<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
<PAGE> 2
May 12, 2000
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
("Annual Meeting") of Computer Motion, Inc. to be held at the Corporate
Headquarters, 130-B Cremona Drive, Goleta, California on Thursday, June 15, 2000
at 10:00 a.m.
The accompanying Proxy Statement describes the business to be
transacted at the Annual Meeting. It is important that your shares be
represented whether or not you are personally able to attend the Annual 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,
/s/ Robert W. Duggan
- ---------------------------
Robert W. Duggan
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
COMPUTER MOTION, INC.
130 CREMONA DRIVE
GOLETA, CALIFORNIA 93117
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 15, 2000
- --------------------------------------------------------------------------------
The 2000 Annual Meeting of Shareholders ("Annual Meeting") of Computer
Motion, Inc. (the "Company") will be held at the Corporate Headquarters, 130-B
Cremona Drive, Goleta, California on June 15, 2000 at 10:00 a.m. for the
following purposes:
1. To elect five (5) directors of the Company.
2. To approve the conversion of the promissory note issued to a certain
officer and director of the Company into securities of the Company,
as required by the rules of the Nasdaq National Market.
3. To ratify the re-appointment of independent public accountants.
4. To transact any other business that properly comes before the Annual
Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on May 11, 2000
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual 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, please 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. If you attend
the Annual Meeting in person, you may revoke your proxy and vote your shares in
person. If your shares are held in the name of a broker or other nominee and you
desire to vote your shares at the Annual Meeting, you should bring with you a
proxy or letter from your broker confirming your ownership of shares.
By Order of the Board of Directors
/s/ Gordon L. Rogers
---------------------------
Gordon L. Rogers
Secretary
Goleta, California
May 12, 2000
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, DATE
AND RETURN YOUR PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU
DESIRE.
<PAGE> 4
COMPUTER MOTION, INC.
130 CREMONA DRIVE
GOLETA, CALIFORNIA 93117
-----------------------
PROXY STATEMENT
-----------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 15, 2000
-----------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
We are furnishing this Proxy Statement to you in connection with the
solicitation by the Board of Directors of Computer Motion, Inc. (the "Company")
of the enclosed proxy for use at the 2000 Annual Meeting of Shareholders (the
"Meeting") to be held on June 15, 2000 at 10:00 a.m. local time, at the
Corporate Headquarters, 130-B Cremona Drive, Goleta, California, or any
adjournment or postponement thereof, for the purposes set forth below.
These proxy solicitation materials were mailed on or about May 12, 2000
to all shareholders entitled to vote at the Meeting.
RECORD DATE AND OUTSTANDING SHARES
Only shareholders of record at the close of business on May 11, 2000
(the "Record Date") are entitled to receive notice of and to vote at the
Meeting. The outstanding voting securities of the Company on that date consisted
of 8,823,638 shares of common stock, $.001 par value.
REVOCABILITY OF PROXIES
You may revoke your proxy at any time by written notice, to the
Secretary of the Company, or by your request in person at the Meeting. If you do
not revoke your proxy, it 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 five
nominees and the five nominees with the greatest number of votes will be
elected.
Proxies for use at the Meeting are being solicited by the Board of
Directors of the Company. Proxies were mailed to shareholders on or about May
12, 2000 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 materials to the beneficial owners of the
common stock. 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.
The cost of soliciting proxies is paid by the Company. The Company will
reimburse brokerage firms and other persons representing beneficial owners of
common stock for their expenses in forwarding proxy materials to such beneficial
owners. The Company has no present plans to hire paid solicitors to assist in
obtaining proxies, but may do so if it appears that a quorum at the Meeting
might not otherwise be obtained.
1
<PAGE> 5
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
The required quorum for the transaction of business at the Meeting is a
majority of the shares of common stock issued and outstanding as of the Record
Date. Shares that are voted "FOR," "AGAINST," or "WITHHELD" are treated as being
present at the Meeting for purposes of establishing a quorum.
There is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions. The Company will count abstentions for
purposes of determining both (i) the presence of a quorum for the transaction of
business, and (ii) the total number of votes with respect to a proposal.
Abstentions will be treated as a vote against all proposals.
