<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
Micro Therapeutics, 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] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
MICRO THERAPEUTICS, INC.
1062 CALLE NEGOCIO #F
SAN CLEMENTE, CALIFORNIA 92673
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 1998
TO THE STOCKHOLDERS OF MICRO THERAPEUTICS, INC.,
The 1998 Annual Meeting of Stockholders of Micro Therapeutics, Inc. (the
"Company"), will be held at the Hyatt Regency, 17900 Jamboree Road, Irvine,
California 92614 on May 29, 1998, at 11:30 a.m., for the following purposes as
more fully described in the accompanying Proxy Statement:
(1) To elect the following five nominees to serve as directors until the
next annual meeting of stockholders or until their successors are
elected and have qualified:
George Wallace Dick Allen
H. DuBose Montgomery Kim Blickenstaff
Wende Hutton
(2) To consider and vote upon a proposal to amend the Company's Employee
Stock Purchase Plan to increase the number of shares thereunder by
50,000 shares, bringing the total number of shares issuable
thereunder to a total of 150,000;
(3) To consider and vote upon a proposal to amend the Company's 1996
Stock Incentive Plan to increase the number of shares issuable
thereunder by 500,000 shares, bringing the total number of shares
available for issuance thereunder to a total of 1,100,000;
(4) To ratify the appointment of Coopers & Lybrand L.L.P as independent
auditors of the Company for the fiscal year ending December 31,
1998; and
(5) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on April 14, 1998
will be entitled to vote at the meeting or any adjournment or postponement
thereof.
By Order of the Board of Directors
George Wallace
Chief Executive Officer President
and Director
San Clemente, California
April 28, 1998
YOUR VOTE IS IMPORTANT. THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING
YOU SHOULD COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. Any stockholder
present at the meeting may withdraw his or her proxy and vote personally on each
matter brought before the meeting. Stockholders attending the meeting whose
shares are held in the name of a broker or other nominee who desire to vote
their shares at the meeting should bring with them a proxy or letter from that
firm confirming their ownership of shares.
<PAGE> 3
MICRO THERAPEUTICS, INC.
1062 CALLE NEGOCIO #F
SAN CLEMENTE, CALIFORNIA 92673
---------------
PROXY STATEMENT
---------------
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Micro Therapeutics, Inc., a
Delaware corporation (the "Company"), for use at its 1998 Annual Meeting of
Stockholders ("Annual Meeting") to be held on May 29, 1998, at 11:30 a.m., at
the Hyatt Regency, 17900 Jamboree Road, Irvine, California 92614 . This Proxy
Statement and the accompanying proxy are being mailed to stockholders on or
about April 28, 1998. It is contemplated that this solicitation of proxies will
be made primarily by mail; however, if it should appear desirable to do so in
order to ensure adequate representation at the meeting, directors, officers and
employees of the Company may communicate with stockholders, brokerage houses and
others by telephone, telegraph or in person to request that proxies be furnished
and may reimburse banks, brokerage houses, custodians, nominees and fiduciaries
for their reasonable expenses in forwarding proxy materials to the beneficial
owners of the shares held by them. All expenses incurred in connection with this
solicitation shall be borne by the Company.
Holders of shares of common stock of the Company ("stockholders") who
execute proxies retain the right to revoke them at any time before they are
voted. Any proxy given by a stockholder may be revoked or superseded by
executing a later dated proxy, by giving notice of revocation to the Secretary,
Micro Therapeutics, Inc., 1062 Calle Negocio #F, San Clemente, California 92673,
in writing prior to or at the meeting or by attending the meeting and voting in
person. A proxy, when executed and not so revoked, will be voted in accordance
with the instructions given in the proxy. If a choice is not specified in the
proxy, the proxy will be voted "FOR" the nominees for election of directors
named in this Proxy Statement, "FOR" the amendment to the Company's Employee
Stock Purchase Plan, "FOR" the amendment to the Company's 1996 Stock Incentive
Plan and "FOR" the ratification of Coopers & Lybrand L.L.P as the Company's
independent auditors.
VOTING SECURITIES
The shares of Common Stock, $.001 par value, constitute the only
outstanding class of voting securities of the Company. Only the stockholders of
the Company of record as of the close of business on April 14, 1998 (the "Record
Date"), will be entitled to vote at the meeting or any adjournment or
postponement thereof. As of the Record Date, there were 6,591,890 shares of
Common Stock outstanding and entitled to vote. No shares of the Company's
preferred stock, $.001 par value, were outstanding. A majority of shares
entitled to vote represented in person or by proxy will constitute a quorum at
the meeting. Each stockholder is entitled to one vote for each share of Common
Stock held as of the Record Date. Abstentions and broker non-votes are each
included in the determination of the number of shares present and voting for the
purpose of determining whether a quorum is present. Abstentions will be treated
as shares present and entitled to vote for purposes of any matter requiring the
affirmative vote of a majority or other proportion of the shares present and
entitled to vote. With respect to shares relating to any proxy as to which a
broker non-vote is indicated on a proposal, those shares will not be considered
present and entitled to vote with respect to any such proposal. Abstentions or
broker non-votes or other failures to vote will have no effect in the election
of directors, who will be elected by a plurality of the affirmative votes cast.
With respect to any matter brought before the Annual Meeting requiring the
affirmative vote of a majority or other proportion of the outstanding shares, an
abstention or broker non-vote will have the same effect as a vote against the
matter being voted upon.
<PAGE> 4
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Bylaws, as amended, authorize a total of five directors.
Currently, there are five members of the Board of Directors. Directors are
elected at each annual stockholders' meeting to hold office until the next
annual meeting or until their successors are elected and have qualified. Unless
otherwise instructed, the proxy holders named in the enclosed proxy will vote
the proxies received by them for the five nominees named below. All of the
nominees are presently directors of the Company. If any nominee becomes
unavailable for any reason before the election, the enclosed proxy will be voted
for the election of such substitute nominee or nominees, if any, as shall be
designated by the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees will be unavailable to serve.
The names and certain information concerning the five nominees for
election as directors are set forth below. THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW.
DIRECTORS
All members of the Company's Board of Directors hold office until the next
annual meeting of stockholders or until their successors are elected and
qualified. Officers serve at the discretion of the Board of Directors.
The director nominees of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------- ----- --------------------------------------
<S> <C> <C>
George Wallace 39 Chief Executive Officer, President
and Director
H. DuBose Montgomery 49 Chairman of the Board
Dick Allen 54 Director
Wende Hutton 38 Director
Kim Blickenstaff 45 Director
</TABLE>
Mr. Wallace is a founder of the Company and has served as President and
Chief Executive Officer since the Company's formation in June 1993. From 1989 to
1993, Mr. Wallace was with Applied Medical Resources ("AMR") holding a number of
positions, the last of which was the General Manager of its Applied Vascular and
Applied Urology Divisions. AMR is a manufacturer of specialty surgical products
used in general, vascular and urologic surgery. From 1986 to 1989, Mr. Wallace
was Vice President of Marketing and Sales for Vaser, Inc., a laser angioplasty
company with peripheral and coronary laser angioplasty systems. From 1980 to
1986, Mr. Wallace held various positions in sales, sales management, marketing
and marketing management at Edwards Laboratories, a division of American
Hospital Supply and later Baxter International. Mr. Wallace holds a B.S. in
Marketing from Arizona State University.
