<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PERCLOSE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MERRILL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PERCLOSE, INC.
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 15, 1998
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 Wednesday, July 15,
1998, at 9:00 a.m., local time, at the offices of Wilson Sonsini Goodrich &
Rosati, 650 Page Mill Road, Palo Alto, California 94304 for the following
purposes (as more fully described in the Proxy Statement accompanying this
Notice):
1. To elect three Class III directors of the Company to serve for terms of
three years expiring upon the 2001 Annual Meeting of Stockholders or
until their successors are elected.
2. To ratify the appointment of Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending March 31, 1999.
3. 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 May 18, 1998 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
/s/ John B. Simpson
John B. Simpson, Ph.D., M.D.
CHAIRMAN OF THE BOARD OF DIRECTORS
Menlo Park, California
June 18, 1998
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
1998 ANNUAL MEETING OF STOCKHOLDERS
JULY 15, 1998
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 July 15, 1998 at 9:00 a.m., local time, or at any
adjournment thereof. The Annual Meeting will be held at the offices of Wilson
Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304. The
telephone number at the meeting location is (650) 493-9300.
These proxy solicitation materials and the Annual Report to stockholders for
the fiscal year ended March 31, 1998 (the "Last Fiscal Year"), including
financial statements, were first mailed on or about June 18, 1998 to all
stockholders entitled to vote at the Annual Meeting.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on May 18, 1998 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting. At the
Record Date, 10,739,902 shares of the Company's Common Stock, $.001 par value
(the "Common Stock"), were issued and outstanding and held of record by
approximately 254 stockholders. The approximate number of beneficial owners at
May 18, 1998 was 2,655.
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 three Class III directors, 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 1999 ANNUAL
MEETING
Proposals that are intended to be presented by stockholders of the Company
at the 1999 Annual Meeting must be received by the Company no later than
February 14, 1999 in order to be considered for inclusion in the proxy statement
and form of proxy relating to that meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's 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 1998, all filing requirements applicable to its
officers, directors and ten percent stockholders were complied with except that
(i) the Company failed to file on behalf of John B. Simpson, a timely Form 4
with respect to five sales transactions and one acquisition transaction, and
(ii) the Company failed to file on behalf of John G. McCutcheon, a timely Form 4
with respect to two acquisition transactions and one sales transaction.
Additionally, the Company became aware during fiscal year 1998 that (i) a timely
Form 4 was not filed on behalf of John B. Simpson with respect to one
acquisition transaction occurring during fiscal year 1997, and (ii) a timely
Form 4 was not filed on behalf of Henry A. Plain, Jr. with respect to three
disposition transactions occurring during fiscal year 1997.
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
April 30, 1998, 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 group. Unless otherwise indicated, officers and
directors can be reached at the Company's principal executive offices. A total
of 10,737,150 shares of the Company's Common Stock were issued and outstanding
as of April 30, 1998.
2
<PAGE>
<TABLE>
<CAPTION>
SHARES APPROXIMATE
BENEFICIALLY PERCENT OWNED
NAME AND ADDRESS OWNED (1) (2)
- --------------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
John B. Simpson, Ph.D., M.D. (3)....................................................... 1,922,001 17.9%
Putnam Investment Management, Inc...................................................... 1,108,309 10.3%
One Post Office Square
Boston, MA 02109
Deerfield Management................................................................... 600,000 5.6%
450 Lexington Avenue
Suite 1450
New York, NY 10017
Scudder Kemper Investments, Inc........................................................ 591,900 5.5%
345 Park Avenue
New York, NY 10154
James W. Vetter, M.D. (4).............................................................. 341,969 3.2%
Henry A. Plain, Jr. (5)................................................................ 294,368 2.7%
Mark A. Wan (6)........................................................................ 53,659 *
Three Arch Partners
2800 Sand Hill Road, Suite 270
Menlo Park, CA 94025
Vaughn D. Bryson (7)................................................................... 49,477 *
800 Pembroke Court
Vero Beach, FL 32963
Serge Lashutka (8)..................................................................... 13,562 *
Unocal Corporation
2141 Rosecrans Avenue, Suite 4000
El Segundo, CA 90245
Michael L. Eagle (9)................................................................... 11,562 *
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Ronald W. Songer (10).................................................................. 111,011 1.0%
Coy F. Blevins (11).................................................................... 70,915 *
John G. McCutcheon (12)................................................................ 52,778 *
Kenneth E. Ludlum (13)................................................................. 47,122 *
All directors and executive officers as a group (Includes 12 persons) (14)............. 3,034,545 28.3%
</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) Includes (i) 1,291,943 shares held by the Simpson Family Trust over which
Dr. Simpson and his wife hold voting and dispositive control, (ii) 48,000,
50,000, 50,000 and 49,600 shares held by the
3
<PAGE>
Kendall L. Simpson Trust, the Kimberly Lynn Simpson Trust, the Lindi D'Aunn
Simpson Trust and the John David Simpson Trust, respectively, over which
Dr. Simpson and his wife hold voting and dispositive control (iii) 396,294
shares held by Fox Hollow, Ltd., and (iv) 7,000 shares held by Rita Lynn
Simpson. Also includes 29,164 shares issuable upon exercise of stock
options exercisable within 60 days after April 30, 1998.