Broker non-votes will be counted for purposes of determining the
presence of a quorum for the transaction of business, but will not be counted
for purposes of determining the number of votes with respect to any proposal.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Shareholder proposals for the Company's 2001 annual meeting to be held
in May 2001 must be received by the Company no later than November 24, 2000 in
order that they may be included in the proxy statement relating to that meeting.
2
<PAGE> 6
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 30, 2000 by
(i) persons holding 5% or more of such stock, (ii) Company directors and
executive officers individually, and (iii) all Company directors and executive
officers as a group. Percentage of outstanding shares is based upon 8,823,638
shares of common stock outstanding at March 30, 2000. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. Shares of common stock subject to options or warrants currently
exercisable or exercisable within 60 days of March 30, 2000 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. Except as otherwise indicated and
except for the effect of community property laws, as applicable, the persons
listed below have sole voting and investment power with respect to all shares
shown as beneficially owned by them.
COMMON STOCK PERCENT OF
BENEFICIALLY OUTSTANDING
BENEFICIAL OWNERS OWNED SHARES
- ----------------- ------------ -----------
Directors and Executive Officers:
Robert W. Duggan 1,244,310(1) 13.6
Yulun Wang 999,711(2) 11.3
Daniel R. Doiron 92,403(3) 1.0
David A. Stuart 81,425(3) *
W. Peter Geis 21,641(3) *
Gregory Ruehle 21,000(3) *
M. Jacqueline Eastwood 5,000(3) *
Directors and Executive Officers 2,465,490(4) 26.3
As a Group (7 persons)
Scudder Kemper Investments, Inc. 675,400(5) 7.7
345 Park Avenue
New York, NY 10154
Capital Research and Management Co. 434,900(6) 4.9
333 South Hope Street
Los Angeles, CA 90071
- ------------------
* Less than 1.0%
(1) Includes 144,699 shares owned by Mr. Duggan's spouse of which he disclaims
beneficial ownership and 299,770 stock options and warrants which may be
exercised within sixty days from March 30, 2000.
(2) Includes 24,912 shares owned by Dr. Wang's minor children of which he
disclaims beneficial ownership and 58,709 stock options and warrants which
may be exercised within sixty days from March 30, 2000.
(3) Includes 79,501, 78,140, 20,000, 18,606 and 5,000 stock options and warrants
which may be exercised by Mr. Stuart, Dr. Doiron, Mr., Ruehle, Dr. Geis and
Ms. Eastwood, respectively within sixty days from March 30, 2000.
(4) Includes 559,726 stock options and warrants which may be exercised within
sixty days from March 30, 2000.
(5) As of December 31, 1999, Scudder Kemper Investments, Inc. reported that it
beneficially owned 675,400 shares of the Company's common stock of which it
held sole power to vote or direct the vote of 395,800 shares, shared power
to vote or direct the vote of 10,000 shares and no power to vote or direct
the vote of 269,600 shares.
(6) Beneficial ownership as reported as of December 31, 1999.
3
<PAGE> 7
PROPOSAL 1: ELECTION OF DIRECTORS
Five directors will be elected at the 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, ages and the principal occupations of the nominees are set
forth below, based upon information furnished to the Company by such nominees.
VOTE REQUIRED
The five nominees receiving the highest number of affirmative votes of
the shares present in person or represented by proxy shall be elected as
directors. Shareholders do not have the right to cumulate votes in the election
of 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF
THE NOMINEES NAMED BELOW.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE PRINCIPAL OCCUPATION SINCE
- ------------ -------------------- --------
<S> <C> <C>
Daniel R. Doiron (49) Founder (Retired) 1996
Miravant Medical Technologies, Inc.
Santa Barbara, CA
(Pharmaceuticals)
Robert W. Duggan (55) Chairman and Chief Executive Officer of the Company 1990
M. Jacqueline Eastwood (53) President and Chief Executive Officer 1998
TissueLink Medical, Inc.
Dover, NH
(Medical devices)
W. Peter Geis (58) Director 1996
Minimally Invasive Surgical Training Institute
Baltimore, MD
(Endoscopic training institute)
Yulun Wang (39) Chief Technical Officer, Executive Vice President and 1990
Founder of the Company
</TABLE>
4
<PAGE> 8
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 at Santa Barbara Foundation Board of Trustees, as
well as the University's Engineering Steering Committee.
