As filed with the Securities and Exchange Commission on August 23, 1996
Registration No. ________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
PALOMAR MEDICAL TECHNOLOGIES, INC.
----------------------------------
(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
04-3128178
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(I.R.S. employer identification number)
66 Cherry Hill Drive, Beverly, Massachusetts 01915 (508) 921-9300
-----------------------------------------------------------------
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Paul Weiner
Corporate Controller
Palomar Medical Technologies, Inc.
66 Cherry Hill Drive
Beverly, Massachusetts 01915
(508) 921-9300
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
from time to time after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
______________________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] ______________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------- ------------------- --------------------- ------------------- ------------------------------
Title of Shares Amount to be Proposed Proposed
to be Registered Registered Maximum Maximum Amount of Registration
Offering Price Aggregate Fee
Per Share Offering Price
- ---------------------------------- ------------------- --------------------- ------------------- ------------------------------
- ---------------------------------- ------------------- --------------------- ------------------- ------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per 1,100,000 $8.875 $9,762,500 $3,366
share.
- ---------------------------------- ------------------- --------------------- ------------------- ------------------------------
</TABLE>
The Common Stock being registered consists of (i) 600,000 shares
underlying Series F Convertible Preferred Stock (the "Preferred Stock") issued
to TRAL & Co., and (ii) 500,000 shares underlying a stock purchase warrant
issued with the Preferred Stock to TRAL & Co. as described in the Selling
Stockholder and Plan of Distribution sections of the Prospectus.
Pursuant to Rule 416, there are also registered hereby such additional
indeterminate number of shares of such Common Stock as may become issuable to
prevent dilution resulting from stock splits, stock dividends or similar
transactions as set forth in the terms of the Preferred Stock and the warrants
referred to above.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SUBJECT TO COMPLETION DATED AUGUST 22 , 1996
PROSPECTUS
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PALOMAR MEDICAL TECHNOLOGIES, INC.
1,100,000 Shares of Common Stock
consisting of:
600,000 shares underlying Series F Convertible
Preferred Stock; and 500,000 shares
underlying a stock purchase warrant
This Prospectus relates to shares of Common Stock, $.01 par value,
("Common Stock" or the "Shares") of Palomar Medical Technologies, Inc. (the
"Company", the "Registrant" or "Palomar") consisting of: (i) 600,000 shares
underlying Series F Convertible Preferred Stock (the "Preferred Stock") issued
to TRAL & Co., and (ii) 500,000 shares underlying a stock purchase warrant
issued with the Preferred Stock to TRAL & Co. which are excercisable as
described in the Selling Stockholder and Plan of Distribution sections of the
Prospectus. All shares to be registered hereby are to be offered by the selling
stockholder listed herein (the "Selling Stockholder") and the Company will
receive no proceeds from the sale of such shares. The Company has agreed to
indemnify certain of the Selling Stockholder against certain liabilities,
including certain liabilities under the Securities Act of 1933, as amended (the
"Securities Act"), or to contribute to payments which such Selling Stockholder
may be required to make in respect thereof. See "Plan of Distribution".
The Company's Common Stock, par value $.01 per share, is listed on the
National Association of Securities Dealers Automated Quotation, System
("NASDAQ") and traded on the NASDAQ SmallCap Market. The last reported bid price
of the Common Stock on the NASDAQ SmallCap Market on August 15, 1996 was $8.875
per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AT PAGES 6 THROUGH 14.
It is anticipated that usual and customary brokerage fees will be paid
by the Selling Stockholder on the sale of the Common Stock registered hereby.
The Company will pay the other expenses of this offering. See "Plan of
Distribution". The offer of shares of Common Stock by the Selling Stockholder as
described in this Prospectus is referred to as the "Offering".
The date of this Prospectus is , 1996.
