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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the commission Only (as permitted by rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
VENTANA MEDICAL SYSTEMS, INC.
(Name of Registrant As Specified In Its Charter)
(Name of Person(s) Filing the 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)(4)0
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
VENTANA MEDICAL SYSTEMS, INC.
3865 Business Center Drive
Tucson, Arizona 85705
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 4, 2000
The 2000 Annual Meeting of Stockholders of Ventana Medical Systems,
Inc. will be held at the Westward Look Resort, 245 East Ina Road, Tucson,
Arizona 85704, on May 4, 2000, at 10:00 a.m., Local Time.
MATTERS TO BE VOTED ON:
1. Ratification of the selection of Ernst & Young LLP as the
independent auditors for our fiscal year 2000;
2. Election of two Class I directors to serve for a term of three
years expiring at the 2003 Annual Meeting of Stockholders or
until his successor is elected;
3. To approve the amendment of our 1996 Employee Stock Purchase
Plan to increase the number of shares that may be purchased
under that plan by 200,000 shares to a new total of 400,000
shares; and
4. Any other matters that may properly come before the meeting or
any adjournment thereof.
The close of business on March 20, 2000 has been fixed as the record
date for the determination of the stockholders of record entitled to notice of,
and to vote at, this meeting or any adjournment thereof. The list of
stockholders entitled to vote at this meeting is available at the offices of
Ventana Medical Systems, Inc., 3865 N. Business Center Drive, Tucson, Arizona
85705, for examination by any stockholder.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THIS MEETING, PLEASE SIGN,
DATE AND RETURN THE ENCLOSED PROXY, WHICH IS SOLICITED BY AND ON BEHALF OF THE
BOARD OF DIRECTORS. THE GIVING OF SUCH PROXY WILL NOT AFFECT YOUR RIGHT TO
REVOKE SUCH PROXY OR TO VOTE IN PERSON SHOULD YOU LATER DECIDE TO ATTEND THIS
MEETING.
By Order of the Board of Directors
John Patience
Vice Chairman of the Board
Tucson, Arizona
April 6, 2000
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PROXY STATEMENT
TABLE OF CONTENTS
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GENERAL INFORMATION ....................................................... 1
Who Can Vote ......................................................... 1
Voting by Proxies .................................................... 1
How You May Revoke Your Proxy Instructions ........................... 1
How Votes are Counted ................................................ 1
Cost of this Proxy Solicitation ...................................... 2
Attending the Annual Meeting ......................................... 2
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL? ........................... 2
WHO SHOULD I CALL IF I HAVE QUESTIONS? .................................... 2
PROPOSALS ................................................................. 3
PROPOSAL NO. 1 - RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS ...... 3
PROPOSAL NO. 2 - ELECT TWO CLASS I DIRECTORS ......................... 4
INFORMATION ABOUT THE NOMINEES ....................................... 5
PROPOSAL NO. 3 - APPROVAL OF AMENDMENT TO 1996 EMPLOYEE STOCK PURCHASE
PLAN ............................................................... 7
ABOUT THE BOARD AND ITS COMMITTEES ........................................ 9
OTHER MATTERS ............................................................. 10
STOCKHOLDER PROPOSALS ..................................................... 10
ANNUAL REPORT ............................................................. 10
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PROXY STATEMENT
Your vote is very important. For this reason, the Board of Directors is
requesting that you allow your common stock to be represented at the Annual
Meeting by the Proxies who are named on the enclosed Proxy Card. This Proxy
Statement is being sent to you in connection with this request and has been
prepared for the Board by our management. "We," "our," "Ventana" and the
"Company" refer to Ventana Medical Systems, Inc. and its subsidiaries. This
Proxy Statement is first being sent to our stockholders on or about April 3,
2000.
GENERAL INFORMATION
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Who Can Vote You are entitled to vote your common stock if our
records showed that you held your shares as of
March 20, 2000. At the close of business on that
date, 13,783,631 shares of common stock were
outstanding and entitled to vote. Each share of
common stock has one vote. The enclosed Proxy Card
shows the number of shares that you are entitled
to vote. Your individual vote is confidential and
will not be disclosed to third parties.
