MICRO THERAPEUTICS INC, DEF 14A, 1999-04-26

MICRO THERAPEUTICS INC
DEF 14A, 1999-04-26
PHARMACEUTICAL PREPARATIONS

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<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 [ ]

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):

[ ] 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:

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(4) Date Filed:

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<PAGE> 2
MICRO THERAPEUTICS, INC.
2 Goodyear
Irvine, California 92618

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 27, 1999

TO THE STOCKHOLDERS OF MICRO THERAPEUTICS, INC.,

The 1999 Annual Meeting of Stockholders of Micro Therapeutics, Inc. (the
"Company"), will be held at 2 Goodyear, Irvine, California 92618 on May 27,
1999, at 10:00 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 200,000;

(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 900,000 shares, bringing the total number of shares
available for issuance thereunder to a total of 2,000,000;

(4) To ratify the appointment of PricewaterhouseCoopers LLP as
independent auditors of the Company for the fiscal year ending
December 31, 1999; 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, 1999
will be entitled to vote at the meeting or any adjournment or postponement
thereof.

By Order of the Board of Directors

/s/ GEORGE WALLACE
------------------------------------
George Wallace
Chief Executive Officer President
and Director

Irvine, California
April 26, 1999

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.
2 Goodyear
Irvine, California 92618

---------------
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 1999 Annual Meeting of
Stockholders ("Annual Meeting") to be held on May 27, 1999, at 10:00 a.m., at 2
Goodyear, Irvine, California 92618. This Proxy Statement and the accompanying
proxy are being mailed to stockholders on or about April 26, 1999. 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., 2 Goodyear, Irvine, California 92618, 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 PricewaterhouseCoopers LLP 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, 1999 (the "Record
Date"), will be entitled to vote at the meeting or any adjournment or
postponement thereof. As of the Record Date, there were 6,792,458 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. 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
have qualified. Officers serve at the discretion of the Board of Directors.

The director nominees of the Company are as follows:

Name Age Position
---- --- --------
<S> <C> <C>
George Wallace 40 Chief Executive Officer, President
and Director
H. DuBose Montgomery 50 Chairman of the Board
Dick Allen 55 Director
Wende Hutton 39 Director
Kim Blickenstaff 46 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
member of the boards of seven 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

<PAGE> 5

Health Inc.) and is the chairman of the board of Hoag Memorial Hospital
Presbyterian and is a member of the boards of several private companies. Mr.
Allen holds a B.S. from Yale University and an M.B.A. from Stanford University
Graduate School of Business.

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 is a
member of the boards of several private companies. 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 four meetings during the
fiscal year ended December 31, 1998. 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 held two meetings during
the fiscal year ended December 31, 1998.

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 one meeting during
the fiscal year ended December 31, 1998.

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.

<PAGE> 6

OTHER EXECUTIVE OFFICERS

The other current executive officers of the Company are as follows:

Mr. Harold Hurwitz, 47, 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. William Gearhart, 51, 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. William McLain, 49, 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. Jack Gehrich, 62, 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. Earl Slee, 38, joined the Company in April 1998 as the Vice
President Research & Development. From August 1995 until 1998, Mr. Slee was
Vice-President Research and Development with Aequitron Medical, Inc., a
manufacturer of portable respiratory care devices. From June 1992 until August
1995, Mr. Slee was Director of Engineering with Instromedix, a manufacturer of
portable EKG monitors. From 1978 to 1992, Mr. Slee held various engineering and
management positions with Pfizer, Welch Allyn and Hughes Aircraft Co. Mr. Slee
holds an M.B.A. from the Tuck School of Business, Dartmouth College, an MSEE
from San Diego State University, and a B.A. in Physics from the University of
California, San Diego.

<PAGE> 7

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth compensation earned during the three
fiscal years ended December 31, 1996, 1997 and 1998 by the Company's Chief
Executive Officer and the four other most highly compensated executive officers
whose total salary and bonus during 1998 exceeded $100,000 (collectively, the
"Named Executive Officers").