M. Jacqueline Eastwood, has been President and Chief Executive Officer
of TissueLink Medical, Inc., a medical device company, since August 1999. Ms.
Eastwood previously served as Vice President, Corporate Ventures of Medtronic,
Inc., a medical device company, from 1997 to 1998. Ms. Eastwood's positions with
Medtronic Inc. have also 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., founded Computer Motion in 1989 and served as
President until January 1996, at which time he became Chief Technical Officer
and Executive Vice President. He had been a Director of the company since its
inception. Dr. Wang is the principal architect of the company's product
strategy, and inventor of many of the technologies that are used to create the
company's products. Dr. Wang has over 40 publications and holds over two dozen
patents and patents-pending. He frequently gives presentations at major medical
meetings on the future of robotics and computers in the field of surgery. Prior
to founding the company, Dr. Wang taught at the University of California, Santa
Barbara. He has also been the recipient of many research grants from the
National Aeronautics and Space Administration (NASA), National Institute of
Health and Defense Advanced Research Projects Agency (DARPA). Dr. Wang earned
B.S., M.S. and Ph.D. degrees in electrical engineering from the University of
California at Santa Barbara.
MEETINGS. During 1999, the Board of Directors met five times. Ms.
Eastwood, Mr. Duggan and Dr. Wang attended 100% of the meetings, Dr. Doiron
attended 80% of the meetings and Dr. Geis attended 60% of the meetings.
BOARD COMMITTEES. The Audit Committee, consisting of Dr. Doiron
(Chairman), Mr. Williams (resigned July 6, 1999) and Ms. Eastwood, met once in
1999. Among other duties, the Audit Committee approves the engagement of
independent public accountants and reviews the scope and results of independent
audits, the Company's financial results and presentation, and comments by the
independent public accountants regarding internal controls and accounting
procedures and management's responses to those comments. The Compensation
Committee, consisting of Ms. Eastwood (Chairman), Mr. Williams (resigned July 6,
1999), Dr. Doiron and Dr. Geis, met four times in 1999. The Compensation
Committee's duties include review of the Company's compensation policies,
including salary, bonus and long-term incentive programs, evaluation and
approval of the compensation program for executive officers, approval of certain
stock option grants and consideration of matters with respect to other employee
benefits provided by the Company.
5
<PAGE> 9
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. 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
the annual meeting, or if later, within 10 days of public notice of the annual
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.
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 stock option
grants under the Company's stock plans. There were no stock option grants to
non-employee directors in 1999.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION. The following table
shows the cash compensation and certain other compensation paid or accrued by
the Company to each of the executive officers of the Company whose total cash
compensation exceeded $100,000 (collectively the "Named Executive Officers")
during fiscal years 1999, 1998, and 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(1)
--------------------------- ---- -------- ------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Robert Duggan (2) 1999 $160,447 $ 3,280 20,000 $ --
Chairman 1998 108,750 16,312 20,000 --
Chief Executive Officer 1997 -- -- 25,933 --
Yulun Wang 1999 160,447 12,300 20,000 --
Chief Technical Officer 1998 143,750 21,562 20,000 --
Founder 1997 120,000 7,020 15,000 --
Stephen L. Wilson (3) 1999 156,990 -- 35,000 --
Former Executive Vice 1998 151,250 22,688 20,000 --
President and Chief Financial 1997 87,500 75,000 116,701 39,956
Officer
David A. Stuart 1999 129,125 10,050 20,000 --
Vice President 1998 117,500 10,576 20,000 30,000
Operations 1997 110,000 18,262 18,153 --
Richard J. DeRisio (4) 1999 7,796 -- 50,000 40,458
Vice President Clinical, 1998 -- -- -- --
Regulatory and Quality Affairs 1997 -- -- -- --
Gregory J. Ruehle (5) 1999 77,213 -- 160,000 --
Vice President 1998 -- -- -- --
Global Sales 1997 -- -- -- --
John M. Greathouse (6) 1999 89,330 7,000 20,000 --
Former Vice President 1998 126,400 10,652 20,000 --
Business Development 1997 100,302 17,396 23,339 --
Kermit R. Pope, Jr. (7) 1999 -- -- -- 64,825
Former Vice President 1998 132,914 -- 20,000 --
Sales and Marketing 1997 93,269 27,392 127,800 --
</TABLE>
- ----------------
(1) Does not include the value of other compensation which in the aggregate did
not exceed the lesser of $50,000 or 10% of the executive officer's salary
and bonus.
