PAMET SYSTEMS, INC.
1000 Main Street
Acton, Massachusetts 01720
___________________________
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
___________________________
Acton, Massachusetts
May 5, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of PAMET
SYSTEMS, INC. (the "Company"), a Massachusetts corporation, will be held at
the executive offices of the Company, 1000 Main Street, Acton,
Massachusetts 01720 on May 28, 1999, at 10:00 a.m. (Eastern Standard Time),
for the purposes of considering and voting upon the following matters, as
more fully described in the attached Proxy Statement:
1. To elect Dr. Joel B. Searcy and Dr. Davinder Sethi to serve as directors
for a term of three years (expiring in 2002) and until their respective
successors are elected and qualified; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only those stockholders of record at the close of business on April 30,
1999 shall be entitled to receive notice of, and vote at the meeting and
any adjournment(s) thereof. Such stockholders may vote in person or by
proxy. The stock transfer books will not be closed.
All stockholders are cordially invited to attend the meeting in person. In
any event, please mark your votes, then date, sign and return the
accompanying proxy in the envelope enclosed for that purpose (to which no
postage need be affixed if mailed in the United States) whether or not you
expect to attend the meeting in person. The proxy is revocable by you at
any time prior to its exercise as provided herein. The prompt return of the
proxy will be of assistance in preparing for the meeting and your
cooperation in this respect will be appreciated.
The Annual Report of the Company for the fiscal year ended December 31,
1998 is also enclosed.
By order of the Board Of Directors
ARTHUR V. JOSEPHSON, JR.
Clerk
<PAGE>
PAMET SYSTEMS, INC.
1000 Main Street
Acton, Massachusetts 01720
___________________
PROXY STATEMENT
___________________
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1999
This Proxy Statement is furnished to holders of Common Stock, $.01 par
value per share (the "Common Stock") of Pamet Systems, Inc. (the "Company")
in connection with the solicitation of proxies, in the accompanying form,
by the Board of Directors of the Company, for use at the Annual Meeting of
Stockholders to be held at the executive offices of the Company, 1000 Main
Street, Acton, Massachusetts on May 28, 1999, at 10:00 a.m., and at any and
all adjournments thereof. Stockholders may revoke the authority granted by
their execution of proxies at any time prior to their use by filing with
the Clerk of the Company a written revocation or duly executed proxy
bearing a later date or by attending the meeting and voting in person.
Solicitation of proxies will be made chiefly through the mails, but
additional solicitation may be made by telephone or telegram by the
officers or regular employees of the Company. The Company may also enlist
the aid of brokerage houses in soliciting proxies. All solicitation
expenses, including costs of preparing, assembling and mailing proxy
material, will be borne by the Company. This proxy statement and
accompanying form of proxy are being mailed to stockholders on or about May
4, 1999.
Shares of the Company's Common Stock represented by executed and unrevoked
proxies will be voted in accordance with the choice or instructions
specified thereon. It is the intention of the persons named in the proxy,
unless otherwise specifically instructed in the proxy, to vote all proxies
received by them (i) FOR the election of Dr. Joel B. Searcy and Dr.
Davinder Sethi to serve as directors for a term of three years (expiring in
2002) and until their successors are elected and qualified and (ii) in the
discretion of such persons named in the proxy on any other proposals to
properly come before the meeting or any adjournment thereof.
VOTING
Only stockholders of record at the close of business on April 30, 1999 will
be entitled to vote at the meeting and any and all adjournments thereof. As
of April 30, 1999, the Company had issued and outstanding 2,545,500 shares
of Common Stock. Each holder of Common Stock will be entitled to one vote
for each share of Common Stock registered in his or her name on the record
date. The holders of fifty-one percent (51%) of the outstanding shares of
Common Stock constitute a quorum and are required to be present in person
or by proxy to conduct business at the meeting.
Directors are elected by a plurality of the votes cast at the meeting.
Broker non-votes and abstentions will have no effect on the election of
Directors at the Annual Meeting. The Board of Directors recommends a vote
FOR each of the nominees named below.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. One class of
directors will be elected at the 1999 Annual Meeting. The directors in
Class III, Dr. Joel B. Searcy and Dr. Davinder Sethi, are nominated for a
term of three years and until their successors are duly elected and have
qualified. Each nominee has indicated to the Company that he is willing to
serve as a director of the Company if elected, and the Board of Directors
has no reason to believe that any of the nominees will become unable or
unwilling to serve, although it is anticipated that Dr. Searcy will
relinquish his title of Chairman of the Board of Directors. However, in the
event that any nominee should become unavailable for election for any
presently unforeseen reason, the persons named in the form of proxy will
vote for any nominee who shall be designated by the present Board of
Directors.
