<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X] Filed by a Party other than the Registrant [_]
- --------------------------------------------------------------------------------
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to 14a-11(c) or 14a-12
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
Nitinol Medical Technologies, 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>
NITINOL MEDICAL TECHNOLOGIES, INC.
27 WORMWOOD STREET
BOSTON, MASSACHUSETTS 02210-1625
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JUNE 19, 1997
The 1997 Annual Meeting of Stockholders of Nitinol Medical Technologies,
Inc. (the "Company") will be held at the Company's offices at 27 Wormwood
Street, Boston, Massachusetts, on Thursday, June 19, 1997 at 9:30 a.m., local
time, to consider and act upon the following matters:
1. To elect seven members of the Board of Directors, each to serve for a
one-year term.
2. To approve the Company's 1997 Employee Stock Purchase Plan and the
reservation of 90,000 shares of Common Stock for purchase thereunder.
3. To ratify the selection of Arthur Andersen LLP as the Company's
independent auditors for the current year.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on April 23, 1997 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
C. Leonard Gordon, Chairman of the
Board
Boston, Massachusetts
April 25, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ENSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE
AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC.
27 WORMWOOD STREET
BOSTON, MASSACHUSETTS 02210-1625
PROXY STATEMENT FOR THE
1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 19, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Nitinol Medical Technologies, Inc. (the
"Company") for use at the 1997 Annual Meeting of Stockholders to be held on
June 19, 1997, and at any adjournment of that meeting. All proxies will be
voted in accordance with the stockholders' instructions, and if no choice is
specified, the proxies will be voted in favor of the matters set forth in the
accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at
any time before its exercise by delivery of written revocation or a
subsequently dated proxy to the Secretary of the Company or by voting in
person at the Annual Meeting.
At the close of business on April 23, 1997, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there
were outstanding and entitled to vote an aggregate of 9,553,331 shares of
Common Stock of the Company, par value $.001 per share (the "Common Stock"),
constituting all of the outstanding voting stock of the Company. Each share
entitles the record holder to one vote on each of the matters to be voted upon
at the Annual Meeting.
The Company's Annual Report for the year ended December 31, 1996 is being
mailed to stockholders with the mailing of this Notice and Proxy Statement on
or about April 25, 1997.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
EXCEPT FOR EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON
WRITTEN REQUEST TO THE CHIEF FINANCIAL OFFICER, NITINOL MEDICAL TECHNOLOGIES,
INC., 27 WORMWOOD STREET, BOSTON, MASSACHUSETTS 02210-1625. EXHIBITS WILL BE
PROVIDED UPON WRITTEN REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
VOTES REQUIRED
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Annual Meeting shall constitute a
quorum for the transaction of business at the Annual Meeting. Shares of Common
Stock present in person or represented by proxy (including shares which
abstain or do not vote with respect to one or more of the matters presented
for stockholder approval) will be counted for purposes of determining whether
a quorum is present at the Annual Meeting.
The affirmative vote of the holders of a plurality of the shares of Common
Stock voting on the matter is required for the election of directors. The
affirmative vote of the holders of a majority of the shares voting on the
matter is required to (i) approve the proposed 1997 Employee Stock Purchase
Plan and (ii) ratify the selection of Arthur Andersen LLP as the Company's
independent auditors for the current year.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that
they do not have discretionary authority to vote such shares as to a
particular matter, will not be voted in favor of such matter, and also will
not be counted as shares voting or votes cast on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on a
matter that requires the affirmative vote of a plurality or a majority of the
shares voting or votes cast on such matter.
1
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 31, 1997,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each nominee for director of the
Company, (iii) each executive officer of the Company named in the Summary
Compensation Table set forth under the caption "Executive Compensation" below,
and (iv) all directors and executive officers of the Company as of March 31,
1997 as a group:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHARES OUTSTANDING
BENEFICIALLY COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(2) STOCK(3)
- --------------------------------------- ------------ -------------
<S> <C> <C>
Whitney Equity Partners, L.P....................... 1,829,065 19.38%
c/o J.H. Whitney & Co.
177 Broad Street
Stamford, CT 06901
C. Leonard Gordon(4)............................... 712,452 7.36%
c/o Immunotherapy Inc.
360 Lexington Avenue
New York, NY 10017
Fletcher Spaght, Inc.(5)........................... 626,469 6.56%
222 Berkeley Street
Boston, MA 02116-3761
Jack Reinstein(6).................................. 634,052 6.68%
7779 Willow Glen Road
Los Angeles, CA 90046
Morris Simon, M.D.(7).............................. 101,777 1.07%
Michael C. Brooks(8)............................... 1,667 *
c/o J.H. Whitney & Co.
177 Broad Street
Stamford, CT 06901
R. John Fletcher(5)................................ 1,667 *
c/o Fletcher Spaght, Inc.
222 Berkeley Street
Boston, MA 02116-3761
Jeffrey R. Jay, M.D.(9)............................ 1,667 *
c/o J.H. Whitney & Co.
177 Broad Street
Stamford, CT 06901
Robert A. Van Tassel, M.D. ........................ -- --
c/o Minneapolis Cardiology Associates
920 East 28th Street
Minneapolis, MN 55047
Thomas M. Tully(10)................................ 195,507 2.03%
David A. Chazanovitz(11)........................... 38,377 *
Theodore I. Pincus(12)............................. 40,569 *
All directors and executive officers of the Company
as a group (9 persons) (13)....................... 1,091,683 10.86%
</TABLE>
2
<PAGE>
- --------
*Less than 1%
(1) Except as otherwise indicated, the address of each beneficial owner is c/o
Nitinol Medical Technologies, Inc., 27 Wormwood Street, Boston, MA 02210-
1625.
(2) The number of shares of Common Stock beneficially owned by each director
or executive officer is determined under the rules of the Securities and
Exchange Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has sole or
shared voting power or investment power and also any shares which the
individual has the right to acquire within 60 days after March 31, 1997
through the exercise of any stock option or other right. Unless otherwise
indicated, each person has sole investment and voting power (or shares
such power with his spouse) with respect to the shares set forth in the
table. The inclusion herein of any shares deemed beneficially owned does
not constitute an admission of beneficial ownership of those shares.
(3) The number of shares deemed outstanding for purposes of calculating these
percentages is comprised of the 9,435,922 shares of Common Stock
outstanding on March 31, 1997, plus any shares of Common Stock issuable to
the person in question within 60 days of March 31, 1997 upon exercise of
stock options or any other rights held by such person.
