<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>
COMPUTER MOTION, 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
[COMPUTER MOTION LETTERHEAD]
March 26, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of Computer Motion, Inc. to be held at the Company's headquarters, 130-B Cremona
Drive, Goleta, California, on Tuesday, May 19, 1998 at 10:00 a.m.
The accompanying Proxy Statement describes the business to be transacted
at the meeting. It is important that your shares be represented whether or not
you are personally able to attend the meeting. Regardless of the number of
shares you own, your vote is important to us. In order to assure that you will
be represented, we ask you to please sign, date and return the enclosed proxy
card promptly. This will not limit your right to vote in person or to attend the
Annual Meeting.
Sincerely,
[SIG]
Robert W. Duggan
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
COMPUTER MOTION, INC.
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 19, 1998
- --------------------------------------------------------------------------------
Notice is hereby given that the 1998 Annual Meeting of Shareholders of
Computer Motion, Inc. will be held at the Company's headquarters, 130-B Cremona
Drive, Goleta, California, on May 19, 1998 at 10:00 a.m. for the following
purposes:
1. To elect six (6) directors of the Company.
2. To ratify the re-appointment of independent auditors for the Company
for the current fiscal year.
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 23, 1998
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting or any adjournment or postponement thereof. All
shareholders are cordially invited to attend the Annual Meeting in person.
Regardless of whether you plan to attend the Annual Meeting, shareholders are
requested to complete, sign and date the enclosed proxy card and return it
promptly in the envelope provided. No postage is required if mailed in the
United States. Shareholders who attend the Annual Meeting in person may revoke
their proxy and vote their shares in person. Shareholders 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.
By Order of the Board of Directors
[SIG]
Stephen L. Wilson
Secretary
Goleta, California
March 26, 1998
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE, SIGN, DATE AND
RETURN YOUR PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON.
SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON
IF THEY DESIRE.
<PAGE> 4
COMPUTER MOTION, INC.
----------
PROXY STATEMENT
----------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 19, 1998
----------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is furnished to the holders of common stock, par
value $.001 per share of Computer Motion, Inc. (the "Company") in connection
with the solicitation by the Board of Directors of the Company of the enclosed
proxy for use at the 1998 Annual Meeting of Shareholders ("Annual Meeting") to
be held on May 19, 1998 at 10:00 a.m. local time, at the Company's headquarters,
130-B Cremona Drive, Goleta, California, or any adjournment or postponement
thereof, for the purposes set forth herein.
These proxy solicitation materials were mailed on or about March 26,
1998 to all shareholders entitled to vote at the meeting.
RECORD DATE; OUTSTANDING SHARES
Only shareholders of record at the close of business on March 23, 1998
(the "Record Date") are entitled to receive notice of and to vote at the
meeting. The outstanding voting securities of the Company as of such date
consisted of 7,916,316 shares of common stock, $.001 par value.
REVOCABILITY OF PROXIES
Any proxy may be revoked at any time before it is voted by written
notice, mailed or delivered to the Secretary of the Company, or by revocation of
a written proxy by request in person at the Annual Meeting; but if not so
revoked, the shares represented by such proxy will be voted according to your
directions. If your proxy card is signed and returned without specifying a vote
or an abstention on any proposal, it will be voted according to the
recommendation of the Board of Directors on each proposal.
VOTING AND SOLICITATION
Every shareholder of record on the record date is entitled to one vote
for each share held on each proposal that comes before the meeting. In the
election of directors, each shareholder will be entitled to vote for six
nominees and the six nominees with the greatest number of votes will be elected.
Proxies for use at the Annual Meeting are being solicited by the Board
of Directors of the Company. Proxies will be mailed to shareholders on or about
March 26, 1998 and will be solicited chiefly by mail. The Company will make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy material to the beneficial owners of the
common stock. Should it appear desirable to do so in order to ensure adequate
representation of shares at the Annual Meeting, officers, agents and employees
of the Company may communicate with shareholders, banks, brokerage houses and
others by telephone, facsimile or in person to request that proxies be
furnished.
1
<PAGE> 5
The cost of soliciting proxies will be borne by the Company. The Company
will reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may be solicited by certain of the Company's
directors, officers and employees. The Company has no present plans to hire
special employees or paid solicitors to assist in obtaining proxies, but
reserves the option of doing so if it should appear that a quorum at the Annual
Meeting might not otherwise be obtained.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual
Meeting is a majority of the shares of common stock issued and outstanding on
the Record Date. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a
proposal are treated as being present at the meeting for purposes of
establishing a quorum.
While there is no definitive statutory or case law authority in Delaware
as to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of votes
with respect to a proposal. Accordingly, the Company intends to treat
abstentions as a vote against a proposal.
