<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 [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-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, MAY 31, 2000
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Eclipse
Surgical Technologies, Inc., a California corporation, will be held on
Wednesday, May 31, 2000, at 2:00 p.m. local time, at the Embassy Suites Hotel,
2885 Lakeside Drive, Santa Clara, CA 95054 for the following purposes:
1. To elect five (5) directors to serve until the next Annual Meeting of
Shareholders or until their successors are elected and qualified.
2. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of Eclipse for the fiscal year ending December 31, 2000.
3. 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 April 3, 2000, 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
April 26, 2000
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 2000
ANNUAL MEETING OF SHAREHOLDERS
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
ECLIPSE SURGICAL TECHNOLOGIES, INC., a California corporation, for use at the
Annual Meeting of Shareholders to be held Wednesday, May 31, 2000, at 2:00 p.m.
local time, or at any adjournment thereof, for the purposes set forth herein and
in the accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting
of Shareholders will be held at the Embassy Suites Hotel, 2885 Lakeside Drive,
Santa Clara, CA 95054. The telephone number at that address is (408) 496-6400.
Our Annual Report to Shareholders for the year ended December 31, 1999,
including financial statements, and these proxy solicitation materials were
first mailed on or about April 26, 2000 to all shareholders entitled to vote at
the meeting.
RECORD DATE AND VOTING SECURITIES
Only shareholders of record at the close of business on April 3, 2000 are
entitled to notice of and to vote at the meeting. We have one series of Common
Shares outstanding, designated common stock, no par value. At April 3, 2000,
30,024,191 shares of our common stock were issued and outstanding and held of
record by 217 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 of April 3, 2000. 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 five (5) 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 of
Shareholders. 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
Eclipse 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 us and all related costs will be
borne by us. We 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
our directors, officers and regular employees, without additional compensation,
personally, by telephone or by telegram. Except as described above, we do not
presently intend to solicit proxies other than by mail.
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<PAGE> 4
DEADLINE FOR SHAREHOLDER PROPOSALS
We currently intend to hold our 2001 Annual Meeting of Shareholders in
late-May 2001 and to mail proxy statements relating to such meeting in
late-April 2001. Shareholder proposals that are intended to be presented at our
2001 Annual Meeting of Shareholders must be received by us no later than January
29, 2001, 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 our 2001 Annual
Meeting of Shareholders, but submitted outside the processes of Rule 14a-8 under
the Securities Exchange Act of 1934, must be received by us prior to April 13,
2001 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
We currently have five (5) directors. A board of five (5) directors is to
be elected at the Annual Meeting of Shareholders. Unless otherwise instructed,
the proxy holders will vote the proxies received by them for our five (5)
nominees named below, all of whom are presently directors of Eclipse. If any of
our nominees is unable or declines to serve as a director at the time of the
Annual Meeting of Shareholders, the proxies will be voted for any nominee who is
designated by the present board of directors to fill the vacancy. We are 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 five (5) nominees receiving the
highest number of affirmative votes will be elected to the board of directors.
Abstentions and broker nonvotes are not counted in the election of directors.
NOMINEES
The names of the nominees and certain information about them as of March
31, 2000 is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Douglas Murphy-Chutorian, M.D. ....................... 45 Chairman of the Board
Jack M. Gill, Ph.D.(1)................................ 64 Director
Alan L. Kaganov, Sc.D. ............................... 61 Chief Executive Officer and Director
Robert L. Mortensen(2)(3)............................. 66 Director
Robert C. Strauss(1)(2)............................... 59 Director
</TABLE>
- ---------------
(1) Joined the board of directors in March 1999 upon the closing of the merger
of a wholly-owned subsidiary of Eclipse with and into CardioGenesis
Corporation in which CardioGenesis survived the transaction as a
wholly-owned subsidiary of Eclipse.
(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 our board of directors and are appointed annually. There are no
family relationships between any of our directors or officers.