(4) Mr. Gordon's shares are all owned jointly with his wife. Includes 244,149
shares of Common Stock issuable to Mr. Gordon within 60 days of March 31,
1997 upon exercise of stock options. Mr. Gordon disclaims beneficial
ownership in an aggregate of 237,870 shares owned by, or in trust for, his
children and grandchildren.
(5) An aggregate of 514,651 shares and warrants to purchase 111,818 shares of
Common Stock at an exercise price of $2.15 per share are held by Fletcher
Spaght, Inc., of which Mr. Fletcher is the founder, Chief Executive
Officer and a principal stockholder. Includes warrants to purchase 28,489
shares of Common Stock at an exercise price of $2.15 per share which may
be transferred to Mr. Chazanovitz under certain conditions pursuant to an
agreement between Mr. Chazanovitz and Fletcher Spaght, Inc. Mr. Fletcher
is a director of the Company.
(6) Includes 53,360 shares of Common Stock issuable to Mr. Reinstein within 60
days of March 31, 1997 upon exercise of stock options and 104,008 shares
owned by Synergistic Associates, Inc. Money Purchase Pension Plan, of
which Mr. Reinstein is the sole trustee. Mr. Reinstein disclaims
beneficial ownership of 190,316 shares owned by his children.
(7) Includes 47,147 shares of Common Stock issuable to Dr. Simon within 60
days of March 31, 1997 upon exercise of stock options. Dr. Simon disclaims
beneficial ownership of 655,327 shares owned by his wife and children.
(8) Consists of shares of Common Stock issuable to Mr. Brooks within 60 days
of March 31, 1997 upon exercise of stock options. Mr. Brooks is a managing
member of J.H. Whitney Equity Partners, L.L.C., the general partner of
Whitney Equity Partners, L.P. Mr. Brooks disclaims beneficial ownership of
the shares held by Whitney Equity Partners, L.P., except to the extent of
his proportionate interest.
(9) Consists of shares of Common Stock issuable to Dr. Jay within 60 days of
March 31, 1997 upon exercise of stock options. Dr. Jay is a managing
member of J.H. Whitney Equity Partners, L.L.C., the general partner of
Whitney Equity Partners, L.P. Dr. Jay disclaims beneficial ownership of
the shares held by Whitney Equity Partners, L.P., except to the extent of
his proportionate interest.
(10) Consists of shares of Common Stock issuable to Mr. Tully within 60 days
of March 31, 1997 upon exercise of stock options.
3
<PAGE>
(11) Includes 34,430 shares of Common Stock issuable to Mr. Chazanovitz within
60 days of March 31, 1997 upon exercise of stock options. Does not
include warrants to purchase 28,489 shares of Common Stock at an exercise
price of $2.15 per share which may be transferred to Mr. Chazanovitz
under certain conditions pursuant to an agreement between Mr. Chazanovitz
and Fletcher Spaght, Inc.
(12) Consists of shares of Common Stock issuable to Mr. Pincus within 60 days
of March 31, 1997 upon exercise of stock options.
(13) Includes an aggregate of 619,433 shares of Common Stock issuable upon
exercise of stock options held by all directors and executive officers as
a group which are exercisable within 60 days of March 31, 1997.
PROPOSAL 1--ELECTION OF DIRECTORS
The persons named in the enclosed proxy will vote to elect as directors the
seven nominees listed below, unless authority to vote for the election of any
or all of the nominees is withheld by marking the proxy to that effect. All of
the nominees listed below are currently directors of the Company. All of the
nominees have indicated their willingness to serve, if elected, but if any
should be unable or unwilling to serve, proxies may be voted for a substitute
nominee designated by the Board of Directors.
NOMINEES
Set forth below for each nominee are his name and age, his positions with
the Company, his principal occupation and business experience during the past
five years, and the year of his first election as a director of the Company:
THOMAS M. TULLY, age 51, has served as President, Chief Executive Officer
and Director of the Company since January 1996. From June 1995 to January 1996
Mr. Tully served as a consultant to the Company. From May 1994 to April 1995,
Mr. Tully served as President of the Institute of Molecular Biology, a
biotechnology company focused on tissue repair and regeneration and from
August 1991 to March 1994, Mr. Tully served as President of Organogenesis,
Inc., a biotechnology company focused on the commercialization of medical
device applications of tissue engineering. Prior to that Mr. Tully served for
three years as the President of the Schneider division of Pfizer, Inc., which
concentrates on interventional radiology and cardiology, and spent nine years
in various executive positions in consumer products and medical devices at
Johnson & Johnson, Inc. and was the founding President of Johnson & Johnson
Interventional Systems, an interventional medicine company.
MORRIS SIMON, M.D., age 71, a co-founder of the Company, has been a Director
and the Scientific Director of the Company since 1986. Since 1973, Dr. Simon
has been a Director of Clinical Radiology, Department of Radiology, at Beth
Israel Hospital, and since 1976, a Professor of Radiology at Harvard Medical
School.
C. LEONARD GORDON, age 67, a co-founder of the Company, served as the
Company's Chief Executive Officer and President, from August 1990 to January
1996. Mr. Gordon has served as a Director of the Company since its inception
in 1986 and as Chairman of the Board of the Company since January 1996. Mr.
Gordon has been engaged in venture capital enterprises for more than 10 years,
particularly in the field of new medical technologies and devices. He was co-
founder and Chief Executive Officer of (i) Oxigene, Inc., a publicly-traded
company engaged in the design and development of drugs and (ii) Biofield
Corp., a publicly-traded medical device company that has developed a breast
cancer detection system. Mr. Gordon presently serves as Chairman of the Board
of Biofield Corp. and Chairman of the Board of Immunotherapy, Inc., a
privately-held biotechnology company. Mr. Gordon has practiced law in New York
City for approximately 41 years and is currently of counsel to Gordon Altman
Butowsky Weitzen Shalov & Wein.
4
<PAGE>
MICHAEL C. BROOKS, age 52, has been a director of the Company since March
1996. He has been a General Partner of J.H. Whitney & Co., a venture capital
partnership, since January 1985 and currently serves as Managing Partner. Mr.
Brooks is also a director of SunGard Data Systems, Inc., a computer software
and services company, DecisionOne Holdings Corp., a multivendor computer
service company, and several private companies.