Broker non-votes will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, but will not be
counted for purposes of determining the number of votes with respect to a
proposal.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Shareholder proposals for the Company's 1998 Annual Meeting to be held
in May 1999 must be received by the Company no later than November 26, 1998 in
order that they may be included in the proxy statement relating to that meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information provided to the Company as to
the beneficial ownership of the Company's common stock as of March 23, 1998 by
(i) persons holding 5% or more of such stock, (ii) named executive officers and
(iii) all directors and executive officers as a group:
<TABLE>
<CAPTION>
COMMON STOCK PERCENT OF
BENEFICIAL OWNERS BENEFICIALLY OWNED OUTSTANDING SHARES
- ------------------ --------------------- ------------------
<S> <C> <C>
Named Executive Officers:
Robert W. Duggan 1,168,636 (1),(6) 14.3%
Gene Wang 53,131 (1) 0.7%
Yulun Wang 1,003,767 (1),(7) 12.6%
Stephen L. Wilson 148,381 (1) 1.8%
Kermit R. (Kerry) Pope, Jr. 19,360 (1),(8) 0.2%
David A. Stuart 35,616 (1) 0.4%
John M. Greathouse 37,500 (1) 0.5%
Directors and Executive Officers as a Group
(10 persons) 2,566,122 (2) 30.1%
Capital Research and Management Company 419,400 (3) 5.3%
333 South Hope Street
Los Angeles, CA 90071
Chase Manhattan Capital Corporation 870,026 (4) 11.0%
c/o Chase Capital Partners
380 Madison, 12th Floor
New York, NY 55432
Medtronic Asset Management, Inc. 440,548 (5) 5.6%
Corporate Center
7000 Central Avenue N.E.
Minneapolis, MN 55432
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
COMMON STOCK PERCENT OF
BENEFICIAL OWNERS (cont'd) BENEFICIALLY OWNED OUTSTANDING SHARES
- --------------------------- --------------------- ------------------
<S> <C> <C>
The Kaufmann Fund, Inc. 495,000 (9) 6.3%
140 East 45th Street
New York, NY 10017
</TABLE>
Percentage of outstanding shares is based upon 7,916,316 shares of common
stock outstanding at March 23, 1998. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and includes
voting and investment power with respect to shares shown as beneficially owned.
Shares of common stock subject to options or warrants currently exercisable or
exercisable within 60 days of March 23, 1998 are deemed outstanding for
computing the shares and percentage ownership of the person holding such options
or warrants, but are not deemed outstanding for computing the percentage
ownership of any other person or entity. Except as otherwise indicated and
except for the effect of community property laws, as applicable, the persons or
entities listed below have sole voting and investment power with respect to all
shares shown as beneficially owned by them.
(1) Includes 279,396, 42,758, 20,593, 110,217, 15,560, 34,231 and 28,265 shares
which Messrs. Duggan and Gene Wang, Dr. Yulun Wang, and Messrs. Wilson,
Pope, Stuart and Greathouse, respectively may acquire within sixty days from
the date hereof, pursuant to the exercise of stock options and warrants.
(2) Includes 612,378 shares which such individuals may acquire within sixty days
from March 23, 1998 pursuant to the exercise of stock options and warrants.
(3) As of December 31, 1997, Capital Research Management Company reported that
it beneficially owned 419,400 shares of the Company's common stock of which
it held sole power to vote or direct the vote of 419,400 shares.
(4) As of December 31, 1997, Chase Manhattan Capital Corporation reported (i)
that it beneficially owned 701,968 shares of the Company's common stock,
including 138,591 warrants exercisable for shares of common stock, of which
it held sole power to vote or direct the vote of 701,968 shares; (ii) that
Chase Venture Capital Associates, L.P. beneficially owned 81,896 warrants
exercisable for shares of the Company's common stock of which it held sole
power to vote or direct the vote of 81,896 shares; and (iii) that Archery
Partners beneficially owned 86,162 shares of the Company's common stock,
including 17,011 warrants exercisable for shares of common stock, of which
it held shared power to vote or direct the vote of 86,162 shares.
(5) As of December 31, 1997, Medtronic Asset Management, Inc., a wholly-owned
subsidiary of Medtronic, Inc., reported that it beneficially owned 440,548
shares of the Company's common stock of which it held sole power to vote or
direct the vote of 440,548 shares.
(6) Includes 144,699 shares owned by Mr. Duggan's spouse of which he disclaims
beneficial ownership.
(7) Includes 20,530 shares owned by Dr. Yulun Wang's spouse and minor children
of which he disclaims beneficial ownership.
(8) Includes 800 shares owned by Mr. Pope's spouse of which he disclaims
beneficial ownership.
(9) As of December 31, 1997, The Kaufmann Fund, Inc. reported that it
beneficially owned 495,000 shares of the Company's common stock of which it
held sole power to vote or direct the vote of 495,000 shares.
3
<PAGE> 7
PROPOSAL 1: ELECTION OF DIRECTORS
Six directors will be elected at the Annual Meeting. Directors are
elected at each annual shareholders' meeting to hold office until the next
annual meeting or until their successors are elected and have qualified. The
Board of Directors has nominated for election the persons named below. Unless
otherwise instructed, the proxy holders named in the enclosed proxy intend to
vote the proxies received by them for such nominees. The Company believes that
each nominee named below will be able to serve; but should any such nominee be
unable to serve as a director, the proxy holders named in the proxies will vote
proxies received by them for the election of such substitute nominee(s) as the
Board of Directors may propose.
The names and ages of the nominees, their principal occupations and
amount of Company common stock owned by each such person are set forth below,
based upon information furnished to the Company by such nominees.
VOTE REQUIRED
The six nominees receiving the highest number of affirmative votes of
the shares present in person or represented by proxy and entitled to vote for
them, a quorum being present, shall be elected as directors. Only votes cast
"FOR" a nominee will be counted, except that the accompanying proxy will be
voted for all nominees in the absence of instructions to the contrary. Broker
non-votes and proxies marked "withheld" as to one or more nominees will result
in the respective nominees receiving fewer votes. However, the number of votes
otherwise received by the nominee will not be reduced by such action.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES NAMED BELOW.
