<PAGE>
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))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
VISTA 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>
VISTA MEDICAL TECHNOLOGIES, INC.
5451 AVENIDA ENCINAS, SUITE A
CARLSBAD, CALIFORNIA 92008
April 30, 1998
To the Stockholders of
VISTA MEDICAL TECHNOLOGIES, INC.
You are cordially invited to attend the Annual Meeting of the
Stockholders of Vista Medical Technologies, Inc., to be held on Tuesday, June
9, 1998 at 10:00 a.m. at the Sheraton San Diego Hotel and Marina located at
1380 Harbor Island Drive, San Diego, California.
Details of the business to be conducted at the Annual Meeting are given
in the attached Notice of Annual Meeting and Proxy Statement.
If you do not plan to attend the Annual Meeting, please sign, date and
return the enclosed proxy promptly in the accompanying reply envelope. If
you decide to attend the Annual Meeting and wish to change your proxy vote,
you may do so automatically by voting in person at the Annual Meeting.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ JOHN R. LYON
-------------------------------------
John R. Lyon
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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 (to which no postage need be affixed if mailed in the
United States).
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
5451 AVENIDA ENCINAS, SUITE A
CARLSBAD, CALIFORNIA 92008
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 9, 1998
TO THE STOCKHOLDERS OF
VISTA MEDICAL TECHNOLOGIES, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Vista
Medical Technologies, Inc. (the "Company") will be held at the Sheraton San
Diego Hotel and Marina located at 1380 Harbor Island Drive, San Diego,
California on Tuesday, June 9, 1998 at 10:00 a.m. (the "Annual Meeting") for
the following purposes, as more fully described in the Proxy Statement
accompanying this Notice:
1. To elect the Board of Directors. The Board of Directors has
nominated the following persons for election at the Annual Meeting:
Nicholas B. Binkley, John R. Lyon, Olav B. Bergheim, James C. Blair, Daniel
J. Holland and Larry M. Osterink.
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on April 15, 1998
are entitled to notice of and to vote at the Annual Meeting. The transfer
books will remain open between the record date and the date of the meeting.
A list of stockholders entitled to vote at the Annual Meeting will be
available for inspection at the executive offices of the Company.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed proxy
as promptly as possible in the envelope enclosed for your convenience.
Should you receive more than one proxy because your shares are registered in
different names and addresses, each proxy should be signed and returned to
assure that all your shares will be voted. You may revoke your proxy at any
time prior to the Annual Meeting. If you attend the Annual Meeting and vote
by ballot, your proxy will be revoked automatically and only your vote at the
Annual Meeting will be counted. The prompt return of your proxy will assist
us in preparing for the Annual Meeting.
By Order of the Board of Directors
/s/ ROBERT J. DE VAERE
------------------------------------------
Robert J. De Vaere
CHIEF FINANCIAL OFFICER, VICE PRESIDENT OF
FINANCE AND ADMINISTRATION AND SECRETARY
Carlsbad, California
April 30, 1998
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
5451 AVENIDA ENCINAS, SUITE A
CARLSBAD, CALIFORNIA 92008
--------------------------------
PROXY STATEMENT
--------------------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
JUNE 9, 1998
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors of Vista Medical Technologies, Inc., a Delaware corporation (the
"Company" or "Vista"), for use at the annual meeting of stockholders to be
held on June 9, 1998 (the "Annual Meeting"). The Annual Meeting will be held
at 10:00 a.m. at the Sheraton San Diego Hotel and Marina located at 1380
Harbor Island Drive, San Diego, California. Stockholders of record on April
15, 1998 will be entitled to notice of and to vote at the Annual Meeting.
These proxy solicitation materials were first mailed to stockholders on or
about April 30, 1998.
The mailing address of the principal executive office of the Company is
5451 Avenida Encinas, Suite A, Carlsbad, California 92008.
PURPOSE OF THE MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders ("Notice"). Each proposal is described in more detail in this
Proxy Statement.
VOTING RIGHTS AND SOLICITATION
VOTING
On April 15, 1998, the record date for determination of stockholders
entitled to notice of and to vote at the Annual Meeting, 13,450,567 shares of
the Company's common stock, par value $.01 (the "Common Stock"), were issued
and outstanding. Each stockholder is entitled to one vote for each share of
Common Stock held by such stockholder on April 15, 1998.
All votes will be tabulated by the inspector of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes are
counted as present for purposes of determining the presence or absence of a
quorum for the transaction of business. Abstentions will be counted towards
the tabulations of votes cast on proposals presented to the stockholders and
will have the same effect as negative votes, whereas broker non-votes will
not be counted for purposes of determining whether a proposal has been
approved.
PROXIES
If the enclosed Proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with
the instructions specified thereon. If the Proxy does not specify how the
shares represented thereby are to be voted, the Proxy will be voted FOR the
election of the directors proposed by the Board unless the authority to vote
for the election of such directors is withheld and, if no contrary
instructions are given, the Proxy will be voted FOR the approval of Proposal
2 described in this Proxy Statement and the accompanying Notice. You may
revoke or change your Proxy at any time before the Annual Meeting by filing
with the Chief Financial Officer of the Company at the Company's principal
executive offices at 5451 Avenida Encinas, Suite A, Carlsbad, California
92008, a notice of revocation or another signed Proxy with a later date. You
may also revoke your Proxy by attending the Annual Meeting and voting in
person.
<PAGE>
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the
Proxy and any additional soliciting material furnished to stockholders.
Copies of solicitation material will be furnished to brokerage houses,
fiduciaries and custodians holding shares in their names that are
beneficially owned by others so that they may forward this solicitation
material to such beneficial owners. In addition, the Company may reimburse
such persons for their costs of forwarding the solicitation materials to such
beneficial owners. The original solicitation of Proxies by mail may be
supplemented by solicitation by telephone, telegram or other means by
directors, officers, employees or agents of the Company. No additional
compensation will be paid to these individuals for any such services. Except
as described above, the Company does not presently intend to solicit Proxies
other than by mail.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company is currently composed of six
members with one vacancy. The Company's Second Restated Certificate of
Incorporation provides that, beginning with this Annual Meeting, the Board of
Directors will be classified into three classes of directors serving
staggered three-year terms, with one class of directors to be elected at each
subsequent annual meeting of stockholders. All of the current members of the
Board of Directors have been nominated to continue to serve on the Board.
Mr. Nicholas B. Binkley and Dr. Larry M. Osterink have been nominated to
stand for election to the Board for terms to expire at the 1999 annual
meeting of stockholders or until their successors are elected and have
qualified, Messrs. Olav B. Bergheim and Daniel J. Holland have been nominated
to stand for election to the Board of Directors for terms to expire at the
2000 annual meeting of stockholders, or until their successors are elected
and have qualified, and Dr. James C. Blair and Mr. John R. Lyon have been
nominated to stand for election to the Board of Directors for terms to expire
at the 2001 annual meeting of stockholders or until their successors are
elected and have qualified. There is also a vacancy on the Board of
Directors in the class of directors for terms to expire at the 1999 annual
meeting of stockholders. Each person nominated for election has agreed to
serve if elected, and management has no reason to believe that any nominee
will be unavailable to serve.
