<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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
COLLAGEN AESTHETICS, 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
COLLAGEN AESTHETICS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 28, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of COLLAGEN
AESTHETICS, INC., a Delaware corporation (the "Company"), will be held on
Wednesday, October 28, 1998 at 10:00 a.m., local time, at the Stanford Park
Hotel, 100 El Camino Real, Menlo Park, California 94025, for the following
purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending June 30, 1999.
3. To transact such other business as may properly come before the meeting
or any postponement or adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on September 4, 1998
are entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof.
All stockholders are cordially invited to attend the Annual Meeting.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she returned a proxy.
Very truly yours,
Elias J. Blawie
Secretary
Palo Alto, California
September 28, 1998
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL
HAVE THE ADDED EXPENSE OF RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND
THE MEETING AND SO DESIRE, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY.
<PAGE> 3
COLLAGEN AESTHETICS, INC.
------------------------
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Collagen Aesthetics, Inc. (the "Company" or "Collagen") for use at the Annual
Meeting of Stockholders to be held Wednesday, October 28, 1998 at 10:00 a.m.,
local time, or at any postponement or adjournment thereof (the "Annual
Meeting"), for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at the Stanford
Park Hotel, 100 El Camino Real, Menlo Park, California 94025.
These proxy solicitation materials were mailed on or about September 28,
1998 to all stockholders entitled to vote at the Annual Meeting.
RECORD DATE
Stockholders of record of the Company's Common Stock at the close of
business on September 4, 1998 are entitled to notice of, and to vote at, the
Annual Meeting. At the September 4, 1998 record date, 8,847,588 shares of the
Company's Common Stock were issued and outstanding, exclusive of shares held by
the Company as treasury stock.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it any time before its use by delivering to the Company (Attention:
Norman L. Halleen, Inspector of Elections) a written notice of revocation or a
duly executed proxy bearing a later date or by attending the meeting and voting
in person.
VOTING AND SOLICITATION
Holders of shares of Common Stock are entitled to one vote per share on all
matters, except that all such holders are entitled to cumulate their votes in
the election of directors.
Every stockholder voting for the election of directors may cumulate such
stockholder's votes and give one candidate the number of votes equal to the
number of directors to be elected multiplied by the number of votes to which the
stockholder's shares are entitled, or may distribute such stockholder's votes on
the same principle among as many candidates as the stockholder may select,
provided that votes cannot be cast for more than five candidates. However, no
stockholder shall be entitled to cumulate votes unless the names of the
candidates for which votes are being cumulated have been placed in nomination
prior to the voting and the stockholder, or any other stockholder, has given
notice at the meeting, prior to the voting, of the stockholder's intention to
cumulate the stockholder's votes. On all other matters, each share of Common
Stock has one vote.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections (the "Inspector") with the assistance of the
Company's transfer agent. The Inspector will also determine whether or not a
quorum is present. Except with respect to the election of directors where
cumulative voting is invoked and except in certain other specific circumstances,
the affirmative vote of a majority of shares present in person or represented by
proxy at a duly held meeting at which a quorum is present is required under
Delaware law for approval of proposals presented to stockholders. In general,
Delaware law also provides that a quorum consists of a majority of the shares
entitled to vote and present in person or represented by proxy. The Inspector
will treat abstentions as shares that are present and entitled to vote for
purposes of determining the presence of a quorum and as negative votes for
purposes of determining the approval of any matter
1
<PAGE> 4
submitted to the stockholders for a vote. Any proxy that is returned using the
form of proxy enclosed and that is not marked as to a particular item will be
voted for the election of directors, for ratification of the appointment of the
designated independent auditors, and, as the proxy holders deem advisable, on
other matters that may come before the meeting, as the case may be with respect
to the item not marked. If a broker indicates on the enclosed proxy or its
substitute that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present with
respect to that matter. The Company believes that the tabulation procedures to
be followed by the Inspector are consistent with the general statutory
requirements in Delaware concerning voting of shares and determination of a
quorum.
The cost of soliciting proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by certain of
the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone or telegram.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders that are intended to be presented by such
stockholders at the Company's 1999 Annual Meeting must be received by the
Company no later than May 29, 1999 in order that such proposals may be included
in the proxy statement and form of proxy relating to that meeting.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
NOMINEES
A board of five directors is to be elected at the meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for
Management's five nominees named below, all of whom are currently directors of
the Company. In the event that any nominee of the Company is unable or declines
to serve as a director at the time of the Annual Meeting, the proxies will be
voted for any nominee who shall be designated by the present Board of Directors
to fill the vacancy. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies received by
them in such a manner in accordance with cumulative voting as will assure the
election of as many of the nominees listed below as possible and, in such event,
the specific nominees to be voted for will be determined by the proxy holders.
It is expected that all nominees will be able and willing to serve as directors.
The term of office of each person elected as a director will continue until the
next Annual Meeting of Stockholders or until such director's successor has been
elected and qualified.
2
<PAGE> 5
The names of the nominees, and certain information about them as of
September 4, 1998, are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<S> <C> <C> <C>
Gary S. Petersmeyer......... 51 President and Chief Executive Officer of the 1995
Company
Anne L. Bakar............... 41 President and Chief Executive Officer of 1993
Telecare Corporation (a provider of
in-patient psychiatric services)
Fulton Collins.............. 55 Chairman and Chief Executive Officer of 1998
Collins Investments, Inc., Chairman of the
Board of Trustees of the University of Tulsa
and Trustee of the Donald W. Reynolds
Foundation
William G. Davis............ 65 Independent business consultant; retired 1984
President of Medical Instrument Systems
Division, Eli Lilly and Company (a
diversified health care company)
Gerald Lazarus, M.D......... 59 Dean Emeritus of the School of Medicine at 1998
the University of California, Davis and
Professor in the Departments of Dermatology
and Biological Chemistry
</TABLE>
Except as set forth below, each of the nominees has been engaged in his or
her principal occupation described above during the past five years. There is no
family relationship between any of the directors or executive officers of the
Company.