<TABLE>
<CAPTION>
PERCENT
COMMON STOCK OF
DIRECTOR BENEFICIALLY OUTSTANDING
NAME AND AGE PRINCIPAL OCCUPATION SINCE OWNED SHARES
- ------------ -------------------------------- -------- ---------------- -----------
<S> <C> <C> <C> <C>
Daniel R. Doiron Founder (Retired) 1996 82,029 (1) 1.0%
(47) Miravant Medical Technologies, Inc.
Santa Barbara, CA
(Pharmaceutical company)
Robert W. Duggan Chairman and Chief Executive 1990 1,168,636 (1),(2) 14.3%
(53) Officer of the Company
M. Jacqueline Vice President Corporate 1998 - -
Eastwood (51) Ventures
Medtronic, Inc.
Minneapolis, MN
(Medical devices)
W. Peter Geis (56) Director 1996 19,154 (1),(3) 0.2%
Minimally Invasive Surgical
Training Institute
Baltimore, MD
(Endoscopic training institute)
Yulun Wang (37) Chief Technical Officer and 1990 1,003,767 (1),(4) 12.6%
Founder of the Company
William D. President (Retired) 1995 51,679 (1) 0.7%
Williams (50) Pyxis Corporation
San Diego, CA
(Medical device subsidiary of
Cardinal Health, Inc.)
</TABLE>
4
<PAGE> 8
Percentage of outstanding shares is based upon 7,916,316 shares of common stock
outstanding at March 23, 1998. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and includes voting and
investment power with respect to shares shown as beneficially owned. Shares of
common stock subject to options or warrants currently exercisable or exercisable
within 60 days of March 23, 1998 are deemed outstanding for computing the shares
and percentage ownership of the person holding such options or warrants, but are
not deemed outstanding for computing the percentage ownership of any other
person or entity. Except as otherwise indicated and except for the effect of
community property laws, as applicable, the persons or entities listed below
have sole voting and investment power with respect to all shares shown as
beneficially owned by them.
(1) Includes 67,766, 279,396, 16,154, 20,593 and 40,196 shares which Dr.
Doiron, Mr. Duggan, Dr. Geis, Dr. Wang and Mr. Williams, respectively
may acquire within sixty days from March 23, 1998, pursuant to the
exercise of stock options and warrants.
(2) Includes 144,699 shares held by Mr. Duggan's spouse of which he
disclaims beneficial ownership.
(3) Excludes 35 shares held by Dr. Geis' daughter of which he disclaims
beneficial ownership.
(4) Includes 20,530 shares held by Dr. Wang's spouse and minor children of
which he disclaims beneficial ownership.
OTHER INFORMATION REGARDING THE BOARD AND NOMINEES
BUSINESS EXPERIENCE.
Daniel R. Doiron, Ph.D., was a founder and director of Miravant Medical
Technologies, Inc. (formerly PDT, Inc.), a pharmaceutical company specializing
in photodynamic therapy for certain cancers and other diseases, where he served
in various capacities, including Vice President of Technology and Chief
Scientist and President of its subsidiary, PDT Systems, Inc., from 1989 to 1997.
Dr. Doiron holds B.S. and M.S. degrees in Nuclear Engineering and a Ph.D. in
Chemical Engineering from the University of California at Santa Barbara.
Robert W. Duggan, has been Chairman of the Board of Directors of the
Company since 1990 and Chief Executive Officer since October 1997. Mr. Duggan
has been a private venture investor for more than 25 years, and has participated
as a director of, investor in and advisor to numerous small and large businesses
in the medical equipment, computer local and wide area networks, PC hardware and
software distribution, digital encryption, consumer retail goods and outdoor
media communications industries. He has also assisted in corporate planning,
capital formation and management for his various investments. He is a member of
the University of California, Santa Barbara Foundation Board of Trustees, as
well as the University's Engineering Steering Committee. Formerly, Mr. Duggan
served as a Board of Trustee for the Santa Barbara Museum of Art and the Santa
Barbara Symphony.
M. Jacqueline Eastwood, has been Vice President, Corporate Ventures of
Medtronic, Inc., a medical device company, since March 1997. Previously, Ms.
Eastwood's positions with Medtronic, Inc., included Vice President of Minimally
Invasive Cardiac Surgery from December 1995, and Vice President and General
Manager of Bio-Medicus from 1992.
W. Peter Geis, M.D., is Director of the Minimally Invasive Surgical
Training Institute ("MISTI"), an endoscopic training institution in Baltimore,
Maryland. Dr. Geis was an Associate Professor of Surgery at the University of
Illinois. Dr. Geis has been Clinical Professor of Surgery for the University of
Chicago since 1991. Dr. Geis is a member of the American College of Surgeons and
the Society of American Gastrointestinal Endoscopic Surgeons. Dr. Geis also sits
on the advisory faculty of Johnson & Johnson's Ethicon Endo-Surgery business.
Dr. Geis received his M.D. from Loyola University in Chicago.