VOTE REQUIRED
The two candidates for the class of directors whose terms expire at the
1999 annual meeting of stockholders, the two candidates for the class of
directors whose terms expire at the 2000 annual meeting of stockholders, and
the two candidates for the class of directors whose terms expire at the 2001
annual meeting of stockholders receiving the highest number of affirmative
votes of the stockholders entitled to vote at the Annual Meeting, will be
elected directors of Vista Medical. Unless otherwise instructed, the
proxyholders will vote each returned Proxy for the nominees named below for
election to the class indicated below, or for as many nominees of the Board
of Directors as possible, such votes to be distributed among such nominees in
the manner as the proxyholders see fit.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE NOMINEES
LISTED ABOVE.
-2-
<PAGE>
NOMINEES
The following table sets forth information regarding the nominees.
<TABLE>
<CAPTION>
Year First Class
Elected Termination
Name Director Age Year Position
- - ---------------------------------- ------ --- ---- -----------------------
<S> <C> <C> <C> <C>
James C. Blair, Ph.D.(1)......... 1995 58 2001 Chairman of the Board
John R. Lyon .................... 1995 51 2001 Chief Executive Officer
Olav B. Bergheim ................ 1996 47 2000 Director
Nicholas B. Binkley (1).......... 1995 52 1999 Director
Daniel J. Holland (2) ........... 1995 62 2000 Director
Larry M. Osterink, Ph.D.(2)...... 1995 57 1999 Director
</TABLE>
- - ----------------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
BUSINESS EXPERIENCE OF NOMINEES FOR TERM ENDING UPON THE 1999 ANNUAL MEETING
OF STOCKHOLDERS
NICHOLAS B. BINKLEY. Mr. Binkley has served as a Director of the
Company since July 1995. In June 1993, Mr. Binkley was one of the founding
principals of Forrest Binkley & Brown L.P., the managing general partner of
SBIC Partners, L.P., a private equity investment fund licensed as a small
business investment company by the U.S. Small Business Administration. From
1977, Mr. Binkley served in a variety of senior executive positions at
Security Pacific Corporation ("SPC"), including Chairman and Chief Executive
Officer of Security Pacific Financial Services System, SPC's non-banking
subsidiary, from 1981, and Vice Chairman of the Board of Directors of SPC
from 1991. In April 1992, Mr. Binkley became Vice Chairman of the Board of
Directors of BankAmerica Corporation ("BankAmerica"), following the merger of
SPC into BankAmerica, serving in such capacity until his resignation in May
1993. Mr. Binkley is a graduate of The Colorado College and holds a masters
degree from Johns Hopkins School of Advanced International Studies.
LARRY M. OSTERINK. Dr. Osterink has been a Director of the Company
since July 1995. Since 1993, Dr. Osterink has served as President of Medical
Optics Inc., a subsidiary of Kaiser Aerospace. From 1984 to 1992, Dr.
Osterink was President of Kaiser Electro-Optics Inc. and from 1979 to 1984 he
was General Manager of the Industrial Laser Division of SpectraPhysics Inc.
Dr. Osterink graduated from Michigan State University and holds a Ph.D. in
Electrical Engineering from Stanford University.
BUSINESS EXPERIENCE OF NOMINEES FOR TERM ENDING UPON THE 2000 ANNUAL MEETING
OF STOCKHOLDERS
OLAV B. BERGHEIM. Mr. Bergheim has served as a Director of the Company
since August 1996. Mr. Bergheim has been a Venture Partner of Domain
Associates since October 1995. From April to July 1995, Mr. Bergheim was
Executive Vice-President of Coram Healthcare and from 1977 to 1995 served in
various management capacities with Baxter Healthcare Corporation in Europe
and the United States. From 1992 to 1995, Mr. Bergheim was President of
Baxter's Cardiovascular Group. Mr. Bergheim is a director of Fusion Medical
Technologies, Inc. Mr. Bergheim graduated from the University of Oslo with a
Masters degree in Industrial Pharmacy.
DANIEL J. HOLLAND. Mr. Holland has served as a Director of the Company
since July 1995. Mr. Holland is a General Partner of One Liberty Fund III, a
venture capital fund organized in 1995. He served as President of
-3-
<PAGE>
Morgan, Holland Ventures Corporation until 1995 when he was appointed Senior
Officer of OneLiberty Ventures, Inc. (formerly Morgan, Holland Ventures
Corporation). He has also served as a Managing General Partner of Morgan,
Holland Fund and Morgan, Holland Fund II since 1981 and 1988, respectively.
Mr. Holland holds a B.S. in mechanical engineering from The Massachusetts
Institute of Technology and an MBA from Harvard Business School.
BUSINESS EXPERIENCE OF NOMINEES FOR TERM ENDING UPON THE 2001 ANNUAL MEETING
JAMES C. BLAIR. Dr. Blair has served as Chairman of the Board and a
Director of the Company since July 1995. Dr. Blair has been a General Partner
of Domain Associates ("Domain"), a venture capital management company, since
1985. From 1969 to 1985, Dr. Blair was an officer of three investment banking
and venture capital firms. Dr. Blair is a director of Amylin Pharmaceuticals,
Inc., Aurora Biosciences Corp., CoCensys Inc., Dura Pharmaceuticals, Inc.,
Gensia Sicor, Inc. and Trega Biosciences Inc., all biopharmaceutical
companies. Dr. Blair is a graduate of Princeton University and holds a Ph.D.
from the University of Pennsylvania.
JOHN R. LYON. Mr. Lyon co-founded the Company in July 1993 and has
served as President since July 1993, as Chief Executive Officer since
December 1996 and as a director of the Company since July 1995. Prior to
co-founding Vista Medical, Mr. Lyon served for three years with Cooper
Companies, as President of the International Division within Cooper's Health
Care Group from January 1991 through December 1992, and as President of
CooperSurgical, a manufacturer and distributor of minimally invasive surgical
products, from January 1992 through January 1993. Mr. Lyon also was employed
by Kaiser Aerospace in a business development role from February 1993 until
the Company was founded in July 1993. Mr. Lyon holds a B.A. from the
University of Durham, United Kingdom.
BOARD COMMITTEES AND MEETINGS
The Board of Directors held nine meetings and acted by unanimous written
consent five times during the fiscal year ended December 31, 1997 (the "1997
Fiscal Year"). The Board of Directors has an Audit Committee and a
Compensation Committee. Each director attended or participated in 75% or
more of the aggregate of (i) the total number of meetings of the Board of
Directors and (ii) the total number of meetings held by all committees of the
Board on which such director served during the 1997 Fiscal Year. The
Compensation Committee held three meetings and acted by unanimous written
consent four times during the 1997 Fiscal Year. The Audit Committee did not
meet during the 1997 Fiscal Year.
