<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
File by the Registrant: [X]
Filed by a Party other than the Registrant: [_]
Check the appropriate box:
[_]Preliminary Proxy Statement
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CANDELA CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CANDELA CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (check the appropriate box).
[_]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: Not
Applicable
(2) Aggregate number of securities to which transactions applies: Not
Applicable
(3) Per-unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: Not Applicable
(4) Proposed maximum aggregate value of transaction: Not Applicable
[_]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 see 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: Not Applicable
(2) Form, Schedule, or Registration Statement Number: Not Applicable
(3) Filing party: Not Applicable
(4) Date filed: Not Applicable
<PAGE>
CANDELA CORPORATION
530 BOSTON POST ROAD
WAYLAND, MA 01778
(508) 358-7400
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
An Annual Meeting of Shareholders of Candela Corporation, a Delaware
corporation, will be held on Thursday, November 21, 1996, at 10:00 a.m., at
the Boston Park Plaza Hotel, 64 Arlington Street, Boston, Massachusetts 02116
for the following purposes:
1. To elect a Board of Directors for the ensuing year.
2. To consider and act upon a proposal to ratify the selection of the firm
of Coopers & Lybrand L.L.P. as independent auditors for the fiscal year
ending June 28, 1997.
3. To transact such other business as may properly come before the meeting
and any adjournments thereof.
Shareholders entitled to notice of and to vote at the meeting shall be
determined as of September 27, 1996, the record date fixed by the Board of
Directors for such purpose.
All shareholders are cordially invited to attend the meeting in person. To
ensure your representation at the meeting, however, you are urged to sign and
return the enclosed proxy card as promptly as possible in the enclosed
postage-prepaid envelope. You may revoke your proxy in the manner described in
the accompanying Proxy Statement at any time before it has been voted at the
annual meeting. Any shareholder attending the annual meeting may vote in
person even if he or she has returned a proxy.
By Order of the Board of Directors,
/s/ Gordon H. Hayes, Jr.
Gordon H. Hayes, Jr., Secretary
Wayland, Massachusetts
October 16, 1996
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN THE ENCLOSED PROXY CARD AND RETURN
IT PROMPTLY IN THE ENCLOSED STAMPED ENVELOPE BY RETURN MAIL.
<PAGE>
PROXY STATEMENT
OCTOBER 16, 1996
Proxies in the form enclosed with this Proxy Statement are solicited by the
Board of Directors (the "Board") of Candela Corporation (the "Company") for
use at the Annual Meeting of Shareholders to be held on Thursday, November 21,
1996, at 10:00 a.m. (the "Meeting"), at the Boston Park Plaza Hotel, 64
Arlington Street, Boston, Massachusetts 02116.
Only shareholders of record as of September 27, 1996 (the "Record Date")
will be entitled to vote at the Meeting and any adjournments thereof. As of
that date, 5,847,033 shares of Common Stock, $.01 par value (the "Common
Stock"), of the Company were issued and outstanding.
The holders of Common Stock are entitled to one vote per share on any
proposal presented at the Meeting. Shareholders may vote in person or by
proxy. Execution of a proxy will not in any way affect a shareholder's right
to attend the Meeting and vote in person. Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before it is
voted. Proxies may be revoked by (1) filing with the Secretary of the Company,
before the taking of the vote at the Meeting, a written notice of revocation
bearing a later date than the proxy; (2) duly executing a later-dated proxy
relating to the same shares and delivering it to the Secretary of the Company
before the taking of the vote at the Meeting; or (3) attending the Meeting and
voting in person (although attendance at the Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to Candela Corporation,
530 Boston Post Road, Wayland, Massachusetts 01778, Attention, Secretary, at
or before the taking of the vote at the Meeting.
The persons named as attorneys in the proxies are directors and/or officers
of the Company. All properly executed proxies returned in time to be counted
at the Meeting will be voted and, with respect to the election of the Board of
Directors, will be voted as stated below under "Election of Directors." Any
shareholder submitting a proxy has the right to withhold authority to vote for
any individual nominee to the Board of Directors by writing that nominee's
name on the space provided on the proxy. In addition to the election of
Directors, the shareholders will consider and vote upon a proposal to ratify
the selection of auditors, as further described in this Proxy Statement. Where
a choice has been specified on the proxy with respect to the foregoing
matters, the shares represented by the proxy will be voted in accordance with
the specification and will be voted FOR if no specification is made.
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is
necessary to establish a quorum for the transaction of business. Votes
withheld from any nominee, abstentions and broker non-votes are counted as
present or represented for purposes of determining the presence or absence of
a quorum. A "non-vote" occurs when a broker holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because the
broker does not have discretionary voting power and has not received
instructions from the beneficial owner. Directors are elected by a plurality
of the votes cast by shareholders entitled to vote at the Meeting. All other
matters being submitted to shareholders require the affirmative vote of the
majority of shares present in person or represented by proxy at the Meeting.
An automated system administered by the Company's transfer agent tabulates the
votes. The vote on each matter submitted to shareholders is tabulated
separately. Abstentions are included in the number of shares present or
represented and voting on each matter and, therefore, with respect to votes on
specific proposals, will have the effect of negative votes. Broker "non-votes"
are not so included.
