<PAGE>
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
/X/ Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PERCLOSE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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>
PERCLOSE, INC.
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 24, 1996
------------------------
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of PERCLOSE,
INC., a Delaware corporation (the "Company") will be held on Tuesday, September
24, 1996, at 10:00 a.m., local time, at the Company's principal executive
offices, 199 Jefferson Drive, Menlo Park, California 94025 for the following
purposes (as more fully described in the Proxy Statement accompanying this
Notice):
1. To elect two Class I directors of the Company to serve for terms of
three years expiring upon the 1999 Annual Meeting of Stockholders or
until their successors are elected.
2. To approve an amendment of the Company's 1992 Stock Plan to (a) increase
the number of shares of Common Stock available for issuance thereunder by
450,000 shares and (b) provide for the grant of stock options and stock
purchase rights under the 1992 Stock Plan to non-employee directors of
the Company.
3. To ratify the appointment of Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending March 31, 1997.
4. To transact such other business as may properly come before the meeting
or any 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 July 26, 1996 are
entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting. However, to
ensure your representation at the meeting, you are urged to mark, sign, date and
return the enclosed proxy as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. If you attend the meeting, you may vote in
person even if you return a proxy.
FOR THE BOARD OF DIRECTORS
John B. Simpson, Ph.D., M.D.
CHAIRMAN OF THE BOARD OF DIRECTORS
Menlo Park, California
July 29, 1996
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED, IF YOU ATTEND THE MEETING,
YOU MAY VOTE IN PERSON, EVEN IF YOU RETURN A PROXY.
<PAGE>
PERCLOSE, INC.
------------------
PROXY STATEMENT FOR
1996 ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 24, 1996
---------------------
INFORMATION CONCERNING VOTING AND PROXY SOLICITATION
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Perclose, Inc. ("Perclose" or the "Company") for use at the Annual Meeting of
Stockholders to be held on September 24, 1996 at 10:00 a.m., local time, or at
any adjournment thereof. The Annual Meeting will be held at the Company's
principal executive offices, 199 Jefferson Drive, Menlo Park, California 94025.
The telephone number at the meeting location is (415) 473-3100.
These proxy solicitation materials and the Annual Report to stockholders for
the fiscal year ended March 31, 1996 (the "Last Fiscal Year"), including
financial statements, were first mailed on or about August 7, 1996, to all
stockholders entitled to vote at the Annual Meeting.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on July 26, 1996 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
the Record Date, 9,493,986 shares of the Company's Common Stock, $.001 par value
(the "Common Stock"), were issued and outstanding and held of record by
approximately 345 stockholders.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the meeting and voting in person. Attending the Annual
Meeting in and of itself may not constitute a revocation of a proxy.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share held as of the
record date. Stockholders will not be entitled to cumulate their votes in the
election of directors.
The cost of soliciting proxies will be borne by the Company. The Company
expects to reimburse brokerage firms and other persons representing beneficial
owners of shares for their expense in forwarding solicitation material to such
beneficial owners. Proxies may be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation, in
person or by telephone or facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
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, 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 is required under Delaware law for
approval of proposals presented to stockholders. In general, Delaware law also
provides that a quorum consists of a majority of shares entitled to vote and
present or represented by proxy at the meeting.
<PAGE>
The Inspector will treat shares that are voted "WITHHELD" or "ABSTAIN" as
being present and entitled to vote for purposes of determining the presence of a
quorum but will not be treated as votes in favor of approving any matter
submitted to the stockholders for a vote. Any proxy which is returned using the
form of proxy enclosed and which is not marked as to a particular item will be
voted for the election of the two Class I directors, for approval of the
amendment of the 1992 Stock Plan, for the confirmation of the appointment of the
designated independent auditors and, as the proxy holders deem advisable, on
other matters that may come before the meeting, as the case may be with respect
to the items not marked.
If a broker indicates on the enclosed proxy or its substitute that it does
not have discretionary authority as to certain shares to vote on a particular
matter ("Broker Non-Votes"), 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.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS TO BE PRESENTED AT 1997 ANNUAL
MEETING
Proposals that are intended to be presented by stockholders of the Company
at the 1997 Annual Meeting must be received by the Company no later than March
31, 1997 in order to be considered for inclusion in the proxy statement and form
of proxy relating to that meeting.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors and
persons who own more than ten percent of a registered class of the Company's
equity securities to file an initial report of ownership on Form 3 and changes
in ownership on Form 4 or 5 with the Securities and Exchange Commission (the
"SEC") and the National Associates of Securities Dealers, Inc. Executive
officers, directors and greater than ten percent stockholders are also required
by SEC rules to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that, with respect to fiscal year 1996, all filing requirements applicable to
its officers, directors and ten percent stockholders were complied with.
SHARE OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Common Stock of the Company as of
July 26, 1996, by (i) each person who is known to the Company to beneficially
own more than five percent of the outstanding shares of its Common Stock, (ii)
each director and nominee for election, (iii) each officer named in the Summary
Compensation Table below and (iv) all directors, nominees for election and
executive officers as a
2
<PAGE>
group. Unless otherwise indicated, officers and directors can be reached at the
Company's principal executive offices. A total of 9,493,986 shares of the
Company's Common Stock were issued and outstanding as of July 26, 1996.
<TABLE>
<CAPTION>
SHARES APPROXIMATE
BENEFICIALLY PERCENT
NAME AND ADDRESS OWNED (1) OWNED (2)
- -------------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Robert C. Bellas, Jr. (3)............................................................. 413,956 4.4%
2730 Sand Hill Road, Suite 280
Menlo Park, CA 94025
Vaughn D. Bryson (4).................................................................. 20,207 *
Vector Securities International, Inc.