The information set forth below as to the ages and principal occupations of
these nominees and the other members of the Board of Directors has been
furnished to the Company by such nominees or directors.
<TABLE>
<CAPTION>
NOMINEES WHOSE TERMS EXPIRE IN 2002
(Class II)
Director
Director Name Age Principal Occupation Since
<S> <C> <C> <C>
Dr. Joel B. Searcy 63 Dr. Searcy has been Chairman of 1987
the Board of Directors of the
Company since the Company's
inception in 1987, was President
and CEO until June 1997,
Treasurer until May 1991 and
served as Clerk until September
1990.
Dr. Davinder Sethi 65 Dr. Sethi has been an independent
advisor since 1996 and served
1998 as a Senior Advisor to
Barclays de Zoete Wedd, an
investment banking firm, from
1990 until 1996.
</TABLE>
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS EXPIRE IN 2000
(Class I)
Director
Director Name Age Principal Occupation Since
<S> <C> <C> <C>
Richard C. Becker 53 Mr. Becker has been Vice 1991
President - Finance and
Administration since June 1997,
Assistant Clerk since February
1991 and Treasurer since May
1991. He was Vice President and
Chief Operating officer of the
Company from June 1993 through
May 1997 and Vice President of
Finance and Administration of
the Company from January 1991
through June 1993.
Arthur V. Josephson, 55 Mr. Josephson has served as 1988
Jr. Clerk for the Company since
September 1990. In addition to
his responsibilities to the
Company, Mr. Josephson has
served as an accounting
consultant to a number of
clients in Massachusetts since
1985.
Mr. Josephson also served as
the Treasurer of Assabet Valley
Home Health Association, Inc.,
a visiting nurse agency, from
1977 through October 1994.
Bruce J. Rogow 53 Mr. Rogow has served as a 1997
Gartner Group Fellow since 1992
at Gartner Group, a computer
consulting firm, and executive
principal of Rogow Opportunity
Capital, a private investment
firm, since 1997.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
(Class II)
Director
Director Name Age Principal Occupation Since
Dr. Stanley J. Robboy 57 Since January 1998, Dr. Robboy 1990
has been Vice Chairman Of the
department of Pathology at Duke
University Medical Center which
is in addition to the positions he
has held since April 1993. Since
April 1993 he has been Professor
of Pathology, Obstetrics and
Gynecology and Head of the
Division of Gynecologic Pathology
of the Department of Pathology at
Duke University Medical Center.
David T. McKay 56 Mr. McKay has been President and 1997
Chief Executive Officer of the
Company since June 1997. Mr. McKay
served as the Global Systems
Manager for Mobil Oil, an oil
production company, from 1996 to
1997. From 1994 to 1996 he was the
Vice President of Information
Systems at Moore Corporation, a
business forms company. From 1992
to 1994 he was a Vice President of
Gartner Group, a computer
consulting firm.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended December 31, 1998 the Board of Directors of
the Company held thirteen meetings. During such period, each of the current
directors of the Company attended 75% or more of the aggregate of (a) the
total number of meetings of the Board of Directors and (b) the total number
of meetings held by all committees of the Board on which such director
served.
The Board of Directors has two committees, an Audit Committee and a
Compensation Committee. The Board of Directors does not have a nominating
committee.
The Audit Committee consists of Bruce J. Rogow, Stanley J. Robboy and
Davinder Sethi. The Audit Committee acts as a liaison between the Company
and its independent auditors and reports on matters pertaining to the
Company's independent audit and the Company's accounting policies The Audit
Committee met once during fiscal 1998.
The Compensation Committee consists of Arthur Josephson, Jr., Bruce J.
Rogow, Stanley Robboy, and Davinder Sethi. The Compensation Committee was
formed to make recommendations to the Board of Directors with respect to
the compensation of the officers of the Company for each year and to
administer the Company's employee benefit plans. The Compensation Committee
met twice during fiscal 1998.