The Board of Directors knows of no other matter to be presented at the
Meeting. If any other matter should be presented at the Meeting upon which a
vote properly may be taken, shares represented by all proxies received by the
Company will be voted with respect thereto in accordance with the judgment of
the persons named as attorneys in the proxies.
The Company's Annual Report, containing financial statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the fiscal year ended June 29, 1996, is being mailed
contemporaneously with this Proxy Statement to all shareholders entitled to
vote. This Proxy Statement and the form of proxy were first mailed to
shareholders on or about the date hereof.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of September 27, 1996 by
(i) each person known to the Company who beneficially owns 5% or more of the
outstanding shares of its Common Stock, (ii) each director or nominee to
become a director of the Company, (iii) each executive officer identified in
the Summary Compensation Table and (iv) all directors and executive officers
of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP (1)
----------------------------------------------
NUMBER AND ADDRESS OF NUMBER OF SHARES PERCENT OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED (1) BENEFICIALLY OWNED (2)
- --------------------- ---------------------- -----------------------
<S> <C> <C>
Gerard E. Puorro(3)............ 156,954 2.7%
Theodore G. Johnson(4)......... 78,349 1.3%
Kenneth D. Roberts(5).......... 34,000 *
Douglas W. Scott(6)............ 20,000 *
Richard J. Cleveland, M.D.(7).. 12,000 *
Robert E. Dornbush(8).......... 295,335 5.0%
James C. Hsia(9)............... 111,968 1.9%
Kenji Shimizu(10).............. 33,750 *
William B. Kelley(11).......... 51,239 *
Richard J. Olsen(12)........... 75,050 1.3%
Singatronics Asset Hold-
ings Private Limited(13)...... 870,146 14.9%
506 Chai Chee Lane
Singapore 469026
William D. Witter, Inc.(14).... 1,302,225 22.3%
153 East 53rd Street
New York, NY 10022
All Directors and Executive
Officers as a Group (11
Persons)(15).................. 872,711 14.9%
</TABLE>
- --------
* Represents less than 1% of the Company's outstanding Common Stock.
(1) Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
beneficially owned by them. The number of shares of Common Stock deemed
outstanding includes shares issuable pursuant to options held by the
respective person or group which may be exercised within 60 days after
the date of this Proxy Statement ("presently exercisable stock options"),
as set forth below.
(2) As of September 27, 1996, there were 5,847,033 shares of the Company's
Common Stock outstanding. Pursuant to the rules of the Securities and
Exchange Commission, presently exercisable stock options held by a person
or group are deemed outstanding for the purpose of computing the
percentage ownership of such person or group.
(3) Includes 155,000 shares issuable pursuant to presently exercisable stock
options.
(4) Includes 25,500 shares issuable pursuant to presently exercisable stock
options.
(5) Includes 20,000 shares issuable pursuant to presently exercisable stock
options. Excludes 3,000 shares held by a trust for the benefit of one of
Mr. Roberts' children as to which Mr. Roberts disclaims beneficial
ownership.
(6) Includes 20,000 shares issuable pursuant to presently exercisable stock
options.
(7) Includes 10,000 shares issuable pursuant to presently exercisable stock
options.
2
<PAGE>
(8) Includes 5,000 shares issuable pursuant to presently exercisable stock
options and warrants to purchase 2,000 shares of Common Stock. Excludes
119,885 shares held by Kenan Greg Loomis which, by virtue of their
expectation that they are likely to act in concert with respect to future
transactions in the Company's securities, each of Messrs. Dornbush and
Loomis may be deemed to own beneficially. However, each of Messrs.
Dornbush and Loomis disclaims voting power and investment power over the
securities of the Company owned by the other. Information based on
Amendment No. 2 to Schedule 13D, dated September 9, 1992, and Amendment
No. 6 to Schedule 13D, dated December 22, 1994 filed with the Securities
and Exchange Commission.
(9) Includes 76,796 shares issuable pursuant to presently exercisable stock
options.
(10) Includes 31,250 shares issuable pursuant to presently exercisable stock
options.
(11) Includes 50,714 shares issuable pursuant to presently exercisable stock
options.
(12) Includes 43,939 shares issuable pursuant to presently exercisable stock
options.
(13) Includes warrants to purchase 39,142 shares of Common Stock. Information
based on Amendment No. 3 to Schedule 13D, dated June 9, 1992 filed with
the Securities and Exchange Commission.
(14) Information based on Amendment No. 2 to Schedule 13G which was filed with
the Securities and Exchange Commission on September 12, 1995, Amendment
No. 4 to Schedule 13G filed on February 16, 1996 and Amendment No. 5 to
Schedule 13G filed on June 21, 1996.
(15) Includes 456,224 shares subject to presently exercisable stock options.
Also includes warrants to purchase 2,000 shares of Common Stock. See
footnotes (2) through (12).
ELECTION OF DIRECTORS
Each Director of the Company is elected to hold office until the next
meeting of shareholders, and until his successor is elected and qualified.
Shares represented by all proxies received by the Company and not so marked as
to withhold authority to vote for any individual nominee for Director or for
all nominees will be voted (unless one or more nominees are unable or
unwilling to serve) for the election of the six nominees named below. The
Board of Directors knows of no reason why any such nominee should be unable or
unwilling to serve, but if such should be the case, proxies will be voted for
the election of another person or for fixing the number of Directors at a
lesser number. All of the nominees are currently Directors of the Company.
