SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
INAMED CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Persons(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee 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:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
<PAGE>
(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:
- --------------------------------------------------------------------------------
-2-
<PAGE>
INAMED CORPORATION
5540 EKWILL STREET, SUITE D
SANTA BARBARA, CALIFORNIA 93111
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JUNE 3, 1999
------------------------------------
TO THE STOCKHOLDERS OF INAMED:
We invite you to attend our annual stockholders' meeting on Thursday,
June 3, 1999 at 460 Ward Drive, Santa Barbara, California 93111 at 10:30 a.m. At
the meeting, you will hear an update on our operations, have a chance to meet
some of our directors and executives, and act on the following matters:
1) To elect eight (8) directors to a one year term;
2) To ratify the appointment of BDO Seidman, LLP as the
Company's independent accountants for fiscal 1999;
and
3) Any other matters that properly come before the
meeting.
This booklet includes a formal notice of the meeting and the proxy
statement. The proxy statement tells you more about the agenda and procedures
for the meeting. It also describes how our Board of Directors operates and gives
personal information about our director nominees.
Only stockholders of record at the close of business on April 19, 1999
will be entitled to vote at the annual meeting. Even if you only own a few
shares, we want your shares to be represented at the annual meeting. I urge you
to complete, sign, date, and return your proxy card promptly in the enclosed
envelope.
We have also provided you with the exact place and time of the meeting
if you wish to attend in person.
By Order of the Board of Directors
INAMED CORPORATION
CAROL A. BRENNAN
Secretary
Dated: April 30, 1999
<PAGE>
INAMED CORPORATION
5540 EKWILL STREET, SUITE D
SANTA BARBARA, CALIFORNIA 93111
-------------------------
ANNUAL MEETING OF STOCKHOLDERS
-----------------------
1999 PROXY STATEMENT
-------------------------
This proxy statement contains information related to the annual meeting
of stockholders of INAMED Corporation to be held on Thursday, June 3, 1999,
beginning at 10:30 a.m., at 460 Ward Drive, Santa Barbara, California 93111, and
at any postponements or adjournments thereof.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Company's annual meeting, stockholders will hear an update on
the Company's operations, have a chance to meet some of its directors and
executives and will act on the following matters:
1) To elect eight (8) directors to a one year term;
2) To ratify the appointment of BDO Seidman, LLP as the
Company's independent accountants for fiscal 1999;
and
3) Any other matters that properly come before the
meeting.
WHO MAY VOTE
Stockholders of INAMED Corporation, as recorded in our stock register
on April 19, 1999, may vote at the meeting. As of April 19, 1999, we had
11,472,314 shares of Common Stock eligible to vote. We have only one class of
voting shares. All shares in this class have equal voting rights of one vote per
share.
HOW TO VOTE
You may vote in person at the meeting or by proxy. We recommend that
you vote by proxy even if you plan to attend the meeting. You can always change
your vote at the meeting.
HOW PROXIES WORK
Our Board of Directors is asking for your proxy. Giving us your proxy
means you authorize us to vote your shares at the meeting in the manner you
direct. You may vote for all, some, or none of our director nominees. You may
also vote for or against the other proposal or abstain from voting.
If you sign and return the enclosed proxy card but do not specify how
to vote, we will vote your shares in favor of all our director nominees and in
favor of the ratification of the appointment of BDO Seidman, LLP as the
independent accountants.
<PAGE>
You may receive more than one proxy or voting card depending on how you
hold your shares. If you hold shares through someone else, such as a
stockbroker, you may get materials from them asking how you want to vote. The
latest proxy card we receive from you will determine how we will vote your
shares.
REVOKING A PROXY
There are three ways to revoke your proxy. First, you may submit a new
proxy with a later date up until the existing proxy is voted. Secondly, you may
vote in person at the meeting. Lastly, you may notify our corporate secretary in
writing at 5540 Ekwill Street, Suite D, Santa Barbara, California 93111.
QUORUM
In order to carry on the business of the meeting, we must have a
quorum. This means at least a majority of the outstanding shares eligible to
vote must be represented at the meeting, either by proxy or in person. Shares
that we own are not voted and do not count for this purpose.
VOTES NEEDED
The director nominees receiving a majority of the votes cast during the
meeting will be elected to fill the seats of our Board of Directors. For the
other proposal to be approved, we require the favorable vote of a majority of
the votes cast. Only votes for or against a proposal count. Votes which are
withheld from voting on a proposal will be excluded entirely and will have no
effect in determining the quorum or the majority of votes cast. Abstentions
count for quorum purposes, but will have no effect in determining the election
of directors. Abstentions, however, will have the effect of a vote against the
other proposal. Broker non-votes count for quorum purposes only and not for
voting purposes. Broker non-votes occur when a broker returns a proxy but does
not have the authority to vote on a particular proposal. Brokers that do not
receive instructions are entitled to vote on the election of directors and the
ratification of the auditors.
ATTENDING IN PERSON
Only stockholders, their proxy holders, and our invited guests may
attend the meeting. If you wish to attend the meeting in person but you hold
your shares through someone else, such as a stockbroker, you must bring proof of
your ownership to the meeting. For example, you could bring an account statement
showing that you owned INAMED Corporation shares as of April 19, 1999 as
acceptable proof of ownership.
-2-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the shares of Common
Stock owned as of April 19, 1999, by (i) each person known by the Company to be
the beneficial owner of more than five percent of the outstanding Common Stock
of the Company, (ii) each person who is presently a director of the Company,
(iii) each of the officers named in the Summary Compensation Table and (iv) all
the directors and executive officers of the Company as a group. Unless otherwise
indicated in the footnotes following the table and subject to community property
laws where applicable, the person(s) as to whom the information is given had
sole voting and investment power over the shares of Common Stock shown as
beneficially owned.
<TABLE>
<CAPTION>
Percent of Class
Based on Based on shares
shares actually owned and Based on fully
Name and Address of beneficially currently diluted shares
Beneficial owner Number of Shares Owned(1) Outstanding(2) Outstanding(3)
- ---------------- ---------------- -------- -------------- --------------
5% HOLDERS
<S> <C> <C> <C> <C>
Appaloosa Management L.P. 6,046,052(4) 36.8% 9.0% 30.1%
26 Main Street
Chatham, New Jersey 07928
Oracle Partners, L.P. 1,297,902(5) 10.2% 0.6% 6.5%
712 Fifth Avenue, 45th Floor
New York, New York 10019
Donald K. McGhan 1,275,822(6) 11.1% 11.0% 6.4%
3800 Howard Hughes Pkwy
Suite 1800
Las Vegas, Nevada 89109
Parker Quillen 996,124(7) 8.6% 8.1% 4.5%
c/o Quilcap Corp.