Douglas Murphy-Chutorian, M.D. has been our Chairman of the Board since
June 1989. He also served as our Chief Executive Officer from June 1989 to March
1999. Dr. Murphy-Chutorian was also Chairman of the Board of Atlantis Catheter
Company, Inc. 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.
Jack M. Gill, Ph.D. has been one of our directors 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 served as our Chief Executive Officer since
December 1999 and has been one of our directors 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. Dr. Kaganov also serves as a director of EndoCare, Inc.
Robert L. Mortensen has been one of our directors 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 one of our directors since March 1999. Mr.
Strauss formerly served on the board of directors of CardioGenesis Corporation
from December 1997 to March 1999. Mr. Strauss has served as President and Chief
Executive Officer of Noven Pharmaceuticals, Inc. since December 1997. From March
1997 to July 1997, Mr. Strauss served as President and Chief Operating Officer
of IVAX Corporation, a pharmaceutical company. In 1983, Mr. Strauss joined
Cordis Corporation, a medical device company, as Chief Financial Officer. From
February 1987 to February 1997, he served as President and Chief Executive
Officer of Cordis Corporation and in 1995, Mr. Strauss was named Chairman of the
Board. Mr. Strauss serves on the board of trustees for the University of Miami
and on the board of directors of each of Columbia Laboratories, Inc. and Noven
Pharmaceuticals, Inc. Mr. Strauss received his B. S. degree in Engineering
Physics from the University of Illinois and his M.S. in Physics from the
University of Idaho.
BOARD MEETINGS AND COMMITTEES
Our board of directors held a total of eleven meetings during 1999. No
directors attended fewer than 75% of the total number of meetings of the board
of directors or committees of the board of directors held in 1999 during the
period in which such directors were members of the board of directors. The board
of directors has an Audit Committee and a Compensation Committee. The board of
directors does not have a nominating committee or any committee performing
similar functions.
In 1999 the Audit Committee consisted of Robert L. Mortensen and Iain M.
Watson and met one (1) time. This committee is primarily responsible for
approving the services performed by our independent auditors and for reviewing
and evaluating our accounting principles and our system of internal accounting
3
<PAGE> 6
controls. Iain Watson resigned from our board of directors and the Audit
Committee in March 2000. Robert Mortensen and Robert Strauss will serve as the
Audit Committee for 2000.
In 1999 the Compensation Committee consisted of Robert L. Mortensen and
Iain M. Watson and met one (1) time. This committee reviews and approves our
executive compensation policy and plan. Iain Watson resigned from the
Compensation Committee in March 2000. Mr. Mortensen will remain a member of the
Compensation Committee for the year ended December 31, 2000 and the Board will
appoint a new member to the compensation committee at its first meeting after
the Annual Meeting of Shareholders.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Our board of directors has selected PricewaterhouseCoopers LLP, independent
auditors, to audit our consolidated financial statements for the fiscal year
ending December 31, 2000, and recommends that the shareholders vote for
ratification of that appointment. Notwithstanding this selection, the board of
directors, in its discretion, may direct the appointment of new independent
auditors at any time during the year, if the board of directors feels that such
a change would be in the best interest of Eclipse and our shareholders. If there
is a negative vote on ratification, our board of directors will reconsider its
selection.
PricewaterhouseCoopers LLP has audited our 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 of director's selection. In addition, the affirmative votes must
represent at least a majority of the required quorum. If the shareholders reject
the nomination, our board of directors will reconsider its selection.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS.
