<PAGE>
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
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, For Use of the 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
CONCEPTUS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CONCEPTUS, INC.
- --------------------------------------------------------------------------------
(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 transactions 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:
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(4) Date Filed:
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<PAGE>
CONCEPTUS, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1998
------------------------
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CONCEPTUS,
INC., a Delaware corporation (the "Company"), will be held on Tuesday, May 26,
1998 at 12:00 p.m., local time, at Hotel Sofitel, 223 Twin Dolphin Drive,
Redwood City, California 94065, for the following purposes:
(1) To elect Class I directors to serve a term of three years and until
their successors are elected.
(2) To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 31, 1998.
(3) To transact such other business as may properly come before the meeting
or any postponement or adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on Friday, April 10,
1998 are entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.
All stockholders are cordially invited to attend the Annual Meeting. It is
important that your shares be represented at the Annual Meeting. Whether or not
you plan to attend the Annual 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. Your shares will be voted at the Annual
Meeting in accordance with your instructions. You can revoke the proxy at any
time prior to voting and the giving of a proxy will not affect your right to
vote in the event you attend the Annual Meeting in person.
Very truly yours,
Michael W. Hall
SECRETARY
San Carlos, California
April 17, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE OF
RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING AND SO DESIRE, YOU
MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY.
<PAGE>
CONCEPTUS, INC.
----------------
PROXY STATEMENT
---------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Conceptus, Inc. (the "Company"), for use at the Annual Meeting of Stockholders
to be held on Tuesday, May 26, 1998, at 12:00 p.m., local time, or at any
postponement or adjournment(s) thereof (the "Annual Meeting"), for the purposes
set forth herein and in an accompanying Notice of Annual Meeting of
Stockholders. The Annual Meeting will be held at Hotel Sofitel, 223 Twin Dolphin
Drive, Redwood City, California 94065. The address of the Company's principal
executive offices is 1021 Howard Avenue, San Carlos, CA 94070 and its telephone
number is (650) 802-7240.
These proxy solicitation materials were mailed to stockholders on or about
April 17, 1998. The cost of soliciting these proxies will be borne by the
Company.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use either (i) by delivering to the Company
(Attention: Sanford Fitch) a written notice of revocation or a duly executed
proxy bearing a later date or (ii) by attending the Annual Meeting and voting in
person. Attending the Annual Meeting by itself will not revoke a proxy
previously given.
RECORD DATE AND SHARE OWNERSHIP
Only stockholders of record at the close of business on Friday, April 10,
1998 are entitled to notice of and to vote at the meeting. At the record date,
9,506,928 shares of the Company's Common Stock were issued and outstanding.
VOTING AND SOLICITATION
Holders of shares of Common Stock are entitled to one vote per share on all
matters to be acted upon at the meeting, including the election of directors.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by the
Inspector of Elections (the "Inspector") with the assistance of the Company's
transfer agent. The Inspector will also determine whether or not a quorum is
present. Except in certain specific circumstances, Delaware law requires the
affirmative vote of a majority of shares present in person or represented by
proxy at a duly held meeting at which a quorum is present for approval of
proposals presented to stockholders. In general, Delaware law also provides that
a quorum consists of a majority of the shares entitled to vote and present in
person or represented by proxy. The Inspector will treat abstentions as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum and as negative votes for purposes of determining the approval of
any matter submitted to the stockholders for a vote.
The shares represented by the proxies received, properly marked, dated,
signed and not revoked will be voted at the Annual Meeting. Where such proxies
specify a choice with respect to any matter to be acted on, the shares will be
voted in accordance with the specifications made. Any proxy which is returned
using the form of proxy enclosed and which is not marked as to a particular item
will be voted, as the case may be with respect to the item not marked: FOR the
election of directors, FOR ratification of the appointment of the designated
independent auditors and as the proxy holders deem advisable on other matters
that may come before the meeting. If a broker indicates on the enclosed proxy or
its substitute that
<PAGE>
the broker does not have discretionary authority as to certain shares to vote on
a particular matter ("broker nonvotes"), those shares will not be considered as
present with respect to that matter. The Company believes that the tabulation
procedures to be followed by the Inspector are consistent with the general
statutory requirements in Delaware concerning voting of shares and determination
of a quorum.
The cost of soliciting proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by certain of
the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone or telegram.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders that are intended to be presented by such
stockholders at the Company's 1999 Annual Meeting must be received by the
Company no later than December 15, 1998 in order that such proposals may be
included in the proxy statement and form of proxy relating to that meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Each class of
directors consists of two or three directors, and each class of directors serves
for a staggered three year term or until a successor is elected and qualified.
The Class I directors are Robert F. Kuhling and Richard D. Randall, whose
current terms will end at this Annual Meeting. The Class II directors are Thomas
C. McConnell and Howard D. Palefsky, whose current terms will end at the Annual
Meeting of Stockholders in 1999, and the Class III directors are Kathryn A.
Tunstall, Sanford Fitch and Dr. Florence Comite, whose current terms will end at
the Annual Meeting of Stockholders in 2000.
Nancy S. Olson, a long-standing member of the Board of Directors and a Class
II director, has resigned from the Board of Directors effective immediately
prior to the Annual Meeting. The Company extends its gratitude to Ms. Olson for
her invaluable contributions to the past and future success of the Company. The
Board of Directors has amended the Company's Bylaws to decrease the number of
members of the Board of Directors from eight to seven effective immediately
prior to the Annual Meeting.
All members of Class I are standing for re-election in 1998. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's two nominees named below, both of whom are currently directors
of the Company.
In the event that any such nominee is unable or declines to serve as a
director at the time of the Annual Meeting, the proxy holders will vote in their
discretion for a substitute nominee. It is expected that all nominees will be
able and willing to serve as directors.
2
<PAGE>
The names of directors and their ages, as of February 28, 1998, and certain
other information about them are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY CLASS DIRECTOR SINCE
- ---------------------------------------- --- ------------------------------------------ --------- ---------------
<S> <C> <C> <C> <C>
Howard D. Palefsky (1).................. 51 Chairman of the Board of Directors II 1997
Kathryn A. Tunstall..................... 47 President, Chief Executive Officer and III 1993
Director
Sanford Fitch........................... 57 Senior Vice President, Chief Financial III 1994
Officer and Director
Florence Comite......................... 45 Director III 1997
Robert F. Kuhling (2)................... 49 Director I 1992
Richard D. Randall (1)(2)............... 46 Director I 1992
Thomas C. McConnell (2)................. 43 Director II 1992
</TABLE>
- ------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
NOMINEES FOR ELECTION AS DIRECTORS THROUGH 2001
CLASS I DIRECTOR (TERMS EXPIRE 1998):
MR. KUHLING has served as a director of the Company since December 1992. Mr.