Mr. Montgomery has served as Chairman of the Board of the Company since
December 1993. Since 1976, Mr. Montgomery has been a general partner of
Menlo Ventures, a venture capital firm in Menlo Park, California. Mr.
Montgomery is a director of several private companies. Mr. Montgomery holds
a B.S. in Electrical Engineering and Management Science and an M.S. in
Electrical Engineering from M.I.T. and an M.B.A. from the Harvard University
Graduate School of Business.
Mr. Allen has been a director of the Company since June 1994. He is
the President of DIMA Ventures, Inc., a private investment firm providing
seed capital and board-level support for start-up companies in the healthcare
field. He was a founder of Caremark, Inc., a home infusion therapy company,
and served as a Vice President from its inception in 1979 until 1986. From
1968 to 1978, Mr. Allen held various management positions with Baxter
International. Mr. Allen also served as a Lecturer in Management at the
Stanford University Graduate School of Business from 1989 to 1992. He was a
founder and director of Pyxis Corporation (acquired by Cardinal Health Inc.)
and is a member of the boards of Hoag Memorial Hospital Presbyterian and
several private companies. Mr. Allen holds a B.S. from Yale University and
an M.B.A. from Stanford University Graduate School of Business.
2
<PAGE> 5
Ms. Hutton has been a director of the Company since February 1995.
From July 1993 until March 1995, Ms. Hutton was a venture partner, and since
March 1995 has been a general partner of Mayfield Fund VIII, a venture
capital firm, in Menlo Park, California. Since August 1993, Ms. Hutton has
served as a director of Heartstream, Inc. where she served as Vice President
of Marketing from February 1993 until November 1993. From March 1991 to
January 1993 she was General Manager of the Transgenic Laboratory products
division of GenPharm International, Inc., a biotechnology company. From
August 1986 to March 1991, Ms. Hutton was employed by Nellcor, Inc., where
she held various senior positions in international marketing and business
development. Ms. Hutton holds a B.A. in Human Biology from Stanford
University and an M.B.A. from Harvard University Graduate School of
Business.
Mr. Blickenstaff has been a director of the Company since July 1997.
Mr. Blickenstaff is President, Chief Executive Officer, director and
co-founder of Biosite Diagnostics, Inc., a leading point-of care diagnostics
company. Prior to forming Biosite Diagnostics, Inc. in 1988, Mr.
Blickenstaff held various positions over a five year period with Hybritech,
Inc. and was responsible for developing business plans and financing
strategies which resulted in raising $70 million to fund Hybritech's
development of cancer diagnostic and therapeutic products. Prior to joining
Hybritech, Mr. Blickensatff held various management positions with The
Christiana Companies Inc., National Health Laboratories, and Baxter Travenol
Laboratories. Mr. Blickenstaff received his M.B.A. from the Graduate School
of Business at Loyola University in Chicago.
BOARD MEETINGS AND ATTENDANCE
The Board of Directors of the Company held five meetings during the fiscal
year ended December 31, 1997. Each incumbent Director attended at least
seventy-five percent (75%) of the aggregate of the number of meetings of the
Board and the number of meetings held by all committees of the Board on which he
or she served. There are no family relationships among any of the directors or
executive officers of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee and a Compensation
Committee. The Audit Committee is comprised of two directors selected by the
Board of Directors of the Company. The current members of the Audit Committee
are Kim Blickenstaff and Wende Hutton. The Audit Committee is authorized to
handle all matters which it deems appropriate regarding the Company's
independent accountants and to otherwise communicate and act upon matters
relating to the review and audit of the Company's books and records, including
the scope of the annual audit and the accounting methods and systems to be
utilized by the Company. In addition, the Audit Committee also makes
recommendations to the Board of Directors with respect to the selection of the
Company's independent accountants. The Audit Committee did not meet during the
fiscal year ended December 31, 1997.
The Compensation Committee is comprised of two directors selected by the
Board of Directors of the Company. The current members of the Compensation
Committee are H. DuBose Montgomery and Dick Allen. The functions of the
Compensation Committee include advising the Board of Directors on officer and
employee compensation. The Board of Directors, based on input from the
Compensation Committee, establishes the annual compensation rates for the
Company's executive officers. The Compensation Committee held three meetings
during the fiscal year ended December 31, 1997.
The Company does not have a nominating committee. Instead, the Board of
Directors, as a whole, identifies and screens candidates for membership on the
Company's Board of Directors.
3
<PAGE> 6
OTHER EXECUTIVE OFFICERS
The other current executive officers of the Company are as follows:
Mr. Hurwitz joined the Company in December 1997 as Chief Financial
Officer. From May 1997 until joining the Company, Mr. Hurwitz was Chief
Financial Officer of Opal Concepts, Inc. a privately held company in the
haircare industry. From February 1997 through April 1997, Mr. Hurwitz was a
partner with Scott, Bankhead & Co., a certified public accounting firm. From
September 1974 to October 1996, Mr. Hurwitz was an employee and partner with
Coopers & Lybrand L.L.P., a certified public accounting firm. Mr. Hurwitz
holds a B.A. in Economics from the University of California, Los Angeles.
Mr. Gearhart joined the Company in July 1997 as Executive Vice
President-Sales and Marketing. From June 1996 until joining the Company, Mr.
Gearhart served as Vice President, Sales and Marketing for Interventional
Technologies, Inc. From June 1993 until June 1996, Mr. Gearhart served as
Vice President, Sales and Marketing at the Schneider (USA) Division of
Pfizer, Inc. From September 1991 to June 1993, Mr. Gearhart held the
position of Director of Marketing at the St. Jude Medical Division of St.
Jude Medical, Inc. From August 1989 to September 1991, Mr. Gearhart served
as the Director of Sales and Marketing of the Clinical Nutrition Division of
Sandoz Nutrition. From April 1985 to August 1989, Mr. Gearhart served as
President of Competitive Business Strategies, a consulting business
specializing in business planning and operations management for start-up and
emerging health care businesses. From 1978 to 1985 Mr Gearhart held various
management positions at Medtronic, Inc. Mr. Gearhart holds a J.D. from
William Mitchell College of Law, an M.B.A. from the University of Michigan
Graduate School of Business Administration and a B.S. in Economics from the
University of Pennsylvania, Wharton School of Finance and Commerce.
Mr. McLain joined the Company in September 1996 as Vice
President-Operations. From January 1990 until joining the Company, Mr. McLain
held several positions at Applied Medical Resources, including Vice President of
Operations from January 1994 until January 1995, Director of Materials and
Planning, Director of Product Development for Laparoscopy and Director of
Process Development from January 1990 until January 1994. From 1976 to 1990, Mr.
McLain held various engineering and management positions with C.R Bard, American
Hospital Supply, and Allergan, Inc. Mr. McLain holds an M.B.A. from Pepperdine
University and a B.S. in Physics from the University of Colorado.
