<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Candela Corporation
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--Enter Company Name Here--
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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>
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 Tuesday, January 12, 1999, at 10:00 a.m., at the
Exchange Hall, The Exchange Conference Center at the Boston Fish Pier, 212
Northern Avenue, Boston, Massachusetts 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 PricewaterhouseCoopers LLP as independent auditors for the fiscal
year ending June 26, 1999.
3. To consider and act upon a proposal to ratify adoption of the 1998
Stock Plan.
4. To transact any 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 December 1, 1998, 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
December 4, 1998
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
DECEMBER 4, 1998
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 Tuesday, January 12,
1998, at 10:00 a.m. (the "Meeting"), at the Exchange Hall, The Exchange
Conference Center at the Boston Fish Pier, 212 Northern Avenue, Boston,
Massachusetts.
Only shareholders of record as of December 1, 1998 (the "Record Date") will
be entitled to vote at the Meeting and any adjournments thereof. As of that
date, 5,481,686 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 26, 1998, 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.
1
<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 December 1, 1998 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 OF SHARES PERCENT OF SHARES
NUMBER AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
- -------------------------------------- ------------------ ------------------
<S> <C> <C>
Gerard E. Puorro(2)...................... 193,952 3.4%
Theodore G. Johnson(3)................... 85,849 1.6%
Kenneth D. Roberts(4).................... 51,500 *
Douglas W. Scott(5)...................... 28,750 *
Richard J. Cleveland, M.D.(6)............ 32,502 *
Robert E. Dornbush(7).................... 319,835 5.8%
James C. Hsia(8)......................... 104,672 1.9%
William B. Kelley(9)..................... 69,525 1.3%
Singatronics Asset Holdings Private 831,004 15.2%
Limited(10).............................
506 Chai Chee Lane
Singapore 469026
William D. Witter, Inc.(11).............. 1,298,733 23.7%
153 East 53rd Street
New York, NY 10022
Massachusetts Capital Resource 300,000 5.19%
Company(12).............................
The Berkley at 420 Boylston Street
Boston, MA 02116
All Directors and Executive
Officers as a Group (14 Persons)(13).... 926,112 16.7%
</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. Pursuant to the rules of the Securities and
Exchange Commission the number of shares of Common Stock deemed
outstanding includes, for each person or group referred to in the table,
shares issuable pursuant to options held by the respective person or
group which may be exercised within 60 days after December 1, 1998.
(2) Includes 190,527 shares issuable pursuant to stock options exercisable
within the 60 day period following December 1, 1998.
(3) Includes 28,000 shares issuable pursuant to stock options exercisable
within the 60 day period following December 1, 1998.
(4) Includes 37,500 shares issuable pursuant to stock options exercisable
within the 60 day period following December 1, 1998. 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.
2
<PAGE>
(5) Includes 22,500 shares issuable pursuant to stock options exercisable
within the 60 day period following December 1, 1998.
(6) Includes 25,502 shares issuable pursuant to stock options exercisable
within the 60 day period following December 1, 1998.
(7) Includes 22,500 shares issuable pursuant to stock options exercisable
within the 60 day period following December 1, 1998 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.
(8) Includes 73,000 shares issuable pursuant to stock options exercisable
within the 60 day period following December 1, 1998.
(9) Includes 69,000 shares issuable pursuant to stock options exercisable
within the 60 day period following December 1, 1998.
(10) 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.
(11) Information based on Amendment No. 2 to Schedule 13D which was filed with
the Securities and Exchange Commission on January 30, 1998.
(12) Includes warrants to purchase 300,000 shares of Common Stock.
(13) Includes 505,726 shares subject to stock options exercisable within the
60 day period following December 1, 1998. Also includes warrants to
purchase 2,000 shares of Common Stock.
PROPOSAL NO. 1--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>
President, Chief Executive Officer and
Gerard E. Puorro.................... 51 Director
Kenneth D. Roberts.................. 65 Chairman of the Board of Directors
Theodore G. Johnson................. 66 Director
Douglas W. Scott.................... 52 Director
Richard J. Cleveland, M.D........... 66 Director
Robert E. Dornbush.................. 51 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. Puorro became acting Chief Executive Officer of Candela Skin Care Centers,
Inc. in June 1997.
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 time and for many years,
he was Senior Vice President and Treasurer of Dynatech Corporation, a provider
of diversified high technology products and services.
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.
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 time,
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 five real estate entities: Pratezk Partners, Double
M Investments, Dom Associates, Westside Development 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 28,
1997. Each incumbent Director who served on the Board during fiscal 1997
attended at least 75% of the Meetings of the Board and committees of the Board
on which he served during that period. The Audit Committee of the Board, of
which Mr. Roberts, Mr. Johnson and Mr. Dornbush were members during fiscal
1997, 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 1997, 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 met once and the Stock Option and Compensation Committee met
three times during the fiscal year ended June 28, 1997. 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.
4
<PAGE>
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 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 of 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. Including cancellations, options for the purchase of 66,500
shares have been granted at a range of exercise prices from $3.25 to $14.50
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. To date, options for the purchase of 50,000 shares
have been granted at exercise prices ranging from $1.625 to $3.25 per share.
On December 24, 1996, Dr. Cleveland, a director of the Company, was granted
non-statutory options to purchase 20,000 shares of the common stock of Candela
Skin Care Centers, Inc., a subsidiary of the Company, at an exercise price of
$1.00. These non-statutory options were granted pursuant to the terms of the
Candela Skin Care Centers, Inc. 1996 Incentive and Non-Statutory Stock Option
Plan, have a term of 10 years from the date of grant and become exercisable
over a four-year period. On August 21, 1997, options granted under the CSCC
Plan were converted to options in Candela Corporation at the rate of 0.21053
Candela Corporation options for each CSCC option. Mr. Cleveland realized
options for 4,211 Candela Corporation as a result of this conversion.
On August 14, 1997, Non-Qualified Options to purchase 10,000 shares of the
Company's Common Stock were granted to each of Theodore G. Johnson, Kenneth D.
Roberts, Richard J. Cleveland, Douglas W. Scott and Robert E. Dornbush, at an
exercise price of $4.688 per share, such price being the market price of the
Common Stock on the date of the grant. These Non-Qualified Options were
granted pursuant to the Company's 1989 Stock Plan (the "Plan") and vest in
equal 50% amounts on each of the first and second anniversaries of the date of
the grant, provided that each such optionee continues to serve as a director
of the Corporation on such anniversary date.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation paid or accrued by the Company for services rendered to the
Company, in all capacities, for the year ended June 27, 1998 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
$100,000 during the year ended June 27, 1998 (collectively, the "Named
Executive Officers").