R. JOHN FLETCHER, age 51, was elected a Director of the Company in January
1996. Mr. Fletcher is the founder and Chief Executive Officer of Fletcher
Spaght, Inc., a management consulting company which specializes in strategic
development for health care and high technology businesses. Prior to founding
Fletcher Spaght, Inc. in 1983, he was a senior member of The Boston Consulting
Group, a management consulting company. Mr. Fletcher was the Chairman of the
Board of InnerVentions, Inc. from April 1995 to February 1996, at which time
the Company acquired InnerVentions. See "Certain Transactions." Mr. Fletcher
is a director of AutoImmune, Inc., a biotechnology company developing orally
administered pharmaceutical products, and Cayenne Software, Inc., a software
development company.
JEFFREY R. JAY, M.D., age 38, has been a Director of the Company since March
1996. Since 1993, he has been a General Partner of J.H. Whitney & Co., a
venture capital partnership. From 1988 to 1993, Dr. Jay was employed by Canaan
Partners, a venture capital firm. Dr. Jay currently is a national advisory
member of the American Medical Association's Physician Capital Source
Committee and is on the Board of CRA Managed Care, Inc., a workers
compensation managed care company, Advance ParadigM, Inc., a pharmaceutical
benefits manager, and a number of other privately-held companies.
ROBERT A. VAN TASSEL, M.D., age 58, has been a director of the Company since
March 1997. Dr. Van Tassel is a Board certified cardiologist. He has served as
a consulting cardiologist at the Abbott Northwestern Hospital in Minneapolis
since 1970 and is currently Chairman of that hospital's Cardiovascular
Services Division and a member of the Board of Directors of Abbott
Northwestern and Medical Health Plan. Dr. Van Tassel has also served as a
Clinical Professor of Medicine at the University of Minnesota since 1972. In
addition, Dr. Van Tassel was a founder of the Minneapolis Heart Institute and
past President of the Institute's Foundation. Dr. Van Tassel was also a
founder of Angiomedics Incorporated, a medical device company which was
purchased by Pfizer Corporation in 1986. Dr. Van Tassel is a director of
Boston Advance Technology, a fuels analysis company, Angiomedics II, a medical
technology company, Invasotec, a medical devices company, and New Bridge
Wellness, a complementary medicine company.
There are no family relationships among any of the executive officers and
nominees as directors of the Company.
BOARD AND COMMITTEE MEETINGS
The Board of Directors has established an Audit Committee which will provide
the opportunity for direct contact between the Company's independent auditors
and the Board. The Audit Committee is responsible for reviewing the scope and
results of the annual audit, discussing the Company's internal accounting
control policies and procedures and considering and recommending the selection
of the Company's independent auditors. The current members of the Audit
Committee are Messrs. Gordon, Brooks and Fletcher. The Audit Committee did not
meet during 1996.
The Board of Directors has established a Compensation Committee which is
responsible for reviewing the Company's overall compensation policies and
setting the compensation of the Company's executive officers. The
5
<PAGE>
current members of the Compensation Committee are Messrs. Tully and Gordon and
Dr. Jay. The Compensation Committee met once during 1996.
The Board of Directors established a Stock Option Committee to administer
the Company's stock option plans. The current members of the Stock Option
Committee are Mr. Fletcher and Dr. Jay. The Stock Option Committee met once
during 1996.
The Board of Directors met ten times during 1996. Each director attended at
least 75% of the meetings of the Board and of the committees on which he then
served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In July 1996, in connection with the Company's initial public offering of
Common Stock, the Board of Directors established a Compensation Committee
consisting of three members, including two of the Company's non-employee
directors. Prior to the establishment of the Compensation Committee,
compensation decisions were made by the entire Board of Directors. The current
members of the Company's Compensation Committee are Messrs. Tully and Gordon
and Dr. Jay. No executive officer of the Company has served as a director or
member of the compensation committee (or other committee serving an equivalent
function) of any other entity, whose executive officers served as a director
of or member of the Compensation Committee of the Company.
DIRECTORS' COMPENSATION
Each non-employee director of the Company receives an annual fee of $4,000
and all directors receive reimbursement of travel expenses incurred in
connection with their attendance at Board and Committee meetings. The Company
also has entered into oral arrangements with C. Leonard Gordon, the Company's
Chairman of the Board, and Dr. Morris Simon pursuant to which the Company has
agreed to pay Mr. Gordon and Dr. Simon certain additional fees for their
service on the Board of Directors. See "Certain Transactions."
In 1996, the Board of Directors adopted, and the stockholders approved, the
Nitinol Medical Technologies, Inc. 1996 Stock Option Plan for Non-Employee
Directors (the "1996 Directors' Stock Plan"), which provides for the issuance
of a maximum of 150,000 shares of Common Stock. On the effective date of the
1996 Directors' Stock Plan, each non-employee director of the Company who does
not otherwise receive compensation from the Company, received an option to
purchase 10,000 shares of Common Stock. In addition, the 1996 Directors' Stock
Plan currently provides that options to purchase 10,000 shares of Common Stock
will be granted to each new non-employee director upon his or her initial
election to the Board of Directors. These options will vest in equal monthly
installments over a three-year period. Pursuant to the 1996 Directors' Stock
Plan options to purchase 2,500 shares of Common Stock will also be granted
annually to each eligible director, other than to a director who receives an
initial grant of options in the same year. These options will become fully
vested six months after the date of grant. The exercise price of options
granted under the 1996 Directors' Stock Plan will equal the fair market value
of the Common Stock on the date of grant. In the event an optionee ceases to
serve as a director, each option may be exercised by the optionee for the
portion then exercisable at any time within one year after the optionee ceases
to serve as a director.
6
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information concerning the
compensation for each of the last two fiscal years for the Company's Chief
Executive Officer and its three other most highly compensated executive
officers whose total annual salary and bonus exceeded $100,000 in the fiscal
year ended December 31, 1996 (collectively, the "Named Executives").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION(1) AWARDS
---------------- ------------
SECURITIES
UNDERLYING
OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SARS(#)(2) COMPENSATION
- --------------------------- ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Thomas M. Tully...................... 1996 $194,398 $50,000 419,590 $125,000(4)
President and Chief Executive Offi-
cer(3) 1995 45,000 15,000
David A. Chazanovitz................. 1996 144,940 32,000 143,420 --
President, Septal Repair Division(3) 1995 20,000
Theodore I. Pincus................... 1996 145,774 14,000 59,473 (5)
Executive Vice President and 1995 31,000 10,000 52,630
Chief Financial Officer(3)
C. Leonard Gordon.................... 1996 135,000 -- -- 51,000(8)
Chairman of the Board and 1995 112,500 1,000 210,525 54,000(8)
Former Chief Executive Officer(6)(7)
</TABLE>
- --------
(1) In accordance with the rules of the Commission, other compensation in the
form of perquisites and other personal benefits has been omitted in those
instances where such perquisites and other personal benefits constituted
less than the lesser of $50,000 or ten percent of the total of annual
salary and bonus for the Named Executive for the fiscal year.