375 Park Avenue
Suite 1404
New York, New York 10152
Richard L. Chilton, Jr. 702,000 6.1% 6.1% 3.5%
Chilton Investment Co., Inc.
320 Park Avenue, 22nd Floor
New York, NY 10022
Medical Device Alliance, Inc. 660,000(8) 5.8% 5.8% 3.3%
3800 Howard Hughes Pkwy
Suite 1800
Las Vegas, Nevada 89109
</TABLE>
<TABLE>
<CAPTION>
Percent of Class (based on shares
Number of Shares Beneficially Owned(1)
---------------- ---------------------
OFFICERS AND DIRECTORS(9)
<S> <C> <C>
Richard G. Babbitt 230,000(10) 2.0%
Ilan K. Reich 305,100(11) 2.6%
Tom K. Larson, Jr. 46,000(12) **
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Jeffrey J. Barber 24,000(13) **
James E. Bolin 0(14) **
Harrison E. Bull 60,000(15) **
John F. Doyle 20,000 **
Richard Wm. Talley 85,000(15) **
David A. Tepper 6,046,052(4) 36.7%
John E. Williams 60,000(15) **
All officers and directors as a group 6,873,952(16) 40.0%
</TABLE>
- ----------------------
** Less than 1%
(1) The percentages are calculated on the basis of the amount of
outstanding securities, which is 11,472,314, plus securities underlying
each holder's options, warrants and securities convertible into Common
Stock which have been issued and are exercisable within 60 days hereof.
(2) The percentages are calculated on the basis of the amount of
outstanding securities, which is 11,472,314, without giving effect to
additional securities underlying each holder's options, warrants and
convertible securities.
(3) The percentages are calculated on the basis of shares outstanding on a
fully-diluted basis, including 11,472,314 shares of Common Stock which
are currently outstanding and options and warrants to purchase, and
securities convertible into, approximately 8.6 million shares of Common
Stock.
(4) Based on the Schedule 13D/A filed jointly in March 1999 by Appaloosa
Management L.P. and David A. Tepper. Mr. Tepper is the President of
Appaloosa Partners Inc., the general partner of Appaloosa Management
L.P. Includes (i) 2,660,343 shares of Common Stock issuable upon the
exercise of warrants to purchase shares of Common Stock at $5.50 per
share, (ii) 1,460,500 shares of Common Stock issuable upon the exercise
of warrants to purchase shares of Common Stock at $7.50 per share,
(iii) 579,510 shares of Common Stock issuable upon the exercise of
warrants to purchase shares of Common Stock at $6.50 per share and (iv)
308,899 shares of Common Stock which Appaloosa has rights to acquire
pursuant to an agreement with INAMED.
(5) Includes (i) 749,091 shares of Common Stock issuable upon exercise of
warrants to purchase Common Stock at $5.50 per share and (ii) 477,011
shares of Common Stock issuable upon exercise of warrants to purchase
Common Stock at $7.50 per share.
(6) Based on a Schedule 13D filed jointly in March 1999 by Donald K.
McGhan, Shirley M. McGhan, McGhan Management Corp., McGhan Management
Limited Partnership, International Integrated Industries LLC and
Medical Device Alliance Inc., includes (i) 87,485 shares owned by
McGhan Management Corporation, a corporation for which Mr. McGhan is
the chairman; (ii) 197,280 shares owned by McGhan Management Limited
Partnership, a limited partnership of which Mr. McGhan is the general
partner; (iii) 346,453 shares owned by International Integrated
Industries L.L.C., a limited liability corporation of which Mr. McGhan
is the managing member; and (iv) 8,571 shares of Common Stock issuable
upon exercise of warrants to purchase Common Stock at $7.50 per share.
Does not include 207,310 shares of Common Stock owned by Shirley M.
McGhan, the wife of Donald K. McGhan, to which Mr. McGhan disclaims
beneficial ownership. Pursuant to a letter agreement dated July 8,
1998, Mr. McGhan agreed for a five-year period to comply with various
traditional "standstill" provisions, including, among others, to vote
all of the Common Stock owned by him
-4-
<PAGE>
or his affiliates (including International Integrated Industries, Inc.
and Medical Device Alliance Inc.) in proportion to the votes (or
abstentions) of all other shareholders on any matter submitted to a
vote or consent of shareholders, except for a vote on any proposed
business combination, recapitalization or other similar transaction.
(7) Based on a Schedule 13G filed jointly in December 1998 by Little Wing,
L.P., Quilcap Corp., Tradewinds Fund Ltd., Little Wing Too, L.P.,
Quilcap International Corp. and Parker Quillen, includes (i) 37,455
shares of Common stock issuable upon the exercise of warrants to
purchase Common Stock at $5.50 per share, (ii) 23,851 shares of Common
Stock issuable upon the exercise of warrants to purchase Common Stock
at $7.50 per share and (iii) 8,159 shares of Common Stock issuable upon
the exercise of warrants to purchase Common Stock at $6.50 per share.
(8) Based on a Schedule 13D/A filed jointly in March 1999 by Donald K.
McGhan, Shirley M. McGhan, McGhan Management Corp., McGhan Management
Limited Partnership, International Integrated Industries LLC and
Medical Device Alliance Inc. ("MDA"), a corporation for which Mr.
McGhan is the chairman. As set forth in the Schedule 13D/A, Mr. McGhan
does not have the power as an officer, director or Chairman of MDA to
vote or dispose of the shares owned by MDA. Does not include a
four-year warrant to purchase 260,000 shares of Common Stock which is
not exercisable if and to the extent that it would result in Mr. McGhan
and his affiliates becoming the beneficial owners of more than 20% of
the outstanding Common Stock at that time. Pursuant to a letter
agreement dated July 8, 1998, Mr. McGhan agreed for a five-year period
to comply with various traditional "standstill" provisions, including,
among others, to vote all of the Common Stock owned by him or his
affiliates (including International Integrated Industries, Inc. and
MDA) in proportion to the votes (or abstentions) of all other
shareholders on any matter submitted to a vote or consent of
shareholders, except for a vote on any proposed business combination,
recapitalization or other similar transaction.