Yulun Wang, Ph.D., has been Chief Technical Officer of the Company since
January 1996 and a Director since 1990 and has served in numerous other
capacities since he founded the Company in 1989. Prior to founding the
5
<PAGE> 9
Company, Dr. Wang had been the principal investigator on research and
development contracts and grants from the National Science Foundation, the
National Aeronautics and Space Administration ("NASA")/Jet Propulsion
Laboratories, NASA/Langley, National Institute of Health and the United States
Navy. Dr. Wang earned B.S., M.S. and Ph.D. degrees in electrical engineering
from the University of California at Santa Barbara.
William D. Williams, served as the President of Pyxis Corporation
("Pyxis"), a subsidiary of Cardinal Health, Inc., from 1996 to 1998. From 1988
to 1996, Mr. Williams served as Vice President of Sales for Pyxis. Mr. Williams
earned a B.S. from the University of Missouri.
MEETINGS. During 1997, the Board of Directors met five times. Each director
attended more than 75% of the meetings of the Board of Directors.
BOARD COMMITTEES. The Audit Committee, consisting of Messrs. Duggan and Stephen
F. Wiggins, who resigned from the Board of Directors in February 1998, did not
meet in 1997. Among other duties, the Audit Committee reviews the scope and
results of independent audits, the Company's financial results and presentation;
and comments by the auditors regarding internal controls and accounting
procedures and management's responses to those comments.
The Compensation Committee, consisting of Messrs. Duggan, Wiggins and
Williams, did not meet in 1997. The Compensation Committee's duties include
annual approval of the Company's compensation policies, including salary, bonus
and long-term incentive programs, evaluation of the appropriate salary levels
for executive officers for Board of Directors approval and consideration of
matters with respect to other employee benefits provided by the Company.
The full Board of Directors was responsible for Audit Committee and
Compensation Committee matters in 1997.
The Board of Directors will consider nominees for Board membership
submitted by shareholders. Nominations by shareholders must be made pursuant to
timely notice in writing to the Company Secretary at 130-B Cremona Drive,
Goleta, California, 93117. Candidates for director should be persons with broad
training and experience in their chosen fields who have earned distinction in
their activities. According to the Company's Bylaws, notice by the shareholder
to be timely must be received 45 to 90 days prior to meeting, or within 10 days
of public notice of the meeting date. The notice shall set forth certain
information concerning such shareholder and the nominee(s), including their
names and addresses, their principal occupation or employment, their
beneficially owned common stock of the Company, such other information as would
be required in a proxy statement soliciting proxies for the election of the
nominees and the consent of each nominee to serve as a director if so elected.
The Committee may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
CERTAIN TRANSACTIONS. Pursuant to a sales agreement dated May 28, 1997 (the
"Sales Agreement"), Medtronic, Inc. ("Medtronic") will act as the Company's
exclusive distributor of ZEUS(TM) robotic surgical systems for use in
cardiothoracic surgical procedures in Europe, the Middle East and Africa and
will co-promote ZEUS for use in cardiothoracic surgical procedures in North
America. In exchange for co-promoting ZEUS in North America, Medtronic will
receive a commission based on the Company's sales of ZEUS. The Company retains
direct distribution rights of ZEUS in North America, as well as the worldwide
right to distribute ZEUS for use in other procedures. In March 1997, Medtronic
invested $4,000,000 in the Company in the form of a convertible loan, evidenced
by a convertible debenture. Such loan was converted into 363,743 shares of
common stock of the Company upon the execution of the Sales Agreement.
Concurrent with the closing of the Company's initial public offering, Medtronic
purchased an additional 76,805 shares of common stock at a per share price of
$13.02 (the initial public offering price per share, less underwriting discounts
and commissions).
6
<PAGE> 10
In October 1997, Gene Wang resigned as President and Chief Executive
Officer. Mr. Wang has a consulting agreement with the Company which provides for
payment of $200,000 over a maximum of an eighteen month period from October
1997. Mr. Wang's stock options continue to vest over the consulting period and
must be exercised within 30 days of the last consulting payment.
In February 1997, Daniel R. Doiron, a director of the Company, loaned
the Company the sum of $150,000 at an interest rate equal to the prime rate plus
1%. Such loan was evidenced by a promissory note and was repaid in April 1997
pursuant to its terms.
In June 1997, Stephen L. Wilson, Executive Vice President and Chief
Financial Officer, purchased 32,417 shares of common stock at $4.57 per share
and was issued warrants to purchase 32,417 shares of common stock at $4.57 per
share and 5,186 restricted shares of common stock.
In 1997, the Company sold to certain directors of the Company 40,195
shares of Series E preferred stock at an effective purchase price of $7.71 per
share and warrants to purchase 40,195 shares of common stock at an effective
purchase price of $.015 per warrant exercisable at any time at an exercise price
of $7.71 per share and expiring on December 31, 2003 as follows:
<TABLE>
<CAPTION>
SHARES OF
SERIES E
PREFERRED WARRANTS TO
STOCK PURCHASE AGGREGATE
PURCHASER PURCHASED COMMON STOCK CONSIDERATION
--------------------- ---------------- --------------- ------------------
<S> <C> <C> <C>
Daniel R. Doiron 20,746 20,746 $160,320
Robert W. Duggan 25,932 25,932 $200,400
William D. Williams 6,483 6,483 $ 50,100
</TABLE>
Bridge financing notes executed with certain directors of the Company
were repaid by the Company in August 1997. Warrants to purchase common stock
were issued in connection with the notes and were sold for $.0002 per warrant,
may be exercised at any time, have an exercise price of $4.57 per share and
expire seven years after the applicable issuance date. The principal amounts
repaid and number of warrants are as follows:
<TABLE>
<CAPTION>
WARRANTS TO
BRIDGE FINANCING PURCHASE
PURCHASER NOTES REPAID COMMON STOCK
-------------------- ------------------- --------------------
<S> <C> <C>
Robert W. Duggan $750,000 245,685
Yulun Wang $ 12,000 3,931
Daniel R. Doiron $100,000 32,758
</TABLE>
BOARD COMPENSATION. Directors do not receive any cash compensation for
their services as members of the Board of Directors, but are reimbursed for
expenses in connection with attendance at Board of Directors and Committee
meetings. Non-employee directors are eligible for discretionary option grants
under the Company's stock option plans. During 1997, a stock option grant for
1,451 shares was made to Dr. Geis.