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
------------------------- ---------------
NAME AND PRINCIPAL FISCAL OTHER ANNUAL AWARDS(2) ALL OTHER
POSITION YEAR SALARY($) COMPENSATION($) OPTIONS/SARS(#) COMPENSATION($)
- ------------------ ------ --------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Gerard E. Puorro ....... 1998 237,500 114,885(3) 10,527(4) 4,972(5)
Chief Executive Offi-
cer, 1997 209,792 15,000(3) 100,000(4) 3,046(5)
President and Director 1996 207,615 15,000(3) 50,000(4) 2,376(5)
James C. Hsia, Ph.D. ... 1998 155,000 105,188(6) 33,000(7) 2,942(8)
Senior Vice President, 1997 141,686 -- 20,000(7) 2,935(8)
Research 1996 131,019 -- 40,000(7) 2,470(8)
William B. Kelley ...... 1998 163,942 65,188(9) -- 2,443(10)
Vice President, North 1997 156,988 -- 25,000 2,401(10)
American Sales and
Service 1996 135,520 -- -- 1,934(10)
Jay D. Caplan .......... 1998 130,000 54,674(9) 5,000 2,100(12)
Vice President, Opera-
tions 1997 120,000 -- 20,000(11) 1,920(12)
1996 102,500 -- 12,525(11) --
Robert Wilber .......... 1998 108,844 46,772(9) 15,000 8,009(13)
Vice President--World-
wide 1997 93,301 5,000 -- 12,433(13)
Service 1996 86,554 -- 3,250 8,956(13)
</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.
(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 27, 1998, June 28, 1997 or
June 29, 1996.
(3) Fiscal years 1998, 1997 and 1996, each includes $15,000 for debt
forgiveness. Fiscal 1998 also includes incentive bonus of $99,885.
(4) Options granted in fiscal 1996 for the purchase of 50,000 shares in
Candela Skin Care Centers, Inc., a subsidiary of the Company, were
converted to 10,527 during the fiscal year ended June 27, 1998. All
rights and interests in options granted in fiscal 1997 to purchase
100,000 shares at $7.50 per share were forfeited during fiscal 1998.
(5) For fiscal 1998, includes $2,375 in matching contributions by the Company
pursuant to the Company's 401(k) Plan, $766 in life insurance premiums
paid by the Company for the benefit of Mr. Puorro, and $1,831 for a
Company provided automobile. For fiscal 1997, includes $2,320 in matching
contributions by the Company pursuant to the Company's 401(k) Plan and
$726 in life insurance premiums paid by the Company for the benefit of
Mr. Puorro. 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.
(6) Includes $65,188 incentive bonus approved by Board of Directors, based on
Company results for second half of Fiscal 1998. Additionally, includes an
Inventor's Bonus of $40,000 which was awarded to Dr. Hsia in fiscal 1998
for recognition of his involvement with the GentleLase.
(7) During fiscal 1998 options granted in fiscal 1991 to purchase 8,000
shares of stock at $8.75 and options granted in fiscal 1992 to purchase
25,000 shares of stock were repriced at $3.25 per share. All rights and
interests in options granted in fiscal 1996 to purchase 15,000 shares at
$9.875 per share and options granted in fiscal 1997 to purchase 20,000
shares at $7.50 were forfeited during fiscal 1998.
(8) For fiscal 1998, includes $2,144 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $798 in life insurance premiums
paid by the Company for the benefit of Dr. Hsia. For fiscal 1997,
includes $2,175 in matching contributions by the Company pursuant to the
Company's 401(k) Plan and $760 in life insurance premiums paid by the
Company for the benefit of Dr. Hsia. 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.
(9) Incentive bonus approved by Board of Directors, based on Company results
for second half of Fiscal 1998.
6
<PAGE>
(10) For fiscal 1998, includes $2,325 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $118 in life insurance premiums
paid by the Company for the benefit of Mr. Kelley. For fiscal 1997,
includes $2,291 in matching contributions by the Company pursuant to the
Company's 401(k) Plan and $110 in life insurance premiums paid by the
Company for the benefit of Mr. Kelley. 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.
(11) All rights and interests in options granted in fiscal 1996 to purchase
10,000 shares at $9.875 per share and options granted in fiscal 1997 to
purchase 20,000 shares at $7.50 were forfeited during fiscal 1998.
(12) For fiscal 1998, includes $1,950 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $150 in life insurance premiums
paid by the Company for the benefit of Mr. Caplan. For fiscal 1997,
includes $1,771 in matching contributions by the Company pursuant to the
Company's 401(k) Plan and $149 in life insurance premiums paid by the
Company for the benefit of Mr. Caplan.
(13) For fiscal 1998, includes $1,533 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $6,476 in commissions paid on
service contracts sold to customers. For fiscal 1997, includes $1,639 in
matching contributions by the Company pursuant to the Company's 401(k)
Plan and $10,794 in commissions paid on service contracts sold to
customers. For fiscal 1996, includes $1,406 in matching contributions by
the Company pursuant to the Company's 401(k) Plan and $7,550 in
commissions paid on service contracts sold to customers.
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth grants of stock options pursuant to the
Company's 1989 Stock Plan during the fiscal year ended June 27, 1998 to the
Named Executive Officers listed in the Summary Compensation Table above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
ANNUAL RATES
OF
PERCENT OF STOCK PRICE
TOTAL APPRECIATION
OPTIONS/ EXERCISE FOR
GRANTED TO OF BASE OPTIONS(1)
OPTION EMPLOYEES IN PRICE EXPIRATION --------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 10%
---- ----------- ------------ --------- ----------- 5% -------
<S> <C> <C> <C> <C> <C> <C>
Gerard E. Puorro........ 10,527(2) 5.43% 4.75 8/21/07 31,447 79,692
James C. Hsia, Ph.D..... 33,000(3) 17.03% 3.25 4/24/08 67,449 170,929
William B. Kelley....... -- 0% -- -- -- --
Jay D. Caplan........... 5,000 2.58% 4.688 8/14/07 14,741 37,357
Robert Wilber........... 15,000 7.74% 4.688 8/14/07 44,224 112,072
</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, 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 were granted in fiscal 1996 for the purchase of 50,000
shares in Candela Skin Care Centers, Inc., a subsidiary of the Company,
and converted to 10,527 options in the Company on August 21, 1997. These
options have a term of ten years from the date of conversion, become
exercisable one year from the date of conversion, and qualify as incentive
stock options under Section 422 of the Internal Revenue Code.
(3) Options for 8,000 shares, granted in fiscal 1991 at $8.75 per share were
repriced on April 27, 1998, have a term of 10 years from the date of
repricing, and are 100% vested at the date of repricing. Options for
25,000 shares, granted in fiscal 1992 at $8.125 per share were repriced on
April 27, 1998, have a term of 10 years from the date of repricing, and
are 100% vested at the date of repricing.