Mr. Gehrich joined the Company in December 1996 as Vice
President-Regulatory & Clinical Affairs. From 1981 to 1996, Mr. Gehrich was
with Cardiovascular Devices, Inc. ("CDI"), a division of 3M Healthcare,
holding a number of positions, the last of which was Vice President, R&D and
Scientific and Regulatory Affairs. CDI, which Mr. Gehrich co-founded, is a
manufacturer of products for real time measurement of blood gases. From 1978
to 1981, Mr. Gehrich was Manager, Product Evaluation and Planning for the
Edwards Laboratories division of American Hospital Supply, a manufacturer of
cardiovascular catheters and artificial heart valves. Mr. Gehrich holds a
Ph.D. in Electrical/Biomedical Engineering and an MSEE from the University of
Southern California and BSEE from the University of Dayton.
Mr. Latham joined the Company in May 1995 as National Sales Manager and
became Vice President-Sales in January 1996. From 1981 to 1995, Mr. Latham held
various sales and marketing positions with Cordis, Inc., a medical device
manufacturer, serving most recently as Sales Manager for its Cordis Endovascular
Systems subsidiary, specializing in the development and marketing of
interventional radiology and neuroradiology devices. From 1978 to 1981, Mr.
Latham held positions in market research and sales administration with Althin
Medical (formerly Cordis Dow Corporation), a manufacturer of hemodialysis
disposable products. Mr. Latham holds a B.S. in Chemistry and an M.B.A. in
Marketing from the University of Florida.
4
<PAGE> 7
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation earned during the two fiscal
years ended December 31, 1996 and 1997 by the Company's Chief Executive Officer
and the four other most highly compensated executive officers whose total salary
and bonus during such year exceeded $100,000 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------- -----------------
AWARDS
-----------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMP.(1)
- ----------------------------------- ---- --------- -------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
George Wallace 1997 173,333 (2) 25,000
Chief Executive Officer and 1996 159,000 -- --
President
Glenn Latham 1997 105,292 7,294 7,000
Vice President - Sales 1996 100,875 7,025 22,750 50,855(3)
Jack Gehrich 1997 108,212(4)
Vice President - Regulatory &
Clinical Affairs
Michael McLain 1997 107,917 21,000
Vice President - Operations 1996 30,227(5) 39,000
Thomas Berryman 1997 106,958 -- 15,000 15,875(6)
Chief Financial Officer 1996 113,250 -- 9,750
</TABLE>
- ----------
(1) Does not reflect certain personal benefits, which in the aggregate are
less than 10% of each Named Executive Officer's salary and bonus.
(2) Based on 1997 performance results, the Board of Directors awarded Mr.
Wallace a $25,000 bonus. This bonus was paid to him in February 1998.
(3) Consists of an automobile allowance of $6,000 and a moving expense
reimbursement of $44,855 to reimburse Mr. Latham for his expenses incurred
in moving from Florida to Southern California.
(4) Mr. Gehrich was hired on December 5, 1996 but did not assume the duties of
the V.P. Regulatory & Clinical Affairs until January 1, 1997.
(5) Mr. McLain was hired on September 16, 1996.
(6) Mr. Berryman resigned his position as Chief Financial Officer on November
17, 1997 to accept a position as the President and Chief Executive Officer
of Genyx Medical, Inc., a minority owned subsidiary of the Company. This
amount reflects compensation paid by the Company to Mr. Berryman for
services rendered to Genyx Medical, Inc.
5
<PAGE> 8
OPTION MATTERS
Option Grants. The following table sets forth certain information
concerning grants of options to each of the Company's Named Executive Officers
during the fiscal year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED(#) YEAR (1) ($/SHARE) DATE (2)
- --------------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
George Wallace 25,000 7.1 5.25 05/09/07
Glenn Latham 7,000 2.0 5.25 05/09/07
Jack Gehrich -- -- --
Michael McLain 5,000 5.25 05/09/07
16,000 6.0 5.25 10/28/07
Thomas Berryman(3) 15,000 4.3 5.25 05/09/07
</TABLE>
- ----------
(1) Options to purchase an aggregate of 351,450 shares of Common Stock were
granted to employees, including the Named Executive Officers during the
fiscal year ended December 31, 1997.
(2) Options granted have a term of 10 years, subject to earlier termination in
certain events related to termination of employment. For the Named
Executive Officers hired in 1996 or prior, options vest in equal monthly
installments over four years. For new officers hired in 1997, one quarter
of the options vest on the first anniversary of the date of grant and the
remainder vest in equal monthly installments over the next three
succeeding years.
(3) Mr. Berryman's options ceased vesting on February 28, 1998. The vested
options were exercisable through March 28, 1998 and all vested options
were exercised on March 9, 1998 and March 17, 1998.
Option Exercises. Thomas Berryman was the only Named Executive Officer who
exercised options to purchase shares of the Company's Common Stock during the
fiscal year ended December 31, 1997. On August 14, 1997, Mr. Berryman exercised
options to purchase 10,000 shares at $.46 per share, for a realized value of
$36,650. On August 29, 1997, Mr. Berryman exercised options to purchase 2,600
shares at $.46 per share, for a realized value of $9,204.
The following table includes the number of shares covered by both
exercisable and unexercisable stock options as of December 31, 1997. Also
reported are the values for "in the money" options which represent the positive
spread between the exercise prices of any such existing stock options and the
fiscal year end price of the Company's Common Stock ($6.50 per share).
6
<PAGE> 9
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)
------------------------------ -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
George Wallace 20,410 30,590 $ 103,325 $ 84,925
Glenn Latham 21,068 24,932 113,664 98,586
Jack Gehrich 13,000 39,000 14,500 43,500
Michael McLain 13,686 46,314 15,467 54,283
Thomas Berryman 31,705 35,045 175,540 145,200
</TABLE>
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company entered into an employment agreement with Mr. Gearhart,
effective July 8, 1997, for a term expiring January 8, 1999, pursuant to which
he will serve as Executive Vice President, Sales and Marketing. The employment
agreement provides for a base salary of One Hundred Fifty Five Thousand Dollars
($155,000) per year with annual raises to be determined by the Company. Mr.
Gearhart may earn a performance bonus based upon the attainment of certain
operating goals of the Company. Mr. Gearhart's target performance bonus is Five
Thousand Dollars ($5,000) for each of the six quarters ending December 31, 1998.
Mr. Gearhart is also eligible to participate in incentive compensation and other
employee benefit plans established by the Company from time to time. Mr.
Gearhart's employment agreement provides for a severance benefit of Two Hundred
Thousand Dollars ($200,000) if he is terminated without cause within the first
twelve months of his employment and such termination occurs within six months of
a change in control. The severance benefit is in addition to his current base
salary accrued through date of termination coupled with his prorated performance
bonus for the quarter.
The Company entered into an employment agreement with Mr. Hurwitz,
effective December 1, 1997, for a term expiring June 1, 1999, pursuant to which
he will serve as Chief Financial Officer. The employment agreement provides for
a base salary of One Hundred Thirty Five Thousand Dollars ($135,000) per year
with annual raises to be determined by the Company. Mr. Hurwitz is also eligible
to participate in incentive compensation and other employee benefit plans
established by the Company from time to time. Mr. Hurwitz's employment agreement
provides for a severance benefit of One Hundred Fifty Thousand Dollars
($150,000) if he is terminated without cause within the first twelve months of
his employment and such termination occurs within six months of a change in
control. The severance benefit is in addition to his current base salary accrued
through date of termination.
