<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(c)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Imagyn Medical Technologies, Inc.
--------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Imagyn Medical Technologies, Inc.
--------------------------------------------------------------
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
IMAGYN MEDICAL TECHNOLOGIES, INC.
5 Civic Plaza, Suite 100
Newport Beach, California 92660
(949) 668-5858
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Imagyn Medical Technologies, Inc. (the "Company") to be held on
November 24, 1998, at The Four Seasons Hotel, 690 Newport Center Drive, Newport
Beach, California 92660 commencing at 9:00 a.m., local time.
At this meeting, you will be asked to elect two directors to serve a
three-year term or until their successors are duly elected and qualified. In
addition, you will be asked to ratify the selection of Deloitte & Touche LLP as
the independent auditors of the Company for the fiscal year ending March 31,
1999.
THE BOARD OF DIRECTORS HAS APPROVED THE PROPOSAL SET FORTH ABOVE AND
RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL AND THE NOMINEES FOR ELECTION
TO THE BOARD OF DIRECTORS AT THE ANNUAL MEETING.
It is important that your shares be voted at the meeting, regardless
of the number of shares you hold. THEREFORE, PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING. This will not prevent you from voting your shares in person if you
do attend. We have enclosed for your information a copy of the Company's Annual
Report on Form 10-K for the year ended March 31, 1998, which includes audited
financial statements for the Company's most recently completed fiscal year.
We look forward to seeing you on November 24, 1998.
Sincerely,
/s/ CHARLES A. LAVERTY
-------------------------------
Charles A. Laverty
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
IMAGYN MEDICAL TECHNOLOGIES, INC.
5 Civic Plaza, Suite 100
Newport Beach, California 92660
(949) 668-5858
To the Stockholders of
Imagyn Medical Technologies, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Imagyn Medical Technologies, Inc. ("Imagyn" or the
"Company") will be held on November 24, 1998, at The Four Seasons Hotel, 690
Newport Center Drive, Newport Beach, California 92660 commencing at 9:00 a.m.
local time, for the following purposes:
1. To elect two Class I directors to serve a three-year term or
until their successors are duly elected and qualified.
2. To ratify the selection of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending March
31, 1999 (the "Accountants Proposal").
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only those stockholders of record at the close of business on September
30, 1998 will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY AS SOON AS POSSIBLE, WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE
ANNUAL MEETING. Proxies are revocable at any time prior to the time they are
voted, and stockholders who are present at the meeting may withdraw their
proxies and vote in person if they so desire.
By Order of the Board of Directors
/s/ KEVIN M. HIGGINS
----------------------------------
Kevin M. Higgins
Secretary
Newport Beach, California
October 20, 1998
<PAGE> 4
IMAGYN MEDICAL TECHNOLOGIES, INC.
5 Civic Plaza, Suite 100
Newport Beach, California 92660
---------------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Imagyn Medical Technologies, Inc. (the
"Company") for use at the Company's Annual Meeting of Stockholders to be held on
November 24, 1998(the "Annual Meeting"), at 9:00 a.m., local time, at The Four
Seasons Hotel, 690 Newport Center Drive, Newport Beach, California 92660, and at
any adjournment thereof. This Proxy Statement and the accompanying proxy are
first being sent to stockholders entitled to vote at the Annual Meeting on or
about October 20, 1998.
THE PROXY
The persons named as proxyholders, Charles A. Laverty, Kevin M.
Higgins and Michael A. Montevideo, were selected by the Board of Directors of
the Company and are executive officers of the Company.
All shares represented by each properly executed, unrevoked proxy
received in time for the Annual Meeting will be voted in the manner specified
therein. If no specification is made on the proxy as to any one or more of the
proposals, the shares represented by the proxy will be voted FOR the election of
those directors named in the attached Proxy Statement and FOR the Accountants
Proposal, and with respect to any other matters that may come before the Annual
Meeting, at the discretion of the proxyholders. An executed proxy may be revoked
at any time before its exercise by filing with the Secretary of the Company a
written notice of revocation or a duly executed proxy bearing a later date. The
execution of the enclosed proxy will not affect a stockholder's right to vote in
person should such stockholder find it convenient to attend the Annual Meeting
and desire to vote in person.
VOTING AT THE ANNUAL MEETING
Presently, the only issued and outstanding voting securities of the
Company are (i) its shares of Common Stock, $.001 par value (the "Common
Stock"), of which 38,687,325 shares were outstanding at the close of business on
September 30, 1998 (the "Record Date") and (ii) its Convertible Subordinated
Debentures which vote with the Common Stock on an "as converted" basis, and, as
of the Record Date, the outstanding Convertible Subordinated Debentures had
voting rights equivalent to 4,587,156 shares of Common Stock. The Common Stock
and the Convertible Subordinated Debentures are hereinafter referred to as
"Voting Stock" and the total number of outstanding shares of Voting Stock as of
the Record Date was 43,274,481. Only holders of record of Voting Stock at the
close of business on the Record Date are entitled to receive notice of and to
vote at the Annual Meeting and any adjournment thereof. The holders of the
Voting Stock of the Company are entitled to one vote per share (or in the case
of the Convertible Subordinated Debentures one vote for each share of Common
Stock issuable upon conversion of the Convertible Subordinated Debentures into
Common Stock) on each matter submitted to a vote of the stockholders.
The holders of a majority of the Company's outstanding Voting Stock,
present in person by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting or any adjournment thereof. While there is no
definitive statutory or case law authority in Delaware as to the proper
treatment of abstentions (also referred to as withheld votes), the Company
believes that abstentions should be counted for purposes of determining if a
quorum is present at the Annual Meeting for the transaction of business. With
respect to broker nominee votes, the Delaware Supreme Court has held that broker
nominee votes may be counted as present or represented for purposes of
determining the presence of a quorum. Abstentions are included in determining
the number of shares voted on the proposals submitted to stockholders (other
than the election of directors) and will have the same effect as a no vote on
such proposals, whereas broker non-votes are not counted.
With respect to the election of the Company directors, cumulative
voting is not permitted. Directors are elected by a plurality of the votes of
the shares of Voting Stock represented and voted at the Annual Meeting and
abstentions and broker non-votes will have no effect on the outcome of the
election of directors. The affirmative vote of a majority of the shares of
Voting Stock represented and voted at the Annual Meeting is required to ratify
the Accountants Proposal.
1
<PAGE> 5
SOLICITATION
The Company will bear the expense of soliciting proxies from its
stockholders. Proxies will be solicited principally through the use of the mail,
but directors, officers and regular employees of the Company may solicit proxies
personally or by telephone or special letter without any additional
compensation. The Company also will reimburse banks, brokerage houses and other
custodians, nominees and fiduciaries for any reasonable expenses in forwarding
proxy materials to beneficial owners. The Company may engage Mackenzie Partners
("Mackenzie") to supplement the Company's solicitation efforts in which case the
Company will pay Mackenzie's customary fee, estimated to be approximately
$6,000.