7
<PAGE>
OPTION EXERCISES AND FISCAL YEAR END VALUES
The following table sets forth information with respect to options to
purchase (1) the Company's Common Stock granted under the 1987 Stock Option
Plan and 1989 Stock Plan, and (2) shares of the Company's subsidiary, Candela
Skin Care Centers, Inc. including (i) the number of shares purchased upon
exercise of options in the most recent fiscal year, (ii) the net value
realized upon such exercise, (iii) the number of unexercised options
outstanding at June 27, 1998, and (iv) the value of such unexercised options
at June 27, 1998:
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
JUNE 27, 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT JUNE 27, 1998 IN-THE-MONEY OPTIONS
SHARES VALUE (#) AT JUNE 27, 1998 ($)(2)
ACQUIRED ON REALIZED -------------------------- -------------------------
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerard E. Puorro........ -- -- 155,000(3) 35,527(3) 4,725 1,575
James C. Hsia, Ph.D. ... -- -- 76,796(4) --(4) -- --
William B. Kelley....... -- -- 60,464 23,750 850 315
Jay Caplan.............. -- -- 4,525(5) 5,000(5) -- --
Robert Wilber........... -- -- 8,750 17,500 2,032 2,032
</TABLE>
- --------
(1) Named Executive Officers will receive cash only if and when they sell the
securities issued upon exercise of the options and the amount of cash
received by such individuals is dependent on the value of such securities
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 1998 fiscal year end ($2.813 per share as quoted on the
NASDAQ Stock Market at the close of trading on June 26, 1998) multiplied
by the number of shares underlying the option.
(3) All rights and interests in options granted in fiscal 1997 to purchase
100,000 shares at $7.50 per share were forfeited during fiscal 1998.
(4) All rights and interests in options granted in fiscal 1996 to purchase
15,000 shares at $9.875 per share and options granted in fiscal 1997 to
purchase 20,000 shares at $7.50 were forfeited during fiscal 1998.
(5) All rights and interests in options granted in fiscal 1996 to purchase
10,000 shares at $9.875 per share and options granted in fiscal 1997 to
purchase 20,000 shares at $7.50 were forfeited during fiscal 1998.
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 27, 1988,
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>
NO. OF MARKET LENGTH OF
SECURITIES PRICE ORIGINAL TERM
UNDERLYING OF STOCK AT EXERCISE REMAINING
OPTIONS/ TIME OF PRICE AT AT DATE OF
SAR'S REPRICING TIME OF NEW REPRICING
DATE OF REPRICED OR OR REPRICING EXERCISE OF
NAME REPRICING AMENDED (#) AMENDMENT $ 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
7/21/95 25,000 3.1875 8.750 3.1875 5.9 years
James C. Hsia, PhD. .... 4/27/98 8,000 3.25 8.75 3.25 3.0 years
4/27/98 25,000 3.25 8.125 3.25 3.75 years
William B. Kelley....... 8/10/89 1,200 7.375 9.625 7.375 9.0 years
7/21/95 7,000 3.1875 8.50 3.1875 6.0 years
7/21/95 6,000 3.1875 8.125 3.1875 6.5 years
7/21/95 1,514 3.1875 5.50 3.1875 8.4 years
Robert Wilber........... 7/21/95 750 3.1875 6.82 3.1875 4.25 years
7/21/95 1,500 3.1875 8.50 3.1875 6.1 years
7/21/95 1,000 3.1875 8.125 3.1875 6.5 years
Jay Caplan.............. 7/21/95 525 3.1875 5.75 3.1875 3.9 years
7/21/95 2,000 3.1875 8.50 3.1875 6.0 years
</TABLE>
COMPENSATION COMMITTEE REPORT ON OPTION REPRICING
On April 27, 1998, 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 James C. Hsia,
Ph.D., Senior Vice President of the Company to $3.25 per share, the fair
market value of the Company's Common Stock on April 27, 1998. These options
were granted in fiscal 1991 and fiscal 1992 at exercise prices ranging from
$8.125 to $8.75 per share. Terms and conditions of the repriced options
reflect full vesting at the time of repricing, with a term of 10 years.
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. 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 1998. Both members of the Compensation Committee are non-employee
directors. Pursuant to the authority delegated by the Board of Director's the
Compensation Committee each year sets the compensation of the Chief Executive
Officer and reviews and approves the compensation of all other senior
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, bonus, 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 1998, the Chief
Executive Officer and President made recommendations for salary increases for
the executive group, and the Compensation Committee granted an increase of 5%
to one executive officer.
Bonus Compensation
In addition to salary compensation, on January 19, 1998, the Compensation
Committee established a Management Incentive Plan whereby senior executives
recommended by the Chief Executive Officer and approved for inclusion in the
Plan by the Compensation Committee receive bonus compensation based on a
percentage of base salary. Bonuses paid under this Plan were a percentage of
base salary for the second half of fiscal 1998 and were based on pre-tax
profits, after bonus, for the third and fourth quarters and for the device
business only. Bonuses paid were 42% of applicable annual salaries and totaled
$425,699 in the aggregate.
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
10
<PAGE>
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 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
1998, options to purchase shares of Common Stock were granted to Mr. Broyer,
Mr. Caplan, Mr. Hsia, Mr. Puorro, and Mr. Wilber.
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. In fiscal 1998, Mr.
Puorro's cash compensation remained at $237,500 per year. Additionally,
outstanding options to purchase 50,000 shares in Candela Skin Care Centers,
Inc., a subsidiary of the Company, were exchanged for options to purchase
10,527 shares of Common Stock of the Company. The Compensation Committee
believes that Mr. Puorro's 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.
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 toward 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, 1992 (the date of the beginning of the Company's fifth
preceding fiscal year) in the Company's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends, if any.
Candela graph appears here
- -----------------------------FISCAL YEAR ENDING-------------------------------
<TABLE>
<CAPTION>
COMPANY/INDEX/MARKET 7/02/1993 7/01/1994 6/30/1995 6/28/1996 6/27/1997 6/26/1998
<S> <C> <C> <C> <C> <C> <C>
Candela Corp. 100.00 104.17 66.67 279.17 208.33 93.75
Electromedical Equipment 100.00 103.74 167.66 227.94 269.86 352.36
NASDAQ Market Index 100.00 109.66 128.61 161.89 195.02 258.52
</TABLE>
EMPLOYMENT CONTRACTS
The Company has a severance agreement with each of Messrs. Puorro, Hsia,
Broyer, Kelley and Caplan. Under the Company's agreements the Company has
agreed to continue payment of 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.
PROPOSAL NO. 2--RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of PricewaterhouseCoopers LLP,
independent certified public accountants, to serve as auditors for the fiscal
year ending June 26, 1999. PricewaterhouseCoopers LLP has acted as the
Company's independent auditors since March 1989. It is expected that a member
of PricewaterhouseCoopers LLP 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 PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING JUNE 26, 1999.