(4) Includes 24,477 shares issuable upon exercise of stock options exercisable
within 60 days after April 30, 1998.
(5) Includes 20,999 shares issuable upon exercise of stock options exercisable
within 60 days after April 30, 1998.
(6) Includes 52,811 shares issuable upon exercise of stock options exercisable
within 60 days after April 30, 1998
(7) Consists of 49,477 shares issuable upon exercise of stock options
exercisable within 60 days after April 30, 1998.
(8) Includes 11,562 shares issuable upon exercise of stock options exercisable
within 60 days after April, 1998. Consists of 11,562 shares issuable upon
exercise of stock options exercisable within 60 days after April 30, 1998.
(9) Consists of 11,562 shares issuable upon exercise of stock options
exercisable within 60 days after April 30, 1998.
(10) Includes 15,112 shares issuable upon exercise of stock options exercisable
within 60 days after April 30, 1998.
(11) Includes 38,415 shares issuable upon exercise of stock options exercisable
within 60 days after April 30, 1998.
(12) Includes 24,704 shares issuable upon exercise of stock options exercisable
within 60 days after April 30, 1998.
(13) Consists of 47,122 shares issuable upon exercise of stock options
exercisable within 60 days after April 30, 1998.
(14) Includes 335,903 shares issuable upon exercise of stock options
exercisable within 60 days after April 30, 1998.
4
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES FOR DIRECTOR
Pursuant to the Company's Restated 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. Three Class III directors are to be elected at the Annual Meeting. The
Class I and Class II directors will be elected at the Company's 1999 and 2000
Annual Meetings of Stockholders, respectively. Each of the three Class III
directors elected at the Annual Meeting will hold office until the 2001 Annual
Meeting of Stockholders or until a 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 three Class III 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 I and
Class II 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 III DIRECTORS
John B. Simpson, Ph.D., M.D. ................... 54 Chairman, Perclose, Inc. 1992
Professor, Stanford University
Henry A. Plain, Jr. ............................ 40 President and Chief Executive Officer, 1993
Perclose, Inc.
Vaughn D. Bryson................................ 60 President, Life Science Advisors, LLC 1995
CONTINUING CLASS I DIRECTORS
Michael L. Eagle................................ 51 Vice President, Manufacturing, 1996
Eli Lilly and Company
Serge Lashutka.................................. 51 Manager of Organizational Development, 1996
Unocal Corporation
CONTINUING CLASS II DIRECTORS
James W. Vetter, M.D. .......................... 41 Staff Cardiologist, Sequoia Hospital 1992
Associate Professor, Stanford University
Mark A. Wan..................................... 33 General Partner, Three Arch Partners 1992
</TABLE>
There are no family relationships among directors or executive officers of
the Company.
DR. SIMPSON co-founded Perclose in March 1992 and has served as Chairman of
the Board since the Company's inception. Dr. Simpson is a professor of clinical
medicine at Stanford University. He has served as a Staff Cardiologist at
Sequoia Hospital in Redwood City, California since 1981. Dr. Simpson founded
Advanced Cardiovascular Systems, Inc. ("ACS") in 1978 and Devices for Vascular
Intervention, Inc. ("DVI") in 1984, each of which are currently divisions of
Guidant Corporation. Dr. Simpson is a director of several privately held
companies. Dr. Simpson holds a B.S. in Agriculture from Ohio State University, a
Ph.D. in Biomedical Sciences from the University of Texas at Houston and an M.D.
from Duke University.
5
<PAGE>
MR. PLAIN joined Perclose in February 1993 as President and Chief Executive
Officer and a member of the Company's board of directors. Prior to joining
Perclose, Mr. Plain was with Eli Lilly and Company ("Lilly") for twelve years
where he held various management positions in Lilly's pharmaceutical and medical
device units in a variety of functional areas including marketing, sales,
finance, human resources, manufacturing and international operations. Mr. Plain
is a director of several private companies.