1751 Lake Cook Road, Suite 350
Deerfield, IL 60015
Tomoaki Hinohara, M.D. (5)............................................................ 187,204 2.0
Henry A. Plain, Jr. (6)............................................................... 321,092 3.4
John B. Simpson, Ph.D., M.D. (7)...................................................... 2,033,078 21.4
James W. Vetter, M.D. (8)............................................................. 392,845 4.1
Mark A. Wan (9)....................................................................... 54,759 *
Three Arch Partners
2800 Sand Hill Road, Suite 270
Menlo Park, CA 94025
Michael L. Eagle...................................................................... -- --
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Serge Lashutka........................................................................ -- --
Unocal Corporation
2141 Rosecrans Avenue, Suite 4000
El Segundo, CA 90245
Randolph E. Campbell.................................................................. 52,716 *
Jeffrey M. Closs...................................................................... 89,352 *
Ronald W. Songer...................................................................... 102,910 1.1
Steve M. Van Dick (10)................................................................ 17,778 *
All directors and executive officers as a group (11).................................. 3,685,897 38.8
</TABLE>
- ------------------------
* Less than 1%.
(1) Except as indicated in the footnotes to this table, the persons or entities
named in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to
community property laws where applicable.
(2) Percent of the outstanding shares of Common Stock, treating as outstanding
all shares issuable on exercise of options held by the particular beneficial
owner that are included in the first column.
(3) Consists of 394,415 shares held by Morgenthaler Venture Partners III. Mr.
Bellas is a general partner of Morgenthaler Management Partners III, the
managing general partner of Morgenthaler Venture Partners III, and disclaims
beneficial ownership of the shares held by such entity
3
<PAGE>
except to the extent of his proportionate partnership interest therein.
Voting and investment power are shared by the general partners of
Morgenthaler Venture Partners III. Also includes 3,541 shares issuable upon
exercise of stock options exercisable within 60 days after July 26, 1996.
(4) Consists of 20,207 shares issuable upon exercise of stock options
exercisable within 60 days after July 26, 1996.
(5) Includes 6,353 shares issuable upon exercise of stock options exercisable
within 60 days after July 26, 1996.
(6) Includes 25,000 shares held by the Alexandra Marie Plain 1994 Trust and
25,000 shares held by the Henry Albert Plain, III 1994 Trust, over each of
which Mr. Plain holds voting and dispositive control.
(7) Includes (i) 1,342,857 shares held by the Simpson Family Trust over which
Dr. Simpson and his wife hold voting and dispositive control, (ii) 50,000
shares held by Kendall L. Simpson, 50,000 shares held by Kimberly Lynn
Simpson and 50,000 shares held by Lindi D'Aunn Simpson and (iii) 446,294
shares held by Fox Hollow, Ltd. and 50,000 shares held by John B. Simpson as
Custodian for John David Simpson over which Dr. Simpson holds voting and
dispositive control. Also includes 3,541 shares issuable upon exercise of
stock options exercisable within 60 days after July 26, 1996.
(8) Includes 6,353 shares issuable upon exercise of stock options exercisable
within 60 days after July 26, 1996.
(9) Includes 25,485 shares held by Three Arch Partners, L.P. and 5,733 shares
held by Three Arch Associates, L.P. Mr. Wan is a general partner of both
Three Arch Partners, L.P. and Three Arch Associates, L.P. and disclaims
beneficial ownership of the shares held by such entities except to the
extent of his proportionate partnership interest therein. Also includes
23,541 shares issuable upon exercise of stock options exercisable within 60
days after July 26, 1996. Excludes shares held by Brentwood Associates V,
L.P., in which Mr. Wan has a carried interest. Mr. Wan is a Special Limited
Partner of entities affiliated with Brentwood Associates and disclaims
beneficial ownership of all shares held by such entities, except to the
extent of his carried interest therein.
(10) Effective March 31, 1996, Mr. Van Dick resigned his positions with the
Company. Effective May 8, 1996, Kenneth E. Ludlum is the Company's Vice
President of Finance and Administration and Chief Financial Officer.
(11) Includes 394,415 shares held by Morgenthaler Venture Partners III,
1,342,857 shares held by the Simpson Family Trust, 50,000 shares held by
Kendall L. Simpson, 50,000 shares held by the John B. Simpson as Custodian
for John David Simpson, 50,000 shares held by Kimberly Lynn Simpson, 50,000
shares held by Lindi D'Aunn Simpson, 446,294 shares held by Fox Hollow,
Ltd., 25,000 shares held by the Alexandra Marie Plain 1994 Trust, 25,000
shares held by the Henry Albert Plain, III Trust, 25,485 shares held by
Three Arch Partners, L.P., 5,733 shares held by Three Arch Associates, L.P.
and 63,536 shares issuable upon exercise of stock options exercisable within
60 days after July 26, 1996. See footnotes 3-9 above.
4
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES FOR DIRECTOR
Pursuant to the Company's Certificate of Incorporation, the Company's Board
of Directors currently consists of seven persons, divided into three classes
serving staggered terms of three years. Currently there are two directors in
Class I, two directors in Class II and three directors in Class III. Two Class I
directors are to be elected at the Annual Meeting. The Class II and Class III
directors will be elected at the Company's 1997 and 1998 Annual Meetings of
Stockholders, respectively. Each of the two Class I directors elected at the
Annual Meeting will hold office until the 1999 Annual Meeting of Stockholders or
until his successor has been duly elected and qualified.
In the event that any of such persons becomes unavailable or declines to
serve as a director at the time of the Annual Meeting, the proxy holders will
vote the proxies in their discretion for any nominee who is designated by the
current Board of Directors to fill the vacancy. It is not expected that any of
the nominees will be unavailable to serve.
The names of the two Class I nominees for election to the Board of Directors
at the Annual Meeting, their ages as of the Record Date and certain information
about them are set forth below. The names of the current Class II and Class III
directors with unexpired terms, their ages as of the Record Date and certain
information about them are also set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- ------------------------------------------------ --- ----------------------------------------------- -----------
<S> <C> <C> <C>
NOMINEES FOR CLASS I DIRECTORS
Michael L. Eagle................................ 49 Vice President, Manufacturing, Eli Lilly and --
Company
Serge Lashutka.................................. 49 Manager of Organizational Development, Unocal --
Corporation
CONTINUING CLASS II DIRECTORS
James W. Vetter, M.D............................ 39 Staff Cardiologist, Sequoia Hospital 1992
Mark A. Wan..................................... 31 General Partner, Three Arch Partners 1992
CONTINUING CLASS III DIRECTORS
John B. Simpson, Ph.D., M.D..................... 52 Staff Cardiologist, Sequoia Hospital 1992
Henry A. Plain, Jr.............................. 38 President and Chief Executive Officer, 1993
Perclose, Inc.