PROPOSAL ONE - ELECTION OF DIRECTORS
At the Annual Meeting, the Company's stockholders will elect two
Class I directors to serve a three-year term or until their successors are duly
elected and qualified or until any such directors' earlier resignation or
removal. The Board of Directors has no reason to believe that any of its
nominees will be unable or unwilling to serve if elected to office and to the
knowledge of the Board of Directors, each of its nominees intends to serve the
entire term for which election is sought. However, should any of the nominees of
the Board of Directors become unable or unwilling to accept nomination or
election as a director, the proxies solicited by the Board of Directors will be
voted for such other person as the Board may determine.
In voting for directors, each stockholder is entitled to cast one
vote for each candidate for each share of Voting Stock. Stockholders are not
entitled to cumulate their votes for members of the Board of Directors. The
nominees for election to the Company's Board of Directors who receive the
greatest number of affirmative votes (or in the case of the holders of the
Convertible Subordinated Debentures, the greatest number of affirmative votes
related to the Convertible Subordinated Debentures) will be elected to the
Company's Board of Directors. The Board of Directors has nominated the
individuals listed below for election at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE EACH NOMINEE FOR
ELECTION AS A MEMBER OF THE BOARD OF DIRECTORS.
The nominees for election are:
Richard Newhauser
Francis J. Tedesco, M.D.
2
<PAGE> 6
NOMINEES AND DIRECTORS
The following table provides information regarding each nominee and other
members of the Board of Directors. The ages shown are as of September 30, 1998.
A summary of the background and experience of each of these individuals is set
forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION HELD SINCE
---- --- ------------- --------
<S> <C> <C> <C>
MEMBERS OF THE BOARD WHOSE TERMS EXPIRE IN 1998:
Richard Newhauser .................................... 51 Director 1996
Francis J. Tedesco, M.D.(3)........................... 54 Director 1995
MEMBERS OF THE BOARD WHOSE TERMS EXPIRE IN 1999:
Philip Green (2)...................................... 48 Director 1997
James W. Biondi, M.D.................................. 56 Director 1998
Michael S. Gross (1)(2) .............................. 36 Director 1996
MEMBERS OF THE BOARD WHOSE TERMS EXPIRE IN 2000:
Charles A. Laverty (1)................................ 52 Chairman of the Board and Chief Executive Officer 1994
John S. Chamberlin (1)(3)............................. 69 Director 1996
Lawrence Goelman (1)(2)(3) ........................... 56 Director 1996
</TABLE>
(1) Member of Executive Committee
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
The Company's Board of Directors is divided into three classes. One class
of directors of Imagyn is elected at each annual meetings of stockholders to
serve a three-year term or until their successors are elected and officers of
Imagyn serve at the discretion of the Board of Directors.
RICHARD NEWHAUSER became a director of the Company in August 1996. Prior to
that he served as Chairman and Chief Executive Officer of Richard-Allan Medical
Industries, Inc. (Richard Allan), a medical device company, from 1974 until the
acquisition of Richard-Allan by the Company in August 1996. Mr. Newhauser serves
as a director of WPBT in Miami, Florida and as a member of the Citizens Board
for the University of Miami.
FRANCIS J. TEDESCO, M.D. has served as a director of the Company since
December 1995. Dr. Tedesco has served as President of the Medical College of
Georgia since 1988, and prior to that time he held several different positions
at the college, including Professor of Medicine and Chief, Section of
Gastroenterology and Vice President for Clinical Affairs.
PHILIP GREEN has served as a director since October 1997. Mr. Green is and
for more than 5 years has been the Managing Partner of Green, Stewart, Farber, a
law firm in Washington, D.C.
JAMES W. BIONDI, M.D. has served as a director since 1998. Dr. Biondi has
served as the Chairman, Chief Executive Officer and President of Cardiopulmonary
Corporation since 1992 and is an Adjunct Associate Professor of Medicine at the
Yale University School of Medicine.
MICHAEL S. GROSS has served as a director of the Company since June 1996.
Mr. Gross is one of the founding principals of Apollo Advisors, L.P. which,
together with an affiliate, acts as managing general partner of Apollo
Investment Fund, L.P., AIF II, L.P. and Apollo Investment Fund III, L.P.,
private securities investment funds, and of Lion Advisors, L.P., which acts as
financial advisor to and representative for certain institutional investors with
respect to securities investments. Mr. Gross is a director of Allied Waste
Industries, Inc., Converse, Inc., The Florsheim Group, Inc., Furniture Brands
International, Inc. and Proffitts, Inc.
CHARLES A. LAVERTY became Chief Executive Officer in September 1994, and
Chairman of the Board of Directors in December 1994. Mr. Laverty has spent the
last 15 years of his 20 years of management and marketing experience in the
healthcare field. Prior to joining the Company, Mr. Laverty was employed as
Senior Executive Vice President and was a director of Coram Healthcare
Corporation, which was formed by the merger of Curaflex Health Services, Inc.,
HealthInfusion, Inc., Medisys, Inc., and T2 Medical, Inc. Mr. Laverty served as
the Chairman of the Board, President and Chief Executive Officer of Curaflex
Health Services from
3
<PAGE> 7
February 1989 to July 1994. Prior to his association with Curaflex, Mr. Laverty
served as President and Chief Executive Officer of InfusionCare, Inc., a home
infusion services company, from October 1988 to February 1989. In addition, he
has held several positions, including Chief Operating Officer, with Foster
Medical Corporation, a durable medical equipment supply company, and worked in
both sales and management for C.R. Bard, a medical device company.
JOHN S. CHAMBERLIN has served as a director of the Company since June 1996.
Mr. Chamberlin worked for 22 years in various assignments for General Electric
Company, including sales, product planning, marketing, General Manager of Radio
Receiver Department and Vice President and General Manager of the Housewares and
Audio Business Division. From 1976 to 1985 he was the President and Chief
Executive Officer of Lenox, Inc. and in 1985 joined Avon Products, Inc. as
President and Chief Operating Officer, leaving Avon in 1988. Mr. Chamberlin is
presently Chairman of the Board of WNS, Inc., and he serves on the Boards of
Directors of Seasons, Inc., the Robbins Company, Healthsouth Corporation and the
Sports Holding Company. Mr. Chamberlin is a Trustee of the Medical Center of
Princeton and the Woodrow Wilson National Fellowship Foundation.
LAWRENCE GOELMAN has served as a director of the Company since March 1995.
From 1981 until 1995, Mr. Goelman served as the Chairman and Chief Executive
Officer of CostCare, a national healthcare cost management firm. Since 1995, Mr.
Goelman has acted as a consultant, and currently is Managing Director of Tremont
Partners.
Litigation
In July and August 1997, nine complaints were filed in the United States
District Court for the Central District of California against the Company,
certain of its current or former officers and directors and in certain
complaints, the lead underwriters of the Company's November 1996 public offering
requesting certification of a class action, alleging various violations of
Federal securities laws and seeking unspecified compensatory damages. A
Consolidated and Amended Complaint was filed in November 1997. In addition to
naming Urohealth Systems, Inc. as a defendant, the amended complaint names as
defendants Charles A. Laverty, Bruce A. Hazuka, M. Cassandra Hoag, and James L.
