon the position, responsibilities
and expected contribution of the individual. This approach is designed to
maximize stockholder value over a long term, as no benefit is realized from the
option grant unless the price of Eclipse's Common Stock has increased over a
number of years.
In addition to the Option Plan, executive officers are eligible to
participate in Eclipse's Employee Stock Purchase Plan. This plan allows
employees to purchase Eclipse's Common Stock at a price equal to 85% of the
lower of the fair market value at the beginning of the offering period or the
fair market value at the end of the purchase period.
Other elements of executive compensation include life and long-term
disability insurance, medical benefits and a 401(k) deferred compensation plan
with no Eclipse matching contribution for the fiscal year ended December 31,
1998. All such benefits are available to all regular, full-time employees of
Eclipse.
The foregoing report has been furnished by the Compensation Committee of
the Board of Directors of Eclipse.
Compensation Committee
Robert L. Mortensen
Iain M. Watson
12
<PAGE> 15
STOCK PERFORMANCE GRAPH
The Stock Performance Graph (the "Graph") below shall not be deemed
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference in any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent that the Company specifically incorporates this information
by reference.
The following Graph sets forth the Company's total cumulative shareholder
return as compared to the Nasdaq Stock Market -- Total Return Index (the "Nasdaq
Total Return Index") and the Nasdaq Stock Market -- Medical Devices, Instruments
and Supplies, Manufacturers and Distributors Total Return Index (the "Nasdaq
Medical Devices Index") from May 31, 1996 through December 31, 1998.
The Company had previously utilized the Nasdaq Total Return Index and, a
constructed Peer Group (the "Peer Group"), comprised of: Circadian Inc., PLC
Systems Inc., Health Watch, Inc., CardioGenesis Corporation and Trimedyne Inc.
Of the Peer Group, one company has ceased to be a reporting company due to
merger with Eclipse Surgical Technologies, Inc. (CardioGenesis Corporation), one
company is reported on Nasdaq by means of the Nasdaq OTC Bulletin Board system
(Circadian Inc.), one company is reported by Nasdaq on the Small Cap Index
(Health Watch Inc.) and two companies (Trimedyne Inc. and PCL Systems Inc.) are
listed on the Nasdaq Stock Market. The Company believes that the Peer Group, as
it was comprised, no longer represents an accurate Peer Group for comparison
purposes. The Company believes that the Nasdaq Medical Devices Index is a more
appropriate comparison.
Total shareholder return assumes $100 was invested at the beginning of the
period in the Common Stock of the Company, the stocks represented in the Nasdaq
Total Return Index and the stocks represented in the Nasdaq Medical Devices
Index, respectively. Total return also assumes reinvestment of dividends; the
Company has paid no dividends on its Common Stock.
Historical stock price performance should not be relied upon as indicative
of future stock price performance.
ECLIPSE SURGICAL TECHNOLOGIES, INC.
NASDAQ STOCK MARKET -- TOTAL RETURN INDEX
NASDAQ STOCK MARKET -- MEDICAL DEVICES INDEX
<TABLE>
<CAPTION>
ECLIPSE SURGICAL NASDAQ TOTAL RETURN NASDAQ MEDICAL DEVICES
TECHNOLOGIES, INC. INDEX INDEX
------------------ ------------------- ----------------------
<S> <C> <C> <C>
5/31/96 100 100 100
6/30/96 83 95 91
9/30/96 73 99 90
12/31/96 53 104 87
3/31/97 36 98 81
6/30/97 48 116 88
9/30/97 54 136 104
12/31/97 36 127 99
3/31/98 75 149 109
6/30/98 61 153 104
9/30/98 55 139 92
12/31/98 44 179 112
</TABLE>
13
<PAGE> 16
SECURITY OWNERSHIP
The following table sets forth as of April 30, 1999 (except as noted in the
footnotes) certain information with respect to the beneficial ownership of the
Company's Common Stock by (i) each director of the Company, (ii) each of the
Named Executive Officers and (iii) all directors and executive officers as a
group. There are no persons known by the Company to own beneficially more than
5% of the outstanding shares of Common Stock. Except as indicated in the
footnotes to this table, the persons and entities named in the table have sole
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where applicable.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
-----------------------
PERCENTAGE
NAME OF BENEFICIAL OWNER(2) NUMBER OWNERSHIP
--------------------------- --------- ----------
<S> <C> <C>
5% SHAREHOLDERS:
Douglas Murphy-Chutorian, M.D.(3)........................... 4,942,863 17.5%
c/o Eclipse Surgical Technologies, Inc.