Kuhling has been a general partner of venture capital funds managed by ONSET
Ventures since 1987. Prior to 1987, he served as Director of Design Automation
Marketing at Sun Microsystems, Inc., a computer manufacturer, and Vice President
of Marketing and a division manager at General ElectricCalma, a software and
computer systems company. Mr. Kuhling currently also serves on the Board of
Directors of Euphonix, Inc. Mr. Kuhling received an M.B.A. from the Harvard
University Graduate School of Business.
MR. RANDALL has served as a director of the Company since December 1992. Mr.
Randall served as the Company's President and Chief Executive Officer from
December 1992 to July 1993 and Chief Financial Officer from December 1992 to
January 1995. Mr. Randall has served as President, Chief Executive Officer and
Director of Innovasive Devices, Inc., a medical device manufacturer, since
January 1994. Mr. Randall served as President and Chief Executive Officer of
Target Therapeutics, Inc. ("Target") from June 1989 to May 1993. He also served
as a director of Target from June 1989 to April 1997. Prior to joining Target,
Mr. Randall served in various capacities with Trimedyne, Inc., a cardiovascular
laser company, Baxter International and the U.S.C.I. Division of C.R. Bard, Inc.
Mr. Randall holds a B.S. in Biology Education from State University of New York
College at Buffalo.
DIRECTORS WHOSE TERMS DO NOT EXPIRE THIS YEAR
CLASS II DIRECTORS (TERMS EXPIRE 1999):
MR. MCCONNELL has served as a director of the Company since December 1992.
Mr. McConnell has been with New Enterprise Associates ("NEA"), a venture capital
investment firm, since 1985 and has served as a General Partner of that firm
since 1989. Prior to joining NEA, Mr. McConnell was a Product Manager at Apple
Computer, Inc. and a consultant with the Boston Consulting Group. Mr. McConnell
is also a director of Applied Imaging Corp., Cardiothoracic Systems and
Innovasive Devices, Inc. Mr. McConnell holds an M.B.A. from the Stanford
University Graduate School of Business.
MR. PALEFSKY was elected to the Company's Board of Directors in October 1997
and was appointed to serve as Chairman of the Board in November 1997. He
currently serves as a consultant to the Company
3
<PAGE>
pursuant to a consulting agreement. Mr. Palefsky is a corporate director,
consultant and private investor. From 1995 to 1997, Mr. Palefsky served as
Chairman of the Board and Chief Executive Officer of Collagen Corporation. Mr.
Palefsky served as President, Chief Executive Officer and Director of Collagen
Corporation from 1978 to 1995. Mr. Palefsky is also a director of Innovasive
Devices, Inc. Mr. Palefsky holds an M.B.A. from Stanford University Graduate
School of Business.
CLASS III DIRECTORS (TERMS EXPIRE 2000):
DR. COMITE was elected to the Company's Board of Directors in September 1997
and also serves as a consultant to the Company pursuant to a consulting
agreement. In 1992, Dr. Comite founded Women's Health at Yale University School
of Medicine. She currently serves as Clinical Director of Women's Health at
Yale, as well as Associate Professor in Endocrinology, Departments of Internal
Medicine and Pediatrics and in Reproductive Endocrinology, Department of
Obstetrics and Gynecology at Yale University School of Medicine. From 1994 to
1997, Dr. Comite served as Deputy Medical Director of Time Life Medical/ Patient
Education Media, Inc. In 1994 and 1995, Dr. Comite also served as Senior
Clinical and Research Advisor to the National Institutes of Health Offices of
Alternative Medicine and Research in Women's Health. Dr. Comite received her
M.D. from Yale University School of Medicine.
MR. FITCH has served as Vice President, Finance and Operations, Chief
Financial Officer and a director of the Company since December 1994 and was
promoted to Senior Vice President in February 1997. From January 1994 to
December 1994, Mr. Fitch served as Vice President, Finance and Operations and
Chief Financial Officer of Voyant Corporation, a video technology company. From
December 1990 to January 1994, Mr. Fitch served as Chief Financial Officer of
SanDisk Corp., a manufacturer of flash memory devices. From 1983 through 1989,
Mr. Fitch was the Chief Financial Officer of Komag Inc., a manufacturer of rigid
media for the disk drive industry. Mr. Fitch holds a B.S. in Chemistry and an
M.B.A. from Stanford University.
MS. TUNSTALL has served as President, Chief Executive Officer and a director
of the Company since July 1993. Prior to joining the Company, Ms. Tunstall spent
seven years as an executive officer and in senior marketing positions of the
Edwards Less Invasive Surgery Division of Baxter International, a division
engaged in the research and development, manufacturing and marketing of
cardiovascular catheters, serving as President from June 1990 to June 1993 and
serving as Vice President and Director of Worldwide Sales and Marketing from
November 1986 to June 1990. From 1980 to 1986, Ms. Tunstall held various
positions in manufacturing and marketing of McGaw Laboratories, a pharmaceutical
and medical device company, serving most recently as Vice President of
Marketing. Ms. Tunstall also serves as a director of RESOLVE, a non-profit
infertility support, education and advocacy organization. Ms. Tunstall holds a
B.A. in Economics from the University of California and has also completed
graduate level studies in Business and Healthcare Administration.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of fifteen meetings during the fiscal
year ended December 31, 1997. The Board of Directors has an Audit Committee and
a Compensation Committee, of which there is a Stock Option Subcommittee. The
Company does not have a nominating committee or a committee performing the
functions of a nominating committee.
As of immediately prior to the Annual Meeting, the Audit Committee of the
Board of Directors consists of Mr. Palefsky and Mr. Randall. During the last
fiscal year, the Audit Committee consisted of Ms. Olson and Mr. Randall and four
meetings were held. The Audit Committee recommends engagement of the Company's
independent auditors, reviews the scope of the audit, considers comments made by
the independent auditors with respect to the Company's internal control
structure, including systems, procedures and internal accounting controls and
the consideration given thereto by management, and reviews
4
<PAGE>
the Company's system of internal controls, including systems, procedures and
internal accounting controls, with the Company's financial and accounting staff.