DIRECTORS' FEES
The Company's directors are not paid cash compensation for their services
on the Company's Board of Directors. All directors may be reimbursed for certain
expenses incurred for meetings of the Board of Directors which they attended.
Pursuant to the Company's 1996 Stock Incentive Plan, each non-employee director
shall receive an initial grant of 8,000 shares, vesting 25% immediately and the
remaining 75% over the following three years, plus an annual grant of 2,000
shares on each anniversary of such director's election, vesting 25% immediately
and the remaining 75% over the following three years. Accordingly, in fiscal
year 1997, Mr. Montgomery, Mr. Allen, Ms. Hutton and Mr. Blickenstaff were each
granted options to purchase 8,000 shares.
7
<PAGE> 10
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon its review of the copies of Forms 3 and 4 and amendments
thereto furnished to the Company, or written representations that no annual Form
5 reports were required, the Company believes that all filing requirements under
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") applicable to its directors, officers and any persons holding ten percent
(10%) or more of the Company's Common Stock were made with respect to the
Company's fiscal year ended December 31, 1997, except for a late filing of Mr.
Blickenstaff's Form 3 reporting the grant of stock options received upon his
election to the Company's Board of Directors.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Set forth below is certain information as of February 28, 1998 regarding
the beneficial ownership of the Company's Common Stock by (i) any person who was
known by the Company to own more than five percent (5%) of the voting securities
of the Company, (ii) all directors and nominees, (iii) each of the Named
Executive Officers identified in the Summary Compensation Table, and (iv) all
current directors and executive officers as a group. Unless otherwise indicated,
the persons named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property laws
where applicable.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS (1) OWNERSHIP (2) OF CLASS
- ----------------------------------------- ---------------------- --------
<S> <C> <C>
Menlo Ventures VI, L.P. (3) 2,007,542 30.74%
Menlo Entrepreneurs Fund VI, L.P.
MV Management VI, L.P.
Thomas H. Bredt
John W. Jarve
Douglas C. Carlisle
H. DuBose Montgomery
Michael D. Laufer, M.D.
Sonja L. Hoel
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, California 94025
Mayfield VII (4) 1,031,108 15.79%
Mayfield VII Management Partners
Mayfield Associates Fund II
Yogen K. Dalal
F. Gibson Myers, Jr.
Kevin A. Fong
William D. Unger
Wendell G. Van Auken
Michael J. Levinthal
A. Grant Heidrich, III
2800 Sand Hill Road
Suite 250
Menlo Park, California 94025
The CIT Group/Venture Capital, Inc. (5) 351,392 5.38%
The CIT Group/Equity Investments, Inc.
The Dai-Ichi Kangyo Bank, Ltd.
650 CIT Drive
Livingston, New Jersey 07039-5795
</TABLE>
8
<PAGE> 11
<TABLE>
<S> <C> <C>
Kingsbury Capital Partners L.P. II (6) 351,392 5.38%
Kingsbury Associates, L.P.
Timothy P. Wollaeger
3655 Nobel Drive
Suite 490
Sand Diego, California 92122
Guidant Corporation (7) 487,804 6.95%
111 Monument Circle, 29th Floor
Indianapolis, Indiana 46204
Chancellor LGT Asset Management, Inc. (8) 457,500 7.01%
Chancellor LGT Trust Company
LGT Asset Management, Inc.
50 California Street, 27th Floor
San Francisco, California 94111
George Wallace (9) 331,614 5.05%
H. DuBose Montgomery (10) 2,011,542 30.78%
c/o Menlo Ventures
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, California 94025
Dick Allen (11) 49,800 *
Wende Hutton (12) 4,000 *
Kim Blickenstaff (13) 2,000 *
Michael McLain (14) 19,356 *
Jack Gehrich (15) 18,162 *
Glenn Latham (16) 26,476 *
Thomas Berryman (17) 51,289 *
All executive officers and
directors as a group (12 persons) (18) 2,515,487 37.69%
</TABLE>
- ----------------
* Less than 1%
(1) Unless otherwise indicated, the business address of each stockholder is
c/o Micro Therapeutics, Inc., 1062 Calle Negocio #F, San Clemente,
California 92673.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options, warrants and convertible notes currently exercisable
or convertible, or exercisable or convertible within 60 days of February
28, 1998, are deemed outstanding for computing the percentage of the
person holding such options but are not deemed outstanding for computing
the percentage of any other person. Except as indicated by footnote, and
subject to community property laws where applicable, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them.
9
<PAGE> 12
(3) Based on information set forth in a Schedule 13G, filed with the
Securities and exchange commission on February 12, 1998. Includes (i)
1,977,854 shares owned by Menlo Ventures VI, L.P. of which MV Management
VI, L.P. is its General Partner and (ii) 29,668 shares owned by Menlo
Entrepreneurs Fund VI, L.P. of which MV Management VI L.P. is its General
Partner. Each of the individuals named above are general partners of MV
Management VI, L.P., the general partner of both Menlo Ventures VI, L.P.
and Menlo Entrepreneurs Fund VI, L.P. and accordingly, may be deemed to
beneficially own such shares. Each of the individuals disclaims beneficial
ownership of the shares owned by Menlo Ventures VI, L.P. and Menlo
Entrepreneurs Fund VI, L.P., except to the extent of their pecuniary
interest therein.
(4) Based on information set forth in a Schedule 13G, filed with the
Securities and exchange commission on February 17, 1998. Includes (i)
987,854 shares owned by Mayfield VII of which Mayfield VII Management
Partners is the sole General Partner and (ii) 43,254 shares owned by
Mayfield Associates Fund II. The individuals listed above are General
Partners of Mayfield VII Management Partners and are General Partners of
Mayfield Associates Fund II. Such individuals may be deemed to have shared
voting and dispositive power over the shares which are or may be deemed to
be beneficially owned by Mayfield VII and Mayfield Associates Fund II but
disclaim such beneficial ownership.
(5) Based on information set forth in a Schedule 13G, filed with the
Securities and exchange commission on February 17, 1998. All of the
outstanding shares of capital stock of The CIT Group/Venture Capital, Inc.
are owned by The CIT Group/Equity Investments, Inc., the beneficial owner
of which is CIT Group, Inc. Approximately 80% of the outstanding capital
stock of CIT Group, Inc. is beneficially owned by The Dai-Ichai Kangyo
Bank, Ltd. CIT Group Equity Investments, Inc., CIT Group, Inc. and the
Dai-Ichai Kangyo Bank, Ltd. each disclaims beneficial ownership of the
shares owned by the CIT Group/Venture Capital, Inc., except to the extent
of their pecuniary interest therein.
(6) Based on information set forth in a Schedule 13G, filed with the
Securities and exchange commission on February 13, 1998. Includes 351,392
shares owned by Kingsbury Capital Partners L.P. II, of which Kingsbury
Associates is the General Partner and may be deemed to have sole power to
vote and dispose of the shares owned directly by Kingsbury Capital
Partners L.P. II. Timothy P. Wollaeger is the General Partner of Kingsbury
Associates, L.P., the General Partner of Kingsbury Capital Partners L.P.