Proxies cannot be voted for more than six nominees.
The nominees for Directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gerard E. Puorro........... 49 President, Chief Executive Officer and Director
Theodore G. Johnson........ 64 Director
Kenneth D. Roberts......... 63 Chairman of the Board of Directors
Douglas W. Scott........... 49 Director
Richard J. Cleveland,
M.D. ..................... 64 Director
Robert E. Dornbush......... 49 Director
</TABLE>
Mr. Puorro was appointed a Director of the Company in September 1991. Mr.
Puorro has been President and Chief Executive Officer of the Company since
April 1993. From April 1989 until April 1993, Mr. Puorro was Senior Vice
President and Chief Financial Officer of the Company. Mr. Puorro was elected
Treasurer in April 1991 and Chief Operating Officer in December 1992. Prior to
joining the Company and since 1982, he was Vice President and Controller at
Massachusetts Computer Corporation, a manufacturer of micro-supercomputers.
Mr. Johnson has been a Director of the Company since February 1988. From
1983 until 1991, he managed his own venture capital and consulting business,
Prelude Management, Inc. Since that time, he has been an active venture
investor and director of a number of companies. Prior to that and for twenty-
five years, he was a Vice President at Digital Equipment Company. Mr. Johnson
is currently a Director of Kronos, Inc., Gensym, Inc., and a number of private
companies including Enrollment Collaborative, Inc., a computer-based college
application service.
3
<PAGE>
Mr. Roberts has been a Director of the Company since August 1989 and
Chairman of the Board of Directors since November 1991. From November 1992 to
June 1995, Mr. Roberts was employed on a part-time basis as Vice President and
Chief Financial Officer of Foster Miller, Inc., an engineering services
company. Since December 1988, he has been an independent management
consultant. From July 1986 to December 1988, Mr. Roberts was Vice President,
Treasurer and Chief Financial Officer of Massachusetts Computer Corporation, a
manufacturer of micro-supercomputers. Prior to that and for many years, he was
Senior Vice President and Treasurer of Dynatech Corporation, a provider of
diversified high technology products and services.
Mr. Scott has been a Director of the Company since September 1991. Since
1985, Mr. Scott has been a partner with Phildius, Kenyon & Scott, a health
care consulting and investment firm. Mr. Scott is currently President, Chief
Operating Officer, and a Director of Avitar, Inc., a publicly held health care
company. Mr. Scott also served as Chief Executive Officer of Avitar from
December 1989 through April 1991.
Dr. Cleveland was appointed a Director of the Company in April 1994. He has
been Professor of Surgery at Tufts University School of Medicine since 1972.
In 1986, he was appointed the Andrews Professor of Surgery at the same
institution. From 1975 to 1993, Dr. Cleveland was Chairman of the Department
of Surgery and Surgeon-in-Chief at the New England Medical Center and a member
of the staff of several hospitals in the Boston area. He is presently
Secretary-Treasurer of the American Board of Thoracic Surgery and has held
numerous positions in a variety of other professional associations.
Mr. Dornbush was appointed a Director of the Company in January 1995. He has
been a principal in Co-Development International, a health care consulting
firm, since 1992. In that capacity, he served as a materials management
consultant for Kaiser Permanente from 1994 through 1995. Prior to that, Mr.
Dornbush was President of UNIT Consulting Group. From 1978 through 1991, Mr.
Dornbush held the positions of President and Chief Executive Officer at Itel
Distribution Systems, Inc. and The Dornbush Group, Inc. Mr. Dornbush also is
currently a partner in four real estate entities: Pratezk Partners, Double M
Investments, Dom Associates and Lewis, Wolcott and Dornbush Real Estate, Inc.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met five times during the fiscal year ended June 29,
1996. Each incumbent Director who served on the Board during fiscal 1996
attended all of the Meetings of the Board and committees of the Board on which
he served during that period, except for Messrs. Scott and Dornbush, who
attended less than 75% of such Meetings. The Audit Committee of the Board, of
which Mr. Roberts, Mr. Johnson and Mr. Dornbush were members during fiscal
1996, reviews all financial functions of the Company, including matters
relating to the appointment and activity of the Company's auditors. The Stock
Option and Compensation Committee, of which Dr. Cleveland and Mr. Scott were
members during fiscal 1996, sets the compensation of the Chief Executive
Officer and reviews and approves the compensation arrangements for all other
officers of the Company and administers the Company's 1989 Stock Plan. The
Audit Committee and the Stock Option and Compensation Committee each met two
times during the fiscal year ended June 29, 1996. The Board of Directors does
not have a standing nominating committee.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive a fee of $750 per
meeting of the Board of Directors or committee meeting thereof if held
separately. Directors are also reimbursed for out-of-pocket expenses incurred
in connection with the performance of their duties as a director.
On May 10, 1990, the Board of Directors of the Company adopted the 1990 Non-
Employee Director Plan, which was approved by the Company's shareholders on
November 13, 1990. The 1990 Non-Employee Director
4
<PAGE>
Plan provides for the issuance of options for the purchase of up to 60,000
shares of the Company's Common Stock. Under this plan, each member the
Company's Board of Directors who is neither an employee nor officer of the
Company receives a one-time grant of an option to purchase 10,000 shares of
Common Stock at an exercise price equal to the fair market value on the date
of grant. The options generally become exercisable in equal amounts over a
period of four years from the date of grant, expire seven years after the date
of grant and are nontransferable. Options for the purchase of 30,000 shares
have been granted at a range of exercise prices from $7.75 to $9.25 per share.
