UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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Micrus Endovascular Corporation

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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MICRUS ENDOVASCULAR CORPORATION

JOHN T. KILCOYNE

President and Chief Executive Officer

July 27, 2007

 

Dear Micrus Endovascular Corporation Stockholder:

 

We cordially invite you to attend Micrus Endovascular Corporation’s Annual Meeting of Stockholders for the 2007 fiscal year, which will be held at the Holiday Inn at 1740 North First Street, San Jose, CA 95142 on September 20, 2007 at 9:00 a.m. Pacific Time. A webcast of the Annual Meeting will be available on our website at www.micruscorp.com.

 

At this year’s Annual Meeting, stockholders will be asked to elect three (3) Class II directors and to ratify the appointment of PricewaterhouseCoopers LLP as Micrus Endovascular Corporation’s independent registered public accounting firm for the 2008 fiscal year. Additional information about the Annual Meeting is given in the attached Notice of 2007 Annual Meeting of Stockholders and Proxy Statement.

 

Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as possible. You may vote your proxy by mailing a completed proxy card or by voting over the Internet. Voting your proxy will ensure your representation at the Annual Meeting.

 

We urge you to carefully review the proxy materials and to vote FOR the director nominees and FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the current fiscal year.

 

We hope to see you at the September 20, 2007 Annual Meeting.

 

Sincerely,

 

 

John T. Kilcoyne

 

821 Fox Lane

San Jose, CA 95131

Phone: (408) 433-1400

Fax: (408) 433-1401

MICRUS ENDOVASCULAR CORPORATION

821 Fox Lane

San Jose, CA 95131

Phone: (408) 433-1400

 

NOTICE OF 2007 ANNUAL MEETING OF STOCKHOLDERS

September 20, 2007

at 9:00 a.m. Pacific Time

 

The 2007 Annual Meeting of Stockholders of Micrus Endovascular Corporation will be held on September 20, 2007 at 9:00 a.m. Pacific Time at the Holiday Inn at 1740 North First Street, San Jose, CA 95142, for the following purposes, as more fully described in the accompanying Proxy Statement:

 

1. To elect three (3) Class II directors to hold office until the 2010 Annual Meeting of Stockholders and until their successors are elected and qualified.

 

2. To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending March 31, 2008.

 

3. To transact such other business as may properly come before the meeting or any adjournments or postponements thereof.

 

Only stockholders of record at the close of business on July 25, 2007 will be entitled to notice of, and to vote at, such meeting or any adjournments or postponements thereof.

 

BY ORDER OF THE BOARD OF

DIRECTORS

 

 

John T. Kilcoyne

President and Chief Executive Officer

 

San Jose, California

July 27, 2007

 

 

 

 

 

TABLE OF CONTENTS

 

MICRUS ENDOVASCULAR CORPORATION

821 Fox Lane

San Jose, CA 95131

Phone: (408) 433-1400

 

 

PROXY STATEMENT

 

 

Voting Procedures

 

As a stockholder of Micrus, you have a right to vote on certain business matters affecting Micrus. The proposals that will be presented at the Meeting and upon which you are being asked to vote are discussed below under the “Proposals” section. Each share of Micrus common stock you own entitles you to one vote.

 

Methods of Voting

 

You may vote by mail, over the Internet or in person at the Meeting.

 

Voting by Mail.  By signing the proxy card and returning it in the prepaid and addressed envelope enclosed with proxy materials delivered by mail, you are authorizing the individuals named on the proxy card (known as “proxies”) to vote your shares at the Meeting in the manner you indicate. We encourage you to sign and return the proxy card even if you plan to attend the Meeting so that your shares will be voted if you are unable to attend the Meeting. If you received more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted.

 

Voting over the Internet.  To vote over the Internet, please follow the instructions included on your proxy card. If you vote over the Internet, you do not need to complete and mail your proxy card.

 

Voting in Person at the Meeting.  If you plan to attend the Meeting and vote in person, we will provide you with a ballot at the Meeting. If your shares are registered directly in your name, you are considered the stockholder of record and you have the right to vote in person at the Meeting. If your shares are held in the name of your broker or other nominee, you are considered the beneficial owner of shares held in street name. As a beneficial owner, if you wish to vote at the Meeting, you will need to bring to the Meeting a legal proxy from your broker or other nominee authorizing you to vote such shares.

 

Revoking Your Proxy

 

You may revoke your proxy at any time before it is voted at the Meeting. To do this, you must:

 

 

Votes Required for the Proposals

 

The votes required and the method of calculation for the proposals to be considered at the Meeting are as follows:

 

Proposal No. 1 — Election of Directors.  The three nominees receiving the highest number of votes, in person or by proxy, will be elected as directors. You may vote “for” the nominees for election as directors or you may “withhold” your vote with respect to one or more nominees. Each share of Micrus common stock you own entitles you to one vote. There is no cumulative voting with respect to the election of directors. If you return a proxy card that withholds your vote from the election of all directors, your shares will be counted as present for the purpose of determining a quorum.

 

Proposal No. 2 — Ratification of Appointment of Independent Registered Public Accounting Firm.  Ratification of the appointment of PricewaterhouseCoopers LLP for the current fiscal year requires the affirmative vote of a majority of the shares present at the Meeting, in person or by proxy. Our 2008 fiscal year began on April 1, 2007 and will end on March 31, 2008.

 

You may vote “for,” “against” or “abstain” from the proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the current fiscal year.

Quorum Requirement

 

A quorum, which is a majority of the outstanding shares entitled to vote as of the record date, July 25, 2007, must be present in order to hold the Meeting and to conduct business. Shares are counted as being present at the Meeting if you vote in person at the Meeting, over the Internet or by submitting a properly executed proxy card. Abstentions are counted as present for the purpose of determining a quorum.