II, and, accordingly, may be deemed to beneficially own such shares. Mr.
Wollaeger disclaims beneficial ownership of the shares owned by Kingsbury
Capital Partners L.P. II, except to the extent of his pecuniary interest
therein.
(7) Based on information set forth in a Schedule 13D, filed with the
Securities and exchange commission on November 26, 1997. Includes 487,804
shares which may be acquired pursuant to conversion of the Convertible
Subordinated Note Agreement, dated November 17, 1997, by and between the
Company and Guidant Corporation.
(8) Based on information set forth in a Schedule 13G, filed with the
Securities and exchange commission on February 6, 1998. Chancellor LGT
Asset Management, Inc. and Chancellor LGT Trust Company, as investment
advisers for various fiduciary accounts, have sole power to vote or to
direct to vote, and sole power to dispose of or to direct the disposition
of, all of the shares included above. Chancellor LGT Asset Management,
Inc. is a wholly owned subsidiary of LGT Asset Management, Inc. LGT Asset
Management, Inc. is an indirect wholly owned subsidiary of Liechtenstein
Global Trust, AG. Liechtenstein Global Trust, AG which has numerous
worldwide affiliates is controlled by The Prince of Liechtenstein
Foundation, a parent organization for the various business enterprises of
the Princely Family of Liechtenstein.
(9) Includes 30,365 shares subject to options exercisable within 60 days of
February 28, 1998. Also includes 6,000 shares held by Mr. Wallace as
custodian for his three daughters who were given shares pursuant to the
Uniform Gift to Minors Act, and 2,000 shares held in trust for Mr.
Wallace's mother. Mr. Wallace disclaims beneficial ownership of the shares
held in trust for his mother.
(10) Includes 4,000 shares subject to options exercisable within 60 days of
February 28, 1998. Also includes shares described in Note (3) above. Mr.
Montgomery is the general partner of MV Management VI, L.P., the general
partner of both Menlo Ventures VI, L.P. and Menlo Entrepreneurs Fund VI,
L.P. and accordingly, may be deemed to beneficially own such shares. Mr.
Montgomery disclaims beneficial ownership of the shares owned by Menlo
Ventures VI, L.P. and Menlo Entrepreneurs Fund VI, L.P., except to the
extent of his pecuniary interest therein.
10
<PAGE> 13
(11) Includes 4,000 shares subject to options exercisable within 60 days of
February 28, 1998. Also includes 7,800 shares owned by the Allen
Investment Partnership, of which Mr. Allen is the managing partner; 36,000
shares owned by DIMA Ventures, Incorporated; 1,000 shares owned by the
Brett Richard Allen Trust; and 1,000 shares owned by Jennifer Lee Allen
Trust. Mr. Allen disclaims beneficial ownership of the shares owned by The
Allen Investment Partnership, except to the extent of his pecuniary
interest therein and disclaims beneficial ownership of the 2,000 shares
held in the two trusts named above.
(12) Includes 4,000 shares subject to options exerciseable within 60 days of
February 28, 1998. Ms. Hutton is a general partner in Mayfield VIII
Management Partners, the general partner of Mayfield VIII, but is not a
general partner of Mayfield VII Management Partners, Mayfield VII or
Mayfield Associates Fund II.
(13) Consists of 2,000 shares subject to options exercisable within 60 days of
February 28, 1998.
(14) Includes 19,121 shares subject to options exercisable within 60 days of
February 28, 1998
(15) Includes 16,751 shares subject to options exercisable within 60 days of
February 28, 1998.
(16) Includes 26,241 shares subject to options exercisable within 60 days of
February 28, 1998.
(17) Includes 36,189 shares subject to options exercisable within 60 days of
February 28, 1998. Mr. Berryman's options ceased vesting on February 28,
1998 in conjunction with his resignation as Chief Financial Officer of the
Company.
(18) Includes directors' and executive officers' shares, including shares
subject to options exercisable within 60 days of February 28, 1998 and
includes the shares described in Note (3) above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1997, the Company's Board of Directors,
based upon the recommendations of the Compensation Committee, established the
levels of compensation for the Company's executive officers, provided, however,
Mr. Gearhart and Mr. Hurwitz, each have an employment agreement with the Company
and each of their compensation is determined in accordance with the terms and
conditions of such agreements. Prior to January 27, 1998, the Compensation
Committee consisted of H. DuBose Montgomery, Dick Allen and Wende Hutton.
CERTAIN TRANSACTIONS
On May 17, 1996, the Company entered into a Series C Stock Purchase
Agreement with Menlo VI and Mayfield VII both of which are principal
stockholders of the Company, together with other investors, pursuant to which
the Company issued 224,315 and 155,350 shares of Series C Preferred Stock to
Menlo VI and Mayfield VII, respectively, for $6.46 per share.
In November 1997, the Company received $5,000,000 from Guidant Corporation
under the terms of a Convertible Note Agreement. The note bears an interest rate
of 5% per annum. Should the Company achieve, before December 31, 1998, certain
milestones, as defined in the Note Agreement, the Company has the option to
require Guidant Corporation to purchase up to an additional $3 Million of the
Company's Common Stock and to loan to the Company up to an additional $2
Million. The Company met one of the two milestones under the Note Agreement in
April 1998. As such, the Company may require Guidant Corporation to purchase up
to $2.5 Million of Common Stock or loan the Company up to an additional $2
Million, or any combination thereof, up to a maximum amount of $2.5 Million.
There is no assurance, however, that the Company will be able to achieve the
other milestone before December 31, 1998.
The Company believes that all of the transactions set forth above were
made on terms no less favorable to the Company than could otherwise be obtained
from unaffiliated third parties. All future transactions, including loans,
between the Company and its officers, directors, principal stockholders and
their affiliates will be approved by a majority of the Board of Directors,
including a majority of the independent and disinterested outside directors on
the Board of Directors.
11
<PAGE> 14
PROPOSAL TWO
APPROVAL OF AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors adopted and the stockholders of the Company
originally approved the Employee Stock Purchase Plan (the "Purchase Plan") in
July 1996. The purposes of the Purchase Plan are to provide to employees an
incentive to join and remain in the service of the Company and its subsidiaries,
to promote employee morale and to encourage employee ownership of the Company's
Common Stock by permitting them to purchase shares at a discount through payroll
deductions. The Purchase Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code. At the time of
its adoption, the Purchase Plan authorized the sale of up to 100,000 shares of
Common Stock. As of December 31, 1997, a total of 31,198 shares had been sold,
leaving only 68,802 shares available for sale under the Purchase Plan. Subject
to approval by the Company's stockholders, the Board of Directors amended the
Purchase Plan on April 23, 1998 to increase the authorized number of shares of
Common Stock issuable thereunder by 50,000 shares and to reserve the additional
shares for issuance under the Purchase Plan, bringing the total number of shares
of Common Stock subject to the Purchase Plan to 150,000.