1049 Kiel Court, Sunnyvale, CA 94089
DIRECTORS:
Jack M. Gill, Ph.D.(4)...................................... 1,181,610 4.2%
Allen W. Hill(5)............................................ 350,185 1.2%
Alan L. Kaganov, Sc.D.(6)................................... 61,809 *
Robert L. Mortensen(7)...................................... 87,696 *
Robert C. Strauss(8)........................................ 3,690 *
Iain M. Watson(9)........................................... 244,965 *
NAMED EXECUTIVE OFFICERS:
Richard L. Mueller(10)...................................... 784,168 2.8%
Linda Fenney, M.D.(11)...................................... 85,711 *
William E. Picht(12)........................................ 78,390 *
Vurnetha R. Bitoy(13)....................................... 40,018 *
All directors and officers as a group (13
persons)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(14)......... 8,120,553 27.1%
</TABLE>
- ---------------
* Less than 1%.
(1) Percentage ownership is based on 28,236,266 shares of Common Stock
outstanding as of April 30, 1999.
(2) Except as otherwise indicated in the footnotes to this table and pursuant
to applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock.
(3) Includes an aggregate of 3,581,724 shares of Common Stock held by Leslie
Murphy-Chutorian, the wife of Dr. Murphy-Chutorian, and by Mrs.
Murphy-Chutorian as Trustee of the Murphy-Chutorian Family Trust UDT dated
1-13-97. Also includes 29,166 shares subject to stock options held by Dr.
Murphy-Chutorian that are exercisable within 60 days of April 30, 1999.
(4) Includes 3,792 shares subject to stock options held by Dr. Gill that are
exercisable within 60 days of April 30, 1999.
(5) Includes 289,413 shares subject to stock options held by Mr. Hill that are
exercisable within 60 days of April 30, 1999.
(6) Includes 61,809 shares subject to stock options held by Mr. Kaganov that
are exercisable within 60 days of April 30, 1999.
(7) Includes 87,696 shares subject to stock options held by Mr. Mortensen that
are exercisable within 60 days of April 30, 1999.
(8) Includes 3,690 shares subject to stock options held by Mr. Strauss that are
exercisable within 60 days of April 30, 1999.
14
<PAGE> 17
(9) Includes 87,696 shares subject to stock options held by Mr. Watson and a
warrant to purchase 33,333 shares that are exercisable within 60 days of
April 30, 1999.
(10) Includes 779,168 shares subject to stock options held by Mr. Mueller that
are exercisable within 60 days of April 30, 1999.
(11) Includes 84,774 shares subject to stock options held by Dr. Fenney that are
exercisable within 60 days of April 30, 1999.
(12) Includes 77,498 shares subject to stock options held by Mr. Picht that are
exercisable within 60 days of April 30, 1999.
(13) Includes 38,891 shares subject to stock options held by Ms. Bitoy that are
exercisable within 60 days of April 30, 1999.
(14) Includes options to purchase an aggregate of 1,735,664 shares of Common
Stock held by all officers and directors as a group exercisable within 60
days of April 30, 1999.
CERTAIN TRANSACTIONS WITH MANAGEMENT
In November 1998, Eclipse contributed certain licenses, patents, and other
intellectual property and the MicroHeart name to MicroHeart Holdings, Inc.