(9) The address of each officer and director is 5540 Ekwill Street, Suite
D, Santa Barbara, California 93111.
(10) Includes 200,000 shares of Common Stock issuable upon the exercise of
options and/or warrants within 60 days hereof.
(11) Includes 275,000 shares of Common Stock issuable upon the exercise of
options and/or warrants within 60 days hereof.
(12) Includes 45,000 shares of Common Stock issuable upon the exercise of
options and/or warrants within 60 days hereof.
(13) Includes 10,000 shares of Common Stock issuable upon the exercise of
options and/or warrants within 60 days hereof.
(14) Mr. Bolin is the Vice President of Appaloosa Partners Inc., the general
partner of Appaloosa Management L.P. Mr. Bolin disclaims beneficial
ownership of all shares owned by Appaloosa Management L.P.
(15) Consists of shares of Common Stock issuable upon the exercise of
options and warrants within 60 days hereof.
(16) Includes 5,744,252 shares of Common Stock issuable upon the exercise of
options and warrants within 60 days hereof.
-5-
<PAGE>
PROPOSAL 1. ELECTION OF DIRECTORS
Unless otherwise specified, all proxies received will be voted in favor
of the election of the persons named below as directors of the Company, to serve
until the next annual meeting of stockholders of the Company and until their
successors shall be duly elected and shall have qualified. Directors shall be
elected by a plurality of the votes cast, in person or by proxy, at the Meeting.
Except for Dr. Malcolm Currie and Dr. Mitchell Rosenthal, all nominees
for director are currently directors of the Company. The terms of the current
directors expire at the next annual meeting of stockholders and when their
successors are duly elected and shall have qualified. Harrison E. Bull and
Richard Wm. Talley, who are currently directors of the Company, have not been
nominated for re-election as directors. Management has no reason to believe that
any of the nominees will be unable or unwilling to serve as a director, if
elected. Should any of the nominees not remain a candidate for election at the
date of the Meeting, the proxies will be voted in favor of those nominees who
remain candidates and may be voted for substitute nominees selected by the Board
of Directors.
The names of the nominees are set forth below, as well as certain
information concerning the nominees and the executive officers of the Company,
together with their ages and positions. There are no family relationships among
any of the Company's directors and executive officers.
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Richard G. Babbitt 73 Chairman of the Board and Chief Executive Officer
James E. Bolin 40 Director
Malcolm R. Currie, Ph.D. 72 Director Nominee
John F. Doyle 69 Director
Ilan K. Reich 44 President and Director
Mitchell S. Rosenthal, M.D. 63 Director Nominee
David A. Tepper 41 Director
John E. Williams, M.D. 78 Director
EXECUTIVE OFFICERS WHO ARE NOT
DIRECTORS
Jeffrey J. Barber 39 Executive Vice President, Business Development
Tom K. Larson, Jr. 63 Vice President, Finance and Administration,
Chief Financial Officer
John P. Strohmeyer 55 Vice President, Manufacturing
</TABLE>
-6-
<PAGE>
RICHARD G. BABBITT
Mr. Babbitt has served as the Chief Executive Officer and President of
INAMED since January 22, 1998, and Chairman since February 6, 1998. He has been
associated with DNA Technologies, Inc., Ben Hogan Company, B.I. Industries,
American Safety Equipment Corporation, Welsh Manufacturing and Medical Supply
Company in C.E.O. and Board positions.
JAMES E. BOLIN
Mr. Bolin has served as a director of INAMED since March 18, 1999. Mr.
Bolin has been a Vice President and Secretary of Appaloosa Partners Inc. since
1995. He has previously been a Vice President and Director of Corporate Bond
Research at Goldman, Sachs & Co. He also worked at Smith Barney, Harris Upham in
the Fixed Income Research Department. Mr. Bolin holds a Bachelor of Arts from
Washington University in St. Louis and an MBA in accounting and finance from
University of Missouri-St. Louis.
MALCOLM R. CURRIE, PH.D.
Dr. Currie has served as the President and CEO of Currie Technologies
Incorporated, an electric transportation company, since 1997. He has been the
Chairman Emeritus of Hughes Aircraft Company since his retirement in 1992 as
Chairman and CEO. He has had an extensive career in high technology research,
engineering and management. Dr. Currie currently serves on the Boards of
Directors of the following publicly traded companies: Investment Company of
America, SMA Corporation, UNOCAL Corporation and LSI Logic Corporation. Dr.
Currie also serves as the Chairman of the University of Southern California
Board of Trustees. He has previously served as President and CEO of Delco
Electronics Corporation and GM Hughes Electronics Corporation. Dr. Currie holds
a B.A. in Physics and a Ph.D. in Engineering Physics from the University of
California at Berkeley.
JOHN F. DOYLE
Mr. Doyle has served as a director of INAMED since March 18, 1999. He
currently performs marketing and management consulting, primarily for start-up
companies, since 1992. Prior to 1992, Mr. Doyle worked with IBM and Craig
Corporation in executive and sales and marketing positions. He served as the
Chairman and Chief Executive Officer of Pioneer Electronics (USA) Inc. from 1971
to 1986. Mr. Doyle currently serves on the Board of Directors of the Pomona
Valley Hospital Foundation, and has served on the Board of various consumer
groups as well as business and philanthropic organizations. Mr. Doyle holds a
Bachelor of Arts from Miami University of Ohio.
ILAN K. REICH
Mr. Reich has served as a director of INAMED since January 22, 1998 and
President since December 22, 1998. Prior to becoming President, he was Executive
Vice President since January 22, 1998. Until that time he was a partner with the
New York law firm of Olshan Grundman Frome & Rosenzweig LLP, specializing in
corporate and securities law. From 1988 to June 1996, Mr. Reich served in
various senior executive positions with public and private companies controlled
by a private investor, including Western Publishing Group, Inc., the largest
U.S. publisher of children's books, and Rabco Health Services, Inc., a
distributor of medical/surgical products and a wholesale pharmaceutical company.