Upon shareholder approval of the 1993 Non-Employee Director Stock Option Plan,
the Board of Directors terminated the granting of options under the 1990 Non-
Employee Director Stock Option Plan.
On June 2, 1993, the Board of Directors of the Company adopted the 1993 Non-
Employee Director Stock Option Plan, which was approved by the Company's
shareholders on November 18, 1993. The 1993 Non-Employee Director Plan
provides for the issuance of options for the purchase of up to 80,000 shares
of the Company's Common Stock. Under this Plan, each member of the Company's
Board of Directors who is neither an employee nor an officer of the Company
receives a onetime grant of an option to purchase 10,000 shares of Common
Stock at an exercise price equal to the fair market value on the date of
grant. The options generally become exercisable in equal amounts over a period
of two years from the date of grant, expire ten years after the date of grant
and are nontransferable. Options for the purchase of 50,000 shares have been
granted at exercise prices ranging from $1.50 to $3.25 per share.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
annual and long-term compensation paid or accrued by the Company for services
rendered to the Company, in all capacities, for the year ended June 29, 1996
by its Chief Executive Officer (the "CEO") and the four other most highly paid
executive officers of the Company, in each case whose total salary and bonus
exceeded $100,000 during the year ended June 29, 1996 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS(2) OTHER
-------------------------------- --------------- ---------------
FISCAL OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) COMPENSATION($) OPTIONS/SARS(#) COMPENSATION($)
- --------------------------- ------ --------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Gerald E. Puorro......... 1996 207,615 15,000(3) 50,000(4) 2,376(5)
Chief Executive Officer, 1995 205,085 43,125(3) 100,000 2,590(5)
President & Director 1994 166,904 28,125(3) 0 2,144(5)
James C. Hsia, Ph.D...... 1996 131,019 -- 40,000 2,470(6)
Senior Vice President, 1995 127,453 -- 0 2,673(6)
Research 1994 127,453 -- 3,796 2,412(6)
Kenji Shimizu............ 1996 145,720 -- 0 174(7)
Executive Vice President 1995 135,011 -- 25,000 188(7)
1994 117,338 -- 0 163(7)
William B. Kelley........ 1996 135,520 -- 0 1,934(8)
Vice President, North 1995 135,408 -- 20,000 2,119(8)
American Sales and
Service 1994 122,396 -- 1,514 1,770(8)
Richard J. Olsen......... 1996 124,377 -- 90,000(4) 1,669(9)
Senior Vice President 1995 116,384 -- 20,000 2,028(9)
1994 105,200 -- 3,715 2,023(9)
</TABLE>
- --------
(1) Excludes perquisites and other personal benefits, the aggregate annual
amount of which for each officer was less than the lesser of $50,000 or
10% of the total salary and bonus reported for the named executive
officer.
5
<PAGE>
(2) The Company did not grant any restricted stock awards or stock
appreciation rights ("SARs") or make any long-term incentive plan pay-outs
during the fiscal years ended June 29, 1996, July 1, 1995 or July 2, 1994.
(3) For fiscal 1996, 1995 and 1994, includes $15,000, $43,125 and $28,125 of
debt forgiveness, respectively.
(4) Options for the purchase of shares in Candela Skin Care Centers, Inc., a
subsidiary of the Company.
(5) For fiscal 1996, includes $1,717 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $659 in life insurance premiums
paid by the Company for the benefit of Mr. Puorro. For fiscal 1995,
includes $1,816 in matching contributions by the Company pursuant to the
Company's 401(k) Plan and $714 in life insurance premiums paid by the
Company for the benefit of Mr. Puorro. For fiscal 1994, includes $1,523 in
matching contributions by the Company pursuant to the Company's 401(k)
Plan and $621 in life insurance premiums paid by the Company for the
benefit of Mr. Puorro.
(6) For fiscal 1996, includes $1,773 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $697 in life insurance premiums
paid by the Company for the benefit of Dr. Hsia. For fiscal 1995, includes
$1,912 in matching contributions by the Company pursuant to the Company's
401(k) Plan and $761 in life insurance premiums paid by the Company for
the benefit of Dr. Hsia. For fiscal 1994, includes $1,745 in matching
contributions by the Company pursuant to the Company's 401(k) Plan and
$667 in life insurance premiums paid by the Company for the benefit of Dr.
Hsia.
(7) For fiscal 1996, 1995 and 1994, includes $174, $188 and $163,
respectively, in life insurance premiums paid by the Company for the
benefit of Mr. Shimizu.
(8) For fiscal 1996, includes $1,837 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $97 in life insurance premiums
paid by the Company for the benefit of Mr. Kelley. For fiscal 1995,
includes $2,012 in matching contributions by the Company pursuant to the
Company's 401(k) Plan and $107 in life insurance premiums paid by the
Company for the benefit of Mr. Kelley. For fiscal 1994, includes $1,675 in
matching contributions by the Company pursuant to the Company's 401(k)
Plan and $95 in life insurance premiums paid by the Company for the
benefit of Mr. Kelley.