("MicroHeart"), a Delaware company previously formed by U.S. Ventures and
Venrock Associates, in exchange for common stock (less than a 1% voting interest
in MicroHeart) and two warrants to acquire MicroHeart common shares. Mr. Alan
Kaganov, a director of Eclipse is also a director of MicroHeart. U.S. Ventures
and Venrock Associates together purchased $5.5 million of shares of Series A
Preferred Stock of MicroHeart and Mr. Kaganov is a Venture Partner of U.S.
Venture Partners.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
By Order of
THE BOARD OF DIRECTORS
Susan J. Skaer
Secretary
Dated: May 28, 1999
15
<PAGE> 18
APPENDIX A
DESCRIPTION OF THE STOCK OPTION PLAN
GENERALLY: The Company's Stock Option Plan, as amended and restated (the
"Option Plan") was approved by the Board of Directors and the shareholders in
April 1996. The total number of shares currently reserved for issuance under the
Plan is 4,000,000 shares. In May 1999, the Board of Directors approved a further
increase of 1,100,000 shares issuable under the Option Plan, which, if approved,
by the shareholders would increase the total shares reserved for issuance under
the Option Plan since its inception to 5,100,000 shares. The Option Plan
terminates in March 2006.
Options granted under the Option Plan may be either "incentive stock
options" (ISOs), as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") or nonstatutory options (NSOs).
The Option Plan is not qualified under Section 401(a) of the Code and is
not subject to the Employee Retirement Income Security Act of 1974 ("ERISA").
PURPOSE OF THE OPTION PLAN: The purposes of the Option Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to employees and consultants of
the Company and to promote the success of the Company's business.
ADMINISTRATION OF THE OPTION PLAN: The Option Plan may be administered by
the Board of Directors of the Company or by one or more Committees appointed by
the Board (the "Administrator"). The Administrator has full power to select the
individuals to whom Options will be granted from among the officers, directors,
consultants or other employees eligible for grants, to make any combination of
grants to any participant and to determine the specific terms of each grant,
subject to the provisions of the Option Plan. The interpretation of any
provision of the Option Plan by the Administrator shall be final and conclusive.
Members of the Board or its Committee receive no additional compensation for
their services as Administrator of the Option Plan.
ELIGIBILITY: The Option Plan provides that Options may be granted to
employees and consultants (including employees, consultants and directors of the
Company and its majority-owned subsidiaries). Outside directors are excluded
from participation in the Option Plan.
STOCK OPTIONS: The Option Plan permits the granting of stock options that
are intended to qualify as either ISOs or NSOs. In the case of ISOs, the option
exercise price for each share shall not be less than 100% of fair market value
of a share of common stock on the date of grant of such option. In the case of
NSOs, the option exercise price for each share covered shall be determined by
the Administrator. The fair market value of the Common Stock shall be the
closing price as of the date prior to the date of grant as reported by the
NASDAQ National Market System or other stock exchange. The term of each option
will be fixed by the Administrator but may not exceed ten years from the date of
grant for ISOs. The Administrator will determine the time or times that each
option may be exercised. No employee may be granted an Option for more than
300,000 Shares in any fiscal year; provided however that in connection with
initial employment an employee may be granted up to 600,000 additional shares.
The exercise price of Options granted under the Option Plan must be paid in
full by cash, check, Shares of the Company (which, in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company and which have a fair market value on the exercise
date equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised) or promissory note. The Administrator may authorize as
payment the retention of Shares having a fair market value on the date of
exercise equal to the exercise price for the total number of Shares as to which
the Option is exercised or it may authorize delivery of a properly executed
exercise notice together with irrevocable instructions to a broker to promptly
deliver to the Company the amount of sale or loan proceeds required to pay the
exercise price. The Administrator may also authorize payment by any combination
of the foregoing methods, as well as tax withholding with stock. For any ISO,
the form of payment permitted will be stated on the notice of grant of the
Option.
A-1
<PAGE> 19
In the event of termination of employment or of an Optionee's consultancy
for any reason, including retirement, an Option may thereafter be exercised (to
the extent it was exercisable), for a period of ninety days, subject to the
stated term of the Option. If an Optionee's employment or consultancy is
terminated by reason of the Optionee's death or disability, the Option will in
general be exercisable for twelve (12) months following death, subject to the
stated term of the Option.
