<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to [ ] 240.14a-11(c) or [ ] 240.14a-12
VITALCOM INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] 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:
---------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------
<PAGE> 2
VITALCOM INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 25, 2000
TO THE STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders of
VitalCom Inc. (the "Company") to be held on Tuesday, July 25, 2000 at 1:00 p.m.,
local time, at the Company's headquarters, 15222 Del Amo Avenue, Tustin,
California 92780, for the following purposes:
(1) To elect four directors to serve until the next Annual Meeting of
Stockholders and until their successors are elected.
(2) To approve an amendment to the Company's 1996 Employee Stock Purchase
Plan to increase the number of shares of Common Stock reserved for
issuance thereunder from 300,000 shares to 450,000 shares.
(3) To ratify the appointment of Deloitte & Touche LLP as independent
public accountants of the Company for the fiscal year ending December
31, 2000.
(4) To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on June 6, 2000 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a proxy card.
Sincerely,
FRANK T. SAMPLE
Frank T. Sample
Chairman of the Board, President
and Chief Executive Officer
Tustin, California
June 30, 2000
YOUR VOTE IS IMPORTANT. IN ORDER TO ASSURE YOUR REPRESENTATION AT THE
MEETING, YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 3
VITALCOM INC.
PROXY STATEMENT FOR 2000
ANNUAL MEETING OF STOCKHOLDERS
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
VitalCom Inc. (the "Company") for use at the Annual Meeting of Stockholders to
be held on Tuesday, July 25, 2000 at 1:00 p.m., local time, or at any
adjournment thereof (the "Annual Meeting"), for the purposes set forth herein
and in the accompanying Notice of Annual Meeting of Stockholders. The Annual
Meeting will be held at the Company's headquarters, 15222 Del Amo Avenue,
Tustin, California 92780.
These proxy solicitation materials and the Company's Report on Form 10-K
for the year ended December 31, 1999 were first mailed on or about June 30, 2000
to all stockholders entitled to vote at the Annual Meeting. The Company's
principal executive offices are located at 15222 Del Amo Avenue, Tustin,
California 92780, and the Company's telephone number at that location is (714)
546-0147.
RECORD DATE AND PRINCIPAL STOCK OWNERSHIP
Stockholders of record at the close of business on June 6, 2000 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. On
the Record Date, 8,003,606 shares of the Company's Common Stock were issued and
outstanding, and held of record by approximately 43 stockholders.
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Common Stock as of the Record Date as
to (i) each person known by the Company to own beneficially more than five
percent of the outstanding shares of Common Stock, (ii) each director of the
Company, (iii) each Named Executive Officer (as defined below) of the Company
and (iv) all directors and current executive officers as a group. Unless
otherwise indicated, the address for each stockholder is care of VitalCom Inc.,
15222 Del Amo Avenue, Tustin, California 92780.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
--------------------
NAME AND ADDRESS NUMBER PERCENT
---------------- --------- -------
<S> <C> <C>
Warburg, Pincus Ventures, L.P.(1)........................ 3,915,181 45.7%
466 Lexington Avenue, 10th Floor
New York, NY 10017
ABS Capital Partners, L.P.(2)............................ 457,062 5.3
One South Street
Baltimore, MD 21202
Vertical Fund Associates, L.P.(3)........................ 539,582 6.3
18 Bank Street
Summit, NJ 07901
Frank T. Sample(4)....................................... 477,187 5.7
Jonathan S. Leff(5)...................................... 3,915,181 45.7
Jack W. Lasersohn(6)..................................... 755,782 8.8
Timothy T. Weglicki(7)................................... 457,062 5.3
Warren J. Cawley(8)...................................... 114,332 1.4
John R. Graham(9)........................................ 195,917 2.4
Shelley B. Thunen(10).................................... 49,117 *
Patric L. Wiesmann(11)................................... 20,000 *
All current executive officers and directors as a Group
(8 persons)(12)........................................ 5,960,531 69.5
</TABLE>
<PAGE> 4
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options, warrants and convertible notes currently exercisable or
convertible, or exercisable or convertible within 60 days of June 6, 2000
are deemed outstanding for computing the percentage of the person holding
such option but are not outstanding for purposes of computing the
percentage of any other person. Except as indicated by footnote, and
subject to community property laws where applicable, the persons named in
the table above have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them.
---------------
* Less than one percent of the outstanding Common Stock.
(1) The sole general partner of Warburg, Pincus Ventures, L.P. ("Ventures") is
Warburg, Pincus & Co., a New York general partnership ("WP"). E.M. Warburg,
Pincus & Co., LLC, a New York limited liability company ("EMW LLC"),
manages Ventures. The members of EMW LLC are substantially the same as the
partners of WP. Lionel I. Pincus is the managing partner of WP and the
managing member of EMW LLC and may be deemed to control both WP and EMW
LLC. WP has a 15% interest in the profits of Ventures as the general
partner, and also owns approximately 1.5% of the limited partnership
interests in Ventures. Jonathan S. Leff, a director of the Company, is a
Managing Director and a member of EMW LLC and a general partner of WP. As
such, Mr. Leff may be deemed to have an indirect pecuniary interest (within
the meaning of Rule 16a-1 under the Exchange Act) in an indeterminate
portion of the shares beneficially owned by Ventures and WP. See Note 5
below.
(2) The sole general partner of ABS Capital Partners, L.P. ("ABS Capital") is
ABS Partners, L.P. ("ABS Partners"). Timothy T. Weglicki, a director of the
Company, is a general partner of ABS Partners.
(3) The sole general partner of Vertical Fund Associates, L.P. ("Vertical
Fund") is The Vertical Group, Inc. ("Vertical"). Jack W. Lasersohn, a
director of the Company, is a Managing Director of Vertical.
