<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
CANDELA CORPORATION
530 Boston Post Road
Wayland, MA 01778
(508) 358-7400
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
An Annual Meeting of Shareholders of Candela Corporation, a Delaware
corporation, will be held on Thursday, January 20, 2000, 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 July 1, 2000.
3. 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 November 22, 1999, 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.
<TABLE>
<S> <C>
By Order of the Board of Directors,
/s/ GORDON H. HAYES, JR.
-------------------------
Gordon H. Hayes, Jr.,
SECRETARY
</TABLE>
Wayland, Massachusetts
December 20, 1999
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 20, 1999
Proxies in the form enclosed with this Proxy Statement are solicited by the
Board of Directors (the "Board") of Candela Corporation (the "Company") for use
at the Annual Meeting of Shareholders to be held on Thursday, January 20, 2000,
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 November 22, 1999 (the "Record Date") will
be entitled to vote at the Meeting and any adjournments thereof. As of that
date, 7,256,712 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 July 3, 1999, is being
<PAGE>
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.
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 November 22, 1999 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:
AMOUNT OF BENEFICIAL OWNERSHIP(1)
<TABLE>
<CAPTION>
NUMBER AND ADDRESS OF NUMBER OF SHARES PERCENT OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED BENEFICIALLY OWNED
- --------------------- ------------------ ------------------
<S> <C> <C>
Gerard E. Puorro(2)......................................... 199,452 2.69%
Theodore G. Johnson(3)...................................... 78,849 1.09%
Kenneth D. Roberts(4)....................................... 79,500 1.10%
Douglas W. Scott(5)......................................... 40,000 *
Richard J. Cleveland, M.D.(6)............................... 43,470 *
Nancy Nager, R.N., B.S.N., M.S.N............................ -- --
James C. Hsia Ph.D.(7)...................................... 107,172 1.46%
Jay D. Caplan(8)............................................ 14,777 *
William B. Kelley(9)........................................ 31,125 *
William B. Spies(10)........................................ 12,500 *
William D. Witter, Inc.(11)................................. 1,790,172 24.43%
153 East 53rd Street
New York, NY 10022
William D. Witter, Inc.(12)................................. 1,790,172 24.43%
153 East 53rd Street
New York, NY 10022
All Directors and Executive
Officers as a Group (10 Persons)(13)........................ 655,016 8.49%
</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 November 22, 1999.
(2) Includes 190,527 shares issuable pursuant to stock options exercisable
within the 60 day period following November 22, 1999.
(3) Includes 4,000 shares issuable pursuant to stock options exercisable within
the 60 day period following November 22, 1999.
2
<PAGE>
(4) Includes 52,500 shares issuable pursuant to stock options exercisable within
the 60 day period following November 22, 1999. 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.
(5) Includes 37,500 shares issuable pursuant to stock options exercisable within
the 60 day period following November 22, 1999.
(6) Includes 40,970 shares issuable pursuant to stock options exercisable within
the 60 day period following November 22, 1999.
(7) Includes 80,500 shares issuable pursuant to stock options exercisable within
the 60 day period following November 22, 1999.
(8) Includes 14,525 shares issuable pursuant to stock options exercisable within
the 60 day period following November 22, 1999.
(9) Includes 31,125 shares issuable pursuant to stock options exercisable within
the 60 day period following November 22, 1999.
(10) Includes 6,250 shares issuable pursuant to stock options exercisable within
the 60 day period following November 22, 1999.
(11) Includes 1,720,172 shares of common stock beneficially owned by William D.
Witter, Inc. Includes warrants to purchase 70,000 shares of Common Stock.
Mr. Witter is the President and primary owner of Williams D. Witter, Inc.
and has the sole power to dispose or to direct the disposition of all of the
shares of Common Stock which are beneficially owned respectively by William
D. Witter, Inc. and William D. Witter.
(12) Information based in Amendment No. 8 to Schedule 13G dated January 27, 1998
filed with the Security Exchange Commission. All such shares are also
beneficially owned by William D. Witter, individually, the President and
primary owner of William D. Witter, Inc.
(13) Includes 457,897 shares subject to stock options exercisable within the
60 day period following November 22, 1999. Also includes warrants to
purchase 2,000 shares of Common Stock.