Johnson. The complaint alleges that the Company and the individual defendants
violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
Section 11 of the Securities Act of 1933, and Securities and Exchange Commission
Rule 10b-5 by making alleged misrepresentations about the Company's business,
growth and prospects, and financial statements. The Company filed a motion to
dismiss the lawsuit, which the court denied. Discovery has commenced.
On September 11, 1997, a shareholder derivative complaint was filed in the
Superior Court of the State of California, County of Orange. In addition to
naming Urohealth Systems, Inc. as the nominal defendant, the complaint names as
defendants Charles Laverty, Abbey J. Butler, John S. Chamberlin, Robert N.
Elkins, M.D., Melvyn J. Estrin, C. Sage Givens, Lawrence Goelman, Michael S.
Gross, Richard Newhauser, and Francis J. Tedesco, M.D. The complaint alleges
that certain of the Company's officers and directors breached their fiduciary
duties owed to the Company and its shareholders by allowing the Company to
misreport its financial statements. The Company and the individual defendants
answered the complaint, denying any breach of fiduciary duties and asserting
numerous affirmative defenses. The Court stayed the action pending the
resolution of the motion to dismiss the federal class actions. Discovery has
commenced.
Election of Directors
Pursuant to the Employment Agreement between Charles A. Laverty and the
Company, the Company is obligated to use its best efforts to cause Mr. Laverty
to be elected as a voting member of the Company's Board of Directors during the
term of his employment. In connection with the acquisition of Richard-Allan, the
Company agreed to use its best efforts to cause Richard Newhauser to be elected
to the Company's Board of Directors until August 1999. Mr. Gross is one of the
two nominees to which the holders of the Convertible Subordinated Debentures are
entitled under the Securities Purchase Agreement dated May 3, 1996. The holders
of the Convertible Subordinated Debentures have elected not to name a second
nominee at this time. There are no other arrangements or understandings between
any director or executive officer and any other person pursuant to which such
director or executive officer was or is to be elected as a director or executive
officer, as applicable.
Directors' Fees
Each director of the Company who is not a salaried officer is entitled to
receive $10,000 per year and $1,000 for each directors' and committee meeting
attended. Directors are entitled to reimbursement of expenses incurred in
connection with business of the Company. Directors receive annual grants of
options to purchase 7,500 shares of Common Stock of the Company after each
annual stockholders meeting pursuant to the Company's 1996 Directors' Stock
Incentive Plan.
4
<PAGE> 8
Committees of the Board
The Company currently has three committees of the Board of Directors: the
Executive Committee, the Audit Committee and the Compensation Committee.
The Executive Committee, currently consisting of Messrs. Laverty, Goelman,
Chamberlin and Gross, exercises the power of the Board of Directors (except for
certain powers that may only be exercised by the full Board) in monitoring the
management of the business of the Company between meetings of the full Board of
Directors.
The Audit Committee, currently consists of Messrs. Goelman, Gross and Green,
recommends the appointment of the Company's independent auditors, reviews and
approves the scope of the annual audit and reviews the results thereof with the
Company's independent auditors. The Audit Committee also assists the Board of
Directors in reviewing the Company's business ethics and conflict of interests
policies.
The Compensation Committee, consists of Messrs. Goelman, Chamberlin and Dr.
Tedesco, reviews and establishes the salary, bonus and stock awards, received by
the Company's Chief Executive Officer, and, in consultation with the Chief
Executive Officer, reviews the compensation of the other executive officers of
the Company. The Compensation Committee is also responsible for administering
the Company's 1994 Stock Incentive Plan and other stock-based incentive plans.
The Compensation Committee determines the recipients of awards, sets the
exercise price of shares granted and determines the terms, provisions and
conditions of all rights granted.
Compensation Committee Interlocks and Insider Participation
During fiscal 1998, the Compensation Committee consisted of Messrs.
Goelman, Estrin and Dr. Elkins. Dr. Elkins and Mr. Estrin resigned from the
Board and the Compensation Committee after fiscal year end. None of these
persons is or has been an officer or employee of the Company or any of its
subsidiaries. In addition, there are no Board of Directors or Compensation
Committee interlocks between the Company and other entities involving the
Company's executive officers and Board members who serve as executive officers
of such entities.
Attendance at Board and Committee Meetings
During the fiscal year ended March 31, 1998, the Board of Directors met 11
times. In addition, the Audit Committee met six times and the Compensation
Committee met five times. Each continuing director attended 75% or more of the
aggregate number of meetings held by the Board of Directors and all committees
of the Board of Directors on which such directors served.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors to file reports of beneficial
ownership on Form 3 and changes in beneficial ownership on Forms 4 and 5 with
the SEC. Executive officers and directors are also required by the SEC rules to
furnish the Company with copies of all Section 16(a) reports which they file.
Based solely on its review of the Forms 3, 4 and 5 provided to or filed on
behalf of its executive officers and directors, as well as written
representations from these individuals regarding Forms 5, the Company believes
that, during the fiscal year ended March 31, 1998, all Section 16(a) filing
requirements applicable to its executive officers and directors were complied
with pursuant to the SEC rules, except for Form 4s by Messrs. Chamberlin, Gross
and Drs. Elkins, Tedesco relating to options automatically granted under the
Company's 1996 Directors' Stock Incentive Plan after the 1997 Annual Meeting of
Stockholders. Each of the late Form 4s related to an option grant for 7,500
shares and the late forms were filed in April 1998.
5
<PAGE> 9
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
AND OTHER INFORMATION
Summary of Executive Compensation
The following table sets forth for each of the Company's last three
completed fiscal years the compensation of the Company's Chief Executive Officer
and the Company's four other most highly compensated executive officers and two
additional persons who are former executive officers of the Company
(collectively, "named executive officers"). Other information regarding the
Company's executive officers is set forth in its Form 10K as amended for the
fiscal year ended March 31, 1998 under the caption "Compensation Executive
Officers".
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------- ------------
AWARDS
SECURITIES
UNDERLYING
OPTIONS/SARS
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($) OTHER($) (#)
--------------------------- ------- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Charles A. Laverty 1998 $ 604,163 -- * 1,500,000
President and 1997 $ 450,000 -- *
Chief Executive Officer 1996 $ 250,100 $375,900 927,667
Bruce A. Hazuka 1998 $ 300,000 $150,000 * 150,000
Executive Vice President 1997 $ 220,833 -- *
and Chief Operating Officer 1996 $ 104,700 $ 52,000 * 200,000
Michael Schuler 1998 $ 225,000 $ 75,000 * 100,000
President - Surgical Products 1997 $ 225,000 -- * --
1996 $ 142,879 -- * 100,000
Kevin M. Higgins 1998 $ 200,000 $ 75,000 * 150,000
Senior Vice President and 1997 $ 200,000 -- * --
General Counsel 1996 $ 32,692 -- * 150,000
M. Cassandra Hoag 1998 $ 200,000 $ 75,000 * 100,000
President - Gynecology Products 1997 $ 177,332 -- * --
1996 $ 83,926 -- * 100,000
James L. Johnson (2) 1998 $ 328,107 -- * --
Former executive officer 1997 $ 294,733 -- * --
1996 $ 152,000 $ 51,100 * 336,517
Richard Kindberg (2) 1998 $ 278,511 $ 75,000 * 50,000
Former executive officer 1997 $ 181,042 $ 51,866 * 100,000
1996 $ 118,125 $ 28,502 * --
</TABLE>
- ----------
* Perquisites and other personal benefits did not exceed the lesser of $50,000
or 10% of the total annual salary and bonus.