(4) Includes 438,750 shares issuable upon exercise of options exercisable
within 60 days of the Record Date.
(5) All of the shares indicated as owned by Mr. Leff are owned directly by
Ventures and are included because of his affiliation with Ventures. Mr.
Leff disclaims "beneficial ownership" of these shares within the meaning of
Rule 13d-3 under the Exchange Act. See Note 1 above.
(6) Of the shares indicated as owned by Mr. Lasersohn, 216,200 are owned
directly by Vertical Life Sciences, L.P., of which Vertical is the sole
general partner, and 539,582 are owned directly by Vertical Fund, and all
of such shares are included because of Mr. Lasersohn's affiliation with
those entities. As such, Mr. Lasersohn may be deemed to have an indirect
pecuniary interest in an indeterminate portion of the shares beneficially
owned by Vertical Life Sciences, L.P., Vertical Fund and Vertical. Mr.
Lasersohn disclaims "beneficial ownership" of these shares within the
meaning of Rule l3d-3 under the Exchange Act.
(7) All of the shares indicated as owned by Mr. Weglicki are owned directly by
ABS Capital and are included because of his affiliation with that entity.
As such, Mr. Weglicki may be deemed to have an indirect pecuniary interest
in an indeterminate portion of the shares beneficially owned by ABS Capital
and ABS partners. Mr. Weglicki disclaims "beneficial ownership" of these
shares within the meaning of Rule 13d-3 under the Exchange Act.
(8) Includes 46,162 shares issuable upon exercise of stock options exercisable
within 60 days of the Record Date.
(9) Includes 54,759 shares issuable upon exercise of stock options exercisable
within 60 days of the Record Date.
(10) Includes 47,641 shares issuable upon exercise of stock options exercisable
within 60 days of the Record Date. Ms. Thunen stepped down from her
position as Vice President, Finance and Chief Financial Officer in January
2000.
(11) Includes 14,688 shares issuable upon exercise of stock options exercisable
within 60 days of the Record Date. Mr. Wiesmann resigned from his position
of Vice President, Sales in April 2000.
(12) Includes 572,484 shares issuable upon exercise of stock options exercisable
within 60 days of the Record Date and 3,915,181, 457,062, 539,582 and
216,200 shares owned directly by Ventures, ABS, Vertical Fund and Vertical
Life Sciences, L.P., respectively. See notes 5, 6 and 7 above.
2
<PAGE> 5
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 Annual Meeting and voting in person.
VOTING AND SOLICITATION
Each holder of Common Stock is entitled to one vote for each share of stock
held on all matters to be voted on by the stockholders. In all matters other
than the election of directors, the affirmative vote of the majority of shares
present in person or represented by proxy at the meeting and entitled to vote on
the subject matter shall be the act of the stockholders. Directors shall be
elected by a plurality of the votes of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote on the election
of directors.
This solicitation of proxies is made by the Company, and all related costs
will be borne by the Company. In addition, the Company may reimburse brokerage
firms and other persons representing beneficial owners of stock for their
expenses in forwarding solicitation material to such beneficial owners. Proxies
may also be solicited by certain of the Company's directors, officers and
regular employees, without additional compensation, personally or by telephone,
telegram or facsimile.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2001 Annual Meeting of Stockholders must
be received by the Company no later than March 2, 2001 in order that they may be
considered for inclusion in the notice and proxy statement relating to that
meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
A board of four directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's four (4) nominees named below, all of whom are presently
directors of the Company. In the event that any nominee of the Company is unable
or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. The Company is not aware of any nominee
who will be unable or will decline to serve as a director. In the event that
additional persons are nominated for election as directors, the proxy holders
intend to vote all proxies received by them in such a manner as will assure the
election of as many of the nominees listed below as possible, and, in such
event, the specific nominees to be voted for will be determined by the proxy
holders. The term of office for each person elected as a director will continue
until the next Annual Meeting or until a successor has been elected and
qualified.
VOTE REQUIRED
If a quorum is present, the four (4) nominees receiving the highest number
of votes will be elected to the Board of Directors. Votes withheld from any
nominee, abstentions and shares held by brokers that are present but not voted
because the brokers are prohibited from exercising discretionary authority
(broker non-votes) will be counted only for the purpose of determining if a
quorum is present.
3
<PAGE> 6
NOMINEES
The names of the nominees and certain information about them as of the
Record Date are set forth below:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE POSITION WITH THE COMPANY DIRECTOR SINCE
--------------- --- ------------------------- --------------
<S> <C> <C> <C>
Frank T. Sample................... 54 President, Chief Executive Officer 1997
and Chairman of the Board of
Directors
Jonathan S. Leff.................. 31 Director 1999
Jack W. Lasersohn................. 47 Director 1995
Timothy T. Weglicki............... 48 Director 1995
</TABLE>
FRANK T. SAMPLE has served as a director of the Company and as its
President and Chief Executive Officer since October 1997. In February 1998, Mr.
Sample was appointed Chairman of the Board. From August 1997 to October 1997,
Mr. Sample served as Executive Vice President at IDX Systems Corporation, a
leading provider of information technology to the healthcare industry. From
December 1990 to July 1997, when PHAMIS, Inc., a provider of patient-centered
medical record information systems, was merged into IDX Systems Corporation, Mr.
Sample served as President and Chief Executive Officer of PHAMIS, Inc. He is a
director of IDX Systems Corporation. Mr. Sample holds a B.B.A. in Business
Administration from Cleveland State University.