(2) Mr. Duggan was appointed Chief Executive Officer in October 1997, but did
not begin drawing a salary until March 1998.
(3) Mr. Wilson resigned in November 1999.
(4) Mr. DeRisio began employment with the Company in December 1999, at an annual
salary of $147,000.
(5) Mr. Ruehle began employment with the Company in July 1999, at an annual
salary of $150,000.
(6) Mr. Greathouse resigned in August 1999.
(7) Mr. Pope resigned in November 1998. Under the terms of a separation
agreement, Mr. Pope received $8,333 per month for nine months.
6
<PAGE> 10
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. In addition, in accordance with the rules and regulations of the
Securities and Exchange Commission, the following table sets forth hypothetical
gains or "option spreads" that would exist for the options. Such gains are based
on assumed rates of annual compound stock appreciation of 5% and 10% from the
date on which the options were granted, over the full term of the options. The
rates do not represent the Company's estimate or projection of future common
stock prices and no assurance can be given that the rates of annual compound
stock appreciation assumed for the purposes of the following table will be
achieved.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS POTENTIAL REALIZABLE
UNDERLYING GRANTED TO VALUE(3)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED(1) 1999 PRICE/SHARE(2) DATE 5% 10%
- ---- ---------- ------------ -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Duggan 20,000 2.3% $ 9.00 3/21/09 $ 113,201 $ 286,874
Yulun Wang 20,000 2.3 9.00 3/21/09 113,201 286,874
Stephen L. Wilson 35,000 4.1 9.00 3/21/09 198,102 502,029
David A. Stuart 20,000 2.3 9.00 3/21/09 113,201 286,874
Richard J. DeRisio 50,000 5.8 10.625 12/12/09 334,100 846,676
Gregory J. Ruehle 150,000 17.4 11.00 6/30/09 1,037,676 2,629,675
Gregory J. Ruehle 10,000 1.2 10.063 12/28/09 63,286 160,378
John M. Greathouse 20,000 2.3 9.00 3/21/09 113,201 286,874
</TABLE>
- ----------------
(1) Stock options vest in four equal and annual installments.
(2) The exercise price per share was equal to the fair market value of the
common stock on the date of grant.
(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.
7
<PAGE> 11
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. In addition, the
table includes the number of shares covered by both exercisable and
unexercisable stock options as of December 31, 1999. 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 stock.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(2)
ACQUIRED ON VALUE ----------------------------- ------------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE NON-EXERCISABLE EXERCISABLE NON-EXERCISABLE
- ---- ----------- ----------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Duggan -- $ -- 21,856 44,077 $112,776 $111,499
Yulun Wang -- -- 49,779 53,197 226,856 116,965
David A. Stuart -- -- 70,093 58,080 422,988 201,552
Gregory Ruehle -- -- 20,000 140,000 -- 9,370
Richard DeRisio -- -- -- 50,000 -- 18,750
Stephen L. Wilson 50,862 349,371 46,526 -- 271,429 --
</TABLE>
- --------------
(1) Represents market value of underlying securities at date of exercise less
option exercise price.
(2) Values were calculated using a price of $11.00 per share, the closing sale
price of the Company's common stock as reported by the NASDAQ on December
31, 1999 minus the option exercise price.
8
<PAGE> 12
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.
SHAREHOLDER RETURN PERFORMANCE
<TABLE>
<CAPTION>
INDEX 8/11/97 12/31/97 12/31/98 12/31/99
----- ------- -------- -------- --------
<S> <C> <C> <C> <C>
COMPUTER MOTION, INC. $100.00 $ 75.00 $ 89.29 $ 78.57
S&P 500 $100.00 $103.57 $131.19 $156.80
S&P MEDICAL PRODUCTS AND SUPPLIES $100.00 $ 96.96 $138.80 $127.75
</TABLE>
9
<PAGE> 13
EMPLOYMENT AND INDEMNIFICATION AGREEMENTS
EMPLOYMENT AGREEMENT. The Company does not currently have employment
agreements with any of its employees.