The Company has a standing Compensation Committee currently composed of
Dr. Blair and Mr. Binkley. The Compensation Committee reviews and acts on
matters relating to compensation levels and benefit plans for executive
officers and key employees of the Company, including salary and stock
options. The Committee is also responsible for granting stock awards, stock
options and stock appreciation rights and other awards to be made under the
Company's existing incentive compensation plans. The Company also has a
standing Audit Committee composed of Mr. Holland and Dr. Osterink. The Audit
Committee assists in selecting the Company's independent auditors and in
designating services to be performed by, and maintaining effective
communication with, those auditors.
DIRECTOR COMPENSATION
The Company reimburses its directors for all reasonable and necessary
travel and other incidental expenses incurred in connection with their
attendance at meetings of the Board. Under the 1997 Stock Option/Issuance
Plan, as amended, (the "Plan") which was adopted in February 1997 and amended
in March and May 1997, beginning with this Annual Meeting, each non-employee
director who is first elected to the Board will automatically receive an
option to purchase 15,000 shares of Common Stock for the first year of the
director's Board term and 5,000 shares of Common Stock for each additional
year remaining on the director's Board term following the automatic option
grant. Each director who is currently serving on the Board will receive an
option to purchase 5,000 shares of Common Stock for each additional year for
which he is elected as a director. Therefore, each of the nominees, if
elected, will receive an option to purchase 5,000 shares of Common Stock for
each additional year for which he is elected as a director. These options
will have an exercise price equal to 100% of the fair market value of the
-4-
<PAGE>
Common Stock on the grant date. The grant of 15,000 shares will become
exercisable in equal monthly installments over four years of Board service
completed by the director following such grant, and the grants of 5,000
shares will become exercisable at the end of one year of Board service
completed by the director following the date of grant.
Under the Company's 1995 Stock Option Plan (the "Predecessor Plan"),
each non-employee director received a fully vested option to purchase 4,500
shares of Common Stock in December 1996, and Mr. Lyon received an option to
purchase 11,250 shares of Common Stock of the Company. The option grant to
Mr. Lyon vests over five years, subject to acceleration upon a change of
control. Fifty percent of the shares subject to Mr. Lyon's option will
immediately vest in the event the Company is acquired by a merger or asset
sale, unless the Company's repurchase rights with respect to those shares are
transferred to the acquiring entity. The other 50% of the shares will
immediately vest if Mr. Lyon is terminated without cause within two years of
the merger or asset sale.
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP,
independent public auditors for the Company during the 1997 Fiscal Year, to
serve in the same capacity for the year ending December 31, 1998, and is
asking the stockholders to ratify this appointment.
VOTE REQUIRED
The affirmative vote of a majority of the shares represented and voting
at the Annual Meeting is required to ratify the selection of Ernst & Young
LLP. In the event the stockholders fail to ratify the appointment, the Board
of Directors will reconsider its selection. Even if the selection is
ratified, the Board of Directors in its discretion may direct the appointment
of a different independent auditing firm at any time during the year if the
Board of Directors believes that such a change would be in the best interests
of the Company and its stockholders.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
-5-
<PAGE>
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
January 31, 1998, by (i) all persons who are beneficial owners of five percent
(5%) or more of the Company's Common Stock, (ii) each director and nominee for
director, (iii) the executive officers named in the Summary Compensation Table
of the Executive Compensation and Related Information section of this Proxy
Statement and (iv) all current directors and executive officers as a group.
<TABLE>
<CAPTION>
Number of Percentage
Name and Address of Beneficial Owner (1) Shares (1) Beneficially Owned(2)
---------------------------------------- ---------- ---------------------
<S> <C> <C>
Funds advised by Domain Associates (3) 1,873,320 14.0%
One Palmer Square
Princeton, NJ 08542
SBIC Partners, L.P. 1,633,625 12.2%
201 Main Street, Suite 2302
Fort Worth, TX 76102
Medtronic Asset Management, Inc. 1,600,000 11.9%
7000 central Avenue NE
Minneapolis, MN 55432
Foster City Partners 1,551,944 11.6%
950 Tower Lane, Suite 800
Foster City, CA 94404
Biotechnology Investments Limited (B.I.L.) 926,736 6.9%
Post Office Box 58
St. Julian's Court
St. Peter Port
Guernsey, Channel Islands
One Liberty Fund III, L.P. 646,915 4.8%
1 Liberty Square, 2nd Floor
Boston, MA 02109
James C. Blair (3) 1,873,320 14.0%
John R. Lyon (4) 415,949 3.0%
Olav B. Bergheim (5) 19,500 *
Nicholas B. Binkley (6) 1,639,125 12.2%
Daniel J. Holland (7) 667,415 5.0%
Larry Osterink (8) 139,500 1.0%
Koichiro Hori (9) 279,796 2.1%
Nancy M. Briefs (10) 248,295 1.8%
Allen Newman (11) 210,584 1.6%
Clifford F. Potocky (12) 79,361 *
All directors and executive officers as a 5,638,182 39.9%
group (11 persons) (13)
</TABLE>
- - --------------------
* Less than 1%
-6-
<PAGE>
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them, subject to community
property laws, where applicable. Share ownership in each case includes
shares issuable upon exercise of certain outstanding options as described
in the footnotes below. The address for those individuals for which an
address is not otherwise indicated is: 5451 Avenida Encinas, Suite A,
Carlsbad, California 92008.
(2) Percentage of ownership is calculated pursuant to Commission
Rule 13d-3(d)(1).
(3) Includes 1,767,787 shares beneficially owned by Domain Partners III, L.P.,
24,161 shares beneficially owned by Domain Partners, II L.P., 61,872 shares
beneficially owned by DP III Associates, L.P. and 19,500 shares
beneficially owned by Domain Associates. Dr. Blair is a general partner of
One Palmer Square Associates, II, L.P., which is the general partner of
Domain Partners II, L.P., and he is also a general partner of One Palmer
Square Associates, III, L.P., the general partner of Domain Partners III,
L.P. and DP III Associates. Dr. Blair has an indirect beneficial ownership
of these shares. Dr. Blair is a general partner of Domain Associates.
Excludes 926,736 shares beneficially owned by BIL. Pursuant to a
contractual agreement, Domain Associates is the U.S. venture capital
advisor to BIL. Domain Associates has neither voting nor investment power
over BIL and Dr. Blair and Domain Associates disclaim beneficial ownership
of the BIL shares.
(4) Includes 247,000 shares issuable upon exercise of options exercisable
within 60 days of January 31, 1998.
(5) Mr. Bergheim is employed by Domain Associates as a Venture Partner.
Mr. Bergheim has no beneficial ownership of any of the shares owned by
funds advised by Domain Associates.