Summary Compensation Table

<TABLE>
<CAPTION>
Long Term
Compensation
------------
Awards
------------
Annual Compensation Securities
------------------------------- Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Options(#) Comp.(1)
- --------------------------- ---- --------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C>
George Wallace 1998 196,200 25,000 30,000
Chief Executive Officer and 1997 173,333 (2) 25,000
President 1996 159,000 -- --

William Gearhart 1998 149,299 15,000 20,000
Vice President - Sales & 1997 74,618 (2) 80,000
Marketing 1996 --

Harold Hurwitz 1998 135,000 15,000
Chief Financial Officer 1997 11,250 50,000
1996 -- --

William McLain 1998 125,125 15,000
Vice President - Operations 1997 107,917 21,000
1996 30,227 39,000

Jack Gehrich (4) 1998 124,200 23,000
Vice President - Regulatory & 1997 108,212 --
Clinical Affairs 1996 (3) --
</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 and Mr. Gearhart a $15,000 bonus. These bonuses
were paid in 1998.

(3) 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.

(4) Mr. Gehrich resigned as an officer of the Company on April 16, 1999.

<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, 1998.

Option Grants in Last Fiscal Year

(Individual Grants)

<TABLE>
<CAPTION>
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted (#) Fiscal Year(1) ($/Share) Date(2)
---- ----------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
George Wallace 30,000 5.93% $10.375 4/23/08
William Gearhart 20,000 3.90% $10.375 4/23/08
Harold Hurwitz 15,000 2.96% $10.375 4/23/08
William McLain 15,000 2.96% $10.375 4/23/08
Jack Gehrich 8,000 -- $ 8.250 1/27/08
15,000 4.54% $10.375 4/23/08
</TABLE>

- -----------------
(1) Options to purchase an aggregate of 506,300 shares of Common Stock were
granted to employees, including the Named Executive Officers during the
fiscal year ended December 31, 1998.

(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 1997 or prior, options vest in equal monthly
installments over four years. For new officers hired in 1998, 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.

Option Exercises. William Gearhart 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, 1998. On July 24, 1998, Mr. Gearhart
exercised options to purchase 200 shares at $5.25 per share, for a realized
value of $850. On July 27, 1998, Mr. Gearhart exercised options to purchase
1,464 shares at $5.25 per share and 2,736 shares at $5.50, for a realized value
of $15,591. On July 28, 1998, Mr. Gearhart exercised options to purchase 14,764
shares at $5.50 per share, for a realized value of $53,520.

<PAGE> 9

The following table includes the number of shares covered by both
exercisable and unexercisable stock options as of December 31, 1998. 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 ($10.00 per share).

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 42,150 38,850 $266,400 $100,350
William Gearhart 17,040 63,796 50,615 225,231
Harold Hurwitz 18,500 46,500 53,125 159,375
William McLain 34,680 40,321 133,275 146,476
Jack Gehrich 6,337 16,663 3,215 10,785
</TABLE>

EMPLOYMENT AND SEVERANCE AGREEMENTS

The Company entered into an employment agreement with Mr. Slee,
effective April 6, 1998, for a term expiring September 6, 2000, pursuant to
which he will serve as Vice President Research and Development. The employment
agreement provides for a base salary of One Hundred Forty-Five Thousand Dollars
($145,000) per year with annual raises to be determined by the Company. Mr. Slee
is also eligible to participate in incentive compensation and other employee
benefit plans established by the Company from time to time. Mr. Slee'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.

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 serves as Executive Vice President, Sales and Marketing. The employment
agreement provided 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 was 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 provided for a severance benefit of Two Hundred
Thousand Dollars ($200,000) if he was terminated without cause within the first
twelve months of his employment and such termination occured within six months
of a change in control. The severance benefit was in addition to his 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 serves 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 was terminated without cause within the first twelve months of
his employment and such termination occur within six months of a change in
control. The severance benefit was in addition to his base salary accrued
through date of termination.

<PAGE> 10

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 1998, Mr. Montgomery, Mr. Allen, Ms. Hutton and Mr. Blickenstaff
were each granted options to purchase 2,000 shares.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership of, and transactions in, the
Company's securities with the Securities and Exchange Commission and The Nasdaq
Stock Market. Such directors, executive officers and 10% stockholders are also
required to furnish the Company with copies of all Section 16(a) forms they
file.