JONATHAN S. LEFF has served as a director of the Company since September
1999. Since 1996, Mr. Leff has been employed as a Managing Director of E.M.
Warburg Pincus & Co., LLC, a private investment firm. He is currently a director
of Visible Genetics, Inc. and Intermune Pharmaceuticals, Inc., as well as
several privately held companies. Mr. Leff holds a B.A. degree from Harvard
University and an MBA from Stanford University.
JACK W. LASERSOHN has served as a director of the Company since June 1995.
He has been a General Partner of The Vertical Group, L.P., a private venture
capital and investment management firm, since its formation in 1989 by former
principals of F. Eberstadt & Co., Inc. From 1981 to 1989, he was a Vice
President and later a Managing Director of the venture capital division of F.
Eberstadt & Co., Inc. Mr. Lasersohn also serves as a director of Cardiothoracic
Systems, Inc., UroQuest Medical Corporation and Massimo Corporation and of a
number of privately held healthcare companies. He holds a B.S. and an M.A. in
Physics from Tufts University, and a J.D. from Yale University.
TIMOTHY T. WEGLICKI has served as a director of the Company since June
1995. Since December 1993, he has been principally employed as a General Partner
of ABS Partners, L.P., the General Partner of ABS Capital Partners, L.P., a
private equity fund and related entities. Prior to that date, he was principally
employed as a Managing Director of Alex. Brown & Sons Incorporated where he
established and headed its Capital Markets Group. Mr. Weglicki holds an M.B.A.
from the Wharton Graduate School of Business and a B.A. from Johns Hopkins
University. Mr. Weglicki is a director of ElderTrust, a healthcare real estate
investment trust, and a number of privately held healthcare companies.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six (6) meetings
during fiscal 1999. No director attended fewer than 75% of the meetings of the
Board of Directors and committees thereof, if any, upon which such director
served. The Board of Directors has an Audit Committee and Compensation
Committee.
The Audit Committee was established in June 1995 and is responsible for
reviewing the results and scope of the audit and other services provided by the
Company's independent auditors. The Audit Committee currently consists of
directors Timothy T. Weglicki, Jack W. Lasersohn, and Jonathan S. Leff. The
Audit Committee met five (5) times in fiscal 1999.
The Executive Compensation Committee and the Option Plan Committee were
combined into one committee in 1997 (the "Compensation Committee"). The
Compensation Committee is responsible for the
4
<PAGE> 7
administration of the Company's 1993 Stock Option Plan, the Company's 1996 Stock
Option Plan, the Company's 1996 Director Option Plan and any future option plans
of the Company, as well as determining which persons are to be granted options
under such plans and the number of shares subject to such options. The
Compensation Committee consists of directors Jonathan S. Leff and Timothy T.
Weglicki. The Compensation Committee met seven (7) times in fiscal 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was formed in December 1997 and the members of
the Compensation Committee are Mr. Leff and Mr. Weglicki. Neither of these
individuals, and Patrick T. Hackett, Mr. Leff's predecessor on the Compensation
Committee, was at any time during the fiscal year ended December 31, 1999, or at
any other time, an officer or employee of the Company. No member of the
Compensation Committee of the Company's Board serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or Compensation
Committee.
DIRECTOR COMPENSATION
Directors of the Company do not receive any fees for serving as such, nor
do any directors receive any fees for serving on any committee of the Board of
Directors. Directors are reimbursed by the Company for their out-of-pocket
expenses in connection with attending any board or committee meeting. In
addition, the directors participate in the Company's 1996 Director Option Plan
(the "Director Plan"). The Director Plan provides for the grant of an option to
purchase a number of shares of Common Stock to be determined by the incumbent
Board of Directors to each non-employee director, and each outside director is
automatically granted an option to purchase 4,000 shares of Common Stock each
year, provided he or she is then a non-employee director and he or she has
served on the Board of Directors for at least the preceding six months. The
first options and each subsequent option have terms of ten years. One quarter of
the shares subject to a first option will vest one year after its date of grant
and an additional one-quarter will vest at the end of each year thereafter,
provided that the optionee continues to serve as a director. Similarly,
one-quarter of the shares subject to a subsequent option will vest one year
after the date of grant and an additional one-quarter will vest at the end of
each year thereafter, provided that the optionee continues to serve as a
director. The exercise price of such options will be 100% of the fair market
value per share of the Company's Common Stock on the date of grant.
PROPOSAL TWO
AMENDMENT TO THE 1996 EMPLOYEE STOCK PURCHASE PLAN
PROPOSED AMENDMENT
The 1996 Employee Purchase Plan (the "Purchase Plan") was adopted by the
Board of Directors in January 1996 and approved by the stockholders in February
1996. A total of 150,000 shares of Common Stock were initially reserved for
issuance under the Purchase Plan. In February 1998, the Board of Directors
approved amendments to the Purchase Plan (i) to increase the number of shares
reserved for issuance thereunder by 150,000 shares from 150,000 shares to a
total of 300,000 shares, and (ii) to make other administrative changes. In
January 2000, the Board of Directors approved amendments to the Purchase Plan to
increase the number of shares reserved for issuance thereunder by 150,000 shares
from 300,000 shares to a total of 450,000 shares.
The Company's stockholders are requested to approve the amendments to the
Purchase Plan to increase the number of shares reserved for issuance thereunder
by 150,000 shares from 300,000 shares to a total of 450,000 shares.
5
<PAGE> 8
REQUIRED VOTE; RECOMMENDATION OF BOARD OF DIRECTORS
The affirmative vote of the majority of the outstanding shares of Common
Stock entitled to vote will be required to approve the amendment to the Purchase
Plan. Abstentions and broker non-votes will have the same effect as votes
against the proposal.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS
PROPOSAL.