MR. BRYSON has served as a Director of Perclose since January 1995. Mr.
Bryson is currently President of Life Science Advisors, LLC. Mr. Bryson was a
thirty-two year employee of Lilly and served as President and Chief Executive
Officer of Lilly from 1991 to 1993. He was Executive Vice President from 1986
until 1991. He served as a member of Lilly's Board of Directors from 1984 until
his retirement in 1993. Mr. Bryson was Vice Chairman of Vector Securities
International from April 1994 to December 1996. Mr. Bryson is also a Director of
Ariad Pharmaceuticals, Chiron Corporation, Fusion Medical Technologies and
Quintiles Transnational Corporation. Mr. Bryson received a B.S. degree in
Pharmacy from the University of North Carolina and completed the Sloan Program
at Stanford University Graduate School of Business.
MR. EAGLE has served as a Director of Perclose since September 1996. He has
held various management positions in Lilly's pharmaceutical and medical device
units 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 ACS, a former Lilly subsidiary, serving
most recently as Senior Vice President of Manufacturing from 1985 to 1988. Mr.
Eagle is also a Director of Cardiac Pathways, Inc. Mr. Eagle holds a B.S. in
Mechanical Engineering from Kettering University and an M.S. in Industrial
Administration from Purdue University.
MR. LASHUTKA has served as a Director of Perclose since September 1996. He
is currently a Manager of Organizational Development of Unocal Corporation, a
major oil, gas and chemical company. From 1993 to 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 to 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 is 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. Dr Vetter is an associate professor of
clinical medicine at Stanford University.
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. Mr. Wan has been involved in the formation
of several privately held venture capital-backed health care companies and
serves as a director of several privately held companies. Mr. Wan holds a B.S.
in Electrical Engineering, and a B.A. in Economics from Yale University and an
M.B.A. from Stanford University.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held six meetings during the fiscal
year ended March 31, 1998. All nominees for election as a director or continuing
director attended at least 75% of the meetings
6
<PAGE>
of the Board of Directors or of the committee(s) upon which such nominee or
director served during the Last Fiscal Year.
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 Eagle. 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 one meeting 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 compensation for executive officers and
certain employees of the Company. The Compensation Committee held two meetings
during the Last Fiscal Year.
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 three nominees receiving the highest number of affirmative votes of the
shares entitled to vote on this matter shall be elected as the Class III
directors.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
NOMINEES SET FORTH HEREIN.
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as independent
auditors of the Company, to audit the financial statements of the Company for
the fiscal year ending March 31, 1999 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, 1999.
7
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return to stockholders of
the Company's Common Stock at March 31, 1998 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 reflects the change in the market price of the Company's Common Stock
relative to the noted indices at March 31, 1998 and not for any interim period.
The performance shown is not necessarily indicative of future price performance.
COMPARISON OF 29 MONTH CUMULATIVE TOTAL RETURN*
AMONG PERCLOSE, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST HEALTHCARE--EXCLUDING BIOTECHNOLOGY INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HAMBRECHT & QUIST HEALTHCARE
<S> <C> <C> <C>
PERCLOSE, INC. NASDAQ STOCK MARKET (U.S.) -EXCLUDING BIOTECHNOLOGY
11/07/95 $100 $100 $100
3/96 $181 $106 $117
3/97 $163 $117 $115
3/98 $218 $178 $165
</TABLE>
* $100 invested on 11/7/95 in stock or index, including reinvestment of
dividends. Fiscal year ending March 31.
THE INFORMATION CONTAINED IN THE STOCK PERFORMANCE GRAPH SHALL NOT BE DEEMED
TO BE "SOLICITING MATERIAL" OR TO BE FILED WITH THE SEC, NOR SHALL SUCH
INFORMATION BE INCORPORATED BY REFERENCE INTO ANY FUTURE FILING UNDER THE
SECURITIES ACT OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT THE COMPANY
SPECIFICALLY INCORPORATES IT BY REFERENCE INTO SUCH FILING.