The Compensation Committee of the Board of Directors currently consists of
Messrs. Kuhling, McConnell and Randall. The Stock Option Subcommittee of the
Compensation Committee currently consists of Messrs. Kuhling and McConnell.
During the last fiscal year, four meetings of the Compensation Committee were
held. In addition, three meetings of the Stock Option Subcommittee were held.
The Compensation Committee, or a subcommittee thereof, where necessary,
administers the Company's incentive compensation and benefit plans (including
stock plans) and, in conjunction with the Board of Directors, establishes
salaries, incentives and other forms of compensation for directors, officers and
other employees. The Stock Option Subcommittee makes recommendations and
approves option grants to employees, officers, directors and consultants
pursuant to the Company's 1993 Stock Plan.
During fiscal 1997, none of the incumbent directors attended fewer than 75%
of the aggregate number of meetings of the Board of Directors (held while such
director was a member) and of the committees upon which such director served
(during the periods such director served), except for Mr. Palefsky who attended
two out of three meetings of the Board of Directors held during his tenure as a
director in 1997 (or 66 2/3% of such meetings).
DIRECTOR COMPENSATION
In fiscal 1997, the Company did not compensate Messrs. Kuhling, McConnell or
Ms. Olson for attendance at meetings of the Board of Directors or a committee
thereof. The Company paid each of Mr. Palefsky and Dr. Comite $1,000 for
attendance at each meeting of the Board of Directors and a retainer of $2,500
for the fourth quarter of fiscal 1997. Mr. Randall received a retainer of $2,500
for the fourth quarter of fiscal 1997. The Company reimbursed each outside
director for out-of-pocket expenses incurred in connection with attendance at
meetings of the Board of Directors or a committee thereof. Beginning in fiscal
1998, each outside director will receive a retainer of $2,500 per calendar
quarter plus $1,000 for attendance at meetings of the Board of Directors or the
committees thereof. The two employee directors, Ms. Tunstall and Mr. Fitch, are
not separately compensated for their services as directors.
Nonemployee directors of the Company are automatically granted options to
purchase shares of the Company's Common Stock pursuant to the terms of the
Company's 1995 Directors' Stock Option Plan (the "Directors' Plan"). Under such
plan, each person who was a nonemployee director on the date of the Company's
initial public offering was granted an option to purchase 10,000 shares of
Common Stock on the date of such offering (unless such director had previously
been granted an option to purchase shares of Common Stock) and each person who
thereafter becomes a nonemployee director will be granted an option to purchase
10,000 shares of Common Stock on the date on which he or she first becomes a
non-employee director (the "First Option"). Thereafter, on the date of each
annual meeting of the Company's stockholders, each non-employee director shall
be automatically granted an additional option to purchase 3,000 shares of Common
Stock (a "Subsequent Option") if, on such date, he or she shall have served on
the Company's Board of Directors for at least six months. The Directors' Plan
provides that the First Option shall become exercisable in installments as to
1/36th of the total number of shares subject to the First Option on each monthly
anniversary of the date of grant of the First Option and that each Subsequent
Option shall become exercisable in installments as to 1/12th of the total number
of shares subject to the Subsequent Option on each monthly anniversary of the
date of grant of the Subsequent Option beginning on the second anniversary of
the grant date. Options granted under the Directors' Plan have an exercise price
equal to the fair market value of the Company's Common Stock on the date of
grant, and a term of ten years. Pursuant to the Directors' Plan, on May 13,
1997, Messrs. Kuhling, McConnell and Randall and Ms. Olson received stock
options in connection with their service on the Board of Directors each in the
amount of 3,000 shares at an exercise price of $9.625 per share; on September
22, 1997, Dr. Comite received a stock option in connection with her election to
the Board of Directors in the amount of 10,000 shares at an exercise price of
$7.00 per share; and on October 15, 1997,
5
<PAGE>
Mr. Palefsky received a stock option in connection with his election to the
Board of Directors in the amount of 10,000 shares at an exercise price of $7.875
per share.
In addition to the options granted under the Directors' Plan, on November 4,
1997, Dr. Comite and Mr. Palefsky were granted options pursuant to the Company's
1993 Stock Plan, as amended (the "1993 Stock Plan"). Dr. Comite received a stock
option in the amount of 7,500 shares at an exercise price of $7.00 per share.
Dr. Comite's option vests at a rate of 1/12th of the shares granted on each
monthly anniversary of the vesting commencement date, which is September 10,
1997. In accordance with the provisions of a consulting agreement between Mr.
Palefsky and the Company, he received an additional stock option in the amount
of 90,000 shares at an exercise price of $7.00 per share and such option vests
at a rate of 1/24th of the shares granted on each monthly anniversary of the
vesting commencement date, which is October 15, 1997. There are no family
relationships among the directors or executive officers of the Company.
Dr. Comite provides consulting services to the Company pursuant to a
consulting agreement, dated September 10, 1997. The Company paid Dr. Comite
$24,000 in consulting fees for services rendered during the year ended December
31, 1997.
Mr. Palefsky provides consulting services to the Company pursuant to a
consulting agreement, dated October 15, 1997. During the year ended December 31,
1997, the Company paid Mr. Palefsky $33,333.32 in consulting fees ($8,333.33 of
which are for services provided by him in January 1998).
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES LISTED
ABOVE FOR THE BOARD OF DIRECTORS OF THE COMPANY.
PROPOSAL NO. 2
APPROVAL OF AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP,
independent public accountants, to audit the financial statements of the Company
for the fiscal year ending December 31, 1998. In the event the stockholders do
not ratify such appointment, the Board of Directors will reconsider its
selection. Representatives of Ernst & Young LLP are expected to be present at
the Annual Meeting and will have the opportunity to respond to appropriate
questions and to make a statement if they desire.