A description of the principal features of the Purchase Plan, a copy of
which may be obtained from the Company, is set forth below.
PURPOSE
The purpose of the Purchase Plan is to provide employees with an
opportunity to purchase Common Stock of the Company through payroll deductions
in a manner that qualifies under Section 423 of the Internal Revenue Code (the
"Code").
ADMINISTRATION
The Purchase Plan is administered by the Board of Directors (the
"Administrator").
ELIGIBILITY
Only employees employed by the Company or its subsidiaries on the first day
of an offering period may participate in the Purchase Plan. For this purpose, an
"employee" is any person who is regularly employed at least twenty hours per
week and at least five months per calendar year by the Company. No employee
shall be granted an option under the Purchase Plan if: (i) immediately after the
grant of the option, the employee (or any other person whose stock would be
attributed to the employee pursuant to Section 424(d) of the Code) would own
five percent or more of the total combined voting power or value of the stock of
the Company or any of its subsidiaries; or (ii) the option permits such
participant's rights to purchase stock under all employee stock purchase plans
of the Company and its subsidiaries to accrue at a rate which exceeds $25,000
worth of stock (determined with reference to the fair market value of the Common
Stock at the time of grant) in a calendar year. Subject to these eligibility
criteria, the Purchase Plan permits eligible employees to purchase Common Stock
through payroll deductions subject to certain limitations described below. See
"Payment of Purchase Price; Payroll Deductions."
At the Record Date, the Company employed approximately 136 people,
approximately 130 of whom were eligible to participate in the Purchase Plan.
Approximately 39 employees were participating in the Purchase Plan as of the
Record Date.
OFFERING PERIOD
The Purchase Plan is implemented by offering periods lasting six months
with a new offering period commencing every six months. Normally, a
participant's payroll deductions are accumulated throughout an offering period
and, at the end of the offering period, shares of the Company's Common Stock are
purchased with the accumulated payroll deductions. Offering periods commence on
or about May 1 and November 1 of each year.
ENROLLMENT IN THE PLAN
Eligible employees become participants in the Purchase Plan by delivering
to the Company's payroll office a subscription agreement authorizing payroll
deductions. Employees hired after the first day of an offering period (or who
otherwise become eligible after such date) may begin participation in the next
offering period. Under the Purchase Plan, once an employee elects to participate
in the Purchase Plan, enrollment in each successive offering period occurs
automatically unless the employee withdraws from participation in the Purchase
Plan.
6
<PAGE> 9
PURCHASE PRICE
The purchase price per share at which shares will be sold in an offering
under the Purchase Plan is the lower of (i) 85% of the fair market value of a
share of Common Stock on the first day of an offering period or (ii) 85% of the
fair market value of a share of Common Stock on the last day of each offering
period. The fair market value of the Common Stock on a given date is generally
the closing sale price of the Common Stock as reported on the Nasdaq Small Cap
Market for such date.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. The Purchase Plan provides that the aggregate of such
payroll deductions during the offering period shall not exceed 10% of the
participant's compensation during any offering period. During the offering
period, a participant may discontinue his or her participation in the Purchase
Plan, and may decrease or increase the rate of payroll deductions in an offering
period within limits set by the Administrator.
All payroll deductions made for a participant are credited to the
participant's account under the Purchase Plan, are withheld in whole percentages
only and are included with the general funds of the Company. Funds received by
the Company pursuant to exercises under the Purchase Plan are used for general
corporate purposes. A participant may not make any additional payments into his
or her account.
PURCHASE OF STOCK; EXERCISE OF OPTION
By executing a subscription agreement to participate in the Purchase Plan,
the employee is entitled to have shares placed under option to him. An employee
may purchase up to a number of shares of the Company's Common Stock determined
by dividing such employee's payroll deductions accumulated prior to such
exercise date and retained in the participant's account as of the exercise date
by the applicable purchase price; provided that in no event shall an employee be
permitted to purchase during any two offering periods more than a number of
shares determined by dividing $12,500 by the fair market value of a share of the
Company's Common Stock on the enrollment date. Unless the employee's
participation is discontinued, the option for the purchase of shares will be
exercised automatically at the end of the offering period at the applicable
price. No fractional shares will be issued upon exercise of the option. Any
amounts insufficient to purchase a full share remaining in a participant's
account after exercise of the option will be credited to the participant and
used in a future offering period. No interest will accrue on the payroll
deductions of a participant in the Purchase Plan.
WITHDRAWAL
A participant may terminate his or her participation in the Purchase Plan
at any time by giving the Company a written notice of withdrawal. In such event,
the payroll deductions credited to the participant's account will be returned,
without interest, to such participant. Payroll deductions will not resume unless
a new subscription agreement is delivered in connection with a subsequent
offering period.
TERMINATION OF EMPLOYMENT
Termination of a participant's employment for any reason, including death,
cancels his or her participation in the Purchase Plan immediately. In such
event, the payroll deductions credited to the participant's account will be
returned without interest to such participant, his or her designated
beneficiaries or the executors or administrators of his or her estate.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any changes in the capitalization of the Company effected
without receipt of consideration by the Company, such as a stock split, stock
dividend, combination or reclassification of the Common Stock, resulting in an
increase or decrease in the number of shares of Common Stock, proportionate
adjustments will be made by the Board in the shares subject to purchase and in
the price per share under the Purchase Plan.
7
<PAGE> 10
Notwithstanding the above, in connection with any merger or acquisition of
assets involving the Company, any offering period then in progress shall be
shortened to a new exercise date and the Board shall notify each participant
that his or her option shall be exercised automatically on the new exercise
date, unless prior to such date the participant has withdrawn from the offering
period.