12
<PAGE>
PROPOSAL NO. 3--APPROVAL OF THE ADOPTION OF THE 1998 STOCK PLAN
On September 19, 1998, the Board of Directors adopted the 1998 Stock Option
Plan (the "1998 Stock Plan"), subject to the approval of the Company's
shareholders. The 1998 Stock Plan provides for the grant of incentive stock
options to employees, the grant of non-qualified stock options to employees,
consultants, directors and officers of the Company, awards of stock of the
Company or the opportunity to make direct stock purchases of shares of the
Company.
The Company's 1998 Stock Plan was adopted by the Board of Directors of the
Company to replace the Company's 1989 Stock Option Plan (the "1989 Stock
Plan") which expires pursuant to its terms on February 6, 1999. The Board of
Directors voted to terminate the 1989 Stock Plan earlier in the event that the
shareholders approve the adoption of the 1998 Stock Plan. In such event, the
1989 Stock Plan shall be terminated as to the grant of any new options
thereunder effective immediately upon the date of shareholder approval of the
1998 Stock Plan. If the shareholders fail to approve the adoption of the 1998
Stock Plan then the 1989 Stock Plan shall remain in effect until such plan
expires by its terms on February 6, 1999. As of December 1, 1998, options to
purchase 987,280 shares of Common Stock (net of cancellations) were issued
under the 1989 Stock Plan of which options to purchase 789,989 shares of
Common Stock were outstanding. Information with respect to the number of
options granted to the Named Officers during 1997 appears under the heading
"Option Grants in Last Fiscal Year." Additional information regarding option
grants may be found in the table under the heading "Option Information" set
forth below.
The following is a summary description of the 1998 Stock Plan, which is
qualified in its entirety by reference to the complete text of the 1998 Stock
Plan which is attached as Appendix A to this Proxy Statement.
SUMMARY OF THE 1998 STOCK PLAN
Purpose. The purpose of the 1998 Stock Plan is to encourage key employees of
the Company and other individuals who render services to the Company by
providing opportunities to purchase stock of the Company pursuant to the 1998
Stock Plan.
Shares Subject to the 1998 Stock Plan. The Board of Directors has reserved a
maximum of 500,000 shares of Common Stock for issuance under the 1998 Stock
Plan.
Eligibility. The 1998 Stock Plan provides for (i) the grant of incentive
stock options ("ISOs") within the meaning of Section 422 of the Code to
employees of the Company, (ii) the grant of non-qualified stock options
("NQSOs") to employees, consultants, directors and officers of the Company,
(iii) awards of stock in the Company ("Awards") and (iv) opportunities to make
direct purchases of stock in the Company ("Purchases"). ISOs, Non-Qualified
Options, Awards and Purchases are sometimes collectively referred to as "Stock
Rights" and ISOs and Non-Qualified Options are sometimes collectively referred
to as "Options." Currently, approximately 148 employees (including directors
who are also employees and officers of the Company) of the Company are
eligible to participate in the 1998 Stock Plan.
Administration. The 1998 Stock Plan is administered by the Compensation
Committee of the Board of Directors, which currently consists of Messrs.
Douglas W. Scott and Richard J. Cleveland, M.D., two non-employee directors of
the Company. Subject to the provisions of the 1998 Stock Plan, the
Compensation Committee has the authority to determine, among other things, the
persons to whom Stock Rights shall be granted, the number of shares covered by
each Stock Right, the exercise price per share and other terms and provisions
governing the Stock Rights, including restrictions, if any, applicable to the
shares of Common Stock issuable upon the exercise of Stock Rights.
Option Price and Duration. The Compensation Committee determines the
exercise price per share for NQSOs under the 1998 Stock Plan, so long as such
exercise price is no less than the minimum legal consideration required under
the laws of any jurisdiction in which the Company may be organized. The
exercise
13
<PAGE>
price per share for ISOs granted under the 1998 Stock Plan may not be less
than the fair market value per share of Common Stock on the date of such
grant. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company, the exercise price per share shall not be
less than one hundred ten percent (110%) of the fair market value per share of
Common Stock on the date of grant. The aggregate fair market value (determined
on the date of grant) of the shares of Common Stock subject to ISOs granted to
an employee and which first become exercisable during any calendar year cannot
exceed $100,000; any portion of an ISO grant that exceeds such $100,000 limit
will be treated for tax purposes as a NQSO. ISOs are not transferable by the
optionholder except by will or by the laws of descent and distribution. NQSOs
are transferable to the extent determined by the Compensation Committee and as
set forth in the agreement relating to the grant of any such NQSOs. Each
option expires on the date specified by the Compensation Committee, but not
more than (i) ten years from the date of grant in the case of options
generally and (ii) five years from the date of grant in the case of ISOs
granted to an employee owning stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company.
Options are subject to early termination in certain circumstances.
Exercisability of Options. Options granted under the 1998 Stock Plan may
either be fully exercisable at the time of the grant or may become exercisable
in such installments as the Compensation Committee may specify. Options may be
exercised from time to time, in whole or in part, up to the total number of
shares with respect to which it is then exercisable by giving written notice
to the Company, stating the number of shares with respect to which the option
is being exercised, accompanied by payment in full for such shares. The
Committee has the right to accelerate the date of exercise of any installment
of any option (subject to the $100,000 per year limitation on the fair market
value of stock subject to ISOs granted to any employee which become
exercisable in any calendar year).
Amendment and Termination. The Board of Directors may from time to time
adopt amendments, certain of which are subject to shareholder approval, and
may terminate the 1998 Stock Plan at any time (although such action shall not
affect options previously granted). Any shares subject to an option which for
any reason expires or terminates unexercised may again be available for future
grants under the 1998 Stock Plan. No options may be granted under the 1998
Stock Plan after September 19, 2008.
Federal Income Tax Consequences. The following discussion summarizes certain
U.S. federal income tax considerations for persons receiving Stock Rights
under the 1998 Stock Plan and certain tax effects on the Company, based upon
the provisions of the Code as in effect on the date of this Proxy Statement,
current regulations and existing administrative rulings of the IRS. However,
the summary is not intended to be a complete discussion of all the federal
income tax consequences of these plans:
Incentive Stock Options:
1. In general, no taxable income results to the optionee upon the grant
of an ISO or upon the issuance of shares to him or her upon the exercise of
the ISO, and the Company is not entitled to a federal income tax deduction
upon either grant or exercise of an ISO.
2. If shares acquired upon exercise of an ISO are not disposed of within
(i) two years from the date the ISO was granted or (ii) one year from the
date the shares are issued to the optionee pursuant to the ISO exercise
(the "Holding Periods"), the difference between the amount realized on any
subsequent disposition of the shares and the exercise price will generally
be treated as capital gain or loss to the optionee.
3. If shares acquired upon exercise of an ISO are disposed of and the
optionee does not satisfy the Holding Periods (a "Disqualifying
Disposition"), then in most cases the lesser of (i) any excess of the fair
market value of the shares at the time of exercise of the ISO over the
exercise price or (ii) the actual gain on disposition will be treated as
compensation to the optionee and will be taxed as ordinary income in the
year of such disposition.