(6) Includes 1,500 shares issuable upon exercise of options exercisable within
60 days of January 31, 1998. Also includes 4,000 shares beneficially owned
by The Binkley Family Trust, of which Mr. Binkley is a trustee, and
1,633,625 shares beneficially owned by SBIC Partners, L.P., a Texas limited
partnership ("SBIC Partners"). SBIC Partners is the beneficial owner of all
shares of the Company's Common Stock registered in its name. Forrest
Binkley & Brown L.P., a Texas limited partnership ("FBB"), is the managing
general partner of SBIC Partners, and Forrest Binkley & Brown Venture Co.,
a Texas corporation ("Venture Co."), is the sole general partner of FBB.
Mr. Binkley is a limited partner of FBB, and is an executive officer,
director and shareholder of Venture Co. Mr. Binkley disclaims beneficial
ownership with respect to all shares of Common Stock owned by SBIC
Partners, except to the extent of his pecuniary interest therein.
(7) Includes 1,000 shares owned by Mr. Holland and 19,500 shares issuable upon
exercise of options exercisable within 60 days of January 31, 1998. Also
includes 646,915 shares beneficially owned by One Liberty Fund III, L.P.
Mr. Holland is a general partner of One Liberty Partners III, L.P., which
is a general partner of One Liberty Fund III, L.P. Mr. Holland disclaims
beneficial ownership with respect to all shares of Common Stock owned by
One Liberty Fund III, L.P.
(8) Includes 19,500 shares issuable upon exercise of options exercisable within
60 days of January 31, 1998.
(9) Includes 75,500 shares issuable upon exercise of options exercisable within
60 days of January 31, 1998.
(10) Includes 135,500 shares issuable upon exercise of options exercisable
within 60 days of January 31, 1998. Also includes 37,500 shares
beneficially owned by Delaware Charter Guarantee & Trust TTEE FBO Nancy
Briefs (the "Briefs Trust"). Ms. Briefs is a beneficiary of the Briefs
Trust. Ms. Briefs pledged 15,000 shares to Goldman, Sachs & Co. as
security for a loan in the amount of $150,000.
(11) Includes 135,500 shares issuable upon exercise of options exercisable
within 60 days of January 31, 1998.
(12) Includes 79,000 shares issuable upon exercise of options exercisable within
60 days of January 31, 1998.
(13) Includes 717,979 shares issuable upon exercise of options exercisable
within 60 days of January 31, 1998. See also footnotes 3, 6, 7 and 10.
-7-
<PAGE>
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The executive officers and key employees of the Company as of January 31,
1998, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- - ----------------------------------- --- ----------------------------------
<S> <C> <C>
John R. Lyon ..................... 51 President, Chief Executive Officer
and Director
Koichiro (Ken) Hori .............. 61 Senior Vice President, Advanced
Technology
Nancy M. Briefs .................. 42 Vice President and General
Manager, CardioThoracic Surgery
division
Allen Newman ..................... 47 Vice President and General
Manager, Head, Neck & Spine
Microsurgery division
Clifford F. Potocky .............. 50 Vice President
Robert J. De Vaere ............... 40 Chief Financial Officer, Vice
President of Finance and
Administration and Secretary
</TABLE>
JOHN R. LYON. Mr. Lyon has been nominated to serve as a director of the
Company. See "Election of Directors" for a discussion of Mr. Lyon's business
experience.
KOICHIRO (KEN) HORI. Mr. Hori co-founded Vista Medical and served as
Executive Vice President and Chief Technical Officer prior to being appointed
Senior Vice President, Advanced Technology in December 1996. Mr. Hori also
served as a director of the Company from July 1995 to December 1996. Prior to
co- founding the Company, Mr. Hori served as President of Technology for
Imaging, which was subsequently acquired by Bristol-Myers Squibb, from
December 1985 to May 1992 and then founded Oktas, Inc. in November 1992 and
served as its President until December 1996. Oktas, Inc. was a wholly-owned
subsidiary of the Company from July 1995 through December 1996, when it was
legally dissolved as a separate entity and its assets were transferred to the
Company. Mr. Hori earned his B.S.E.E. from Tokyo's Nihon University College
of Science and Engineering.
NANCY M. BRIEFS. Ms. Briefs joined the Company as a consultant in May
1995 and has served as Vice President and General Manager of the Company's
CardioThoracic Surgery division since December 1995. Prior to joining Vista
Medical, from August 1993 through April 1995, Ms. Briefs served as Vice
President of Marketing and Sales at American Surgical Technologies
Corporation ("AST"), a company that developed and received approval for the
first three-dimensional endoscope before its assets were acquired by Vista
Medical in July 1995. Previously, Ms. Briefs served as Director of Worldwide
Marketing and Corporate Accounts at Stryker Corp.'s Endoscopy Division from
January 1990 through August 1992, where she was responsible for both the
arthroscopy and laparoscopy business units. She holds a B.A. and B.S. from
Emporia State University in Kansas and an M.B.A. in Marketing from Golden
Gate University in San Francisco.
ALLEN NEWMAN. Mr. Newman joined Vista Medical in June 1994 and served
as the Company's Vice President, Business Development until being appointed
Vice President and General Manager of the Company's Head, Neck & Spine
Microsurgery division in December 1996. Prior to joining the Company, Mr.
Newman served as president of Newman Medical, a medical consultancy, from
October 1992 through June 1994. Previously, he served as Vice President of
Business Development at Birtcher Medical Systems from March through October
1992 and in various sales and management positions at Karl Storz Endoscopy
America from 1982 through February 1992, serving as Vice President, Sales and
Marketing from 1989. Mr. Newman holds a B.A. from California State University
(Sonoma) and graduated from the Medical Marketing Program of the John E.
Anderson Graduate School of Business at the University of California, Los
Angeles ("UCLA").
-8-
<PAGE>
CLIFFORD F. POTOCKY. Mr. Potocky joined Vista Medical in January 1996
and has served as a Vice President of the Company since December 1996. Prior
to joining Vista Medical, Mr. Potocky worked at Frigitronics from 1974
through October 1995, in a variety of positions, including Executive Vice
President, Vice President-Director of Engineering and Product Manager/Product
Engineer. Frigitronics, a subsidiary of Starr Surgical, Inc., was acquired
and became CooperSurgical in 1990, specializing in cryosurgery and other
minimally invasive medical devices. Mr. Potocky holds a B.S. from the
University of Massachusetts.
ROBERT J. DE VAERE. Mr. De Vaere has served as Chief Financial Officer
since December 1996 and as Vice President of Finance and Administration for
the Company since January 1996. From January 1991 until joining Vista
Medical, Mr. De Vaere served in various financial roles at several of Kaiser
Aerospace's business units, most recently as Director of Finance and Business
Management at Kaiser Electro- Optics. Mr. De Vaere holds a B.S. from UCLA.
-9-
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation earned, by the Company's Chief Executive Officer and each of the
four other most highly compensated executive officers of the Company, for
services rendered in all capacities to the Company for the fiscal years ended
December 31, 1996 and 1997. No executive officers who would have otherwise
been includable in such table on the basis of salary and bonus earned for the
1997 fiscal year has been excluded by reason of his or her termination of
employment or change in executive status during that year. The listed
individuals shall be hereinafter referred to as the "Named Executive
Officers".