7
<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION. The following table
shows, for the fiscal years 1997, 1996 and 1995, the cash compensation paid by
the Company and certain other compensation paid or accrued for those years to
each of the executive officers of the Company whose total cash compensation
exceeded $100,000 during fiscal year 1997 in all capacities in which they
served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION SECURITIES
-------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(2)
- ---------------------------- -------------------------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Robert W. Duggan (1) 1997 $ $ - $
Chairman 1996 - - 25,933 -
Chief Executive Officer 1995 - - - -
- - -
Gene Wang (1) 1997 158,333 83,333 - -
President 1996 183,462 50,000 250,259 -
Chief Executive Officer 1995 - - - -
Yulun Wang 1997 120,000 7,020 15,000 -
Chief Technical Officer 1996 110,208 - 47,976 -
Founder 1995 90,646 - - -
Stephen L. Wilson 1997 87,500 75,000 116,701 39,956
Executive Vice President 1996 - - - -
Chief Financial Officer 1995 - - - -
Kerry R. Pope 1997 93,269 27,392 127,800 -
Executive Vice President 1996 - - - -
Sales and Marketing 1995 - - - -
David A. Stuart 1997 110,000 18,262 18,153 -
Vice President 1996 55,000 4,244 70,019 -
Operations 1995 - - - -
John M. Greathouse 1997 100,302 17,396 23,339 -
Vice President 1996 110,000 5,822 15,560 -
Business Development 1995 55,050 1,375 10,372 -
</TABLE>
(1) Mr. Gene Wang resigned from the Company, and Mr. Duggan, Chairman of the
Board, assumed the responsibilities of Chief Executive Officer, in
October 1997. Mr. Duggan received no cash compensation for his service
in 1997.
(2) Does not include the value of other compensation which in the aggregate
did not exceed the lesser of $50,000 or 10% of the officer's salary and
bonus. Mr. Wilson's other compensation relates to his relocation from
Minnesota to California, net of applicable taxes.
8
<PAGE> 12
The following table sets forth information concerning the grants of
stock options made during the last fiscal year to each of the named executive
officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS POTENTIAL
SECURITIES GRANTED TO REALIZABLE
UNDERLYING EMPLOYEES IN EXERCISE EXPIRATION VALUE(3)
NAME OPTIONS GRANTED 1997 PRICE/SHARE(1) DATE 5% 10%
- ---- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Duggan - - % $ - - $ - $ -
Gene Wang - - - - - -
Yulun Wang 15,000 2.3 15.40 9/09/07 145,275 368,155
Stephen L. Wilson 116,701(2) 17.9 4.57 6/02/07 335,404 849,980
Kerry R. Pope 77,800(2) 12.0 4.57 5/19/07 223,604 566,656
50,000 7.7 9.94 12/16/07 312,561 792,090
David A. Stuart 18,153 2.8 4.57 4/23/07 52,175 132,223
John M. 12,966 2.0 4.57 2/24/07 37,268 94,444
Greathouse 10,373 1.6 9.93 8/01/07 64,779 164,162
</TABLE>
(1) The exercise price per share of each stock option was equal to the fair
market value of the common stock on each date of grant, except for Dr.
Yulun Wang's option which was granted at a price 10% above market value
because he was a greater than 10% shareholder of the Company. Stock
options vest over a four or five year period.
(2) Stock option grants in connection with commencement of employment.
(3) The potential realizable value is calculated assuming that the fair
market value of the Company's common stock on the date of grant
appreciates at the indicated annual rate compounded annually for the
entire term of the stock option (ten years) and that the stock option is
exercised and sold on the last day of its term for the appreciated stock
price. The 5% and 10% assumed annual rates of stock price appreciation
are mandated by the rules of the Securities and Exchange Commission.
Actual gain, if any, on stock option exercises are dependent on the
future performance of the common stock.
The following table sets forth information concerning the exercise of
stock options during the last fiscal year and unexercised stock options held as
of the end of the fiscal year for the named executive officers.
FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(2)
---- ------------------------------ ---------------------------------
EXERCISABLE NON-EXERCISABLE EXERCISABLE NON-EXERCISABLE
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Robert W. Duggan 6,483 19,450 $ 38,448 $115,351
Gene Wang 100,103 62,565 593,611 371,007
Yulun Wang 15,884 47,091 86,852 101,971
Stephen L. Wilson 51,867 64,834 307,605 384,509
Kerry R. Pope - 127,800 - 489,529
David A. Stuart 29,824 58,348 176,875 346,041
John M. Greathouse 25,673 36,564 178,897 168,509
</TABLE>
9
<PAGE> 13
(1) No shares were acquired on exercise of stock options by the named executive
officers in 1997. The Company has no stock appreciation rights outstanding.