Approval of the amendments to the Purchase Plan will require the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present or represented at the annual meeting of stockholders and
entitled to vote thereat. Proxies solicited by management for which no specific
direction is included will be voted FOR the amendment of the Purchase Plan to
add 50,000 shares of Common Stock to the pool of shares reserved for issuance
thereunder. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
PURCHASE PLAN.
The principal features of the Purchase Plan are summarized below, but the
summary is qualified in its entirety by reference to the Purchase Plan itself.
Copies of the Purchase Plan can be obtained by writing to the Secretary, Micro
Therapeutics Inc., 1062 Calle Negocio #F, San Clemente
California 92673.
PURCHASE PLAN TERMS
Every employee of the Company who customarily works more than 20 hours per
week will be eligible to participate in offerings made under the Purchase Plan
if on the offering date such employee has been employed by the Company for at
least ninety days. Employees of any present or future subsidiary of the Company
may also participate in the Purchase Plan. An employee may not participate in an
offering under the Purchase Plan if immediately after the purchase the employee
would own shares or options to purchase shares of stock possessing 5% or more of
the total combined voting power or value of all classes of stock of the Company.
As of December 31, 1997, approximately 68 persons were eligible to participate
in the Purchase Plan.
The Purchase Plan may be administered by either the Board of Directors or
a committee appointed by the Board (the "Committee"). The Board has delegated
administration of the Purchase Plan to the Compensation Committee, which is
comprised of two non-employee directors, who are not eligible to participate in
the Purchase Plan. Subject to the provisions of the Purchase Plan, the Committee
has full authority to implement, administer and make all determinations
necessary under the Purchase Plan.
The two annual offerings under the Purchase Plan will commence on January
1 and July 1 (the "Grant Date") and shall continue until the end of the
six-month period (the "Offering Period") ending on the last day of such period.
Eligible employees who elect to participate in an offering will purchase
shares of Common Stock through regular payroll deductions in an amount
designated by the employee not to exceed 20% of such employee's compensation.
For this purpose, "compensation" means the amount indicated on the Form W-2
issued to the employee by the Company, including any election deferrals with
respect to a plan of the Company qualified under either Section 125 or Section
401(a) of the Internal Revenue Code of 1986, as amended. Shares of Common Stock
will be purchased automatically on the last day of the Offering Period (the
"Purchase Date") at a price equal to 85% of the fair market value of the shares
on the Grant Date or 85% of the fair market value of the shares as of the
Purchase Date, whichever is lower. A participant may withdraw from an offering
at any time prior to the Purchase
12
<PAGE> 15
Date and receive a refund of his payroll deductions, without interest. A
participant's rights in the Purchase Plan are nontransferable other than on the
death of the participant. The Purchase Plan is administered in a manner designed
to ensure that any affiliate participant's commencement or discontinuation of
participation in the Purchase Plan or increase or decrease of payroll deductions
will be effected in compliance with the exemptions from liability under Section
16(b) of the Securities Exchange Act of 1934 as set forth in Rule 16b-3
promulgated thereunder.
No employee may purchase stock in an amount which would permit his or her
rights under the Purchase Plan (and any similar purchase plans of the Company
and any parent and subsidiaries of the Company) to accrue at a rate which
exceeds $25,000 in fair market value, determined as of the Grant Date, for each
calendar year not to purchase more than 2,500 share in any year.
The Board of Directors may at any time amend, suspend or terminate the
Purchase Plan; provided that any amendment that would (i) increase the aggregate
number of shares authorized for sale under the Purchase Plan (except pursuant to
adjustments provided for in the Purchase Plan), (ii) change the standards of
eligibility for participation, or (iii) materially increase the benefits which
accrue to participants under the Purchase Plan, shall not be effective unless
approved by the stockholders within 12 months of the adoption of such amendment
by the Board. Unless previously terminated by the Board, the Purchase Plan will
terminate on February 18, 2007 or when all shares authorized for sale thereunder
have been sold, whichever is earlier.
NEW PLAN BENEFITS
The Company believes that the benefits or amounts that have been received
or will be received by any participant under the Purchase Plan cannot be
determined.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF PURCHASE PLAN
No taxable income is recognized by a participant either at the time of
election to participate in an offering under the Purchase Plan or at the time
shares are purchased thereunder.
If shares are disposed of at least two years after the Grant Date and at
least one year after the Purchase Date or in the event of a participant's death
(whenever occurring) while owning such shares, then the lesser of (i) the excess
of the fair market value of the shares at the time of such disposition over the
purchase price of the shares or (ii) fifteen percent of the fair market value of
the shares on the Grant Date will be treated as ordinary income to the
participant. Any further gain upon such disposition will be taxed as long-term
(if held for more than 19 months after the Purchase Date) or as mid-term gain
(if held for more than one year but less than 18 months after the Purchase
Date). Any long-term capital gain will be taxed as capital gain at the rates
then in effect. If the shares are sold and the sale price is less than the
purchase price, there is no ordinary income and the participant will have a
capital loss equal to the difference between the sale price and the purchase
price. The ability of a participant to utilize such a capital loss will depend
on the participant's other tax attributes and the statutory limitation on
capital loss deductions not discussed herein.
If the shares are sold or disposed of (including any disposition by way of
gift) before the expiration of the two-year holding period described above or
within one year after the shares are transferred to the participant, then the
excess of the fair market value of the shares on the Purchase Date over the
Purchase Price will be treated as ordinary income to the participant. This
excess will constitute ordinary income for the year of sale or other disposition
even if no gain is realized on the sale or a gratuitous transfer of shares is
made. The balance of the gain will be taxed as capital gain at the rates then in
effect. If the shares are sold for less than their fair market value on the
Purchase Date, the same amount of ordinary income will be attributed to the
Participant and a capital loss is recognized equal to the difference between the
sale price and the value of the shares on such Purchase Date. As indicated
above, the ability of the Participant to utilize such a capital loss will depend
upon the Participant's other tax attributes and the statutory limitation on
capital losses not discussed herein.
13
<PAGE> 16
PROPOSAL THREE
AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN
The Board of Directors adopted and the stockholders of the Company
originally approved the 1996 Stock Incentive Plan (the "1996 Plan") in July
1996. The purpose of the 1996 Plan is to provide participants with incentives
which will encourage them to acquire a proprietary interest in, and continue to
provide services to, the Company. The 1996 Plan is not subject to any of the
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA") and
is not a qualified deferred compensation plan under Section 401(a) of the Code.
At the time of its adoption, the 1996 Plan authorized the sale of up to
600,000 shares of Common Stock. As of March 31, 1998, a total of 6,126 shares
had been exercised and 496,550 shares were subject to outstanding options,
leaving only 482,071 shares available for grant under the 1996 Plan. Subject to
approval by the Company's stockholders, the Board of Directors amended the 1996
Plan on April 23, 1998 to increase the authorized number of shares of Common
Stock issuable thereunder by 500,000 shares and to reserve the additional shares
for issuance under the 1996 Plan, bringing the total number of shares of Common
Stock subject to the 1996 Plan to 1,100,000.