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
----------------------- --------------------------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (2) BONUS OPTIONS/SARS(#) COMPENSATION
---- --------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C>
John R. Lyon ......................... 1996 $149,510 $75,000(3) 246,000 --
President, Chief Executive Officer and 1997 164,423 50,000 20,000 --
Director
Koichiro Hori ........................ 1996 129,754 32,400(3) 75,000 --
Senior Vice President, 1997 130,000 25,000 10,000 --
Advanced Technology
Allen Newman ......................... 1996 129,696 32,200(3) 135,000 --
Vice President and General Manager, 1997 139,616 35,000 10,000 --
Head, Neck & Spine Microsurgery
division
Nancy M. Briefs ...................... 1996 118,582 32,000(3) 135,000 --
Vice President and General Manager, 1997 139,577 38,000 10,000 --
CardioThoracic Surgery division
Clifford F. Potocky .................. 1996 99,414 16,000(3) 78,750 19,685(5)
Vice President 1997 121,715 28,500(4) 5,000 --
</TABLE>
- - --------------------
(1) Pursuant to Instruction to Item 402(b) of Regulation S-K promulgated by the
Securities and Exchange Commission (the "Commission"), information with
respect to fiscal years prior to 1996 has not been included as the Company
was not a reporting company pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
information has not been previously reported to the Commission in response
to a filing requirement.
(2) Includes amounts deferred pursuant to the Company's 401(k) Plan.
(3) Includes cash payments for bonuses accrued for and related to 1995 and 1996
services.
(4) Includes cash payments for bonuses accrued for and related to 1996 and 1997
services.
(5) Reimbursement for per diem and temporary living expenses.
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<PAGE>
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table sets forth information concerning stock option
grants made to each of the Named Executive Officers for the 1997 Fiscal Year.
The Company granted no stock appreciation rights ("SARs") to Named Executive
Officers during 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(3)
------------------------------------------------------ -----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
- - ---- ---------- ------------ --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
John R. Lyon . . . . . . 20,000 5.7% $11.31 12/11/2007 $142,256 $360,505
Koichiro Hori . . . . . . 10,000 2.8 11.31 12/11/2007 71,128 180,252
Allen Newman . . . . . . 10,000 2.8 11.31 12/11/2007 71,128 180,252
Nancy M. Briefs . . . . . 10,000 2.8 11.31 12/11/2007 71,128 180,252
Clifford F. Potocky . . . 5,000 1.4 11.31 12/11/2007 35,564 90,126
</TABLE>
- - ----------
(1) The exercise price per share of options granted represented the fair market
value of the underlying shares of Common Stock on the dates the respective
options were granted as determined by the Board in accordance with certain
provisions of the 1997 Stock Option/Stock Issuance Plan based on the
closing selling price per share of a share of Common Stock on the date in
question as reported by the Nasdaq National Market.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Commission. The price used for computing this
appreciation is the exercise price of the options. There is no assurance
provided to any executive officer or any other holder of the Company's
securities that the actual stock price appreciation over the 10-year
option term will be at the assumed 5% or 10% levels or at any other
defined level.
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<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information concerning option exercises
during 1997 by the Named Executive Officers and the value of unexercised
options held by each of the Named Executive Officers as of December 31, 1997.
No SARs were exercised during 1997 or outstanding as of December 31, 1997.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT DECEMBER 31, 1997 AT DECEMBER 31, 1997(3)
ACQUIRED ON VALUE ------------------------------- --------------------------------
NAME EXERCISE(#) REALIZED(1) EXERCISABLE(2) UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE
---- ----------- ------------ -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John R. Lyon . . . . . . . -- -- 246,000 20,000 $2,988,300 $21,250
Koichiro Hori . . . . . . . -- -- 75,000 10,000 913,125 10,625
Allen Newman . . . . . . . -- -- 135,000 10,000 1,639,125 10,625
Nancy M. Briefs . . . . . . -- -- 135,000 10,000 1,639,125 10,625
Clifford F. Potocky . . . . -- -- 78,750 5,000 956,531 5,313
</TABLE>
- - ----------
(1) "Value realized" is calculated on the basis of the fair market value of the
Common Stock on the date of exercise minus the exercise price and does not
necessarily indicate that the optionee sold such stock.
(2) The options are immediately exercisable; however, any shares purchased upon
exercise may be subject to rights of repurchase on the part of the Company
which lapse at various times over the next five years.
(3) "Value" is defined as fair market price of the Common Stock at fiscal
year-end ($12.38) less exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors currently
consists of Dr. Blair and Mr. Binkley. Neither of these individuals was an
officer or employee of the Company at any time during the 1997 Fiscal Year or at
any other time. Mr. Lyon, the Company's President and Chief Executive Officer,
participated in the deliberations of the Compensation Committee regarding
executive compensation that occurred during 1997, but did not take part in the
deliberations regarding his own compensation.
No current executive officer of the Company has ever served as a member of
the board of directors or compensation committee of any other entity that has or
has had one or more executive officers serving as a member of the Company's
Board of Directors or Compensation Committee.
EMPLOYMENT ARRANGEMENTS
The Company has not entered into any employment contracts or arrangements
with any of its Named Executive Officers.
Fifty percent of certain unvested shares subject to options outstanding to
the Company's executive officers will immediately vest if the Company is
acquired by a merger or asset sale, unless the Company's repurchase rights with
respect to those shares are transferred to the acquiring entity. The other 50%
of these shares vest if the employee is terminated without cause within two
years of the merger or asset sale.
-12-
<PAGE>
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THE COMPANY'S
PREVIOUS FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES AND EXCHANGES ACT OF 1934, AS AMENDED (THE "EXCHANGE
ACT"), THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN
WHOLE OR IN PART, THE FOLLOWING REPORT AND THE PERFORMANCE GRAPH ON PAGE 15
SHALL NOT BE INCORPORATED INTO ANY SUCH FILINGS.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
It is the duty of the Compensation Committee to review and determine the
salaries and bonuses of executive officers of the Company, including the Chief
Executive Officer, and to establish the general compensation policies for such
individuals. The Compensation Committee also has the sole and exclusive
authority to make discretionary option grants to the Company's executive
officers under the Company's 1997 Stock Option/Stock Issuance Plan.
The Compensation Committee believes that the compensation programs for the
Company's executive officers should reflect the Company's performance and the
value created for the Company's stockholders. In addition, the compensation
programs should support the short-term and long-term strategic goals and values
of the Company and should reward individual contribution to the Company's
success. The Company is engaged in a very competitive industry, and the
Company's success depends upon its ability to attract and retain qualified
executives through the competitive compensation packages it offers to such
individuals.