REQUIRED VOTE
The ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors requires the affirmative vote of the holders of a majority
of the shares of the Company's Common Stock present at the Annual Meeting in
person or by proxy and entitled to vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1998.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of February 28, 1998 as to (i) each person who is known by the
Company to beneficially own more than five percent of the Company's Common
Stock, (ii) each nominee for the Company's Board of Directors, (iii) each of the
Company's remaining directors, (iv) each of the executive officers named in the
Summary Compensation Table on page 10, and (v) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
-------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT(2)
- -------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Boston Scientific Corporation(3) ................................... 1,418,856 14.92%
One Boston Scientific Place
Natick, MA 01760-1537
Entities affiliated with New Enterprise Associates(4) .............. 548,092 5.76%
2490 Sand Hill Road
Menlo Park, CA 94025
Entities affiliated with St. Paul Venture Capital(5) ............... 523,012 5.50%
385 Washington Street
St. Paul, MN 55102
Florence D. Comite, M.D.(6) ........................................ 3,125 *
15 Spencer Place
New Haven, CT 06515
Robert F. Kuhling, Jr.(7) .......................................... 433,906 4.56%
2490 Sand Hill Road
Menlo Park, CA 94025
Thomas C. McConnell(8) ............................................. 970,893 10.21%
2490 Sand Hill Road
Menlo Park, CA 94025
Nancy S. Olson(9) .................................................. 523,012 5.50%
Three Lagoon Drive, Suite 130
Redwood City, CA 94065-1566
Howard D. Palefsky(10) ............................................. 15,000 *
2800 Sand Hill Road, Suite 120
Menlo Park, CA 94025
Richard D. Randall(11) ............................................. 24,166 *
734 Forest
Marborough, MA 01752
Kathryn A. Tunstall(12)............................................. 280,256 2.89%
Lee Blumenfeld...................................................... 626 *
Cynthia M. Domecus(13).............................................. 70,815 *
Sanford Fitch(14)................................................... 133,279 1.39%
James J. Messemer(15)............................................... 84,697 *
All directors and officers as a group (13 persons)(16).............. 2,154,627 21.51%
</TABLE>
- ------------------------
* Less than 1%.
7
<PAGE>
(1) 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.
(2) Percentage of ownership is based on 9,506,928 shares of Common Stock
outstanding on February 28, 1998. The number of shares of Common Stock
beneficially owned includes the shares issuable pursuant to stock options
that are exercisable within 60 days of February 28, 1998. Shares issuable
pursuant to stock options are deemed outstanding for computing the
percentage of the person holding such options but are not outstanding for
computing the percentage of any other person.
(3) Boston Scientific Corporation acquired Target Therapeutics, Inc. ("Target")
on April 8, 1997. Target is now a separate business unit of Boston
Scientific Corporation.
(4) Represents 450,980 shares held by New Enterprise Associates V, Limited
Partnership, and 91,112 shares held by Chemicals and Materials Enterprise
Associates, Limited Partnership. Also includes 6,000 shares issuable upon
exercise of options exercisable by NEA Development Corp. within 60 days of
February 28, 1998.
(5) St. Paul Venture Capital is an affiliate of St. Paul Fire and Marine
Insurance Company ("St. Paul"), which is the owner of record of these
shares. Includes 6,000 shares issuable upon exercise of options exercisable
by St. Paul within 60 days of February 28, 1998.
(6) Represents shares issuable upon exercise of options exercisable within 60
days of February 28, 1998.
(7) Includes 417,647 shares held by ONSET Enterprise Associates, L.P., and
6,000 shares issuable upon exercise of options exercisable by ONSET Venture
Services Corp. within 60 days of February 28, 1998, all of which Mr.
Kuhling may be deemed to beneficially own by virtue of his status as a
general partner of OEA Management, L.P., a general partner of ONSET
Enterprise Associates, L.P. Mr. Kuhling disclaims beneficial ownership of
the shares held by such entity except to the extent of his proportionate
partnership interest therein.
(8) Includes 450,980 shares held by New Enterprise Associates V, Limited
Partnership, 91,112 shares held by Chemicals and Materials Enterprise
Associates, Limited Partnership, and 6,000 shares issuable upon exercise of
options exercisable by NEA Development Corp. within 60 days of February 28,
1998, all of which Mr. McConnell may be deemed to beneficially own by
virtue of his status as a general partner of NEA Partners V, Limited
Partnership (the general partner of New Enterprise Associates V, Limited
Partnership), and as a general partner of NEA Chemicals and Materials
Partners, Limited Partnership (a general partner of Chemicals and Materials
Enterprise Associated, Limited Partnership). Also includes 417,647 shares
held by ONSET Enterprise Associates, Limited Partnership, all of which Mr.
McConnell may be deemed to beneficially own by virtue of his status as a
general partner of NEA Onset Partners, Limited Partnership, a general
partner of ONSET Enterprise Associates, Limited Partnership. Mr. McConnell
disclaims beneficial ownership of the shares held by all such entities
except to the extent of his proportionate partnership interest therein.
(9) Includes 517,012 shares held by St. Paul, which Ms. Olson may be deemed to
beneficially own by virtue of her status as a general partner of St. Paul
Venture Capital, an affiliate of St. Paul. Also includes 6,000 shares
issuable upon exercise of options exercisable by St. Paul within 60 days of
February 28, 1998. Ms. Olson disclaims beneficial ownership of the shares
held by such entity. Ms. Olson has resigned from the Company's Board of
Directors effective immediately prior to the Annual Meeting.
(10) Represents shares issuable upon exercise of options exercisable within 60
days of February 28, 1998.
(11) Includes 15,833 shares issuable upon exercise of options exercisable
within 60 days of February 28, 1998.
8
<PAGE>
(12) Includes 195,245 shares issuable upon exercise of options exercisable
within 60 days of February 28, 1998.
(13) Includes 69,443 shares issuable upon exercise of options exercisable
within 60 days of February 28, 1998.
(14) Includes 79,302 shares issuable upon exercise of options exercisable
within 60 days of February 28, 1998.
(15) Includes 80,933 shares issuable upon exercise of options exercisable
within 60 days of February 28, 1998.
(16) Includes 1,912,398 shares beneficially owned by entities affiliated with
Mr. McConnell, Mr. Kuhling and Ms. Olson of which they disclaim beneficial
ownership other than to the extent of their proportionate interest
therein. Also includes 509,380 shares issuable upon exercise of options
exercisable within 60 days of February 28, 1998.