Mr. Petersmeyer joined the Company as President, Chief Operating Officer
and Director in February 1995. In February 1997, Mr. Petersmeyer became the
Company's Chief Executive Officer. Prior to joining the Company, Mr. Petersmeyer
was employed by Syntex Corporation, a manufacturer of pharmaceutical products,
from 1991 to January 1995, where he served as Vice President of Managed Health
Care from March 1993 to January 1995, as well as serving at various times as
National Sales Director and Director of Corporate Development. From 1986 to
1990, he served as President and Chief Executive Officer of Beta Phase, Inc., a
medical device manufacturer, and from 1982 to 1986, he was the Executive Vice
President and General Manager, Ophthalmic Products Division, of CooperVision,
Inc., a manufacturer and distributor of ophthalmic products.
Ms. Bakar has been President and Chief Executive Officer of Telecare
Corporation, the largest private provider of psychiatric services in the state
of California, since 1987. Previously, Ms. Bakar spent seven years in the
investment banking industry.
Mr. Collins is Chairman and Chief Executive Officer of Collins Investments,
Inc., Chairman of the Board of Trustees of the University of Tulsa and a Trustee
of the Donald W. Reynolds Foundation. He has served at Syntex Corporation from
1971 to 1980 where he was Group Vice President, from 1980 to 1994 as Chairman
and Chief Executive Officer of Liberty Glass Company and Chairman of Summit
Acceptance Corporation from 1994 to 1998. Mr. Collins holds a BA, MS and MBA
from Stanford University.
Mr. Davis was associated with Eli Lilly and Company from 1957 to 1984,
where he served as Executive Vice President, Eli Lilly International
Corporation, from 1972 to 1975, Executive Vice President, Pharmaceutical
Division, from 1975 to 1982 and President, Medical Instrument Systems Division,
from 1982 until his retirement in 1984. Mr. Davis is also a director of Alza
Corporation and CardioVascular Dynamics, Inc.
Dr. Lazarus is Dean Emeritus of the School of Medicine at the University of
California, Davis, and Professor in the Departments of Dermatology and
Biological Chemistry. Dr. Lazarus' career includes the Harvard Medical School,
the University of Cambridge (England), the Montefiore Hospital and Medical
Center and Distinguished Professor and Chairman of Dermatology at both Duke
University Medical Center and the University of Pennsylvania School of Medicine.
3
<PAGE> 6
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of fifteen meetings
during the fiscal year ended June 30, 1998, including meetings held by
conference telephone call. The Board of Directors has an Audit Committee and a
Human Resources Committee. There is no committee performing the functions of a
nominating committee.
The Audit Committee recommends engagement of the Company's independent
auditors, reviews the scope of the audit, considers comments made by the
independent auditors with respect to the Company's internal control structure,
including systems, procedures and internal accounting controls and the
consideration given thereto by management, and reviews the Company's internal
control structure, including systems, procedures and internal accounting
controls, with the Company's financial and accounting staff. This Committee
consisted of director Bakar and director Craig W. Johnson (who resigned from the
Board in August 1998 in connection with the spinoff of Cohesion Technologies,
Inc. from the Company) and held three meetings during fiscal 1998. The Audit
Committee for fiscal 1999 will consist initially of directors Bakar and Collins.
The Human Resources Committee provides guidance and commentary for all
corporate compensation, benefits, perquisite and employee (and director) equity
programs. It reviews and makes recommendations to the Board regarding such
matters as the Company's compensation of its officers, all employee equity plans
and individual equity grants and bonus plans and bonus payments. This Committee,
which consisted of directors Davis and Bakar and director Reid W. Dennis (who
resigned from the Board in August 1998 in connection with the spinoff of
Cohesion Technologies, Inc. from the Company), held five meetings during fiscal
1998.
No incumbent director attended fewer than 75% of the aggregate number of
meetings (held while such director was a member) of the Board of Directors and
of the committees, if any, upon which such director served during fiscal 1998.
COMPENSATION OF DIRECTORS
The Company currently pays each director who is not an employee (currently
four persons) a monthly retainer of $1,000, a fee of $1,000 for each meeting of
the Board attended by such director, a fee of $250 for each telephonic meeting
of the Board in which such director participates and a fee of $500 for each
committee meeting attended by such director on a date not coinciding with a
meeting of the Board. Prior to August 18, 1998, each nonemployee director
participated in the Company's 1990 Directors' Stock Option Plan, pursuant to
which nonemployee directors are automatically granted options to purchase shares
of Common Stock of the Company on the terms and conditions set forth in such
plan. On August 18, 1998, the 1998 Directors' Stock Option Plan took effect and,
as described under the heading "Proposal No. 5: Adoption of the Company 1998
Directors' Stock Option Plan" in the Company's Proxy Statement for its Special
Meeting of Stockholders held August 12, 1998, each nonemployee director is
granted options to purchase shares of the Company's Common Stock on the terms
and conditions set forth therein. On July 1, 1997, each of the Company's
nonemployee directors on such date were granted a 3,000 share option at an
exercise price of $19.25 per share, all pursuant to the terms of the Company's
1990 Directors' Stock Option Plan. On July 1, 1998, each of the Company's
nonemployee directors on such date were granted a 3,000 share option at an
exercise price of $18.09 per share pursuant to the Company's 1990 Directors'
Stock Option Plan. On August 12, 1998 Messrs. Collins and Lazarus were granted
15,000 shares at $18.88 per share. In connection with the spinoff, this price
was adjusted to $13.40. This adjusted price was determined in accordance with
the Emerging Issues Task Force Issue 90-9 as agreed upon by the Company's Board.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES LISTED
ABOVE.
4
<PAGE> 7
PROPOSAL NO. 2:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending June 30, 1999, and recommends that stockholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Ernst & Young LLP has audited the Company's financial statements annually
since fiscal 1978. Representatives of Ernst & Young LLP are expected to be
present at the meeting, with the opportunity to make a statement if they desire
to do so, and to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE COMPANY. THE
EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THE PROPOSAL.