(2) The Company has never granted any stock appreciation rights.
(3) Salaries include amounts earned by all three individuals as part-time
consultants to the Company in 1995 and early 1996 before joining the
Company as full-time employees.
(4) Represents the amount paid to Mr. Tully in connection with the execution
of his employment agreement and upon the closing of the Company's
acquisition of the septal repair technology.
(5) In addition, the Company loaned Mr. Pincus $65,000, one-third of which
will be forgiven each year over a three-year period commencing May 1996 so
long as Mr. Pincus remains employed by the Company.
(6) Mr. Gordon served as Chief Executive Officer of the Company through
January 1996 and as a consultant to the Company for the remainder of the
year.
(7) Does not include income received by Mr. Gordon in 1995 as an "S"
Corporation stockholder.
(8) Includes $50,000 paid in each of 1996 and 1995 in connection with the
negotiation of an exclusive licensing agreement with Boston Scientific,
and director's fees of $1,000 and $4,000 paid in 1996 and 1995,
respectively.
7
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning grants of
stock options made during the year ended December 31, 1996 to each of the
Named Executives.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------
PERCENTAGE POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS EXERCISE ANNUAL RATES OF STOCK
SECURITIES GRANTED TO OR BASE PRICE APPRECIATION FOR
UNDERLYING INDIVIDUALS PRICE PER OPTION TERM(1)
OPTIONS IN FISCAL SHARE EXPIRATION ----------------------
NAME GRANTED YEAR ($/SHARE) DATE 5%($) 10%($)
- ---- ---------- ----------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Thomas M. Tully......... 263,157(2) 23.7% $2.15 2/14/06 $ 355,788 $ 901,839
116,433(3) 10.5% 6.95 5/6/06 508,929 1,289,728
40,000(4) 3.6% 10.00 11/6/06 251,560 637,480
David A. Chazanovitz.... 118,420(5) 10.7% 2.15 2/14/06 160,104 405,825
25,000(4) 2.3% 10.00 11/6/06 157,225 398,425
Theodore I. Pincus...... 39,473(6) 3.6% 2.15(7) 4/16/06 53,357 135,274
20,000(4) 1.8% 10.00 11/6/06 125,780 318,470
C. Leonard Gordon....... -- -- -- -- -- --
</TABLE>
- --------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. The gains shown are net of the option exercise price, but
do not include deductions for taxes or other expenses associated with the
exercise of the option or the sale of the underlying shares. Actual gains,
if any, on stock option exercises will depend on the future performance of
the Common Stock, the optionholder's continued employment through the
option period, and the date on which the options are exercised.
(2) Options to purchase 42,631 shares vested upon the execution of Mr. Tully's
employment agreement with the Company and the remaining options vest in
equal monthly installments over a three-year period commencing February
1996, subject to acceleration in the event of a change of control of the
Company.
(3) Options vest in equal monthly installments over a three-year period
commencing May 1996, subject to acceleration in the event of a change of
control of the Company.
(4) Options vest 25% per year beginning with the first anniversary of the date
of grant, subject to acceleration in the event of a change of control of
the Company.
(5) Options to purchase 92,105 shares vest in equal monthly installments over
a three-year period commencing February 1996 and options to purchase
26,315 shares vest upon the earlier of the achievement of certain
milestones or December 31, 2000, subject to acceleration in the event of a
change of control of the Company.
(6) Options vest in equal monthly installments over a three-year period
commencing June 1996, subject to acceleration in the event of a change of
control of the Company.
(7) The fair market value of the Common Stock on the date of the grant was
$3.19 per share.
8
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth, for each Named Executive, the number of
shares of Common Stock acquired upon exercise of options during the fiscal
year ended December 31, 1996, the aggregate dollar value realized upon such
exercise and the number and value of unexercised options held by each Named
Executive on December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NUMBER UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OF SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1996 DECEMBER 31, 1996(2)
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas M. Tully(3)...... -- -- 141,314 278,276 $1,353,928 $2,115,950
David A.
Chazanovitz(4)(5)...... 3,947 $18,975 21,638 117,835 223,953 1,023,342
Theodore I. Pin-
cus(4)(6).............. -- -- 27,778 84,325 287,502 715,764
C. Leonard Gordon(7).... -- -- 229,530 73,098 2,478,659 756,564
</TABLE>
- --------
(1) Represents the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise.
(2) Represents the difference between the last reported sale price per share
of the Common Stock on December 31, 1996 ($12.50 per share), as reported
on the Nasdaq National Market System, less the option exercise price,
multiplied by the number of shares underlying the options.
(3) Exercisable includes options to purchase 118,674 shares at an exercise
price of $2.15 per share and options to purchase 22,640 shares at an
exercise price of $6.95 per share. Unexercisable includes options to
purchase 144,483 shares at an exercise price of $2.15 per share, options
to purchase 93,793 shares at an exercise price of $6.95 per share and
options to purchase 40,000 shares at an exercise price of $10.00 per
share.
(4) Exercisable options are exercisable at an exercise price of $2.15 per
share.
(5) Unexercisable includes options to purchase 92,835 shares at an exercise
price of $2.15 per share and options to purchase 25,000 shares at an
exercise price of $10.00 per share.
(6) Unexercisable includes options to purchase 64,325 shares at an exercise
price of $2.15 per share and options to purchase 20,000 shares at an
exercise price of $10.00 per share.
(7) Exercisable includes options to purchase 26,315 shares at an exercise
price of $0.76 per share, options to purchase 65,788 shares at an exercise
price of $1.14 per share and options to purchase 210,525 shares at an
exercise price of $2.15 per share. Unexercisable includes options to
purchase 73,098 shares at an exercise price of $2.15 per share.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Effective September 1, 1995, Thomas M. Tully became President and Chief
Executive Officer of the Company pursuant to an employment agreement dated
February 13, 1996. The agreement is for a term of three years, however, if Mr.
Tully is employed by the Company on June 1, 1998, the term will automatically
be extended until August 31, 1999, unless either party gives three months'
prior written notice. Pursuant to his agreement, Mr. Tully received a salary
of $175,000 until August 31, 1996, currently receives a salary of $200,000 and
commencing September 1, 1997, will receive a salary of $250,000 per year. Mr.