9
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation received in the fiscal years
ended December 31, 1995, December 31, 1996 and December 31, 1997 by (i) the
Company's Chief Executive Officer and (ii) the Company's four other most highly
paid executive officers who earned in excess of $100,000 during the fiscal year
ended December 31, 1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------------------ ----------------------------
OTHER ANNUAL SECURITIES ALL OTHER
BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($)(2) OPTIONS(#) ($)
- ---------------------------------------- --------- ----------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kathryn A. Tunstall..................... 1997 $ 199,992 $ -- $ 1,178 140,000 $ 41,000(4)
President and Chief Executive Officer 1996 173,106 36,500 690 -- --
1995 162,900 32,100 20,833(3) 116,666 --
Lee Blumenfeld.......................... 1997 140,005 -- 294 10,000 357,150(5)
Vice President, Worldwide Sales and 1996 164,333 7,200 177 -- 15,857(4)
Marketing 1995 87,385(6) -- -- -- --
Cynthia M. Domecus...................... 1997 164,808 -- 364 40,000 --
Senior Vice President, Clinical
Research, 1996 144,906 28,800 194 -- --
Regulatory Affairs and Quality
Assurance 1995 125,675 16,200 -- 40,000 --
Sanford Fitch........................... 1997 159,994 -- 2,350 60,000 --
Senior Vice President and 1996 145,350 23,200 1,398 -- --
Chief Financial Officer 1995 127,731 20,025 -- 74,999(7) --
James J. Messemer....................... 1997 140,005 -- 294 25,000 --
Vice President, Business Development 1996 134,400 19,800 186 -- --
1995 105,000 14,700 -- 26,666 --
</TABLE>
- ------------------------------
(1) 1997 bonuses to the Company's executive officers for fiscal 1997 performance
have not been determined. 1996 bonuses represent bonuses paid in 1997 to its
executive officers for fiscal 1996 performance. 1995 bonuses represent
bonuses paid in 1996 to its executive officers for fiscal 1995 performance.
Bonuses to executive officers are paid at the discretion of the Board of
Directors.
(2) Except as otherwise set forth, represents premiums paid by the Company for
group term life insurance in 1997 and in 1996.
(3) Represents the reimbursement of certain transportation expenses.
(4) Represents income attributable to same day stock sales.
(5) Mr. Blumenfeld resigned from the Company as of December 31, 1997. $72,100 of
this amount represents a lump-sum severance payment made pursuant to a
termination agreement executed December 26, 1997 between Mr. Blumenfeld and
the Company. In addition, $285,050 of this amount represents income
attributable to same day stock sales.
(6) Represents salary for a partial fiscal year. Mr. Blumenfeld joined the
Company on September 1, 1995.
(7) Mr. Fitch was also issued 50,000 shares of the Company's Common Stock at a
purchase price of $0.48 per share on March 1, 1995. These shares are subject
to a repurchase right in the Company's favor that lapses over a four-year
period from December 19, 1994. These shares participate in dividends if and
when declared. At December 31, 1997, based upon an estimated fair market
value of the Company's Common Stock of $5.00 per share, these purchased
shares had an aggregate value of $226,000 in excess of the amount paid
therefor.
10
<PAGE>
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1997
The following table provides certain information with respect to stock
options granted to the Named Executive Officers in the last fiscal year. In
addition, as required by Securities and Exchange Commission rules, the table
sets forth the hypothetical gains that would exist for the options based on
assumed rates of annual compound stock price appreciation during the option
term.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)(2)
---------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS/ ANNUAL RATES OF STOCK
SECURITIES SARS GRANTED EXERCISE PRICE APPRECIATION
UNDERLYING TO EMPLOYEES OR BASE FOR OPTION TERM(3)
OPTIONS/SARS IN FISCAL PRICE EXPIRATION ------------------------
NAME GRANTED(#) YEAR(%)(4) ($/SH)(5) DATE 5% ($) 10% ($)
- ---------------------------------- ------------- ----------------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Kathryn A. Tunstall............... 140,000 21.6% $ 9.625 5/13/00 $ 847,436 $ 2,147,568
Lee Blumenfeld.................... 10,000 1.5% 9.625 5/13/00 60,531 153,398
Cynthia M. Domecus................ 40,000 6.2% 9.625 5/13/00 242,124 613,591
Sanford Fitch..................... 60,000 9.3% 9.625 5/13/00 363,187 920,386
James J. Messemer................. 25,000 3.9% 9.625 5/13/00 151,328 383,494
</TABLE>
- ------------------------
(1) No stock appreciation rights were granted to the Named Executive Officers in
the last fiscal year. Options vest at a rate of 1/8th of the shares on the
six-month anniversary of the vesting commencement date (the "VCD"), which
date is September 30, 1996, and 1/48th of the original number of shares on
each monthly anniversary of the VCD thereafter.
(2) On January 20, 1998, certain of the named executive officers were granted
additional options to purchase common stock at an exercise price of $4.625
per share. Ms. Tunstall received 60,000 shares, Ms. Domecus, 30,000 shares,
Mr. Fitch, 15,000 shares and Mr. Messemer, 10,000 shares. Such options vest
at a rate of 1/2 of the shares on the six-month anniversary of the VCD,
which date is January 1, 1998, and 1/12th of the original number of shares
on each monthly anniversary of the VCD thereafter.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the Securities and Exchange Commission. There is no
assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
10-year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the Common Stock appreciates over
the option term, no value will be realized from the option grants made to
the executive officers. Potential Realizable Value is not calculated for
options that were canceled during the fiscal year ended December 31, 1997.
(4) The Company granted stock options representing 647,500 shares to employees
during the fiscal year ended December 31, 1997.
(5) The exercise price may be paid in cash, in shares of Common Stock valued at
fair market value on the exercise date or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The Company may
also finance the option exercise by loaning the optionee sufficient funds to
pay the exercise price for the purchased shares and the federal and state
income tax liability incurred by the optionee in connection with such
exercise.
11
<PAGE>
The following table sets forth certain information for the Named Executive
Officers with respect to the exercise of options to purchase Common Stock during
the fiscal year ended December 31, 1997.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED
DECEMBER 31, 1997 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE DECEMBER 31, 1997 (#) DECEMBER 31, 1997 ($)(1)
ACQUIRED ON REALIZED ---------------------------- --------------------------
NAME EXERCISE (#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ------------- -------------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kathryn A. Tunstall......... 5,000 $ 41,000 173,857 147,642 $ 405,405 $ 59,246
Lee Blumenfeld.............. 30,000 285,050 20,833 -- (3) 50,469 --
Cynthia M. Domecus.......... -- -- 59,999 45,557 165,360 40,020
Sanford Fitch............... -- -- 68,052 69,947 141,246 47,085
James J. Messemer........... -- -- 74,961 30,038 268,502 23,463
</TABLE>
- ------------------------
(1) Calculated by determining the difference between the estimated fair market
value of the Company's Common Stock as of December 31, 1997 ($5.00 per
share) and the exercise price of the securities underlying the options.