Mr. Reich holds a Bachelor of Arts from Columbia College and a J.D. from
Columbia Law School, and is a member of various bar associations.
MITCHELL S. ROSENTHAL, M.D.
Dr. Rosenthal is a psychiatrist and the president of Phoenix House
Foundation, which he founded over 30 years ago and which is the nation's largest
non-profit substance abuse treatment and prevention system, with more than three
dozen programs in New York, California, Texas and Florida. Dr. Rosenthal has
been a White House advisor on drug
-7-
<PAGE>
policy, a special consultant to the Office of National Drug Control Policy and
serves on the New York State Advisory Council on Alcoholism and Substance Abuse,
which he chaired from 1985 to 1997. Dr. Rosenthal is a lecturer in psychiatry at
Columbia University's College of Physicians and Surgeons and a former president
of the American Association of Psychoanalytic Physicians. He is a graduate of
Lafayette College and earned his M.D. from the State University of New York. Dr.
Rosenthal is a member of the Council on Foreign Relations and serves on the
Board of the Pro Musicis Foundation.
DAVID A. TEPPER
Mr. Tepper has served as a director of INAMED since March 18, 1999. Mr.
Tepper has been President of Appaloosa Partners Inc. since its formation in
1993. He was previously head trader in the High Yield Department of Goldman,
Sachs & Co. He also has been employed by Keystone Funds and Republic Steel. Mr.
Tepper holds an MBA from Carnegie Mellon University and a Bachelor of Arts with
honors in Economics from the University of Pittsburgh.
JOHN E. WILLIAMS, M.D.
Dr. Williams has served as a director of INAMED since March 31, 1997.
Dr. Williams is a plastic surgeon specializing in aesthetic surgery. He is
currently not practicing. He is a Diplomat of the American Board of Plastic
Surgery and is a Fellow of the American College of Surgeons. Dr. Williams is a
member of the American Society of Plastic and Reconstructive Surgeons and the
American Society of Aesthetic Plastic Surgeons. He holds memberships in state,
national and international plastic surgery societies and is a member of the
American Medical Association and the Los Angeles County Medical Association.
JEFFREY J. BARBER
Mr. Barber has served as an Executive Vice President, Business
Development of INAMED since March 31, 1997. Mr. Barber originally joined the
Company in 1992 as Worldwide Marketing Manager for McGhan Medical Corporation.
He later became Vice President of Business Development and Marketing. In 1996 he
became a vice president of the Company responsible for marketing, business
development and international development. Prior to his employment with the
Company, Mr. Barber held positions with Chiron Corporation and Baxter
Healthcare, Inc.
TOM K. LARSON, JR.
Mr. Larson has served as Vice President, Finance and Administration and
Chief Financial Officer of INAMED since April 1, 1998. Mr. Larson has broad
experience in financial and operating management in a wide range of industries.
He is a 16-year veteran of Xerox Corporation, with financial and administrative
roles in their telecommunications business, research laboratories and special
products division, which included aerospace and medical diagnostic products. He
has also been the CFO of Revell Corporation (a Rothchilds company), a maker of
scale model kits, and for the past eight years was the CFO of a privately held
specialty bed manufacturer. Mr. Larson has a B.A. degree from Allegheny College,
a Masters degree from the University of Pittsburgh and has attended programs at
Harvard Business School.
JOHN P. STROHMEYER
Mr. Strohmeyer has served as Vice President, Manufacturing since
November 2, 1998. Mr. Strohmeyer has been involved in the electronics and
automotive industries, including Nissan Motor Corporation and Nippondenso
(Japan). He has been involved in start-ups, re-engineering of manufacturing
facilities, relocation and development of international operations, and is
skilled in manufacturing and general management of companies. Mr. Strohmeyer
holds a B.S. from Long Beach State University, California.
-8-
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES FOR DIRECTOR.
MEETINGS OF DIRECTORS AND DIRECTORS COMPENSATION
For the fiscal year ended December 31, 1998, there were seven meetings
of the Board of Directors. All of the directors attended each meeting. From time
to time, the members of the Board of Directors act by unanimous written consent
pursuant to the laws of the State of Delaware.
The Board of Directors has created an Audit Committee, a Compensation
Committee and a Nominating Committee. The members of the Audit Committee are
Messrs. Bull and Talley and Dr. Williams. The Audit Committee is charged with
reviewing the Company's annual audit and meeting with the Company's independent
auditors to review the Company's internal controls and financial management
practices. The members of the Compensation Committee are Messrs. Bull and Talley
and Dr. Williams. The Compensation Committee recommends to the Board of
Directors compensation for the Company's key employees and administers the
Company's option plans. The members of the Nominating Committee are Messrs.
Bolin and Reich and Dr. Williams. The Nominating Committee recommends nominees
to the Board of Directors of the Company.
Directors who are not employees of the Company receive an annual fee of
$25,000 and a fee of $1,000 for each Board of Directors meeting attended, and
are reimbursed for their expenses. In addition, upon their initial election
Directors receive options to purchase 5,000 shares of Common Stock, and
thereafter receive options to purchase 5,000 shares of Common Stock on each
subsequent anniversary of their election to the Board of Directors as long as
they remain Directors. Directors who are employees are not entitled to any
compensation for their service as a director.
-9-
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth, for the
fiscal years indicated, all compensation awarded to, paid to or earned by the
following type of executive officers for the fiscal years ended 1996, 1997 and
1998: (i) individuals who served as, or acted in the capacity of, the Company's
chief executive officer for the fiscal year ended December 31, 1998 (Donald K.