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No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus in connection with the offer
contained in this Prospectus, and, if given or made, such other information or
representations must not be relied upon as having been authorized by the Company
or the Selling Stockholder. This Prospectus does not constitute an offer to sell
or a solicitation of an offer to buy the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, Room 1024 and at the public
reference facilities maintained by the Commission on the 14th Floor, 75 Park
Place, New York, New York 10007; Suite 1400, Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 60661; and Suite 500 East, Securities and
Exchange Commission Building, 5757 Wilshire Boulevard, Los Angeles, California
90036. Copies can be obtained from the Commission at prescribed rates by writing
to the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
reports, proxy statements and similar information can also be inspected and
copied at the National Association of Securities Dealers, 1735 K Street, N.W.,
Washington, DC 20006-1500. This prospectus, which constitutes part of a
Registration Statement filed by the Company with the Commission under the
Securities Act omits certain of the information contained in the Registration
Statement in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and to the Exhibits
relating thereto for further information with respect to the Company and the
Securities offered hereby. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and, in each instance,
reference is made to the copy of such documents filed as an exhibit to the
Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-KSB and Form 10-KSB\A-1 for its
fiscal year ended December 31, 1995, the Company's Quarterly Report on Form
10-QSB and Form 10-QSB\A-1 for its quarter ending March 31, 1996, the Company's
Quarterly Report on Form 10-QSB for its quarter ending June 30, 1996, the
Company's Form 8-K filed with the commission on May 16, 1996, as amended by Form
8-K/A filed June 11, 1996, and the description of the Company's Common Stock
contained in its Registration Statement on Form 8-A filed with the Commission on
June 6, 1992, as amended by Form 8 on December 17, 1992, all of which have been
previously filed with the Commission, are incorporated in this Prospectus by
reference. All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering made hereby are also incorporated by reference
herein and made a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated by reference herein is modified
or superseded for all purposes to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which is incorporated by
reference modifies or replaces such statement. The Company will provide without
charge to each person, including any beneficial owner, to whom a copy of this
Prospectus is delivered, upon the written or oral request of such person, a copy
of all documents incorporated herein by reference (not including the exhibits to
such documents, unless such exhibits are specifically incorporated by reference
in such documents).
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Requests for such copies should be directed to: Deborah R. Randazza, Palomar
Medical Technologies, Inc., 66 Cherry Hill Drive, Beverly, Massachusetts 01915;
telephone number (508) 921 - 9300.
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
more detailed information appearing elsewhere in this Prospectus or incorporated
herein by reference and the financial statements which are incorporated herein
by reference.
<TABLE>
<S> <C>
THE COMPANY........................................ Palomar Medical Technologies, Inc. (the "Company") has two business
segments: medical products and electronic products. The medical
products are under various stages of development and clinical
trials. The Company does derive revenue from the sale of medical
products by its acquired subsidiaries Spectrum Medical Technologies,
Inc. and Tissue Technologies, Inc. The flexible circuit board
business of the electronic products segement is the principal source
of the Company's revenues.
RISK FACTORS....................................... The Offering involves substantial risk. See "Risk Factors".
SECURITIES OFFERED................................. 1,100,000 shares of Company Common Stock, par value $.01 per share.
OFFERING PRICE..................................... All or part of the Shares offered hereby may be sold from time to
time in amounts and on terms to be determined by the Selling
Stockholder at the time of sale.
USE OF PROCEEDS.................................... The Company will receive no part of the proceeds from the sale of the
shares registered pursuant to this Registration Statement.
SELLING STOCKHOLDER................................ The Shares being offered hereby are being offered for the account of
the Selling Stockholder specified under the caption "Selling
Stockholder".
NASDAQ TRADING SYMBOL.............................. PMTI
</TABLE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK AND
SHOULD NOT BE MADE BY PERSONS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. THE FOLLOWING FACTORS, IN ADDITION TO THOSE DISCUSSED ELSEWHERE IN
THIS PROSPECTUS, SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND
ITS BUSINESS.
HOLDING COMPANY STRUCTURE. The Company has no significant operations
other than those incidental to its ownership of the capital stock of its
subsidiaries. As a holding company, the Company is dependent on dividends or
other intercompany transfers of funds from its subsidiaries to meet the
Company's debt service and other obligations. Claims of creditors of the
Company's subsidiaries, including trade creditors, will generally have priority
as to the assets of such subsidiaries over the claims of the Company and the
holders of the Company's indebtedness.