(2) Calculated by determining the difference between the fair market value of
the Company's Common Stock as of the date of exercise and the exercise price
of the securities underlying the exercised options.
(3) Mr. Blumenfeld resigned from the Company on December 31, 1997. As of that
date, 20,833 option shares were vested and all other option shares in his
name were canceled.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In December 1997, the Company entered into a termination agreement with Lee
Blumenfeld which provided for a severance payment equal to six months salary
which was paid in January 1998 in a lump sum payment of $72,100.
In May 1997, the Company entered into an agreement with Ms. Tunstall that
provides, in the event of certain change-in-control transactions, for the
acceleration of options held by her whereby each such option shall become fully
vested and immediately exercisable. In the event of an involuntary termination
prior to two years after the change-in-control transaction, the agreement
provides for (i) her to be paid according to the Company's standard payroll
procedure for a period of 18 months; (ii) the continuation of health and life
insurance benefits for a period of 18 months; (iii) monthly severance payments
equal to 1/12th of the "target bonus" she would have received for the fiscal
year in which the termination occurs; and (iv) outplacement services not to
exceed a value of $15,000.
In May 1997, the Company entered into an agreement with Mr. Fitch that
provides, in the event of certain change-in-control transactions, for the
acceleration of options held by him whereby each such option shall become fully
vested and immediately exercisable. In the event of an involuntary termination
prior to two years after the change-in-control transaction, the agreement
provides for (i) him to be paid according to the Company's standard payroll
procedure for a period of 12 months; (ii) the continuation of health and life
insurance benefits for a period of 12 months; (iii) monthly severance payments
equal to 1/12th of the "target bonus" he would have received for the fiscal year
in which the termination occurs; and (iv) outplacement services not to exceed a
value of $15,000.
In May 1997, the Company entered into agreements with its other executive
officers including Lee Blumenfeld, Cynthia Domecus, James Messemer, which
provide, in the event of certain change-in-control transactions, for the
acceleration of options held by such officers whereby in the event of a "hostile
12
<PAGE>
takeover" each such option shall become fully vested and immediately
exercisable; provided, however, in the event of any other type of "change of
control" each such option shall become vested as to 50% of the option shares
that have not otherwise vested on the effective date of the change of control
transaction. In the event of an involuntary termination prior to two years after
the change-in-control transaction, the agreement provides for (i) each of the
above mentioned officers to be paid according to the Company's standard payroll
procedure for a period of 12 months; (ii) the continuation of health and life
insurance benefits for a period of 12 months; (iii) monthly severance payments
equal to 1/12th of the "target bonus" each would have received for the fiscal
year in which the termination occurs; (iv) acceleration of all options to become
fully vested and immediately exercisable; and (iv) outplacement services not to
exceed a value of $15,000. The Company otherwise does not have any employment
agreements with any of the executive officers.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND
THE PERFORMANCE GRAPH ON PAGE 16 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS.
COMPENSATION COMMITTEE REPORT
The following is a report of the Compensation Committee of the Board of
Directors (the "Committee") describing the compensation policies applicable to
the Company's executive officers during the fiscal year ended December 31, 1997.
The Committee, comprised of directors Kuhling, McConnell and Randall, recommends
salaries, incentives and other forms of compensation for directors, officers and
other employees of the Company, administers the Company's various incentive
compensation and benefit plans (including stock plans) and recommends policies
relating to such incentive compensation and benefit plans; provided, however,
that the Stock Option Subcommittee consisting of directors Kuhling and McConnell
administers the Company's 1993 Stock Plan. Executive officers who are also
directors have not participated in deliberations or decisions involving their
own compensation.
EXECUTIVE OFFICER COMPENSATION
COMPENSATION POLICY
The goal of the Company's executive compensation policy is to ensure that an
appropriate relationship exists between executive pay and the creation of
stockholder value, while at the same time motivating and retaining key
employees. To achieve this goal, the Company's executive compensation policies
integrate annual base compensation, bonuses based on corporate and individual
performance, and stock option grants. All executive officers as well as
senior-level managerial and technical employees are eligible for and do
participate in these compensation plans.
BASE SALARIES FOR FISCAL 1997
The Compensation Committee evaluates the performance and recommends the
salary of the Company's Chief Executive Officer, Kathryn Tunstall, and all other
executive officers. Survey data is drawn from comparable companies participating
in medical device, biotechnology, and/or pharmaceutical executive compensation
surveys, several of which are included in the peer group index in the Company's
Performance Graph at page 16. Within this framework, executive salaries are
determined based on individual performance, level of responsibility, the
Company's overall salary structure, and the financial condition of the Company.
The Company's compensation policy is designed to maintain executive officer base
salaries within a range approximating the median of such salary data for like
characteristics. Generally, salaries paid to the Company's executive officers in
fiscal 1997 were within the targeted range. While it is the Committee's intent
to continue to review periodically base salary information to monitor
13
<PAGE>
competitive ranges within the applicable market, including information related
to the Company's geographic location and individual job responsibilities, it is
further the intent of the Committee to maintain a close relationship between the
Company's performance and the base salary component of its executive officers'
compensation.
STOCK OPTION AWARDS FOR FISCAL 1997
The Company's 1993 Stock Plan provides for the issuance of stock options to
officers and employees of the Company to purchase shares of the Company's Common
Stock at an exercise price equal to the fair market value of such stock on the
date of the option grant. The Company's stock options typically vest over a 48
month period in increments of 12.5% after the initial six months and 2.08% each
month thereafter. Stock options are granted to the Company's executive officers
and other employees both as a reward for past individual and corporate
performance and as an incentive for future performance. The Committee believes
that stock based performance compensation arrangements are essential in aligning
the interests of management and the stockholders in enhancing the value of the
Company's equity.
During fiscal 1997, the Committee or the Stock Option Subcommittee approved
grants of stock options to certain employees, including two executive officers,
in connection with the hiring or promotion of such employees. In November 1997,
the Committee approved grants to two nonemployee directors in connection with
their election to the Board of Directors and the execution of consultant
agreements between each of them and the Company. In addition, in January 1998,
the Committee approved grants of stock options to each Named Executive Officer
(with the exception of Mr. Blumenfeld) pursuant to the Company's 1993 Stock
Plan; provided, however, such options vest at a rate of 50% of the shares after
the initial six months and 8.33% each month thereafter.