INDEMNIFICATION AGREEMENTS. The Company indemnifies its directors and
officers against certain costs which could be incurred if they were made, or
threatened to be made, a party to a legal proceeding because of their official
status 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1999, the Compensation Committee of
the Company's Board of Directors established the levels of compensation for the
Company's executive officers. The Compensation Committee consists of Mr.
Williams (resigned July 6, 1999), Dr. Doiron and Ms. Eastwood. None of these
individuals have ever been an officer or employee of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
was responsible for administering the compensation program for the Company's
executive officers, including the named executive officers, in 1999. The
Committee is composed exclusively of independent, non-employee directors who are
not eligible to participate in any aspect of the executive compensation program,
except for the possible receipt of stock options under the Company's stock
plans.
COMPENSATION PHILOSOPHY. The Company's continued growth, new product
development, regulatory clearance and market introduction activities, together
with worldwide healthcare reform and competitive pressures, present significant
challenges to the Company's management. The Committee believes that, if the
Company is to continue its growth, bring new products to market, achieve
significant revenues and become profitable, 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 opportunity
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 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.
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BONUS PROGRAM. Payments under the Company's management bonus program
are based on the Company's achievement of performance goals as approved by the
Compensation Committee and the executive's achievement of individual objectives
as approved by the Chief Executive Officer. Company performance goals for 1999
were related to targeted levels of revenue, profitability and gross margin based
on the Company's 1999 operating plan which was approved by the Board of
Directors. It is anticipated that performance goals for 2000 will also relate to
these categories. The management bonus program provides for a normal bonus of up
to a maximum of 50% of base pay, with an over-achievement bonus of up to an
additional maximum of 25% of base pay.
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.
STOCK OPTION GRANTS. Stock options encourage and reward executive
officers for creating shareholder value as measured by stock price appreciation.
Stock options are granted 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 price of the stock on the date
options are granted. The executive officers and shareholders benefit equally
from such stock price appreciation. The Company utilizes stock options, in lieu
of higher, industry standard base salaries and bonuses, as a means to attract,
retain and motivate talented executives upon whose performance the Company is
dependent.
Stock options are generally granted 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 period. The number of stock options granted to each executive officer
is approved by the Compensation Committee. 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 an
assessment of the executive officer's 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. Robert W. Duggan, the Chairman
of the Board, assumed the responsibility of Chief Executive Officer in October,
1997. Mr. Duggan's annual salary is currently $164,000. He has an annual normal
bonus opportunity of up to a maximum of 50% of base pay, with an annual
over-achievement bonus opportunity of up to an additional maximum of 25% of base
pay based on over-achievement of stated objectives. For 1999, the Company's
overall performance was below targeted levels and therefore, Mr. Duggan's bonus
was $3,280. Mr. Duggan's salary and bonus opportunity were considered to be very
reasonable in comparison to similar salaries and bonus structures for medical
device company Chief Executive Officers. The Compensation Committee will
consider future salary and bonus adjustments and stock option grants for the
Chief Executive Officer based on the Company's operating performance, as well as
the compensation packages of similarly positioned medical device company Chief
Executive Officers. The Committee believes that the Chief Executive Officer
should have an equity interest in the Company. As of March 30, 2000, Mr.
Duggan's beneficial ownership of the Company's common stock was 13.6% of the
outstanding shares.
FISCAL YEAR 1999 COMPENSATION. Under Section 162(m) of the Internal
Revenue Code of 1986, as amended, compensation paid or accrued with respect to
an 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 employee. The Company's
stock option plans are structured such that any compensation deemed paid to an
executive officer when he exercises an outstanding stock option under the plan
will qualify as performance-based compensation that will not be subject to the
$1 million limitation.
SUBMITTED BY THE COMPENSATION COMMITTEE
M. Jacqueline Eastwood, Chairman
Daniel R. Doiron, Member
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THE FOREGOING COMPENSATION COMMITTEE 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.