 

Abstentions and Broker Non-Vote Voting

 

If you return a proxy card that indicates an abstention from voting on the proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the current fiscal year, the shares represented will be counted as present for the purpose of determining a quorum and will have the same effect as votes “against” the proposal.

 

If you sign and return your proxy card without providing your voting instructions, your shares will be voted “for” the three named nominees for directors and “for” the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the current fiscal year, and in the discretion of the proxies as to other matters that may properly come before the Meeting.

 

If your shares are held in street name and you do not instruct your broker on how to vote your shares, your brokerage firm may either leave your shares unvoted or vote your shares on routine matters. Both of our proposals should be considered routine matters. To the extent your brokerage firm votes your shares on your behalf on any of the proposals, your shares will be counted as present for the purpose of determining a quorum.

 

Voting Confidentiality

 

Proxies, ballots and voting tabulations are handled on a confidential basis to protect your voting privacy. This information will not be disclosed except as required by law.

 

Publication of Voting Results

 

Votes will be tabulated by Robert A. Stern, the inspector of elections appointed for the Meeting, who will separately tabulate affirmative and negative votes and abstentions. Preliminary voting results will be announced at the Meeting, with the final voting results posted shortly after the Meeting on our website at www.micruscorp.com and available there through October 4, 2007. Voting results will also be published in Micrus’ Quarterly Report on Form 10-Q for the second fiscal quarter of 2008 filed with the Securities and Exchange Commission (the “SEC”). After the report is filed, you may obtain a copy by:

 

 

Householding of Proxy Materials

 

In a further effort to reduce printing costs and postage fees, we have adopted a practice approved by the SEC called “householding.” Under this practice, stockholders who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of our proxy materials, unless one or more of these stockholders notifies us that he or she wishes to continue receiving individual copies. Stockholders who participate in householding will continue to receive separate proxy cards.

 

If you share an address with another stockholder and received only one set of proxy materials and would like to request a separate copy of these materials, please: (1) mail your request to Micrus Endovascular Corporation, 821 Fox Lane, San Jose, California 95131 Attn: Investor Relations, or (2) call our Investor Relations department at (408) 433-1400. Additional copies of the proxy materials will be sent within 30 days after receipt of your request. Similarly, you may also contact us if you received multiple copies of the proxy materials and would prefer to receive a single copy in the future.

Proxy Solicitation Costs

 

The proxies being solicited hereby are being solicited by our Board of Directors. The cost of soliciting proxies in the enclosed form will be borne by the Company. Our officers and regular employees may, but without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by telephone, telex, facsimile or electronic means. We will, upon request, reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation material to the beneficial owners of our stock.

 

Other Matters

 

Except for the election of three (3) Class II directors and the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the current fiscal year, Micrus’ Board does not intend to bring any other matters to be voted on at the Meeting. Micrus’ Board is not currently aware of any other matters that will be presented by others for action at the Meeting.

 

PROPOSALS

 

The following proposals will be considered at the Meeting:

 

Vice President Sales and Marketing and New Business Development at Medical Scientific, Inc., a medical device company. From July 1993 to February 1997, he served as the Director of Marketing at Microsurge, Inc., a medical device company. Mr. Kilcoyne served in various sales and marketing positions with Guidant and Boston Scientific. Mr. Kilcoyne received his B.S. from Cornell University. Mr. Kilcoyne serves as a member of the board of directors of Onset Medical Corporation and Ellipse Technologies, both are private companies.

 

Mr. Thiel has served as our director since 1999. Since December 2006, Mr. Thiel has served as President, Chief Operating Officer and Director of Devax, Inc., a medical device company. From June 2003 to December 2006, Mr. Thiel served as President, Chief Executive Officer and Director of Devax, Inc. From January 2001 until June 2002, Mr. Thiel served as President and Chief Executive Officer of Radiance Medical Systems, Inc., a medical device company. Prior to that, Mr. Thiel served as President and Chief Operating Officer of Radiance Medical Systems, Inc. from February 1999 until January 2001, and as Vice President of Operations from October 1996 until February 1999. Mr. Thiel received his B.S. in Economics from the University of Wisconsin-River Falls, and his MBA from the College of St. Thomas.

Mr. Wolf has served as our director since 2006. Mr. Wolf serves as Chief Executive Officer of Medical Caid Systems, Inc. (“MCS”), a managed care organization based in San Juan, Puerto Rico. Prior to MCS, Mr. Wolf served as the President of CIGNA Group Insurance as well as its subsidiaries, CIGNA Life Insurance Company of New York and Life Insurance Company of North America from 2002 to 2005. Mr. Wolf joined CIGNA in 2001 as a Division President to lead a new business development initiative. From 2000 to 2001, Mr. Wolf was Chairman and Chief Executive Officer of nextHR.com, an application service provider of human resource asset management services. From 1995 to 1999, Mr. Wolf held various positions with Humana, Inc., including Senior Vice President of Sales and Marketing, Chief Operating Officer, President and Chief Executive Officer. Mr. Wolf is a graduate of Penn State University and Central Michigan University.

 

Recommendation of the Board:

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF ALL NOMINEES NAMED ABOVE.

Stockholder Communications.  Our Board welcomes communications from our stockholders. Any stockholder wishing to communicate with any of our directors regarding Micrus may write to Robert A. Stern, Corporate Secretary, Micrus Endovascular Corporation, 821 Fox Lane, San Jose, CA 95131. The Corporate Secretary will forward these communications directly to the director(s). The independent directors of the Board review and approve the stockholders’ communication process periodically to ensure effective communication with stockholders.