BONUS AWARDS FOR FISCAL 1997
In conjunction with the establishment of a fiscal 1997 bonus pool early in
the fiscal year, the Committee established certain performance objectives,
including corporate profit and departmental goals, which, when met, would result
in bonus payments to employees, including executive officers, in varying amounts
based upon the degree of achievement of the established objectives and
compensation level. At the time of the printing of this report, the Committee
had not yet determined or approved bonuses for executive officers and employees
in recognition of their efforts in contributing to the Company's fiscal 1997
performance.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The fiscal 1997 compensation of Kathryn A. Tunstall, the Company's Chief
Executive Officer ("CEO"), consisted of base salary and a bonus. As with other
executive officers of the Company, the amounts of the CEO's stock option and
bonus awards are based on attainment of a combination of corporate and
individual performance objectives. Ms. Tunstall's stock options of 140,000
shares granted in May 1997 reflect the Committee's judgment as to Ms. Tunstall's
personal performance during the fiscal year as well as her role in the
attainment of the Company's overall objectives.
14
<PAGE>
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee has considered the impact of Section 162(m) of the Internal
Revenue Code adopted under the Omnibus Budget Reconciliation Act of 1993, which
section disallows a deduction for any publicly held corporation for individual
compensation exceeding $1 million in any taxable year for the CEO and four other
most highly compensated executive officers, unless such compensation meets the
requirements for the "performance-based" exception to the general rule. Since
the cash compensation paid by the Company to each of its executive officers is
expected to be well below $1 million and the Committee believes that options
granted under the Company's 1993 Stock Plan will meet the requirements for
qualifying as performance-based, the Committee believes that this section will
not affect the tax deductions available to the Company. It will be the
Committee's policy to qualify, to the extent reasonable, the executive officers'
compensation for deductibility under applicable tax law.
Submitted by the Compensation
Committee
of the Board of Directors,
Robert F. Kuhling
Thomas C. McConnell
Richard D. Randall
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the year ended December 31, 1997, the following individuals served on
the Company's Compensation Committee: Robert F. Kuhling, Thomas C. McConnell and
Richard D. Randall. Messrs. McConnell and Kuhling also served on the Stock
Option Subcommittee and have never served as officers or employees of the
Company. Mr. Randall served as the Company's Chief Executive Officer and Chief
Financial Officer from December 1992 until July 1993.
15
<PAGE>
PERFORMANCE GRAPH
The following graph compares, since the time that the Company's Common Stock
has been registered under Section 12 of the Securities Exchange Act of 1934, as
amended (beginning February 1, 1996), the cumulative total stockholder return
for the Company's Common Stock, assuming reinvestment of all dividends, to the
cumulative return over such period of The Nasdaq Stock Market - U.S. Index and
the S&P Medical Products & Supplies Index. The graph assumes that $100 was
invested on February 1, 1996, the date of the Company's initial public offering
of Common Stock, in the Common Stock of the Company and in each of the
comparative indices. The graph further assumes that such amount was initially
invested in the Common Stock of the Company at a price per share of $14, the
price at which such stock was first offered to the public by the Company on that
date.
COMPARISON OF TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF TOTAL RETURN
<S> <C> <C> <C>
Conceptus, Inc. Nasdaq Stock Market-US S&P Medical Products & Supplies
2/96 $ 101.28 $ 102.860 $ 99.125
3/96 103.85 102.987 98.251
6/96 87.18 110.805 96.839
9/96 70.51 114.723 107.387
12/96 52.56 120.718 107.957
3/97 65.38 114.235 106.573
6/97 47.44 134.841 127.674
9/97 36.22 157.621 131.900
12/97 25.64 146.836 133.606
2/98 20.83 165.552 150.706
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1992, the Company issued to Target Therapeutics, Inc. ("Target")
666,666 shares of Series A Preferred Stock with value of $0.75 per share along
with a warrant to purchase up to 1,000,000 shares of Common Stock at an exercise
price of $1.50 per share, in exchange for the grant of an exclusive license to
technology and certain supply commitments. Target converted this warrant into
892,857 shares of Common Stock in connection with the Company's initial public
offering. Mr. Randall served as President and Chief Executive Officer of Target
from June 1989 until May 1993 and as Chairman of the Board from April 1993 until
May 1994 and served on Target's Board of Directors until April 1997 when Target
was acquired by Boston Scientific Corporation ("BSC"). Pursuant to a license
agreement between the Company and Target (the "License Agreement"), Target
granted to the Company an exclusive, worldwide, royalty-free license, with the
right to sublicense, to use any of Target's technology, and to use, make and
16
<PAGE>
sell products incorporating the Target technology, in the field of reproductive
physiology (the "Conceptus field"). The Company granted back to Target an
exclusive, worldwide, royalty-free license, with the right to sublicense, to use
Conceptus technology (made up of the Company's improvements on Target technology
and the Company's own developments for use in the Conceptus field), and to use,
make and sell products incorporating the Conceptus technology, in the fields of
interventional neuroradiology, interventional radiology, interventional
cardiology and interventional electrophysiology (but excluding the Conceptus
field). These license grants apply to any technology existing on the date of the
agreement or subsequently developed through February 1, 1996. This License
Agreement will terminate upon the later of December 2002 or the expiration of
all patent rights in the Target technology. The License Agreement also includes
provisions preventing Target from engaging in certain research, marketing, sales
or acquisition activities in the Conceptus field during the life of the
agreement. In connection with such transaction, Target and Conceptus also agreed
that during the two year period following the Company's initial public offering
of securities, Target would not acquire Conceptus capital stock to the extent
that doing so would cause Target's ownership interest in the Company to exceed
the greater of 20% of the outstanding voting stock prior to such acquisition or
the percentage held by Target immediately prior to the effectiveness of the
registration statement covering the Company's initial public offering.