Voting by Proxies If your common stock is held by a broker, bank or
other nominee (i.e., in "street name"), you will
receive instructions from it that you must follow
in order to have your shares voted. If you hold
your shares in your own name as a holder of
record, you may instruct the Proxies how to vote
your common stock by signing, dating and mailing
the Proxy Card in the envelope provided. Of
course, you can always come to the meeting and
vote your shares in person. If you give us a proxy
without giving specific voting instructions, your
shares will be voted by the Proxies as recommended
by the Board of Directors. We are not now aware of
any other matters to be presented at the Annual
Meeting except for those described in this Proxy
Statement. However, if any other matters not
described in this proxy statement are properly
presented at the meeting, the Proxies will use
their own judgment to determine how to vote your
shares. If the meeting is adjourned, your common
stock may be voted by the Proxies on the new
meeting date as well, unless you have revoked your
proxy instructions prior to that time.
How You May Revoke You may revoke your proxy instructions by any of
Your Proxy the following procedures:
Instructions
1. Send us another signed proxy with a later date;
2. Send a letter to our Corporate Secretary
revoking your proxy before your common stock
has been voted by the Proxies at the meeting;
or
3. Attend the Annual Meeting and vote your shares
in person.
How Votes are Counted The Annual Meeting will be held if a majority of
the outstanding shares of common stock entitled to
vote is represented at the meeting. If you have
returned valid proxy instructions or attend the
meeting in person, your common stock will be
counted for the purpose of determining whether
there is a quorum, even if you wish to abstain
from voting on some or all matters introduced at
the meeting.
Cost of this Proxy We will pay the cost of this proxy solicitation.
Solicitation We will, upon request, reimburse brokers, banks
and other nominees for their expenses in sending
proxy material to their principals and obtaining
their proxies. We will solicit proxies by mail,
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except for any incidental personal solicitation
made by our directors, officers and employees, for
which they will not be paid.
Attending the Annual If you are a holder of record and you plan to
Meeting attend the Annual Meeting, please indicate this
when you vote. If you are a beneficial owner of
common stock held by a broker or bank, you will
need proof of ownership to be admitted to the
meeting. A recent brokerage statement or letter
from a broker or bank showing your current
ownership and ownership of our shares on the
record date are examples of proof of ownership. If
you want to vote in person your common stock held
in street name, you will have to get a proxy in
your name from the registered holder.
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WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
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Proposal 1: Ratification of The affirmative vote of a majority of the votes
Independent Auditors cast at the Annual Meeting is required to ratify
the selection of independent auditors. Therefore,
if you "abstain" from voting, it has the same
effect as if you voted "against" this proposal.
Proposal 2: Election of Two The two nominees for director who receive the most
Class I Directors votes will be elected. Therefore, if you do not
vote for a nominee or you indicate "withhold
authority to vote" for any nominee on your proxy
card, your vote will not count for or against any
nominee.
Proposal 3: Amendment The affirmative vote of a majority of the votes
of the 1996 Employee cast at the Annual Meeting is required to satisfy
Purchase Plan the amendment of the 1996 Employee Stock Purchase
Plan. Therefore, if you "abstain" from voting, it
has the same effect as if you voted "against" this
proposal.
</TABLE>
WHO SHOULD I CALL IF I HAVE QUESTIONS?
If you have questions about the Annual Meeting or voting, please
call Jay Meridew, our Corporate Secretary. Mr. Meridew may be reached at (520)
887-2155.
2
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PROPOSALS
PROPOSAL NO. 1 - RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Our Board of Directors, acting upon the recommendation of the Audit
Committee, has selected the firm of Ernst & Young LLP independent auditors, to
audit our financial statements for the fiscal year ending December 31, 2000, and
to perform other appropriate accounting services. A resolution will be presented
to the Annual Meeting to ratify this selection. The affirmative vote of a
majority of the number of votes entitled to be cast by the common stock
represented at the meeting is needed to ratify the selection. If the
stockholders do not ratify the appointment of Ernst & Young LLP, the selection
of independent auditors will be reconsidered by the Board of Directors.