Vaughn D. Bryson................................ 58 Vice Chairman of the Board, Vector Securities 1995
International, Inc.
</TABLE>
There are no family relationships among directors or executive officers of
the Company.
MR. EAGLE has held various management positions in the pharmaceutical and
medical device units of Eli Lilly and Company ("Lilly"), a diversified
pharmaceutical and medical products company, since 1983, and currently serves as
Vice President, Manufacturing. From June 1993 until January 1994, he served as
Vice President of pharmaceutical manufacturing for Lilly, and from January 1991
until June 1993, he served as Vice President of the vascular intervention
component of the Medical Devices and Diagnostics Division of Lilly. From 1988 to
1991, Mr. Eagle was President and Chief Executive Officer of IVAC Corporation, a
Lilly subsidiary. From 1983 to 1988, he held various positions with Advanced
Cardiovascular Systems, Inc., a former Lilly subsidiary, serving most recently
as Senior Vice
5
<PAGE>
President of Manufacturing from 1985 to 1988. Mr. Eagle holds a B.S. in
mechanical engineering from GMI Engineering and Management Institute and a M.S.
in industrial administration from Purdue University.
MR. LASHUTKA is Manager of Organizational Development of Unocal Corporation,
a major oil, gas and chemical company. From 1993 to April 1996, Mr. Lashutka was
Director, Organization Development, and Senior Consultant of Pacific Health
Systems, Inc., a managed health care organization. From 1979 to 1993, he was
Manager of the Organization Effectiveness Department at the Kaiser Permanente
Medical Care Program, a major managed health care organization operating in
California. Mr. Lashutka holds a B.A. from Ohio State University, an M.A. in
Psychology from the United States International University and an M.B.A. from
the University of California at Berkeley.
DR. VETTER is a co-founder of the Company and has served as a director of
the Company and a consultant and medical advisor to the Company since its
inception. Since 1989, Dr. Vetter has served as a Staff Cardiologist at Sequoia
Hospital in Redwood City, California.
MR. WAN has served as a Director of Perclose since September 1992. He has
been a General Partner of Three Arch Partners, a venture capital firm
specializing in health care investments since October 1993. From 1987 to 1993,
Mr. Wan held various positions at Brentwood Associates, a venture capital firm,
most recently as a General Partner. He is a director of General Surgical
Innovations, Inc.
DR. SIMPSON co-founded Perclose in March 1992 and has served as Chairman of
the Board since the Company's inception. He has served as a Staff Cardiologist
at Sequoia Hospital in Redwood City, California since 1981.
MR. PLAIN joined Perclose in February 1993 as President and Chief Executive
Officer and a member of the Company's board of directors. From 1981 until
joining the Company, Mr. Plain held various management positions in the
pharmaceutical, agricultural and medical device units of Lilly, serving most
recently as Director of Worldwide Manufacturing Human Resources from November
1992 to February 1993.
MR. BRYSON has served as a Director of Perclose since January 1995. He is
Vice Chairman of the Board of Vector Securities International, Inc., a
Chicago-based investment banking firm. Mr. Bryson spent 32 years in increasingly
senior marketing and line management positions with Lilly, serving as Executive
Vice President from 1986 until November 1991 and as President and Chief
Executive Officer from November 1991 until June 1993. He also served as a
director of Lilly from 1984 until 1993. Mr. Bryson is a director of ARIAD
Pharmaceuticals, Inc., Endovascular Technologies, Inc., Fusion Medical
Technologies, Inc., Napro Biotherapeutics, Inc. and Vector Securities
International, Inc.
Robert C. Bellas, Jr. and Tomoaki Hinohara, M.D. are not standing for
re-election.
BOARD MEETINGS, COMMITTEES AND DIRECTOR COMPENSATION
The Board of Directors of the Company held six meetings during the fiscal
year ended March 31, 1996.
The Board of Directors has an Audit Committee and a Compensation Committee.
It does not have a nominating committee or a committee performing the functions
of a nominating committee. From time to time, the Board has created various ad
hoc committees for special purposes. No such committee is currently functioning.
The Audit Committee consists of directors Wan and Bellas. Upon the election
of Mr. Bellas' successor, Mr. Bellas will cease to be member of the Audit
Committee. The Audit Committee is responsible for reviewing the results and
scope of the audit and other services provided by the Company's independent
auditors. The Audit Committee held two meetings in the last fiscal year.
The Compensation Committee consists of directors Wan, Simpson and Bryson.
The Compensation Committee reviews and makes recommendations to the Board
concerning salaries and incentive
6
<PAGE>
compensation for executive officers and certain employees of the Company. The
Compensation Committee held two meetings during the last fiscal year. Mr. Plain,
President and Chief Executive Officer of the Company, participates fully with
all other committee members in recommending salaries and incentive compensation
to the board of directors, except that he does not participate in committee
proceedings relating to his salary and compensation.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive cash compensation for services they
provide as directors. From time to time, certain directors who are not employees
of the Company have received grants of options to purchase shares of the
Company's Common Stock. Under the 1995 Director Option Plan, directors who are
not employees of the Company receive options to purchase up to 15,000 shares of
Common Stock upon joining the Board of Directors and annual grants of options to
purchase up to 5,000 shares of Common Stock. The Company does not provide
additional compensation for committee participation or special assignments of
the Board of Directors.
VOTE REQUIRED
The two nominees receiving the highest number of affirmative votes of the
shares entitled to vote on this matter shall be elected as the Class I
directors.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
NOMINEES SET FORTH HEREIN.
PROPOSAL NO. 2
APPROVAL OF THE AMENDMENT OF THE COMPANY'S 1992 STOCK PLAN
The Company's Board of Directors and stockholders have previously adopted
and approved the 1992 Stock Plan (the "Stock Plan"). A total of 1,650,000 shares
of Common Stock have been reserved for issuance under the Stock Plan, and only
165,000 shares were available for future grant as of the Record Date. In July
1996, the Board of Directors authorized an amendment to the Stock Plan, subject
to stockholder approval, to increase the shares reserved for issuance thereunder
by 450,000, bringing the total number of shares issuable under the Option Plan
to 2,100,000.