5
<PAGE> 8
OTHER INFORMATION
COMMON STOCK OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of June 30, 1998 as to (i) each person who is known by the
Company to beneficially own more than 5% of the Company's Common Stock, (ii)
each of the Company's directors, (iii) each of the executive officers named in
the Summary Compensation Table beginning on page 8 and (iv) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
5% STOCKHOLDERS, DIRECTORS, -----------------------
NAMED EXECUTIVE OFFICERS, AND DIRECTORS AND PERCENT OF
EXECUTIVE OFFICERS AS A GROUP NUMBER CLASS (2)
------------------------------------------- --------- ----------
<S> <C> <C>
Wellington Management Company(3)....................... 1,244,300 14.1%
75 State Street
Boston, MA 02109
Heartland Advisors, Inc.(4)............................ 1,079,800 12.2%
790 North Milwaukee Street
Milwaukee, WI 53202
T. Rowe Price Associates, Inc.(5)...................... 727,400 8.2%
100 East Pratt Street
Baltimore, MD 21202
Reid W. Dennis(6)...................................... 700,043 7.9%
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Vanguard Specialized Portfolios, Inc.(7)............... 525,800 5.9%
Health Care Portfolio
100 Vanguard Boulevard, # V34
Malvern, PA 19355
Dimensional Fund Advisors, Inc.(8)..................... 504,050 5.7%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Anne L. Bakar(9)....................................... 27,000 *
Fulton Collins(10)..................................... 27,900 *
William G. Davis(11)................................... 34,000 *
Gerald Lazarus, M.D.................................... -- --
Gary S. Petersmeyer(12)................................ 149,321 1.7%
Reinhard Koenig, M.D.(13).............................. 13,820 *
David J. Foster(14).................................... 55,715 *
Norman L. Halleen(15).................................. 9,820 *
Jean-Pierre Capdevielle(16)............................ 11,820 *
All directors and executive officers as a group
(13 persons)(17)..................................... 1,067,298 4.2%
</TABLE>
- ---------------
* Less than 1 percent.
(1) The persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the other footnotes to this table.
(2) As of September 4, 1998, 8,847,588 shares were issued and outstanding,
exclusive of shares held by the Company as treasury stock.
(3) Wellington Management Company ("WMI") is an investment advisor registered
with the Securities and Exchange Commission under the Investment Advisors
Act of 1940, as amended. WMI may be deemed to beneficially own the stated
shares by virtue of its status as a registered investment advisor to its
various investment advisory clients. Of such amount, WMI may be deemed to
have shared voting
6
<PAGE> 9
power with respect to 545,800 shares and shared dispositive power with
respect to 1,244,300 shares. The information presented is based upon
information filed with the Commission on Schedule 13G/A by the stockholder
on February 19, 1997.
(4) Heartland Advisors, Inc., America's Value Investor(R) ("Heartland
Advisors") is an investment advisor registered with the Securities and
Exchange Commission under the Investment Advisors Act of 1940, as amended.
Heartland Advisors may be deemed to beneficially own the stated shares by
virtue of its status as a registered investment advisor to its various
investment advisory clients. Of such amount, Heartland Advisors may be
deemed to have sole voting power with respect to 1,069,300 shares and sole
dispositive power with respect to 1,079,800 shares. The information
presented is based upon information filed with the Commission on Schedule
13G by the stockholder on January 27, 1998.
(5) T. Rowe Price Associates, Inc. is an investment advisor registered under
the Investment Advisors Act of 1940, as amended. T. Rowe Price Associates,
Inc. may be deemed to beneficially own the stated shares by virtue of its
status as a registered investment advisor to its various investment
advisory clients. Of such amount, T. Rowe Price Associates, Inc. may be
deemed to have sole voting power with respect to 253,300 shares and sole
dispositive power with respect to 727,400 shares. The information presented
is based upon information filed with the Commission on Schedule 13G by the
stockholder on February 9, 1998.
(6) Includes 27,000 shares issuable upon exercise of options exercisable within
60 days of September 4, 1998; excludes 1,500 shares held by Mr. Dennis as
Trustee for Suzanna Weaver Dennis, in which he disclaims any beneficial
ownership.
(7) Vanguard Specialized Portfolios, Inc. -- Health Care Portfolio ("Vanguard")
is an investment advisor registered under the Investment Advisors Act of
1940, as amended. Vanguard may be deemed to beneficially own the stated
shares by virtue of its status as a registered investment advisor to its
various investment advisory clients. Of such amount, Vanguard may be deemed
to have sole voting power with respect to 525,800 shares and shared
dispositive power with respect to 525,800 shares. The information presented
is based upon information filed with the Commission on Schedule 13G by the
stockholder on February 9, 1998.
(8) Dimensional Fund Advisors, Inc. ("DFA") is an investment advisor registered
under the Investment Advisors Act of 1940, as amended. DFA may be deemed to
beneficially own the stated shares by virtue of its status as a registered
investment advisor to its various investment advisory clients. Of such
amount, DFA may be deemed to have sole voting power with respect to 339,650
shares and sole dispositive power with respect to 504,050 shares. The
information presented is based upon information filed with the Commission
on Schedule 13G by the stockholder on February 10, 1998.
(9) Represents shares issuable upon exercise of options exercisable within 60
days of September 4, 1998.
(10) Represents shares issuable upon exercise of options exercisable within 60
days of September 4, 1998.
(11) Includes 27,000 shares issuable upon exercise of options exercisable within
60 days of September 4, 1998.
(12) Includes 145,800 shares issuable upon exercise of options exercisable
within 60 days of September 4, 1998.
(13) Represents shares issuable upon exercise of options exercisable within 60
days of September 4, 1998.