8
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION TABLES
SUMMARY COMPENSATION TABLE. The following table sets forth certain
compensation paid by the Company to the Chief Executive Officer and the four
other most highly compensated executive officers of the Company for services
rendered during each of the fiscal years ended March 31, 1996, 1997 and 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
FISCAL --------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (# OF SHARES) COMPENSATION
- ------------------------------------------------- ----------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Henry A. Plain, Jr............................... 1998 $ 243,846 $ 21,000 62,000 $ 733(1)
President and Chief Executive Officer 1997 215,000 19,250 9,000 770(1)
1996 187,370 35,000 30,000 770(1)
Coy F. Blevins................................... 1998 140,640 20,000 21,000 20,671(2)
Vice President of Sales 1997 107,246 11,000 24,500 51,412(3)
1996 92,444 -- 7,500 51,412(4)
Kenneth E. Ludlum................................ 1998 158,404 12,000 36,000 759(1)
Vice President of Finance, 1997 127,154 11,000 84,500 1,260(1)
Chief Financial Officer 1996 -- -- -- --
John G. McCutcheon............................... 1998 146,521 20,000 31,000 733(1)
Vice President of 1997 113,090 11,000 34,500 736(1)
International Sales and Marketing 1996 95,375 -- 15,000 740(1)
Ronald W. Songer................................. 1998 142,616 12,000 21,000 692(1)
Vice President of Product Development 1997 125,577 11,000 24,500 770(1)
1996 107,260 10,000 15,000 770(1)
</TABLE>
- ------------------------
(1) Consists of life insurance premiums paid by the Company.
(2) Consists of commissions totaling $15,092, automobile allowance totaling
$4,846, and life insurance premiums totaling $733, all paid by the Company.
(3) Consists of commissions totaling $43,600, automobile allowance totaling
$6,300, and life insurance premiums totaling $1,512, all paid by the
Company.
(4) Consists of commissions totaling $43,600, automobile allowance totaling
$6,300 and life insurance premiums totaling $1,512, all paid by the Company.
9
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth
information with respect to each grant of stock options made during the fiscal
year ended March 31, 1998 to each executive officer named in the Summary
Compensation Table above:
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OPTIONS ANNUAL RATES OF STOCK
OF SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM (2)
OPTIONS IN FISCAL PRICE (1) EXPIRATION ---------------------
NAME GRANTED(1)(#) YEAR ($/SH) DATE 5% ($) 10% ($)
- ----------------------------------- ------------- --------------- ----------- --------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Henry A. Plain, Jr................. 709 0.1 20.25 05/05/07 9,029 22,882
1,291 0.1 20.25 05/05/07 16,441 41,665
3,881 0.4 24.63 07/15/07 61,684 154,830
6,119 0.6 24.63 07/15/07 97,254 244,113
3,890 0.4 19.75 01/21/08 48,316 122,443
46,110 4.7 19.75 01/21/08 572,717 1,451,377
Coy F. Blevins..................... 105 0.0 20.25 05/05/07 1,337 3,389
895 0.1 20.25 05/05/07 11,398 28,885
4,622 0.5 19.75 01/21/08 57,408 145,484
15,378 1.6 19.75 01/21/08 191,005 484,044
Kenneth E. Ludlum.................. 1,000 0.1 20.25 05/05/07 12,735 32,273
15,000 1.5 20.25 05/05/07 191,027 484,099
5,203 0.6 19.75 01/21/08 64,625 163,772
14,797 1.5 19.75 01/21/08 183,789 465,756
John G. McCutcheon................. 105 0.0 20.25 05/05/07 1,337 3,389
895 0.1 20.25 05/05/07 11,398 28,885
2,084 0.2 22.63 10/06/07 32,623 79,875
7,916 0.8 22.63 10/06/07 123,917 303,404
1,699 0.2 19.75 01/21/08 21,103 53,478
18,301 1.9 19.75 01/21/08 227,311 576,050
Ronald W. Songer................... 107 0.0 20.25 05/05/07 1,363 3,453
893 0.1 20.25 05/05/07 11,372 28,820
4,148 0.4 19.75 01/21/08 51,521 130,564
15,852 1.6 19.75 01/21/08 196,892 498,964
</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.
(3) Options generally become exercisable as to 25% of the option shares on the
first anniversary of the vesting commencement date and thereafter ratably on
a monthly basis, with full vesting occurring on the fourth anniversary of
the vesting commencement date.