To qualify as ISOs, Options must meet additional federal income tax
requirements. Under current law these requirements include limits on the value
of ISOs that may become first exercisable annually with respect to any Optionee,
and a shorter exercise period and a higher minimum exercise price in the case of
certain large shareholders.
STOCK PURCHASE RIGHTS: The Option Plan permits the Company to grant stock
purchase rights to purchase Common Stock of the Company ("Stock Purchase
Rights") either alone, in addition to, or in tandem with other awards under the
Option Plan and/or cash awards made outside the Option Plan. Upon the granting
of a Stock Purchase Right under the Option Plan, the offeree shall be advised in
writing of the terms, conditions, and restrictions related to the offer,
including the number of shares of Common Stock that the offeree shall be
entitled to purchase, the price to be paid (which in no case shall be less than
85% of fair market value) and the time within which the offeree must accept such
offer (which shall in no event exceed six (6) months from the date upon which
the Administrators made the determination to grant the Stock Purchase Right),
the offer shall be acceptable by execution of a restricted stock purchase
agreement between the Company and the offeree.
Unless the Administrator of the Option Plan determines otherwise, the
restricted stock purchase agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment or consulting relationship with the Company for any reason (including
death or disability). The purchase price for shares repurchased pursuant to the
restricted restricted stock purchase agreement shall be the original price paid
by the purchaser and may be paid by cancellation of any indebtedness of the
purchase to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine. The restricted stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Option Plan as may be determined by the Administrator, and such provisions need
not be the same with respect to each purchaser. Upon exercise of a Stock
Purchase Right, the purchaser shall have rights equivalent to those of a
shareholder of the Company. As of the date of this proxy statement, no Stock
Purchase Rights have been granted under the Option Plan.
ADJUSTMENTS FOR STOCK DIVIDENDS, MERGERS ETC.: The Administrator is
authorized to make appropriate adjustments in connection with outstanding
Options or Stock Purchase Rights to reflect stock dividends, stock splits and
similar events. In the event of a merger, liquidation or similar event, the
Administrator in its discretion may provide for substitution or adjustments in,
or may accelerate or adjust such Options or Stock Purchase Rights.
AMENDMENT AND TERMINATION: The Board may amend, alter, suspend or
discontinue the Option Plan at any time, but such amendment, alteration,
suspension or discontinuation shall not impair any Options or Stock Purchase
Rights then outstanding under the Option Plan without the participant's consent.
A-2
<PAGE> 20
APPENDIX B
DESCRIPTION OF THE 1996 EMPLOYEE STOCK PURCHASE PLAN
GENERALLY: In April 1996 the Board of Directors of the Company adopted, and
the shareholders subsequently approved, the 1996 Employee Stock Purchase Plan
(the "Purchase Plan") and the reservation of 250,000 shares for issuance under
the Purchase Plan. The Board has approved and the shareholders are being
requested to approve an amendment to the Purchase Plan to increase the number of
shares reserved for issuance under the Purchase Plan by 150,000 for a total of
400,000 shares.
The Purchase Plan is intended to qualify under Sections 421 and 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). The Purchase Plan is not
qualified under Section 401(a) of the Code and is not subject to the Employee
Retirement Income Security Act of 1974 ("ERISA").
PURPOSE: The purpose of the Purchase Plan is to provide employees of the
Company and it's majority-owned subsidiaries with an opportunity to purchase
Common Stock of the Company through payroll deductions. At this time, all of the
Company's subsidiaries are Designated Subsidiaries for purposes of participation
in the Purchase Plan.
ADMINISTRATION: The Purchase Plan is administered by the Board or a
committee of the Board. The interpretation of any provision of the Purchase Plan
by the Administrator shall be final and conclusive. Members of the Board or its
Committee receive no additional compensation for their services in administering
the Stock Purchase Plan.