(14) Includes 45,860 shares issuable upon exercise of options exercisable within
60 days of September 4, 1998. Mr. Foster resigned as an officer of the
Company in August 1998 but will continue to serve as Chief Executive
Officer and member of the Cohesion Technologies, Inc. board of directors.
(15) Represents shares issuable upon exercise of options exercisable within 60
days of September 4, 1998.
7
<PAGE> 10
(16) Represents shares issuable upon exercise of options exercisable within 60
days of September 4, 1998. Mr. Capdevielle commenced employment with the
Company in February 1997 and resigned as an officer in August 1998.
(17) See footnotes (6) and (9) through (16).
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation received by (i) the individual
who served as Chief Executive Officer of the Company during the fiscal year
ended June 30, 1998 and (ii) the four other most highly compensated executive
officers of the Company serving at the end of the fiscal year ended June 30,
1998 and the compensation received by each such individual for the Company's two
prior fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------------------- UNDERLYING ALL OTHER
FISCAL OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#)(1) ($)(2)
--------------------------- ------ --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Gary S. Petersmeyer................ 1998 $309,040 $138,376(7) 35,000 $ 3,254
President, Chief Executive 1997 $262,777 $108,000 150,000 2,238
Officer and director 1996 $213,956 $ 29,025 25,000 36,301
Jean-Pierre Capdevielle (3)........ 1998 $187,270 $ 65,914(7) 6,500 --
Vice President and Managing 1997 $ 70,024 $ 21,240 25,000 24,158
Director, International 1996 -- -- -- --
David J. Foster(4)................. 1998 $183,639 $ 64,095(7) 15,000 626
Senior Vice President and 1997 $160,263 $ 47,600 6,000 453
General Manager, 1996 $144,306 $ 24,575 10,000 314
Collagen Technologies Group
Norman L. Halleen(5)............... 1998 $163,133 $ 46,838(7) 6,500 762
Vice President, Finance and 1997 $ 66,441 $ 18,816 20,000 226
Chief Financial Officer 1996 -- -- -- --
Reinhard Koenig, M.D.(6)........... 1998 $172,979 $ 60,543(7) 6,500 391
Vice President, Medical Affairs 1997 $123,689 $ 35,700 25,000 20,287
and Regulatory Affairs 1996 -- -- -- --
</TABLE>
- ---------------
(1) This table does not reflect options granted subsequent to the close of
fiscal 1998, which may represent grants partially in recognition of fiscal
1998 performance.
(2) Stated amounts represent (a) a hiring bonus to Mr. Petersmeyer in fiscal
1996, (b) a mortgage assistance payment to Dr. Koenig in fiscal 1997 and
payment for a hiring bonus in fiscal 1997 and (c) a $22,758 hiring bonus to
Mr. Capdevielle and a $1,400 tuition assistance for Mr. Capdevielle's
children in fiscal 1997. Remaining amounts represent insurance premiums paid
by the Company for term life insurance under the Company's group life
insurance employee benefit.
(3) Mr. Capdevielle commenced employment with the Company in February 1997 and
resigned as an officer in August 1998.
(4) Mr. Foster resigned as an officer of the Company in August 1998 but will
continue to serve as Chief Executive Officer and member of the Cohesion
Technologies, Inc. board of directors.
(5) Mr. Halleen commenced employment with the Company in February 1997.
(6) Dr. Koenig commenced employment with the Company in October 1996.
(7) Amount reflects bonuses earned in fiscal year 1998 but paid in August 1998.
8
<PAGE> 11
The following table sets forth information for the named executive officers
with respect to grants of options to purchase Common Stock of the Company made
during the fiscal year ended June 30, 1998.
STOCK OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL
-------------------------------------------------- REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE 10-YEAR OPTION TERM($)(3)
OPTIONS IN FISCAL PRICE EXPIRATION --------------------------
GRANTEE NAME GRANTED(#) YEAR(2) $/SH. DATE 5% 10%
------------ ----------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gary S. Petersmeyer........ 15,000 5.32% $ 17.8125 08/07/07 $ 168,033 $ 425,828
20,000 7.09% $ 17.8125 08/07/07 $ 224,044 $ 567,771
Jean-Pierre
Capdevielle(4)............. 6,500 2.30% $ 17.8125 08/07/07 $ 72,814 $ 184,525
David J. Foster(5)......... 15,000 5.32% $ 17.8125 08/07/07 $ 168,033 $ 425,828
Norman L. Halleen.......... 6,500 2.30% $ 17.8125 08/07/07 $ 72,814 $ 184,525
Reinhard Koenig, M.D....... 5,500 1.95% $ 17.8125 08/07/07 $ 61,612 $ 156,137
1,000 0.35% $ 17.8125 08/07/07 $ 11,202 $ 28,389
</TABLE>
- ---------------
(1) Consist of stock options granted pursuant to the Company's stock option
plans, which generally become exercisable at a rate of two percent of the
shares subject to the option per month for 50 months as long as the optionee
remains an employee with, consultant to or director of the Company. The
maximum term of each option granted is ten years from the date of grant. The
exercise price is equal to the fair market value of the stock on the grant
date.
(2) Out of a total of 282,115 options granted during the last fiscal year to
purchase Company common stock.
(3) These amounts represent certain assumed rates of appreciation for a given
exercise price only. Actual gains, if any, on stock option exercises and
Common Stock holdings are dependent on the future performance of the Common
Stock. There is no assurance that the amounts reflected will be realized.
(4) Mr. Capdevielle resigned as an officer of the Company in August 1998.
(5) Mr. Foster resigned as an officer of the Company in August 1998 but will
continue to serve as Chief Executive Officer and member of the Cohesion
Technologies, Inc. board of directors.