 

Director Independence

 

Micrus has adopted standards for director independence pursuant to NASDAQ listing standards and SEC rules. An “independent director” means a person other than an officer or employee of Micrus or its subsidiaries, or any other individual having a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. To be considered independent, the Board must affirmatively determine that neither the director nor an immediate family member has had any direct or indirect material relationship with Micrus within the last three years.

 

The Board considered relationships, transactions or arrangements with each of the directors and concluded that none of the non-employee directors has any relationships with Micrus that would impair his or her independence. The Board has determined that each nominee and each member of the Board who served as a director during the last fiscal year, other than Mr. Kilcoyne, qualifies as an independent director under applicable NASDAQ listing standards and SEC rules. Mr. Kilcoyne did not meet the independence standards as he is an employee of Micrus. In addition, the Board has also determined that:

 

 

The independent directors meet regularly in executive sessions without the presence of the non-independent directors or members of Micrus’ management at least twice per year during regularly scheduled Board meeting days and from time to time as they deem necessary or appropriate. The lead independent director presides over these executive sessions.

 

Meetings and Committees of the Board of Directors

 

During Micrus’ 2007 fiscal year, the Board met seven times and took action by unanimous written consent two times during the same period. Each director attended at least 75% of all Board and applicable committee meetings during this time, with the exception of Mr. Hopkins, who attended four Board meetings. The Board has three standing committees: the Nominating and Corporate Governance Committee, the Compensation Committee and the Audit Committee. Each of these committees has a written charter approved by the Board. A copy of each charter can be found on our website at www.micruscorp.com. The current members of the committees are identified in the following table:

 

Audit Committee.  The Audit Committee held six meetings during the 2007 fiscal year. Our Audit Committee is composed of Messrs. Shammo (chairperson), Holubow and Thiel. Mr. Shammo is our Audit Committee financial expert as currently defined under applicable Securities and Exchange Commission rules and is an independent director as that term is defined under the NASDAQ listing standards. We believe that the composition of our Audit Committee meets the criteria for independence under, and the functioning of our Audit Committee complies with the applicable requirements of, the Sarbanes-Oxley Act of 2002 and the NASDAQ Global Market rules. The primary functions of our Audit Committee include:

 

 

Both our independent auditors and internal financial personnel regularly meet privately with our Audit Committee and have unrestricted access to this committee.

 

Compensation Committee.  The Compensation Committee held 13 meetings during the 2007 fiscal year. Our Compensation Committee is currently composed of Messrs. Henson (chairperson), Eagle and Wolf. Each member of our Compensation Committee is an “outside” director as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, and a “non-employee” director within the meaning of Rule 16b-3 of the rules promulgated under the Securities Exchange Act of 1934, as amended. The functions of our Compensation Committee include:

 

 

Nominating and Corporate Governance Committee.  The Nominating and Corporate Governance Committee held one meeting during the 2007 fiscal year and took one action. Our Nominating and Corporate Governance Committee is currently composed of Messrs. Henson, Holubow, Shammo, and Thiel. Each member of our Nominating and Corporate Governance Committee is an independent director as that term is defined under the NASDAQ listing standards. The functions of our Nominating and Corporate Governance Committee include:

 

Equity Compensation.  Our 2005 Equity Incentive Plan (“the 2005 Plan”) provides for the automatic grant of options to purchase shares of common stock to our non-employee directors on the date of each annual meeting of stockholders, beginning with the annual meeting held in 2006. Each such stock option grant covers 25,000 shares of our common stock for each non-employee director who first becomes a Micrus director after the date the 2005 Plan became effective (an “initial grant”), and 10,000 shares of our common stock for each non-employee director (including current non-employee directors) if he or she has served as a director for at least the previous six months (an “annual grant”). The initial grants will vest as to 1/36th of the shares on each monthly anniversary of the date of grant, subject to the director’s continued service on each relevant vesting date. The annual grants will vest as to 1/12th of the shares on each monthly anniversary of the date of grant, subject to the director’s continued service on each relevant vesting date. Generally, upon a change of control or a merger or sale of all or substantially all of our assets, the vesting of options granted to non-employee directors, who are then serving on our Board of Directors, will accelerate, and become immediately exercisable. Each option granted to a non-employee director will have an exercise price equal to the fair market value of our common stock on the date of grant and will have a ten year term.

 

The following table provides certain information concerning the compensation earned by our non-employee directors for the fiscal year ended March 31, 2007.

 

 

 

 

The aggregate number of option awards held by each non-employee director and outstanding at the end of the fiscal year ended March 31, 2007 is disclosed in the table below.

 

Mr. Edward F. Ruppel, Jr., 41, joined us in June 2003 and is our Vice President, Technical Operations. Since July 2006, Mr. Ruppel has also served as our Corporate Compliance Officer. From March 2001 to March 2003, Mr. Ruppel served as the Vice President of Operations of CBYON, Inc., a surgical navigation software and equipment company. From June 1994 to December 2000, he served as Director of Operations, among other management positions, for Biometric Imaging Inc., a subsidiary of Becton, Dickinson & Company, a medical technology company. Mr. Ruppel received his B.S. in Mechanical Engineering at the University of Rochester.

 

Mr. David A. Watson, 48, has served as our Vice President of Research and Development since October 2004. From July 1999 to September 2004, Mr. Watson acted as an engineering and program management consultant to companies in the medical device industry from August 1999 to September 2004. From June 2001 to December 2002, he served as the Director of Engineering and Product Development for Control Delivery Systems, Inc., a medical device company. From September 1995 to July 1999, he served as Director of Engineering and Program Management, Director of Engineering and Associate Director, Engineering Development at Cythotherapeutics, Inc. Mr. Watson received his B.S. in Mechanical Engineering from California Polytechnic State University.