14
<PAGE>
4. In any year that an optionee recognizes ordinary income on a
Disqualifying Disposition of stock acquired by exercising an ISO, the
Company generally should be entitled to a corresponding federal income tax
deduction.
5. The difference between the amount realized by the optionee as the
result of a Disqualifying Disposition and the sum of (i) the exercise price
and (ii) the amount of ordinary income recognized under the above rules
generally will be treated as capital gain or loss.
6. Capital gain or loss recognized by an optionee on a disposition of
shares will be long-term capital gain or loss if the optionee's holding
period for the shares exceeds one year. If the optionee's Holding Period
for the shares exceeds eighteen months, the optionee may be entitled to a
reduced long-term capital gains rate.
7. An optionee may be entitled to exercise an ISO by delivering shares of
the Company's Common Stock to the Company in payment of the exercise price
if the optionee's ISO agreement so provides. If an optionee exercises an
ISO in such fashion, special rules will apply.
8. In addition to the tax consequences described above, the exercise of
ISOs may result in an "alternative minimum tax" under the Code. The Code
provides that an "alternative minimum tax" (at a rate of 26% or 28%) will
be applied against a taxable base which is equal to "alternative minimum
taxable income," generally reduced by a statutory exemption. In general,
the amount by which the value of the shares received upon exercise of the
ISO exceeds the exercise price is included in the optionee's alternative
minimum taxable income. A taxpayer is required to pay the higher of his or
her regular tax liability or the alternative minimum tax. A taxpayer who
pays alternative minimum tax attributable to the exercise of an ISO may be
entitled to a tax credit against his or her regular tax liability in later
years.
9. Special rules apply if the shares acquired upon the exercise of an ISO
are subject to vesting, or are subject to certain restrictions on resale
under federal securities laws applicable to directors, officers or 10%
shareholders.
Non-Qualified Options:
1. The optionee generally does not recognize any taxable income upon the
grant of a NQSO, and the Company is not entitled to a federal income tax
deduction by reason of such grant.
2. The optionee generally will recognize ordinary income at the time of
exercise of a NQSO in an amount equal to the excess, if any, of the fair
market value of the shares on the date of exercise over the exercise price.
The Company may be required to withhold income tax on this amount.
3. When the optionee sells the shares acquired upon exercise of a NQSO,
he or she generally will recognize a capital gain or loss in an amount
equal to the difference between the amount realized upon the sale of the
shares and his or her basis in the shares (generally, the exercise price
plus the amount taxed to the optionee as ordinary income). If the
optionee's holding period for the shares exceeds one year, such gain or
loss will be a long-term capital gain or loss.
4. The Company generally should be entitled to a federal income tax
deduction when ordinary income is recognized by the optionee.
5. An optionee may be entitled to exercise a NQSO by delivering shares of
the Company's Common Stock to the Company in payment of the exercise price.
If an optionee exercises a NQSO in such fashion, special rules will apply.
6. Special rules apply if the shares acquired upon the exercise of an
NQSO are subject to vesting, or are subject to certain restrictions on
resale under federal securities laws applicable to directors, officers or
10% shareholders.
15
<PAGE>
Awards and Purchases:
The following general rules are applicable under current federal income
tax law to the grant of Awards and Purchases under the 1998 Stock Plan:
1. Under current federal income tax law, persons receiving Common
Stock pursuant to an award of Common Stock ("Award") or a grant of an
opportunity to purchase Common Stock ("Purchase") generally recognize
ordinary income equal to the fair market value of the shares received,
reduced by the purchase price paid. The Company will generally be
entitled to a corresponding federal income tax deduction. When such
stock is sold, the seller generally will recognize capital gains or
loss.
2. Special rules apply if the stock acquired is subject to vesting,
or is subject to certain restrictions on resale under federal
securities laws applicable to directors, officers or 10% stockholders.
Votes Required for Approval:
The affirmative vote of a majority of the shares of Common Stock of the
Company represented in person or by proxy at the Meeting and entitled to
vote will be required to approve the adoption of the 1998 Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE ADOPTION OF
THE 1998 STOCK PLAN.
OPTION INFORMATION
As of December 1, 1998 the Company had approximately 80 employees with
outstanding option grants under the 1989 Stock Plan.
The following table sets forth as of December 1, 1998, options granted in
the aggregate under the 1989 Stock Plan to (i) the Named Officers, (ii) each
other person who received five percent of such options, (iii) all executive
officers of the Company as a group, (iv) all current directors of the Company
who are not executive officers as a group and (v) all employees, including all
current officers who are not executive officers, as a group:
<TABLE>
<CAPTION>
NO. OF
NAME TITLE OPTIONS GRANTED
- ---- ----- ---------------
<S> <C> <C>
Gerard E. Puorro........ Chief Executive Officer, President and Director 190,527
James C. Hsia, Ph.D..... Senior Vice President, Research 96,796
Jay D. Caplan........... Vice President, Operations 29,525
William B. Kelley....... Vice President, Operations Latin American Sales 83,014
Robert Wilber........... Vice President--WorldWide Service 26,250
All executive officers as a group....................................... 514,862
All current directors who are not executive officers as a group......... 129,211
All employees who are not executive officers as a group................. 145,916
</TABLE>
SHAREHOLDER PROPOSALS
The Company intends to hold its next Annual Meeting of Shareholders in the
second fiscal quarter of 1999. 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 1998 must be
received at the Company's principal executive offices not later than June 7,
1999. 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.
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EXPENSES AND SOLICITATION
The cost and 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.
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APPENDIX A
CANDELA CORPORATION
1998 STOCK PLAN
1. PURPOSE. The purpose of the Candela Corporation 1998 Stock Plan (the
"Plan") is to encourage key employees of Candela Corporation (the "Company")
and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations") and other individuals who render
services to the Company or a Related Corporation, by providing opportunities
to participate in the ownership of the Company and its future growth through
(a) the grant of options which qualify as "incentive stock options" ("ISOs")
under Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"); (b) the grant of options which do not qualify as ISOs ("Non-Qualified
Options"); (c) awards of stock in the Company ("Awards"); and (d)
opportunities to make direct purchases of stock in the Company ("Purchases").