9
<PAGE> 12
The following table sets forth information for the named executive officers
with respect to exercises of options to purchase Common Stock of the Company in
the fiscal year ended June 30, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY OPTIONS
UNDERLYING UNEXERCISED AT
OPTIONS AT FISCAL FISCAL YEAR-END
SHARES YEAR-END(#) (EXERCISABLE/
ACQUIRED ON VALUE (EXERCISABLE/ UNEXERCISABLE)
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE) ($)(1)
---- ----------- ----------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Gary S. Petersmeyer................ -- -- 124,200/145,800 $386,214/$532,499
Jean-Pierre Capdevielle(2)......... -- -- 9,300/22,200 $34,653/$74,411
David J. Foster(3)................. -- -- 45,160/18,640 $176,221/$42,650
Norman L. Halleen.................. -- -- 7,700/18,800 $27,805/$59,859
Reinhard Koenig, M.D............... -- -- 11,300/20,200 $41,213/$52,651
</TABLE>
- ---------------
(1) The fair market value of the Company's Common Stock at the close of business
on June 30, 1998 was $18.13 per share.
(2) Mr. Capdevielle resigned as an officer of the Company in August 1998.
(3) Mr. Foster resigned as an officer of the Company in August 1998 but will
continue to serve as Chief Executive Officer and member of the Cohesion
Technologies, Inc. board of directors.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report and
the Performance Graph on page 13 shall not be incorporated by reference into any
such filings.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Human Resources Committee of the Board of Directors (the "Committee")
is currently comprised of directors Davis and Bakar. The Committee oversees the
administration of the Company's benefits and compensation plans, reviews
corporate human resources programs and establishes policies governing the annual
compensation of the executive officers of the Company.
The following is a report submitted by the above listed committee members
in their capacity as the Board's Human Resources Committee, addressing the
Company's compensation policy as it related to the Company's executive officers
for fiscal 1998.
COMPENSATION POLICY
The goal of the Company's executive compensation policy is to ensure that
an appropriate relationship exists between executive pay and the creation of
stockholder value, while at the same time motivating and retaining key
employees. To achieve this goal, the Company's executive compensation policies
integrate annual base compensation, bonuses based on corporate performance and
stock option grants. All executive officers, as well as senior-level managerial
and technical employees, are eligible for and do participate in these
compensation plans.
Salary
The Committee evaluates the performance and sets the salary of the
Company's Chief Executive Officer, Gary S. Petersmeyer, on an annual basis. Mr.
Petersmeyer evaluates the performance of all other executive officers and
recommends salary adjustments which are reviewed and approved by the Committee.
Survey data is drawn from comparable companies participating in medical device,
biotechnology, and/or pharmaceutical
10
<PAGE> 13
executive compensation surveys, several of which are included in the peer group
index in the Company's Performance Graph at page 13. Within this framework,
executive salaries are determined based on individual performance, level of
responsibility, the Company's overall salary structure and the financial
condition of the Company. The Company's compensation policy is designed to
maintain executive officer base salaries within a range approximating the median
of such salary data for like characteristics.
Bonuses
The Company seeks to provide annual incentives and rewards to executives
who make contributions of outstanding value, contingent upon the performance of
the Company as a whole.
The Company's annual bonus program is funded by the attainment of a
specific operating goal, with individual payouts based on performance relative
to both additional corporate objectives and specific objectives for each
executive's division. The operating goal and the corporate objectives are
recommended by the Chief Executive Officer and approved by the Committee and the
full Board.
Both the target amount and potential range of bonuses available to
executive officers are set annually by the Committee. Bonus awards are weighted
so that high-end bonuses are available when the Company's performance exceeds
corporate target, up to a defined maximum, and proportionally smaller or no
awards are made when the Company does not meet corporate targets.
Stock Options
The Committee believes that equity ownership provides significant
additional motivation to executives to maximize value for the Company's
stockholders, and therefore approves both annual and periodic grants of stock
options under the Company's 1994 Stock Option Plan. The Company's primary option
grants are generally approved on an annual basis largely in recognition of
individual performance during the fiscal year. The amounts of the annual grants
are determined relative to guidelines derived from an industry survey of
executive stock compensation provided by an outside consultant. In determining
individual grants, the Committee also considers individual performance, current
stock option holdings and grants to others within the Company. Additional grants
may be given during the fiscal year in recognition of promotions or exemplary
performance achievements.
Stock options are granted at the prevailing market price and will only have
value if the Company's stock price increases over the exercise price. The
Committee believes that the performance-based value of stock options serves to
align the interests of executive officers closely with those of other
stockholders. In accordance with this philosophy, the Company does not have a
discounted option or restricted stock program for its executive officers.
In addition to providing an opportunity for increased equity ownership,
stock options also create an incentive for officers and key employees to remain
with the Company for the long term, as such options become exercisable over time
for so long as the officer or key employee continues his or her employment
relationship with the Company.
Deductibility of Executive Compensation
The Committee has considered the impact of Section 162(m) of the Internal
Revenue Code adopted under the Omnibus Budget Reconciliation Act of 1993, which
section disallows a deduction for any publicly held corporation for individual
compensation exceeding $1 million in any taxable year for the Chief Executive
Officer and the four other most highly compensated executive officers, unless
such compensation meets the requirements for the "performance-based" exception
to the general rule. Since the cash compensation paid by the Company to each of
its executive officers is expected to be well below $1 million and the Committee
believes that options granted under the 1994 Stock Option Plan will meet the
requirements for qualifying as performance-based, the Committee believes that
this section will not affect the tax deductions available to the Company. It
will be the Committee's policy to qualify, to the extent reasonable, the
executive officers' compensation for deductibility under applicable tax law.
11
<PAGE> 14
CHIEF EXECUTIVE OFFICER COMPENSATION
During fiscal 1998, the compensation of Gary S. Petersmeyer, the Chief
Executive Officer of the Company, consisted of base salary and a bonus. Mr.
Petersmeyer did not participate in any decisions related to his compensation.
Mr. Petersmeyer's annual base salary was increased from $300,000 to
$320,016 in February 1998 and he was granted an option to purchase 35,000 shares
of Common Stock at an exercise price of $17.8125 per share, the fair market
value of the Company's Common Stock on the date of grant. See "Compensation of
Executive Officers -- Stock Option Grants in Fiscal 1998."