Directors who are not officers of the Company who were nominated and
elected prior to November 1998 are entitled to receive an annual stipend of
$1,000 for serving on the Board and its committees and reimbursement for
out-of-pocket expenses in connection with their attendance at directors'
meetings. Additionally, under the 1990 Stock Option Plan each non-employee
director who was a director of the Company on the last day of a calendar
year or has ceased to be a director during the calendar year due to his or
her death or attainment of an age greater than 65 was automatically granted
a non-qualified stock option to purchase 2,000 shares of Common Stock on
January 1 of the succeeding calendar year at the fair market value per
share on the date of grant.
In November 1998, the Company implemented a new compensation program for
non-employee Directors. Under the new system Directors who are not officers
of the Company who were nominated and elected after November 1998 will be
granted a non qualified stock option to purchase 45,000 shares of Common
Stock. The vesting of the grant is over three years. In addition these
Directors are entitled to receive an annual stipend of $6,000 for serving
on the Board and its committees and reimbursement for out of pocket
expenses in connection with their attendance at directors meetings. It is
expected that Directors will be able to elect to receive their annual cash
stipend in the form of Company common Stock
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's executive officers and directors are required under Section
16(a) of the Securities Exchange Act of 1934, as amended, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission. Copies of those reports must also be furnished to the Company.
Based solely on the Company's review of the copies of such reports it has
received, the Company believes that all of its other executive officers and
directors, and greater than ten percent beneficial owners complied with all
filing requirements applicable to them except that Richard C. Becker, David
T. McKay and Dr. Stanley Robboy were each late in filing one Form 4 and one
Form 5 (each such late filing related to one transaction), Dr. Joel B.
Searcy was late in filing one Form 5 (which related to three transactions).
SECURITY OWNERSHIP OF CERTAIN STOCKHOLDERS
The following table provides information regarding beneficial ownership as
of April 30, 1999 of the Company's Common Stock as to (i) each nominee and
director of the Company, (ii) each of the Named Executive Officers
(hereafter defined), (iii) each person who is known to the Company to be
the beneficial owner of more than 5% of the Company's voting securities and
(iv) all directors and executive officers as a group. The information set
forth below as to nominees, directors, and officers has been furnished to
the Company by such nominee, officer or director.
</TABLE>
<TABLE>
<CAPTION>
Percent of Common
Name and Address of Amount and Nature of Stock (if over 1%)
Beneficial Owner Beneficial Ownership Owned Beneficially
<S> <C> <C>
Dr. Joel B. Searcy 347,277(1) 13.5%
1000 Main Street
Acton, MA 01720
David T. McKay 93,500(2) 3.0%
Richard C. Becker 101,000(3) 3.8%
Arthur V. Josephson, Jr. 62,750(4) 2.4%
Dr. Stanley J. Robboy 371,591(5) 14.2%
104 Donegal Drive
Chapel Hill, NC 27514
Bruce J. & Winnie R. Rogow 803,147(6) 27.3%
220 Ocean Avenue
Marblehead, MA 01945
Dr. Davinder Sethi 15,000(7) *
37 East Ridge Road
Skillman, NJ 08559
William J. Bell 1993 Trust 544,826(8) 17.6%
10539 Bellagio Road
Los Angeles, CA 90077
Calvin Hori 145,000(9) 5.7%
35 Norwich Road
Wellesley, MA 02181
Henry Mehlman 161,698(10) 6.4%
40 Bartlett Street
Marblehead, MA 01945
All directors and executive 1,784,265(11) 53.3%
officers as a group (7 people)
</TABLE>
* Represents beneficial ownership of less that 1% of the Common Stock
(1) Includes 24,000 shares issuable upon the exercise of currently
exercisable options.
(2) Includes 87,500 shares issuable upon the exercise of currently
exercisable options.
(3) Includes 100,000 shares issuable upon the exercise of currently
exercisable options.
(4) Includes 31,000 shares issuable upon the exercise of currently
exercisable options.
(5) Includes 47,000 shares issuable upon the exercise of currently
exercisable options, 109,090 shares of Common Stock issuable upon
conversion of a $300,000 note convertible until February 28, 2001, at a
price of $2.75 per share and 30,000 shares issuable upon the exercise of
warrants exercisable any time prior to November 5, 2003 at a price of $2.75
per share.