(1) The information for fiscal 1996 covers a nine month transition period ending
March 31, 1996.
(2) Mr. Johnson's employment with the Company terminated July 1997, and Mr.
Kindberg's employment with the Company terminated December 1997.
6
<PAGE> 10
Summary of Option Grants
The following table sets forth the individual grants of stock options made
by the Company during the year ended March 31, 1998 to each of the named
executive officers of the Company. The option term is 10 years with vesting over
a 36 month period.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
--------------------------------------------- VALUE AT
NUMBER OF % OF TOTAL ASSUMED RATE
SECURITIES OPTIONS/SARS OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE OR APPRECIATION FOR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION OPTION TERM
-------------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ------------ --------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Laverty 1,500,000 41.2% $8.50 5/21/2007 $8,018,406 $20,320,216
Bruce A. Hazuka 50,000 1.4% $8.50 5/21/2007 $ 267,280 $ 677,341
Bruce A. Hazuka 100,000 2.7% $3.6875 10/30/2007 $ 231,905 $ 587,693
Michael Schuler 100,000 2.7% $3.6875 10/30/2007 $ 231,905 $ 587,693
Kevin M. Higgins 50,000 1.4% $8.50 5/21/2007 $ 267,280 $ 677,341
Kevin M. Higgins 100,000 2.7% $3.6875 10/30/2007 $ 231,905 $ 587,693
M. Cassandra Hoag 50,000 1.4% $8.50 5/21/2007 $ 267,280 $ 677,341
M. Cassandra Hoag 50,000 1.4% $3.6875 10/30/2007 $ 115,952 $ 293,846
James L. Johnson -- -- -- -- -- --
Richard Kindberg 50,000 1.4% $3.6875 10/30/2007 $ 115,952 $ 293,846
</TABLE>
Summary of Options Exercised
The following table sets forth information concerning exercise of stock
options during the year ended March 31, 1998 by each of the named executive
officers of the Company and the value of unexercised options at March 31, 1998.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED ON VALUE FY-END (#) FY-END ($)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Charles A. Laverty -- -- 1,525,116/1,613,718 --/--
Bruce A. Hazuka -- -- 194,445/155,555 --/--
Michael Schuler -- -- 94,339/113,889 --/--
Kevin M. Higgins -- -- 136,111/163,889 --/--
M. Cassandra Hoag -- -- 184,722/106,945 --/--
James L. Johnson -- -- 208,739/0 --/--
Richard Kindberg -- -- 150,000/0 --/--
</TABLE>
1996 Directors' Stock Incentive Plan
In July 1996, the Company approved the 1996 Directors' Stock Incentive Plan
(the "Directors' Plan") which authorizes the issuance of up to 300,000 shares of
Common Stock in the form of stock options to non-employee directors of the
Company. The Directors' Plan was approved by the Company's stockholders in
August 1996. Under the Directors' Plan, each non-employee director of the
Company automatically receives an option to purchase 7,500 shares of Common
Stock of the Company upon joining the Company's Board of Directors and an
additional 7,500 share option immediately following each annual meeting of
stockholders. Options are granted at fair market value on the date of grant and
have a ten-year term. Options vest on the first anniversary of the date of
grant; provided, that the options become immediately exercisable upon a "change
of control."
7
<PAGE> 11
Retirement Savings Plan
In January 1995, the Company adopted the Company's Retirement Savings Plan
(the "401(k) Plan") under Section 401(k) of the Internal Revenue Code. The
401(k) Plan generally covers all full-time employees of the Company who are over
age 21 and have completed one year of service with at least 1,000 hours of
service. Employees may elect to defer, in the form of contributions to the
401(k) Plan, from 1% up to 12% of their annual compensation, subject to the
federal maximum limit. No matching contributions are expected to be made by the
Company relating to fiscal 1998. Employees are fully vested in contributions
made by them to the 401(k) Plan. Employees become vested in contributions made
by the Company after completion of two years of service.
Employment Agreements
CHARLES A. LAVERTY. The Company and Mr. Laverty are parties to an Amended
and Restated Employment Agreement, dated April 1, 1996, pursuant to which Mr.
Laverty serves as the Company's Chief Executive Officer. The initial term of the
agreement is through April 1, 1999, after which date the agreement automatically
renews for successive three-year terms unless either party exercises their
option to terminate the agreement. Mr. Laverty's salary under the agreement was
$450,000 for fiscal 1997, adjusted annually, plus bonuses. Mr. Laverty's base
salary under the agreement was increased to $750,000 during fiscal 1998.
The Company may terminate the agreement for "cause" which is defined as (a)
Mr. Laverty's final conviction of a felony related to his duties under the
agreement or (b) Mr. Laverty's willful failure to perform his reasonable
responsibilities and duties under the agreement after 30 days notice from the
Board. In the event that Mr. Laverty terminates the agreement without cause at
any time during the last two quarters of any fiscal year any options scheduled
to vest during such fiscal year shall automatically vest as of the date of
termination. If the Company terminates the agreement for any reason other than
for cause, or if Mr. Laverty terminates the agreement due a material breach by
the Company of its obligations under the agreement, then the Company will be
obligated to (A) pay to Mr. Laverty severance pay equal to three years of his
salary and earned bonus as of the date of such termination and (B) provide and
pay for all benefits to which Mr. Laverty is entitled under the agreement for a
period of three years after termination. In addition, if the Company terminates
the agreement for any reason other than for cause, or if Mr. Laverty terminates
the agreement due to a material breach by the Company, all options then granted
to Mr. Laverty will become immediately vested and exercisable.
Mr. Laverty may terminate the agreement upon 30 days notice upon or within
one year after a "change of control" as such term is defined in the agreement.
If Mr. Laverty terminates the agreement for any reason (including with or
without cause) upon or within one year after a Change of Control, the Company is
obligated to (A) pay to Mr. Laverty severance equal to $2,500,000, and (B)
provide and pay for all benefits to which he is entitled under the agreement for
a period of three years after termination. In addition, all options then held by
Mr. Laverty will become immediately vested and exercisable. If, however, an
event giving rise to a Change of Control is initiated by the Company, then prior
to the Company's Board approving the Change of Control, Mr. Laverty must inform
the Board whether he intends to terminate the agreement. If Mr. Laverty informs
the Board that he does not intend to terminate the agreement as a result of the
Change of Control, he will forfeit all termination and payment rights in the
agreement based on that particular Change of Control. The Agreement provides for
Mr. Laverty to receive certain payments in the event that the Company is merged
or combined with another corporation in a transaction in which the Company is
not the surviving or continuing entity. The amount of the fee would be equal to
the greater of: (i) 1% of value of such transaction in excess of $20 per share;
and (ii) 1% of the capitalization of the Company in excess of $640 million.
