<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))
/X/ 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):
/ / 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, CA 92008
April 28, 1999
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 8, 1999 at
10:00 a.m. at the Westin Harbor Island located at 1590 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 8, 1999
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 Westin Harbor
Island located at 1590 Harbor Island Drive, San Diego, California on Tuesday,
June 8, 1999 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 two Class I directors for a term of three years or until
their successors are duly elected and qualified. The Board of Directors
has nominated the following persons for election at the Annual Meeting:
Nicholas B. Binkley 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, 1999.
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, 1999 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 28, 1999
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.
2
<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 8, 1999
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 8, 1999 (the "Annual Meeting"). The Annual Meeting will be held at
10:00 a.m. at the Westin Harbor Island located at 1590 Harbor Island Drive, San
Diego, California. Stockholders of record on April 15, 1999 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 28, 1999.
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, 1999, the record date for determination of stockholders
entitled to notice of and to vote at the Annual Meeting, 13,694,434 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, 1999.
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.
3
<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
GENERAL
The Board of Directors of the Company is currently comprised of six members
with one vacancy. The directors are divided into three classes with overlapping
three-year terms. A director serves in office until his or her respective
successor is duly elected and qualified unless the director resigns or by reason
of death or other cause is unable to serve in the capacity of director. The
vacancy is in the category of Class I directors whose terms expire at the 1999
annual meeting of stockholders.
NOMINEES FOR CLASS I DIRECTORS
Two Class I directors are to be elected at the annual meeting for a
three-year term ending in 2002. The Board of Directors has nominated Nicholas
B. Binkley and Larry M. Osterink for re-election as Class I directors. Unless
otherwise instructed, the persons named in the enclosed proxy intend to vote
proxies received by them for the re-election of Messrs. Binkley and Osterink.
Vista Medical Technologies expects Messrs. Binkley and Osterink will accept such
nomination. In the event that either Mr. Binkley or Mr. Osterink is unable or
declines to serve as a director at the time of the Annual Meeting, proxies will
be voted for a substitute nominee or nominees designated by the present Board of
Directors. The term of office of the persons elected as directors will continue
until such director's term expires in 2002 or until such director's successor
has been elected and qualified.
VOTE REQUIRED
Directors are elected by a plurality of votes cast. Votes withheld and
broker non-votes are not counted toward a nominee's total.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE NOMINEES
LISTED ABOVE.
4
<PAGE>
NOMINEES
The following table sets forth information regarding the nominees for Class
I directors with terms expiring in 2002.
<TABLE>
<CAPTION>
Year First Class
Elected Termination
Name Director Age Year Position
- -------------------------------------- --------- ---- ---- ----------
<S> <C> <C> <C> <C>
Nicholas B. Binkley (1)............... 1995 53 2002 Director
Larry M. Osterink, Ph.D.(2) .......... 1995 58 2002 Director
</TABLE>
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
BUSINESS EXPERIENCE OF NOMINEES FOR CLASS I DIRECTORS WITH TERMS ENDING UPON THE
2002 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 director of Golden
State Vintners, Inc. and several privately - held companies. 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. Dr. Osterink has been Executive Vice President of Clinicon
Corporation since January 1998. From 1993 until 1998, Dr. Osterink 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 INCUMBENT CLASS II DIRECTORS WITH TERMS 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 Morgan,
Holland Ventures Corporation until 1995 when he was appointed Senior Officer of
One Liberty 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.
5
<PAGE>
BUSINESS EXPERIENCE OF INCUMBENT CLASS III DIRECTORS WITH TERMS ENDING UPON THE
2001 ANNUAL MEETING OF STOCKHOLDERS
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, 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. 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 six meetings during the fiscal year ended
December 31, 1998 (the "1998 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 1998 Fiscal Year. The
Compensation Committee held four meetings and acted by unanimous written consent
one time during the 1998 Fiscal Year. The Audit Committee held one meeting
during the 1998 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 the first Annual Meeting following the Company's
initial public offering in July 1997, 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 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.
6
<PAGE>
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 1998 Fiscal Year, to
serve in the same capacity for the year ending December 31, 1999, 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, 1999.