A vote for the amendment of the Stock Plan will constitute approval of both
the proposed increase in the number of shares authorized for issuance under the
Stock Plan and the proposed expansion of the designation of persons eligible to
be granted stock options and stock purchase rights under the Plan to include
directors who are not also employees of the Company ("Outside Directors"). The
amendment to make Outside Directors eligible for option or stock purchase right
grants under the Stock Plan is being proposed in light of changes in certain
rules promulgated by the Securities and Exchange Commission (the "SEC") which
will take effect on August 15, 1996. At present, the Company does not have any
plans to grant options or stock purchase rights under the Plan to Outside
Directors, but in light of the SEC rule change, the Company desires to have the
flexibility to alter its policies with respect to granting options or stock
purchase rights to Outside Directors in the future.
At the Annual Meeting, the stockholders are being requested to consider and
approve the proposed amendments to the Stock Plan to increase the number of
shares of Common Stock reserved for issuance thereunder and to provide for the
grant of options and stock purchase rights under the Stock Plan to Outside
Directors. The Board of Directors believes that the amendments are necessary to
enable the Company to, among other things, continue its policy of employee stock
ownership as a means to motivate high levels of performance and to recognize key
employee accomplishments. A summary of the Stock Plan is set forth below.
SUMMARY OF THE 1992 STOCK PLAN
GENERAL. The Stock Plan was originally adopted by the Board of Directors in
August 1992 and approved by the stockholders in August 1992. The Option Plan
authorizes the Board of Directors (the
7
<PAGE>
"Board"), or one or more committees which the Board may appoint from among its
members (the "Committee"), to grant options and rights to purchase Common Stock.
Options granted under the Option Plan may be either "incentive stock options" as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or nonstatutory stock options, as determined by the Board or the
Committee.
PURPOSE. The general purpose of the Option Plan is to attract and retain
the best available personnel for positions of substantial responsibility, to
provide additional incentive to employees and consultants and to promote the
success of the Company's business.
ADMINISTRATION. The Stock Plan may be administered by the Board or the
Committee. Subject to the other provisions of the Stock Plan, the Administrator
has the authority: (i) to determine the Fair Market Value; (ii) to select the
Service Providers to whom Options and Stock Purchase Rights may be granted under
the Stock Plan; (iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted under the Stock Plan;
(iv) to approve forms of agreement for use under the Stock Plan; (v) to
determine the terms and conditions, not inconsistent with the terms of the Stock
Plan, of any Option or Stock Purchase Right granted under the Stock Plan,
including the exercise price, the time or times when Options or Stock Purchase
Rights may be exercised (which may be based on performance criteria), any
vesting acceleration or waiver of forfeiture restrictions, and any restriction
or limitation regarding any Option or Stock Purchase Right or the shares of
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine; (vi) to reduce the
exercise price of any Option or Stock Purchase Right to the then current Fair
Market Value if the Fair Market Value of the Common Stock covered by such Option
or Stock Purchase Right shall have declined since the date the Option or Stock
Purchase Right was granted; (vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Stock Plan and awards granted
pursuant to the Stock Plan; (ix) to prescribe, amend and rescind rules and
regulations relating to the Stock Plan, including rules and regulations relating
to sub-plans established for the purpose of qualifying for preferred tax
treatment under foreign tax laws; (x) to modify or amend each Option or Stock
Purchase Right (subject to Section 15(c) of the Stock Plan), including the
discretionary authority to extend the post-termination exercisability period of
Options longer than is otherwise provided for in the Stock Plan; (xi) to allow
Optionees to satisfy withholding tax obligations by electing to have the Company
withhold from the Shares to be issued upon exercise of an Option or Stock
Purchase Right that number of Shares having a Fair Market Value equal to the
amount required to be withheld; (xii) to authorize any person to execute on
behalf of the Company any instrument required to effect the grant of an Option
or Stock Purchase Right previously granted by the Administrator; and (xiii) to
make all other determinations deemed necessary or advisable for administering
the Stock Plan.
ELIGIBILITY. The Stock Plan provides that options and rights may be granted
to the Company's employees, directors who are employees and independent
contractors. Incentive stock options may be granted only to employees. Any
optionee who owns more than 10% of the combined voting power of all classes of
outstanding stock of the Company (a "10% Stockholder") is not eligible for the
grant of an incentive stock option unless the exercise price of the option is at
least 110% of the fair market value of the Common Stock on the date of grant. A
vote for the amendment of the Stock Plan will constitute approval of the
proposed expansion of the designation of persons eligible to be granted options
under the Plan to include Outside Directors.
TERMS AND CONDITIONS OF OPTIONS. Each option granted under the Stock Plan
is evidenced by a written stock option agreement between the optionee and the
Company and is subject to the following terms and conditions:
(a) EXERCISE PRICE. The Board or the Committee determines the exercise
price of options to purchase shares of Common Stock at the time the options are
granted. However, excluding options issued to 10% Stockholders, the exercise
price under an incentive stock option must not be less than 100% of the fair
market value of the Common Stock on the date the option is granted. If the
Common
8
<PAGE>
Stock is listed on any established stock exchange or a national market system,
the fair market value shall be the closing sale price for such stock (or the
closing bid if no sales were reported) on the date the option is granted. If the
Common Stock is traded on the over-the-counter market, the fair market value
shall be the mean of the high bid and high ask prices on the date the option is
granted.
(b) FORM OF CONSIDERATION. The means of payment for shares issued upon
exercise of an option is specified in each option agreement and generally may be
made by cash, check, promissory note, other shares of Common Stock of the
Company owned by the optionee, consideration received by the Company under a
formal cashless exercise program adopted by the Company, a reduction in the
amount of any Company liability to the Optionee, or by a combination thereof.
(c) EXERCISE OF THE OPTION. Each stock option agreement will specify the
term of the option and the date when the option is to become exercisable.
However, in no event shall an option granted under the Stock Plan be exercised
more than 10 years after the date of grant. Moreover, in the case of an
incentive stock option granted to a 10% Stockholder, the term of the option
shall be for no more than five years from the date of grant. To date, all
options granted under the Stock Plan vest 25% annually, starting one year from
the date of grant.