McGhan served as the Company's chief executive officer until January 22, 1998 at
which time he was replaced by Richard G. Babbitt); (ii) the Company's other most
highly compensated executive officers, whose salary and bonus exceeded $100,000
with respect to the fiscal year ended December 31, 1998 and who were employed at
the end of fiscal year 1998; and (iii) individuals for whom disclosure would
have been provided but for the fact that the individual was not serving as an
executive officer of the Company at the end of fiscal year 1998 (Jim J. McGhan
served as the Company's chief operating officer until June 24, 1998). The
Company did not have any executive officer, except for Mr. Donald K. McGhan and
Mr. Jim J. McGhan, whose salary and bonus exceeded $100,000 with respect to the
fiscal year ended December 31, 1998 and who was not the Company's employee at
the end of fiscal year 1998.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------------------------
Other Stock
Annual Options/SARs All Other
Compensation Granted Compen-
$ (in shares)(#) sation ($)(1)
--- -------------- -------------
Salary Bonus
Name and Principal Position Year $ $
--------------------------- -- -
CURRENT OFFICERS
<S> <C> <C> <C> <C> <C> <C>
Richard G. Babbitt (2) 1998 356,923 100,000 -- 400,000 157,000(3)
Chairman, Chief Executive Officer
Ilan K. Reich (4) 1998 363,077 100,000 -- 400,000 714
President
Tom K. Larson, Jr. (5) 1998 119,308 500 -- 40,000 55,458(6)
V.P. Finance and Administration
Chief Financial Officer
Jeffrey J. Barber 1998 208,377 500 -- -- 462
Executive Vice President 1997 120,462 9,162 -- -- 5,536(7)
PERSONS NO LONGER AFFILIATED WITH
THE COMPANY
Donald K. McGhan (8) 1998 6,078 -- -- -- 3,104 (9)
Chairman, Chief Executive 1997 27,763 -- -- -- 20,289(10)
Officer and President 1996 6,427 32,994(11)
Jim J. McGhan (12) 1998 189,693 -- -- -- 714
Chief Operating Officer 1997 218,077 3,462 180,000(13) -- 536
1996 -- -- 330,000(13) -- -
</TABLE>
- -----------------
(1) Amounts shown, unless otherwise noted, reflect employer contributions
to group term life insurance premiums.
(2) Mr. Babbitt has served as Chief Executive Officer since January 22,
1998 and Chairman since February 6, 1998.
-10-
<PAGE>
(3) Includes a relocation allowance of $100,000, an automobile allowance of
$15,837 and temporary living expenses of $32,344.
(4) Mr. Reich has served as a director since January 22, 1998 and President
since December 22, 1998. Prior to becoming President, he was Executive
Vice President since January 22, 1998.
(5) Mr. Larson has served as Vice President, Finance and Administration and
as Chief Financial Officer since April 1, 1998.
(6) Includes a moving allowance of $50,000 and miscellaneous reimbursements
of $3,946.
(7) Includes reimbursed moving costs of $5,201.
(8) Mr. Donald McGhan was Chairman from 1985 to February 6, 1998, President
from January 1987 to March 1997, and Chief Executive Officer from April
1987 until June 1992 and March 31, 1997 until January 22, 1998.
(9) Includes an automobile allowance and parking expense reimbursement of
$2,285.
(10) Includes an automobile allowance and parking expense reimbursement of
$17,380.
(11) Includes an automobile allowance of $28,080.
(12) Mr. Jim McGhan served as Chief Operating Officer from January 22, 1998
to June 24, 1998 and served as President from March 31, 1997 to January
22, 1998. Mr. McGhan's employment with the Company ceased on June 24,
1998. Prior to his direct employment with the Company, he served as a
consultant to one of the Company's subsidiaries, McGhan Medical
Corporation.
(13) Represents consulting fees paid to Mr. McGhan.
-11-
<PAGE>
The following table sets forth certain information regarding stock
option grants made to each of the executive officers named in the Summary
Compensation Table during the fiscal year ended December 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
% OF TOTAL
OPTIONS
NUMBER OF SECURITIES GRANTED TO EXERCISE
UNDERLYING OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- -------------- ------------ -------- ------ ----- ------
CURRENT OFFICERS
<S> <C> <C> <C> <C> <C> <C>
Richard G. Babbitt 400,000 27.3% 3.525 1/31/08 829,720 2,156,320
Ilan K. Reich 400,000 27.3% 3.95 1/22/08 863,630 2,310,560
Tom K. Larson 20,000(2) 1.4% 1.45 3/24/05 122,264 180,486
25,000 1.7% 5.51 4/1/08 76,043 202,672
Jeffrey J. Barber 0 - - - - -
PERSONS NO LONGER
AFFILIATED WITH THE COMPANY
Donald K. McGhan 0 - - - - -
Jim J. McGhan 0 - - - - -
</TABLE>
- -------------------
(1) Unless otherwise noted, amounts represent shares of Common Stock
underlying warrants to purchase shares of Common Stock.
(2) Represents options granted under the Company's 1986 Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning
unexercised stock options held by the executive officers named in the Summary
Compensation Table as of December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT 1998 FISCAL YEAR-END(#) OPTIONS AT 1998 FISCAL YEAR-END($)(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------------------------- ------------------------------------
<S> <C> <C>
CURRENT OFFICERS
Richard G. Babbitt 0/400,000 0/2,495,000
Ilan K. Reich 75,000/400,000 350,812/2,665,000
Tom K. Larson 20,000/25,000 174,750/116,937
Jeffrey J. Barber 10,000/0 87,375/0
PERSONS NO LONGER AFFILIATED
WITH THE COMPANY
Donald K. McGhan 0/0 0/0
Jim J. McGhan 0/0 0/0
</TABLE>
- -------------------
-12-
<PAGE>
(1) On December 31, 1998, the last reported sales price of the Common Stock
as reported on the OTC Bulletin Board was $10-3/16.
STOCK OPTION EXERCISES IN 1998
None of the executive officers named in the summary compensation table
herein exercised any options to purchase Common Stock during 1998.
STOCK OPTION PLANS
In 1984, McGhan Medical Corporation adopted an incentive stock option
plan (the "1984 Plan"). Under the terms of the 1984 Plan, 100,000 shares of its
Common Stock were reserved for issuance to key employees at prices not less than
the market value of the stock at the date the option is granted. In 1985, INAMED
Corporation agreed to substitute options to purchase its shares of Common Stock
(on a two-for-one basis) for those of McGhan Medical Corporation. No options
were granted under the 1984 Plan during 1996 and 1997. Options to purchase
10,000 shares of Common Stock of the Company were granted under the 1984 Plan
during 1998.
In 1986, the Company adopted an incentive and nonstatutory stock option
plan (the "1986 Plan"). Under the terms of the 1986 Plan, 300,000 shares of
Common Stock were reserved for issuance to key employees. No options were
granted under the 1986 Plan during 1996 and 1997. Options to purchase 20,000
shares of Common Stock of the Company were granted under the 1986 Plan during
1998.