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 Exchange Act applicable to its
directors, officers and any persons holding ten percent or more of the Company's
Common Stock were made with respect to the Company's fiscal year ended December
31, 1998.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

Set forth below is certain information as of February 28, 1999 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
Name and Address of Beneficial Percent
Beneficial Owners(1) Ownership(2) of Class
-------------------- ------------ --------
<S> <C> <C>
Menlo Ventures VI, L.P. (3) 2,007,542 29.9%
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
</TABLE>

<PAGE> 11

<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address of Beneficial Percent
Beneficial Owners(1) Ownership(2) of Class
-------------------- ------------ --------
<S> <C> <C>
Mayfield VII (4) 1,031,108 15.4%
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

Abbott Laboratories (5) 717,948 9.6%
100 Abbott Park Road
Abbott Park, IL 60064-3500

Guidant Corporation (6) 535,442 7.43%
111 Monument Circle, 29th Floor
Indianapolis, Indiana 46204

Chancellor LGT Asset Management, Inc. (7) 457,500 6.8%
Chancellor LGT Trust Company
LGT Asset Management, Inc.
50 California Street, 27th Floor
San Francisco, California 94111

Kingsbury Capital Partners L.P. II (8) 351,392 5.2%
Kingsbury Associates, L.P.
Timothy P. Wollaeger
3655 Nobel Drive
Suite 490
San Diego, California 92122

George Wallace (9) 344,928 5.1%

H. DuBose Montgomery (10) 2,011,542 29.9%
c/o Menlo Ventures
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, California 94025

Dick Allen (11) 65,300 *

Wende Hutton (12) 6,500 *

Kim Blickenstaff (13) 4,500 *
</TABLE>

<PAGE> 12

Jack Gehrich (15) 43,241 *

Harold Hurwitz (16) 29,911 *

William Gearhart (17) 46,269 *

All executive officers and directors
as a group (10 persons)(18) 2,627,516 37.6%
</TABLE>

- -------------

* Less than 1%

(1) Unless otherwise indicated, the business address of each stockholder is
c/o Micro Therapeutics, Inc., 2 Goodyear, Irvine, California 92618.

(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, 1999, 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.

(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) Includes 384,615 shares and 333,333 shares which may be acquired
pursuant to conversion of the Convertible Subordinated Note Agreement,
dated August 1998 and the Convertible Credit Facility Note dated
November 1998, respectively, by and between the Company and Abbott
Laboratories.

(6) Based on information set forth in a Schedule 13G, filed with the
Securities and Exchange Commission on June 9, 1998. Includes 487,805
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.

<PAGE> 13

(7) 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.

(8) 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.

(9) Includes 56,355 shares subject to options exercisable within 60 days of
February 28, 1999. 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 6,500 shares subject to options exercisable within 60 days of
February 28, 1999. Also includes shares described in Note (3) above. Mr.
Montgomery is a general partner of MV Management 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 MV Management VI, L.P. and Menlo
Entrepreneurs Fund VI, L.P., except to the extent of his pecuniary
interest therein.

(11) Includes 19,500 shares subject to options exercisable within 60 days of
February 28, 1999. 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 6,500 shares subject to options exercisable within 60 days of
February 28, 1999. 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 4,500 shares subject to options exercisable within 60 days
of February 28, 1999.

(14) Includes 44,500 shares subject to options exercisable within 60 days of
February 28, 1999

(15) Includes 40,755 shares subject to options exercisable within 60 days of
February 28, 1999.

(16) Includes 29,417 shares subject to options exercisable within 60 days of
February 28, 1999.

(17) Includes 33,705 shares subject to options exercisable within 60 days of
February 28, 1999.

(18) Includes directors' and executive officers' shares, including shares
subject to options exercisable within 60 days of February 28, 1999 and
includes the shares described in Note (3) above.

<PAGE> 14

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the year ended December 31, 1998, 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. Slee, 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.