PROPOSAL 2: APPROVAL OF THE CONVERSION OF THE PROMISSORY NOTE ISSUED
TO A CERTAIN OFFICER AND DIRECTOR OF THE COMPANY INTO SECURITIES OF
THE COMPANY, AS REQUIRED BY THE RULES OF THE NASDAQ NATIONAL MARKET
GENERAL
On March 9, 2000 the Company's Board of Directors approved the issuance
of a $3 million convertible promissory note to Robert W. Duggan (the "Bridge
Note"). Mr. Duggan is currently the Company's Chairman of the Board of Directors
and Chief Executive Officer and beneficially owns 13.6% of the Company's common
stock. Pursuant to the terms of the Bridge Note, the principal and accrued
interest then outstanding under the Bridge Note shall convert into common stock
of the Company subject to approval by the Company's stockholders. The conversion
price per share shall be derived from the price per share of the next private
placement of the Company's securities (the "Private Placement"). In the event
the Board of Directors approves the issuance of preferred stock in the Private
Placement, it is anticipated that the terms of the Bridge Note will be modified
so that it will convert into such series of preferred stock. The Company intends
to close such a Private Placement to raise an aggregate of up to $4 million
during its current fiscal quarter. The terms of the Private Placement and the
effective price per share in the Private Placement will be determined by
arms-length negotiation between the Company and unrelated third-party investors,
and will be subject to approval by the Board of Directors of the Company.
However, if the Private Placement is not timely closed, Mr. Duggan may lend the
Company an additional $2 million, increasing the principal under the Bridge Note
to $5 million. Although it is not possible to predict the terms and price of the
Private Placement, if the effective per share price was $8.20 per share of
common stock, (equal to an average of the high and low price per share, as
reported on the NASDAQ National Market on April 20, 2000) an aggregate of
365,853 shares of common stock would be issued on conversion of the Bridge Note.
In such event, Mr. Duggan would beneficially own up to approximately 17.0% of
the Company's common stock. Mr. Duggan could, either solely or acting with other
significant stockholders, have the ability to significantly influence the
election of the Company's directors and other stockholder actions and, as a
result, direct the operation of the Company, including delaying or preventing a
proposed acquisition.
If stockholder approval is obtained, the Company plans to consummate
the conversion as soon as reasonably practicable after the closing of the
Private Placement in which the conversion price will be determined.
INITIAL CLOSING AND USE OF PROCEEDS
On March 31, 2000 Mr. Duggan delivered payment of $3 million and
entered into a Bridge Financing Agreement with the Company. The Company did not
pay a placement fee in connection with the Bridge Note, and therefore received
approximately $2,995,000 after deducting estimated expenses. The Company plans
to use the net proceeds of the initial loan, and any additional amounts received
under the loan, for working capital and general corporate purposes.
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<PAGE> 16
REASON FOR STOCKHOLDER APPROVAL
Rule 4330 of the Nasdaq Stock Market requires stockholder approval of
the sale to officers and directors of the lesser of: (i) one percent of the
number of shares of common stock outstanding, (ii) one percent of the total
voting power, or (iii) an aggregate of 25,000 shares. The Company is therefore
requesting its stockholders approve the conversion mechanism of the Promissory
Note, whereby the principal and accrued interest then outstanding under the
Bridge Note shall convert into common stock of the Company. In order to comply
with he rules of the Nasdaq Stock Market, the conversion of the Bridge Note was
conditioned upon the receipt of stockholder approval of such conversion.
CONSEQUENCES OF FAILURE TO RECEIVE STOCKHOLDER APPROVAL
If the Company's stockholders do not approve the conversion of the
Bridge Note, the Bridge Note will be due and payable on June 15, 2001, with
interest at a prime rate of borrowing from the date or dates of advances to the
Company under the Note, and the issuance of the stock to Mr. Duggan will not be
consummated.
OTHER INFORMATION
The Company's audited consolidated financial statements and notes
thereto, including selected financial data and management's discussion and
analysis of financial condition and results of operations for the fiscal year
ended December 31, 1999, are included in the Company's 1999 Annual Report on
Form 10-K, which is hereby incorporated by reference.
BOARD OF DIRECTIONS RECOMMENDATION
The Board of Directors of the Company believes that the conversion of
the Bridge Note is in the best interests of the Company and its stockholders.