LIMITED OPERATING HISTORY; RECENT ACQUISITIONS. Many of the Company's
subsidiaries have limited operating histories and are in the development stage,
and the Company is subject to all of the risks inherent in the establishment of
a new business enterprise. Historically, most of the Company's revenues have
been generated by its flexible circuit board component business, however,
Spectrum Medical Technologies, Inc. ("Spectrum"), acquired by the Company in
April 1995, contributed 18% of the Company's revenues in 1995. The Company
acquired Comtel Electronics, Inc. ("Comtel") in March 1996, and Tissue
Technologies, Inc. ("Tissue") in May 1996. Both Comtel and Tissue have had
limited operating histories. The likelihood of success of the Company must be
considered in light of the problems, expenses, difficulties, complications and
delays frequently encountered in connection with the establishment of a new
business and development of new technologies in the medical products and
electronic products industries. These include, but are not limited to,
government regulation, competition, the need to expand manufacturing
capabilities and market expertise, and setbacks in production, product
development, market acceptance and sales and marketing. The Company's prospects
could be a significantly affected by its ability to subsequently manage and
integrate the operating of several distinct businesses with diverse products,
services and customer bases in order to achieve cost efficiencies. There can be
no assurance that the Company will be able to successfully manage and integrate
the operations of newly acquired businesses into its operations or that the
failure to do so will not increase the costs inherent in the establishment of
new business enterprises.
SUBSTANTIAL AND CONTINUING LOSSES. The Company incurred a net loss of
US$12,620,768 for the year ended December 31, 1995 and a net loss of
US$15,263,802 for the six month period ended June 30, 1996. These losses are
expected to continue for the near term, and there can be no assurance that the
Company will achieve profitable operations or that profitable operations will be
sustained if achieved. At June 30, 1996, the Company's accumulated deficit was
US$41,636,803. Dynaco Corp. ("Dynaco"), Star Medical Technologies, Inc.
("Star"), CD Titles, Inc. ("CD Titles"), Dynamem, Inc. ("Dynamem"), Comtel and
Tissue each have had a history of losses prior to acquisition by the Company.
There can be no assurance that these companies will achieve profitable
operations or that profitable operations will be sustained if achieved. The
Company anticipates incurring substantial research and development expenses,
which will reduce cash available to fund current operations. The Company must
continue to secure additional financing to complete its research and development
activities, commercialize its current and proposed medical products, expand its
current nonmedical business, execute its acquisition business plan and fund
ongoing operations. The Company believes that the cash generated to date from
its financing activities and amounts available under its credit agreement will
be sufficient to satisfy its working capital requirements through June 1997.
However, there can be no assurance that this assumption will prove to be
accurate or that in the future will not require the Company to obtain additional
financing sooner than presently anticipated. The Company may also determine,
depending upon the opportunities available to it, to seek additional debt or
equity financing to fund the costs of acquisitions or continuing expansion. To
the extent that the Company finances
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an acquisition with a combination of cash and equity securities, any such
issuance of equity securities could result in dilution to the interests of the
Company's shareholders. Additionally, to the extent that the Company incurs
indebtedness to fund increased levels of accounts receivable or to finance the
acquisition of capital equipment or issues debt securities in connection with
any acquisition, the Company will be subject to risks associated with incurring
substantial additional indebtedness, including the risks that interest rates may
fluctuate and cash flow may be insufficient to pay principal and interest on any
such indebtedness. The Company continues to investigate several financing
alternatives, including additional government research grants, strategic
partnerships, additional bank financing, private, debt and equity financing and
other sources. While the Company regularly reviews potential funding sources in
relation to its ongoing and proposed research projects, there can be no
assurance that the current levels of funding or additional funding will be
available, or if available will be on terms satisfactory to the Company. Failure
to obtain additional financing could have a material adverse effect on the
Company, including possibly requiring it to significantly curtail its
operations.