(2) Values were calculated using a price of $10.50 per share, the closing sale
price of the Company's common stock as reported by the NASDAQ on December
31, 1997.
STOCK PERFORMANCE. The Securities and Exchange Commission requires that
the Company include in this proxy statement a line-graph presentation comparing
cumulative five-year shareholder returns on an indexed basis with the Standard
and Poor's ("S&P") 500 Stock Index and either a nationally recognized industry
standard or an index of peer companies selected by the Company. The Company uses
the S&P Medical Products and Supplies Index as its peer group index. The table
below compares the cumulative total return as of the Company's last fiscal year
assuming $100 was invested as of August 11, 1997, the date of the Company's
initial public offering, in the common stock of the Company, the S&P Medical
Products and Supplies Index and the S&P 500 Stock Index, assuming the
reinvestment of all dividends. The Indexes are weighted based on market
capitalization at the time of each reported data point. THE FOLLOWING GRAPH
SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT") OR THE SECURITIES AND EXCHANGE ACT OF
1934 (THE "1934 ACT"), EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY
INCORPORATES THIS INFORMATION BY REFERENCE AND SHALL NOT OTHERWISE BE DEEMED
FILED UNDER THE 1933 ACT OR THE 1934 ACT.
<TABLE>
<CAPTION>
INDEX 8/11/97 12/31/97
----- ------- --------
<S> <C> <C>
COMPUTER MOTION, INC. $100.00 $75.00
S&P 500 $100.00 $103.57
S&P MEDICAL PRODUCTS AND SUPPLIES $100.00 $96.96
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The members
of the Company's Compensation Committee during the fiscal year ended December
31, 1997 consisted of Messrs. Duggan, Williams and Wiggins, who resigned from
the Board in February 1998. The Compensation Committee did not meet during the
fiscal year ended December 31, 1997. Decisions regarding compensation of the
executive officers were made by the Board of Directors as a whole. Mr. Duggan is
presently the Chief Executive Officer of the Company, but he did not receive a
salary in connection with his service in 1997. The Company anticipates that
executive compensation for future periods will be determined by the Compensation
Committee.
10
<PAGE> 14
EMPLOYMENT, TERMINATION AND CHANGE IN CONTROL AGREEMENTS
EMPLOYMENT AGREEMENT. The Company has entered into an agreement relating
to the employment of Stephen L. Wilson whereby the Company has agreed to provide
Mr. Wilson with severance benefits during the first year of employment equal to
one year's salary plus bonus and thereafter equal to two years' salary plus
bonus. The Agreement also provides that, in the event of termination following a
change of control of the Company, Mr. Wilson will receive three years' salary
plus bonus and all his outstanding stock options will fully vest.
INDEMNIFICATION AGREEMENTS. The Company has entered into indemnification
agreements with each of its directors and officers which provide for
indemnification against certain costs incurred by each director and officer made
or threatened to be made a party to a proceeding because of his or her official
capacity as a director or officer. The indemnification agreements, together with
the Company's Bylaws provide for indemnification to the fullest extent permitted
by Delaware law.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Board of Directors was responsible for administering the
compensation program for the Company's executive officers including the named
executive officers in 1997. The Company anticipates that future determinations
as to executive compensation will be made by the Compensation Committee. The
Committee is composed exclusively of independent, non-employee directors who are
not eligible to participate in any of the executive compensation programs.
COMPENSATION PHILOSOPHY. The Company's continued growth and new product
development activities together with worldwide healthcare reform and competitive
pressures present significant challenges to the Company's management. The Board
believes that, if the Company is to continue its growth, and bring new products
to market, its executive compensation program must have the flexibility to
attract and retain high quality employees. Furthermore, the executive
compensation program must provide incentives which will reward key managers for
aggressively pursuing the actions necessary to improve the Company's performance
and enhance long-term shareholder value.
The Company's executive compensation program is based upon a
pay-for-performance philosophy. There are three components to the Company's
executive compensation program: base salary, a cash incentive bonus payment and
long-term stock based incentives. The Company is committed to a strong link
between its business and strategic goals and its compensation program. The
financial goals for certain elements of the compensation program are reviewed
and approved by the Board of Directors in conjunction with its approval of the
Company's strategic and operating plans.
BASE SALARY. An executive's base salary is determined by an assessment
of his or her sustained performance, advancement potential, experience,
responsibility, scope and complexity of the position, current salary in relation
to the range designated for the job and salary levels for comparable positions
at peer group companies. Additionally, the Board sets base salaries for
executive officers based on the executive's contribution to the Company's
success through operational improvements and strategic initiatives. Factors
considered in determining base salary are not assigned pre-determined relative
weights.
INCENTIVE BONUS. Payments under the incentive bonus program are based on
the Company's performance relative to the annual operating plan as approved by
the Board of Directors and the executive's achievement of individual objectives
as approved by the President/Chief Executive Officer.