Tully is also eligible to receive bonus payments upon the achievement by the
Company of certain specified goals. In addition, in connection with the
execution of his employment agreement and upon the closing of the acquisition
by the Company of the septal repair technology, Mr. Tully received a lump sum
payment of $125,000 and non-qualified stock options to purchase 263,157 shares
of the Company's Common Stock, which options are exercisable at $2.15 per
share. Options to purchase 42,631 shares vested upon execution of the
agreement and the remaining options vest at a rate of 3.45% per month and are
accompanied by certain "piggy-back" registration rights. The options are
exercisable for a period of ten years after the date of grant and become
immediately exercisable in
9
<PAGE>
the event of a change of control of the Company. If Mr. Tully's employment is
terminated due to his death or disability, the number of options deemed to be
exercisable shall be an amount equal to the number of options exercisable at
the date of termination multiplied by two and the portion of the options due
to become exercisable on the first day of the month coincident with or next
following the date of termination, prorated for the number of days he was
employed during that month, shall become exercisable and all other
unexercisable options shall expire. Mr. Tully will forfeit all unexercisable
options if the Company terminates his employment with or without cause. If the
Company terminates Mr. Tully's employment without cause, the Company will be
obligated to continue to pay his annual salary for a period of one year from
termination. Mr. Tully has agreed not to compete with the Company for a period
of one year after he ceases to be employed by the Company. Mr. Tully has
agreed to serve on the Company's Board of Directors upon request of the
Company during the term of his employment agreement.
Effective January 1, 1996, David A. Chazanovitz became President, Septal
Repair Division pursuant to a three-year employment agreement dated February
13, 1996. Pursuant to his agreement, Mr. Chazanovitz received a salary of
$160,000 until December 31, 1996, currently receives a salary of $175,000 and
commencing January 1, 1998, will receive a salary of $185,000 per year. Mr.
Chazanovitz is also eligible to receive bonus payments upon the achievement by
the Company of certain specified goals. In connection with his employment, Mr.
Chazanovitz received (i) non-qualified stock options to purchase 92,105 shares
of the Company's Common Stock at an exercise price of $2.15 per share, which
vest at a rate of 2.77% per month and (ii) options to purchase an aggregate of
up to 26,315 shares of the Company's Common Stock at an exercise price of
$2.15 per share, which vest upon the earlier of (x) the achievement of certain
milestones as described in his employment agreement or (y) December 31, 2000.
The options are exercisable for a period of ten years after the date of grant
and become immediately exercisable in the event of a change of control of the
Company. If Mr. Chazanovitz's employment is terminated due to his death or
disability, the portion of the options due to become exercisable on the first
day of the month coincident with or next following the date of termination,
prorated for the number of days he was employed during the month, shall become
exercisable and all other unexercisable options shall expire. Mr. Chazanovitz
will forfeit all unexercisable options if the Company terminates his
employment with or without cause. If the Company terminates Mr. Chazanovitz's
employment without cause, the Company will be obligated to continue to pay his
annual salary for a period of six months from termination. Mr. Chazanovitz has
agreed not to compete with the Company for a period of one year after he
ceases to be employed by the Company.
Effective May 1996, Theodore I. Pincus became Executive Vice President and
Chief Financial Officer pursuant to a three-year employment agreement.
Pursuant to his employment agreement dated May 17, 1996, Mr. Pincus currently
receives a salary of $160,000, commencing May 1, 1997 will receive a salary of
$175,000 per year and commencing May 1, 1998 will receive a salary of $185,000
per year. In addition, Mr. Pincus received living expenses of $35,000 the
first year and $20,000 the second year, in lieu of receiving the Company's
relocation benefits package. Mr. Pincus is also eligible to receive bonus
payments upon the achievement by the Company of certain specified goals. In
connection with his employment, Mr. Pincus received non-qualified stock
options to purchase 39,473 shares of Common Stock of the Company at an
exercise price of $2.15 per share. The options vest in equal monthly
installments over three years. The options are exercisable for a period of ten
years after the date of grant and become immediately exercisable in the event
of a change of control of the Company. If Mr. Pincus's employment is
terminated due to his death or disability, the portion of the options due to
become exercisable on the first day of the month coincident with or next
following the date of termination, prorated for the number of days he was
employed during the month, shall become exercisable and all other
unexercisable options shall expire. Mr. Pincus will forfeit all unexercisable
options if the Company terminates his employment with or without cause. If the
Company terminates Mr. Pincus's employment without cause, the Company will be
obligated to continue to pay his annual salary for a period of six months
after
10
<PAGE>
termination. Mr. Pincus has agreed not to compete with the Company for a
period of one year after he ceases to be employed by the Company.
CERTAIN TRANSACTIONS
Since January 1, 1996, the Company has entered into or engaged in the
following transactions with the following directors, officers and stockholders
who beneficially own more than 5% of the outstanding Common Stock of the
Company ("5% Stockholders"), and affiliates of such directors, officers and 5%
Stockholders.
In February 1996, the Company entered into an Agreement and Plan of Merger
pursuant to which InnerVentions, Inc. ("InnerVentions"), a wholly-owned
subsidiary of Fletcher Spaght, Inc. and the exclusive licensee of the
technology relating to the CardioSeal Septal Occluder, was merged with and
into NMT Heart, Inc., a wholly-owned subsidiary of the Company. Pursuant to
the Agreement and Plan of Merger, the Company acquired all the existing
development, manufacturing and testing equipment, patent licenses, know-how
and documentation relating to the manufacture of the CardioSeal Septal
Occluder, which had been originally developed by Bard Radiology, donated to
Children's Hospital of Boston, then licensed to InnerVentions. In connection
with the merger, Fletcher Spaght, Inc. received 514,651 shares of Common Stock
of the Company and warrants to purchase 111,818 shares of Common Stock at an
exercise price of $2.15 per share, which shares and warrants are accompanied
by certain "piggy-back" registration rights. In connection with the
transaction, the Company agreed to use its best efforts to nominate a designee
of Fletcher Spaght, Inc. as a director of the Company and certain of the
Company's stockholders agreed to vote their shares of Common Stock in favor of
such designee. Fletcher Spaght, Inc.'s designee, R. John Fletcher, the founder
and Chief Executive Officer of Fletcher Spaght, Inc., was elected to the Board
of Directors of the Company in January 1996.