GENERAL COMPENSATION POLICY. The Compensation Committee's policy is to
provide the Company's executive officers with compensation opportunities which
are based upon their personal performance, the financial performance of the
Company and their contribution to that performance and which are competitive
enough to attract and retain highly skilled individuals. Each executive
officer's compensation package is comprised of three elements: (i) base salary
that is competitive with the market and reflects individual performance; (ii)
annual variable performance awards payable in cash and tied to the Company's
achievement of performance goals and (iii) long-term stock-based incentive
awards designed to strengthen the mutuality of interests between the executive
officers and the Company's stockholders.
FACTORS. The principal factors that were taken into account in
establishing each executive officer's compensation package for the 1997 fiscal
year are described below. However, the Compensation Committee may in its
discretion apply entirely different factors, such as different measures of
financial performance, for future fiscal years.
BASE SALARY. In setting base salaries, the Compensation Committee
reviewed published compensation survey data for its industry. The Committee
also identified a group of companies for comparative compensation purposes
for which it reviewed detailed compensation data incorporated into their
proxy statements. The base salary for each officer reflects the salary levels
for comparable positions in the published surveys and the comparative group
of companies, as well as the individual's personal performance and internal
alignment considerations. Each executive officer's base salary is adjusted
each year on the basis of (i) the Compensation Committee's evaluation of the
officer's personal performance for the year and (ii) the competitive
marketplace for persons in comparable positions. The Company's performance
and profitability may also be a factor in determining the base salaries of
executive officers.
ANNUAL INCENTIVES. Annual incentives in the form of cash bonuses were
awarded by the Compensation Committee based upon its evaluation of the
performance of each executive officer and the achievement of Company goals
during the year which included product commercialization, raising capital for
operations, and continued product innovation. In 1997, annual incentive
compensation awarded to the Named Executive Officers averaged approximately
24% of base salary and totaled in the aggregate $168,000.
LONG TERM INCENTIVES. Generally, stock option grants are made annually
by the Compensation Committee to each of the Company's executive officers.
Each grant is designed to align the interests of the executive officer with
those of the stockholders and provide each individual with a significant
incentive to manage the Company from the perspective of an owner with an
equity stake in the business. Each grant allows the officer to acquire
shares of the Company's Common Stock at a fixed price per share (the market
price on the grant date) over a specified period
-13-
<PAGE>
of time (up to 10 years). Each option becomes exercisable in a series of
installments over a five-year period, contingent upon the officer's continued
employment with the Company. Accordingly, the option will provide a return
to the executive officer only if he or she remains employed by the Company
during the vesting period, and then only if the market price of the shares
appreciates over the option term.
The size of the option grant to each executive officer, including the Chief
Executive Officer, is set by the Compensation Committee at a level that is
intended to create a meaningful opportunity for stock ownership based upon the
individual's current position with the Company, the individual's personal
performance in recent periods and his or her potential for future responsibility
and promotion over the option term. The relevant weight given to each of these
factors varies from individual to individual. The Compensation Committee has
established certain guidelines with respect to the option grants made to the
executive officers, but has the flexibility to make adjustments to those
guidelines at its discretion.
CEO COMPENSATION. In setting the total compensation payable to Mr. Lyon,
the Company's President and CEO for the 1997 fiscal year, the Compensation
Committee sought to make that compensation competitive with the compensation
paid to the chief executive officers of the companies in the surveyed group,
while at the same time assuring that a significant percentage of compensation
was tied to Company performance and achievement of its goals.
The Compensation Committee adjusted Mr. Lyon's base salary for the 1997
fiscal year in recognition of his personal performance and with the objective of
maintaining his base salary at a competitive level when compared with the base
salary levels in effect for similarly situated chief executive officers. Mr.
Lyon received an incentive bonus determined on the same basis as the incentive
bonuses for other executive officers.
The Compensation Committee also awarded a stock option grant to Mr. Lyon in
fiscal 1997 in order to provide him with an equity incentive to continue
contributing to the financial success of the Company. The option will have
value for Mr. Lyon only if the market price of the underlying option shares
appreciates over the market price in effect on the date the grant was made.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m). The Committee has
considered the potential impact of Section 162(m) of the Internal Revenue Code
adopted under the Federal Revenue Reconciliation Act of 1993. Section 162(m)
disallows a tax deduction for any publicly-held corporation for individual
compensation exceeding $1 million in any taxable year for any of the Named
Executive Officers, unless compensation is performance based. Since the
targeted cash compensation of each of the named executive officers is well below
the $1 million threshold and the Committee believes that any options granted
under the Company's stock option plan will meet the requirement of being
performance based under the transition provisions provided in the regulations
under Section 162(m), the Committee believes that Section 162(m) will not reduce
the tax deduction available to the Company. The Company's policy is to qualify
to the extent reasonable its executive officers' compensation for deductibility
under applicable tax laws.
It is the opinion of the Compensation Committee that the executive
compensation policies and plans provide the necessary total remuneration program
to properly align the Company's performance and the interests of the Company's
stockholders through the use of competitive and equitable executive compensation
in a balanced and reasonable manner, for both the short and long-term.
Submitted by the Compensation Committee of the Company's Board of
Directors.
-14-
<PAGE>
STOCK PERFORMANCE GRAPH
The graph depicted below shows a comparison of cumulative total stockholder
returns for the Company, the CRSP Total Return Index for the Nasdaq Stock Market
(U.S. Companies) (the "Nasdaq Stock Market - U.S. Index") and the Hambrecht and
Quist Healthcare - Excluding Biotech Index (the "H&Q Healthcare - Excluding
Biotech Index"). The graph covers the period from July 2, 1997, the
commencement date of the Company's initial public offering of shares of its
Common Stock, to December 31, 1997. The total return for the Company's Common
Stock and each index assumes that $100 was invested on July 2, 1997 and that all
dividends were reinvested, although dividends have not been declared on the
Company's Common Stock. The stockholder return shown on the graph below is not
necessarily indicative of future performance and the Company will not make or
endorse any predictions as to future stockholder returns.
<TABLE>
<CAPTION>
Nasdaq Stock Market H&Q Healthcare
Date Vista Medical - U.S. Index -Excluding Biotech Index
---- ------------- ------------------- ------------------------
<S> <C> <C> <C>
July 2, 1997 100.00 100.00 100.00
July 1997 100.00 109.57 102.67
August 1997 112.50 109.40 97.53
September 1997 165.28 115.88 102.00
October 1997 138.89 109.85 96.96
November 1997 101.39 110.40 98.76
December 1997 137.50 108.67 101.98
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Registration Statement on Form S-1 pursuant to which the
Company completed its initial public offering ("IPO") was declared effective on
July 2, 1997. As part of the IPO, each four shares of the Company's Preferred
Stock automatically converted into three shares of Common Stock and all
outstanding warrants to purchase shares of the Company's Preferred Stock
automatically converted into the right to acquire a number of shares of Common
Stock (adjusted for the three-for-four reverse stock split) at the same exercise
price.