Mr. Laverty agreed that during his employment and for a period of 18 months
after he ceases to be employed by the Company, regardless of the manner of
termination and except as limited by the agreement, he will not compete with the
Company.
BRUCE A. HAZUKA. The Company and Mr. Hazuka are parties to an employment
agreement pursuant to which Mr. Hazuka serves as a member of senior management
of the Company. The agreement provides for an initial one-year term with two
automatic one-year renewals thereafter. Mr. Hazuka's annual salary under the
agreement is currently at $300,000 plus bonuses. The Company can terminate Mr.
Hazuka's employment for cause (as defined in the agreement). The Company can
terminate Mr. Hazuka's employment without cause upon at least 90 days' prior
notice, in which case Mr. Hazuka shall be entitled to severance equal to two
times the annual amount of his salary and bonus for the preceding year under the
agreement, and all outstanding unvested options shall vest and be exercisable as
of the termination date.
Following a "change of control" (as defined in the agreement), Mr. Hazuka
may terminate the agreement with or without "good reason" (as defined in the
agreement), upon 30 days' notice given at any time during the one-year period
after the change of control. If
8
<PAGE> 12
Mr. Hazuka terminates his employment during the one-year period after the change
of control for good reason, or if his employment is terminated without cause
during such period, then he shall be entitled to receive a severance payment
equal to two times his salary and bonus for the 12 months preceding the change
of control.
MICHAEL SCHULER. The Company and Mr. Schuler are parties to an employment
agreement dated January 2, 1996 pursuant to which Mr. Schuler serves as a member
of senior management of the Company. The agreement provides for an initial
one-year term, with two automatic one-year renewals thereafter. Mr. Schuler's
annual salary under the agreement is $225,000 plus bonuses. The Company can
terminate Mr. Schuler's employment for cause (as defined in the agreement). The
Company can terminate Mr. Schuler's employment without cause upon at least 90
days' prior notice, in which case Mr. Schuler is entitled to severance equal to
the amount of his salary for the remaining term of the agreement (including
extensions thereof).
Following a "change of control" (as defined in the agreement), Mr. Schuler
may terminate the agreement with or without "good reason" (as defined in the
agreement), upon 30 days' notice given at any time during the one-year period
after the change of control. If Mr. Schuler terminates his employment during the
one-year period after the change of control for good reason, or if his
employment is terminated by the Company without cause, then he shall be entitled
to receive a severance payment equal to the greater of (i) one times his salary
and bonus for the 12 months preceding the change of control and (ii) the
remaining amount of salary payable for the term of the agreement.
KEVIN M. HIGGINS. The Company and Mr. Higgins are parties to an employment
agreement pursuant to which Mr. Higgins serves as a member of senior management
of the Company. The agreement provides for an initial one-year term, with
automatic two year extensions on each anniversary date thereafter. Mr. Higgins'
annual salary under the agreement is currently $200,000 plus bonuses. The
Company can terminate Mr. Higgins' employment for cause (as defined in the
agreement). The Company can terminate Mr. Higgins' employment without cause upon
at least 90 days' prior notice, in which case Mr. Higgins is entitled to
severance equal to two times the annual amount of his salary and bonus for the
preceding year under the agreement, and all outstanding unvested options shall
vest and be exercisable as of the termination date.
Following a "change of control" (as defined in the agreement), Mr. Higgins
may terminate the agreement with or without "good reason" (as defined in the
agreement), upon 30 days' notice given at any time during the one-year period
after the change of control. If Mr. Higgins terminates his employment during the
one-year period after the change of control for good reason, or if his
employment is terminated by the Company without cause, then he shall be entitled
to receive a severance payment equal to two times his salary and bonus for the
12 months preceding the change of control.
M. CASSANDRA HOAG. The Company and Ms. Hoag are parties to an employment
agreement pursuant to which Ms. Hoag serves as a member of senior management of
the Company. The agreement provides for an initial one-year term, with automatic
two year extensions on each anniversary date thereafter. Ms. Hoag's annual
salary under the agreement is currently $200,000 plus bonuses. The Company can
terminate Ms. Hoag's employment for cause (as defined in the agreement). The
Company can terminate Ms. Hoag's employment without cause upon at least 90 days'
prior notice, in which case Ms. Hoag is entitled to severance equal to two times
the annual amount of her salary and bonus for the preceding year under the
agreement, and all outstanding unvested options shall vest and be exercisable as
of the termination date.
Following a "change of control" (as defined in the agreement), Ms. Hoag may
terminate the agreement with or without "good reason" (as defined in the
agreement), upon 30 days' notice given at any time during the one-year period
after the change of control. If Ms. Hoag terminates her employment during the
one-year period after the change of control for good reason, or if her
employment is terminated by the Company without cause, then she shall be
entitled to receive a severance payment equal to two times her salary and bonus
for the 12 months preceding the change of control.
9
<PAGE> 13
Notwithstanding anything to the contrary set forth in the Company's
previous public filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that might incorporate future filings, including this
report, in whole or in part, the following report and Stock Performance Graph
which follows shall not be deemed to be incorporated in any such filings.
Report of the Compensation Committee on Executive Compensation
GENERAL
The Company's Board of Directors has a Compensation Committee (the
"Committee"), which during fiscal 1998 consisted of Dr. Elkins, Mr. Estrin, and
Mr. Goelman. In 1998, Mr. Estrin and Dr. Elkins resigned from the Board of
Directors and the Committee. The Committee is charged by the Board of Directors
with establishing a compensation plan which will enable the Company to compete
effectively for the services of qualified officers and key employees, to give
such employees appropriate incentive to pursue the maximization of long-term
stockholder value and to recognize such employees' success in achieving both
qualitative and quantitative goals for the benefit of the Company. The Committee
establishes appropriate levels of compensation for specific individuals, as well
as compensation and benefit programs for the Company as a whole.
COMPENSATION PHILOSOPHY AND POLICIES FOR EXECUTIVE OFFICERS
As its beginning principle, the Committee believes that executives of the
Company should be rewarded based upon their success in meeting the Company's
operational goals, improving its earnings, maintaining its leadership role in
the markets served, and generating consistent and superior returns for its
stockholders. The Committee is quite aware that fiscal 1998 was a very difficult
year, for both the Company, which faced significant liquidity issues in the
later part of fiscal 1998, as well as for the Company's stockholders.
Notwithstanding the Committee's beginning principles, it is often necessary to
adapt those principles to actual circumstances to best serve the interests of
the Company. For that reason, the Committee, early in fiscal 1998, approved
bonuses for certain employees, including certain senior executive officers.
These bonuses were awarded to these employees in recognition of their efforts
during fiscal 1997 and early fiscal 1998 to integrate and consolidate acquired
operations and achieve other operating efficiencies, and to continue to focus on
introducing new products to market. At the time the bonuses were awarded, the
Company was not facing the liquidity issues that arose later in the year, and
the Committee believed that this was the appropriate course of action. The
bonuses were awarded to certain employees, who in many cases, had not received
any bonuses for the preceding two years.