In February 1996, the Company sold an aggregate of 3,787,104 shares of
Convertible Preferred Stock for an aggregate purchase price of $8,500,000 to
certain investors. Upon the consummation of the Company's initial public
offering in October 1996, the outstanding shares of Convertible Preferred
Stock were automatically converted into units, consisting of an aggregate of
1,993,212 shares of Common Stock and 37,871 shares of the Company's Redeemable
Preferred Stock. The Redeemable Preferred Stock was redeemed by the Company
upon consummation of the initial public offering at an aggregate redemption
price of $4,250,000 plus accrued dividends of approximately $255,000 thereon.
In connection with the sale of the Convertible Preferred Stock, the Company
entered into a Registration Rights Agreement with the purchasers of the
Convertible Preferred Stock, granting to such purchasers certain demand and
"piggy-back" registrations rights. Whitney Equity Partners, L.P. purchased
1,829,066 shares (on a Common Stock equivalent basis) for an aggregate
purchase price of $4,105,000 in the offering. Michael C. Brooks and Jeffrey R.
Jay, M.D., both directors of the Company, are General Partners of J.H. Whitney
& Co., an affiliate of Whitney Equity Partners L.P.
In January 1996, C. Leonard Gordon, the Chairman of the Board of Directors
of the Company, entered into an oral arrangement with the Company to provide
certain executive services to the Company, including serving as the Chairman
of the Board and consulting upon various aspects of the Company business. The
Company agreed to compensate Mr. Gordon for such services in an amount not to
exceed $135,000 per year. Beginning January 1, 1997, Mr. Gordon agreed to be
compensated for such services in an amount not to exceed $90,000 per year.
In April 1987, the Company entered into a Technology Purchase Agreement with
Morris Simon, M.D. pursuant to which the Company agreed to pay Dr. Simon
certain royalty payments based on sales of products using the technology
invented by Dr. Simon relating to the Company's Simon Nitinol Filter. Dr.
Simon assigned a percentage of his royalty payments to Beth Israel Hospital
Association. In January 1996, Dr. Simon entered into an oral arrangement with
the Company to provide certain consulting services to the Company, including
serving as the Company's Scientific Director. The Company agreed to compensate
Dr. Simon for such services in an amount not to exceed $100,000 per year.
11
<PAGE>
In May 1996, the Company loaned Theodore I. Pincus, the Company's Executive
Vice President and Chief Financial Officer, $65,000, one third of which will
be forgiven each year over the three-year period commencing May 1996;
provided, however, that (i) if Mr. Pincus is terminated for cause (as defined
in his employment agreement) the then-outstanding loan together with interest
at prime plus one percent shall become immediately due and payable, or (ii) if
Mr. Pincus is terminated for any other reason, the then-outstanding loan
together with interest at prime plus one percent shall be payable monthly with
a final payment due on April 30, 1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of
the Common Stock to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Except as described below, and based
solely upon a review of reports submitted, and representations made, to the
Company, the Company believes that during 1996, its executive officers,
directors and holders of more than 10% of the Common Stock complied with all
Section 16(a) filing requirements.
In April 1997, Dr. Morris Simon, a director of the Company, filed a
Statement of Changes in Beneficial Ownership on Form 4 to report his purchase
of 2,000 shares of Common Stock in October 1996.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Company's Board of Directors, which is
currently comprised of Mr. Tully and two non-employee directors, Mr. Gordon
and Dr. Jay, and the Stock Option Committee, which is currently comprised of
two non-employee directors, Mr. Fletcher and Dr. Jay, are responsible for
establishing compensation policies with respect to the Company's executive
officers, including the Chief Executive Officer and the other executive
officers named in the Summary Compensation Table, and setting the compensation
for these individuals.
The Company's executive compensation program is designed to maximize the
performance of the Company's executive officers and, thereby, to maximize the
Company's business goals and shareholder returns. Executive compensation
consists of a combination of base salary, annual cash bonuses and merit-based
stock incentives. The Compensation Committee considers merit-based stock
incentives, which are determined by the Stock Option Committee, to be a
critical component of an executive's compensation package in order to help
align executive interests with stockholder interests.
Compensation Philosophy
The objectives of the executive compensation program are to align
compensation with business objectives and individual performance, and to
enable the Company to attract, retain and reward executive officers who are
expected to contribute to the long-term success of the Company. The Company's
executive compensation philosophy is based on the principles of competitive
and fair compensation and sustained performance.
.COMPETITIVE AND FAIR COMPENSATION
The Company is committed to providing an executive compensation program
that helps attract and retain highly qualified executives. In order to
ensure continuity of certain key members of management, the Board has
approved multi-year employment contracts with each of the Company's
executive officers. To ensure that compensation is competitive, the
Company compares its compensation practices with those of other
companies in the industry and sets the Company's compensation
12
<PAGE>
guidelines based on this review. The Compensation Committee believes
compensation for the Company's executive officers is within the range
of compensation paid to executives with comparable qualifications,
experience and responsibilities in the same or similar business and of
comparable size and success. The Compensation Committee also strives to
achieve equitable relationships both among the compensation of
individual officers and between the compensation of officers and other
employees throughout the Company.
. SUSTAINED PERFORMANCE
Executive officers are rewarded based upon corporate performance and
individual performance. Corporate performance is evaluated by reviewing
the extent to which strategic scientific and business plan goals are
met, including such factors as continued innovation in the development
of the Company's technologies, formation of new business alliances, and
meeting stated financial objectives. Individual performance is
evaluated by reviewing attainment of specified individual objectives
and the degree to which teamwork and Company values are fostered.
In evaluating each executive officer's performance, the Compensation
Committee and the Stock Option Committee generally conform to the following
process:
. Company and individual goals and objectives generally are set at the
beginning of the performance cycle.
. At the end of the performance cycle, the accomplishment of the
executive's goals and objectives and his or her contributions to the
Company are evaluated.
. The executive's performance is then compared with peers within the
Company and the results are communicated to the executive.
. The comparative results, combined with comparative compensation
practices of other companies in the industry, are then used to review
base salary levels and to determine cash bonuses and stock compensation
awards.
Annual compensation for the Company's executives generally consists of three
elements--base salary, cash bonuses and stock options.
Each of the Company's executive officers has entered into a three-year
employment agreement with the Company which sets forth the executive's base
salary during the term of the agreement. In addition, Mr. Tully's employment
agreement provides that salary increases beyond the annual increases set forth
in the agreement are to be considered by the Board annually and that any
actual additional increase in his base salary is at the discretion of the
Board. The base salaries were generally set by reviewing compensation for
competitive positions in the market and the historical compensation levels of
the executive. Payment of bonus awards are based on actual corporate and
individual performance against targeted performance and various additional
performance criteria. Targeted performance criteria vary for each executive
based on his area of responsibility. Subjective performance criteria include
an executive's ability to motivate others, develop the skills necessary to
grow as the Company matures, recognize and pursue new business opportunities
and initiate programs to enhance the Company's growth and success. The
Compensation Committee does not use a specific formula based on these targeted
performance and additional criteria, but instead makes an evaluation of each
executive officer's contributions in light of all such criteria.