In March 1994, Target extended to the Company a $300,000 lease line of
credit for the lease of test, production or other machinery and equipment and
computer hardware, fixtures and furniture, on a sale and leaseback basis, with
payment terms varying between three and four years depending on the type of
equipment involved. Conceptus drew down the entire amount of the lease line and
at December 31, 1997, approximately $22,000 remains payable by the Company under
the lease line. In connection with the extension of the lease line, Target also
loaned to the Company an additional $209,000 pursuant to two promissory notes
secured by certain tangible property of the Company similar in type to that
subject to the lease line. These notes are payable over a three to four year
period (depending on the nature of the collateral involved), and bear interest
at the rate of 8.5% per annum, compounded monthly. During 1997, one such note
was paid in full and at December 31, 1997, approximately $6,000 of the principal
balance remains outstanding under the remaining note. In connection with this
lease line and secured loan transaction, the Company issued to Target a warrant
to purchase up to an additional 12,000 shares of Common Stock at an average
exercise price of $4.05 per share, which warrant was exercised in connection
with the Company's initial public offering at an aggregate price of $48,600.
In March 1994 and May 1995, as part of the Company's third and fourth rounds
of financing, Target purchased an additional aggregate of 101,102 shares of
Preferred Stock for a total of $500,000. The Company has also reimbursed Target
for certain employee benefit expenses incurred by Target on the Company's
behalf. For the year ended December 31, 1996, approximately $177,000 was paid
and no additional payments are due to Target under this arrangement. This
agreement was discontinued at December 31, 1996. Upon the closing of the
Company's initial public offering, each outstanding share of Preferred Stock was
converted into one share of Common Stock.
On April 8, 1997, Target completed a merger with BSC, pursuant to which a
wholly owned subsidiary of BSC merged with and into Target (the "Merger").
Pursuant to the Agreement and Plan of Merger Agreement, each share of common
stock of Target was converted into the right to receive 1.07 shares of common
stock of BSC. As a result of the Merger, BSC now holds all rights, preferences
and privileges to the stock, license fees and technology agreements which were
previously held by Target in connection with the Company. The Merger was a
tax-free stock-for-stock exchange for federal income tax purposes and a pooling
of interests for accounting purposes.
With the approval of a majority of the Board of Directors, on April 24,
1997, the Company loaned to Steve Bacich $100,000 pursuant to an unsecured
promissory note in connection with his relocation and hiring by the Company as
its Vice President of Research and Development. The note bears interest at a
rate of 9.5% per annum, compounded annually. All principal and accrued interest
is due in full on the earlier of March 26, 2001 or the termination of Mr.
Bacich's employment relationship with the Company.
17
<PAGE>
The Company has agreed that on each of the first four anniversaries of the
commencement of Mr. Bacich's employment with the Company, the Company will
forgive 25% of the original loan amount, plus accrued interest. The Company has
further agreed that if, prior to March 26, 2001, Mr. Bacich's employment with
the Company is involuntarily terminated without cause in connection with a
change of control of the Company, the remaining balance of the principal, plus
accrued but unpaid interest, shall be forgiven in full by the Company on the
date of such termination. At December 31, 1997, $106,518 was outstanding and
payable by Mr. Bacich.
Dr. Comite provides consulting services to the Company pursuant to a
consulting agreement, dated September 10, 1997. The Company paid Dr. Comite
$24,000 in consulting fees for services rendered during the year ended December
31, 1997.
Mr. Palefsky provides consulting services to the Company pursuant to a
consulting agreement, dated October 15, 1997. During the year ended December 31,
1997, the Company paid Mr. Palefsky $33,333.32 in consulting fees ($8,333.33 of
which are for services provided by him in January 1998).
All future transactions, including any loans from the Company to its
officers, directors, principal stockholders or affiliates, will be approved by a
majority of the Board of Directors, including a majority of the independent and
disinterested members of the Board of Directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no less favorable
to the Company than could be obtained from unaffiliated third parties.
The Company has entered into indemnification agreements with its officers
and directors containing provisions which may require the Company, among other
things, to indemnify its officers and directors against certain liabilities that
may arise by reason of their status or service as officers or directors (other
than liabilities arising from willful misconduct of a culpable nature) and to
advance their expenses incurred as a result of any proceeding against them as to
which they could be indemnified.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of the Company's
equity securities ("Reporting Persons") to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Reporting
Persons are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, all of the Section 16(a) filing requirements
with respect to the fiscal year ended December 31, 1997 have been satisfied. In
making this statement, the Company has relied solely upon review of the copies
of such reports furnished to the Company and written representations from its
officers and directors that no other reports were required.
OTHER MATTERS
The Board of Directors knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, then the persons
named in the enclosed form of proxy will vote the shares they represent in such
manner as the Board may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
Michael W. Hall
SECRETARY
Dated: April 17, 1998
18
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CONCEPTUS, INC.
1998 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Conceptus, Inc., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April 17, 1997, and hereby
appoints Kathryn A. Tunstall and Sanford Fitch, or either of them, as
proxies and attorneys-in-fact with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at
the 1998 Annual Meeting of Stockholders of Conceptus, Inc. to be held on
Tuesday, May 26, 1998, at 12:00 p.m., at Hotel Sofitel, 223 Twin Dolphin
Drive, Redwood City, California 94065, and at any adjournment(s) or
postponement(s) thereof, and to vote all shares of Common Stock that the
undersigned would be entitled to vote if then and there personally present,
on the matters set forth on the reverse side, and in their discretion, upon
such other matter or matters that may properly come before the meeting and
any adjournment(s) or any postponement(s) thereof.
This proxy will be voted as directed or, if no contrary direction is
indicated, will be voted as follows: (1) for the election of directors;
(2) for ratification of the appointment of Ernst & Young LLP as independent
auditors; and as said proxies deem advisable on such other matters as may
come before the meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE>
NOTE: This Proxy should be marked, dated and signed by the stockholder(s)
exactly as his or her name appears hereon, and returned in the enclosed
envelope.
/X/ Please mark your votes as in this example
FOR all nominees WITHHOLD authority to
listed to the right vote for all nominees
(except as indicated) listed to the right
1. Election of Nominees: Richard D. Randall
Directors / / / / Robert F. Kuhling
If you wish to withhold authority to vote for
any individual nominee, strike a line through
that nominee's name in the list to the right.
2. To ratify the appointment of Ernst & Young
LLP as the Company's independent auditors for FOR AGAINST ABSTAIN
the fiscal year ending December 31, 1998. / / / / / /
3. To vote at their discretion on any other
proposals or matters that may come before
the shareholder meeting and any
postponement(s) or adjournment(s) thereof.
SIGNATURE(S)_________________________________ DATE_____________
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED
ENVELOPE. Please sign exactly as name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, 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 an
authorized person.