Both ISOs and Non-Qualified Options are referred to hereafter individually as
an "Option" and collectively as "Options." Options, Awards and authorizations
to make Purchases are referred to hereafter collectively as "Stock Rights." As
used herein, the terms "parent" and "subsidiary" mean "parent corporation" and
"subsidiary corporation," respectively, as those terms are defined in Section
424 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall (be administered by
the Board of Directors of the Company (the "Board") or, subject to
paragraph 2(D) (relating to compliance with Section 162(m) of the Code), by
a committee appointed by the Board (the "Committee"). Hereinafter, all
references in this Plan to the "Committee" shall mean the Board if no
Committee has been appointed. Subject to ratification of the grant or
authorization of each Stock Right by the Board (if so required by
applicable state law), and subject to the terms of the Plan, the Committee
shall have the authority to (i) determine to whom (from among the class of
employees eligible under paragraph 3 to receive ISOs) ISOs shall be
granted, and to whom (from among the class of individuals and entities
eligible under paragraph 3 to receive Non-Qualified Options and Awards and
to make Purchases) Non-Qualified Options, Awards and authorizations to make
Purchases may be granted; (ii) determine the time or times at which Options
or Awards shall be granted or Purchases made; (iii) determine the purchase
price of shares subject to each Option or Purchase, which prices shall not
be less than the minimum price specified in paragraph 6; (iv) determine
whether each Option granted shall be an ISO or a Non-Qualified Option; (v)
determine (subject to paragraph 7) the time or times when each Option shall
become exercisable and the duration of the exercise period; (vi) extend the
period during which outstanding Options may be exercised; (vii) determine
whether restrictions such as repurchase options are to be imposed on shares
subject to Options, Awards and Purchases and the nature of such
restrictions, if any, and (viii) interpret the Plan and prescribe and
rescind rules and regulations relating to it. If the Committee determines
to issue a Non-Qualified Option, it shall take whatever actions it deems
necessary, under Section 422 of the Code and the regulations promulgated
thereunder, to ensure that such Option is not treated as an ISO. The
interpretation and construction by the Committee of any provisions of the
Plan or of any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such
rules and regulations for carrying out the Plan as it may deem advisable.
No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Stock
Right granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of its members as its
chairman, and shall hold meetings at such time and places as it may
determine. A majority of the Committee shall constitute a quorum and acts
of a majority of the members of the Committee at a meeting at which a
quorum is present, or acts reduced to or approved in writing by all the
members of the Committee (if consistent with applicable state law), shall
be the valid acts of the Committee. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
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C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be granted to
members of the Board. All grants of Stock Rights to members of the Board
shall in all respects be made in accordance with the provisions of this
Plan applicable to other eligible persons. Members of the Board who either
(i) are eligible to receive grants of Stock Rights pursuant to the Plan or
(ii) have been granted Stock Rights may vote on any matters affecting the
administration of the Plan or the grant of any Stock Rights pursuant to the
Plan, except that no such member shall act upon the granting to himself or
herself of Stock Rights, but any such member may be counted in determining
the existence of a quorum at any meeting of the Board during which action
is taken with respect to the granting to such member of Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its discretion, may take
such action as may be necessary to ensure that Stock Rights granted under
the Plan qualify as "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code and applicable regulations
promulgated thereunder ("Performance-Based Compensation"). Such action may
include, in the Board's discretion, some or all of the following (i) if the
Board determines that Stock Rights granted under the Plan generally shall
constitute Performance-Based Compensation, the Plan shall be administered,
to the extent required for such Stock Rights to constitute Performance-
Based Compensation, by a Committee consisting solely of two or more
"outside directors" (as defined in applicable regulations promulgated under
Section 162(m) of the Code), (ii) if any Non-Qualified Options with an
exercise price less than the fair market value per share of Common Stock
are granted under the Plan and the Board determines that such Options
should constitute Performance Based Compensation, such options shall be
made exercisable only upon the attainment of a pre-established, objective
performance goal established by the Committee, and such grant shall be
submitted for, and shall be contingent upon shareholder approval and (iii)
Stock Rights granted under the Plan may be subject to such other terms and
conditions as are necessary for compensation recognized in connection with
the exercise or disposition of such Stock Right or the disposition of
Common Stock acquired pursuant to such Stock Right, to constitute
Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees of
the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.
4. STOCK. The stock subject to Stock Rights shall be authorized but unissued
shares of Common Stock of the Company, par value $.01 per share (the "Common
Stock"), or shares of Common Stock reacquired by the Company in any manner.
The aggregate number of shares which may be issued pursuant to the Plan is
500,000, subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in
whole or in part or shall be repurchased by the Company, the unpurchased
shares of Common Stock subject to such Option shall again be available for
grants of Stock Rights under the Plan.
No employee of the Company or any Related Corporation may be granted Options
to acquire, in the aggregate, more than 350,000 shares of Common Stock under
the Plan during any fiscal year of the Company. If any Option granted under
the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or
in part or shall be repurchased by the Company, the shares subject to such
Option shall be included in the determination of the aggregate number of
shares of Common Stock deemed to have been granted to such employee under the
Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan at
any time on or after September 19, 1998 and prior to September 18, 2008. The
date of grant of a Stock Right under the Plan will be the date specified by
the Committee at the time it grants the Stock Right; provided, however, that
such date shall not be prior to the date on which the Committee acts to
approve the grant.
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6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND PURCHASES. Subject to
paragraph 2(D) (relating to compliance with Section 162(m) of the Code),
the exercise price per share specified in the agreement relating to each
Non-Qualified Option granted, and the purchase price per share of stock
granted in any Award or authorized as a Purchase, under the Plan may be
less than the fair market value of the Common Stock of the Company on the
date of grant; provided that, in no event shall such exercise price or such
purchase price be less than the minimum legal consideration required
therefor under the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
B. PRICE FOR ISOS. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less
than the fair market value per share of Common Stock on the date of such
grant. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, the
price per share specified in the agreement relating to such ISO shall not
be less than one hundred ten percent (110%) of the fair market value per
share of Common Stock on the date of grant. For purposes of determining
stock ownership under this paragraph, the rules of Section 424(d) of the
Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee may
be granted Options treated as ISOs only to the extent that, in the
aggregate under this Plan and all incentive stock option plans of the
Company and any Related Corporation, ISOs do not become exercisable for the
first time by such employee during any calendar year with respect to stock
having a fair market value (determined at the time the ISOs were granted)
in excess of $100,000. The Company intends to designate any Options granted
in excess of such limitation as Non-Qualified Options, and the Company
shall issue separate certificates to the optionee with respect to Options
that are Non-Qualified Options and Options that are ISOs.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the date of grant or, if the
prices or quotes discussed in this sentence are unavailable for such date,
the last business day for which such prices or quotes are available prior
to the date of grant and shall mean (i) the average (on that date) of the
high and low prices of the Common Stock on the principal national
securities exchange on which the Common Stock is traded, if the Common
Stock is then traded on a national securities exchange; or (ii) the last
reported sale price (on that date) of the Common Stock on the Nasdaq
National Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the
Nasdaq National Market. If the Common Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value" shall mean
the fair value of the Common Stock as determined by the Committee after
taking into consideration all factors which it deems appropriate,
including, without limitation, recent sale and offer prices of the Common
Stock in private transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in paragraphs
9 and 10 or in the agreement relating to such Option, each Option shall expire
on the date specified by the Committee, but not more than (i) ten years from
the date of grant in the case of Options generally and (ii) five years from
the date of grant in the case of ISOs granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs
9 and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through 12,
each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable on the date of
grant or shall become exercisable thereafter in such installments as the
Committee may specify.