After careful review of the Company's performance as measured against the
annual corporate goals and objectives for fiscal 1998, the Committee determined
that approximately 100% of all corporate objectives were realized for fiscal
1998. The Committee found 100% of Mr. Petersmeyer's target bonus award for the
fiscal year to be appropriate relative to his total compensation package and to
the compensation that chief executive officers in related industries can
achieve. Accordingly, in August 1998, Mr. Petersmeyer was awarded an incentive
bonus in the amount of $138,376, which represented approximately 46% of his
annual salary, or 100% of the target award for individual and corporate
performance in fiscal 1998.
SUBMITTED BY THE HUMAN RESOURCES COMMITTEE
OF THE BOARD OF DIRECTORS
Anne L. Bakar
William G. Davis
HUMAN RESOURCES COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The members of the Human Resources Committee of the Company's Board are
currently directors Bakar and Davis, none of the members of the Human Resources
Committee has at any time been an officer or employee of the Company or any
subsidiary of the Company.
12
<PAGE> 15
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return,
assuming reinvestment of all dividends, for the Company's Common Stock at June
30, 1998 since June 30, 1993 to the cumulative return over such period of (i)
The Nasdaq Stock Market -- US Index and (ii) the S & P Medical Products &
Supplies Index. The graph assumes that $100 was invested on June 30, 1993 in the
Common Stock of the Company and in each of the comparative indices. The graph
further assumes that such amount was initially invested in the Common Stock of
the Company at a price per share of $22.75, the closing price on June 30, 1993.
The stock price performance on the following graph is not necessarily indicative
of future stock price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG COLLAGEN AESTHETICS, INC., THE NASDAQ STOCK MARKET
-- US INDEX AND THE S & P MEDICAL PRODUCTS & SUPPLIES INDEX
<TABLE>
<CAPTION>
S & P HEALTH
CARE
COLLAGEN (MEDICAL
AESTHETICS, NASDAQ STOCK PRODUCTS &
INC. MARKET (U.S.) SUPPLIES)
<S> <C> <C> <C>
JUN-93 100.00 100.00 100.00
JUN-94 82.90 100.96 96.40
JUN-95 76.32 134.77 147.90
JUN-96 85.99 173.03 194.31
JUN-97 79.59 210.38 257.48
JUN-98 83.30 277.69 344.43
</TABLE>
* $100 INVESTMENT ON 6/30/93 IN STOCK OR INDEX
INCLUDING REINVESTMENT OF DIVIDENDS,
FISCAL YEAR ENDING JUNE 30.
13
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CollOptics, Inc.
In December 1992, the Company purchased 800,000 shares of preferred stock
of CollOptics, Inc. ("CollOptics") for an aggregate of $500,000. In addition,
the Company granted to CollOptics a license to use the Company's technology in
the field of refractive surgery for long-term vision correction and entered into
certain other technology-related agreements with CollOptics. In September 1995,
the Company purchased an additional 1,000,000 shares of CollOptics preferred
stock for an aggregate of $500,000. During fiscal 1997, CollOptics made certain
payments to the Company, primarily for research and development services and the
reimbursement of expenses paid by the Company, totaling $500,000. As of June 30,
1997, CollOptics owed the Company $769,981 for research and development services
and the reimbursement of expenses paid by the Company. David J. Foster, Chief
Executive Officer of Cohesion Technologies, Inc. and Dr. Frank DeLustro,
President and Chief Operating Officer of Cohesion, are directors of CollOptics.
As of June 30, 1997, the Company held a 47% equity interest in CollOptics. In
connection with the spinoff of Cohesion Technologies, Inc. by the Company, all
outstanding shares of CollOptics owned by the Company and all agreements between
the Company and CollOptics were transferred to Cohesion Technologies, Inc.
effective January 1, 1998.
Cohesion Corporation
In November 1993, the Company purchased from Cohesion Corporation, for
approximately $65,000, 50,000 shares of Preferred Stock ("Cohesion Corporation
Preferred Stock") and 200,000 shares of Common Stock ("Cohesion Corporation
Common Stock"). In April 1994, the Company purchased 95,238 shares of Cohesion
Corporation Preferred Stock for approximately $86,000, and in July 1994, the
Company purchased 104,762 shares of Cohesion Corporation Preferred Stock for
approximately $94,000. Cohesion Corporation was formerly known as Otogen
Corporation ("Otogen") and Dr. Rodney Perkins, a director of the Company at that
time, was the majority stockholder, Chairman and President. In addition to the
purchase of shares, the Company granted to Cohesion Corporation a license to use
the Company's technology in the fields of otology and neurosurgical
applications, in return for which the Company was granted an additional 50,000
shares of Cohesion Corporation Common Stock. Between April 1994 and May 1996,
the Company made an additional equity investment in Cohesion Corporation of
$180,000 and loaned to Cohesion Corporation an aggregate of approximately
$1,540,000. In May 1996, the Company purchased an additional aggregate of
875,000 shares of Cohesion Corporation Common Stock and Cohesion Corporation
Preferred Stock from Cohesion Corporation for an aggregate of approximately $5.1
million (including conversion of Cohesion Corporation's outstanding indebtedness
to the Company) and purchased 275,000 shares of Cohesion Corporation Common
Stock and Cohesion Corporation Preferred Stock from Dr. Perkins for an aggregate
of $1,452,500. The Company also granted to Cohesion Corporation a license to use
certain of the Company's technology in the fields of tissue adhesion and
anti-adhesion technology, excluding ophthalmic applications, in return for which
the Company was granted an additional 75,000 shares of Cohesion Corporation
Preferred Stock. In addition, the Company agreed to loan Cohesion Corporation up
to $5,000,000 in the form of convertible debt, which loan, drawn upon at the
direction of the President of Cohesion Corporation, bore interest at an annual
rate of the greater of the prime lending rate or 10% and will be due and payable
five years after the date of the first disbursement, subject to acceleration
under certain circumstances. In connection with the loan transaction, Dr.