3
<PAGE>
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 or her successor is elected and
qualified. Shares represented by all proxies received by the Company and not so
marked as to withhold authority to vote for any individual nominee for Director
or for all nominees will be voted (unless one or more nominees are unable or
unwilling to serve) for the election of the six nominees named below. The Board
of Directors knows of no reason why any such nominee should be unable or
unwilling to serve, but if such should be the case, proxies will be voted for
the election of another person or for fixing the number of Directors at a lesser
number. All of the nominees are currently Directors of the Company. Proxies
cannot be voted for more than six nominees.
The nominees for Directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Gerard E. Puorro.................. 52 President, Chief Executive Officer
and Director
Kenneth D. Roberts................ 66 Chairman of the Board of Directors
Theodore G. Johnson............... 67 Director
Douglas W. Scott.................. 53 Director
Richard J. Cleveland, M.D......... 67 Director
Nancy Nager, R.N., B.S.N.,
M.S.N........................... 48 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.
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
4
<PAGE>
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.
MS. NAGER was appointed a Director of the Company in February 1999. From
1990 until the present, Ms. Nager has been the Principal and CEO of Specialized
Health Management, Inc., a privately held behavioral health care corporation.
Ms. Nager also founded and directs Specialized HomeCare, Inc., Specialized
Billing Services, Inc. and Seniorlink, an information, referral and resource
corporation. Previously, Ms. Nager was the Chief Operating Officer of Charles
River Hospital, a private psychiatric facility in Wellesley, where she
previously held a number of positions in nursing and administration from 1976
through 1990. Ms. Nager also provided corporate consulting to the hospital's
parent company Community Care Systems, Inc. from 1990 through 1992.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met 9 times during the fiscal year ended July 3,
1999. The Audit Committee of the Board, of which Mr. Roberts and Mr. Johnson
were members during fiscal 1999, reviews all financial functions of the Company,
including matters relating to the appointment and activity of the Company's
auditors. The Compensation Committee, of which Dr. Cleveland and Mr. Scott were
members during fiscal 1999, 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 2 times and the Compensation Committee met 3 times during the fiscal year
ended July 3, 1999. The Pricing Committee, of which Mr. Puorro, Mr. Roberts and
Mr. Scott were members during fiscal 1999, met 1 time during fiscal 1999. The
Board of Directors does not have a standing nominating committee.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive an annual retainer of
$4,000 and a fee of $1,000 per regularly scheduled meeting of the Board of
Directors or committee meeting thereof if held separately. Directors are also
reimbursed for out-of-pocket expenses incurred in connection with the
performance of their duties as a director.
On May 10, 1990, the Board of Directors of the Company adopted the 1990
Non-Employee Director Plan, which was approved by the Company's shareholders on
November 13, 1990. The 1990 Non-Employee Director 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
5
<PAGE>
of grant, expire ten years after the date of grant and are nontransferable. To
date, options for the purchase of 60,000 shares have been granted at exercise
prices ranging from $1.625 to $8.00 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.
On August 21, 1997, Candela granted Richard J. Cleveland options to purchase
4,000 shares of Common Stock at $7.00 per share. These options are fully vested
and have a term of ten years.
On September 30, 1998, Non-Qualified Options to purchase 5,000 shares of our
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 $3.63 per share, such price being the market price of the common stock
on the date of the grant. These Non-Qualified Options were granted outside of a
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 Candela on such anniversary date.
On January 12, 1999, Non-Qualified Options to purchase 5,000 shares of our
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 $7.00 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
our 1998 Stock Plan and are fully vested.
6
<PAGE>
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 July 3, 1999 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
$100,000 during the year ended July 3, 1999 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
--------------------------- ---------------
FISCAL OTHER ANNUAL AWARDS(2) ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) COMPENSATION($) OPTIONS/SARS(#) COMPENSATION($)
- --------------------------- -------- --------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Gerard E. Puorro................. 1999 243,284 375,912(9) 20,000 5,471(5)
Chief Executive Officer, 1998 237,500 114,885(3) 10,527(4) 4,972(5)
President and Director 1997 209,792 15,000(3) 100,000(4) 3,046(5)
James C. Hsia, Ph.D.............. 1999 208,201 261,160(9) 30,000 4,229(8)
Senior Vice President, 1998 155,000 105,188(6) 33,000(7) 2,942(8)
Research 1997 141,689 -- 20,000(7) 2,935(8)
William D. Spies................. 1999 169,505 277,094(9) 60,000 3,324(10)
Senior Vice President of 1998 -- -- -- --
Marketing, Sales and Service 1997 -- -- -- --
William B. Kelley................ 1999 187,186 261,160(9) 10,000 3,025(11)
Vice President, North 1998 163,942 65,188(9) -- 2,443(11)
American Sales and Service 1997 156,988 -- 25,000 2,401(11)
Jay D. Caplan.................... 1999 139,532 232,670(9) 30,000 2,573(13)
Vice President, Operations 1998 130,000 54,674(9) 5,000 2,100(13)
1997 120,000 -- 20,000(12) 1,920(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 July 3, 1999, June 27, 1998 or June 28, 1997.