The Committee recognizes that the demand for executives with expertise and
experience in the areas of medical devices and services within the healthcare
services fields is intense. In order to attract and retain qualified persons,
the Committee believes that the Company must offer current compensation at
levels consistent with those of other publicly-traded healthcare companies. In
addition, the Committee believes that it is in the best interests of the
Company's stockholders to offer its executives meaningful equity participation
in the Company. The Committee feels that the historic mix of cash compensation
and equity participation has proven to be effective in stimulating the Company's
executives to meet both long-term and short-term goals and has been a major
factor in limiting turnover among senior executives. During fiscal 1998, an
important focus of the Committee was on employee turnover issues. The Committee
believes that it is critical to the success of the Company that it maintain its
ability to retain, motivate and incentivize key employees and senior executives.
This objective was more difficult to achieve during fiscal 1998 as the Company
faced a declining stock price, as well as significant liquidity issues later in
the fiscal year, and competition from other healthcare companies for key
personnel.
The Company's compensation program has three distinct elements: base
salary; incentive compensation, including both cash incentive compensation and
equity-based compensation; and retirement compensation. These elements are
discussed below:
Base Salary: While the demand for experienced managers in the healthcare
industry continues to grow, the Company has been successful in attracting and
retaining key executives. The Company believes that its compensation package is
instrumental in such success. The Committee endeavors to establish base salary
levels for those key executives which are consistent with those provided for
similarly situated executives of other publicly-traded healthcare companies,
taking into account each executive's areas and level of responsibility,
historical performance and tenure with the Company. In establishing such levels,
the Company considers compensation for executives of other publicly-traded
providers of healthcare services, as well as other publicly-traded companies of
similar size and with a similar growth rate. Compensation decisions are not
targeted to specific levels in the range of compensation paid by such companies,
nor does the Company maintain a record of where its compensation stands with
respect to such other companies.
10
<PAGE> 14
However, the Committee takes such levels of compensation into account in
determining appropriate levels of compensation for the Company's executives.
Incentive Compensation: In addition to base salary, the Committee
establishes cash incentive compensation for executives of the Company, based
upon each such executive's success in meeting qualitative and quantitative
performance goals on an annual basis. Individual incentive bonuses are
determined on a basis that takes into account each executive's success in
achieving standards of performance, which may or may not be quantitative,
established by the Committee and such executive's superiors. Bonus
determinations are made on a case-by-case basis, taking into account appropriate
quantitative and qualitative factors, and there is no fixed relationship between
any particular performance factor and the amount of a given executive's bonus.
Incentive compensation can be a major component of the Company's executive
compensation, and the Committee believes that placing executives at risk for
such a component is effective in motivating such executives to achieve such
goals.
In addition to cash incentive compensation, the Company utilizes
equity-based compensation, in the form of stock options, as a tool to encourage
its executives to work to meet its operational goals and maximize long-term
stockholder value. Because the value of stock options granted to an executive is
directly related to the Company's success in enhancing its market value over
time, the Committee feels that its stock option program is a very effective tool
in aligning the interests of management and stockholders.
The Committee determines stock option grants under the Company's stock
option plans. Specific grants are determined taking into account an executive's
current responsibilities and historical performance, as well as the executive's
perceived contribution to the Company's results of operations. Options are also
used to give incentive to newly-promoted officers at the time that they are
asked to assume greater responsibilities, and, in some cases, to executives who
have joined the Company through acquisitions and have assumed significant
leadership roles within the Company. In evaluating option grants, the Committee
considers prior grants and shares currently held, as well as the recipient's
success in meeting operational goals and the recipient's level of
responsibility. However, no fixed formula is utilized to determine particular
grants. The Committee believes that the opportunity to acquire a significant
equity interest in the Company has been a strong motivation for the Company's
executives to pursue the long-term interests of the Company and its
stockholders, and has promoted longevity and retention of key executives.
Information relating to stock options granted to the five most
highly-compensated executive officers of the Company is set forth elsewhere
herein.
Retirement Compensation: As described elsewhere herein, in 1995 the Company
adopted a 401(k) retirement plan in order to give all full-time employees an
opportunity to provide for their retirement on a tax-advantaged basis.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Company is a party to an Employment Agreement with Charles Laverty,
pursuant to which Mr. Laverty is employed as Chairman of the Board, Chief
Executive Officer and President of the Company for a three-year term which ends
April 1, 1999. In addition, the Company has agreed to use its best efforts to
cause Mr. Laverty to be elected as a Director of the Company during the term of
the Agreement. Under the Agreement, Mr. Laverty's base salary was $750,000 in
fiscal 1998, subject to annual review by the Board of Directors, and he is
entitled to participate in any bonus plan approved by the Board of Directors for
the Company's management in an amount equal to 100% of his base salary. Mr.
Laverty was not awarded a cash bonus during fiscal 1998. In early fiscal 1998,
the Committee, did, however, grant Mr. Laverty an additional 1,500,000 stock
options vesting over 36 months at the closing price of a share of the Company's
Common Stock on May 21, 1997. Such additional option grant was based on the
Committee's assessment of Mr. Laverty's contribution to the Company as the
builder of the urological, gynecological and minimally invasive surgical
platforms for the Company. Mr. Laverty is also provided with a car allowance and
with life and disability insurance. Under the Agreement, Mr. Laverty's
employment may be terminated for cause or if he should become disabled.
Termination of Mr. Laverty's employment under the Agreement will result in
certain severance pay arrangements. In the event that the Company were to be
acquired, merged or reorganized in such a manner as to result in a change of
control of the Company, Mr. Laverty has the right to terminate his employment
under the Agreement, in which case he will receive payment of $2.5 million. Mr.
Laverty has agreed not to compete with the Company for an eighteen month period
after any such termination. The Committee approved an amendment to the Agreement
that provides for Mr. Laverty to receive certain payments in the event that the
Company is merged or combined with another corporation in a transaction in which
the Company is not the surviving or continuing entity. The amount of the fee
would be equal to the greater of: (i) 1% of value of such transaction in excess
of $20 per share; and (ii) 1% of the capitalization of the Company in excess of
$640 million.
11
<PAGE> 15
During fiscal 1997 and fiscal 1998, the Board of Directors approved loans
to Mr. Laverty aggregating $2,050,000. The loans are payable on November 25,
1999, or earlier in the event Mr. Laverty's employment is terminated (see
"Certain Relationships and Related Transactions").
The Committee reports to the Board of Directors on compensation
arrangements with Mr. Laverty and recommends to the Board of Directors the level
of incentive compensation, both cash and equity-based, which is appropriate for
Mr. Laverty with respect to each fiscal year of the Company. In making such
recommendation, the Committee takes into account the Company's performance in
the marketplace, its success in meeting strategic goals and its success in
meeting budgets. Again, ultimate compensation decisions are not made in a
formulary manner, but in a manner which takes into account the Company's
competitive position, its position in the financial markets, and the significant
contributions made by Mr. Laverty in building the Company.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
The Omnibus Budget Reconciliation Act of 1993 contained a provision under
which a publicly-traded corporation is sometimes precluded from taking a federal
income tax deduction for compensation in excess of $1,000,000 that is paid to
the chief executive officer and the four other most highly-compensated
executives of the corporation during a corporation's tax year. Compensation in
excess of $1,000,000 continues to be deductible if that compensation is
"performance based" within the meaning of that term under Section 162(m) of the
Internal Revenue Code. Certain transition rules apply with respect to stock
option plans which were approved prior to December 20, 1993, pursuant to Rule
16b-3(b) under the Exchange Act.