 

Mr. Robert C. Colloton, 49, joined us in March 2005 and is our Vice President, Global Sales and Marketing. From February 2003 to March 2005, Mr. Colloton served as the Vice President, Account and Market Development of VNUS Medical Technologies, Inc., a medical device company. Prior to this position, he also held the positions of Vice President, Worldwide Marketing and International Sales from April 2001 to February 2003 and Vice President, Worldwide Sales and Marketing from June 1999 to April 2001, at VNUS Medical Technologies, Inc. From June 1997 to June 1999, Mr. Colloton served as Vice President, Sales and Marketing of TransVascular, Inc., a medical device company. From January 1993 to June 1997, he served in various sales and marketing executive positions at Cardiometrics, Inc. Mr. Colloton received his B.S. in Business Administration at Miami University in Oxford, Ohio.

 

Mr. William G. Rigas, 64, joined us in November 2004 and is our Vice President of Sales, Asia and Latin America. From October 2003 to November 2004, Mr. Rigas served as Vice President of Sales and Marketing of Bioplate Inc., a manufacturer of neurosurgical and cranial facial products. From March 2002 to November 2003, he served as Managing Partner of Neurox Inc., a medical device company. Mr. Rigas also served as the Director International Sales and Marketing of Micro Therapeutics, Inc., from March 2001 to March 2002. From November 1998 to January 2001, Mr. Rigas served as Vice President Worldwide Sales & Marketing of Radiance Medical Systems Inc., a medical device company. Mr. Rigas also served as Vice President Worldwide Sales from June 1993 to December 1997 and as Vice President Sales and Marketing from June 1991 to July 1993 of Neuro Navigational Corporation, a manufacturer of neurosurgery products. Mr. Rigas received his B.S. from California State University, Long Beach.

 

Mr. Michael R. Crompton, 49, joined us in October 2006 and serves as our Vice President of Regulatory, Clinical and Quality. From March 2006 to September 2006, Mr. Crompton was a consultant to medical device companies and served as an instructor at the University of California, Santa Cruz. From June 2005 to February 2006, he served as Vice President, Regulatory/Clinical Affairs & Quality Assurance at Spinal Kinetics, Inc.. From October 2002 to June 2005 he served as Vice President, Regulatory/Clinical Affairs & Quality Assurance and Chief Compliance Officer at Carl Zeiss Meditec, Inc. From December 2000 to September 2002 he was the Vice President, Regulatory/Clinical Affairs & Quality Assurance at CryoVasular Systems, Inc. From May 1996 to November 2000 he served as Vice President, Regulatory Affairs & Quality Assurance at Symphoix Devices, Inc. He received his bachelors degree in biochemistry and masters degree in public health (biomedical sciences) from the University of California, Berkeley and his J.D. from the University of San Francisco School of Law.

 

Ms. Carolyn M. Bruguera, 41, joined us in November 2005 and is our Vice President and General Counsel. From March 2004 to November 2005, she was a partner with Montgomery Law Group in Menlo Park, specializing in corporate and securities law, and from 2000 to 2004 she was a partner with Thoits, Love, Hershberger & McLean in Palo Alto, which she joined as an associate in 1998. She was an associate with Venture Law Group from 1995-1998 and with Heller, Ehrman, White & McAuliffe from 1993-1995. Ms. Bruguera received her J.D. from the University of California, Berkeley’s Boalt Hall School of Law, and her A.B. from Harvard University.

 

Mr. Jim B. Robbins, 43, has served as our Vice President of Finance since June 2006 and joined us as our Director of Finance in June 2004. From September 2003 through June 2004, Mr. Robbins served as the Corporate Controller for Genitope Corporation, a biotechnology company focused on the research and development of novel

immunotherapies for the treatment of cancer. From April 2000 through July 2001 Mr. Robbins was the Corporate Controller for Extricity, Inc., a leading provider of business-to-business software products. From May 1998 through April 2000, Mr. Robbins was the Corporate Controller for InVision Technologies, Inc., a leader in the development, manufacture and marketing of explosive detection systems for screening checked luggage for the aviation security industry. Mr. Robbins received his Bachelor of Business Administration with a concentration in accounting from the University of Texas at Austin and is a Certified Public Accountant.

 

Mr. Richard J. Snyder, 63, joined us in September 2006 and serves as our Vice President of Human Resources. From June 2005 to August 2006, he was the Vice President of Human Resources for a private mortgage banking company. Mr. Snyder acted as a Human Resources consultant to companies in the medical device, high tech and financial services industries from February 2002 to June 2005. Prior to 2002, Mr. Snyder served in Senior Human Resources positions, both international and domestic, with Docent Inc, Lucent Technologies, Sybase, Bank of America and Citicorp. He received a M.A. in Industrial Relations from the University of Minnesota and a B.A. in Economics from Macalester College.

 

Mr. Mitch Auran, 49, has served as our Vice President of Micrus Design Technology since December 2006. From August 2004 through November 2006, Mr. Auran served as the President and Chief Financial Officer of VasCon, LLC, a medical device company. From January 2003 through July 2004, he served as the Chief Operating Officer of Southern Specialties, Inc., a produce company. From October 2001 to December 2002, he served as Principal, Operations and Finance, of Cenetec Ventures, LLC, a technology commercialization company, including serving as the President of APA Wireless Technologies, Inc., a broadband wireless technology company funded by Cenetec from March 2002 to December 2002. From January 1997 to October 2001, Mr. Auran was involved with two medical and one software startup companies. From April 1991 through January 1997, he also served in various management position with American Hydro-Surgical Instruments and Davol, Inc. Mr. Auran received his Bachelor of Business Administration with a concentration in accounting and finance from the University of Colorado at Boulder, Colorado and his M.B.A. from the Nova Southeastern University.