(9) For fiscal 1996, includes $1,072 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $597 in life insurance premiums
paid by the Company for the benefit of Mr. Olsen. For fiscal 1995,
includes $1,182 in matching contributions by the Company pursuant to the
Company's 401(k) Plan and $846 in life insurance premiums paid by the
Company for the benefit of Mr. Olsen. For fiscal 1994, includes $1,440 in
matching contributions by the Company pursuant to the Company's 401(k)
Plan and $583 in life insurance premiums paid by the Company for the
benefit of Mr. Olsen.
6
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth grants of stock options pursuant to the
Company's 1989 Stock Plan and grants of stock options exercisable for shares
of the Company's subsidiary, Candela Skin Care Centers, Inc., during the
fiscal year ended June 29, 1996 to the Named Executive Officers listed in the
Summary Compensation Table above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
OPTION
INDIVIDUAL GRANTS TERM ($) (1)
-------------------------------------------------- --------------------
PERCENT OF
TOTAL
OPTIONS/SARS
GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED (#) IN FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ------------ -------------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gerard E. Puorro........ 50,000(2) 36%(5) 1.00 5/1/06 31,445 79,687
James C. Hsia, Ph.D. ... 25,000(3) 50% 3.750 10/26/05 58,959 149,413
15,000(4) 30% 9.875 5/2/06 93,155 236,073
Kenji Shimizu........... -- -- -- -- -- --
William B. Kelley....... -- -- -- -- -- --
Richard J. Olsen........ 90,000(2) 64%(5) 1.00 5/1/06 56,600 143,437
-- -- -- -- -- --
</TABLE>
- --------
(1) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation (5% and 10%)
on the Company's Common Stock or the common stock of Candela Skin Care
Centers, Inc., as the case may be, over the term of the options. These
numbers are calculated based on rules promulgated by the Securities and
Exchange Commission and do not reflect the Company's estimate of future
stock price growth. Actual gains, if any, on stock option exercises and
Common Stock holdings are dependent on the timing of such exercise and the
future performance of the Company's Common Stock. There can be no
assurance that the rates of appreciation assumed in this table can be
achieved or that the amounts reflected will be received by the
individuals.
(2) These options, for the purchase of shares of common stock of Candela Skin
Care Centers, Inc., were granted on May 1, 1996 pursuant to the terms of
the 1996 Incentive and Non-Statutory Stock Option Plan of Candela Skin
Care Centers, Inc., have a term of 10 years from the date of grant, become
exercisable over a two-year period, and qualify as incentive stock options
under Section 422 of the Internal Revenue Code.
(3) These options were granted on October 26, 1995, have a term of ten years
from the date of grant and become exercisable over a four year period, and
qualify as incentive stock options under Section 422 of the Internal
Revenue Code.
(4) These options were granted May 2, 1996, have a term of ten years from the
date of grant, become exercisable over a four year period, and qualify as
incentive stock options under Section 422 of the Internal Revenue Code.
(5) Represents percentage of total options granted in Candela Skin Care
Centers, Inc.
7
<PAGE>
OPTION EXERCISES AND FISCAL YEAREND VALUES
The following table sets forth information with respect to options to
purchase (1) the Company's Common Stock granted under the 1987 Stock Option
Plan and 1989 Stock Plan, and (2) shares of the Company's subsidiary, Candela
Skin Care Centers, Inc. including (i) the number of shares purchased upon
exercise of options in the most recent fiscal year, (ii) the net value
realized upon such exercise, (iii) the number of unexercised options
outstanding at June 29, 1996, and (iv) the value of such unexercised options
at June 29, 1996:
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
JUNE 29, 1996 OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT JUNE 29, 1996 (#) AT JUNE 29, 1996 ($) (2)
----------------------------- -------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------------------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerard E. Puorro........ 0 0 130,000 50,000 546,250 421,875
0 0 0 50,000(3) 0 -- (4)
James C. Hsia, Ph.D..... 0 0 76,796 15,000 207,788 0
Kenji Shimizu........... 20,000 68,984 37,500 12,500 157,422 105,469
William B. Kelley....... 0 0 50,714 10,000 229,616 84,375
Richard J. Olsen........ 0 0 43,939 10,000 193,718 84,375
0 0 0 90,000(3) 0 -- (4)
</TABLE>
- --------
(1) Named Executive Officers will receive cash only if and when they sell the
Common Stock issued upon exercise of the options and the amount of cash
received by such individuals is dependent on the value of the Company's
Common Stock at the time of such sale, if any.
(2) Value is based on the difference between option grant price and the fair
market value at 1996 fiscal year end ($8.375 per share as quoted on the
Nasdaq Stock Market at the close of trading on June 29, 1996) multiplied
by the number of shares underlying the option.
(3) These options are for the purchase of shares of Candela Skin Care Centers,
Inc., a subsidiary of the Company.
(4) Value of options to purchase shares of Candela Skin Care Centers, Inc.
cannot be determined due to the lack of a public market. At the time of
grant, the board of directors of Candela Skin Care Centers, Inc.
determined that the exercise price of $1.00 was not less than the fair
market value of shares of Candela Skin Care Centers, Inc.
8
<PAGE>
OPTION REPRICING
The following table sets forth information concerning the repricing of stock
options held by certain executive officers of the Company since June 16, 1986,
the date of the Company's initial public offering, including (i) the date of
repricing; (ii) the number of shares subject to repricing; (iii) the market
price at the time of repricing; (iv) the exercise price prior to repricing;
(v) the new exercise price; and (vi) the original option term remaining at the
date of repricing.