Among the factors considered by the Board in approving the Bridge Note (i) the
Board's desire to comply with Rule 4430 of the Nasdaq Stock Market and the terms
of the Addenda, and (ii) the Board's view that the proceeds from the Bridge Note
were necessary to support the Company's near term working capital requirements.
Approval of the conversion of the Bridge Note into common stock will
require the affirmative vote of the holders of a majority of the outstanding
shares of common stock present or represented at the Meeting and entitled to
vote thereat. Proxies solicited by management for which no specific direction is
included will be voted FOR the conversion of the Bridge Note into common stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
ISSUANCE OF STOCK ON CONVERSION OF THE BRIDGE NOTE.
PROPOSAL 3: RATIFICATION OF RE-APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Andersen LLP has been the Company's
independent public accounting firm since 1993. Arthur Andersen LLP has been
re-appointed by the Board of Directors as the Company's independent public
accounting 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.
A representative from Arthur Andersen LLP will be in attendance at the
Meeting and will have the opportunity to make a statement if he so desires and
will be available 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 PUBLIC
ACCOUNTANTS.
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SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
The proxy rules of the Securities and Exchange Commission permit
shareholders, to present proposals for shareholder action 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, 2000 is expected to be held on or about May 17, 2001, and proxy
materials in connection with that meeting are expected to be mailed on or about
March 26, 2001. In order to be included in the Company's proxy statement for
2001, shareholder proposals prepared in accordance with the proxy rules must be
received by the Company on or before November 26, 2000 (120 days before the
mailing date).
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 such business that is appropriate for consideration at an annual meeting
may be conducted. In addition, such business must be specified in the notice of
the meeting, properly brought before the meeting by or at the direction of the
Board of Directors, or properly brought before the meeting by a shareholder who
has given timely written notice to the Secretary of the Company of such
business. 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 such
business 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.
DISCRETIONARY PROXY VOTING. 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 month and day
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.
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<PAGE> 18
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 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. 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 properly executed proxies will be voted in the manner directed by
you. If no direction is made, proxies will be voted "FOR" the election of the
Board of Director's nominees for directors, "FOR" the approval of the conversion
of the promissory note issued to a certain officer and director of the Company
into securities of the Company, as required by the rules of the NASDAQ National
Market, and "FOR" the ratification of the re-appointment of the independent
public accountants.
We know of no additional matters 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 judgement.
All expenses in connection with solicitation of proxies will be paid 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, 1999 is enclosed. 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. You 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 Cremona Drive, Goleta,
California 93117.
By Order of the Board of Directors
/s/ Gordon L. Rogers
--------------------
Gordon L. Rogers
Secretary
Goleta, California
May 12, 2000
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert W. Duggan and Gordon L. Rogers
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 May 11, 2000, at the Annual Meeting of Shareholders to be held
on June 15, 2000 or any adjournment or postponement thereof.
(TO BE SIGNED ON REVERSE SIDE)
PLEASE MARK YOUR
A[X] VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD AUTHORITY
listed at right to vote for one
(except as indicated to or more nominees
the contrary below) as listed at right
[ ] [ ]
1. ELECTION OF DIRECTORS NOMINEES: Daniel R. Doiron
Robert W. Duggan
FOR, except vote withheld from M. Jacqueline Eastwood
the following nominees: W. Peter Geis
Yulun Wang
____________________________ FOR AGAINST ABSTAIN
Proposal no. 2
APPROVAL OF THE CONVERSION OF THE [ ] [ ] [ ]
PROMISSORY NOTE ISSUED TO A CERTAIN
OFFICER AND DIRECTOR OF THE COMPANY
INTO SECURITIES OF THE COMPANY, AS
REQUIRED BY THE RULES OF THE NASDAQ
NATIONAL MARKET
Proposal no. 3
RATIFICATION OF RE-APPOINTMENT OF [ ] [ ] [ ]
INDEPENDENT PUBLIC ACCOUNTANTS
Please sign below, date and return promptly.
SIGNATURE________________ ________________________ Dated: _____, 2000
SIGNATURE IF HELD JOINTLY
IMPORTANT: Please sign exactly as name appears hereon. When signing on
behalf of a corporation, partnership, estate, 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.