CERTAIN TRANSACTIONS

In November 1997, the Company received $5 million from Guidant
Corporation ("Guidant") under the terms of a Convertible Note Agreement. The
note bears interest of 5% per annum. At the option of Guidant, the principal
amount of the note may be converted into shares of Common Stock at a conversion
price which is currently $10.25 per share. In April 1998, the Company achieved
one of the two milestones under the Note Agreement and elected to have Guidant
purchase $500,000 of Common Stock and loan the Company $2 million.

In August 1998, the Company entered into a ten-year Distribution
Agreement with Abbott Laboratories ("Abbott") which provides Abbott with
exclusive rights to distribute the Company's peripheral blood clot therapy
products in the U.S. and Canada. Concurrently, the Company received $5 million
from Abbott Laboratories under the terms of a Convertible Subordinated Note. The
note bears interest of 5% per annum. At the option of Abbott, the principal
amount of the note may be converted into shares of Common Stock of the Company
at a conversion price which is currently set at $13.00 per share. In November
1998, the Company received an additional $5,000,000 from Abbott Laboratories
under the terms of a Convertible Credit Facility Note. The note bears interest
of 5% per annum. At the option of the Company, the principal amount of the note
may be converted into shares of Common Stock of the Company at a conversion
price which is currently $15.00 per share; provided, however, that the Company
may not call for conversion if the shares are trading at less than $12.00 per
share.

The Company believes 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, including a majority of
the independent and disinterested outside directors on the Board.

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. On May 29, 1998, the Board of Directors and the stockholders
amended the Purchase Plan 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. As of December 31, 1998, a
total of 53,656 shares had been sold, leaving only 96,344 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 January 19, 1999 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 200,000.

<PAGE> 15

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., 2 Goodyear, Irvine, California 92618.

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, 1998, approximately 116 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 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 shares in any year.

<PAGE> 16

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

The following is a summary of certain federal income tax consequences of
participation in the Purchase Plan. The summary should not be relied upon as
being a complete statement of all possible federal income tax consequences.
Federal tax laws are complex and subject to change. Participation in the
Purchase Plan may also have consequences under state and local tax laws which
vary from the federal tax consequences described below. For such reasons, the
Company recommends that each participant consult his or her personal tax advisor
to determine the specific tax consequences applicable to him or her.

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
capital gain. 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 will be 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.

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.

<PAGE> 17

At the time of its adoption, the 1996 Plan authorized the sale of up to
600,000 shares of Common Stock. On May 29, 1998 the Board of Directors and
stockholders amended the 1996 Plan 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. As of March 31,
1999, a total of 38,563 shares had been exercised and 944,925 shares were
subject to outstanding options, leaving only 116,512 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 January 19, 1999 to increase the
authorized number of shares of Common Stock issuable thereunder by 900,000
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
2,000,000.

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 900,000 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., 2 Goodyear, Irvine, California 92618.

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, 1999,
approximately 90 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 make all
determinations necessary under the 1996 Plan. See "Directors' Fees" regarding
the annual grant of options to non-employee directors.

<PAGE> 18

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. The summary should not be relied upon as being a
complete statement of all possible federal income tax consequences. Federal tax
laws are complex and subject to change. Participation in the 1996 Plan may also
have consequences under state and local tax laws which vary from the federal tax
consequences described below. For such reasons, the Company recommends that each
participant consult his or her personal tax advisor to determine the specific
tax consequences applicable to him or her.

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 long-term capital gain or
loss 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 (other than certain transfers
upon the optionee's death) 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 realized in excess of the amount 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 will be treated as a capital loss. Capital gains and
losses resulting from disqualifying dispositions will be treated as long-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 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
disposition of the shares received upon exercise of an incentive option.

<PAGE> 19

The exercise of an incentive option may result in items of "tax
preference" for purposes of the "alternative minimum tax." Alternative minimum
tax is imposed on an individual's income only if the amount of the alternative
minimum tax exceeds the individual's regular tax for the year. For purposes of
computing alternative minimum tax, the excess of the fair market value on the
date of exercise of the shares received on exercise of an incentive option over
the exercise price paid is included in alternative minimum taxable income in the
year the option is exercised. An optionee who is subject to alternative minimum
tax in the year of exercise of an incentive option may claim as a credit against
the optionee's regular tax liability in future years the amount of alternative
minimum tax paid which is attributable to the exercise of the incentive option.
This credit is available in the first year following the year of exercise in
which the optionee has regular tax liability.