EFFECT OF LIQUIDATION, DISSOLUTION, SALE OF ASSETS OR MERGER
In the event of a liquidation or dissolution of the Company, an offering
period will terminate immediately prior to the consummation of such proposed
action, unless otherwise proposed by the Board. In the event of a sale of all or
substantially all of the assets of the Company or a merger of the Company with
or into another corporation, the offering period then in progress shall be
shortened by setting a new exercise date. The Board shall notify each
participant in writing at least ten (10) business days prior to the termination
date on which date all options subject to the Purchase Plan will be exercised
automatically.
NON-ASSIGNABILITY
No rights or accumulated payroll deductions of an employee under the
Purchase Plan may be pledged, assigned or transferred for any reason, and any
such attempt may be treated by the Company as an election to withdraw from the
Purchase Plan, unless prior to such date the participant has withdrawn from the
Purchase Plan.
REPORTS
Individual accounting will be maintained for each participant in the
Purchase Plan. Each participant receives a report showing the details of the
participant's account at least once every 12 months.
AMENDMENT AND TERMINATION
The Board may at any time and for any reason amend or terminate the
Purchase Plan, except that no such termination shall affect options previously
granted and no amendment shall make any change in an option granted prior
thereto which adversely affects the rights of any participant. Stockholder
approval for amendments to the Purchase Plan shall be obtained in such a manner
and to such a degree as required to comply with all applicable laws or
regulations. The Plan will terminate in the year 2006, unless terminated earlier
by the Board in accordance with the Purchase Plan.
CERTAIN FEDERAL INCOME TAX INFORMATION
The following brief summary of the effect of federal income taxation upon
the participant and the Company with respect to the shares purchased under the
Purchase Plan does not purport to be complete, and does not discuss the tax
consequences of a participant's death or the income tax laws of any
municipality, state or foreign country in which the participant may reside.
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the shares purchased under the Purchase Plan are sold or otherwise
disposed of. Upon sale or other disposition of the shares, the participant will
generally be subject to tax in an amount that depends upon the holding period.
If the shares are sold or otherwise disposed of more than two years from the
enrollment date and one year from the applicable exercise date, the participant
will recognize ordinary income measured as the lesser of (a) the excess of the
fair market value of the shares at the time of such sale or disposition over the
purchase price, or (b) an amount equal to 15% of the fair market value of the
shares as of the enrollment date. Any additional gain will be treated as
long-term capital gain. If the shares are sold or otherwise disposed of before
the expiration of these holding periods, the participant will recognize ordinary
income generally measured as the excess of the fair market value of the shares
on the date the shares are purchased over the purchase price. Any additional
gain or loss on such sale or disposition will be long-term or short-term capital
gain or loss, depending on the holding period. The Company generally is not
entitled to a deduction for amounts taxed as ordinary income or capital gain to
a participant except to the extent of ordinary
8
<PAGE> 11
income recognized by participants upon a sale or disposition of shares prior to
the expiration of the holding periods described above.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON THE PARTICIPANT AND THE COMPANY WITH RESPECT TO THE SHARES PURCHASED UNDER
THE PURCHASE PLAN AND DOES NOT PURPORT TO BE COMPLETE. REFERENCE SHOULD BE MADE
TO THE APPLICABLE PROVISIONS OF THE TAX CODE. IN ADDITION, THIS SUMMARY DOES NOT
DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE INCOME TAX LAWS OF
ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
PARTICIPATION IN THE PURCHASE PLAN
The Company is unable to predict the amount of benefits that will be
received or allocated to any particular participant under the Purchase Plan. The
following table sets forth the dollar amount and the number of shares purchased
under the Purchase Plan during the last fiscal year by (i) each of the Company's
Named Executive Officers, (ii) all executive officers as a group, (iii) all
non-employee directors as a group and (iv) all employees other than executive
officers as a group.
<TABLE>
<CAPTION>
PURCHASE PLAN
----------------------------
NUMBER
OF DOLLAR VALUE OF
NAME AND POSITION SHARES(1) BENEFIT(2)($)
----------------- --------- ---------------
<S> <C> <C>
Frank T. Sample..................................... 7,058 $ 1,323
President and Chief Executive Officer
Warren J. Cawley.................................... 5,000 1,172
Vice President, Product Management
John R. Graham...................................... -- --
Vice President, Corporate Alliances
Patric L. Wiesmann.................................. -- --
Vice President, Sales(3)
Shelley B. Thunen................................... -- --
Vice President, Finance and Chief Financial
Officer(4)
All current executive officers as a group (5
persons).......................................... 19,477 4,112
All current non-executive directors as a group (3
persons).......................................... -- --
All other employees (excluding current executive
officers) as a group.............................. 54,857 11,461
</TABLE>
---------------
(1) Includes shares of Common Stock of the Company purchased under the Purchase
Plan for purchase prices of $1.3281 and $1.0625 per share, which represents
the lower of (i) 85% of the fair market value of a share of Common Stock on
the first day of an offering period, or (ii) 85% of the fair market value of
a share of Common Stock on the last day of such offering period in the
offering periods ended April 30, 1999 and October 31, 1999.
(2) The dollar value of the benefit represents the number of shares purchased
multiplied by the difference between the fair market value of a share of
Common Stock on the date of purchase and the purchase prices of $1.3281 and
$1.0625 per share, respectively.
(3) Mr. Wiesmann resigned from his position of Vice President, Sales in April
2000.
(4) Ms. Thunen stepped down from her position as Vice President, Finance and
Chief Financial Officer in January 2000.
9
<PAGE> 12
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Deloitte & Touche LLP, independent
public accountants, to audit the financial statements of the Company for the
fiscal year ending December 31, 2000, and recommends that stockholders vote for
ratification of such appointment. In the event of a negative vote on
ratification, the Board of Directors will reconsider its selection.