(d) TERMINATION OF EMPLOYMENT. If an optionee's employment terminates for
any reason (other than death or permanent disability), then all options held by
such optionee under the Stock Plan expire upon the earlier of (i) such period of
time as is set forth in his or her option agreement (but not to exceed ninety
days after the termination of his or her employment in the event of an incentive
stock option) or (ii) the expiration date of the option. The optionee may
exercise all or part of his or her option at any time before such expiration to
the extent that such option was exercisable at the time of termination of
employment.
(e) PERMANENT DISABILITY. If an employee is unable to continue employment
with the Company as a result of permanent and total disability (as defined in
the Code), then all options held by such optionee under the Stock Plan shall
expire upon the earlier of (i) 12 months after the date of termination of the
optionee's employment or (ii) the expiration date of the option. The optionee
may exercise all or part of his or her option at any time before such expiration
to the extent that such option was exercisable at the time of termination of
employment.
(f) DEATH. If an optionee dies while employed by the Company, his or her
option shall expire upon the earlier of (i) 12 months after the optionee's death
or (ii) the expiration date of the option. The executors or other legal
representative or the optionee may exercise all or part of the optionee's option
at any time before such expiration to the extent that such option was
exercisable at the time of death.
(g) TERMINATION OF OPTIONS. Each stock option agreement will specify the
term of the option and the date when all or any installment of the option is to
become exercisable. Notwithstanding the foregoing, however, the term of any
incentive stock option shall not exceed 10 years from the date of grant. No
options may be exercised by any person after the expiration of its term.
(h) NONTRANSFERABILITY OF OPTIONS. Unless determined otherwise by the
Administrator, during an optionee's lifetime, his or her option(s) shall be
exercisable only by the optionee and shall not be transferable other than by
will or laws of descent and distribution.
(i) VALUE LIMITATION. If the aggregate fair market value of all shares of
Common Stock subject to an optionee's incentive stock option which are
exercisable for the first time during any calendar year exceeds $100,000, the
excess options shall be treated as nonstatutory options.
(j) OTHER PROVISIONS. The stock option agreement may contain such terms,
provisions and conditions not inconsistent with the Stock Plan as may be
determined by the Board or Committee.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION, CORPORATE TRANSACTIONS. In the
event that the stock of the Company is changed by reason of any stock split,
reverse stock split, stock dividend, recapitalization or other change in the
capital structure of the Company, appropriate proportional adjustments shall be
made in the number and class of shares of stock subject to the Stock Plan, the
9
<PAGE>
number and class of shares of stock subject to any option or right outstanding
under the Stock Plan, and the exercise price of any such outstanding option or
night. Any such adjustment shall be made upon approval of the Board and, if
required, the stockholders of the Company, whose determination shall be
conclusive. Notwithstanding the above, in connection with any merger,
consolidation, acquisition of assets or like occurrence involving the Company,
each outstanding option and right shall be assumed or an equivalent option or
right substituted by a successor corporation. If the successor corporation does
not assume the options or substitute substantially equivalent options, then the
exercisability of all outstanding options and rights shall be automatically
accelerated.
AMENDMENT, SUSPENSIONS AND TERMINATION OF THE STOCK PLAN. The Board may
amend, suspend or terminate the Stock Plan at any time; provided, however, that
stockholder approval is required for any amendment to the extent necessary to
comply with Rule 16b-3 promulgated under the Securities Exchange Act of 1934 or
Section 422 of the Code, or any similar rule or statute. In any event, the Stock
Plan will terminate automatically in 2002.
FEDERAL TAX INFORMATION. Options granted under the Stock Plan may be either
incentive stock options, as defined in Section 422 of the Code, or nonstatutory
options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares at the date of the option exercise or (ii)
the sale price of the shares. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% stockholder of the Company. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as
long-term or short-term capital gain or loss, depending on the holding period.
All other options which do not quality as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize taxable income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the optionee's purchase price, to the
extent not recognized as taxable income as described above, will be treated as
long-term or short-term capital gain or loss, depending on the holding period.
Subject to Section 162(m) of the Code, the Company will be entitled to a tax
deduction in the same amount as the ordinary income recognized by the optionee
with respect to shares acquired upon exercise of a nonstatutory option.
Stock purchase rights are taxed in substantially the same manner as
nonstatutory options.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Stock Plan, does not purport to be complete, and does not
discuss the tax consequences of the optionee's death or the income tax laws of
any municipality, state or foreign country in which an optionee may reside.
VOTE REQUIRED
The approval of the amendment of the Stock Plan requires the affirmative
vote of a majority of the shares of the Company's Common Stock present and
voting at the Annual Meeting.
10
<PAGE>
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
AMENDMENT OF THE 1992 STOCK PLAN SET FORTH HEREIN.
PROPOSAL NO. 3
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent auditors,
to audit the financial statements of the Company for the fiscal year ending
March 31, 1997 and recommends that the stockholders vote FOR confirmation of
such selection. In the event of a negative vote on such ratification, the Board
of Directors will reconsider its selection. Representatives of Ernst & Young LLP
are expected to be present at the Annual Meeting with the opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 1997.
EXECUTIVE COMPENSATION
COMPENSATION TABLES
SUMMARY COMPENSATION TABLE. The following table sets forth certain
compensation paid by the Company to the Chief Executive Officer and the four
other most highly compensated executive officers of the Company for services
rendered during each of the fiscal years ended March 31, 1995 and 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION AWARDS OF ALL OTHER
FISCAL ------------------------ OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (# OF SHARES) ($)
- ----------------------------------------------- --------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Henry A. Plain, Jr............................. 1996 $ 187,370 $ 35,000 30,000 $ 800(1)
President and Chief Executive Officer 1995 152,019 26,382 -- 18,770(2)
Randolph E. Campbell........................... 1996 105,091 10,000 15,000 850(1)
Vice President of Operations 1995 96,776 -- -- 47,309(3)
Jeffrey M. Closs............................... 1996 189,468(4) 10,000 15,000 75,125(5)
Vice President of International Sales and 1995 135,957(6) 5,000 -- 110,955(7)
Marketing, General Manager, Europe
Ronald W. Songer............................... 1996 107,260 10,000 15,000 850(1)
Vice President of Research and Development 1995 104,102 5,000 -- 732(1)
Steve M. Van Dick (8).......................... 1996 112,601 10,000 15,000 87,267(9)
Vice President of Finance and Administration 1995 3,530 -- 65,000 --
and Chief Financial Officer
</TABLE>
- ------------------------
(1) Consists of life insurance premiums paid by the Company.