Compensation at the executive officer level also includes the long-term
incentives afforded by stock options. The stock option program, which is
administered by the Stock Option Committee, is designed to promote the
13
<PAGE>
identity of long-term interests between the Company's employees and its
shareholders and to assist in the retention of executives. The size of option
grants is generally intended to reflect the executive's position with the
Company and his contributions to the Company, including his success in
achieving the individual performance criteria described above. The option
program generally uses a four-year vesting period to encourage key employees
to continue in the employ of the Company. When granting stock options, it has
generally been the policy of the Company to fix the exercise price of such
options at 100% of the fair market value of the Common Stock on the date of
grant. During 1996, all current executive officers received options to
purchase an aggregate of 622,483 shares of Common Stock, at a weighted average
exercise price of $4.12 per share.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), generally disallows a
tax deduction to a public company for compensation over $1.0 million paid to
the company's Chief Executive Officer and four other most highly compensated
executive officers. Qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. The Company
intends to structure the performance-based portion of the compensation of its
executive officers in a manner that complies with the statute to mitigate any
disallowance of deductions.
Mr. Tully's 1996 Compensation
Mr. Tully, the President and Chief Executive Officer of the Company, is
eligible to participate in the same executive compensation plans available to
the other executive officers of the Company. The Compensation Committee and
the Stock Option Committee believe that Mr. Tully's annual compensation,
including the portion of his compensation based upon the Company's merit-based
stock option program, has been set at a level competitive with other companies
in the industry.
Mr. Tully's salary for 1996 increased to $194,398 from $45,000 in 1995,
during which year Mr. Tully was a consultant to the Company on a part-time
basis. Mr. Tully's cash compensation is based upon the terms of his employment
agreement with the Company. Mr. Tully also received bonus compensation of
$50,000 in 1996. Mr. Tully did not participate in the Compensation Committee's
discussion of his 1996 bonus compensation. Pursuant to his employment
agreement, Mr. Tully was granted stock options to purchase 263,157 shares of
the Company's Common Stock at an exercise price of $2.15 per share. In
addition, Mr. Tully was granted stock options to purchase 116,433 shares of
the Company's Common Stock at an exercise price of $6.95 per share and 40,000
shares of Common Stock at an exercise price of $10.00 per share. The exercise
price of each stock option represented the fair market value of the Company's
Common Stock on the date of the grant. In determining whether to grant stock
options to Mr. Tully (other than pursuant to his employment agreement), the
Stock Option Committee considered his overall compensation package relative to
that of other chief executives in the Company's industry and past option
grants as well as the effectiveness of Mr. Tully's leadership of the Company
and the resulting success of the Company in the attainment of its goals.
Compensation Committee
Thomas M. Tully
C. Leonard Gordon
Jeffrey R. Jay, M.D.
Stock Option Committee
R. John Fletcher
Jeffrey R. Jay, M.D.
14
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company from September 27, 1996 (the effective date of the
registration of the Company's Common Stock under the Securities Exchange Act
of 1934, as amended) through December 31, 1996 with the cumulative total
return during this period of (i) The Nasdaq Stock Market U.S. Index and (ii)
The S&P Health Care (Medical Products and Supplies) Index. This graph assumes
the investment of $100 on September 27, 1996 in the Company's Common Stock,
and in each of the indices listed above, and assumes dividends are reinvested.
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
SEPTEMBER 27, 1996 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Nitinol Medical Technologies, Inc. $100.00 $114.00
The Nasdaq Stock Market U.S. Index $100.00 $105.00
The S&P Health Care (Medical Products and
Supplies) Index $100.00 $101.00
</TABLE>
PROPOSAL 2--APPROVAL OF 1997 EMPLOYEE STOCK PURCHASE PLAN
On March 11, 1997, the Board of Directors adopted, subject to stockholder
approval, the Company's 1997 Employee Stock Purchase Plan (the "Purchase
Plan"). The Purchase Plan authorizes the issuance of up to a total of 90,000
shares of Common Stock to participating employees through a series of six
semi-annual offerings, which are expected to commence on each April 1 and
October 1, beginning October 1, 1997. THE BOARD OF DIRECTORS BELIEVES THAT
ADOPTION OF THE PURCHASE PLAN IS IMPORTANT TO THE COMPANY'S ABILITY TO
MAINTAIN A
15
<PAGE>
COMPETITIVE POSITION IN ATTRACTING AND RETAINING KEY PERSONNEL AND IS IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE PURCHASE PLAN AND THE
RESERVATION OF 90,000 SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER.
SUMMARY OF THE PURCHASE PLAN
All employees of the Company, including directors of the Company who are
employees, and all employees of any participating subsidiaries whose customary
employment is more than 20 hours per week and for more than five months in any
calendar year are eligible to participate in the Purchase Plan. Employees who
would immediately after the grant own 5% or more of the total combined voting
power or value of the stock of the Company or any subsidiary are not eligible
to participate.
On the first day of an offering period (the "Offering Period"), the Company
will grant to each eligible employee who has elected to participate in the
Purchase Plan an option to purchase shares of Common Stock as follows: the
employee may authorize an amount (a percentage from 2% to 12% of such
employee's regular pay) to be deducted by the Company from such pay during the
Offering Period. On the last day of the Offering Period, the employee is
deemed to have exercised the option, at the option exercise price, to the
extent of accumulated payroll deductions. Under the terms of the Purchase
Plan, the option price is an amount equal to 85% of the fair market value per
share of the Common Stock on either the first day or the last day of the
Offering Period, whichever is lower. The Board of Directors may, in its
discretion, choose a different Offering Period of 12 months or less for
offerings.
If an employee is not a participant on the last day of the Offering Period,
such employee is not entitled to exercise any option, and the amount of such
employee's accumulated payroll deductions will be refunded. An employee's
rights under the Purchase Plan terminate upon voluntary withdrawal from the
Purchase Plan at any time, or when such employee ceases employment for any
reason.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to participation in the
Purchase Plan and with respect to the sale of Common Stock acquired under the
Purchase Plan. It does not address the tax consequences that may arise with
respect to any gift or disposition other than by sale of Common Stock acquired
under the Purchase Plan. For precise advice as to any specific transaction or
set of circumstances, employees should consult with their own tax advisors.