(3) Fiscal years 1998 and 1997, 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 1999, includes $2,750 in matching contributions by the Company
pursuant to the Company's 401(k) Plan, $1,275 in life insurance premiums
paid by the Company for the benefit of Mr. Puorro, and $1,446 for a Company
provided automobile. 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
7
<PAGE>
the Company's 401(k) Plan and $726 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-TM-.
(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 1999, includes $3,574 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $655 in life insurance premiums
paid by the Company for the benefit of Dr. Hsia. 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.
(9) Incentive bonus approved by Board of Directors, based on Company results for
fiscal 1999.
(10) For fiscal 1999, includes $2,744 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $580 in life insurance premiums
paid by the Company for the benefit of Mr. Spies.
(11) For fiscal 1999, includes $2,788 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $237 in life insurance premiums
paid by the Company for the benefit of Mr. Kelley. 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.
(12) All rights and interests in options granted in fiscal 1997 to purchase
20,000 shares at $7.50 were forfeited during fiscal 1998.
(13) For fiscal 1999, includes $2,382 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $191 in life insurance premiums
paid by the Company for the benefit of Mr. Caplan. 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 $149
in life insurance premiums paid by the Company for the benefit of
Mr. Caplan.
8
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth grants of stock options pursuant to the
Company's 1989 and 1998 Stock Plans during the fiscal year ended July 3, 1999 to
the Named Executive Officers listed in the Summary Compensation Table above:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTIONS(1)
------------------------------------------------------ ---------------------
PERCENT OF TOTAL EXERCISE
OPTIONS/GRANTED OF BASE
OPTION TO EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- ---------- ---------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gerard E. Puorro...................... 20,000 7.66% 7.00 1/11/09 88,045 223,124
James C. Hsia, Ph.D................... 20,000 11.49% 3.625 9/29/08 45,595 115,546
10,000 7.00 1/11/09 44,023 111,562
William D. Spies...................... 50,000 22.99% 3.438 7/28/08 108,107 273,964
10,000 7.00 1/11/09 44,023 111,562
William B. Kelley..................... 10,000 3.83% 7.00 1/11/09 44,023 111,562
Jay D. Caplan......................... 20,000 11.49% 3.625 9/29/08 45,595 115,546
10,000 7.00 1/11/09 44,023 111,562
</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.
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, 1989 Stock Plan and 1998 Stock Option 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
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such exercise, (iii) the number of unexercised options outstanding at July 3,
1999, and (iv) the value of such unexercised options at July 3, 1999:
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
JULY 3, 1999 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED VALUE AT JULY 3, 1999 (#) AT JULY 3, 1999 ($)(2)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerard E. Puorro................... 5,000 -- 185,527 20,000 2,626,900 205,000
James C. Hsia, Ph.D................ -- -- 73,000 30,000 1,007,625 375,000
William D. Spies................... -- -- -- 60,000 -- 793,100
William B. Kelley.................. 9,000 56,250 25,500 16,250 329,406 163,438
Jay Caplan......................... -- -- 5,775 33,750 78,960 422,108
</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 1999 fiscal year end ($17.25 per share as quoted on the
NASDAQ Stock Market at the close of trading on July 2, 1999) multiplied by
the number of shares underlying the option.
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 1999. 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
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<PAGE>
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 1999, the Chief
Executive Officer and President made recommendations for salary increases for
the executive group, and the Compensation Committee approved increases ranging
from 6% to 21% to 7 of the executive officers. These increases reflect the
impact of promotions as well as incentive changes.