(2) Consists of housing expenses totaling $18,000 and life insurance premiums
totaling $770, all paid by the Company.
11
<PAGE>
(3) Consists of relocation expenses totaling $46,577 and life insurance premiums
totaling $732, all paid by the Company.
(4) Includes commissions totaling $28,508.
(5) Includes European housing assistance payments totaling $74,375 and life
insurance premiums totaling $750, all paid by the Company.
(6) Includes commissions totaling $40,900.
(7) Consists of an international equalization allowance totaling $110,340 and
life insurance premiums totaling $655, all paid by the Company.
(8) Effective March 31, 1996, Mr. Van Dick resigned his positions with the
Company. Effective May 8, 1996, Kenneth E. Ludlum is the Company's Vice
President of Finance and Administration and Chief Financial Officer.
(9) Includes compensation in the amount of $85,991, representing the aggregate
difference between the stock option exercise price offered to Mr. Van Dick
in his employment offer and actual stock option exercise price when Mr. Van
Dick joined the Company and life insurance premiums paid by the Company
totaling $1,276.
OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth
information with respect to each grant of stock options made during the fiscal
year ended March 31, 1996 to each executive officer named in the Summary
Compensation Table above:
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES BASE FOR OPTION TERM (2)
OPTIONS IN FISCAL PRICE (1) EXPIRATION --------------------------
GRANTED (1)(#) YEAR ($/SH) DATE 5% ($) 10% ($)
---------------- ----------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Henry A. Plain, Jr............ 30,000 10.8% $ 23.50 01/31/06 $ 443,371 $ 1,123,588
Randolph E. Campbell.......... 15,000 5.4 23.50 01/31/06 221,685 561,794
Jeffrey M. Closs.............. 15,000 5.4 23.50 01/31/06 221,685 561,794
Ronald W. Songer.............. 15,000 5.4 23.50 01/31/06 221,685 561,794
Steve M. Van Dick............. 15,000 5.4 23.50 01/31/06 221,685 561,794
</TABLE>
- ------------------------
(1) The exercise price and tax withholding obligations related to exercise may
in some cases, be paid by delivery of other shares or by offset of the
shares subject to the options.
(2) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the SEC and therefore are not intended to forecast
possible future appreciation, if any, of the Company's stock price. The
Company did not use an alternative formula for a grant date valuation, as
the Company does not believe that any formula will determine with reasonable
accuracy a present value based on future unknown or volatile factors.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
VALUES. The following table sets forth, for each of the executive officers
named in the Summary Compensation Table above, information with respect to each
exercise of stock options during the fiscal year ended March 31, 1996 and the
value of unexercised options at March 31, 1996:
12
<PAGE>
AGGREGATE OPTION EXERCISES IN FISCAL 1996 AND YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE YEAR-END FISCAL YEAR-END(2)
EXERCISE REALIZED (1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME (#) ($) (#) ($)
- ------------------------------------ ----------- ------------- ------------------------ -------------------------
<S> <C> <C> <C> <C>
Henry A. Plain, Jr.................. -- -- --/30,000 --/--
Randolph E. Campbell................ -- -- --/15,000 --/--
Jeffrey M. Closs.................... -- -- --/15,000 --/--
Ronald W. Songer.................... -- -- --/15,000 --/--
Steve M. Van Dick................... 65,000 $ 780,000 --/15,000 --/--
</TABLE>
- ------------------------
(1) Based on the last reported sale price of the Company's Common Stock on the
date of exercise.
(2) Based on a fair market value of $23.50, which was the last reported sale
price of the Company's Stock on March 29, 1996.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Until his resignation effective March 31, 1996, the Company had an
employment agreement with Steve M. Van Dick, its Vice President and Chief
Financial Officer. The agreement provided that in the event of a change in
control of the Company, all of Mr. Van Dick's then unvested stock options would
become fully vested and that, if Mr. Van Dick's employment were terminated
voluntarily or involuntarily within twelve months following such change in
control, he would be entitled to receive six months severance pay in the event
of voluntary termination and twelve months severance pay in the event of
involuntary termination. The agreement did not provide for any specified term of
employment. No payments were made to Mr. Van Dick under the agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During the year ended March 31, 1996, Messrs. Simpson, Bryson, Wan and Plain
served as the compensation committee of the Company's board of directors. Mr.
Plain, the Company's President and Chief Executive Officer, ceased serving as a
member of the Compensation Committee in September 1995. During the year ended
March 31, 1996, persons and an entity affiliated with Dr. Simpson, Chairman of
the Board of Directors, purchased 200,000 shares of the Company's Preferred
Stock. In addition, Dr. Simpson holds 20,000 options to purchase Common Stock of
the Company. Mr. Bryson holds 60,000 options to purchase Common Stock of the
Company. During the year ended March 31, 1996, entities affiliated with Mr. Wan,
a Director of the Company, purchased 6,218 shares of the Company's Preferred
Stock. In addition, Mr. Wan holds 60,000 options to purchase Common Stock of the
Company. No member of the Compensation Committee has a relationship that would
constitute an interlocking relationship with executive officers or directors of
another entity.
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
THE FOLLOWING IS PROVIDED TO STOCKHOLDERS BY THE MEMBERS OF THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS:
The Compensation Committee of the Board of Directors (the "Committee"),
comprising three outside directors, is responsible for the administration of the
Company's compensation programs. These programs include base salary for
executive officers and both annual and long-term incentive compensation
programs. The Company's compensation programs are designed to provide a
competitive level of total compensation and include incentive and equity
ownership opportunities linked to the Company's performance and stockholder
return.
13
<PAGE>
COMPENSATION PHILOSOPHY
The design and implementation of the Company's executive compensation
programs are based on a series of guiding principles derived from the Company's
values, business strategy and management requirements. These principles may be
summarized as follows:
- Align the financial interests of the management team with the Company and
its 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 short- and long-term Company
performance; and
- Emphasize reward for performance at the individual, team and Company
levels.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
The Committee has 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. Since
the targeted cash compensation of each of the named executive officers is well
below the $1 million threshold and the Committee believes that any options
granted under the Company's stock option plan will meet the requirement of being
performance based under the transition provisions provided in the regulations
under Section 162(m), the Committee believes that Section 162(m) will not reduce
the tax deduction available to the Company. The Company's policy is to qualify
to the extent reasonable its executive officers' compensation for deductibility
under applicable tax laws.