EQUITY BASED COMPENSATION. The Company's overall equity based
compensation philosophy is that equity based incentives should be directly
related to the creation of shareholder value, thus providing a strong link
between management and shareholders. The Company believes that stock based
incentives are very consistent with the entrepreneurial spirit the Company seeks
in its executive team. In support of this philosophy, the Company has awarded to
its executive officers stock options and to a limited extent, restricted stock.
11
<PAGE> 15
STOCK OPTION AWARDS. Stock options encourage and reward executive
officers for creating shareholder value as measured by stock price appreciation.
Stock options are awarded at an exercise price equal to the fair market value of
the stock on the date of grant and therefore, only have value if the price of
the Company's stock appreciates in value from the dates the stock options are
granted. The executive officers and shareholders benefit equally from such stock
price appreciation. The Company utilizes stock options, in lieu of higher base
salaries and bonuses, as a means to attract, retain and motivate talented
executives upon whose performance the Company is dependent.
Stock options are awarded annually consistent with the Company's
objective to provide (i) a long-term equity interest in the Company, and (ii) an
opportunity for a greater financial reward if long-term performance is
sustained. To encourage a long-term perspective, stock options cannot be
exercised immediately. Generally, stock options become exercisable over a
four-year or five-year period. The number of stock options granted to each
executive officer is approved by the Board of Directors. Individual grant size
is dependent on the executive officer's experience, position and level of
responsibility within the Company, an evaluation of the executive officer's
performance and ability to positively impact the Company's future business
plans. No pre-assigned relative weight is ascribed to any of these factors.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Mr. Robert W. Duggan, the
Chairman of the Board, assumed the responsibility of Chief Executive Officer
subsequent to Mr. Gene Wang's resignation in October, 1997. Mr. Duggan received
no cash compensation for his service as Chief Executive Officer in 1997. Mr.
Wang's annual salary of $200,000 and bonus opportunity of a maximum of 50% of
salary were considered to be reasonable in comparison to similar salaries and
bonus structures for medical device company Chief Executive Officers. Mr. Wang
received salary payments of $158,333 and bonus payments of $83,333 for 1997. The
Board believes salary, bonus and stock options for the Chief Executive Officer
will depend on the person's experience and background. In addition, the Board
believes that the Chief Executive Officer should have a substantial equity
interest in the Company.
BOARD ACTION. In 1997, the Compensation Committee did not meet and all
matters of executive officer compensation were approved by the full Board of
Directors. The Company anticipates that future recommendations of the
Compensation Committee will be subject to Board of Directors review and
approval.
SUBMITTED BY THE BOARD OF DIRECTORS
Daniel R. Doiron M. Jacqueline Eastwood Yulun Wang
Robert W. Duggan W. Peter Geis William D. Williams
FISCAL YEAR 1997 COMPENSATION. The Company is required to disclose its
policy regarding qualifying executive compensation deductibility under Section
162(m) of the Internal Revenue Code of 1986, as amended, which provides that,
for purposes of the regular income tax and the alternative minimum tax, the
otherwise allowable deduction for compensation paid or accrued with respect to a
covered employee of a public corporation is limited to no more than $1 million
per year. It is not expected that the compensation to be paid to the Company's
executive officers will exceed the $1 million limit per officer. The Company's
Tandem Stock Option Plan and 1997 Stock Incentive Plan are structured such that
any compensation deemed paid to an executive officer when he exercises an
outstanding stock option under the plan, with an exercise price not less than
the fair market value of the option shares on the grant date, will qualify as
performance-based compensation that will not be subject to the $1 million
limitation.
THE FOREGOING BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION SHALL
NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING
BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF
1933 (THE "1933 ACT") OR THE SECURITIES AND EXCHANGE ACT OF 1934 (THE "1934
ACT"), EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS
INFORMATION BY REFERENCE AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER THE 1933
ACT OR THE 1934 ACT.
12
<PAGE> 16
PROPOSAL 2: RATIFICATION OF RE-APPOINTMENT OF INDEPENDENT AUDITORS
The accounting firm of Arthur Andersen LLP has been the Company's
auditing firm since 1993. Arthur Andersen LLP has been re-appointed by the Board
of Directors as the Company's auditing firm for the current year. Although
shareholder approval is not required, the Board of Directors requests
shareholder ratification of Arthur Andersen LLP's re-appointment. In the event
the re-appointment of Arthur Andersen LLP should not be ratified by the
shareholders, the Board of Directors will reconsider such appointment.
A representative from Arthur Andersen LLP will be available at the
annual meeting of shareholders to answer any appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
RE-APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
The proxy rules of the Securities and Exchange Commission permit
shareholders, after timely notice to issuers, to present proposals for
shareholder action in issuer proxy statements where such proposals are
consistent with applicable law, pertain to matters appropriate for shareholder
action and are not properly omitted by issuer action in accordance with the
proxy rules. The Company's annual meeting for the fiscal year ending December
31, 1998, is expected to be held on or about May 1, 1999, and proxy materials in
connection with that meeting are expected to be mailed on or about March 26,
1999. In order to be included in the Company's proxy statement for 1999,
shareholder proposals prepared in accordance with the proxy rules must be
received by the Company on or before November 26, 1998 (120 days before
mailing).
The Bylaws of the Company establish an advance notice procedure with
regard to (i) certain business to be brought before an annual meeting of
shareholders of the Company; and (ii) the nomination by shareholders of
candidates for election as directors.