7
<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, 1999, 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 13.8%
One Palmer Square
Princeton, NJ 08542
SBIC Partners, L.P. 1,633,625 12.0%
201 Main Street, Suite 2302
Fort Worth, TX 76102
Medtronic Asset Management, Inc. 1,600,000 11.8%
7000 central Avenue NE
Minneapolis, MN 55432
Foster City Partners 1,551,944 11.4%
950 Tower Lane, Suite 800
Foster City, CA 94404
Biotechnology Investments Limited (B.I.L.) 926,736 6.8%
Post Office Box 58
St. Julian's Court
St. Peter Port
Guernsey, Channel Islands
Dimensional Fund Advisors 750,100 5.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
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 13.8%
John R. Lyon (4) 433,504 3.1%
Olav B. Bergheim (5) 19,500 *
Nicholas B. Binkley (6) 1,639,125 12.1%
Daniel J. Holland (7) 667,415 4.9%
Larry Osterink (8) 139,500 1.0%
Koichiro Hori (9) 282,296 2.1%
Nancy M. Briefs (10) 191,627 1.4%
Allen Newman (11) 213,931 1.6%
Robert J. De Vaere (12) 71,520 *
All directors and executive officers as a 5,531,738 39.0%
group (10 persons) (13)
* Less than 1%
</TABLE>
8
<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 L.L.C. 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 managing member of Domain Associates L.L.C.
Excludes 926,736 shares beneficially owned by BIL. Pursuant to a
contractual agreement, Domain Associates L.L.C. is the U.S. venture
capital advisor to BIL. Domain Associates L.L.C. has neither voting
nor investment power over BIL and Dr. Blair and Domain Associates
L.L.C. disclaim beneficial ownership of the BIL shares.
(4) Includes 262,329 shares issuable upon exercise of options
exercisable within 60 days of January 31, 1999.
(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, 1999. 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, 1999. 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, 1999.
(9) Includes 78,000 shares issuable upon exercise of options exercisable
within 60 days of January 31, 1999.
(10) Includes 99,875 shares issuable upon exercise of options exercisable
within 60 days of January 31, 1999. 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.
(11) Includes 138,000 shares issuable upon exercise of options
exercisable within 60 days of January 31, 1999.
(12) Includes 10,329 shares issuable upon exercise of options exercisable
within 60 days of January 31, 1999.
(13) Includes 629,033 shares issuable upon exercise of options
exercisable within 60 days of January 31, 1999. See also
footnotes 3, 6, 7 and 10.
9
<PAGE>
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The executive officers and key employees of the Company as of January 31,
1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- --------------------------------- --- --------------------------
<S> <C> <C>
John R. Lyon.................... 52 President, Chief Executive Officer
and Director
Koichiro (Ken) Hori ............ 62 Senior Vice President, Advanced
Technology
Allen Newman ................... 48 Vice President and General
Manager, Head, Neck & Spine
Microsurgery division
Robert J. De Vaere ............. 41 Chief Financial Officer, Vice
President of Finance and
Administration and Secretary
</TABLE>
JOHN R. LYON. Mr. Lyon is an incumbent Class III 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.
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").
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.
10
<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, 1997 and 1998. No executive officers who would have
otherwise been includable in such table on the basis of salary and bonus earned
for the 1998 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 1998 206,346 -- 20,000 --
Koichiro Hori. . . . . . . . . . . . . . . 1996 129,754 32,400(3) 75,000 --
Senior Vice President, 1997 130,000 25,000 10,000 --
Advanced Technology 1998 142,500 -- 10,000 --
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 1998 155,385 2,500 10,000 --
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 1998 159,384 -- -- --
Robert J. De Vaere . . . . . . . . . . . . 1996 90,006 16,000(3) 35,625 --
Chief Financial Officer, Vice 1997 117,654 30,000 16,250 --
President of Finance and Administration 1998 134,808 2,500 22,000 --
and Secretary
</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 to1996 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.
11
<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 1998 Fiscal Year.
The Company granted no stock appreciation rights ("SARs") to Named Executive
Officers during 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term (2)
--------------------------------------------------------- -------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted Fiscal Year Share (1) Date 5% 10%
- ---- ------------ ------------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
John R. Lyon. . . . . 20,000 7.2% $ 2.25 12/08/2008 $ 28,300 $ 71,718
Koichiro Hori . . . . 10,000 3.6 2.25 12/08/2008 14,150 35,859
Allen Newman. . . . . 10,000 3.6 2.25 12/08/2008 14,150 35,859
Nancy M. Briefs . . . -- -- -- -- -- --
Robert J. De Vaere. . 10,000 3.6 5.06 06/08/2008 31,822 80,643
12,000 4.3 2.25 12/08/2008 16,980 43,031
</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.