(6) As reported on an Amendment No.3 to the Schedule 13D filed with
the Securities and Exchange Commission on January 6, 1999, filed by Bruce
J. Rogow and Winnie R. Rogow relating to the beneficial ownership of (i)
5,000 shares of Common Stock held by Mr. Rogow's 401(k) account, (ii)
20,000 shares held by Mr. Rogow's retirement money purchase account, (iii)
95,000 shares of Common Stock held jointly, (iv) 4,000 shares held by Mrs.
Rogow as custodian for Mr. and Mrs. Rogow's minor child, (v) 325,000 shares
of Common Stock held by Rogow Opportunity Capital, LLC, a Massachusetts
limited liability company ("Rogow Opportunity") of which Mr. and Mrs. Rogow
are the sole members, (vi) warrants (the "Warrants") held by Rogow
Opportunity exercisable at any time or from time to time prior to March 2,
2003, to purchase up to 31,250 shares of Common Stock at an exercise price
of $4.25 per share, (vii) a note that is convertible at any time or from
time to time prior to June 1, 2001 into up to 206,897 shares of Common
Stock at a price of $1.45 per share and (viii) warrants exercisable at any
time or from time to time prior to November 5, 2003, to purchase 120,000
shares of Common Stock at an exercise price of $2.50 per share.
(7) Represents 15,000 shares issuable upon the exercise of currently
exercisable options.
(8) Represents 172,413 shares of Common Stock issuable upon conversion
of a $250,000 note convertible until November 12, 2000 at a conversion
price of $1.45 per share, 172,413 shares issuable upon the exercise of
warrants exercisable at any time from time to time prior to November 12,
2003 at an exercise price of $1.45 per share, a $250,000 note convertible
at a conversion price of $2.50 per share and 100,000 shares issuable upon
the exercise of warrants exercisable at any time or from time to time prior
to February 4, 2004 at an exercise price of $2.50 per share.
(9) As reported on Schedule 13D filed with the Securities and Exchange
Commission on August 11,1995.
(10) As reported on Schedule 13D filed with the Securities and Exchange
Commission on June 5,1995.
(11) Includes 801,737 shares issuable upon the exercise of currently
exercisable options and warrants, conversion of convertible notes held by
all directors and officers of the Company as a group.
EXECUTIVE OFFICERS OF THE COMPANY
The following table set forth the names, ages and all positions and
offices with the Company held by the Company's present executive officers
Name Age Position
Dr. Joel B. Searcy 63 Dr. Searcy has been Chairman of
the Board of Directors of the
Company since the Company's inception in
1987, was President and CEO until June
1997, Treasurer until May 1991 and served
as Clerk until September 1990.
David T. McKay 56 Mr. McKay has been President and
Chief Executive Officer of the
Company since June 1997. Mr. McKay
served as the Global Systems Manager
for Mobil Oil, an oil production company,
from 1996 to 1997. From 1994 to 1996
he was the Vice President of
Information Systems at Moore Corporation, a
business forms company. From 1992 to
1994 he was a Vice President of Gartner
Group, a computer consulting firm.
Richard C. Becker 53 Mr. Becker has been Vice
President - Finance and Administration
since June 1997, Assistant Clerk since
February 1991 and Treasurer since May 1991.
He was Vice President and Chief Operating
officer of the Company from June 1993
through May 1997 and Vice President of
Finance and Administration of the
Company from January 1991 through June 1993.
Arthur V. Josephson, 55 Mr. Josephson has served as
Jr. Clerk for the Company since September
1990. In addition to his responsibilities
to the Company, Mr. Josephson has served as
an accounting consultant to a number
of clients in Massachusetts since 1985.
Mr. Josephson also served as the Treasurer
of Assabet Valley Home Health Association,
Inc.,a visiting nurse agency,from 1977
through October 1994.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for services in all
capacities paid by the Company during the three fiscal years ended December
31, 1998 to the chief executive officer and the executive officers whose
total cash compensation exceeded $100,000 during the fiscal year ended
December 31, 1998, (collectively, the "Named Executive Officers"). The
table excludes perquisites and other personal benefits which are less than
10% of the total annual salary and bonus for Named Executive Officers.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term
Compensation
Securities Under-
Name and Principal Year Salary Bonus lying Options
Position $ $ #
<S> <C> <C> <C> <C>
Dr. Joel B. Searcy 1998 $132,000
Chairman 1997 132,000 10,000
1996 120,000 10,000
David T. Mckay 1998 $160,000 9,334 50,000
President and Chief 1997 93,334 (1) 150,000
Executive Officer
</TABLE>
(1) Represents salary from June 1, 1997, the date on which Mr.