PROPERLY BROUGHT BUSINESS. The Bylaws provide that at the annual meeting
only such business may be conducted as is of a nature that is appropriate for
consideration at an annual meeting and has been either specified in the notice
of the meeting, otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or otherwise properly brought before the
meeting by a shareholder who has given timely written notice to the Secretary of
the Company of such shareholder's intention to bring such business before the
meeting. To be timely, the notice must be given by such shareholder to the
Secretary of the Company not less than 45 days and not more than 90 days prior
to the meeting (or if less than 55 days' notice or prior public disclosure of
the date of the annual meeting is given or made to shareholders, not later than
the tenth day following the day on which the notice of the date of the annual
meeting was mailed or such public disclosure was made). Notice relating to the
conduct of such business at an annual meeting must contain certain information
as described in the Company's Bylaws, which are available for inspection by
shareholders at the Company's principal executive offices. Nothing in the Bylaws
precludes discussion by any shareholder of any business properly brought before
the annual meeting in accordance with the Company's Bylaws.
SHAREHOLDER NOMINATIONS. The Bylaws provide that a notice of proposed
shareholder nominations for the election of directors must be timely given in
writing to the Secretary of the Company prior to the meeting at which directors
are to be elected. To be timely, the notice must be given by such shareholder to
the Secretary of the Company not less than 45 days and not more than 90 days
prior to the meeting (or if less than 55 days notice or prior public disclosure
of the date of the annual meetings given or made to shareholders, not later than
the tenth day following the day on which the notice of the date of the annual
meeting was mailed or such public disclosure was
13
<PAGE> 17
made). The notice to the Company from a shareholder who intends to nominate a
person at the meeting for election as a director must contain certain
information as described in the Company's Bylaws, which are available for
inspection by shareholders at the Company's principal executive offices. If the
presiding officer of a meeting of shareholders determines that a person was not
nominated in accordance with the foregoing procedure, such person will not be
eligible for election as a director.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 (the "1934
Act") requires the Company's directors and executive officers to file with the
Securities and Exchange Commission reports of ownership and changes in ownership
of the Company's common stock, and the Company is required to identify any of
those persons who fail to file such reports on a timely basis. Based solely upon
its review of the copies of Forms 3, 4 and 5 furnished to the Company, and
written representations from certain persons that no annual Form 5 reports were
required, the Company believes that all filing requirements under Section 16(a)
of the 1934 Act were satisfied on a timely basis.
GENERAL
All proxies properly executed will be voted in the manner directed by
shareholders. If no direction is made, proxies will be voted "FOR" the election
of the Board of Director's nominees for directors and "FOR" the ratification of
the re-appointment of the independent auditors.
The management of the Company knows of no matters other than the
foregoing to be brought before the meeting. However, in the event any additional
matters should be presented, the enclosed proxy gives the proxy holders
discretionary authority to vote all proxies with respect thereto in accordance
with their judgment.
All expenses in connection with solicitation of proxies will be borne by
the Company. The Company will pay brokers, nominees, fiduciaries, or other
custodians their reasonable expenses for sending proxy material to, and
obtaining instructions from, persons for whom they hold stock of the Company.
The Company expects to solicit proxies by mail, but directors, officers, and
other employees of the Company or a proxy solicitation firm may also solicit in
person, by telephone, by facsimile or by mail.
The Company's Annual Report to Shareholders for the year ended December
31, 1997 is enclosed herewith. 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. Shareholders may receive without charge a copy of the Company's
Annual Report on Form 10-K, as filed with the Securities and Exchange
Commission, by writing to: Investor Relations, Computer Motion, Inc., 130-B
Cremona Drive, Goleta, California 93117.
By Order of the Board of Directors
[SIG]
Stephen L. Wilson
Secretary
March 26, 1998
14
<PAGE> 18
COMPUTER MOTION, INC.
130-B CREMONA DRIVE, GOLETA, CA 93117
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert W. Duggan and Stephen L. Wilson, as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and vote, as designated on the reverse side of this card, all
shares of common stock of Computer Motion, Inc., held of record by the
undersigned on March 23, 1998, at the Annual Meeting of Shareholders to be held
on May 19, 1998 or any adjournment or postponement thereof.
(TO BE SIGNED ON REVERSE SIDE)
<PAGE> 19
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD
listed at right AUTHORITY
(except as indicated to to vote for one or
the contrary below) more nominees as listed
at right
1. ELECTION OF
DIRECTORS. [ ] [ ]
NOMINEES: Daniel R. Doiron
Robert W. Duggan
M. Jacqueline Eastwood
W. Peter Geis
Yulun Wang
William D. Williams
FOR, except vote withheld from the following nominees:
- ------------------------------------------------------
Proposal no. 2 FOR AGAINST ABSTAIN
RATIFICATION OF RE-APPOINTMENT [ ] [ ] [ ]
OF AUDITORS.
PLEASE SIGN BELOW, DATE AND RETURN PROMPTLY
SIGNATURE
-------------------------------------------
- ------------------------------------------------------
SIGNATURE IF HELD JOINTLY
Dated: 1998
---------------------
IMPORTANT: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. When signing on behalf
of a corporation, partnership, estate or trust or in other
representative capacity, please sign name and title. If executed
by a corporation, the proxy should be signed by a duly authorized
officer. If executed by a partnership, please sign in the
partnership name by an authorized person.