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B. FULL VESTING OF INSTALLMENTS. Once an installment becomes exercisable,
it shall remain exercisable until expiration or termination of the Option,
unless otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at any
time or from time to time, in whole or in part, for up to the total number
of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date that any installment of any Option becomes exercisable;
provided that the Committee shall not, without the consent of an optionee,
accelerate the permitted exercise date of any installment of any Option
granted to any employee as an ISO (and not previously converted into a Non-
Qualified Option pursuant to paragraph 16) if such acceleration would
violate the annual vesting limitation contained in Section 422(d) of the
Code, as described in paragraph 6(C).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the agreement
relating to such ISO, if an ISO optionee ceases to be employed by the Company
and all Related Corporations other than by reason of death or disability as
defined in paragraph 10, no further installments of his or her ISOs shall
become exercisable, and his or her ISOs shall terminate on the earlier of (a)
three months after the date of termination of his or her employment, or (b)
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified
Options pursuant to paragraph 16. For purposes of this paragraph 9, employment
shall be considered as continuing uninterrupted during any bona fide leave of
absence (such as those attributable to illness, military obligations or
governmental service) provided that the period of such leave does not exceed
90 days or, if longer, any period during which such optionee's right to re-
employment is guaranteed by statute or by contract. A bona fide leave of
absence with the written approval of the Committee shall not be considered an
interruption of employment under this paragraph 9, provided that such written
approval contractually obligates the Company or any Related Corporation to
continue the employment of the optionee after the approved period of absence.
ISOs granted under the Plan shall not be affected by any change of employment
within or among the Company and Related Corporations, so long as the optionee
continues to be an employee of the Company or any Related Corporation. Nothing
in the Plan shall be deemed to give any grantee of any Stock Right the right
to be retained in employment or other service by the Company or any Related
Corporation for any period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of his or her death, any ISO owned by such
optionee may be exercised, to the extent otherwise exercisable on the date
of death, by the estate, personal representative or beneficiary who has
acquired the ISO by will or by the laws of descent and distribution, until
the earlier of (i) the specified expiration date of the ISO or (ii) 180
days from the date of the optionee's death.
B. DISABILITY. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his or her disability, such
optionee shall have the right to exercise any ISO held by him or her on the
date of termination of employment, for the number of shares for which he or
she could have exercised it on that date, until the earlier of (i) the
specified expiration date of the ISO or (ii) 180 days from the date of the
termination of the optionee's employment. For the purposes of the Plan, the
term "disability" shall mean "permanent and total disability" as defined in
Section 22(e)(3) of the Code or any successor statute.
11. ASSIGNABILITY. No ISO shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be exercisable only by such optionee. Stock
Rights other than ISOs shall be transferable to the extent set forth in the
agreement relating to such Stock Right.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the
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terms and conditions set forth in paragraphs 6 through 11 hereof and may
contain such other provisions as the Committee deems advisable which are not
inconsistent with the Plan, including restrictions applicable to shares of
Common Stock issuable upon exercise of Options. The Committee may specify that
any Non-Qualified Option shall be subject to the restrictions set forth herein
with respect to ISOs, or to such other termination and cancellation provisions
as the Committee may determine. The Committee may from time to time confer
authority and responsibility on one or more of its own members and/or one or
more officers of the Company to execute and deliver such instruments. The
proper officers of the Company are authorized and directed to take any and all
action necessary or advisable from time to time to carry out the terms of such
instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company
relating to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall
be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, the number of shares of Common Stock
deliverable upon the exercise of Options shall be appropriately increased
or decreased proportionately, and appropriate adjustments shall be made in
the purchase price per share to reflect such subdivision, combination or
stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated with
or acquired by another entity in a merger or other reorganization in which
the holders of the outstanding voting stock of the Company immediately
preceding the consummation of such event, shall, immediately following such
event, hold, as a group, less than a majority of the voting securities of
the surviving or successor entity, or in the event of a sale of all or
substantially all of the Company's assets or otherwise (each, an
"Acquisition"), the Committee or the board of directors of any entity
assuming the obligations of the Company hereunder (the "Successor Board"),
shall, as to outstanding Options, either (i) make appropriate provision for
the continuation of such Options by substituting on an equitable basis for
the shares then subject to such Options either (a) the consideration
payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition, (b) shares of stock of the surviving or
successor corporation or (c) such other securities as the Successor Board
deems appropriate, the fair market value of which shall not materially
exceed the fair market value of the shares of Common Stock subject to such
Options immediately preceding the Acquisition; or (ii) upon written notice
to the optionees, provide that all Options must be exercised, to the extent
then exercisable or to be exercisable as a result of the Acquisition,
within a specified number of days of the date of such notice, at the end of
which period the Options shall terminate; or (iii) terminate all Options in
exchange for a cash payment equal to the excess of the fair market value of
the shares subject to such Options (to the extent then exercisable or to be
exercisable as a result of the Acquisition) over the exercise price
thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a recapitalization
or reorganization of the Company (other than a transaction described in
subparagraph B above) pursuant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an Option shall be entitled to
receive for the purchase price paid upon such exercise the securities he or
she would have received if he or she had exercised such Option prior to
such recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any adjustments
made pursuant to subparagraphs A, B or C with respect to ISOs shall be made
only after the Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of
such ISOs (as that term is defined in Section 424 of the Code) or would
cause any adverse tax consequences for the holders of such ISOs. If the
Committee determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs or would cause adverse tax
consequences to the holders, it may refrain from making such adjustments.
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E. DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution
or liquidation of the Company, each Option will terminate immediately prior
to the consummation of such proposed action or at such other time and
subject to such other conditions as shall be determined by the Committee.