 

Mr. Michael R. Henson, 61, has served as our director since 1996 and is the Chairman of our Board. Since 2000, Mr. Henson has served as a principal manager of the MedFocus Family of Funds, a group of venture capital funds focused on emerging medical technology. In addition, from October 2003 to August 2006, Mr. Henson served as a general manager of the Biostar Private Equity Investment Fund, LLC, a venture capital firm. In June 1997, Mr. Henson served as Chairman of the Board, Chief Executive Officer and President of Radiance Medical Systems, Inc., and served as a director until May 2002. Prior to that, Mr. Henson served as the Chief Executive Officer of Endosonics Corporation from 1988 to 1995, and as Chairman of the Board from 1993 to 1996. Mr. Henson also serves on the board of directors of several private medical companies and a charitable organization. He received his B.S. in Business Administration from Ball State University and his M.B.A. from Ohio State University.

 

Mr. Michael L. Eagle, 60, has served as our director since 2006. Mr. Eagle serves on the board of directors of Favrille, Inc., a publicly traded company, and a member of the board of Radiant Medical, Inc. and of Siegel-Robert, Inc., both privately held companies. Mr. Eagle is a Founding Member of Barnard Life Sciences, LLC. Mr. Eagle served as Vice President of Manufacturing for Eli Lilly and Company from 1994 through 2001 and held a number of executive management positions with Eli Lilly and its subsidiaries throughout his career there. Mr. Eagle has a degree in mechanical engineering from Kettering University and an MBA from the Krannert School of Management at Purdue University. He serves on the board of trustees of Kettering University, on the Dean’s Senior Advisory Council of the Krannert School of Management at Purdue University and on the board of directors of the Eiteljorg Museum of American Indians and Western Art.

 

Dr. L. Nelson Hopkins, 64, has served as our director since September 1998. Dr. Hopkins has served as a Professor and Chairman of Neurosurgery at the State University of New York at Buffalo since January 1989 and as a Professor of Radiology at the State University of New York at Buffalo since July 1989. He received his B.A. from Rutgers University and his M.D. from Albany Medical College.

 

Mr. Fred Holubow, 68, has served as our director since July 1999. Since January 2001, Mr. Holubow has been a Managing Director of William Harris Investors, Inc., a registered investment advisory firm. From August 1982 to January 2001, Mr. Holubow served as Vice President of Pegasus Associates, a registered investment advisory firm

he co-founded. He is a director of BioSante Pharmaceuticals, Inc, a pharmaceuticals company. He received his B.S. from the Massachusetts Institute of Technology and his MBA from the University of Chicago.

 

Mr. Francis J. Shammo, 46, has served as our director since July 2004. Since September 2005, Mr. Shammo has served as Senior Vice President and Chief Financial Officer of Verizon Business. From 2003 to September 2005, Mr. Shammo served as President of the West Area for Verizon Wireless, a telecommunications company. From 1995 to 2003, Mr. Shammo served as Vice President and Controller of Verizon Wireless. Mr. Shammo is a Certified Public Accountant. He received his B.S. in accounting from the Philadelphia College of Textiles and Science and his M.B.A. from LaSalle University.

 

Mr. Jeffrey H. Thiel, 51, has served as our director since 1999. Since December 2006, Mr. Thiel has served as President, Chief Operating Officer and Director of Devax, Inc., a medical device company. From June 2003 to December 2006, Mr. Thiel served as President, Chief Executive Officer and Director of Devax, Inc. From January 2001 until June 2002, Mr. Thiel served as President and Chief Executive Officer of Radiance Medical Systems, Inc., a medical device company. Prior to that, Mr. Thiel served as President and Chief Operating Officer of Radiance Medical Systems, Inc. from February 1999 until January 2001, and as Vice President of Operations from October 1996 until February 1999. Mr. Thiel received his B.S. in Economics from the University of Wisconsin-River Falls, and his M.B.A. from the College of St. Thomas.

 

Mr. Gregory H. Wolf, 50, has served as our director since 2006. Mr. Wolf serves as Chief Executive Officer of Medical Caid Systems, Inc. (“MCS”), a managed care organization based in San Juan, Puerto Rico. Prior to MCS, Mr. Wolf served as the President of CIGNA Group Insurance as well as its subsidiaries, CIGNA Life Insurance Company of New York and Life Insurance Company of North America from 2002 to 2005. Mr. Wolf joined CIGNA in 2001 as a Division President to lead a new business development initiative. From 2000 to 2001, Mr. Wolf was Chairman and Chief Executive Officer of nextHR.com, an application service provider of human resource asset management services. From 1995 to 1999, Mr. Wolf held various positions with Humana, Inc., including Senior Vice President of Sales and Marketing, Chief Operating Officer, President and Chief Executive Officer. Mr. Wolf is a graduate of Penn State University and Central Michigan University.

 

There are no family relationships among any of the directors or executive officers of Micrus Endovascular Corporation.

common stock or any members of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest.

 

Limitation of Liability and Indemnification Matters

 

As permitted by the Delaware general corporation law, we have included a provision in our certificate of incorporation to eliminate the personal liability of our officers and directors for monetary damages for breach or alleged breach of their fiduciary duties as officers or directors, other than in cases of fraud or other willful misconduct.