In 1993, the Company adopted a Non-Employee Director Stock Option Plan
which authorized the Company to issue up to 150,000 shares of Common Stock to
directors who are not employees of or consultants to the Company and who are
thus not eligible to receive stock option grants under the Company's stock
option plans. Pursuant to this Plan, each non-employee director is automatically
granted an option to purchase 5,000 shares of Common Stock on the date of his or
her initial appointment or election as a director, and an option to purchase an
additional 5,000 shares of Common Stock on each anniversary of his or her
initial grant date providing he or she is still serving as a director. The
exercise price per share is the fair market value per share on the date of
grant. At December 31, 1998, options to purchase 30,000 shares were granted
under this plan.
In 1998, the Company adopted a stock option plan (the "1998 Plan").
Under the terms of the 1998 Plan, 450,000 shares of Common Stock were reserved
for issuance to key employees. As of the date hereof, 440,000 options to
purchase Common Stock at an exercise price of $6.50 per share have been granted
to 82 employees under the 1998 Plan.
STOCK AWARD PLAN
In 1987, the Board of Directors adopted a stock award plan (the "1987
Plan") whereby 300,000 shares of the Company's Common Stock were reserved for
issuance to selected employees of the Company. The 1987 Plan was adopted to
further the Company's growth, development and financial success by providing
additional incentives to employees by rewarding them for their performance and
providing them the opportunity to become owners of Common Stock of the Company,
and thus to benefit directly from its growth, development and financial success.
Shares were awarded under the 1987 Plan to employees as selected by a committee
appointed by the Board of Directors to administer the plan. Stock awards
totaling 180,388 have been granted as of December 31, 1998. No stock awards were
granted under the 1987 Plan during 1998.
-13-
<PAGE>
EMPLOYMENT, SEVERANCE, AND CHANGE OF CONTROL AGREEMENTS
On January 22, 1998, Donald K. McGhan resigned as Chief Executive
Officer of the Company. Subsequently, on February 11, 1998 Mr. McGhan resigned
as Chairman of the Board and director, positions he had held since 1985.
On January 22, 1998, the Company entered into an Employment Agreement
with Richard G. Babbitt (the "Babbitt Agreement"), whereby the Company engaged
Mr. Babbitt to act as Chief Executive Officer and President for a term of three
years. Under the terms of the Babbitt Agreement, Mr. Babbitt is to be paid
$400,000 per year. In addition, Mr. Babbitt received an Executive Officer
Warrant granting him the right to purchase 400,000 shares of the Company's
Common Stock at an exercise price of $3.525 per share.
On January 22, 1998, the Company entered into an Employment Agreement
with Ilan K. Reich (the "Reich Agreement"), whereby the Company engaged Mr.
Reich to act as Executive Vice President for a term of three years. Under the
terms of the Reich Agreement, Mr. Reich is to be paid $400,000 per year. In
addition, Mr. Reich received an Executive Officer Warrant granting him the right
to purchase 400,000 shares of the Company's Common Stock at an exercise price of
$3.95 per share. On December 22, 1998, Mr. Reich was elected President of the
Company by the Board of Directors.
Mr. Babbitt and Mr. Reich (each, a "Covered Employee") have each
entered into an Employee Severance Agreement (a "Severance Agreement") with the
Company. Under the terms of the Severance Agreement, and for a term of three
years, upon a change in control of the Company (as defined in the Severance
Agreement), and the subsequent termination of the Covered Employee, such Covered
Employee will be entitled to certain benefits, including, among other things, a
lump sum severance payment equal to 300% of annual base salary and a cash
payment in lieu of shares of Common Stock issuable to the Covered Employee upon
severance of certain outstanding options. The payments under the Severance
Agreement are subject to a "gross-up" provision whereby the Company will pay an
additional amount to the Covered Employee to counteract the effect of any excise
tax under Section 4999 of the Internal Revenue Code.
On April 1, 1998, the Company entered into an Employment Agreement with
Tom K. Larson, Jr. (the "Larson Agreement"), whereby the Company engaged Mr.
Larson to act as Vice President, Finance and Administration and Chief Financial
Officer for a term of three years. Under the terms of the Larson Agreement, Mr.
Larson is to be paid $165,000 per year. In addition, Mr. Larson received an
option to acquire 20,000 shares of the Company's Common Stock at an exercise
price of $1.45 under an existing employee stock option plan. Mr. Larson also
received an Executive Officer Warrant granting him the right to purchase 25,000
shares of the Company's Common Stock at an exercise price of $5.51 per share.
On June 24, 1998, Jim J. McGhan's employment with the Company and its
subsidiaries was terminated. Mr. McGhan was the Chief Operating Officer of the
Company, and he is Donald K. McGhan's son.
COMPENSATION COMMITTEE INTERLOCKS
The Compensation Committee consists of Messrs. Bull and Talley and Dr.
Williams. None of such directors was a party to any transaction with the Company
which requires disclosure under Item 402(j) of Regulation S-K.
1998 COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Company established a Compensation Committee of the Board of
Directors in March 1997. The Compensation Committee determines the cash, stock
options and other incentive compensation, if any, to be paid to the Company's
executive officers and key employees.
-14-
<PAGE>
The Company believes that executive compensation should be closely
related to the value delivered to shareholders. This belief has been adhered to
by developing incentive pay programs which provide competitive compensation and
reflect Company performance. Both short-term and long-term incentive
compensation are based on Company performance and the value received by
stockholders.
COMPENSATION MAKE-UP AND MEASUREMENT
The Company's executive compensation is based on three components: base
salary, short-term incentives and long-term incentives, each of which is
intended to serve the overall compensation philosophy.
BASE SALARY
The Company's salary levels are intended to be consistent with
competitive pay practices and level of responsibility, with salary increases
reflecting competitive trends, the overall financial performance of the Company,
general economic conditions as well as a number of factors relating to the
particular individual, including the performance of the individual executive,
level of experience, ability and knowledge of the job.
SHORT-TERM INCENTIVES
Beginning in 1999, target levels of operating profits and working
capital will be established by the senior management of the Company during the
budgeting process and approved by the Board of Directors. An incentive award
opportunity is established for each employee based on the employee's level of
responsibility, potential contribution, the success of the Company and
competitive conditions. 25% of an executive's potential bonus relates to his or
her achievement of personal objectives and 75% relates to the achievement by the
Company and its business units of the pre-established goals for operating
profits and working capital.