10
<PAGE>
AGGREGATED 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, 1998 and the
value of unexercised options at March 31, 1998:
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED VALUE OPTIONS AT FISCAL OPTIONS AT FISCAL
ON REALIZED YEAR-END YEAR-END (2)
EXERCISE (1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME (#) ($) (#) ($)
- --------------------------------------- ----------- ----------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Henry A. Plain, Jr..................... -- -- 18,062/82,938 92,138/602,362
Coy F. Blevins......................... -- -- 36,790/41,210 795,900/337,600
Kenneth E. Ludlum...................... -- -- 37,790/82,710 253,958/618,918
John G. McCutcheon..................... 11,000 251,075 22,111/58,389 278,990/437,636
Ronald W. Songer....................... -- -- 13,700/46,800 72,916/326,209
</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 $28.31, which was the last reported sale
price of the Company's Stock on March 31, 1998.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has an employment agreement with Kenneth E. Ludlum, its Vice
President, Finance and Chief Financial Officer. The agreement provides that in
the event of a change in control of the Company, all of Mr. Ludlum's then
unvested stock options will become fully vested and that, if Mr. Ludlum's
employment were terminated voluntarily or involuntarily within twelve months
following such change in control, he will 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 does not provide for
any specified term of employment. No payments have been made to Mr. Ludlum under
such agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During the year ended March 31, 1998, Messrs. Simpson, Bryson and Wan served
as the Compensation Committee of the Company's board of directors. Dr. Simpson
holds options to purchase up to 45,000 shares of Common Stock of the Company.
Mr. Bryson holds options to purchase up to 70,000 shares of Common Stock of the
Company. Mr. Wan holds options to purchase up to 70,000 shares of 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.
11
<PAGE>
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.
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 short and long-term Company performance; and
- Emphasize reward for performance at the Company level.
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
12
<PAGE>
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. In fiscal 1998, the Company's
targeted cash bonuses ranged from 12% to 16% of base salary, with 16% 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 7%
to approximately 12% of base salary.
The annual bonus payments are based on achieving a set of specific corporate
goals established at the beginning of the fiscal year. The goals are weighted
individually with the total for all goals equal to 100%. Annual cash bonus
payments for the management team are a result of the total percentage of goals
achieved multiplied by the management level's target annual cash bonus. In
establishing bonus payments for the Last Fiscal Year, the Committee measured
progress in the Company's product development programs and clinical trials
during the year, as well as financial performance. 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 in fiscal 1998 was approximately 8%
of his base salary.
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 and other members of management and
are based upon industry and peer group surveys and level of management.
3. EQUITY (LONG TERM) 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 and
other management team members in the Last Fiscal Year based upon providing an
adequate retention incentive in the competitive arena for employment in the
Company's geographic area. Each participant was granted the same number of stock
options under this program. During the Last Fiscal Year, option awards
exercisable for up to an aggregate of 62,000 shares of Common Stock were granted
to the Chief Executive Officer. All stock options granted under this program in
the Last Fiscal Year provide for vesting over a four-year period.
Respectfully submitted,
/s/ John B. Simpson
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.
13
<PAGE>
CERTAIN TRANSACTIONS
During the fiscal year ended March 31, 1998, 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., $61,631.63 and James W. Vetter, M.D., $64,714.77.
On June 23, 1997, the Company loaned to Kenneth E. Ludlum, the Vice
President of Finance and Chief Financial Officer, the principal amount of
$200,000, with interest to accrue at a rate of 6.80% per annum, due and payable
on the earlier of June 23, 2001 or the termination of Mr. Ludlum's employment.
In March 1998, the Company assigned rights in certain technology to
Ventrica, Inc., a company formed by one of the Company's employees, Mark Foley .
In exchange for this technology assignment, the Company received 900,000 shares
of Common Stock of Ventrica, Inc. The Company also has the right to elect one
member of the Board of Directors of Ventrica, Inc.
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: June 18, 1998
14
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PERCLOSE, INC.
1998 ANNUAL MEETING OF STOCKHOLDERS
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 June 17, 1998 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 1998 Annual Meeting of Stockholders of
Perclose, Inc. to be held on July 15, 1998 at 9:00 a.m., local time, at the
offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto,
California 94304 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 III Directors
/ / FOR / / WITHHOLD
NOMINEES: JOHN B. SIMPSON, PH.D., M.D. HENRY A. PLAIN, JR. VAUGHN D. BRYSON
THE STOCKHOLDER MAY WITHHOLD AUTHORITY TO VOTE FOR EITHER NOMINEE BY STRIKING OUT THE NAME OF SUCH NOMINEE
ABOVE.
2. Proposal to ratify the appointment of Ernst & Young LLP as independent auditors of the Company for the
fiscal year ending March 31, 1999.
/ / 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 THREE NOMINATED
CLASS III DIRECTORS; (2) 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: ______________________ , 1998
___________________________________
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.