The Company believes that its employee stock option plans meet the
requirements of Section 162(m) as performance-based plans; however, the
Committee does from time to time grant options outside the employee stock option
plans. The Committee and the Board of Directors have currently made a decision
not to amend the Company's cash compensation programs to meet all requirements
of Section 162(m) because such a decision would not be in the best interests of
the Company's stockholders. The Committee believes that, in establishing bonus
and incentive awards, certain subjective factors must be taken into account in
particular cases, based upon the experienced judgment of the Committee members
as well as on factors which may be objectively quantified. The preservation of
tax deductibility of all compensation is an important consideration. However,
the Committee believes that it is important that the Company retain the
flexibility to reward superior effort and accomplishment even where all cash
compensation may not be fully deductible. The Committee will continue to review
the requirements for deductibility under Section 162(m) and will take such
requirements into account in the future as it deems appropriate and in the best
interests of the Company's stockholders.
CONCLUSIONS
The Committee believes that the levels and mix of compensation provided to
the Company's executives during fiscal 1998 were appropriate. It is the intent
of the Committee to ensure that the Company's compensation programs continue to
motivate its executives and reward them for being responsive to the long-term
interests of the Company and its stockholders.
The foregoing report was submitted on behalf of the Compensation Committee
of the Board of Directors whose members during fiscal year 1998 consisted of
Messrs. Goelman, Estrin and Dr. Elkins.
Lawrence Goelman, Chairman
12
<PAGE> 16
Stock Price Performance
The following performance graph assumes an investment of $100 on June 30,
1992 and compares the change to March 31, 1998 in the market price of the Common
Stock of the Company with a broad market index (Dow Jones Equity Market Index)
and industry index (S&P Healthcare (Medical Products and Supplies)). The Company
paid no dividends during the periods shown; the performance of the indices is
shown on a total return (dividend reinvestment) basis. The graph lines merely
connect the prices on the dates indicated and do not reflect fluctuations
between those dates.
COMPARISON OF 69 MONTH CUMULATIVE TOTAL RETURN*
AMONG IMAGYN MEDICAL TECHNOLOGIES, INC., THE DOW JONES EQUITY MARKET INDEX
AND THE S&P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) INDEX
[GRAPH]
* $100 INVESTED ON 6/30/92 IN STOCK OR INDEX
INCLUDING REINVESTMENT OF DIVIDENDS.
<TABLE>
<CAPTION>
S&P HEALTHCARE*
MEASUREMENT PERIOD (MEDICAL PRODUCTS DOW JONES EQUITY IMAGYN
(FISCAL YEAR COVERED) AND SUPPLIES) MARKET
- --------------------- ----------------- ---------------- --------
<S> <C> <C> <C>
6/30/92 100 100 100
6/30/93 82 115 91
6/30/94 79 116 45
6/30/95 121 146 46
3/31/96 161 177 63
3/31/97 177 212 46
3/31/98 256 312 7
</TABLE>
13
<PAGE> 17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 30, 1998 of (i) each
person known by the Company to own beneficially 5% or more of the Common Stock,
(ii) each current director of the Company and each person nominated to be a
director of the Company, (iii) each named executive officer, and (iv) all
current directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
----------------------
NAME AND ADDRESS(1) NUMBER PERCENT
- ------------------- --------- -------
<S> <C> <C>
Avatex Corporation(2)...................................... 2,464,827 5.6%
Apollo Advisors II, L.P.(3)................................ 2,200,906 5.1%
Chase Venture Capital Associates, L.P.(4).................. 2,196,319 5.1%
Charles A. Laverty(5)...................................... 3,339,059 7.2%
Philip Green (6)........................................... 7,500 *
James Biondi,M.D........................................... - *
Lawrence Goelman(7)........................................ 204,239 *
Francis J. Tedesco,M.D.(8)................................. 22,500 *
Michael S. Gross(9)........................................ 2,215,906 5.1%
John Chamberlin(10)........................................ 75,278 *
Richard Newhauser.......................................... 2,040,281 4.7%
Bruce A. Hazuka(11)........................................ 261,111 *
Kevin M. Higgins (12)...................................... 206,027 *
Michael Schuler(13)........................................ 152,889 *
M. Cassandra Hoag (14) .................................... 229,167 *
James L. Johnson (15) ..................................... 36,517 *
Richard Kindberg (16) ..................................... 150,000 *
All current directors and executive officers as a group (14
persons)(17)............................................. 9,169,885 19.0%
</TABLE>
- ----------
* Less than 1%.
(1) Unless otherwise indicated in the following footnotes, each person named
in the table has sole voting and investment power with respect to all
shares shown as beneficially owned, subject to applicable community
property law. Unless otherwise noted in the following notes the address
of each person listed is c/o Imagyn Medical Technologies, Inc., 5 Civic
Plaza, Suite 100, Newport Beach, California 92660. The foregoing table
presents voting securities which include Common Stock and the
Convertible Subordinated Debentures which vote with the Common Stock on
an "as converted" basis.
(2) Includes 1,414,827 shares of Common Stock and warrants to purchase
1,050,000 shares of Common Stock which are currently exercisable. The
address of Avatex Corporation is 5910 North Central Expressway, Dallas,
Texas 75206. Information provided was obtained from the Schedule 13D of
Avatex Corporation as filed with the Securities and Exchange Commission.
(3) Represents Debentures which vote on an "as converted" basis representing
2,087,156 shares of Voting Stock and warrants to purchase 113,750 shares
of Common Stock which are currently exercisable. The address for Apollo
Advisors II, L.P. is 1301 Sixth Avenue, New York, New York 10019.
(4) Represents Debentures which vote on an "as converted" basis representing
2,082,569 shares of Voting Stock and warrants to purchase 113,750 shares
of Common Stock which are currently exercisable. The address for Chase
Venture Capital Associates, L.P. is 380 Madison Avenue, New York, New
York 10017.
(5) Includes 3,311,519 shares subject to options exercisable on or before
November 30, 1998.
(6) Includes 7,500 shares subject to options exercisable on or before
November 30, 1998.
(7) Includes 180,239 shares subject to options exercisable on or before
November 30, 1998.
(8) Includes 22,500 shares subject to options exercisable on or before
November 30, 1998.
14
<PAGE> 18
(9) Includes securities held by Apollo Advisors II, L.P., of which Mr. Gross
is a principal. Mr. Gross disclaims beneficial ownership of such shares
except to the extent of his pecuniary interest therein. Includes 15,000
shares subject to options exercisable on or before November 30, 1998.
(10) Includes 52,278 shares subject to options exercisable on or before
November 30, 1998.
(11) Includes 261,111 shares subject to options exercisable on or before
November 30, 1998.
(12) Includes 202,778 shares subject to options exercisable on or before
November 30, 1998.
(13) Includes 138,783 shares subject to options exercisable on or before
November 30, 1998.