12
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information concerning option exercises during
1998 by the Named Executive Officers and the value of unexercised options held
by each of the Named Executive Officers as of December 31, 1998. No SARs were
exercised during 1998 or outstanding as of December 31, 1998.
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, 1998 At December 31, 1998 (3)
Acquired on Value ------------------------------- -------------------------------
Name Exercise (#) Realized (1) Exercisable (2) Unexercisable Exercisable (2) Unexercisable
- ---- ------------ ------------ --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John R. Lyon . . . . . -- -- 250,000 36,000 $667,290 $13,800
Koichiro Hori. . . . . -- -- 77,500 17,500 205,500 6,900
Allen Newman . . . . . -- -- 137,000 18,000 365,400 6,900
Nancy M. Briefs. . . . -- -- 99,875 0 259,998 0
Robert J. De Vaere . . -- -- 8,417 33,583 8,025 8,280
</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 ($2.94) 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 1998 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 1998, 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 AND CHANGE IN CONTROL AGREEMENTS
Pursuant to an agreement entered into on December 28, 1998, the Company
has agreed to continue to pay Mr. Lyon his salary, and to continue to provide
certain health care benefits, for a period of twelve (12) months in the event of
his involuntary termination following a change in control of the Company.
Pursuant to agreements entered into on December 28, 1998, the Company
has agreed to continue to pay Messrs. Hori, Newman and De Vaere their salaries,
and to continue to provide certain health care benefits, for a period of nine
(9) months in the event of their involuntary termination following a change in
control of the Company.
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.
13
<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 16
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 1998 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 the Company's
performance goals during the year which included revenue growth, operating
income, earnings per share and product commercialization. In 1998, annual
incentive compensation awarded to the Named Executive Officers totaled in the
aggregate $5,000.
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 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.
14
<PAGE>
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 1998 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 1998
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 did not receive an incentive bonus during 1998.
The Compensation Committee also awarded a stock option grant to Mr. Lyon
in fiscal 1998 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.
15
<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, 1998. 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 165.28 115.87 102.00
October 1997 138.89 109.87 96.95
November 1997 101.39 110.42 98.76
December 1997 137.50 108.65 101.98
January 1998 111.11 112.08 102.18
February 1998 115.28 122.60 111.63
March 1998 123.61 127.13 115.96
April 1998 106.94 129.29 119.62
May 1998 59.72 122.19 114.89
June 1998 56.25 130.81 118.15
July 1998 37.50 129.43 115.97
August 1998 23.61 104.05 96.43
September 1998 29.86 118.42 104.29
October 1998 26.39 123.26 109.85
November 1998 27.78 135.41 116.55
December 1998 32.64 152.73 123.91
</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.
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:
16
<PAGE>
<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 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
17
<PAGE>
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 into1,500,000 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
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
18
<PAGE>
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 January 1, 1998 through December 31, 1998,
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
except as set forth below:
Nancy Briefs failed to file two (2) Form 4's on a timely basis in 1998, covering
a total of five (5) dispositions of the Company's Common Stock. Ms. Briefs
subsequently reported these transactions on a Form 5 filed for the year ended
December 31, 1998.
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 2000 Annual Meeting must be
received no later than December 31, 1999, 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 1998 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 29, 1999. STOCKHOLDERS MAY OBTAIN A COPY
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.
19
<PAGE>
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 28, 1999
20
<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 8, 1999, or at any postponement 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 2002.
FOR WITHHELD
BOTH / / / / FROM BOTH
NOMINEES NOMINEES
/ / _______________________________________
For both nominees except as noted above
2. Ratification of Accountants
Ratification and approval of the selection of Ernst & Young LLP as
independent accountants for the fiscal year ending December 31, 1999.
FOR AGAINST ABSTAIN
/ / / / / /
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 FOR ADDRESS CHANGE AND NOTE AT LEFT / /
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
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 name of more
than one person, each should sign.
Signature:___________________Date:_______________
Signature:___________________Date:_______________