Deloitte & Touche LLP has audited the Company's financial statements
annually since 1992. Representatives of Deloitte & Touche LLP are expected to be
present at the meeting, will have an opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
MANAGEMENT
In addition to Mr. Sample, the following persons were executive officers of
the Company as of June 6, 2000:
<TABLE>
<CAPTION>
NAME OF OFFICER AGE POSITION WITH THE COMPANY
--------------- --- -------------------------
<S> <C> <C>
Warren J. Cawley.............. 59 Vice President, Product Management
John R. Graham................ 54 Vice President, Corporate Alliances
Stephen E. Hannah............. 41 Vice President, Research and Development
Cheryl L. Isen................ 39 Vice President, Corporate Communications
</TABLE>
WARREN J. CAWLEY, VICE PRESIDENT PRODUCT MANAGEMENT -- Mr. Cawley has
served as Vice President, Product Management since July 1996. From 1989 through
June 1996, Mr. Cawley served as Vice President, Direct Sales for the Company.
From 1985 through 1989, Mr. Cawley served as Vice President, OEM Sales for the
Company. Prior to 1985, Mr. Cawley served in various sales and management
capacities at several medical device companies. Mr. Cawley holds a M.B.A. degree
and a B.S. degree from the University of Southern California.
JOHN R. GRAHAM, VICE PRESIDENT CORPORATE ALLIANCES -- Mr. Graham has served
as Vice President, Corporate Alliances since January 1999 and Vice President,
OEM Sales of the Company from 1989 through 1998. Prior to joining the Company in
1989, he acted as a consultant and held various positions at a number of
healthcare organizations and technology-based companies, including serving as
President and Chief Executive Officer of a medical device company. Mr. Graham
holds an M.S. degree in Bioengineering from Columbia University and a B.S.E.E.
degree from Northeastern University.
STEPHEN E. HANNAH, VICE PRESIDENT, RESEARCH AND DEVELOPMENT -- Mr. Hannah
joined the Company in December 1998 as Vice President, Research and Development.
Prior to joining the Company, Mr. Hannah led Product Development, Systems
Engineering at Sony Trans Com Inc. from December 1996 to December 1998. Prior to
Sony, Mr. Hannah developed hardware and software products and managed large
development projects at Hughes Aircraft Company from February 1981 to December
1996. Mr. Hannah holds a B.S. degree in Computer Engineering from the University
of Michigan.
CHERYL L. ISEN, VICE PRESIDENT, CORPORATE COMMUNICATIONS -- Ms. Isen joined
the Company in January 1998 as Senior Director of Corporate Communications and
was promoted to Vice President in January 1999. Prior to joining the Company,
from February 1991 to October 1997, Ms. Isen served as Senior Director of
Corporate Communications at PHAMIS, Inc., which merged with IDX Systems in 1997,
where she was responsible for company-wide communications. Prior to PHAMIS,
Inc., Ms. Isen was Manager of Marketing Communications for the Target Marketing
Services division of TRW from February 1987 to February 1991. Ms. Isen holds a
B.A. degree in Journalism and Marketing from San Diego State University.
10
<PAGE> 13
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by (i) the Company's
Chief Executive Officer, and (ii) the four most highly compensated other
executive officers of the Company, who were serving at the end of fiscal year
1999 (collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company during the fiscal years ended December 31, 1997, 1998
and 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
OTHER --------------------------
ANNUAL COMPENSATION ANNUAL SECURITIES ALL OTHER
---------------------------- COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($)(4) BONUS ($)(1) (2)($) OPTIONS (#) $(5)
--------------------------- ---- ------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Frank T. Sample............. 1999 $291,764(9) $ -- -- -- $2,592
President, Chief Executive 1998 294,958(9) 20,000 -- -- 2,112
Officer and Chairman of 1997 38,434(6) 50,000 -- 780,000 --
the Board
Warren J. Cawley............ 1999 146,977 -- -- 7,500 3,229
Vice President, Product 1998 144,810 -- -- 8,500 1,842
Management 1997 153,500 25,000 -- 30,000 1,800
Patric L. Wiesmann.......... 1999 117,461(7) 45,000(10) -- 100,000 275
Vice President, Sales(8) 1998 -- -- -- -- --
1997 -- -- -- -- --
John R. Graham.............. 1999 145,651 19,391(10) -- 10,000 2,070
Vice President, Corporate 1998 145,000 18,764(10) -- 12,000 1,325
Alliances 1997 138,692 35,000 -- 40,000 1,162
Shelley B. Thunen........... 1999 156,054 -- -- 15,000 318
Vice President, Finance
and 1998 155,000 10,000 -- 15,000 696
Chief Financial Officer(3) 1997 153,068 45,000 -- 60,000 682
</TABLE>
---------------
(1) Represents amounts paid or accrued under the Company's Management Bonus
Plan for which senior management is eligible. The amount of a particular
employee's bonus varies depending on salary level, position with the
Company and the operating results of the Company.
(2) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of prerequisites and other personal benefits
has been omitted in those cases where the aggregate amount of such
prerequisites and other personal benefits constituted less than the lesser
of $50,000 or 10% of the total annual salary and bonus for the Named
Executive Officer for such year.
(3) Ms. Thunen stepped down from her position as Vice President, Finance and
Chief Financial Officer in January 2000.
(4) Amounts include contributions paid by the Company under its 401(k) and
Profit Sharing Plan.
(5) Represents premiums paid by the Company on a life insurance policy for the
benefit of the Named Executive Officer.
(6) Based on an annual salary of $250,000 commencing on October 24, 1997.