(14) Includes 229,167 shares subject to options exercisable on or before
November 30, 1998.
(15) Includes 36,517 shares subject to options exercisable on or before
November 30, 1998.
(16) Includes 150,000 shares subject to options exercisable on or before
November 30, 1998.
(17) Includes 4,839,431 shares subject to options exercisable on or before
November 30, 1998, warrants to purchase 113,750 shares of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1997, the Company loaned $550,000 to Charles A. Laverty, the
Company's Chairman and Chief Executive Officer. The loan bears interest at a
rate of 6.02% per annum and all principal and interest under the note is due and
payable on the earlier of (a) November 25, 1999 and (b) 30 days after
termination of Mr. Laverty's employment agreement. During fiscal 1998, the
Company loaned an additional $1,500,000 to Mr. Laverty on the same terms and
conditions as the earlier loan. As of September 30, 1998 the outstanding
principle and interest is approximately $2,198,850. In July 1998 (fiscal year
1999), Mr. Laverty was granted an option to purchase 1,000,000 shares in
connection with a personal guarantee of a portion of the Company's revolving
credit facility.
PROPOSAL TWO -
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has recommended that the stockholders ratify
the appointment of Deloitte & Touche LLP to serve as independent auditors for
the Company for the fiscal year ending March 31, 1999.
Deloitte & Touche LLP were the principal independent auditors
utilized by the Company for its fiscal year ended March 31, 1998. During this
time, the auditors have examined the Company's consolidated financial
statements, made limited reviews of the interim financial reports, reviewed
filings with the Securities and Exchange Commission and provided general advice
regarding related accounting matters.
In February 1998 the Company notified Ernst & Young LLP that the
Company had elected to change independent auditors for the Company. During the
Company's two most recent fiscal years and the subsequent interim period before
the dismissal of Ernst & Young LLP, there have been no disagreements between the
Company and Ernst & Young LLP on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure which,
if not resolved to Ernst & Young's satisfaction, would have caused it to make a
reference to the subject matter of the disagreement in connection with its
report. Ernst & Young's report on the Company's financial statements for the two
most recent fiscal years did not contain any adverse opinion and was not
qualified as to uncertainty, audit scope or accounting principles.
In the event that ratification of this appointment of auditors is not
approved by a majority of the shares of the Company's Voting Stock voting at the
Annual Meeting in person or proxy, the Board of Directors will review its future
selection of auditors. A representative of Deloitte & Touche LLP is expected to
be present at the Annual Meeting, will have an opportunity to make a statement
and will be available to respond to appropriate questions.
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<PAGE> 19
THE BOARD OF DIRECTORS RECOMMENDS THE ADOPTION OF PROPOSAL TWO.
OTHER BUSINESS
The Board of Directors is not aware of any other matters to come
before the Annual Meeting. If any matter not mentioned herein is properly
brought before the meeting, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect thereto in accordance
with their judgment.
STOCKHOLDER PROPOSALS FOR THE
1999 ANNUAL MEETING
Stockholders who may wish to present proposals for inclusion in the
Company's proxy materials and for consideration at the 1999 annual meeting of
stockholders must submit such proposals in writing to the Secretary at the
address shown at the top of page one above no later than June 22, 1999. In
addition, to be properly considered at the 1999 Annual Meeting of Stockholders
and except as otherwise provided under the Securities Exchange Act of 1934,
notice of any stockholder proposals must be given to the Company's Secretary in
writing not less than 60 days in advance of such meeting if such meeting is to
be held on a day which is within 30 days preceding the anniversary of the
previous year's annual meeting or 90 days in advance of such meeting if such
meeting is to be held on or after the anniversary of the previous year's annual
meeting; and with respect to any other annual meeting of stockholders, on or
before the close of business on the 15th day following the date of public
disclosure of the meeting date. A stockholder's notice to the Secretary shall
set forth as to each matter proposed to be considered, a brief description of
the business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, the name, age and business and
residential address, as they appear on the corporation's records, of the
stockholder proposing such business, the class and number of shares of the
corporation which are beneficially owned by the stockholder, and any material
interest of the stockholder in such business.
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DIRECTORS' APPROVAL AND CERTIFICATE
The contents and sending of this Proxy Statement have been approved
by the Company's Board of Directors.
A stockholder wishing to be represented by proxy at the meeting or
any adjournment thereof must deposit its duly executed form of proxy with the
Company's transfer agent and registrar, American Stock Transfer and Trust
Company, 40 Wall Street, New York, New York 10005, on or before the close of
business on the last day preceding the day of the meeting or any adjournment
thereof at which the proxy is to be voted, or deliver it to the Chairman of the
Meeting on the day of the meeting or any adjournment thereof prior to the time
of voting.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION HAS BEEN INCLUDED WITH THIS PROXY STATEMENT.
By Order of the Board of Directors
/s/ KEVIN M. HIGGINS
------------------------------------
Kevin M. Higgins
Secretary
Newport Beach, California
October 20, 1998
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IMAGYN MEDICAL TECHNOLOGIES, INC.
5 CIVIC PLAZA, SUITE 100
NEWPORT BEACH, CALIFORNIA 92660
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
IMAGYN MEDICAL TECHNOLOGIES, INC. TO BE HELD ON NOVEMBER 24, 1998
The undersigned hereby appoints Charles A. Laverty, Kevin M. Higgins
and Michael A. Montevideo, each with full power of substitution, as proxy of the
undersigned, to attend the Annual Meeting of Stockholders of IMAGYN MEDICAL
TECHNOLOGIES, INC. (the "Company") to be held at The Four Seasons Hotel, 690
Newport Center Drive, Newport Beach, California 92660 at 9:00 a.m. local time,
and at any and all adjournments thereof, and to vote all Common Stock of the
Company, as designated on the reverse side of this proxy, with all powers the
undersigned would possess if personally present at the meeting.
This proxy will be voted or withheld from being voted in accordance
with the instructions specified. Where no choice is specified, this proxy will
confer discretionary authority and will be voted FOR approval of Proposals 1 and
2. This proxy confers authority for the above named persons to vote in his
discretion with respect to amendments or variations to the matters identified in
the notice of the meeting accompanying this proxy and other matters which may
properly come before the meeting. A stockholder has the right to appoint a
person, who need not be a stockholder, to attend and act on his behalf at the
meeting, other than the person designated in this form of proxy, such right may
be exercised by inserting the name of such person in the blank space provided.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
<PAGE> 22
[X] Please mark your
votes as in this
example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS AND
NOMINEES:
<TABLE>
<S> <C> <C>
FOR WITHHELD NOMINEES: 2. Ratification of selection
1. Election of [ ] [ ] Class I: Richard R. Newhauser of independent auditors
Directors Francis J. Tedesco, M.D. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
For, except vote withheld from the following nominee(s):
- -----------------------------------------
SIGNATURE(S) ____________________________________________ DATE ___________, 1998
NOTE: Please sign exactly as name appears hereon. When signing as executor,
administrator, attorney, trustee or guardian please give your full title as
such. If a corporation, please sign in full corporation name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person. If a joint tenancy, please have both tenants sign.
</TABLE>