Perkins granted the Company an option to purchase up to 125,000 additional
shares of Cohesion Corporation Common Stock held by Dr. Perkins, which option
becomes exercisable as to 25,000 shares for each $1,000,000 of the loan
commitment that is disbursed. In each of May 1997, August 1997 and October 1997
the Company loaned $1,000,000 to Cohesion Corporation under the loan commitment
and purchased 25,000 shares of Cohesion Corporation Common Stock from Dr.
Perkins. In addition, in connection with this transaction, the Company agreed to
grant Dr. Perkins an option to purchase up to 77,500 shares of the Company's
Common Stock in connection with his continued participation on the Cohesion
Corporation Board of Directors. In connection with the May 1996 stock purchase
transactions, Craig W. Johnson, a former director and the former Secretary of
the Company, and an investment partnership in which he holds a beneficial
interest purchased an aggregate of 25,000 shares of Cohesion Corporation Common
Stock and Cohesion Corporation Preferred Stock for an aggregate of $127,750. In
June 1996, Dr. John R. Daniels, a
14
<PAGE> 17
former director of the Company, was appointed to Cohesion Corporation's Board of
Directors. As of June 30, 1997, the Company held an 81% equity interest in
Cohesion Corporation and in December 1997 increased its ownership position to
99%. Effective January 1, 1998, the Company contributed all of its holdings of
the Cohesion Corporation capital stock and its research and development programs
for sealant and adhesion barriers to Cohesion Technologies, Inc.
Innovasive Devices, Inc.
In October 1995, the Company purchased 844,000 shares of preferred stock of
Innovasive for $4,100,000. In connection with this investment, the Company
entered into Research and Development, Distribution and Manufacturing and Supply
Agreements with Innovasive with respect to tissue fixation devices manufactured
from collagen-based materials using the Company's proprietary technology.
Shortly following its investment in Innovasive, the Company purchased from
Howard D. Palefsky, the former Chairman and Chief Executive Officer of the
Company, all of his holdings of Innovasive capital stock (30,303 shares) for an
aggregate of $63,552. During fiscal 1997, pursuant to the terms of the Research
and Development Agreement, Innovasive made payments to the Company totaling
$698,665 for research and development services and reimbursement of expenses
paid by the Company. As of June 30, 1997, Innovasive owed the Company $289,243
for research and development services and the reimbursement of expenses paid by
the Company. In connection with the spinoff of Cohesion Technologies, Inc., all
outstanding shares of Innovasive owned by the Company and all agreements between
the Company and Innovasive were transferred to Cohesion Technologies, Inc. Prior
to that transfer, the Company was entitled to elect one member of Innovasive's
Board of Directors so long as it held five percent of Innovasive's capital stock
on a fully diluted basis. Mr. Foster is the Company's current designee on the
Innovasive Board of Directors. As of December 31, 1997, the Company held
approximately nine percent of Innovasive's outstanding capital stock.
Outside Legal Counsel
Since February 1993, the Company has retained as its principal outside
legal counsel Venture Law Group, A Professional Corporation, a law firm of which
Craig W. Johnson, a former director of the Company, is a director. Prior to such
time, the Company had retained Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation ("WSG&R"), as its principal outside legal counsel since 1977. From
1980 until February 1993, Mr. Johnson was a member of WSG&R. In connection with
the spinoff of Cohesion Technologies, Inc., Mr. Johnson, who was elected to the
Cohesion Board, resigned from the Company's Board.
Executive Officers and Directors
In October 1995, Ross Erickson, then an executive officer of the Company
and currently an executive officer of Cohesion and Cohesion Corporation,
borrowed $120,000 from the Company pursuant to a secured promissory note. This
debt was secured by real property purchased by Mr. Erickson and all shares of
the Company's stock issued to Mr. Erickson pursuant to the exercise of stock
options. In May 1997, all amounts due to the Company under such loan were repaid
through the assumption of the loan by Cohesion Corporation In October 1997 and
December 1997 Ross Erickson repaid to Cohesion Corporation all amounts owing on
such promissory note.
In August 1994, June 1995 and December 1995, Howard Palefsky borrowed an
aggregate of $475,000 from the Company pursuant to promissory notes secured by
all shares of the Company's capital stock held by Mr. Palefsky while such debt
is outstanding, and bearing an annual interest rate equal to the lesser of 10%
or the prime rate at the close of each quarter for which interest accrues. In
February 1996, Mr. Palefsky borrowed an additional $1,080,000 from the Company
on an unsecured basis pursuant to a promissory note bearing an annual interest
rate equal to the lesser of 10% or the prime rate at the close of each quarter
for which interest accrues.
In March 1997, Mr. Palefsky entered into an agreement with the Company in
connection with the severance of his employment relationship with the Company
pursuant to which, among other things, Mr. Palefsky agreed to provide consulting
services. Pursuant to the Separation and Distribution Agreement,
15
<PAGE> 18
Cohesion has assumed the Company's obligations under the agreement with Mr.
Palefsky. Under the agreement the Company agreed to pay Mr. Palefsky a
consulting fee of $29,167 during each of the first 24 months of his consultancy.
As additional compensation for services during his consultancy and for Mr.
Palefsky's execution and adherence to a noncompetition agreement with the
Company, the Company agreed to: (i) pay Mr. Palefsky a bonus of $650,000, (ii)
conditioned on completion of the first year of his consultancy and
noncompetition, pay Mr. Palefsky a bonus of $225,000 on the first anniversary
date of the agreement and forgive $425,000 of the principal and any accrued
interest thereon of outstanding loans totaling $475,000 in principal amount,
made to Mr. Palefsky by the Company and (iii) conditioned on completion of the
second year of Mr. Palefsky's consultancy, the Company agreed to forgive the
balance of the principal and any accrued interest thereon of the above loans and
also to forgive the entire principal balance and any accrued interest thereon of
the loan in the principal amount of $1,080,000 made by the Company in February
1996 to Mr. Palefsky. During his consultancy, Mr. Palefsky is also entitled to
reimbursement for his reasonable expenses incurred in connection with rendering
consulting services to the Company. Mr. Palefsky's options to purchase stock of
the Company shall continue to vest during his period of consultancy and shall,
in any event, be fully vested on conclusion of the consultancy.