ELIGIBILITY: Employees who are employed by the Company or a Designated
Subsidiary for at least 20 hours per week and five months per calendar year are
eligible to participant in the Purchase Plan, provided that such employees are
employed by the Company on both the enrollment date and the exercise date of an
Offering Period. Eligibility is subject to certain limitations imposed by
Section 423(b) of the Code and limitations on stock ownership as defined in the
Purchase Plan.
OFFERING DATES: The Purchase Plan generally will be implemented by
consecutive six month Offering Periods that begin every six months on May 16 and
November 15 of each year. The Board has the power to change the duration of
Offering Periods with respect to future offerings without shareholder approval
if such change is announced at least five days prior to the scheduled beginning
of the first Offering Period to be affected.
PARTICIPATION IN THE PLAN: Eligible employees become participants in the
Purchase Plan by filing with the employer's payroll office a subscription
agreement authorizing payroll deductions. An eligible employee who wishes to
become a participant in an offering must file a subscription agreement with the
payroll office prior to the commencement of such Offering Period. An employee
who becomes eligible to participate in the Purchase Plan after the commencement
of an offering may participate in the first Offering Period that starts after
the filing by such employee of a subscription agreement.
PURCHASE PRICE: Subject to certain amendments in response to accounting
changes as described below, the purchase price per share at which shares are
sold to participating employees under the Purchase Plan is the lower of (i) 85%
of the fair market value per share of the Common Stock on the first day of the
Offering Period (the "Offering Date") or (ii) 85% of the fair market value per
share of the Common Stock on the last day of an Offering Period (the "Exercise
Date"). The fair market value of the Common Stock shall be the closing price as
of such date as reported by the NASDAQ National Market System or other stock
exchange.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS: The purchase price of the
shares to be acquired under the Purchase Plan is accumulated by payroll
deductions over each six-month Offering Period. The deductions may not exceed
15% of a participant's compensation. A participant may discontinue or decrease
his participation in the Purchase Plan, but may not increase the rate of payroll
deductions at any time during the Offering Period. Payroll deductions for a
participant shall commence on the first pay day following the Offering Date and
shall continue at the same rate until the end of the Offering Period unless
sooner terminated as provided in the Purchase Plan.
B-1
<PAGE> 21
All payroll deductions made for a participant are credited to his account
under the Purchase Plan and are deposited with the general funds of the Company.
All payroll deductions received or held by the Company under the Purchase Plan
may be used by the Company for any corporate purpose, and the Company shall not
be obligated to segregate such payroll deductions. No charges for administrative
or other costs may be made by the Company against the payroll deductions of a
participant in the Purchase Plan.
PURCHASE OF STOCK; EXERCISE OF OPTION: By executing a subscription
agreement to participate in the Purchase Plan, the employee is entitled to have
shares placed under option to him. The maximum number of shares placed under
option to a participant in an Offering Period is the number determined by
dividing the total amount of his compensation which is to be withheld for the
Offering Period by 85% of the fair market value of the Common Stock on the
Offering Date. Unless the employee's participation is discontinued, his option
for the purchase of shares will be exercised automatically on the Exercise Date
at the applicable price.
Notwithstanding the preceding paragraph, no employee shall be permitted to
subscribe for shares under the Purchase plan if, immediately after the grant of
the option, the employee would own 5% or more of the voting stock or value of
all classes of stock of the Company or its majority-owned subsidiaries, nor
shall any employee be granted an option which would permit him to purchase more
than $25,000 worth of stock (determined at the time the option is granted) under
all employee stock purchase plans of the Company in any calendar year.
WITHDRAWAL FROM THE PURCHASE PLAN: A participant's interest in a given
Offering Period may be terminated in whole, but not in part, by signing and
delivering to the Company a notice of withdrawal from the Purchase Plan. Such
withdrawal may be elected by a participant at any time prior to an Exercise
Date. A participant's withdrawal from an Offering Period does not have any
effect upon his eligibility to participate in subsequent Offering Periods under
the Purchase Plan.