4
<PAGE> 7
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information regarding
the compensation of our Chief Executive Officer and each of our four other most
highly compensated officers (each, a "Named Executive Officer") for services
rendered in all capacities to us for the fiscal years ended December 31, 1999,
1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
---------------
FISCAL ANNUAL COMPENSATION SECURITIES
FISCAL -------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(#) COMPENSATION($)
--------------------------- ------ --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Douglas Murphy-Chutorian, M.D........... 1999 $304,476 -- -- $10,014(1)
Chairman of the Board 1998 295,190 $100,000 50,000 7,236(1)
1997 267,099 22,119 -- 5,905(1)
Alan L. Kaganov, Sc.D.(2)............... 1999 -- -- 157,500 15,000(3)
Chief Executive Officer 1998 -- -- 7,500 19,000(3)
1997 -- -- 100,000 6,000(3)
Richard P. Powers(4).................... 1999 219,248 36,765 49,280 5,670(1)
Executive Vice President of
Administration 1998 -- -- -- --
and Chief Financial Officer 1997 -- -- -- --
Allen W. Hill(2)(4)..................... 1999 305,451 47,700 110,443 6,852(1)
Former Chief Executive Officer 1998 -- -- -- --
and President 1997 -- -- -- --
William E. Picht........................ 1999 204,909 -- 30,000 6,719(1)
Vice President, Operations 1998 181,500 16,335 15,000 745(1)
1997 170,373 21,120 -- 248(1)
</TABLE>
- ---------------
(1) Life and health insurance premiums.
(2) Effective as of December 15, 1999, Mr. Hill resigned as Chief Executive
Officer and President of Eclipse and Dr. Kaganov became our Chief Executive
Officer.
(3) Dr. Kaganov receives no salary as the Chief Executive Officer, but was paid
for his services as one of our directors in 1999, 1998 and 1997.
(4) Mr. Powers and Mr. Hill joined Eclipse in March 1999 upon the closing of the
merger of CardioGenesis with a wholly-owned subsidiary of Eclipse.
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<PAGE> 8
OPTION GRANTS IN FISCAL YEAR 1999
The following tables set forth information regarding stock options granted
to and exercised by the Named Executive Officers during our fiscal year ended
December 31, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZED
NUMBER VALUE AT ASSUMED ANNUAL
OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE PER FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN SHARE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------ --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Douglas Murphy-Chutorian,
M.D. .......................... -- -- -- -- -- --
Alan L. Kaganov, Sc.D. .......... 7,500 0.54% $10.813 6/30/09 $ 51,002 $ 129,249
150,000 10.74% $ 6.063 12/15/09 $571,948 $1,449,429
Richard P. Powers................ 49,280 3.53% $ 8.750 5/4/09 $271,179 $ 687,222
Allen W. Hill.................... 110,443 7.91% $ 8.750 5/4/09 $607,749 $1,540,155
William E. Picht................. 30,000 2.15% $ 8.750 5/4/09 $165,085 $ 418,357
25,000 1.79% $ 6.063 12/15/09 $ 95,325 $ 241,572
</TABLE>
- ---------------
(1) Each of these options was granted pursuant to our Stock Option Plan. A total
of 1,396,611 shares of common stock issuable upon exercise of options were
granted to our employees in the year ended December 31, 1999.
(2) In accordance with the rules of the Securities and Exchange 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 SEC and do not represent our
estimate or projection of future increases in the price of our common stock.
OPTIONS OUTSTANDING IN FISCAL YEAR 1999
The following table sets forth certain information for the year ended
December 31, 1999 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>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED FISCAL YEAR-END(#): FISCAL YEAR-END($)(1):
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas Murphy-Chutorian,
M.D. ........................ -- -- 37,499 12,501 $ 18,750 $ 6,251
Alan L. Kaganov, Sc.D. ........ -- -- 74,724 190,276 $ 84,654 $221,209
Richard P. Powers.............. -- -- 120,685 79,314 $ 94,873 $ 35,034
Allen W. Hill.................. -- -- 321,889 134,136 $1,833,617 $ 22,745
William E. Picht............... -- -- 92,081 52,919 $ 16,875 $ 38,425
</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 closing price of Eclipse's common stock on December 31, 1999
($7.375), multiplied by the total number of shares subject to the option.
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<PAGE> 9
DIRECTOR COMPENSATION
Directors who are not compensated as our employees or as consultants to us
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.