We expect that representatives of Ernst & Young LLP will be present at
the annual meeting and they will be presented with the opportunity to make a
statement if they so desire to do so. They are also expected to be available to
respond to appropriate questions.
The Proxies will vote in favor of ratifying the selection of Ernst &
Young LLP unless instructions to the contrary are indicated on the accompanying
Proxy Card.
YOUR DIRECTORS RECOMMEND A VOTE FOR PROPOSAL NO. 1
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PROPOSAL NO. 2 - ELECT TWO CLASS I DIRECTORS
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Number of Pursuant to our Certificate of Incorporation, our
Directors to Board of Directors currently consists of eight
be Elected persons, divided into three classes serving
staggered terms of three years. Currently, we have
two directors in Class I, three directors in Class
II and three directors in Class III. Two Class I
directors are to be elected at this years Annual
Meeting. The Class II directors will hold office
until next years Annual Meeting and the Class III
directors will hold office until the 2002 Annual
Meeting. If any director resigns or otherwise is
unable to complete his or her term of office, the
Board will elect another director for the
remainder of the resigning director's term.
Vote Required The two individuals with the highest number of
votes are elected to office. There is no
cumulative voting in the election of directors.
Nominees of the The Board has nominated the following individuals
Board to serve as Class I directors until the 2003
Annual Meeting and the election of their
successors:
Henry T. Pietraszek
James R. Weersing
These nominees are currently serving on the Board
and have both agreed to be named in this proxy
statement and to serve if elected. Each of these
nominees attended all of the meetings of the Board
in the prior year.
See "Information about the Nominees" on the
following page for information regarding each of
the Nominees and the continuing Class II and Class
III directors.
</TABLE>
We know of no reason why any of the listed nominees would not be able
to serve. However, if any nominee is unavailable for election, the Proxies would
vote your shares to approve the election of any substitute nominee proposed by
the Board. The Board may also choose to reduce the number of Directors to be
elected, as permitted by our Bylaws.
4
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INFORMATION ABOUT THE NOMINEES
Nominees for Class I Directors
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Henry T. Pietraszek Mr. Pietraszek has served as a director of Ventana
(Age 53) since March 1997. From the time of him joining
Ventana in March 1997 until May 1999, Mr.
Pietraszek served as President and Chief Executive
Officer of Ventana. Prior to joining the Company,
Mr. Pietraszek served as President and Chief
Executive Officer of Biostar, Inc., a medical
diagnostic company. From 1975 to 1994, Mr.
Pietraszek held a variety of executive positions
at Abbott Laboratories and Takeda Chemical
Industries. From 1982 to 1986, he served as
President of Dainabot K.K., a joint venture
between Abbott and Dainippon Pharmaceutical
Company of Japan and from 1980 to 1982 he was Vice
President of Field Service Operations for Abbott's
Diagnostic Division. He is a director of Specialty
Laboratories. Mr. Pietraszek received a B.S. in
Marketing from Gannon University.
James R. Weersing Mr. Weersing has served as a director of Ventana
(Age 60) since October 1994. Since 1984, Mr. Weersing has
been a Managing Director of MBW Venture Partners,
a venture capital investment firm. Mr. Weersing
has also served as President of JRW Technology,
Inc., a consulting firm and, since January 2000,
Member of the Audit and President and CEO of Iomed, Inc. Mr. Weersing
Nominating Committees served as a director of Circadian, Inc., an asthma
dosage management company, from December 1993
until January 1996. Circadian filed a petition
under Chapter 7 of the federal bankruptcy laws in
January 1996. Mr. Weersing received an B.S.M.E.
and an M.B.A. from Stanford University.
Continuing Class II
Directors
Christopher M. Gleeson Mr. Gleeson became President and Chief Executive
(Age 50) Officer and a director in May 1999. He joined
Ventana in March 1999 as Executive Vice President
and Chief Operating Officer. Prior to joining the
Company, Mr. Gleeson was Senior Vice President of
Bayer Diagnostics and General Manager of the U.S.