The employee's actual award is determined after the end of the fiscal
year based on an assessment of the employee's individual performance, including
achievement of personal objectives and the Company's achievement of its pre-tax
profit and revenue goals. This ensures that individual awards reflect an
individual's specific contributions to the success of the Company. If all of the
goals of the 1999 short-term incentive plans are met, approximately 30 key
employees will share a bonus pool of approximately $2.3 million.
LONG-TERM INCENTIVES
Stock options are granted from time to time to reward key employees for
their contributions. The grant of options is based primarily on the key
employee's potential contribution to the Company's growth and profitability.
COMPENSATION OF EXECUTIVE OFFICERS
On January 22, 1998, Donald K. McGhan resigned as Chief Executive
Officer of the Company, and a new senior management team consisting of Richard
G. Babbitt and Ilan K. Reich was installed. As described in the Employment
Agreements section above, Messrs. Babbitt and Reich receive an annual base
salary of $400,000 as determined by contract. In determining such amount, the
Board of Directors considered the responsibilities performed by those officers,
their performance in managing and directing the Company's operations and their
efforts in assisting the Company to improve its capital base. Based on the
significant turnaround of the Company's financial performance, and the
settlement of the breast implant litigation achieved in 1998, Messrs. Babbitt
and Reich were each awarded a cash bonus of $100,000.
Compensation Committee: Harrison E. Bull; Richard Wm. Talley; John E.
Williams.
-15-
<PAGE>
OTHER MATTERS
The Company has been advised by the Securities and Exchange Commission
that it has begun a formal investigation of the matters disclosed in the Form
8-K dated March 6, 1998 (the "March Form 8-K") relating to the resignation of
Coopers & Lybrand LLP as the Company's independent accountant. The Company is
cooperating fully in this investigation. BDO Seidman, LLP was appointed by the
Company to succeed Coopers & Lybrand LLP as the Company's accountants. BDO
Seidman, LLP has audited the Company's financial statements for the years ended
December 31, 1996, 1997 and 1998 and provided the Company with an unqualified
auditor's opinion for all periods. The March Form 8-K discussed the reasons for
the resignation of Coopers & Lybrand LLP. The Company believes that the
procedural and substantive issues raised in that filing have been addressed
through a variety of steps, including the appointment of a new senior management
team, the continual oversight by an audit committee, and the conversion into
equity of the $10.8 million of indebtedness (including accrued interest) owed to
an entity controlled by the former chairman at a significant discount which more
than adequately reflects the dollar value of any potential related party
transactions benefits previously received. The Company does not believe that
this investigation will give rise to any material costs, and is seeking to
pursue a prompt resolution of this matter so that it can focus its efforts on
returning the Company to long-term profitability. Reference is made to the March
Form 8-K for additional information. For a discussion of certain matters
relating to the Company see Appendix A.
-16-
<PAGE>
COMMON STOCK PERFORMANCE
The following graph sets forth the Company's total stockholder return
as compared to the NASDAQ Market Index and the Standard & Poor's Medical
Products and Supplies Index over the period from December 31, 1993 until
December 31, 1998. The total stockholder return assumes $100 invested at
December 31, 1993 in the Company's Common Stock, the NASDAQ Market Index and the
Standard & Poor's Medical Products and Supplies Index. It assumes reinvestment
of all dividends.
INDEXED RETURNS
<TABLE>
<CAPTION>
12/1993 12/1994 12/1995 12/1996 12/1997 12/1998
<S> <C> <C> <C> <C> <C> <C>
INAMED Corporation 100 124 338 324 157 370
Nasdaq Stock Market 100 112 159 195 240 294
(U.S.)
S&P Health Care 100 90 153 175 219 413
(Medical Products &
Supplies)
</TABLE>
There can be no assurance that the Company's stock performance will
continue with the same or similar trends depicted in the graph above.
-17-
<PAGE>
PROPOSAL NO. 2
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of BDO Seidman, LLP has been selected as the
independent public accountants for the Company for the fiscal year ending
December 31, 1999. Although the selection of accountants does not require
ratification, the Board of Directors has directed that the appointment of BDO
Seidman, LLP be submitted to the stockholders for ratification due to the
significance of their appointment by the Company. If the stockholders do not
ratify the appointment of BDO Seidman, LLP, the Board of Directors will consider
the appointment of other certified public accountants. A representative of that
firm, which served as the Company's independent public accountants for the
fiscal year ended December 31, 1998, is expected to be present at the Meeting
and, if he so desires, will have the opportunity to make a statement, and in any
event will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE SELECTION OF THE
INDEPENDENT PUBLIC ACCOUNTANTS.
SOLICITATION STATEMENT
The Company will bear all expenses in connection with the solicitation
of proxies. In addition to the use of the mails, solicitations may be made by
the Company's regular employees, by telephone, facsimile or personal contact,
without additional compensation. The Company has retained Innisfree M & A,
Incorporated to assist the Company in the solicitation of proxies for a fee of
$5,000 plus expenses. The Company will, upon their request, reimburse brokerage
houses and persons holding shares of Common Stock in the names of the Company's
nominees for their reasonable expenses in sending solicited material to their
principals.
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the proxy materials to be
distributed in connection with the next annual meeting of stockholders of the
Company, stockholder proposals for such meeting must be submitted to the Company
no later than December 30, 1999.
OTHER MATTERS
So far as now known, there is no business other than that described
above to be presented for action by the stockholders at the Meeting, but it is
intended that the proxies will be voted upon any other matters and proposals
that may legally come before the Meeting or any adjournment thereof, in
accordance with the discretion of the persons named therein.
-18-
<PAGE>
ANNUAL REPORT
The Company has sent, or is concurrently sending, all of its
stockholders of record as of April 19, 1999 a copy of its Annual Report for the
fiscal year ended December 31, 1998. Such report contains the Company's
certified consolidated financial statements for the fiscal year ended December
31, 1998, including that of the Company's subsidiaries.