We also have a Director Stock Option Plan for non-employee directors. In
the fiscal year ended December 31, 1999, directors Jack Gill, and Robert Strauss
were each granted an option to purchase an aggregate of 22,500 shares of Eclipse
common stock upon joining our board and directors Alan Kaganov, Robert Mortensen
and Iain Watson, were each granted an option to purchase an aggregate of 7,500
shares of Eclipse common stock upon re-election to our board.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors, and persons who own more than ten percent of a
registered class of our equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc. Executive officers, directors
and greater-than-ten-percent shareholders are required by SEC regulation to
furnish us with copies of all Section 16(a) forms they file. Based solely on our
review of the copies of such forms received by us or written representations
from certain reporting persons, we believe that, with respect to 1999, all of
our executive officers, directors and ten percent shareholders complied with all
applicable filing requirements, except for the following: Iain Watson, a
director during 1999, filed a Form 5 reporting the grant of an option to
purchase 7,500 shares and the exercise of a warrant for 1,764 shares three
months late; Robert Mortensen, a director, filed a Form 5 reporting the grant of
an option to purchase 7,500 shares three months late; William Picht, Vice
President of Operations, filed a Form 5 reporting the grant of an option to
purchase 15,000 shares three months late.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of our board of directors for the year ended
December 31, 1999 consisted of Robert Mortensen and Iain Watson. Mr. Watson
resigned from our board of directors and this committee in March 2000. Mr.
Mortensen will remain a member of the Compensation Committee for the year ended
December 31, 2000 and the Board will appoint a new member to the compensation
committee at its first meeting after the Annual Meeting of Shareholders. 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 Eclipse Compensation Committee,
describing the compensation policies and rationale applicable to our executive
officers with respect to the compensation paid to such executive officers for
the year ended December 31, 1999. 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 or the
Securities Exchange Act of 1934, as amended, except to the extent that we
specifically incorporate it by reference into such filing.
TO: Board of Directors
The Compensation Committee of the board of directors 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, 1999, including base salary levels, potential bonuses and stock
option grants were determined by the Committee in March 1999 after the closing
of the merger with CardioGenesis. The following is a report of the Committee
describing compensation policies and
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<PAGE> 10
rationale applicable with respect to the compensation paid to Eclipse's
executive officers for the fiscal year ended December 31, 1999.
Two non-employee members of Eclipse's board of Directors, Robert Mortensen
and Iain Watson, served as the Compensation Committee of the board of directors
during 1999. Mr. Watson resigned from the board of directors and the
compensation committee in May 2000. Mr. Mortensen will remain a member of the
Compensation Committee for the year ended December 31, 2000 and the Board will
appoint a new member to the compensation committee at its first meeting after
the Annual Meeting of Shareholders.
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 publicly available compensation
information and informal compensation surveys obtained by management with
respect to cash compensation and stock option grants to officers 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 to a level that is above the
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 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 Stock 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.
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<PAGE> 11
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,
1999. 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
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<PAGE> 12
STOCK PERFORMANCE GRAPH
The Stock Performance 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 we
specifically incorporate this information by reference.
The following Graph sets forth Eclipse'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, 1999.
Total shareholder return assumes $100 was invested at the beginning of the
period in the common stock of Eclipse, 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.
Eclipse 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 NASDAQ MEDICAL
TECHNOLOGIES RETURN INDEX DEVICES INDEX
---------------- ------------ --------------
<S> <C> <C> <C>
5/31/96 100.00 100.00 100.00
12/31/96 53.03 103.23 86.85
12/31/97 35.61 126.06 99.19
12/31/98 44.32 174.29 111.12
12/31/99 44.70 321.20 134.40
</TABLE>
10
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 2000 (except as noted in the
footnotes) certain information with respect to the beneficial ownership of our
common stock by (i) each person know by us to own beneficially more than 5% of
our outstanding shares of common stock; (ii) each of our directors; (iii) each
of our Named Executive Officers; and (iv) all directors and executive officers
as a group. 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>
Douglas Murphy-Chutorian, M.D.(3)........................... 3,952,639 13.1%
c/o Eclipse Surgical Technologies, Inc.