Commercial Operations for Chiron Diagnostics, and
prior to that, the founder, owner and Managing
Director of Australian Diagnostics Corporation, a
leading diagnostics distributor in Australia. He
is a director of Pharmanetics, Inc. Mr. Gleeson
attended Monash University in Melbourne,
Australia.
Rex J. Bates Mr. Bates has served as a director of Ventana
(Age 76) since April of 1996. From August 1991 to May 1995,
Mr. Bates served on the Board of Directors of
Twentieth Century Industries and was a member of
its compensation committee. Prior to Twentieth
Century Industries, Mr. Bates served as the
Member of the Audit Vice-Chairman of the Board of Directors of the
Committee State Farm Mutual Automobile Insurance Company.
Mr. Bates also served as State Farm's Chief
Investment Officer. In March of 1991, Mr. Bates
retired from State Farm. Since 1992, Mr. Bates has
served on the board of directors of Ophidian
Pharmaceutical, Inc. Prior to Mr. Bates'
employment with State Farm, he was a partner in
the investment firm of Stein, Roe & Farnham in
Chicago. Mr. Bates received a B.S. and an M.S.
from the University of Chicago.
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Edward M. Giles Mr. Giles has served as a director of Ventana since September 1992. Mr. Giles has
(Age 64) served as Chairman of The Vertical Group, Inc., a venture capital investment firm,
since January 1989. Mr. Giles was previously President of F. Eberstadt & Co., Inc., a
securities firm, and Vice Chairman of Peter B. Cannell & Co., Inc., an investment
Member of the Compensation and management firm. He is currently a director of McWhorter Technologies, Inc. and
Nominating Committees Synthetech, Inc. Mr. Giles received a B.S.Ch.E. in Chemical Engineering from
Princeton University and an M.S. in Industrial Management from the Massachusetts
Institute of Technology.
Continuing Class III Directors
Jack W. Schuler Mr. Schuler has served as a director of Ventana since April 1991 and as Chairman of
(Age 59) the Board of Directors since November 1995. Mr. Schuler has been Chairman of the
Board of Directors of Stericycle, Inc., a specialized medical waste management
company, since March 1990. Mr. Schuler is also a partner in Crabtree Partners, a
Member of the Compensation and Chicago based venture capital firm. Prior to joining Stericycle, Mr. Schuler held
Nominating Committees various executive positions at Abbott from December 1972 through August 1989, serving
most recently as President and Chief Operating Officer. He is currently a director
of Medtronic, Inc., and Chiron Corporation. Mr. Schuler received a B.S. in Mechanical
Engineering from Tufts University and an M.B.A. from Stanford University.
John Patience Mr. Patience has served as a director of Ventana since July 1989 and as Vice Chairman
(Age 52) since January 1999. Mr. Patience was a co-founder and served as a General Partner of
Marquette Venture Partners, a venture capital investment firm, from January 1988
until March 1995. Since April 1995, Mr. Patience has been a partner in Crabtree
Member of the Audit Committee Partners, a Chicago-based venture capital firm. Mr. Patience was previously a partner
in the consulting firm of McKinsey & Co., specializing in health care. He is
currently a director of Stericycle, Inc. Mr. Patience received a B.A. in Liberal Arts
and an L.L.B. from the University of Sydney, Australia and an M.B.A. from the
University of Pennsylvania Wharton School of Business.
Thomas M. Grogan, M.D. Dr. Grogan is a founder, a director and Chairman Emeritus of Ventana. He has served as a director
(Age 54) since the founding of the Company in June 1985 and as Chairman of the Board of Ventana from June
1985 to November 1995. He is currently a professor of pathology at the University of Arizona,
College of Medicine, where he has taught since 1979. He received a B.A. in Biology from the
Member of the Audit Committee University of Virginia and an M.D. from George Washington School of Medicine. Dr. Grogan completed
a post-doctorate fellowship at Stanford University.