Approval of the amendments to the 1996 Plan will require the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
present or represented at the annual meeting of stockholders and entitled to
vote thereat. Proxies solicited by management for which no specific direction is
included will be voted FOR the amendment of the 1996 Plan to add 500,000 shares
of Common Stock to the pool of shares reserved for issuance thereunder. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE 1996 PLAN.
The principal features of the 1996 Plan are summarized below, but the
summary is qualified in its entirety by reference to the 1996 Plan itself.
Copies of the 1996 Plan can be obtained by writing to the Secretary, Micro
Therapeutics Inc., 1062 Calle Negocio #F, San Clemente, California 92673.
1996 PLAN TERMS
Incentive Options. Officers and other key employees of the Company or of
any parent or subsidiary corporation of the Company, whether now existing or
hereafter created or acquired (an "Affiliated Company") (including directors if
they also are employees of the Company or an Affiliated Company), as may be
determined by the Administrator, who qualify for incentive stock options under
the applicable provisions of the Code, will be eligible for selection to receive
incentive options under the 1996 Plan. An employee who has been granted an
incentive option may, if otherwise eligible, be granted an additional incentive
option or options and receive nonqualified options or restricted shares if the
Administrator so determines. No incentive stock options may be granted to an
optionee under the 1996 Plan if the aggregate fair market value (determined on
the date of grant) of the stock with respect to which incentive stock options
are exercisable by such optionee in any calendar year under the 1996 Plan of the
Company and its affiliates exceeds $100,000.
Nonqualified Options or Restricted Shares. Officers and other key
employees of the Company or of an Affiliated Company, any member of the Board,
whether or not he or she is employed by the Company, or consultants, business
associates or others with important business relationships with the Company will
be eligible to receive nonqualified options or restricted shares under the 1996
Plan. An individual who has been granted a nonqualified option or restricted
shares may, if otherwise eligible, be granted an incentive option or an
additional nonqualified option or options or restricted shares if the
Administrator so determines.
In no event may any individual be granted options under the 1996 Plan
pursuant to which the aggregate number of shares that may be acquired thereunder
during any calendar year exceeds 100,000 shares. As of March 31, 1998,
approximately 43 persons were currently participating in the 1996 Plan.
The 1996 Plan may be administered by either the Board of Directors or a
committee appointed by the Board (the "Committee"). The Board has delegated
administration of the 1996 Plan to the Compensation Committee, which is
comprised of two non-employee directors, both of whom are eligible to
participate in the 1996 Plan. Subject to the provisions of the 1996 Plan, the
Committee has full authority to implement, administer and
14
<PAGE> 17
make all determinations necessary under the 1996 Plan. See "Directors' Fees"
regarding the annual grant of options to non-employee directors.
The exercise price of incentive stock options must at least be equal to
the fair market value of a share of Common Stock on the date the option is
granted (110% with respect to optionees who own at least 10% of the outstanding
Common Stock). Nonqualified options shall have an exercise price of not less
than 85% of the fair market value of a share of Common Stock on the date such
option is granted (110% with respect to optionees who own at least 10% of the
outstanding Common Stock). The exercise price of all options granted under the
Plan to non-employee directors shall be 100% of the fair market value of the
Common Stock on the date of grant, and all such options shall have a term of 10
years. Payment of the exercise price may be made in cash, by delivery of shares
of the Company's Common Stock or, potentially, through the delivery of a
promissory note. The Compensation Committee has the authority to determine the
time or times at which options granted under the Plan become exercisable,
provided that options must expire no later than ten years from the date of grant
(five years with respect to optionees who own at least 10% of the outstanding
Common Stock). Options are nontransferable, other than upon death by will and
the laws of descent and distribution, and generally may be exercised only by an
employee while employed by the Company or within three months after termination
of employment (one year for termination resulting from death or disability.
The Board may from time to time alter, amend, suspend or terminate the
1996 Plan in such respects as the Board may deem advisable; provided, however,
that no such alteration, amendment, suspension or termination shall be made that
would substantially affect or impair the rights of any person under any
incentive option, nonqualified option or restricted share theretofore granted to
such person without his or her consent. Unless previously terminated by the
Board, the 1996 Plan will terminate on August 1, 2006.
NEW PLAN BENEFITS
The Company believes that the benefits or amounts that have been received
or will be received by any participant under the 1996 Plan cannot be determined.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF 1996 PLAN
The following is a summary of certain federal income tax consequences of
participation in the 1996 Plan. State and local income taxes laws that may vary
from the federal tax consequences described below, are not discussed.
The 1997 Tax Act changed, among other things, the federal income tax
treatment of capital gains. Generally, the federal tax rate on gains from the
sale of shares of the Company's stock depends upon how long the shares have been
held at the time of sale. For shares held less than 12 months, the gain
("short-term capital gain") is taxed at ordinary income tax rates. For sales
made after July 28, 1997, where the shares have been held more than 12 months
but less than 18 months, the gain ("mid-term capital gain") is subject to
federal income tax at a maximum rate of 28 percent, and for shares held more
than 18 months, the gain ("long-term capital gain") is subject to federal income
tax at a maximum rate of 20 percent.
Incentive Options. No taxable income will be recognized by an optionee
under the 1996 Plan upon either the grant or the exercise of an incentive
option. Instead, a taxable event will occur upon the sale or other disposition
of the shares acquired upon exercise of an incentive option, and the tax
treatment of the gain or loss realized will depend upon how long the shares were
held before their sale or disposition. If a sale or other disposition of the
shares received upon the exercise of an incentive option occurs more than (i)
one year after the date of exercise of the option and (ii) two years after the
date of grant of the option, the holder will recognize mid-term or long-term
capital gain or loss (depending upon whether the shares were held for more than
12 months or more than 18 months after exercise) at the time of sale equal to
the full amount of the difference between the proceeds realized and the exercise
price paid. However, a sale, exchange, gift or other transfer of legal title of
such stock before the expiration of either of the one-year or two-year periods
described above will constitute a "disqualifying disposition." A disqualifying
disposition involving a sale or exchange will result in ordinary income to the
optionee in an amount equal to the lesser of (i) the fair market value of the
stock on the date of exercise minus the exercise price or (ii) the amount
realized on disposition minus the exercise price. If the amount realized in a
disqualifying disposition exceeds the fair market value of the stock on the date
of exercise, the gain
15
<PAGE> 18
realized, in excess of that taxed as ordinary income as indicated above, will be
taxed as capital gain. A disqualifying disposition as a result of a gift will
result in ordinary income to the optionee in an amount equal to the difference
between the exercise price and the fair market value of the stock on the date of
exercise. Any loss realized upon a disqualifying disposition, to the extent
recognizable under current tax laws, will be treated as a capital loss. Capital
gains and losses resulting from disqualifying dispositions will be treated as
long-term, mid-term or short-term depending upon whether the shares were held
for more or less than the applicable statutory holding period (which currently
is more than one year but less than 18 months for mid-term capital gains and
more than 18 months for long-term capital gains). The Company will be entitled
to a tax deduction in an amount equal to the ordinary income recognized by the
optionee as a result of a disqualifying disposition. The differences between the
option price and the fair market value of the shares acquired at the time of
exercise of an incentive stock option will be an item of tax preference for
purposes of computing the alternative minimum tax under Section 55 of the Code.