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES ORIGINAL TERM
UNDERLYING MARKET PRICE OF REMAINING AT
OPTIONS/SARS STOCK AT TIME OF EXERCISE PRICE AT NEW DATE OF
DATE OF REPRICED OR REPRICING OR TIME OF REPRICING EXERCISE REPRICING OR
NAME REPRICING AMENDED (#) AMENDMENT ($) OR AMENDMENT ($) PRICE AMENDMENT
---- --------- ------------ ---------------- ----------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerard E. Puorro,....... 7/21/95 5,000 3.1875 5.625 3.1875 3.7 years
Chief Executive 7/21/95 25,000 3.1875 8.750 3.1875 5.9 years
Officer, President &
Director
Kenji Shimizu,.......... 7/21/95 20,000 3.1875 5.75 3.1875 1.6 years
Executive Vice
President
William B. Kelley,...... 8/10/89 1,200 7.375 9.625 7.375 9 years
Vice President, 7/21/95 7,000 3.1875 8.50 3.1875 6 years
North American Sales 7/21/95 6,000 3.1875 8.125 3.1875 6.5 years
and
Service 7/21/95 1,514 3.1875 5.50 3.1875 8.4 years
Richard J. Olsen,....... 8/10/89 17,224 7.375 7.75 7.375 8.5 years
Senior Vice President 7/21/95 17,224(1) 3.1875 7.375 3.1875 2.5 years
7/21/95 3,000 3.1875 8.50 3.1875 6 years
</TABLE>
- --------
(1) In addition to the July 1995 repricing, these options were previously
repriced in August 1989.
COMPENSATION COMMITTEE REPORT ON OPTION REPRICING
On July 21, 1995, the Stock Option and Compensation Committee of the Board
of Directors (the "Compensation Committee") and the Board approved a reduction
in exercise price of certain outstanding stock options held by certain
employees of the Company to $3.1875 per share, the fair market value of the
Company's Common Stock on July 21, 1995. These options were granted between
January 31, 1987 and December 16, 1993 at exercise prices ranging from $5.50
to $14.00 per share. All other terms and conditions of these options,
including vesting schedules and expiration dates, remained unchanged.
As set forth in the Company's Stock Option Plans, stock options are intended
to provide incentives to the Company's officers and employees. The
Compensation Committee believes that such equity incentives are a significant
factor in the Company's ability to attract, retain and motivate key employees
who are critical to the Company's long term success. The Compensation
Committee believed that, at their original exercise prices, the disparity
between the exercise price of these options and recent market prices for the
Company's Common Stock did not provide meaningful incentives to the employees
holding these options. Inquiries conducted indicated that other companies in
the healthcare industry have been confronted with this problem and have made
similar adjustments in option prices to motivate their employees. The
Compensation Committee approved the repricing of these options as a means of
ensuring that optionees will continue to have meaningful equity incentives to
work toward the success of the Company. The adjustment was deemed by the
Compensation Committee to be in the best interest of the Company and its
shareholders.
DOUGLAS W. SCOTT
RICHARD J. CLEVELAND, M.D.
9
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee, which consisted of Mr. Scott and Dr. Cleveland during
fiscal 1996. Both members of the Compensation Committee are nonemployee
directors. Pursuant to the authority delegated by the Board of Directors, the
Compensation Committee each year sets the compensation of the Chief Executive
Officer and reviews and approves the compensation of all other officers,
including approval of annual salaries and bonuses as well as the grant of
stock options to officers and employees.
Compensation Philosophy
The goal of the Company is to attract and retain qualified executives in a
competitive industry. To achieve this goal, the Compensation Committee applies
the philosophy that compensation of executive officers, specifically including
that of the Chief Executive Officer and President, should be linked to revenue
growth, operating results and earnings per share performance.
Under the supervision of the Compensation Committee, the Company has
developed and implemented compensation policies. The Compensation Committee's
executive compensation policies are designed to (i) enhance profitability of
the Company and shareholder value, (ii) integrate compensation with the
Company's annual and long-term performance goals, (iii) reward corporate
performance, (iv) recognize individual initiative, achievement and hard work,
and (v) assist the Company in attracting and retaining qualified executive
officers. Currently, compensation under the executive compensation program is
comprised of cash compensation in the form of annual base salary and long-term
incentive compensation in the form of stock options.
Base Salary
In setting cash compensation for the Chief Executive Officer and reviewing
and approving the cash compensation for all other officers, the Compensation
Committee reviews salaries annually. The Compensation Committee's policy is to
fix base salaries at levels comparable to the amounts paid to senior
executives with comparable qualifications, experience and responsibilities at
other companies of similar size and engaged in a similar business to that of
the Company. In addition, the base salaries take into account the Company's
relative performance as compared to comparable companies.
The salary compensation for the executive officers is based upon their
qualifications, experience and responsibilities, as well as the attainment of
planned objectives. The Chief Executive Officer and President makes
recommendations to the Compensation Committee regarding the planned objectives
and executive compensation levels. The overall plans and operating performance
levels upon which management compensation is based are approved by the
Compensation Committee on an annual basis. During fiscal 1996, the Chief
Executive Officer and President made recommendations for salary increases for
the executive group, and the Compensation Committee granted increases ranging
from 0% to 7.3%.