TERMINATION OF EMPLOYMENT: Termination of a participant's employment for
any reason, including retirement or death, or the failure of the participant to
satisfy the requirements for eligibility, cancels his participation in the
Purchase Plan immediately. In such event, payroll deductions credited to the
participant's account will be returned to him, or in the case of death, to the
person or person entitled thereto as provided in the Purchase Plan.
ADJUSTMENTS FOR STOCK DIVIDENDS, MERGERS ETC.: The Board is authorized to
make appropriate adjustments in connection with outstanding options to reflect
stock dividends, stock splits and similar events. In the event of a merger,
liquidation or similar event, the Board in its discretion may provide for
substitution or adjustments of the options, or may shorten the current Offering
Period(s) to provide for an earlier Exercise Date.
AMENDMENT AND TERMINATION OF THE PLAN: The Board may at any time amend or
terminate the Purchase Plan, except that (subject to special amendments in
response to accounting changes) such termination cannot adversely affect the
rights of any participant.
B-2
<PAGE> 22
APPENDIX C
DESCRIPTION OF THE DIRECTOR STOCK OPTION PLAN
GENERALLY: In April 1996, the Board of Directors and the shareholders of
the Company approved the amended and restated Director Stock Option Plan (the
"Director Plan"). The total number of shares currently reserved for issuance
under the Director Plan is 200,000 shares. In May 1999, the Board of Directors
approved a further increase of 125,000 shares issuable under the Director Plan,
which, if approved, by the shareholders would increase the total shares reserved
for issuance under the Director Plan since its inception to 325,000 shares. The
Director Plan terminates in March 2006.
The Director Plan is not qualified under Section 401(a) of the Code and is
not subject to the Employee Retirement Income Security Act of 1974 ("ERISA").
PURPOSE: The purposes of the Director Plan are to attract and retain the
best available individuals to serve as Directors of the Company and to encourage
their continued service on the Board.
ADMINISTRATION: Generally, the Director Plan will be administered by the
Board. With respect to First Option grants and Subsequent Option grants, the
Board has no discretion to determine which Directors will be granted Options, to
determine the number of shares subject to Options, to determine the exercise
price of the Options or to determine any terms of such Options.
The interpretation of any provision of the Director Plan by the
Administrator shall be final and binding. Members of the Board receive no
additional compensation for their services in administering the Director Plan.
ELIGIBILITY: Options may be granted only to Directors who are not employees
of the Company.
DIRECTORS' OPTIONS: The Director Plan provides for First Option grants of
22,500 shares to each Director upon his election to the Board of Directors and
Subsequent Option grants of 7,500 shares upon his re-election each year
(provided that such re-election is at least six (6) months after the date of
election to the Board of Directors). The option term shall be ten years, and
shall be exercisable while such person remains a Director. The exercise price
shall be 100% of fair market value on the date of grant. The fair market value
of the Common Stock shall be the closing price as of the date prior to the date
of grant as reported by the Nasdaq National Market or other stock exchange.
Stock subject to an First Option shall vest as to one-third of the Shares on the
first, second and third anniversary dates of the date of grant of such Option.
Stock subject to an Subsequent Option shall vest as to all of Shares on the
first anniversary date of the date of grant of such Option. If the Optionee
ceases to serve as a Director for any reason, vesting shall cease as of the date
of such termination.
PURCHASE PRICE; PAYMENT: The exercise price of Options granted under the
Director Plan must be paid in full by cash, check, Shares of the Company (which,
in the case of Shares acquired upon exercise of an Option either have been owned
by the Optionee for more than six months on the date of surrender or were not
acquired, directly or indirectly, from the Company and which have a fair market
value on the exercise date equal to the aggregate exercise price of the Shares
as to which said Option shall be exercised) or promissory note. The
Administrator may authorize as payment the retention of Shares having a fair
market value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised or it may authorize
delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds required to pay the exercise price. The Administrator may also
authorize payment by any combination of the foregoing methods.