McKay commenced employment
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
year ended December 31, 1998 to each Named Executive Officer who received
options during such year.
<TABLE>
<CAPTION>
(1)
Potential Realized
Number of % of Total Value at Assumed
Securities Options Annual Rates of
Underlying Granted to Stock Price
Options Employees in Exercise Expir- Appreciation
Granted Fiscal year Price ation for Option Term
Name (#) (%) ($/sh) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
David T. McKay 50,000 54.1% 1.37 9/27/08 $42,470 $109,168
</TABLE>
(1) Potential realizable values are based on the fair market value per
share as determined by the Company on the date of the grant and represent
hypothetical gains that could be achieved for the respective options if
exercised at the end of the option term. The dollar amounts set forth in
these columns are the results of calculations at the five percent and ten
percent rates set by the Securities and Exchange Commission, and are not
intended to forecast future appreciation, if any, of the Company's Common
Stock price. There can be no assurance that such potential realizable
values will not be more or less than that indicated in the table above.
EMPLOYMENT AGREEMENTS
Dr. Joel B. Searcy was employed by the Company pursuant to an
employment agreement which commenced on November 8, 1990, and terminated on
December 31, 1993, but which was renewed through April 30, 1997. On May 30,
1997, Dr. Searcy entered into a new employment agreement with the Company
which terminates on December 31, 1999, under which Dr. Searcy will serve as
Chairman of the Board of the Company. The term of the employment agreement
will automatically renew for an additional one year term if neither party
gives' the other notice of its intent not to renew at least 180 days prior
to the expiration date of the initial term or any extensions thereof.
Pursuant to his new employment agreement, Dr. Searcy is to receive a base
salary of $132,000 per annum, the use of an automobile and certain other
fringe benefits during the term of the agreement. In addition, Dr. Searcy
may receive bonus compensation, including grants of stock options or other
equity of the Company, at the discretion of the Board of Directors of the
Company.
Pursuant to Dr. Searcy's employment agreement, Dr. Searcy may be
terminated by the Company at any time upon written notice to Dr. Searcy
with or without cause or by Dr. Searcy upon a constructive termination,
change of control of the Company or upon two months prior written notice.
In the event that Dr. Searcy's employment is terminated by the Company for
cause (as defined in the employment agreement) or voluntarily by Dr.
Searcy, Dr. Searcy will be entitled only to compensation and benefits
accrued through the date of such termination. If Dr. Searcy's employment is
terminated as the result of constructive termination (as defined in the
agreement) or by the Company without cause, he will receive (i) his base
salary and all fringe benefits until the later of twelve months from the
date of termination or the expiration date of the employment agreement and
(ii) an additional bonus amount for each twelve month portion of such
period equal to the highest annualized bonus paid to him during the term.
In the event that Dr. Searcy's employment is terminated which 90 days
following a change of control, he will be entitled to receive, in addition
to all compensation and benefits accrued through the date of such
termination, a lump sum amount equal to 2.99 multiplied by the sum of (i)
his base salary and (ii) all bonus compensation paid or payable for the
most recent year. For purposes of Dr. Searcy's employment agreement, a
"change of control" is defined as (i) the election at a meeting of the
Company's stockholders of directors, a majority of whom are not nominated
by the incumbent Board of Directors, or (ii) the acquisition by any person
or entity, other than the Company, Dr. Searcy or any group with which he is
affiliated, or any person who was a member of the Board of Directors of the
Company as of June 1, 1997, of beneficial ownership of 30% or more of the
securities entitled to vote for the election of directors, subject to
certain exceptions set forth in the agreement.
Pursuant to Dr. Searcy's employment agreement, for a period of
twenty-four months following termination of his employment with the
Company, Dr. Searcy will not compete directly or indirectly, with any
service or product made or sold by the Company without the Company's prior
written consent. In addition, during the term of his employment and for a
period of twenty-four months following the termination thereof, Dr. Searcy
may not, directly or indirectly, (i) recruit employees of the Company or
induce them to terminate their employment with the Company or (ii) contact,
solicit, or sell to any of the customers or prospective customers of the
Company.