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 who is an employee 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 that certain reporting requirements are satisfied. If the exercise
price of a nonqualified option is paid by the optionee in cash, the tax basis of
the shares acquired will be equal to the cash paid plus the amount of income
recognized by the optionee as a result of such exercise. If the exercise price
is paid by delivering shares of Common Stock of the Company already owned by the
optionee or by a combination of cash and already-owned shares, there will be no
current taxable gain or loss recognized by the optionee on the already-owned
shares exchanged (however, the optionee will nevertheless recognize ordinary
income to the extent that the fair market value of the shares purchased on the
date of exercise exceeds the price paid, as described above). The new shares
received by the optionee, up to the number of the old shares exchanged, will
have the same tax basis and holding period as the optionee's basis and holding
period in the old shares. The balance of the new shares received will have a tax
basis equal to any cash paid by the optionee plus the amount of income
recognized by the optionee as a result of such exercise, and will have a holding
period commencing with the date of exercise. 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 be treated as long-term capital gain or
loss if the shares have been held for more than the applicable statutory holding
period (which is currently more than one year for long-term capital gains).

Restricted Stock. If no Section 83(b) election is made and repurchase
rights are retained by the Company, 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. Any income recognized by a
participant who is an employee will be subject to income tax withholding by the
Company out of the optionee's current compensation. If such compensation is
insufficient to cover the amount to be withheld, the participant will be
required to make a direct payment to the Company for the balance of the tax
withholding obligation. The Company is entitled to a tax deduction in an amount
equal to the ordinary income recognized by the participant. The participant's
basis in the shares will be equal to the purchase price, if any, increased by
the amount of ordinary income recognized.

If a Section 83(b) election is made within 30 days after the date of
transfer, or if no repurchase rights are retained by the Company, then the
participant will recognize ordinary income on the date of purchase 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.

<PAGE> 20

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.

PROPOSAL FOUR

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board of Directors has selected PricewaterhouseCoopers LLP,
independent auditors, to audit the financial statements of the Company for the
fiscal year ending December 31, 1999, 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.

PricewaterhouseCoopers LLP 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
Company's 2000 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 1, 2000 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.

On May 21, 1998 the Securities and Exchange Commission adopted an
amendment to Rule 14a-4, as promulgated under the Securities and Exchange Act of
1934, as amended. The amendment to Rule 14a-4(c)(1) governs the Company's use of
its discretionary proxy voting authority with respect to a stockholder proposal
which is not addressed in the Company's proxy statement. The new amendment
provides that if a proponent of a proposal fails to notify the Company at least
45 days prior to the current year's anniversary of the date of mailing of the
prior year's proxy statement, then the Company will be allowed to use its
discretionary voting authority when the proposal is raised at the meeting,
without any discussion of the matter in the proxy statement.

With respect to the Company's 2000 Annual Meeting of Stockholders, if
the Company was not provided notice of a stockholder proposal, which the
stockholder has not previously sought to include in the Company's proxy
statement, by March 12, 1999, the Company will be allowed to use its voting
authority as outlined.

<PAGE> 21

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 26, 1999 /s/ GEORGE WALLACE
----------------------------------
George Wallace
Chief Executive Officer President
and Director

The Annual Report to Stockholders of the Company for the fiscal year
ended December 31, 1998 is being mailed concurrently with this Proxy Statement
to all stockholders of record as of April 14, 1999. 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.

<PAGE> 22

PROXY MICRO THERAPEUTICS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF THE STOCKHOLDERS -- MAY 27, 1999

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 2 Goodyear,
Irvine, California 92618 on May 27, 1999, at 10:00 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 all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed 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 200,000 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 900,000 FOR A TOTAL OF 2,000,000 SHARES OF
COMMON STOCK.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

IMPORTANT -- Please sign and date on other side and return promptly
<PAGE> 23

>4. RATIFICATION OF PRICEWATERHOUSECOOPERS LLP 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
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS.

Dated: , 1999
--------------

-------------------------
(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.