 

In addition, our Bylaws provide that we are required to indemnify our officers and directors even when indemnification would otherwise be discretionary, and we are required to advance expenses to our officers and directors as incurred in connection with proceedings against them for which they may be indemnified. We have entered into indemnification agreements with our officers and directors containing provisions that are in some respects broader than the specific indemnification provisions contained in the Delaware general corporation law. The indemnification agreements require us to indemnify our officers and directors against liabilities that may arise by reason of their status or service as officers and directors other than for liabilities arising from willful misconduct of a culpable nature, to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified, and to obtain our directors’ and officers’ insurance if available on reasonable terms. We have obtained directors’ and officers’ liability insurance in amounts comparable to other companies of our size and in our industry.

 

We believe that all related-party transactions described above were made on terms no less favorable to us than could have been otherwise obtained from unaffiliated third parties.

 

Policies for Approval of Related Transactions

 

We review all known relationships and transactions in which Micrus and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. Our legal counsel, in consultation with our finance team, is primarily responsible for developing and implementing processes and controls to obtain information from our directors and executive officers with respect to related-party transactions and then determining, based on the facts and circumstances, whether Micrus or a related-party has a direct or indirect material interest in these transactions. Members of our finance departments are instructed to inform our legal counsel of any transaction between a director and executive officer that comes to their attention. On a periodic basis, the legal and finance teams review all transactions involving payments between Micrus and any company that has a Micrus executive officer or director as an officer or director. Any related person transaction will be disclosed in the applicable SEC filing as required by the rules of the SEC. For purposes of these procedures, “related person” and “transaction” have the meanings contained in Item 404 of Regulation S-K.

 

In addition, the Audit Committee reviews and approves or ratifies all related-party transactions. As authorized in the Audit Committee’s charter, in the course of its review and approval or ratification of a related-party transaction, the committee considers:

 

 

Any member of the Audit Committee who is a related-party with respect to a transaction under review may not participate in the deliberations or vote on the approval or ratification of the transaction. However, such a director may be counted in determining the presence of a quorum at a meeting of the committee that considers the transaction.

Use of Outside Consultants

 

While we may use consultants to assist in the evaluation of executive officer compensation, the Committee has the sole authority to retain and terminate its own compensation consultant as it sees fit. The Committee also has authority to obtain advice and assistance from internal or external legal, accounting or other advisers. During the 2007 fiscal year, the Company engaged Top Five Data Services, Inc. and Radford Surveys + Consulting to provide benchmark data and overall practice reports on compensation. The Committee reviewed and considered this information when making decisions on fiscal 2007 base salaries, cash incentive awards and equity awards for executive officers.

 

Benchmarking of Compensation

 

To ensure that the base salaries, target cash incentive awards, and equity awards for executive officers are competitive, the Committee uses independent third-party executive compensation surveys to review the compensation practices of a group of companies in our industry as well as companies that we consider to be our competitors for executive talent (collectively, the “peer group”). For fiscal 2007, the independent third-party executive compensation surveys were prepared by Top Five Data Services, Inc. and Radford Surveys + Consulting and the companies in the peer group were Abaxis, Inc., Aspect Medical Systems, Inc., ev3, Inc., FoxHollow Technologies, Inc., and NuVasine, Inc. The peer group is reviewed and updated each year to ensure that the comparisons are meaningful. Several factors are considered in selecting the peer group, including product or industry, revenue level, geographic location, number of employees, and competitors for executive talent in our labor markets.

 

Pay Mix

 

The total cash compensation and the ratio of fixed base salary and target cash incentive award components are established for executives based on competitive market practices of our peer group determined from the benchmark surveys. This mix between fixed base salary and cash incentives is comparable to that for similar positions reviewed in the peer group.

 

Target Pay Positioning

 

In fiscal 2007, we believe that our base salary ranges, target cash incentives, and stock grants fell below the 75th percentile of our peer group. For fiscal 2008, we are striving to position our base salary, target cash incentives, and stock guidelines near the 75th percentile of our peer group, such that our targeted total compensation will be competitive within our labor market. An individual’s actual base salary, cash incentive award, and equity grant may fall below or above the target position based on the individual’s experience, seniority, skills, knowledge, performance, and contributions.

 

Elements of Compensation

 

Our executive compensation program has three major components: fixed base salary, short-term cash incentives, and long-term equity incentives. The Company also provides to its executives the same comprehensive retirement and health benefits program that is provided to its other full-time employees. These programs are designed to attract, retain, and motivate highly effective executives to achieve the Company’s business goals and improve stockholder value.

 

Base Salary

 

The level of base salary is established primarily on the basis of the individual’s qualifications, performance and relevant experience, the strategic goals for which he or she has responsibility, the compensation levels at similar companies and the incentives necessary to attract and retain qualified management. Base salary may be adjusted each year to take into account the individual’s performance and to maintain a competitive salary structure. Additionally, the Committee takes into account general economic and business conditions. Our performance does not play a significant role in the determination of base salary.

Base salaries for the Named Executive Officers (as defined below under the Summary Compensation Table) for fiscal 2007 and 2006, and the percentage increases between periods, are as follows:

 

 

 

 

Cash-Based Incentive Compensation

 

Cash bonuses are awarded on a discretionary basis to executive officers and are typically tied to their success in achieving designated individual goals and our success in achieving specific corporate and department goals. Each participant’s target bonus is based upon a percentage of their base salary, which percentage is determined by management level. For fiscal 2007, corporate goals included goals tied to revenue, gross margin percentage, profitability and new products revenue contribution. The target cash bonus for each executive for fiscal 2007 was 30% of base salary, which amount was multiplied 50% of the achievement of the corporate goals, 40% of the achievement of the department goals and 10% of the achievement of the individual goals to determine the actual bonus paid for the executive.