-15-
<PAGE>
Since its formation in July 1993, the Company has issued, in private
placement transactions, shares of its Preferred Stock as follows: 8,094,340
shares of Series A-1 Preferred Stock at a price of $1.325 per share in July
1995; 154,581 shares of Series A-3 Preferred Stock at a price of $1.325 per
share in September 1995; 1,325,331 shares of Series B Preferred Stock at a
price of $4.00 per share in July 1996; and 2,000,000 shares of Series C
Preferred Stock at a price of $5.00 per share in November 1996. The
purchasers of Preferred Stock include, among others, the following executive
officers and holders of more than five percent of the Company's outstanding
stock and their respective affiliates:
<TABLE>
<CAPTION>
SERIES A-1 TOTAL
EXECUTIVE OFFICERS, DIRECTORS AND 5% STOCKHOLDERS PREFERRED STOCK SERIES A-3 SERIES B SERIES C CONSIDERATION
- - ------------------------------------------------- --------------- ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Funds advised by Domain Associates (1) . . . . . 2,113,207 32,215 326,341 -- $4,148,048
SBIC Partners, L.P. (2) . . . . . . . . . . . . . 1,886,792 -- 291,375 -- 3,665,499
Foster City Partners (3) . . . . . . . . . . . . 1,792,453 -- 276,807 -- 3,482,228
Biotechnology Investments Limited . . . . . . . . 1,056,604 15,875 163,170 -- 2,073,715
One Liberty Fund III, L.P. (4) . . . . . . . . . 747,170 -- 115,385 -- 1,451,540
Koichiro Hori . . . . . . . . . . . . . . . . . . 264,151 -- 8,244 -- 382,976
Nancy M. Briefs . . . . . . . . . . . . . . . . . -- -- 50,000 -- 200,000
Medtronic Asset Management, Inc. (5) . . . . . . -- -- -- 2,000,000 10,000,000
</TABLE>
- - ----------
(1) Includes Domain Partners III, L.P., DP III Associates, L.P. and Domain
Partners II, L.P., associated with Dr. Blair.
(2) Associated with Mr. Binkley.
(3) Includes shares of Series A-1 Preferred Stock originally issued to Kaiser
Aerospace and subsequently transferred to Foster City Partners in June
1996. Does not include 750 shares of Common Stock held by Kaiser
Aerospace.
(4) Associated with Mr. Holland.
(5) A wholly-owned subsidiary of Medtronic, Inc.
Holders of converted Preferred Stock are entitled to certain registration
rights with respect to the Common Stock issued upon conversion of such shares.
Vista Medical was founded as a wholly-owned subsidiary of Kaiser Aerospace
in July 1993. Kaiser Aerospace financed the initial operations of the Company
through cash advances aggregating $5.4 million.
In July 1995, the Company raised approximately $8 million from various
venture capital funds, including funds which are principal stockholders of the
Company and/or are affiliated with directors of the Company, in a private
placement of its Series A-1 Preferred Stock. The Company repaid its indebtedness
to Kaiser Aerospace by permitting Kaiser Aerospace to cancel $2.4 million of
indebtedness owed by the Company as payment for shares of Series A-1 Preferred
Stock and by repaying an additional $3 million debt owed to Kaiser Aerospace
with funds received pursuant to the private placement transaction. As part of
this Series A-1 Preferred Stock financing, the Company also acquired Oktas, Inc.
as its wholly-owned subsidiary pursuant to the receipt of all of the outstanding
shares of Oktas, Inc. as payment for shares of Series A-1 Preferred Stock
received by Mr. Koichiro Hori, the founder and sole shareholder of Oktas, Inc.
and currently an executive officer of the Company.
In July 1995, the Company entered into a Manufacturing Supply Agreement
with Kaiser Electro-Optics, a subsidiary of Kaiser Aerospace. This agreement
was subsequently amended in December 1997. In December 1997, the Company
entered into a Technology Strategic Alliance: Memorandum of Understanding
(the "Technology Strategic Alliance") with Kaiser Aerospace, which superseded
a similar agreement entered into by the Company and Kaiser Electro-Optics in
July 1995. The Technology Strategic Alliance provides that the Company and
Kaiser Aerospace, represented by its subsidiary Kaiser Electro-Optics, will
cooperate in joint development programs related to the head-mounted display
("HMD") as appropriate to be negotiated on an arms-length and
project-by-project basis for a five-year term. The Company contracts with
Kaiser Electro-Optics for development and manufacturing services
-16-
<PAGE>
related to the Company's HMD, including initial production quantities for the
HMD. The Manufacturing Supply Agreement provides that Kaiser Electro-Optics
will be the Company's preferred supplier for a five-year period for not less
than 75% of its requirements for the optical subassembly of the Company's
HMD, provided that pricing and other terms are competitive and mutually
agreed upon. Pursuant to the Technology Strategic Alliance, Kaiser Aerospace
granted the Company a right of first refusal to exclusively license
independently developed new technology or devices for medical applications.
Reciprocally, in December 1997, the Company entered into a License Agreement
with Kaiser Aerospace pursuant to which the Company exclusively licensed to
Kaiser Aerospace the right to manufacture and distribute industrial and
professional versions of its HMD in market segments other than medicine in
return for an upfront payment and royalties based on sales.
In July 1996, the Company raised approximately $4.3 million in cash from
Foster City Partners, various venture capital funds, including funds which are
principal stockholders of the Company and/or affiliated with directors of the
Company, and other accredited investors in a private placement of its Series B
Preferred Stock. The Company repaid its indebtedness to certain of the venture
capital funds by permitting such funds to cancel approximately $0.8 million of
indebtedness owed by the Company as consideration for shares of Series B
Preferred Stock.
In September 1995, the Company purchased substantially all of the assets of
American Surgical Technologies Corporation ("AST"), which was engaged in the
business of designing, developing, marketing and supporting stereoscopic
endoscopes. The purchase price for such assets consisted of $25,000 and 154,581
shares of Series A-3 Preferred Stock of Vista Medical, which was non-voting
stock. Pursuant to its rights under the purchase agreement, AST assigned its
rights to receive the consideration payable by Vista Medical to various venture
capital funds, including funds which are principal stockholders of the Company
and/or are affiliated with directors of the Company. The Company's acquisition
of the assets of AST was accounted for using the purchase method of accounting
with the assets being recorded at their estimated fair values at the date of
acquisition.
In September 1994, the Company entered into a license agreement with Allen
Newman, currently an executive officer of the Company, under which Mr. Newman
granted the Company an exclusive license to use the Newman Technology. In
December 1996, the Company and Urohealth Systems, Inc., which changed its name
to Imagyn Medical Technologies in 1997 ("Imagyn") entered into a license
agreement under which the Company exclusively sublicensed the Newman Technology
to Urohealth for use in gynecology, urology and general surgery on a worldwide
basis. In connection with the license agreement, the parties entered into a
consulting agreement whereby Vista Medical agreed to use its reasonable efforts
to provide the services of Mr. Newman as a consultant. The Newman license
agreement was amended in December 1996 to permit the Company to sublicense the
Newman Technology to Urohealth. In connection with the amendment of the Newman
license agreement, the Company paid Mr. Newman $200,000 and agreed to pay
Mr. Newman 50% of the royalties received from Urohealth. Previously, the Company
made advance royalty payments of $37,500 to Mr. Newman in connection with the
execution of the initial license agreement.