Employees should also consult with their own tax advisors regarding the
application of any state, local, and foreign taxes and any federal gift,
estate, and inheritance taxes.
The Purchase Plan is intended to qualify as an "Employee Stock Purchase
Plan" within the meaning of Section 423 of the Code. The Purchase Plan is not
a qualified plan under Section 401(a) of the Code.
Tax Consequences to Participants. In general, an employee will not recognize
taxable income upon enrolling in the Purchase Plan or upon purchasing shares
of Common Stock at the end of an Offering Period. Instead, if an employee
sells Common Stock acquired under the Purchase Plan at a sale price that
exceeds the price at which the employee purchased the Common Stock, then the
employee will recognize taxable income. A portion of that taxable income will
be ordinary income, and a portion may be capital gain.
If the employee sells the Common Stock more than one year after acquiring it
and more than two years after the date on which the offering commenced (the
"Grant Date"), then the employee will be taxed as follows.
16
<PAGE>
If the sale price of the Common Stock is higher than the price at which the
employee purchased the Common Stock, then the employee will recognize ordinary
compensation income in an amount equal to the lesser of:
(i) the excess of the fair market value of the Common Stock on the Grant
Date over the price at which the employee purchased the Common Stock; and
(ii) the excess of the sale price of the Common Stock over the price at
which the employee purchased the Common Stock.
Any further income will be long-term capital gain. If the sale price of the
Common Stock is less than the price at which the employee purchased the Common
Stock, then the employee will recognize long-term capital loss in an amount
equal to the excess of the price at which the employee purchased the Common
Stock over the sale price of the Common Stock.
If the employee sells the Common Stock within one year after acquiring it or
within two years after the Grant Date (a "Disqualifying Disposition"), then
the employee will recognize ordinary compensation income in an amount equal to
the excess of the fair market value of the Common Stock on the date that it
was purchased over the price at which the employee purchased the Common Stock.
The employee will also recognize capital gain in an amount equal to the excess
of the sale price of the Common Stock over the fair market value of the Common
Stock on the date that it was purchased, or capital loss in an amount equal to
the excess of the fair market value of the Common Stock on the date that it
was purchased over the sale price of the Common Stock. This capital gain or
loss will be a long-term capital gain or loss if the employee has held the
Common Stock for more than one year prior to the date of the sale and will be
a short-term capital gain or loss if the employee has held the Common Stock
for a shorter period.
Tax Consequences to the Company. The offering of Common Stock under the
Purchase Plan will have no tax consequences to the Company. Moreover, in
general, neither the purchase nor the sale of Common Stock acquired under the
Purchase Plan will have any tax consequences to the Company except that the
Company will be entitled to a business expense deduction with respect to any
ordinary compensation income recognized by an employee upon making a
Disqualifying Disposition. Any such deduction will be subject to the
limitations of Section 162(m) of the Code.
Withholding. The amount that an employee elects to have deducted from his or
her base pay for the purchase of Common Stock under the Purchase Plan
constitutes taxable wages and is subject to withholding. Moreover, the Company
will have a withholding obligation with respect to ordinary compensation
income recognized by an employee upon making a Disqualifying Disposition. The
Company will require any affected employee to make arrangements to satisfy
this withholding obligation.
PROPOSAL 3--RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Arthur Andersen LLP as the
Company's independent auditors for the current fiscal year. Arthur Andersen
LLP has served as the independent auditors for the Company since 1987.
Although stockholder approval of the Board of Directors' selection of Arthur
Andersen LLP is not required by law, the Board of Directors believes that it
is advisable to give stockholders an opportunity to ratify this selection. If
this proposal is not approved at the Annual Meeting, the Board of Directors
will reconsider its selection of Arthur Anderson LLP.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
17
<PAGE>
OTHER MATTERS
MATTERS TO BE CONSIDERED AT THE MEETING
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly
presented to the Annual Meeting, it is the intention of the persons named in
the accompanying proxy to vote, or otherwise act, in accordance with their
judgment on such matters.
SOLICITATION OF PROXIES
The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph, facsimile, e-mail and personal interviews. The Company will also
request brokerage houses, custodians, nominees and fiduciaries to forward
copies of the proxy material to those persons for whom they hold shares and
request instructions for voting the proxies. The Company will reimburse such
brokerage houses and other persons for their reasonable expenses in connection
with this distribution.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal
office in Boston, Massachusetts not later than December 26, 1997 for inclusion
in the proxy statement for that meeting.
By Order of the Board of Directors,
C. Leonard Gordon, Chairman of the
Board
April 25, 1997
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
18
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas M. Tully, Theodore I. Pincus and
Steven D. Singer and each of them, proxies, with power of substitution and
revocation, acting unanimously and voting or if only one is present and voting
then that one, to vote the shares of stock of NITINOL MEDICAL TECHNOLOGIES, INC.
which the undersigned is entitled to vote, at the annual meeting of stockholders
to be held at Nitinol Medical Technologies, Inc., 27 Wormwood Street, Boston,
Massachusetts 02210-1625, on Thursday, June 19, 1997 at 9:30 a.m., Boston,
Massachusetts time, and at any adjournment or adjournments thereof, with all the
powers the undersigned would possess if present.
(continued and to be signed on the other side)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
NITINOL MEDICAL TECHNOLOGIES, INC.
June 19, 1997
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A [X] Please mark your
votes as in this
example.
For all the nominees
listed at right WITHHOLD authority
(except as marked to to vote for all nominees
the contrary below) listed at right
PROPOSAL 1- [_] [_]
Election of
Directors:
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME AT RIGHT.
Nominees:
Thomas M. Tully
Morris Simon, M.D.
C. Leonard Gordon
Michael C. Brooks
R. John Fletcher
Jeffrey R. Jay, M.D.
Robert A. Van Tassel, M.D.
FOR AGAINST ABSTAIN
PROPOSAL 2- Approval of 1997 Employee Stock [_] [_] [_]
Purchase Plan
PROPOSAL 3- Ratification of Solicitation of
Independent Auditors [_] [_] [_]
The Board of Directors recommends a vote FOR the nominees and FOR proposals 2
and 3.
If no direction is made, this proxy will be voted in favor of proposals 1, 2 and
3.
PLEASE SIGN AND DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE
NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
SIGNATURE OF STOCKHOLDER ___________________________________ DATE: ________ 1997
Note: Please sign exactly as name appears on this proxy, indicating, where
proper, official position or representative capacity.