(7) Based on an annual salary of $150,000 commencing on March 8, 1999.
(8) Mr. Wiesmann resigned from his position of Vice President, Sales in April
2000.
(9) Includes annual salary of $250,000 and Tustin, CA, living expenses.
(10) Represents commissions paid.
11
<PAGE> 14
OPTION GRANTS IN FISCAL 1999
The following table sets forth information with respect to stock option
grants to each of the Named Executive Officers during the year ended December
31, 1999.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------------- ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED(#)(1) FISCAL YEAR(%) ($/SH) DATE 5%(4) 10%(4)
---- ------------- -------------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Frank T. Sample.............. -- -- -- -- -- --
Warren J. Cawley............. 7,500 1.8% $1.875 6/3/09 $ 8,844 $ 22,412
John R. Graham............... 10,000 2.4% $1.875 6/3/09 $11,792 $ 29,883
Patric L. Wiesmann(2)........ 80,000 18.9% $3.000 3/6/09 $20,623 $174,999
20,000 4.7% $1.875 9/27/09 $23,584 $ 59,765
Shelley B. Thunen(3)......... 15,000 3.5% $1.875 6/3/09 $17,688 $ 44,824
</TABLE>
---------------
(1) All of these stock option grants were pursuant to the Company's 1993 Stock
Option Plan, as amended, and are subject to the terms of such plan. These
options were granted at exercise prices equal to the fair market value of
the Common Stock as determined by the Board of Directors of the Company on
the date of grant. Options granted vest as to 25% of the shares subject to
the option on the first anniversary of the date of grant and as to 6.25% of
the shares subject to the option quarterly thereafter.
(2) Mr. Wiesmann resigned from his position of Vice President, Sales in April
2000.
(3) Ms. Thunen stepped down from her position as Vice President, Finance and
Chief Financial Officer in January 2000.
(4) The potential realizable value illustrates value that might be realized upon
exercise of the options immediately prior to the expiration of their terms,
assuming the specified compounded rates of appreciation of the market price
per share from the date of grant to the end of the option term. Actual
gains, if any, on stock option exercise are dependent upon a number of
factors, including the future performance of the common stock and the timing
of option exercises, as well as the optionee's continued employment through
the vesting period. There can be no assurance that the amounts reflected in
this table will be achieved.
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to exercises of
stock options during the year ended December 31, 1999 by each of the Named
Executive Officers, the number of options held at year end and the aggregate
value of the "in-the-money" options held at December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS IN-THE-MONEY
SHARES AT YEAR-END(#) OPTIONS AT YEAR-END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)($)
---- ----------- ----------- -------------------- --------------------
<S> <C> <C> <C> <C>
Frank T. Sample................... -- -- 341,250/438,750 $ 0/$0
Warren J. Cawley.................. -- -- 39,475/ 27,642 $6,116/$0
John R. Graham.................... -- -- 45,759/ 37,358 $6,116/$0
Patric L. Wiesmann(2)............. -- -- 15,000/ 85,000 $ 0/$0
Shelley B. Thunen(3).............. -- -- 67,262/ 58,738 $ 0/$0
</TABLE>
---------------
(1) The closing price of the Company's Common Stock on December 31, 1999 was
$1.6875 per share.
(2) Mr. Wiesmann resigned from his position of Vice President, Sales in April
2000.
(3) Ms. Thunen stepped down from her position as Vice President, Finance and
Chief Financial Officer in January 2000.
12
<PAGE> 15
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
In October 1997, the Company entered into an employment agreement with Mr.
Sample in connection with his appointment as President and Chief Executive
Officer. The agreement provides for a three-year employment term, subject to
early termination in the event of the death or disability of Mr. Sample or
otherwise provided therein. The Company may terminate Mr. Sample's employment
with or without "Just Cause" (as defined therein), but in the event such
termination is without "Just Cause" Mr. Sample will be entitled to receive
severance pay at his then current salary for a period of twelve months following
such termination.
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
During fiscal year 1999, the Compensation Committee was responsible for
setting compensation philosophy and determining base salary, bonus, long-term
incentive compensation and other benefits for the Chief Executive Officer and
other executive officers. The Compensation Committee is comprised of two
directors, each of whom qualifies as an "outside director" under Section 162(m)
of the Internal Revenue Code and as a "non-employee director" under Rule 16b-3
promulgated under the Exchange Act.
The following Compensation Committee Report is not to be deemed to be
*soliciting material* or *filed* with the Commission or incorporated by
reference to any filing by the Company under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates it by reference.
ROLE OF THE COMPENSATION COMMITTEE
The role of the Compensation Committee is to carry out the compensation
responsibilities of the Board of Directors, which involve the discussion,
research and approval of the recommendations of management with regard to the
compensation (including cash and non-cash) of the executive officers of the
Company. This report sets forth the major components of executive compensation
and the basis by which fiscal year 1999 compensation determinations were made
with respect to the executive officers of the Company, including those named in
the Summary Compensation Table.
GENERAL COMPENSATION POLICY AND GUIDELINES
The Company's executive compensation program is designed to attract and
retain the qualified key executives critical to the Company's growth and long
term success, to align the executives' compensation with the long term business
objectives and performance of the Company and to reward such executive officers
and employees for their successful efforts in attaining the objectives
beneficial to the growth and profitability of the Company
The Company's compensation levels and benefits are reviewed on an annual
basis (and more often, to the extent necessary) to determine whether they are
competitive and reasonable in light of the overall performance of the Company
and the Company's ability to attract and retain talented executives. The
particular elements of the compensation programs for the executive officers are
comprised of the following:
- A base salary that is based on the executive's job responsibilities,
individual performance and that is generally competitive with the market.