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YOUR DIRECTORS RECOMMEND A VOTE FOR THE ELECTION OF THE
TWO NOMINEES UNDER PROPOSAL NO. 2
6
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PROPOSAL NO. 3 - APPROVAL OF AMENDMENT TO
1996 EMPLOYEE STOCK PURCHASE PLAN
Our Board of Directors and stockholders have previously adopted and
approved our 1996 Employee Stock Purchase Plan. A total of 200,000 shares of our
common stock are presently reserved for issuance under this plan. As of January
31, 2000, 51,807 shares were available for future issuance.
At the Annual Meeting, we are requesting that the stockholders consider
and approve a proposed amendment to the plan to increase the number of shares
reserved for purchase under it by 200,000 shares, bringing the total number of
shares reserved for issuance to 400,000. The Board believes that the amendment
will enable us to continue our policy of widespread employee stock ownership as
a means to motivate high levels of performance and to recognize key employee
accomplishments.
The plan allows employees to purchase our shares of common stock
through periodic payroll deductions. We have had a longstanding practice of
linking employee compensation to corporate performance, because we believe that
this increases employee motivation to improve stockholder value. Therefore, we
have consistently included equity incentives as a component of compensation for
a broad range of our employees. This practice has enabled us to attract and
retain the talent that we require.
We believe that the remaining shares available for purchase under the
plan are insufficient to accomplish the purposes described above. We anticipate
there will be a need to hire additional technical or management employees on an
ongoing basis. It will be necessary to offer equity incentives to attract and
motivate these individuals, particularly in the current extremely competitive
job market. It will also be necessary to continue to allow current employees to
purchase our shares through the plan in order to retain the services of valuable
employees as we mature and our employee base grows larger.
A summary of the essential features of the plan is set forth below:
SUMMARY OF THE 1996 EMPLOYEE STOCK PURCHASE PLAN
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Summary of the The Board and the stockholders adopted the Employee in 1996. The Stock Purchase Plan plan provides
Employee Stock eligible employees with the opportunity to acquire a stock ownership interest in Ventana through
Purchase Plan periodic payroll deductions. The purpose of the plan is to provide employees with a method to acquire
our shares.
Shares Reserved and The plan currently has 200,000 shares of common stock reserved for issuance to eligible employees.
Eligibility Any of our employees and the employees of our subsidiaries are eligible to participate in the purchase
plan.
Oversight The Board or a committee of the Board administers the purchase plan. It has the authority to interpret
the provisions of the purchase plan and to establish and amend rules for its administration subject to
the plan's limitations.
Method of Payment Eligible employees invest in the plan through regular payroll deductions of up to 15% of their gross
and Stock Price base salary for each period of participation. However, no employee may purchase greater than $25,000
worth of our shares under this plan in any given calendar year. At each purchase date, payroll
deductions are credited to an account established in each participating employee's name and shares are
automatically purchased on behalf of that employee on the last business day of each purchase period at
the lesser of 85% of the market price of
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a share on the commencement date of the offering
period or the purchase period termination date.
Tax Consequences Participating employees will be subject to
taxation on any gain realized from the sale or
other disposition of shares that were acquired
under the plan.
Dilution Protection If any change in our outstanding shares occurs by
reason of any stock split, combination of shares
or other similar transaction affecting our
outstanding common stock as a class, appropriate
adjustments will be made to the maximum number of
shares issuable under the plan.
Amendment and
Termination of the Plan The Board may amend or terminate the plan at any
time. However, the Board does not have the power
to increase the number of shares available for
issuance, amend the requirements as to the class
of employees eligible to participate, or
materially increase the benefits which may accrue
to participants under the plan without stockholder
approval. No termination, modification or
amendment of the plan can adversely affect the
rights of an employee under the Plan without that
employee's consent.
Shares Purchased to Date To date, eligible employees have purchased 148,193
Under the Stock Purchase shares of our common stock under the plan.
Plan
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The amendment to the 1996 Employee Stock Purchase Plan will not take
effect unless it is approved by a vote of the majority of the outstanding shares
of common stock.
VOTE REQUIRED
The approval of the amendment to the plan requires the affirmative vote
of a majority of the votes cast on the proposal at the Annual Meeting. It is
intended that the Proxies will be voted for adoption of the plan unless
instructions to the contrary are indicated on the accompanying proxy form.