Nonqualified Options. No taxable income is recognized by an optionee upon
the grant of a nonqualified option. Upon exercise, however, the optionee will
recognize ordinary income in the amount by which the fair market value of the
shares purchased, on the date of exercise, exceeds the exercise price paid for
such shares. The income recognized by the optionee will be subject to income tax
withholding by the Company out of the optionee's current compensation. If such
compensation is insufficient to pay the taxes due, the optionee will be required
to make a direct payment to the Company for the balance of the tax withholding
obligation. The Company will be entitled to a tax deduction equal to the amount
of ordinary income recognized by the optionee, provided the applicable
withholding requirements are satisfied. The optionee's basis in the shares
acquired will be increased by the amount of ordinary income recognized. Any
subsequent gain or loss recognized upon the sale of the shares will be treated
as a capital gain or loss if the shares have been held for more than the
applicable statutory holding period. Upon the sale or disposition of shares
acquired pursuant to the exercise of a nonqualified option, the difference
between the proceeds realized and the optionee's basis in the shares will be a
capital gain or loss and will qualify for long-term, mid-term or short-term
capital gain or loss treatment if the shares have been held for more than the
applicable statutory holding period (which currently is more than one year but
less than 18 months for mid-term capital gains and more than 18 months for
long-term capital gains).
Restricted Stock. The receipt of restricted stock will not result in a
taxable event to the participant until the expiration of any repurchase rights
retained by the Company with respect to such stock, unless the participant makes
an election under Section 83(b) of the Code to be taxed as of the date of
purchase. If no repurchase rights are retained, or if a Section 83(b) election
is made, the participant will recognize ordinary income in an amount equal to
the excess of the fair market value of such shares on the date of purchase over
the purchase price paid for such shares. Even if the purchase price and the fair
market value of the shares are the same (in which case there would be no
ordinary income), a Section 83(b) election must be made to avoid deferral of the
date ordinary income is recognized. The election must be filed with the Internal
Revenue Service not later than 30 days after the date of transfer. If no Section
83(b) election is made or if no repurchase rights are retained, a taxable event
will occur on each date the participant's ownership rights vest (e.g., when the
Company's repurchase rights expire) as to the number of shares that vest on that
date, and the holding period for capital gain purposes will not commence until
the date the shares vest. The participant will recognize ordinary income on each
date shares vest in an amount equal to the excess of the fair market value of
such shares on that date over the amount paid for such shares.
TAX WITHHOLDING
Under the 1996 Plan, the Company has the power to withhold, or require a
participant to remit to the Company, an amount sufficient to satisfy Federal,
state and local withholding tax requirements with respect to any options
exercised or restricted stock granted under the 1996 Plan. To the extent
permissible under applicable tax, securities, and other laws, the Committee may,
in its sole discretion, permit a participant to satisfy an obligation to pay any
tax to any governmental entity in respect of any option or restricted stock up
to an amount determined on the basis of the highest marginal tax rate applicable
to such participant, in whole or in part, by (i) directing the Company to apply
shares of Common Stock to which the participant is entitled as a result of the
exercise of an option or as a result of the lapse of restrictions on restricted
stock, or (ii) delivering to the Company shares of Common Stock owned by the
participant.
16
<PAGE> 19
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Coopers & Lybrand L.L.P., independent
auditors, to audit the financial statements of the Company for the fiscal year
ending December 31, 1998, and recommends that stockholders vote for ratification
of such appointment. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection.
Coopers & Lybrand L.L.P has audited the Company's financial statements
annually since its fiscal year ended December 31, 1996. Its representatives are
expected to be present at the meeting with the opportunity to make a statement
if they desire to do so and are expected to be available to respond to
appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal for action at the 1999
Annual Meeting of Stockholders and presentation in the Company's Proxy Statement
with respect to such meeting should arrange for such proposal to be delivered to
the Company at its principal place of business no later than January 29, 1999 in
order to be considered for inclusion in the Company's proxy statement relating
to that meeting. Matters pertaining to such proposals, including the number and
length thereof, eligibility of persons entitled to have such proposals included
and other aspects are regulated by the Securities Exchange Act of 1934, Rules
and Regulations of the Securities and Exchange Commission and other laws and
regulations to which interested persons should refer.
OTHER MATTERS
Management is not aware of any other matters to come before the meeting.
If any other matter not mentioned in this Proxy Statement is brought before the
meeting, the proxy holders named in the enclosed Proxy will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgment.
By Order of the Board of Directors
April 28, 1998 George Wallace
Chief Executive Officer President
and Director
The Annual Report to Stockholders of the Company for the fiscal year ended
December 31, 1997 is being mailed concurrently with this Proxy Statement to all
stockholders of record as of April 14, 1998. The Annual Report is not to be
regarded as proxy soliciting material or as a communication by means of which
any solicitation is to be made.
17
<PAGE> 20
PROXY MICRO THERAPEUTICS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF THE STOCKHOLDERS -- MAY 29, 1998
The undersigned hereby nominates, constitutes and appoints George Wallace
and Harold Hurwitz, and each of them individually, the attorney, agent and proxy
of the undersigned, with full power of substitution, to vote all stock of MICRO
THERAPEUTICS, INC. which the undersigned is entitled to represent and vote at
the 1998 Annual Meeting of Stockholders of the Company to be held at the Hyatt
Regency, 17900 Jamboree Road, Irvine, California 92614 on May 29, 1998, at 11:30
a.m., and at any and all adjournments or postponements thereof, as fully as if
the undersigned were present and voting at the meeting, as follows:
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1, 2, 3 AND 4.
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR [ ] WITHHOLD AUTHORITY
all nominees listed below (except as marked to the to vote for all nominees listed
contrary below) below.
</TABLE>
Election of the following nominees as directors: George Wallace, H. DuBose
Montgomery,
Wende Hutton, Dick Allen and Kim Blickenstaff
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, PRINT THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2.AMENDMENT OF THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE NUMBER
OF SHARES SUBJECT THEREOF BY 50,000 FOR A TOTAL OF 150,000 SHARES OF COMMON
STOCK
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3.AMENDMENT OF THE COMPANY'S 1996 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF
SHARES SUBJECT THEREOF BY 500,000 FOR A TOTAL OF 1,100,000 SHARES OF COMMON
STOCK
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IMPORTANT -- PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY
<PAGE> 21
4. RATIFICATION OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT AUDITORS:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5.IN THEIR DISCRETION, ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. WHERE NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED "FOR" THE
ELECTION OF THE DIRECTORS NAMED ON THE REVERSE SIDE OF THIS PROXY, "FOR" THE
AMENDMENT OF THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN, "FOR" THE AMENDMENT OF
THE COMPANY'S 1996 STOCK INCENTIVE PLAN AND "FOR" RATIFICATION OF COOPERS &
LYBRAND L.L.P. AS INDEPENDENT AUDITORS.
Date , 1998
-------------------------
(Signature of
stockholder)
Please sign your name
exactly as it appears
hereon. Executors,
administrators,
guardians, officers of
corporations and others
signing in a fiduciary
capacity should state
their full titles as
such.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN AND RETURN
THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE.