COMPENSATION PROGRAM
The Company's 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. The Committee considers these
components of compensation individually as well as collectively in determining
total compensation for executive officers.
1. BASE SALARY. Each fiscal year the Committee establishes base salaries
for individual executive officers based upon (i) industry and peer group
surveys, (ii) responsibilities, scope and complexity of each position and (iii)
performance judgments as to each individual's past and expected future
contributions. The Committee reviews with the Chief Executive Officer and
approves, with appropriate modifications, an annual base salary plan for the
Company's executive officers other than the Chief Executive Officer. The
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 20% of base salary, with 20% for the chief executive officer position. Each
officer who served in an executive capacity during the Last Fiscal Year,
including the Chief Executive Officer, received a cash bonus for such service
ranging in amount from approximately 5% to approximately 19% of base salary. In
establishing bonus amounts, the Committee generally considers the performance of
each officer in his or her respective area of accountability, each officer's
respective contribution to the success of the Company and competitive data for
similar positions. In establishing bonus awards for the Last Fiscal Year, the
Committee also considered the Company's successful product development programs
and clinical trials during the year, as well as financial performance for the
Last Fiscal Year. Each officer establishes operating objectives for the
functional area of the business for which they take responsibility at the
beginning of the Company's fiscal year. At the end of the year, they are rated
on the attainment of those objectives. A portion of their annual performance
bonus also
14
<PAGE>
may be based on attainment of the overall corporate goals and objectives, which
are also determined at the beginning of the Company's fiscal year. Each officer
may receive a portion or the full amount of their targeted annual performance
based bonus. The bonus award to the Chief Executive Officer was approximately
19% of his base salary.
3. EQUITY BASED INCENTIVE COMPENSATION. Long-term incentives for the
Company's employees are provided under the Company's 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 long-term Company performance and align the financial interests of the
management team with the Company and its stockholders. The Committee established
the grants of stock options to executive officers (other than the Chief
Executive Officer) in the Last Fiscal 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 the Chief Executive Officer. During the Last
Fiscal Year, an option award of 30,000 shares of Common Stock was granted to the
Chief Executive Officer. This was the only option grant made to the Chief
Executive Officer since September 20, 1993. All stock options granted to
executive officers in the Last Fiscal Year provide for vesting over a four-year
period.
Respectfully submitted,
John B. Simpson, Ph.D., M.D.
Vaughn D. Bryson
Mark A. Wan
THE FOREGOING COMPENSATION COMMITTEE REPORT SHALL NOT BE DEEMED TO BE
"SOLICITING MATERIAL" OR TO 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.
15
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return to stockholders of
the Company's Common Stock at March 31, 1996 since November 7, 1995 (the date
the Company first became subject to the reporting requirements of the Exchange
Act) to the cumulative total return over such period of (i) "Nasdaq Stock Market
- -- U.S." index, and (ii) the Hambrecht & Quist "Healthcare, Excluding
Biotechnology" index. The graph assumes the investment of $100 on November 7,
1995 in the Company's Common Stock and each of such indices (from October 31,
1995) and reflect the change in the market price of the company's Common Stock
relative to the noted indices at March 31, 1996 and not for any interim period.
The performance shown is not necessarily indicative of future price performance.
COMPARISON OF 5 MONTH CUMULATIVE TOTAL RETURN*
AMONG PERCLOSE, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE HAMBRECHT & QUIST HEALTHCARE-EXCLUDING BIOTECHNOLOGY INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
11/7/95 3/1/96
<S> <C> <C>
Perclose Inc. 100 181
NASDAQ STOCK MARKET - US 100 106
H & Q HLTHCARE - EXCL BIOTEC 100 117
</TABLE>
* $100 INVESTED ON 11/07/95 IN STOCK OR ON 10/31/95 IN INDEX. INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING MARCH 31.
THE INFORMATION CONTAINED IN THE STOCK PERFORMANCE GRAPH SHALL NOT BE DEEMED
TO BE "SOLICITING MATERIAL" OR TO BE FILED WITH THE SEC, NOR SHALL SUCH
INFORMATION BE INCORPORATED BY REFERENCE INTO ANY FUTURE FILING UNDER THE
SECURITIES ACT OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT THE COMPANY
SPECIFICALLY INCORPORATES IT BY REFERENCE INTO SUCH FILING.
16
<PAGE>
CERTAIN TRANSACTIONS
During the fiscal year ended March 31, 1996, the Company made payments to
the following members of its Board of Directors pursuant to consulting
arrangements between the Company and such directors: John B. Simpson, Ph.D.,
M.D. ($62,609.24); James W. Vetter, M.D. ($134,286.12); and Tomoaki Hinohara
($60,029.73).
During the fiscal year ended March 31, 1996, the Company issued and sold
shares of Series D Preferred Stock at a price of $10.00 per share, respectively,
to the following persons and entities affiliated with directors.
<TABLE>
<CAPTION>
NAME SHARES
- ------------------------------------------------------------------- ---------
<S> <C>
PERSONS AND ENTITIES AFFILIATED WITH DIRECTORS
Children of and custodianship for the benefit of a child of John B.
Simpson, Ph.D., M.D. (1).......................................... 200,000
Morgenthaler Venture Partners (Robert C. Bellas, Jr.).............. 16,474
Three Arch Partners (Mark A. Wan).................................. 6,218
</TABLE>
Upon the completion of the Company's initial public offering in November
1995, each outstanding share of Series D Preferred Stock was converted into one
share of Common Stock.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the accompanying form of proxy to vote the shares they
represent as the Board of Directors may recommend.
THE COMPANY WILL MAIL WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN REQUEST
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS, SCHEDULES AND A LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO
INVESTOR RELATIONS, PERCLOSE, INC., 199 JEFFERSON DRIVE, MENLO PARK, CALIFORNIA
94025.
THE BOARD OF DIRECTORS
Dated: July 29, 1996
17
<PAGE>
PERCLOSE, INC.