YOUR DIRECTORS RECOMMEND A VOTE FOR THE AMENDMENT
OF THE OPTION PLAN UNDER PROPOSAL NO. 3
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ABOUT THE BOARD AND ITS COMMITTEES
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The Board We are governed by a Board of Directors and various committees of the Board which meet
throughout the year. The Board of Directors held four meetings and acted by unanimous
written consent twice during 1999. Directors discharge their responsibility throughout
the year at Board and committee meetings and also through informal telephonic
conferences and other communications with the Vice Chairman and others regarding our
business. All directors attended all Board meetings during 1999.
Committees of the Board The Board has three principal committees, the Compensation Committee, the Audit
Committee and the Nominating Committee. The function of each of these Committees
is described below along with the current membership and number of meetings held
during 1999.
Compensation The Compensation Committee has three primary functions. First, it reviews the
Committee performance of the principal executive officers on an annual basis. The results of
this review are then reported to the Board with a recommendation from the Committee
regarding the compensation packages to be awarded to these officers. Second, the
Compensation Committee reviews the compensation paid to outside directors for
service on the Board and for service on committees of the Board. Finally, the
Committee reviews the level and extent of applicable benefits provided by us with
respect to automobiles, travel, insurance, health and medical coverage, stock options
and other stock plans and benefits.
The Compensation Committee held four meetings, at which all members were present,
during 1999.
In 1999 the Board elected James Weersing, Edward Giles and Jack Schuler to the
Compensation Committee. See "Compensation Committee Interlocks and Insider
Participation" in the following section.
Audit Committee The Audit Committee has several functions. It reviews on an annual basis those matters
which primarily relate to financial controls and our audit. This review includes, but
is not be limited to:
$ Discussing the findings of the independent auditors resulting from their audit and
certification of our financial statements;
$ Discussing with management the accounting principles we use for corporate and tax
reporting purposes, including actual or impending changes in financial accounting
requirements which may have a material affect on us;
$ Reviewing the adequacy of financial and accounting controls, including particular regard
for the scope and performance of the internal auditing function; and
$ Reviewing recommendations by the independent auditors or the internal auditing staff with
respect to changes in policies or practices.
The Audit Committee also recommends to the Board of Directors a firm of certified public
accountants to conduct our audit for the coming year.
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In 1999 the Board elected Rex Bates, Dr. Thomas Grogan and John Patience to the Audit
Committee. The Audit Committee held two meetings during 1999, at which all members were
present.
Nominating Committee The Nominating Committee consists of directors Jack Schuler, Edward Giles and James
Weersing. The Nominating Committee is responsible for the development of general
criteria regarding the qualifications and selection of board members and recommends
candidates for election to the board. The nominating committee held two meetings during
1999.
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BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee consists of three outside directors and is
responsible for the administration of our compensation programs. These programs
include base salary for executive officers and both annual and long-term
incentive compensation programs. Our compensation programs are designed to
provide a competitive level of total compensation and include incentive and
equity ownership opportunities linked to our performance and stockholder return.
COMPENSATION PHILOSOPHY
The design and implementation of the our executive compensation
programs is based on a series of guiding principles derived from the our values,
business strategy and management requirements. These principles may be
summarized as follows:
- Align financial interests of the management team with us and our
stockholders;
- Attract, motivate and retain high-caliber individuals necessary to
increase total return to stockholders;
- Provide a total compensation program where a significant portion
of pay is linked to individual achievement and our short- and
long-term performance; and
- Emphasize reward for performance at the individual, team and
Company levels.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
We have considered the potential impact of Section 162(m) of the
Internal Revenue Code adopted under the Federal Revenue Reconciliation Act of
1993. Section 162(m) disallows a tax deduction for any publicly held corporation
for individual compensation exceeding $1 million in any taxable year for any of
the named executive officers, unless compensation is performance based. None of
our named executive officers exceed the $1 million threshold. Also, we believe
that any options granted under our stock option plan will meet the requirement
of being performance based under the transition provisions provided in the
regulations under Section 162(m). Therefore, we believe that Section 162(m) will
not reduce the tax deduction available to us. Our policy is to qualify to the
extent reasonable its executive officers' compensation for deductibility under
applicable tax laws.