BONUS COMPENSATION
In addition to salary compensation, on September 3 and September 8, 1999 the
Compensation Committee recommended the continuation of the Management Incentive
Plan, adopted by the Board of Directors in the previous year, 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 fiscal 1999 and were based on pre-tax profits, after bonus, for
fiscal 1999 for the device business only.
STOCK OPTIONS
The Compensation Committee relies on incentive compensation in the form of
stock options to retain and motivate executive officers. Incentive compensation
in the form of stock options is designed to provide long-term incentives to
executive officers and other employees, to encourage the executive officers and
other employees to remain with the Company and to enable them to develop and
maintain a stock ownership position in the Company's Common Stock. The Company's
1989 Stock Plan and the 1998 Stock Option Plan, administered by the Compensation
Committee, have been used for the granting of stock options.
Both the 1989 Stock Plan and The 1998 Stock Option Plan permits the
Compensation Committee to administer the granting of 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 approves the
granting of 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, 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 administering 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 1999, options to
purchase shares of Common Stock were granted to Messrs. Broyer, Caplan,
Costello, Hsia, Kelley, McGrail, Mori, Puorro, Spies and Wilber.
11
<PAGE>
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 1999, Mr. Puorro's
cash compensation remained at $237,500 per year. 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.
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 July 1, 1994 (the date of the beginning of the Company's fifth preceding
fiscal year) in the Company's Common Stock and on June 30, 1994 in each of the
foregoing indices and assumes reinvestment of dividends, if any.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CANDELA CORPORATION PEER GROUP S&P 500
<S> <C> <C> <C>
07/01/94 100 100 100
06/30/95 60 164 126
06/28/96 268 234 159
06/27/97 200 288 214
06/26/98 90 378 279
07/02/99 552 512 342
</TABLE>
12
<PAGE>
EMPLOYMENT AGREEMENTS
Candela has entered into severance agreements with each of Messrs. Puorro,
Hsia, Broyer, Kelley, Caplan, Wilber and McGrail. Under our agreements with
Messrs. Hsia, Broyer, Kelley, Caplan, Wilber and McGrail, Candela has agreed to
continue payment of their respective base annual salaries over twelve months in
the event that their services for Candela are terminated for any reason except
for cause or such individuals' resignation. Under our agreement with
Mr. Puorro, in the event that his employment is terminated for any reason, at
either his election or Candela's election other than for just cause, he will be
entitled to receive severance payments equal to his base annual salary for
twelve months and then 50% of his base annual salary for an additional twelve
months. Each of the above named individuals are subject to nonsolicitation and
noncompetition provisions for the period during which he receives severance
payments.
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 July 1, 2000. 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
JULY 1, 2000.
SHAREHOLDER PROPOSALS
The Company intends to hold its next Annual Meeting of Shareholders in the
second fiscal quarter of 2000. 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 2000 must be received at
the Company's principal executive offices not later than June 1, 2000. In order
to avoid uncertainty as to the date on which a proposal was received by the
Company, it is suggested that proponents submit their proposals by Certified
Mail Return Receipt Requested to Candela Corporation, 530 Boston Post Road,
Wayland, Massachusetts 01778.
EXPENSES AND SOLICITATION
The cost 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.
13
<PAGE>
DETACH HERE
PROXY
CANDELA CORPORATION
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
JANUARY 20, 2000
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 Thursday,
January 20, 2000, at 10:00 a.m., local time, at the Exchange Hall, The
Exchange Conference Center at the 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 20, 1999, 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 AND FOR THE
PROPOSAL IN ITEM 2, AND AUTHORITY WILL BE DEEMED GRANTED UNDER ITEM 3.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
DETACH HERE
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
<TABLE>
<S> <C>
FOR AGAINST ABSTAIN
1. To elect a Board of Directors 2. To ratify the appointment of the firm of / / / / / /
Nominees: Gerard E. Puorro, Theodore G. Johnson, Pricewaterhouse Coopers LLP as
Kenneth D. Roberts, Douglas W. Scott, independent auditors of the Company
Richard J. Cleveland, M.D. and Nancy Nager. for the fiscal year ending July 2, 2000.
FOR WITHHELD
ALL / / / / FROM ALL
NOMINEES NOMINEES
/ / ______________________________________ 3. To transact such other business as may properly come
For all nominees except as noted above before the meeting and any adjournments thereof.
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>