Stock Options
The Compensation Committee relies on incentive compensation in the form of
stock options to retain and motivate executive officers. Incentive
compensation in the form of stock options is designed to provide long-term
incentives to executive officers and other employees, to encourage the
executive officers and other employees to remain with the Company and to
enable them to develop and maintain a stock ownership position in the
Company's Common Stock. The Company's 1987 Stock Option Plan and 1989 Stock
Plan, administered by the Compensation Committee, have been used for the
granting of stock options. The Board of Directors has terminated the granting
of options under the 1987 Stock Option Plan.
The 1989 Stock Plan permits the Compensation Committee to grant stock
options to eligible employees, including executive officers. Options generally
become exercisable based upon a vesting schedule tied to years of future
service to the Company. The value realizable from exercisable options is
dependent upon the extent to
10
<PAGE>
which the Company's performance is reflected in the market price of the
Company's Common Stock at any particular point in time. Equity compensation in
the form of stock options is designed to provide long-term incentives to
executive officers and other employees. The Compensation Committee has granted
options in order to motivate these employees to maximize shareholder value.
Generally, options granted to officers and employees vest over 2 or 4 years
and expire after a 10-year period. The Compensation Committee has a general
practice of awarding stock options at not less than the fair market value at
the date of grant. As a result of this policy, executives and other employees
are rewarded economically only to the extent that the shareholders also
benefit through appreciation in the market.
Options granted to employees are based on such factors as individual
initiative, achievement and performance. In making grants to executives, the
Compensation Committee evaluates each officer's total equity compensation
package. The Compensation Committee generally reviews the option holdings of
each of the executive officers, including vesting and exercise price and the
then current value of such unvested options. The Compensation Committee
considers equity compensation to be an integral part of a competitive
executive compensation package and an important mechanism to align the
interests of management with those of the Company's shareholders. In fiscal
1996, Mr. Hsia was granted options to purchase shares of Common Stock. In
addition, Mr. Olsen and Mr. Puorro were granted options in Candela Skin Care
Centers, Inc., a subsidiary of the Company.
Mr. Puorro's Compensation
The cash compensation program for the Chief Executive Officer and the
President of the Company is designed to reward performance that enhances
shareholder value. The compensation package is comprised of base pay and stock
options, which is affected by the Company's revenue growth, market share
growth, profitability, and growth in earnings per share.
Mr. Gerard E. Puorro was promoted from Senior Vice President, Chief
Operating Officer and Chief Financial Officer to Chief Executive Officer and
President in April 1993 without an increase in salary, but with a grant of an
option to purchase 50,000 shares of Common Stock and an agreement to forgive a
$56,250 loan. Fiscal 1994 was a year of rebuilding the Company and returning
it to profitability. During fiscal 1994, the Compensation Committee did not
increase Mr. Puorro's salary but agreed to provide and forgive a $45,000 loan.
See "Certain Transactions." In August 1994, the Compensation Committee and Mr.
Puorro agreed on a new employment contract. As part of this agreement, Mr.
Puorro's cash compensation was increased to $190,000 per year. This figure was
unchanged in fiscal 1996. The Compensation Committee believes that Mr.
Puorro's cash compensation has been, and is now, comparable to the salary of
other Chief Executive Officers in other medical equipment companies,
considering the size and rate of profitability of those companies. Under his
employment agreement, Mr. Puorro is also allowed to offset withholding taxes
due on income derived from his loan forgiveness with cash compensation of
$3,000 and up to four weeks of accrued vacation. In addition, Mr. Puorro was
granted an option to purchase 100,000 shares of Common Stock of the Company
and 50,000 shares of common stock of Candela Skin Care Centers, Inc., in
fiscal 1995 and 1996, respectively.
The Compensation Committee is satisfied that the executive officers of the
Company are dedicated to achieving significant improvements in the long-term
financial performance of the Company and that the compensation policies and
programs implemented and administered have contributed and will continue to
contribute towards achieving this goal.
This report has been submitted by the members of the Stock Option and
Compensation Committee:
DOUGLAS W. SCOTT
RICHARD J. CLEVELAND, M.D.
11
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph illustrates a five year comparison of cumulative total
shareholder return among the Company, the Nasdaq National Market Index and the
Company's "Industry Index." The Company selected an index of companies in the
electro-medical equipment industry as its industry group. Accordingly, the
Industry Index reflects the performance of all companies that are included in
the electro-medical equipment industry with 3845 as their Primary Standard
Industrial Classification Code Number. The comparison assumes $100 was invested
on June 30, 1991 (the date of the beginning of the Companys fifth preceding
fiscal year) in the Company's Common Stock and in each of the foregoing indices
and assumes reinvestment of dividends, if any.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Candela Laser Corp. Industry Index NASDAQ Market Index
<S> <C> <C> <C>
1991 100 100 100
1992 115.38 120.36 107.75
1993 36.92 102.36 132.27
1994 38.46 106.44 145.04
1995 24.62 172.03 170.11
1996 103.08 233.87 214.14
</TABLE>
EMPLOYMENT CONTRACTS
The Company has a severance agreement with each of Messrs. Puorro, Hsia,
Shimizu, Kelley and Olsen. Under the Company's agreements with Messrs. Puorro,
Hsia, Shimizu, Kelley and Olsen, each of them is entitled to continue to
receive from the Company their respective base annual salary over 12 months in
the event that their services for the Company are terminated for any reason
except resignation. Under the Company's agreement with Mr. Puorro, he is
entitled to receive 18 months of severance in the event that there is a change
in control of the Company as defined by the agreement. See "Compensation
Committee Report on Executive Compensation."