 

Cash bonuses paid to our Named Executive Officers for fiscal 2007, were as follows:

 

 

For fiscal 2008, corporate goals will include all of the fiscal 2007 goals except that they will not include new products revenue contribution. The target cash bonus for the Named Executive Officers at 100% achievement for fiscal 2008 has also been revised as follows: 60% of base salary for Mr. Kilcoyne, 50% of base salary for Mr. Stern and 35% of base salary for Mr. Colloton, Mr. Robbins and Ms. Bruguera. Each Named Executive Officer may earn up to twice the target cash bonus if the Company exceeds the corporate goals. This target cash bonus will be multiplied by 75% of the achievement of the corporate goals, 20% of the achievement of the department goals and 5% of the achievement of the individual goals to determine the actual bonus payout for each executive for fiscal 2008; provided that no cash bonuses will be paid to any executive unless 90% or more of the corporate goals are achieved.

 

In addition to the bonus that Mr. Colloton may earn pursuant to the above, Mr. Colloton was eligible to receive sales incentive bonuses for the third and fourth quarters of fiscal 2007 of between 0.0% and 0.5% of North American and European sales achieved (depending on the level of target sales achieved each quarter). However, the sales incentive bonus for each quarter is subject to nonpayment in the event that North America and Europe combined sales are less than a target level for that quarter. For fiscal year 2008, Mr. Colloton will be eligible to receive quarterly sales incentive bonuses of between 0.0% and 0.3% of North American and European sales achieved (depending on the level of target sales achieved each quarter). However, Mr. Colloton will not receive a sales incentive bonus if the gross margin percentage for North America and Europe combined sales is less than a minimum percentage and he may receive up to 110% of his sales incentive bonus if the gross margin percentage is beyond a maximum percentage.

When setting the performance goals for any of our cash bonus program, we establish goals that are “SMART” performance goals (specific, measurable, achievable, realistic and timely). We expect that our executives, through their hard-work and determination, will achieve these goals which are critical to our growth and long-term success.

 

Long-Term Incentive Compensation

 

We utilize our 2005 Equity Incentive Plan (the “Plan”) to retain our executives and other key employees and to provide them additional incentives to maximize long-term stockholder values. The Board of Directors has delegated to the Committee exclusive authority to grant equity awards to the executive officers. Awards granted under the Plan generally take the form of stock options designed to give the recipient a significant equity stake and thereby closely align his or her interests with those of our stockholders. Factors considered in determining the size of such awards include the individual’s position, his or her performance and responsibilities, and internal comparability. The Committee also has the discretion to grant restricted stock or restricted stock units under the Plan. To date, Mr. Robbins is the only executive to have received a restricted stock unit under the Plan and no executive officers have received restricted stock under the Plan.

 

Each option grant allows the executive officer to acquire shares of common stock at a fixed price per share (the closing price of our common stock on the date of grant) over a specified period of time (up to 10 years or less in the event the executive terminates service with the Company). The options typically vest over a four-year period at the rate of 25% on the one year anniversary of the vesting commencement date, and 1/48th of the total number of shares subject to the option vest each month thereafter, contingent upon the executive officer’s continued service with us. Accordingly, the option will provide a return to the executive officer only if he or she remains in our service, and then only if the market price of our common stock appreciates over the option term.

 

Defined Contribution Plans

 

We have a 401(k) plan, which allows our executive officers and other employees to defer up to 75% of their pretax salary up to the maximum allowed under Internal Revenue Service regulations. The 401(k) plan permits the Company to make discretionary matching contributions, however, the Company has not to date made any such discretionary matching contributions.

 

Change of Control and Severance Arrangements

 

Our employment agreement with Mr. Kilcoyne provides that Mr. Kilcoyne’s initial option grant of 311,110 shares will fully vest immediately upon a change of control. In the event Mr. Kilcoyne’s employment is terminated without cause at any time, whether or not there is a change of control, he will be entitled to severance payments equal to six months of his then-current base salary.

 

Our employment agreement with Mr. Stern provides that, if there is a change of control and, within the twelve month period following the change of control, Mr. Stern’s employment is terminated other than for cause or Mr. Stern resigns for good reason, Mr. Stern will receive severance payments equal to twelve months of his then-current base salary and his initial option to purchase 79,999 shares of our common stock will fully vest. Furthermore, if we terminate Mr. Sterns’ employment other than for cause at any time, whether or not there is a change of control, Mr. Stern will receive severance payments equal to twelve months of his then-current base salary, subject to certain limitations.

 

Our employment agreement with Mr. Colloton provides that, if we terminate Mr. Colloton’s employment other than for cause at any time, whether or not there is a change of control, Mr. Colloton will receive severance payments equal to six months of his then-current base salary.

 

Our employment agreement with Ms. Bruguera provides that, if there is a change of control and, within the twelve month period following the change of control, Ms. Bruguera’s employment is terminated other than for cause or Ms. Bruguera resigns for good reason, Ms. Bruguera will receive severance payments equal to six months of her then-current base salary and her initial option to purchase 50,000 shares of our common stock will fully vest. Furthermore, if we terminate Ms. Bruguera’s employment other than for cause at any time, whether or not there is a

change of control, Ms. Bruguera will receive severance payments equal to six months of her then-current base salary, subject to certain limitations.

 

Other Elements of Compensation and Perquisites

 

Medical Insurance.  We provide each Named Executive Officer with such health, dental and optical insurance as we may from time to time make available to our other full-time employees based in the same jurisdiction.