David T. McKay entered into an employment agreement with the
Company, dated as of May 30, 1997, pursuant to which Mr. McKay will serve
as President and Chief Executive Officer of the Company for a term
commencing on June 1, 1997, and terminating on the first anniversary
thereof. The term of the employment agreement will automatically renew for
any additional one year term if neither party give the other notice of its
intent not to renew at least 90 days prior to the expiration date and,
unless 90 days non-renewal notice is given by either party prior to the end
of such first renewal period, the agreement will automatically extend for
an additional two year period. Pursuant to his employment agreement, Mr.
McKay is to receive a base salary of $160,000 per annum, additional
contractual salary based on performance levels, including grants of stock
options or other equity of the Company, at the discretion of the Board of
Directors of the Company, and certain other fringe benefits during the term
of the agreement. The employment agreement also provides for the grant of
fully-vested options to purchase 50,000 shares of the common stock of the
Company on the commencement date of his employment and on August 25, 1997,
to purchase 100,000 shares of the common stock of the Company which vest at
the rate of 25% per year.
Except as described below, the termination provisions of Mr.
McKay's employment agreement are substantially identical to those in Mr.
Searcy's employment agreement, describe above. In the event that during (a)
the first year or (b) second year of Mr. McKay's employment with the
Company, his employment is terminated as the result of constructive
termination (as defined in the employment agreement) or by the Company
without cause, in addition to compensation and benefits accrued through the
date of such termination, he will only be entitled to receive his base
salary and all fringe benefits and additional bonus amounts for an
additional (a) three months period or (b) six month period, respectively.
Mr. McKay's employment agreement includes non-competition and
non-solicitation provisions which are substantially similar to those in Dr.
Searcy's employment agreement described above.
Richard C. Becker entered into an employment agreement with the
Company, dated as of May 30, 1997, pursuant to which Mr. Becker will serve
as Vice President of the Company for a term commencing June 1, 1997 and
terminating on December 31, 1999. The term of the employment agreement will
automatically renew for an additional one year term if neither party gives
the other notice of its intent not to renew at least 180 days prior to the
expiration date of the initial term of any extensions thereof. Pursuant to
his employment agreement, Mr. Becker is to receive a base salary of $93,500
per annum, bonus compensation, including grants of stock options or other
equity of the Company, at the discretion of the Board of Directors of the
Company, and certain other fringe benefits during the term of the
agreement.
Mr. Becker's employment agreement contains termination provisions,
and non-competition and non-solicitation provisions which are substantially
similiar to those in Dr. Searcy's employment agreement described above.
1990 STOCK OPTION PLAN
The Company maintains the Pamet Systems, Inc. 1990 Stock Option Plan
(the "1990 Plan"), which was adopted by the Board and approved by the
stockholders of the Company in September 1990. The 1990 Plan, which has a
maximum of 400,000 shares of Common Stock reserved for issuance, provides
for the discretionary grant of options intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") to key employees of the Company and
of non-qualified stock options to key employees and consultants (but not
non-employee directors) of the Company, and for the automatic grant of
non-qualified options to non-employee directors of the Company. See "The
Board of Directors and its Committees". The maximum number of shares
available under the 1990 Plan have been granted.
1998 STOCK OPTION PLAN
The Company maintains the Pamet Systems, Inc. 1998 Stock Option
Plan (the "1998 Plan"), which was adopted by the Board and approved by the
stockholders of the Company in June 1998. The 1998 Plan, which has a
maximum of 250,000 shares of Common Stock reserved for issuance, provides
for the discretionary grant of options intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") to key employees of the Company and
of non-qualified stock options to key employees and consultants (but not
non-employee directors) of the Company. The maximum number of shares of
Common Stock that may be granted as options under the 1998 Plan to any
participant in any calendar year may not exceed 100,000 shares. The 1998
Plan is administered by a committee of the Board of Directors which has
broad discretion in the operation and administration of the 1998 Plan. As
of April 30, 1999, 166,500 shares were available for grant under the 1998
Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997, in order to provide the Company with working capital funding,
the Company entered in to an agreement with Dr. Stanley J. Robboy a
stockholder and director pursuant to which he agreed to lend money to the
Company. The agreement provided for a partially secured $300,000 line of
credit with interest on the outstanding balance payable at the rate of 12%
per annum. In connection with the loan, Dr. Robboy was granted warrants for
the purchase of up to 100,000 shares of common stock at a price of $2.00
per share. Dr. Joel B. Searcy and Mr. Richard C. Becker were each granted
10,000 options priced at $2.00 in return for their guarantee of a portion
of Dr. Robboy's line of credit. On November 6, 1998 Dr. Robboy converted
his line of credit to a convertible promissory note with interest payable
at the rate of % per annum. The note is convertible until February 28,
2001 into 109,090 shares of Common Stock. In connection with the note Dr.