F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued under the Plan
and the optionee shall receive from the Company cash in lieu of such
fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the events described in
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Stock Rights which
previously have been or subsequently may be granted under the Plan shall
also be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify
the number of shares as to which such Option is being exercised, accompanied
by full payment of the purchase price therefor either (a) in United States
dollars in cash or by check, (b) at the discretion of the Committee, through
delivery of shares of Common Stock having a fair market value equal as of the
date of the exercise to the cash exercise price of the Option, (c) at the
discretion of the Committee, by delivery of the grantee's personal recourse
note bearing interest payable not less than annually at no less than 100% of
the lowest applicable Federal rate, as defined in Section 1274(d) of the Code,
(d) at the discretion of the Committee and consistent with applicable law,
through the delivery of an assignment to the Company of a sufficient amount of
the proceeds from the sale of the Common Stock acquired upon exercise of the
Option and an authorization to the broker or selling agent to pay that amount
to the Company, which sale shall be at the participant's direction at the time
of exercise, or (e) at the discretion of the Committee, by any combination of
(a), (b), (c) and (d) above. If the Committee exercises its discretion to
permit payment of the exercise price of an ISO by means of the methods set
forth in clauses (b), (c), (d) or (e) of the preceding sentence, such
discretion shall be exercised in writing at the time of the grant of the ISO
in question. The holder of an Option shall not have the rights of a
shareholder with respect to the shares covered by such Option until the date
of issuance of a stock certificate to such holder for such shares. Except as
expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends
or similar rights for which the record date is before the date such stock
certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
September 19, 1998, subject, with respect to the validation of ISOs granted
under the Plan, to approval of the Plan by the stockholders of the Company at
the next Meeting of Stockholders or, in lieu thereof, by written consent. If
the approval of stockholders is not obtained prior to September 19, 1999, any
grants of ISOs under the Plan made prior to that date will be rescinded. The
Plan shall expire at the end of the day on September 18, 2008 (except as to
Options outstanding on that date). Subject to the provisions of paragraph 5
above, Options may be granted under the Plan prior to the date of stockholder
approval of the Plan. The Board may terminate or amend the Plan in any respect
at any time, except that, without the approval of the stockholders obtained
within 12 months before or after the Board adopts a resolution authorizing any
of the following actions: (a) the total number of shares that may be issued
under the Plan may not be increased (except by adjustment pursuant to
paragraph 13); (b) the provisions of paragraph 3 regarding eligibility for
grants of ISOs may not be modified; (c) the provisions of paragraph 6(B)
regarding the exercise price at which shares may be offered pursuant to ISOs
may not be modified (except by adjustment pursuant to paragraph 13); and (d)
the expiration date of the Plan may not be extended. Except as otherwise
provided in this paragraph 15, in no event may action of the Board or
stockholders alter or
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impair the rights of a grantee, without such grantee's consent, under any
Stock Right previously granted to such grantee.
16. MODIFICATIONS OF ISOS; CONVERSION OF ISOS INTO NON-QUALIFIED
OPTIONS. Subject to paragraph 13(D), without the prior written consent of the
holder of an ISO, the Committee shall not alter the terms of such ISO
(including the means of exercising such ISO) if such alteration would
constitute a modification (within the meaning of Section 424(h)(3) of the
Code). The Committee, at the written request or with the written consent of
any optionee, may in its discretion take such actions as may be necessary to
convert such optionee's ISOs (or any installments or portions of installments
thereof) that have not been exercised on the date of conversion into Non-
Qualified Options at any time prior to the expiration of such ISOs, regardless
of whether the optionee is an employee of the Company or a Related Corporation
at the time of such conversion. Such actions may include, but shall not be
limited to, extending the exercise period or reducing the exercise price of
the appropriate installments of such ISOs. At the time of such conversion, the
Committee (with the consent of the optionee) may impose such conditions on the
exercise of the resulting Non-Qualified Options as the Committee in its
discretion may determine, provided that such conditions shall not be
inconsistent with this Plan. Nothing in the Plan shall be deemed to give any
optionee the right to have such optionee's ISOs converted into Non-Qualified
Options, and no such conversion shall occur until and unless the Committee
takes appropriate action. Upon the taking of such action, the Company shall
issue separate certificates to the optionee with respect to Options that are
Non-Qualified Options and Options that are ISOs.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the sale
of shares pursuant to Options granted and Purchases authorized under the Plan
shall be used for general corporate purposes.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as
described in Sections 421, 422 and 424 of the Code and regulations thereunder)
of any stock acquired pursuant to the exercise of ISOs granted under the Plan.
A Disqualifying Disposition is generally any disposition occurring on or
before the later of (a) the date two years following the date the ISO was
granted or (b) the date one year following the date the ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a Non-
Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to an
arm's length transaction, the grant of an Award, the making of a Purchase of
Common Stock for less than its fair market value, the making of a
Disqualifying Disposition (as defined in paragraph 18), the vesting or
transfer of restricted stock or securities acquired on the exercise of an
Option hereunder, or the making of a distribution or other payment with
respect to such stock or securities, the Company may withhold taxes in respect
of amounts that constitute compensation includible in gross income. The
Committee in its discretion may condition (i) the exercise of an Option, (ii)
the transfer of a Non-Qualified Stock Option, (iii) the grant of an Award,
(iv) the making of a Purchase of Common Stock for less than its fair market
value, or (v) the vesting or transferability of restricted stock or securities
acquired by exercising an Option, on the grantee's making satisfactory
arrangement for such withholding. Such arrangement may include payment by the
grantee in cash or by check of the amount of the withholding taxes or, at the
discretion of the Committee, by the grantee's delivery of previously held
shares of Common Stock or the withholding from the shares of Common Stock
otherwise deliverable upon exercise of a Option shares having an aggregate
fair market value equal to the amount of such withholding taxes.
20. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that
exercise ISOs under the Plan, and the Company may be required to file tax
information returns reporting the income received by grantees of Options in
connection with the Plan.
A-7
<PAGE>
21. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Stock Rights shall be governed by the laws of Delaware,
or the laws of any jurisdiction in which the Company or its successors in
interest may be organized.
A-8
<PAGE>
PROXY
CANDELA CORPORATION
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
JANUARY 12, 1999
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
CANDELA CORPORATION
The undersigned hereby appoints Gerard E. Puorro and F. Paul Broyer, 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 Tuesday, January 12, 1999,
at 10:00 a.m., local time, at the Exchange Hall, The Exchange Conference Center
at The Boston Fish Pier, 212 Northern Avenue, Boston, Massachusetts, and at any
adjournments thereof, upon matters set forth in the Notice of Annual Meeting of
Shareholders and Proxy statement dated December 4, 1998, 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
PROPOSALS IN ITEMS 2 AND 3 AND AUTHORITY WILL BE DEEMED GRANTED UNDER ITEM 4.
- ----------------- -----------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------------- -----------------
<PAGE>
<TABLE>
<S> <C>
Please mark
[X] votes as in
this example.
1. To elect a Board of Directors FOR AGAINST ABSTAIN
2. To ratify the appointment of the [ ] [ ] [ ]
Nominees: Gerard E. Puorro, firm of PricewaterhouseCoopers
Theodore G. Johnson, Kenneth LLP as independent auditors of
D. Roberts, Douglas W. Scott, the Company for the fiscal year
Richard J. Cleveland, M.D. and ending June 26, 1999.
Robert E. Dornbush.
FOR AGAINST ABSTAIN
FOR WITHHELD 3. To ratify the adoption of the [ ] [ ] [ ]
ALL [ ] [ ] FROM ALL 1998 Stock Plan.
NOMINEES NOMINEES
4. To transact such other business as may properly come
[ ] before the meeting and any adjournments thereof.
--------------------------------------
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT 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.)
Signature: Date: Signature: Date:
---------------------------------------- ---------- --------------------------------------- ---------
</TABLE>