COMPENSATION PROGRAM
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Our executive compensation program has three major components, all of
which are intended to attract, retain and motivate executive officers consistent
with the principles set forth above. We consider these components of
compensation individually as well as collectively in determining total
compensation for executive officers. The three major components are as follows:
1. Base salary. Each fiscal year we establish base salaries for
individual executive officers based upon: (i) industry and
peer group surveys, (ii) responsibilities, scope and
complexity of each position, (iii) performance judgments as to
each individual's past and expected future contributions, and
(iv) internal equity relative to other executive's
responsibilities and base salary levels. The Compensation
Committee reviews with the Chief Executive Officer and
approves, with appropriate modifications, an annual base
salary plan for our executive officers other than the Chief
Executive Officer. The Compensation Committee reviews and
fixes the base salary of the Chief Executive Officer based on
similar competitive compensation data and the Committee's
assessment of his past performance and its expectations as to
his future contributions in leading the Company.
2. Annual cash (short-term) incentives. Annual cash incentives
are established to provide a direct linkage between individual
pay and annual corporate performance. Target annual bonus
awards are established for executive officer positions based
upon industry and peer group surveys and range from 5% to 25%
of base salary, with 25% for the chief executive officer
position. In establishing bonus amounts in the future, the
Committee will primarily consider our financial performance
measured in terms of revenue growth and growth in earnings,
and secondarily consider the performance of each officer in
his or her respective area of accountability. Each officer
will establish operating objectives for the area of the
business for which they take responsibility at the beginning
of our fiscal year. At the end of the year, they will be rated
on the attainment of those objectives. Each officer may
receive a portion or the full amount of their targeted annual
performance based bonus.
3. Equity based incentive compensation. Long-term incentives for
our employees are provided under our stock option plans. Each
fiscal year, the Committee considers the desirability of
granting to executive officers long-term incentives in the
form of stock options. These option grants are intended to
motivate the executive officers to manage the business to
improve our long-term performance and align the financial
interests of the management team with us and our stockholders.
The Committee established the grants of stock options to
executive officers (other than the Chief Executive Officer)
last year, based upon a review with the Chief Executive
Officer of proposed individual awards, taking into account
each officer's scope of responsibility and specific
assignments, strategic and operational goals applicable to the
officer, anticipated performance requirements and
contributions of the officer and competitive data for similar
positions. The Committee independently reviewed these same
factors in determining the option grant to Mr. Gleeson as
Chief Executive Officer.
Respectfully submitted,
Jack W. Schuler
James R. Weersing
Edward M. Giles
11
<PAGE> 15
The foregoing Compensation Committee Report shall not be deemed to be
"soliciting material" or be "filed" with the SEC, 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 Exchange Act, except to the extent
the Company specifically incorporates it by reference into such filing.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return on our common
stock with the cumulative total returns (assuming reinvestment of dividends) on
the Standard & Poor's 500 Stock Index, the Nasdaq Composite Index and the Nasdaq
Medical Device Mfg. Index as if $100 were invested in our common stock and each
such index on July 26, 1996.
[STOCK PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
7/26/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
<S> <C> <C> <C> <C> <C> <C> <C>
Ventana Medical Systems, Inc. 100 178.31 139.76 134.94 119.28 155.42 146.66
Nasdaq Composite Index 100 113.66 119.6 113.18 133.59 156.16 145.48
S&P 500 100 108.61 117.73 120.83 141.94 152.71 157.08
Nasdaq Medical Device Mfg. 100 108.93 105.37 98.36 107.21 126.6 120.71
3/31/98 6/30/98 9/30/98 12/31/98 3/31/99 6/30/99 9/30/99 12/31/99
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ventana Medical Systems, Inc. 256.63 269.88 173.49 208.43 215.66 184.34 163.86 239.76
Nasdaq Composite Index 170.06 175.53 156.92 203.13 228.03 248.84 254.41 376.98
S&P 500 179.16 185.32 167.07 202.7 212.73 227.32 213.24 245.41
Nasdaq Medical Device Mfg. 132.47 125.7 111.34 135.21 143.42 168.63 159.35 163.53
</TABLE>
OTHER MATTERS
Our Board is not aware of any matters to be presented at the meeting
other than those described above. However, if other matters properly come before
the meeting, it is the intention of the persons named in the accompanying proxy
to vote your proxy on such matters in accordance with their judgment.