- An incentive bonus that is provided on a discretionary basis based upon
profitability and to reward achievement of business objectives.
- A stock option plan that is utilized to provide long-term incentives for
the executives to maximize shareholder value. Options are viewed as a
valuable instrument in maintaining the continuity of its senior
executives and a definite aid in securing new executives to the Company.
Because the Company is now traded on the Nasdaq SmallCap Market, rather
than the Nasdaq National Market (effective September 28, 1999), the
Company's ability to utilize stock options and other forms of securities
as
13
<PAGE> 16
executive incentives may be somewhat curtailed pending approvals of
various state administrative agencies.
- Various benefits that are also available to all full-time employees.
The Compensation Committee reviews the executive compensation program to
determine the effectiveness and competitiveness of the program. Guidelines for
the various components of the executive compensation package are set at levels
generally competitive with industry standards for similar executives in similar
companies. Another long-term goal of the compensation program is to align the
financial interests of the Company's executive officers with those of the
Company's stockholders. Compensation has been based upon the following factors:
the strengths and weaknesses of the individual executive officers, the
Compensation Committee's perception of such individual's historical performance
and expected future contributions to the success of the Company; and competitive
factors such as compensation packages being offered by others.
The market for qualified executive personnel was extremely competitive in
1999, and the compensation packages provided to the executives of the Company
are responsive to that competitive market. The Compensation Committee believes
that the base salary levels for the Company's executive officers in 1999 were
competitive within a range considered to be reasonable and necessary.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
As with other executive officers, the base compensation paid to the Chief
Executive Officer of the Company was set at a level deemed reasonable and
necessary to retain a qualified Chief Executive Officer and to provide adequate
incentives to that officer. No new options were granted to the Chief Executive
Officer in 1999; however, prior option grants did vest during the year, and the
number of stock options, and the stock option exercise prices and vesting,
appear to be reasonable and appropriate as incentives -- particularly in light
of the fact that the option exercise prices were greater at year end than the
market prices of the underlying shares. Consistent with its desire to more
closely align the financial incentives of the executive officers with those of
the shareholders, it is anticipated that stock options will continue to be a
significant element of compensation for the Company's Chief Executive Officer.
Similar consideration was given to the compensation packages offered to
each of the other executive officers of the Company.
The Board of Directors of the Company did not reject or modify in any
material way any action or recommendation by the Compensation Committee in 1999.
Compensation Committee
Timothy T. Weglicki
Jonathon S. Leff
14
<PAGE> 17
PERFORMANCE GRAPH
The following graph depicts the Company's total return to shareholders from
February 14, 1996 (the first trading day) through December 31, 1999, relative to
the performance of the Nasdaq National Market Composite Index, and the Center
for Research in Security Prices ("CRSP") Index of Nasdaq Medical Device
Manufacturers Stocks. All indices shown in the graph have been reset to a base
of 100 as of February 14, 1996 and assume an investment of $100 on that date,
and further assumes no payment or reinvestment of dividends. The Company has not
ever paid cash dividends on its Common Stock. The points represent fiscal year
end index levels, other than February 14, 1996, based on the last trading day in
each such fiscal year. The stock price performance on the following graph is not
necessarily indicative of future stock price performance.
The following Performance Graph is not to be deemed to be *soliciting
material* or *filed* with the Commission or incorporated by reference to any
filing by the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates it by reference.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
VITALCOM STOCK NASDAQ MEDICAL DEVICE
PERFORMANCE NASDAQ NM COMPOSITE MFGR (CRSP)
-------------- ------------------- ---------------------
<S> <C> <C> <C>
2/14/96 100.00 100.00 100.00
12/31/96 37.96 119.26 89.59
12/31/97 35.19 145.97 102.63
12/31/98 16.67 204.70 114.96
12/31/99 12.50 380.48 139.25
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act ("Section 16(a)") 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 reports of ownership
and changes in ownership with the Securities and Exchange Commission ("SEC") and
the National Association of Securities Dealers, Inc. Executive officers,
directors and greater than ten percent stockholders are required by SEC
regulation 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 during fiscal 1999, all reporting persons complied with filing requirements
applicable to them.
15
<PAGE> 18
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the stock they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: June 30, 2000
16
<PAGE> 19
EDGAR APPENDIX A
FORM OF PROXY
<PAGE> 20
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
VITALCOM INC.
2000 ANNUAL MEETING OF STOCKHOLDERS
JULY 25, 2000
The undersigned stockholder of VitalCom Inc., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated June 30, 2000, and hereby appoints Frank T. Sample
proxy and attorney-in-fact, with full power of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the 2000 Annual
Meeting of Stockholders of VitalCom Inc. to be held on Tuesday, July 25, 2000 at
1:00 p.m. local time, at the Company's headquarters, 15222 Del Amo Avenue,
Tustin, California 92780, and at any adjournment or adjournments 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:
(1 ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD
(except as indicated)
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW:
Jonathan S. Leff Jack W. Lasersohn Frank T. Sample Timothy T. Weglicki
(2 PROPOSAL TO AMEND THE 1996 EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE
NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER FROM
300,000 SHARES TO 450,000 SHARES:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3 PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR FISCAL 2000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and, in his discretion, upon such other matter or matters which may properly
come before the meeting or any adjournment or adjournments thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT TO THE 1996
EMPLOYEE STOCK PURCHASE PLAN, AND FOR THE RATIFICATION OF THE APPOINTMENT OF
DELOITTE & TOUCHE LLP AS INDEPENDENT PUBLIC ACCOUNTANTS AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated: ____________________ , 2000
__________________________________
Signature
__________________________________
Signature
(This Proxy should be marked, dated and 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.)