1049 Kiel Court, Sunnyvale, CA 94089
Jack M. Gill, Ph.D.(4)...................................... 1,185,318 3.9%
Allen W. Hill(5)............................................ 409,165 1.4%
Alan L. Kaganov, Sc.D.(6)................................... 219,792 *
Richard P. Powers(7)........................................ 186,328 *
William E. Picht(8)......................................... 102,694 *
Robert L. Mortensen(9)...................................... 87,696 *
Robert C. Strauss(10)....................................... 7,500 *
All directors and officers as a group (8
persons)(3)(4)(5)(6)(7)(8)(9)(10)(11)..................... 6,151,132 20.0%
</TABLE>
- ---------------
* Less than 1%.
(1) Percentage ownership is based on 30,024,191 shares of common stock
outstanding as of March 31, 2000.
(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 3,908,197 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 44,442 shares subject to stock options held by Dr.
Murphy-Chutorian that are exercisable within 60 days of March 31, 2000.
(4) Includes 7,500 shares subject to stock options held by Dr. Gill that are
exercisable within 60 days of March 31, 2000.
(5) Includes 88,809 shares subject to stock options held by Mr. Hill that are
exercisable within 60 days of March 31, 2000.
(6) Includes 219,792 shares subject to stock options held by Dr. Kaganov that
are exercisable within 60 days of March 31, 2000.
(7) Includes 137,475 shares subject to stock options held by Mr. Powers that
are exercisable within 60 days of March 31, 2000.
(8) Includes 101,802 shares subject to stock options held by Mr. Picht that are
exercisable within 60 days of March 31, 2000.
(9) Includes 87,696 shares subject to stock options held by Mr. Mortensen that
are exercisable within 60 days of March 31, 2000.
(10) Includes 7,500 shares subject to stock options held by Mr. Strauss that are
exercisable within 60 days of March 31, 2000.
(11) Includes options to purchase an aggregate of 695,016 shares of common stock
held by all officers and directors as a group that are exercisable within
60 days of March 31, 2000.
11
<PAGE> 14
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. Dr. Alan
Kaganov, the Chief Executive Officer and 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 Dr. Kaganov
is a Venture Partner of U.S. Venture Partners.
OTHER MATTERS
Eclipse 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: April 26, 2000
12
<PAGE> 15
DETACH HERE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ECLIPSE SURGICAL TECHNOLOGIES, INC.
2000 ANNUAL MEETING OF SHAREHOLDERS
MAY 31, 2000
The undersigned shareholder of ECLIPSE SURGICAL TECHNOLOGIES, INC. hereby
acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy
Statement, each dated April 26, 2000, and hereby appoints Alan L. Kaganov 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 2000 Annual Meeting of Shareholders of ECLIPSE
SURGICAL TECHNOLOGIES, INC., to be held on May 31, 2000 at 2:00 p.m., local
time, at the Embassy Suites Hotel, 2885 Lakeside Drive, Santa Clara, 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 THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE> 16
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1, AND
"FOR" ITEM 2.
1. Election of Directors:
NOMINEES: (01) Douglas Murphy-Chutorian, M.D.,
(02) Jack M. Gill, Ph.D., (03) Alan L. Kaganov, Sc.D.,
(04) Robert L. Mortensen, (05) Robert C. Strauss
FOR [ ] [ ] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[ ]
--------------------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Proposal to ratify appointment of [ ] [ ] [ ]
PricewaterhouseCoopers LLP as the independent
auditors to the Company for the fiscal year
ending December 31, 2000.
3. To transact such other business as may properly come before the meeting.
MARK HERE IF YOU PLAN TO ATTEND
THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND
NOTE AT LEFT [ ]
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.
Signature: Date:
------------------------------------------------- ---------------
Signature: Date:
------------------------------------------------- ---------------