By Order of the Company,
CAROL A. BRENNAN, Secretary
Dated: April 30, 1999
-19-
<PAGE>
APPENDIX A
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From April 1997 until January 1998, International Integrated
Industries, LLC ("Industries"), an entity affiliated with Mr. Donald K. McGhan,
the Company's former Chairman, Chief Executive Officer and President and large
stockholder, lent the Company an aggregate of $9.9 million, of which $8.8
million was included in liabilities at December 31, 1997.
After Industries began to lend those monies to the Company, Mr. McGhan
represented to the Board of Directors that those funds were derived from
personal financial resources. In early 1998, however, in connection with Mr.
McGhan's unsuccessful efforts to negotiate a payment schedule for the interest
and principal of that loan, the Company learned that approximately two-thirds of
the monies lent by Industries to the Company were in fact derived from loans
made to Industries by Medical Device Alliance, Inc. ("MDA"). MDA is a private
company formed by Mr. McGhan in 1995 to develop and market various products for
use in ultrasonic liposuction; the Company believes that approximately $20
million has been raised to date by MDA from various outside investors through
private placement transactions. The Company does not believe those outside
investors were apprised of the loans from MDA to Industries; importantly,
however, the investment of those funds in a medical device company such as
INAMED was apparently within the permitted scope of the proposed use of funds
which existed when those investors made their investment. The Company's Board of
Directors has been advised by legal counsel: (a) that the Company has no
responsibility whatsoever to the outside investors in MDA for the monies which
Mr. McGhan arranged to loan to Industries, which in turn were loaned by
Industries to the Company, and (b) that Mr. McGhan, as the controlling person of
both MDA and Industries at the times those loans were made, is solely
responsible to the outside investors in MDA for his actions with respect to
those monies.
In July 1998 the Company and Mr. McGhan agreed to convert all of the
10.5% subordinated notes (including accrued interest) into 860,000 shares of
Common Stock and a warrant to purchase 260,000 shares at $12.40 per share. At
the time, the Company's Common Stock was trading at approximately $7.50 per
share. In addition, Mr. McGhan (on behalf of himself and his affiliates) agreed
to a five year standstill and voting agreement which restricts their ability to
vote, sell or acquire their shares of Common Stock.
In 1997, the Company entered into an agreement to sublease from MDA on
a month-to-month basis approximately 5,000 square feet of office space in Las
Vegas for $10,000 per month. Donald K. McGhan is the Chairman of MDA. In July
1998 the Company vacated that office space. While it continues as a named party
under the lease, in July 1998 Mr. McGhan placed 200,000 shares of Common Stock
in escrow with the Company until such time as the Company is no longer liable
under the terms of that lease.
In 1997, the Company signed a distribution agreement with LySonix Inc.,
a subsidiary of MDA, to sell ultrasonic surgery equipment in the European and
Latin American regions. Special incentive discounts were offered to the Company
for the introduction of the product in 1997. Net sales in 1998 were
approximately $606,000. In 1998, the terms of the original agreement were
revised so that the Company would obtain the goods on a consignment basis and
not have an obligation with LySonix until the products were sold. This agreement
and its revision have been reviewed and approved by the Company's current
management.
During 1992, the Company entered into a rental arrangement with Star
America Corporation for rental of an aircraft to provide air transportation for
corporate purposes. Michael D. Farney is the only director and officer of Star
America Corporation. Rental expense for 1995 and 1994 was $900,000 and $888,000,
respectively. In February 1995, the Company received a credit voucher from Star
America Corporation for $800,000. This amount represented payments made during
1994 in excess of the actual rental arrangement. At December 31, 1995, the
credit voucher had an outstanding balance of $107,670. This balance was paid to
the Company on March 11, 1996. The rental arrangement
-20-
<PAGE>
with Star America Corporation was terminated effective December 31, 1995. In
1998 the Internal Revenue Service disallowed approximately $2.7 million of the
expenses paid by the Company under the Star America rental agreement. In
February 1999 the Company initiated a lawsuit against Messrs. McGhan and Farney,
seeking to recover its costs and damages arising from this transaction.
-21-
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
INAMED CORPORATION
PROXY -- ANNUAL MEETING OF STOCKHOLDERS
JUNE 3, 1999
The undersigned, a stockholder of INAMED Corporation, a Delaware
corporation (the "Company"), does hereby appoint Richard G. Babbitt and Ilan K.
Reich, and each of them, the true and lawful attorneys and proxies with full
power of substitution, for and in the name, place and stead of the undersigned,
to vote all of the shares of Common Stock of the Company which the undersigned
would be entitled to vote if personally present at the 1999 Annual Meeting of
Stockholders of the Company to be held at 460 Ward Drive, Santa Barbara,
California 93111, on June 3, 1999, at 10:30 A.M., Local Time, or at any
adjournment or adjournments thereof.
The undersigned hereby revokes any proxy or proxies heretofore given
and acknowledges receipt of a copy of the Notice of Annual Meeting and Proxy
Statement, both dated April 30, 1999, and a copy of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREIN
GIVEN. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO ELECT THE
DIRECTORS, AND TO RATIFY THE APPOINTMENT OF BDO SEIDMAN, LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS.
1. To elect the following directors to serve as directors until the 2000
annual meeting of stockholders of the Company and in each case until
their successors have been duly elected and qualified:
Richard G. Babbitt, James E. Bolin, Malcolm R. Currie, John F. Doyle,
Ilan K. Reich, Mitchell S. Rosenthal, David A. Tepper and John E.
Williams
______________ FOR ALL NOMINEES ________________ WITHHELD FROM ALL NOMINEES
WITHHELD______________________________________________________________________
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEES(S), PRINT NAME ABOVE
2. To ratify the appointment of BDO Seidman, LLP as the independent public
accountants of the Company for the fiscal year ending December 31,
1999.
FOR ___________ AGAINST ________ ABSTAIN ______
3. DISCRETIONARY AUTHORITY: To vote with discretionary authority with
respect to all other matters which may come before the Meeting.
NOTE: Your signature should appear the same as your name appears hereon. In
signing as attorney, executor, administrator, trustee or guardian, please
indicate the capacity in which signing. When signing as joint tenants, all
parties in the joint tenancy must sign. When a proxy is given by a corporation,
it should be signed by an authorized officer and the corporate seal affixed. No
postage is required if mailed in the United States.
Signature: ________________________ Date___________
Signature: ______________________ Date___________
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW: _____________
-22-