1992 STOCK PLAN
(AS PROPOSED TO BE AMENDED SEPTEMBER 24, 1996)
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for positions of
substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means Perclose, Inc., a Delaware corporation.
(h) "CONSULTANT" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services and who is compensated for
such services.
(i) "DIRECTOR" means a member of the Board.
<PAGE>
(j) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination, as reported in THE WALL STREET
JOURNAL or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in THE WALL STREET JOURNAL or such other source as
the Administrator deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
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(p) "NOTICE OF GRANT" means a written or electronic notice evidencing
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
(q) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(t) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(u) "OPTIONED STOCK" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "OPTIONEE" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "PLAN" means this Perclose, Inc. 1992 Stock Plan.
(y) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant to
a grant of Stock Purchase Rights under Section 11 below.
(z) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "SECTION 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
(cc) "SERVICE PROVIDER" means an Employee, Director or
Consultant.
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(dd) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "STOCK PURCHASE RIGHT" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "SUBSIDIARY" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 2,100,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); PROVIDED, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be administered
by different Committees with respect to different groups of Service Providers.
(ii) SECTION 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) RULE 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the Plan shall be administered by the
Board or a Committee of two or more "non-employee directors" within the meaning
of Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above, the
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
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(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan,
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not limited to, the exercise price,
the time or times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be withheld.
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The Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined. All elections
by an Optionee to have Shares withheld for this purpose shall be made in such
form and under such conditions as the Administrator may deem necessary or
advisable;
(xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.
5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. LIMITATIONS.
(a) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 6(a),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall confer
upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than 75% of the Shares.
(ii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 13.
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(iii) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsection (i) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.
7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a
term of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of grant.
(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.
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(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised.
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Full payment may consist of any consideration and method of payment authorized
by the Administrator and permitted by the Option Agreement and the Plan. Shares
issued upon exercise of an Option shall be issued in the name of the Optionee
or, if requested by the Optionee, in the name of the Optionee and his or her
spouse. Until the Shares are issued (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company),
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such Shares promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that he or she is
entitled to exercise it on the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not entitled to exercise his or
her entire Option, the Shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified by the Administrator, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option at any time within twelve (12) months from the date of
termination, but only to the extent that the Optionee is entitled to exercise it
on the date of termination (and in no event later than the expiration of the
term of the Option as set forth in the Option Agreement). If, on the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the Shares covered by the unexercisable portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service Provider,
the Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Optionee would have been entitled to exercise
the Option on the date of death. If, at the time of death, the Optionee is not
entitled to exercise his or her entire Option, the Shares
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<PAGE>
covered by the unexercisable portion of the Option shall immediately revert to
the Plan. The Option may be exercised by the executor or administrator of the
Optionee's estate or, if none, by the person(s) entitled to exercise the Option
under the Optionee's will or the laws of descent or distribution. If the Option
is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines otherwise,
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) OTHER PROVISIONS. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior
to the date the Stock Purchase Right is exercised, except as provided in
Section 13 of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
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Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR ASSET
SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option or Stock Purchase Right shall
lapse as to all such Shares, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the extent it has
not been previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option and Stock Purchase Right shall be assumed
or an equivalent option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the Option or Stock
Purchase Right, the Optionee shall fully vest in and have the right to exercise
the Option or Stock Purchase Right as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an
Option or Stock Purchase Right becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in
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writing or electronically that the Option or Stock Purchase Right shall be fully
vested and exercisable for a period of fifteen (15) days from the date of such
notice, and the Option or Stock Purchase Right shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or
Stock Purchase Right shall be considered assumed if, following the merger
or sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
14. DATE OF GRANT. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Company shall obtain shareholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
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16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PERCLOSE, INC.
1996 ANNUAL MEETING OF SHAREHOLDERS
The undersigned stockholder of Perclose, Inc., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement each dated July 26, 1996 and hereby appoints Henry A. Plain, Jr.
and Kenneth E. Ludlum or either of them, 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 1996 Annual Meeting of Stockholders of
Perclose, Inc. to be held on September 24, 1996 at 10:00 a.m., local time, at
the Company's principal executive offices located at 199 Jefferson Drive, Menlo
Park, California 94025 and at any postponement or adjournment thereof, and to
vote all shares of Common Stock which the undersigned would be entitled to vote
if then and there personally present, on the matters set forth below:
<TABLE>
<S> <C> <C>
1. Election of Class I Directors
/ / FOR / / WITHHOLD
NOMINEES: MICHAEL L. EAGLE SERGE LASHUTKA
2. Proposal to approve an amendment to the 1992 Stock Plan to (a) increase the shares of Common Stock reserved for
issuance thereunder by 450,000 to a new total of 2,100,000 shares and (b) provide for the grant of stock options and
stock purchase rights under one 1992 Stock Plan to non-employee directors of one Company.
/ / FOR / / AGAINST / / ABSTAIN
3. Proposal to ratify the appointment of Ernst & Young LLP as independent auditors of the Company for the year ending
March 31, 1997.
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
SEE REVERSE SIDE
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED AS FOLLOWS: (1) FOR THE ELECTION OF THE TWO NOMINATED
CLASS I DIRECTORS; (2) FOR APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1992 STOCK
PLAN; (3) FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS
INDEPENDENT AUDITORS, AND AS THE PROXY HOLDERS DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY COME BEFORE THE MEETING.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. IF THE STOCK IS
REGISTERED IN THE NAMES OF TWO OR MORE PERSONS, EACH SHOULD SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, GUARDIANS AND ATTORNEYS-IN-FACT SHOULD ADD THEIR
TITLES. IF SIGNER IS A CORPORATION, PLEASE GIVE FULL CORPORATE NAME AND HAVE A
DULY AUTHORIZED OFFICER SIGN, STATING TITLE. IF SIGNER IS A PARTNERSHIP, PLEASE
SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
PLEASE SIGN, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
DATE: ______________________ , 1996
___________________________________
SIGNATURE(S)
___________________________________
SIGNATURE(S)
NOTE: (This Proxy should be marked,
signed by the stockholder(s)
exactly as his or her name appears
hereon, and returned promptly in
the enclosed envelope. Persons
signing in a fiduciary capacity
should so indicate. If shares are
held by joint tenants or as
community property, both should
sign.)