 

Life and Disability Insurance.  We provide each Named Executive Officer with such disability and/or life insurance on the same terms as to other full-time employees.

 

employment terminated without cause and without regard to a change of control on March 31, 2007, the total cash severance Mr. Kilcoyne received would have been $173,938.

 

In November 2003, we entered into an employment letter with Mr. Stern, our Executive Vice President, Chief Financial Officer and Secretary. The employment letter provides that if there is a change of control and within the twelve-month period following the change of control Mr. Stern’s employment is terminated other than for cause or Mr. Stern resigns for good reason, Mr. Stern will receive severance payments equal to twelve months of his then current base salary and his initial option to purchase 79,999 shares of our common stock shall fully vest. Furthermore, if we terminate Mr. Sterns’ employment other than for cause at any time, whether or not there is a change of control, Mr. Stern will receive severance payments equal to twelve months of his then current base salary, subject to certain limitations. If Mr. Stern’s employment terminated without cause and without regard to a change of control on March 31, 2007, the total cash severance Mr. Stern received would have been $312,800.

 

In February of 2005, we entered into an employment letter with Mr. Colloton, our Vice President of Global Sales and Marketing. Under the terms of the employment letter, if we terminate Mr. Colloton’s employment other than for cause, Mr. Colloton will receive severance payments equal to six months of his then current base salary. If Mr. Colloton’s employment terminated without cause and without regard to a change of control on March 31, 2007, the total cash severance Mr. Colloton received would have been $134,750.

 

In November 2005, we entered into an employment letter with Ms. Bruguera, our Vice President and General Counsel. The employment letter provides that if there is a change of control and within the twelve-month period following the change of control Ms. Bruguera’s employment is terminated other than for cause or Ms. Bruguera resigns for good reason, Ms. Bruguera will receive severance payments equal to six months of her then current base salary and her initial option to purchase 50,000 shares of our common stock shall fully vest. Furthermore, if we terminate Ms. Bruguera’s employment other than for cause at any time, whether or not there is a change of control, Ms. Bruguera will receive severance payments equal to six months of her then current base salary, subject to certain limitations. If Ms. Bruguera’s employment terminated without cause and without regard to a change of control on March 31, 2007, the total cash severance Ms. Bruguera received would have been $115,000.

 

The table below summarizes the additional payments we would be obligated to make in a Change of Control where the Executive’s employment terminated on March 31, 2007.

 

 

 

 

Beneficial ownership and percentage ownership are determined in accordance with the rules of the SEC and includes voting or investment power with respect to shares of stock. This information does not necessarily indicate beneficial ownership for any other purpose. Under these rules, shares of common stock issuable under stock options that are exercisable within 60 days of July 25, 2007 are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.

 

Unless otherwise indicated and subject to applicable community property laws, to our knowledge, each stockholder named in the following table possesses sole voting and investment power over their shares of common stock, except for those jointly owned with that person’s spouse. Percentage of beneficial ownership is based on 15,344,506 shares of common stock outstanding as of July 25, 2007.

 

Unless otherwise noted below, the address of each person listed on the table is c/o Micrus Endovascular Corporation, Attn: CFO, 821 Fox Lane, San Jose, California 95131.

 

 

 

 

2005 Equity Incentive Plan

 

The 2005 Plan became effective upon the IPO. The 2005 Plan provides for the issuance of stock options, stock appreciation rights, stock awards (stock and stock units) and cash awards. The Company initially reserved a total of 2,395,020 shares of its common stock for issuance under the 2005 Plan. In addition, the 2005 Plan provides for an automatic annual increase in the number of shares reserved for issuance there under on each April 1 by an amount equal to the lesser of (i) 5% of the Company’s total number of outstanding shares on the immediately preceding March 31; (ii) 666,666 shares, or (iii) a number of shares determined by the Company’s Board of Directors. The shares reserved under the 2005 Plan will also be increased as a result of the forfeiture or repurchase of shares issued under the 1998 Plan and the cancellation of unexercised options under the 1998 Plan. As of July 25, 2007, there were 3,729,976 remaining shares reserved for issuance under the 2005 Plan, of which 1,625,298 were available for grant, 2,098,012 shares were subject to outstanding options and 6,666 shares were subject to outstanding restricted stock units.

 

2005 Employee Stock Purchase Plan

 

The 2005 Employee Stock Purchase Plan (the “Purchase Plan”) became effective upon the IPO. The Purchase Plan provides employees with an opportunity to purchase the Company’s common stock through accumulated payroll deductions. The Company initially reserved a total of 222,222 shares of common stock for issuance under the Purchase Plan. The Purchase Plan provides for annual increases in the total number of shares available for issuance under this plan on April 1st of each year beginning on April 1, 2006, by a number of shares that is equal to the lesser of: (1) 2% of the outstanding shares of the Company’s common stock on the immediately preceding March 31st; (2) 222,222 shares; or (3) a lesser number determined by the Company’s Board of Directors. As of July 25, 2007, there were 548,188 shares reserved for issuance under the Purchase Plan.

One late Form 4 was filed by Beat Merz on May 23, 2006 to report the exercise by Mr. Merz of an option to purchase 2,778 shares on December 16, 2005.

 

One amended Form 4 was filed by Michael R. Henson on October 3, 2006 to report 958 shares of common stock omitted from the Form 4 report filed on June 23, 2005.

 

One late Form 4 was filed by HBM Bioventures Cayman LTD on March 1, 2007 to report the sale of 127,561 shares of common stock between January 31, 2007 and February 9, 2007.