In November 1996, Vista Medical and Medtronic, Inc. entered into a
strategic alliance providing for the distribution and co-promotion of the
Company's current and future visualization and information systems for cardiac
surgery, including the Series 8000. In connection with entering into a
co-promotion agreement, Medtronic, Inc. made a $10 million equity investment in
the Company and received 2,000,000 shares of Series C Preferred Stock, which
automatically converted into 1,500,000 shares of Common Stock in connection with
the IPO.
In May 1996, the Company loaned certain officers of the Company an
aggregate of $63,750 in connection with the exercise of certain stock options by
such officers.
All of the Company's officers are employed by the Company at will.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. The Company expects that all future transactions
between the Company and its officers, directors and principal stockholders and
their affiliates will be approved in accordance with the Delaware General
Corporation Law by a majority of the Board, as well as by a
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<PAGE>
majority of the independent and disinterested directors of the Board, and
will be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
The Company's Second Restated Certificate of Incorporation eliminates,
subject to certain exceptions, directors' personal liability to the Company or
its stockholders for monetary damages for breaches of fiduciary duties. The
Second Restated Certificate of Incorporation does not, however, eliminate or
limit the personal liability of a director for (i) any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law
or (iv) any transaction from which the director derived an improper personal
benefit.
The Company's Restated Bylaws provide that the Company shall indemnify its
directors and executive officers to the fullest extent permitted under the
Delaware General Corporation Law and may indemnify its other officers, employees
and other agents as set forth in the Delaware General Corporation Law. In
addition, the Company has entered into indemnification agreements with its
directors and officers. The indemnification agreements contain provisions that
require the Company, among other things, to indemnify its directors and
executive officers against certain liabilities (other than liabilities arising
from intentional or knowing and culpable violations of law) that may arise by
reason of their status or service as directors or executive officers of the
Company or other entities to which they provide service at the request of the
Company and to advance expenses they may incur as a result of any proceeding
against them as to which they could be indemnified. The Company believes that
these provisions and agreements are necessary to attract and retain qualified
directors and officers. The Company has obtained an insurance policy covering
directors and officers for claims that such directors and officers may otherwise
be required to pay or for which the Company is required to indemnify them,
subject to certain exclusions.
As of the date of this Proxy Statement, there is no pending litigation or
proceeding involving a director, officer, employee or other agent of the Company
as to which indemnification is being sought, nor is the Company aware of any
pending or threatened litigation that may result in claims for indemnification
by any director, officer, employee or other agent.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The members of the Board of Directors, the executive officers of the
Company and persons who hold more than 10% of the Company's outstanding Common
Stock are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934 which require them to file reports with respect
to their ownership of the Common Stock and their transactions in such Common
Stock. Based solely on a review of the copies of such reports furnished to the
Company, or written representations that no Form 5s were required, Vista Medical
believes that, during the period from July 1997 (the first period for which
Section 16(a) reports were required to be filed) through December 31, 1997, all
reporting requirements under Section 16(a) were met in a timely manner by its
directors, executive officers and greater than ten percent beneficial owners.
STOCKHOLDER PROPOSALS FOR 1999 PROXY STATEMENT
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1999 Annual Meeting must be received no
later than December 31, 1998, in order that they may be included in the proxy
statement and form of proxy relating to that meeting.
ANNUAL REPORT
A copy of the Annual Report of the Company for the 1997 Fiscal Year has
been mailed concurrently with this Proxy Statement to all stockholders entitled
to notice of and to vote at the Annual Meeting. The Annual Report is not
incorporated into this Proxy Statement and is not considered proxy solicitation
material.
THE COMPANY FILED AN ANNUAL REPORT ON FORM 10-K WITH THE SECURITIES AND
EXCHANGE COMMISSION ON OR ABOUT MARCH 30, 1998. STOCKHOLDERS MAY OBTAIN A COPY
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<PAGE>
OF THIS REPORT, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND LIST OF
EXHIBITS, WITHOUT CHARGE, BY WRITING TO ROBERT J. DE VAERE, CHIEF FINANCIAL
OFFICER AND VICE PRESIDENT OF FINANCE AND ADMINISTRATION OF THE COMPANY, AT THE
COMPANY'S PRINCIPAL EXECUTIVE OFFICES LOCATED AT 5451 AVENIDA ENCINAS, SUITE A,
CARLSBAD, CALIFORNIA 92008.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other matters is
granted by the execution of the enclosed Proxy.
THE BOARD OF DIRECTORS OF VISTA MEDICAL
TECHNOLOGIES, INC.
Dated: April 30, 1998
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<PAGE>
DETACH HERE
PROXY
VISTA MEDICAL TECHNOLOGIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John R. Lyon and Robert J. De Vaere
jointly and severally, as proxies, with full power of substitution and
resubstitution, to vote all shares of stock which the undersigned is entitled
to vote at the Annual Meeting of Stockholders of Vista Medical Technologies,
Inc. to be held on Tuesday, June 9, 1998, or at any postponements or
adjournments thereof, as specified on this proxy, and to vote in his
discretion on such other business as may properly come before the meeting and
any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Vista Medical Technologies, Inc. develops, manufactures and markets
proprietary visualization and information systems that enable minimally
invasive surgical solutions in cardiothoracic, head, neck and spine and other
selected microsurgical procedures.
DETACH HERE
/x/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
1. Election of Directors.
Nominees: Nicholas B. Binkley and Larry M. Osterink will stand for
election to the Board for terms to expire in 1999.
Olav B. Bergheim and Daniel J. Holland will stand for election to the
Board for terms to expire in 2000.
James C. Blair and John R. Lyon will stand for election to the Board
for terms to expire in 2001.
/ / FOR / / WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
/ /
---------------------------------------------------
For all nominees except as noted above
2. Ratification of Accountants
Ratification and approval of the selection FOR AGAINST ABSTAIN
of Ernst & Young LLP as independent / / / / / /
accountants for the fiscal year ending
December 31, 1998.
UNLESS OTHERWISE SPECIFIED BY THE UNDERSIGNED, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2 AND WILL BE VOTED BY THE PROXYHOLDERS
AT THEIR DISCRETION AS TO ANY OTHER MATTERS PROPERLY TRANSACTED AT THE
MEETING OR ANY ADJOURNMENTS THEREOF. TO VOTE IN ACCORDANCE WITH THE
BOARD OF DIRECTORS' RECOMMENDATIONS JUST SIGN BELOW, NO BOXES NEED
BE CHECKED.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please sign exactly as name appears hereon. If signing as attorney,
executor, administrator, trustee or guardian, please give full title
as such, and, if signing for a corporation, give your title. When shares
are in the names of more than one person, each should sign.
Signature: Date:
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Signature: Date:
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