In February 1997, the Company entered into an employment agreement with
Gary S. Petersmeyer, the Company's President and Chief Executive Officer,
containing arrangements pursuant to which Mr. Petersmeyer is entitled to
receive, in the event of his involuntary termination (other than for cause) by
the Company (apart from a change of control), a lump sum payment of 12 months
base salary, a lump sum payment equal to Mr. Petersmeyer's scheduled bonus, and
accelerated vesting of any options previously granted to and held by Mr.
Petersmeyer as of the termination date, to the extent that such options would
have vested during the 12 months following the termination date. In the event of
his involuntary termination (other than for cause) by the Company within 24
months following a "change of control," Mr. Petersmeyer is entitled to a lump
sum payment of 24 months base salary, a lump sum payment equal to two times Mr.
Petersmeyer's scheduled bonus, and accelerated vesting of any options previously
granted to and held by Mr. Petersmeyer as of the termination date, to the extent
that such options would have vested during the 24 months following the
termination date.
In December 1997, Charles Williams, Vice President, Operations of Cohesion,
borrowed $150,000 from Cohesion Corporation, pursuant to a promissory note
bearing an annual interest rate of 8.5%, secured by certain real property owned
by Mr. Williams and all shares of Cohesion Corporation Common Stock issued to
Mr. Williams upon exercise of stock options currently held or acquired following
the date of the loan by Mr. Williams while the loan amount is outstanding.
Change of Control Agreements
The Company and Cohesion entered into certain "change of control"
agreements with certain of their respective officers pursuant to which all
options granted to such executive officers to purchase Company Common Stock
shall immediately vest to the extent that such options would have vested during
the 24 months following the termination date, and all options granted to such
executive officers to purchase Cohesion Corporation Common Stock, shall
immediately vest to the extent that such options would have vested during the 24
months following a "change of control," in the event that such officer's
employment is involuntarily terminated without cause within a specified period
of time following a change of control of the Company or Cohesion. Events
constituting a change of control include (i) any person acquiring 50% or more of
the total voting power represented by the Company's or Cohesion's then
outstanding voting securities without the approval of the Company's Board or the
Cohesion Board, respectively; (ii) any person acquiring 50% or more of the total
voting power represented by the Company's or Cohesion's then outstanding voting
securities without the approval of the Company's Board or the Cohesion Board,
respectively; (iii) any merger, sale of assets or liquidation of the Company or
Cohesion in which the Company's or Cohesion's outstanding voting securities
prior to the transaction cease to represent at least 50% of the total voting
power represented by the voting securities of the Company or Cohesion,
respectively or of the surviving entity after the transaction; or (iv) replacing
a majority of the Company's Board or the Cohesion Board.
16
<PAGE> 19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
its executive officers and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission ("SEC"). Specific filing deadlines of these
reports have been established and the Company is required to disclose in this
Proxy Statement any failure to file by these dates during the fiscal year ended
June 30, 1998. To the best of the Company's knowledge, all of these filing
requirements have been satisfied. In making these statements, the Company has
relied solely on written representations of its directors and executive officers
and any ten percent holders and copies of the reports that they filed with the
SEC.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of proxy to vote the shares they represent as
the Board of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
Elias J. Blawie, Secretary
Dated: September 28, 1998
17
<PAGE> 20
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF COLLAGEN AESTHETICS, INC.
1998 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints CHARLENE A. FRIEDMAN, NORMAN L. HALLEEN and
GARY S. PETERSMEYER, and each of them, with full power substitution, as
proxies, and authorizes them to represent and to vote, as designated below, all
the stock of COLLAGEN AESTHETICS, INC. that the undersigned is entitled to
vote at the 1998 Annual Meeting of Stockholders of COLLAGEN AESTHETICS, INC. to
be held on October 28, 1998, at 10:00 a.m., local time, at the Stanford Park
Hotel, 100 El Camino Real, Menlo Park, California 94025, and at any adjournment
or postponement thereof, as indicated on the reverse side.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder(s).
If no direction is made, this proxy will be voted in the Election of
Directors in the manner described in the Proxy Statement, FOR the proposal to
ratify the selection of Ernst & Young LLP as the Company's independent auditors
for the current fiscal year. If this proxy is executed in such manner as not to
withhold authority to vote for the election of any nominee to the Board of
Directors, it shall be deemed to grant such authority.
(Continued, and to be dated and signed on the reverse side.)
COLLAGEN AESTHETICS, INC.
P.O. BOX 11042
NEW YORK, N.Y. 10203-0042
<PAGE> 21
Detach Proxy Card Here
PROPOSAL 1. TO ELECT DIRECTORS TO SERVE FOR THE ENSUING YEAR AND UNTIL THEIR
SUCCESSORS ARE ELECTED.
FOR all nominees WITHHOLD AUTHORITY to vote EXCEPTIONS
listed below /X/ for all nominees listed below /X/ /X/
Nominees: GARY S. PETERSMEYER, ANNE L. BAKAR, FULTON COLLINS, WILLIAM G. DAVIS,
and GERALD LAZARUS, M.D.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and strike a line through that nominee's name)
PROPOSAL 2. TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1999.
FOR /X/ AGAINST /X/ ABSTAIN /X/
PROPOSAL 3. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
Change of Address and or Comments Mark Here /X/
Please sign exactly as name appears to the left.
When shares are held by joint tenants, both
should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please sign
in full corporate name by President or other
authorized officer. If a partnership, please sign
in partnership namely authorized person.
DATED: , 1998
--------------------------------
---------------------------------------------
Signature
---------------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Votes MUST be indicated
(X) in Black or Blue Ink