STOCKHOLDER PROPOSALS
Any stockholder desiring to have a proposal included in our proxy
statement for our 2001 Annual Meeting must deliver such proposal (which must
comply with the requirements of Rule 14a-8 promulgated under the Securities
Exchange Act of 1934) to our principal executive offices not later than December
8, 2000.
12
<PAGE> 16
ANNUAL REPORT
Our Annual Report on Form 10-K with certified financial statements
required to be filed for the fiscal year ended December 31, 1999, is
incorporated into this Notice and Proxy Statement by this reference and
accompanies this Notice and Proxy Statement. Any exhibit to the annual report on
Form 10-K will be furnished to any requesting person who sets forth a good faith
representation that he or she was a beneficial owner of our common stock on
March 20, 2000. The fee for furnishing a copy of any exhibit will be 25 cents
per page plus $3.00 for postage and handling.
13
<PAGE> 17
VENTANA MEDICAL SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S
BOARD OF DIRECTORS FOR THE 2000 ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD MAY 4, 2000
The undersigned hereby constitutes and appoints JAY MERIDEW and JOHN
PATIENCE, and each of them acting in the absence of the others, with full power
of substitution, the true and lawful attorneys and proxies of the undersigned,
to attend the Annual Meeting of the Stockholders of VENTANA MEDICAL SYSTEMS,
INC. (the "Company") to be held at the Westward Look Resort, 245 East Ina Road,
Tucson, Arizona 85704, on May 4, 2000, at 10:00 a.m., Local Time and any
adjournments thereof, and to vote all shares of the Company's Common Stock
standing in the name of the undersigned on the matters set forth below and upon
any other matters that may properly come before the meeting of any adjournment
thereof, with all the powers the undersigned would possess if personally present
at the meeting, as follows:
PROPOSAL NO. 1
RATIFICATION OF INDEPENDENT AUDITORS
- ------ VOTE FOR RATIFICATION OF ERNST & YOUNG LLP as the independent
auditors for the Company's fiscal year 2000
- ------ VOTE AGAINST RATIFICATION
- ------ ABSTAIN
PROPOSAL NO. 2
ELECTION OF TWO CLASS I DIRECTORS
Henry T. Pietraszek
James R. Weersing
- ------ VOTE FOR all nominees listed above
- ------ VOTE FOR all nominees listed above, except
-------------------------------------------------------------
- ------ WITHHOLD AUTHORITY to vote for all nominees listed above.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO THE 1996 EMPLOYEE STOCK PURCHASE PLAN
- ------ VOTE FOR APPROVAL OF THE AMENDMENT TO THE 1996 EMPLOYEE
STOCK PURCHASE PLAN
- ------ VOTE AGAINST APPROVAL
- ------ ABSTAIN
<PAGE> 18
PLEASE PROMPTLY DATE, SIGN AND RETURN IN THE ENCLOSED ENVELOPE.
This proxy will be voted in accordance with the directions indicated herein. If
no specific directions are given, this proxy will be voted for approval of all
nominees listed herein, for approval of the proposals listed herein and, with
respect to any other business as may properly come before the meeting, in
accordance with the discretion of the proxies.
DATED: ________ , 2000
___________________________________________
(Signature)
___________________________________________
(Signature)
When signing as executor, administrator,
attorney, trustee or guardian, please give
full title as such. If a corporation, please
sign in full corporate name by president or
other authorized officer. If a partnership,
please sign in partnership name by
authorized person. If a joint tenancy,
please have both joint tenants sign.
2