TERMINATION: In the event of termination of status as a Director, the
Option may thereafter be exercised (to the extent it was exercisable), for a
period of sixty (60) days, subject to the stated term of the Option. If an
Optionee's status as a Director is terminated by reason of the death or
disability, the Option will in general be exercisable for twelve (12) months
following death, subject to the stated term of the Option. Except as otherwise
designated by the Board, Options are not transferable by the Optionee other than
by will or the laws of descent or distribution, and each option is exercisable
during the lifetime of the Director only by such Director.
C-1
<PAGE> 23
ADJUSTMENTS FOR STOCK DIVIDENDS, MERGERS, LIQUIDATIONS ETC.: The Board is
authorized to make appropriate adjustments in connection with outstanding
Options to reflect stock dividends, stock splits and similar events. In the
event of a liquidation or dissolution, to the extent an Option has not been
previously exercised, it shall terminate. In the event of the merger or sale of
substantially all of the assets of the Company, the Options shall be substituted
or assumed by the successor corporation. If substitution or assumption is not
possible, the Options shall be fully vested and exercisable, including as to
shares as to which would not otherwise be exercisable, for a period of 30 days.
To the extent such Options are not exercised within such period, such Options
shall terminate.
AMENDMENT AND TERMINATION: The Board may amend, alter, suspend or
discontinue the Director Plan at any time, but such amendment, alteration,
suspension or discontinuation shall not impair any rights then outstanding under
the Director Plan without the participant's consent.
C-2
<PAGE> 24
1527-PS-99
<PAGE> 25
DETACH HERE
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ECLIPSE SURGICAL TECHNOLOGIES, INC.
1999 ANNUAL MEETING OF SHAREHOLDERS
JUNE 30, 1999
The undersigned shareholder of ECLIPSE SURGICAL TECHNOLOGIES, INC. hereby
acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy
Statement, each dated May 28, 1999, and hereby appoints Allen W. Hill and
Richard P. Powers or either of them, proxies and attorneys-in-fact, with full
power of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 1999 Annual Meeting of Shareholders of ECLIPSE
SURGICAL TECHNOLOGIES, INC., to be held on June 30, 1999 at 9:00 a.m., local
time, at the Company's principal executive offices, 1049 Kiel Court, Sunnyvale,
California, and at any adjournments thereof, and to vote all shares of Common
Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse side.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE
VOTED FOR SUCH PROPOSAL.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNDER STATES.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE> 26
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
The Board of Directors recommends a vote "FOR all nominees" in Item 1, and
"FOR" Items 2, 3, 4 and 5.
1. Election of Directors:
Nominees: Douglas Murphy Chutorian, M.D., Allen W. Hill,
Jack M. Gill, Ph.D., Alan L. Kaganov, Sc.D., Robert C. Mortensen
Robert C. Strauss, Iain M. Watson
FOR / / / / WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
/ /
--------------------------------------
For all nominees except as noted above
<TABLE>
<CAPTION> FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. To approve an amendment to the Stock Option / / / / / /
plan to increase the number of shares of
Common Stock reserved for issuance by
1,100,000 shares.
3. To approve an amendment to the 1998 / / / / / /
Employee Stock Purchase Plan to increase the
number of shares of Common Stock reserved
for issuance by 150,000 shares.
4. To approve an amendment to the Director / / / / / /
Stock Option Plan to increase the number of
shares of Common Stock reserved for
issuance by 125,000 shares.
5. Proposal to ratify appointment of / / / / / /
PricewaterhouseCoopers LLP as the
independent accountants of the Company for
the fiscal year ending December 31, 1999.
6. To transact such other business as may properly come before the meeting.
MARK HERE / / MARK HERE / /
FOR ADDRESS IF YOU PLAN TO
CHANGE AND ATTEND THE
NOTE BELOW MEETING
Please sign exactly as name appears hereon. Joint owners should each sign.
Executors, administrators, trustees, guardians or other fiduciaries should
give full title as such. If signing for a corporation, please sign in full
corporate name by a duly authorized officer.
</TABLE>
Signature: Date: Signature: Date:
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