Robboy was granted a five year warrant to purchase 30,000 shares of Common
Stock at a price of $2.75.
On April 14, 1997 the Company issued 200,000 shares to Rogow Opportunity
Capital (ROC) a principal of which is Bruce Rogow, a stockholder and
Director of the Company, for an aggregate purchase price of $550,000 based
on a purchase price of $2.75 per share. On January 6, 1998 the Company
entered into an agreement with ROC to lend the Company $200,000 at an
interest rate of 12% per annum. On January 30, 1998 ROC agreed to lend the
Company an additional $100,000 at an interest rate of 12% per annum. On
March 2, 1998 the Company issued ROC 125,000 shares of Common Stock for an
aggregate purchase price of $531,250, based on a purchase price of $4.25
per share. In payment of $300,000 of the purchase price for these shares,
ROC surrendered the January 6 and January 30 notes. In connection with this
agreement ROC was granted a five year warrant to purchase 31,250 shares of
Common Stock at a price of $4.25 per share. On June 11, 1998 the Company
entered into an agreement with ROC pursuant to which ROC provided the
Company with a $200,000 loan due with interest payable at a rate of 10% per
annum. On July 31, 1998 ROC lent an additional $100,000 to the Company with
interest payable at a rate of 12% per annum. On November 6, 1998 ROC
converted the June 11 and July 31 loans to a convertible promissory note.
The note is convertible until February 28, 2001 into 206,896 shares of
Common Stock at a price of $1.45 per share. In connection with the note ROC
was granted a five year warrant to purchase 120,000 shares of Common Stock
at a price of $2.75 per share.
On November 13, 1998 the Company entered into an agreement with the William
James Bell 1993 Trust. The Bell Trust loaned the Company $250,000 and was
given a convertible promissory note. The note is convertible until November
12, 2000 into 172,413 shares of Common Stock at a price of $1.45 per share.
In connection with the note the Bell Trust was granted a five year warrant
to purchase 172,413 shares of Common Stock at a price of $1.45 per share.
On February 8, 1999 the Bell Trust loaned the Company an additional
$250,000 and was given a convertible promissory note. The note is
convertible until February 7, 2001 into 100,000 shares of Common Stock at a
price of $2.50 per share. In connection with the note the Bell Trust was
granted a five year warrant to purchase 100,000 shares of Common Stock at a
price of $2.50 per share.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Representatives of Carlin Charron & Rosen LLP, the Company's auditors, are
expected to be present at the meeting. The representatives will have the
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
All stockholder proposals which are intended to be presented at the next
Annual Meeting of Stockholders of the Company contemplated to be held in
2000 must be received by the Company on or before January 4, 2000, for
inclusion in the Board of Directors' proxy statement and form of proxy
relating to the meeting.
MISCELLANEOUS
The Board of Directors knows of no other business to be acted upon at the
meeting. However, if any other business properly comes before the meeting,
it is the intention of the persons named in the enclosed proxy to vote on
such matters in accordance with their best judgment.
The prompt return of your proxy will be appreciated and helpful in
obtaining the necessary vote. Therefore, whether or not you expect to
attend the meeting, please sign the proxy and return it in the enclosed
envelope.
A copy of the Company's Annual report on Form 10-KSB for the fiscal year
ended December 31, 1998 is available without charge from Investor
Relations, Pamet Systems, Inc., 1000 Main Street, Acton, Massachusetts
01720, Telephone: (978) 263-2060.
By order of the Board of Directors
ARTHUR V. JOSEPHSON, Jr.
Clerk
Acton, Massachusetts
May 5, 1999
PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD NOW.