CERTAIN TRANSACTIONS
The Company had two non-interest bearing loans outstanding to Gerard Puorro,
Director, President, and Chief Executive Officer. As of September 27, 1996, the
total outstanding balance of these loans was $15,000. The highest amount
outstanding during fiscal 1995 was $30,000. By agreement with the Company, the
loans will be forgiven, subject to Mr. Puorro's continued employment with the
Company, in annual installments at various dates through June 30, 1997.
12
<PAGE>
SECTION 16(A) REPORTING DELINQUENCIES
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and persons
who own more than 10% of a registered class of the Company's equity
securities, to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission (the "SEC"). Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms they file. James Hsia, Theodore Johnson, Richard
Cleveland, Richard Olsen and Jay Caplan failed to timely file an Annual
Statement of Beneficial Ownership of Securities on Form 5. These forms, which
were due on August 14, 1996. Mr. Hsias form was filed with the SEC on August
27, and the remaining forms were filed on or about October 16 1996. The
foregoing information is based solely on the Company's review of the copies of
such forms received by it or written representations from certain reporting
persons that no Forms 5 were required to be filed.
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Coopers & Lybrand L.L.P.,
independent certified public accountants, to serve as auditors for the fiscal
year ending June 28, 1997. Coopers & Lybrand L.L.P. has acted as the Company's
independent auditors since March 1989. It is expected that a member of Coopers
& Lybrand L.L.P. will be present at the Annual Meeting of Shareholders with
the opportunity to make a statement if so desired and will be available to
respond to appropriate questions.
The Board of Directors recommends a vote FOR ratification of its selection
of Coopers & Lybrand L.L.P. as independent auditors for the fiscal year ending
June 28, 1997.
SHAREHOLDER PROPOSALS
The Company intends to hold its 1997 Annual Meeting of Shareholders in the
second fiscal quarter of 1997. Proposals of shareholders intended for
inclusion in the Proxy Statement to be mailed to all shareholders entitled to
vote at the next Annual Meeting of Shareholders of the Company in 1997 must be
received at the Company's principal executive offices not later than June 6,
1997. In order to avoid uncertainty as to the date on which a proposal was
received by the Company, it is suggested that proponents submit their
proposals by Certified Mail Return Receipt Requested to Candela Corporation,
530 Boston Post Road, Wayland, Massachusetts 01778.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Company, and in
addition to directly soliciting shareholders by mail, the Company may request
banks and brokers to solicit their customers who have stock of the Company
registered in the name of a nominee and, if so, will reimburse such banks and
brokers for their reasonable out-of-pocket costs. Solicitation by officers and
employees of the Company may also be made of some shareholders in person or by
mail or telephone, following the original solicitation. The Company may, if
appropriate, retain an independent proxy solicitation firm to assist the
Company in soliciting proxies. If the Company does retain a proxy solicitation
firm, the Company would pay such firm customary fees and expenses.
13
<PAGE>
DETACH HERE
CANDELA CORPORATION
P Proxy for the Annual Meeting of Shareholders
R
O November 21, 1996
X
Y THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
CANDELA CORPORATION
The undersigned hereby appoints Gerard E. Puorro and James C. Hsia, and
each of them alone, proxies, with full power of substitution, to vote all shares
of stock of the Company.
The undersigned is entitled to vote at the Annual Meeting of
Shareholders of Candela Corporation to be held on Thursday, November 21, 1996,
at 10:00 a.m., local time, at the Boston Park Plaza Hotel, 64 Arlington Street,
Boston, Massachusetts 02116, and at any adjournments thereof, upon matters set
forth in the Notice of Annual Meeting of Shareholders and Proxy statement dated
October 16, 1996, a copy of which has been received by the undersigned.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE
PROPOSAL IN ITEM 2, AND AUTHORITY WILL BE DEEMED GRANTED UNDER ITEM 3.
-------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-------------
<PAGE>
DETACH HERE
Please mark
[X]votes as in
this example.
1. To elect a Board of Directors for the ensuing year.
Nominees: Gerard E. Puorro, Theodore G. Johnson,
Kenneth D. Roberts, Douglas W. Scott, Richard J.
Cleveland, M.D. and Robert E. Dornbush.
FOR WITHHELD
[_] ALL [_] FROM ALL
NOMINEES NOMINEES
[_]____________________________________
FOR all nominees except as noted above
2. To ratify the appointment of the firm of FOR AGAINST ABSTAIN
Coopers & Lybrand L.L.P. as independent [_] [_] [_]
auditors of the Company for the fiscal
year ending June 28, 1997.
3. To transact such other business as may properly come
before the meeting and any adjournments thereof.
MARK HERE FOR
ADDRESS CHANGE [_]
AND NOTE TO LEFT
(If signing as attorney, executor, trustee or guardian,
please give your full title as such. If stock is held
jointly, each owner should sign.)