RISKS ASSOCIATED WITH ACQUISITIONS. Acquisitions may result in the
incurrence of additional debt, the write-off of in-process research and
development or technology acquisition and development costs and the amortization
of expenses related to goodwill and other intangible assets, any of which could
have a material adverse effect on the Company's business, financial condition,
results operations and cash flow. Acquisitions involve numerous additional
risks, including difficulties in the assimilation of the operations, services,
products and personnel of the acquired company, the diversion of management's
attention from other business concerns, entering markets in which the Company
has little or no direct prior experience and the potential loss of key employees
of the acquired company.
MANAGEMENT OF GROWTH. Depending on the extent of its future growth, the
Company may experience a significant strain on its management, operational,
manufacturing and financial resources. The Company's ability to manage its
growth effectively may require it to continue to implement and improve its
operational and financial systems and may require the addition of new management
personnel. The failure of the Company's management team to effectively manage
growth, should it continue to occur, could have a material adverse effect on the
Company's financial condition and results of operations
HIGHLY COMPETITIVE INDUSTRIES. The medical device and electronics
industries are characterized by intense competition. The medical laser industry
is highly competitive and is characterized by the frequent introduction of new
products. The Company competes in the development, manufacture, marketing and
servicing of laser technology products with numerous other companies, certain of
which have substantially greater financial, marketing and other resources than
the Company. In addition, the Company's medical products face competition from
alternative medical products and procedures, such as dermabrasion, chemical
peels, pharmaceutical treatment, electrolysis, waxing and surgery, among others.
There can be no assurance that the Company will be able to differentiate its
products from the products of its competitors or that the marketplace will
consider the Company's products to be superior to competing products or medical
procedures. There can be no assurance that competitors will not develop products
or that new technologies will not be developed that render the Company's
products obsolete or less competitive. In addition, to the extent that the
Company enters areas of business in which it has little or no experience, such
as the opening of laser treatment centers, the Company may not be able to
compete successfully with competitors that are more established in such areas.
In the electronics industry, the Company competes with Packard-Hughes
Interconnect Co., Parlex Corporation, Teledyne Inc., IBM, Apple Computer, Compaq
and Dell Computer, among others. Many, if not most, of the Company's current and
prospective competitors are substantial in size and have substantial financial,
managerial, technical, manufacturing, marketing and other resources, and may
introduce additional products that compete with
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those of the Company. There can be no assurance that the Company's products will
compete favorably with the products of its competitors or that the Company will
have the resources necessary to compete effectively against such companies. As a
result of the intense competition in the personal computer market, the Company
expects that gross margins on sales of its upgradable personal computers will be
extremely narrow and will require the Company to manage carefully its cost of
goods sold. There can be no assurance that the Company will be able to manage
its cost of goods sold to the degree necessary for sales of upgradable computer
products to generate significant gross margins. The Company currently has
limited marketing capabilities and expects to place significant reliance on
independent distributors and resellers for the distribution and marketing of its
products. The Company will be dependent upon the efforts of such third parties.
The inability to establish and maintain a network of independent distributors
and resellers, or a reduction in their sales efforts, could have a material
adverse effect on the Company's financial condition and results of operations.
In addition, there can be no assurance as to the viability or financial
stability of the Company's independent distributors and resellers. The computer
industry has been characterized from time to time by financial difficulties of
distributors and resellers; any such problems could lead to reduced sales and
could have a material adverse effect on the Company's financial condition and
results of operations. There can be no assurance that the Company's products
will compete favorably with the products of its competitors or that the Company
will have the resources necessary to compete effectively against such companies.
POSSIBLE FLUCTUATIONS IN QUARTERLY PERFORMANCE. The Company's results
of operations have fluctuated substantially and can be expected to continue to
vary significantly. The Company's quarterly operating results depend on a number
of factors, including the timing of the introduction or acceptance of new
products offered by the Company or its competitors, changes in the mix of
products sold by the Company, changes in regulations affecting the medical
products or electronics industry, changes in the Company's operating expenses,
personnel changes and general economic conditions. Fluctuations in operating
results may result in volatility in the price of the Shares.
VOLATILITY OF SHARE PRICE. The Company believes that factors such as
announcements of developments related to the Company's business, announcements
by competitors, quarterly fluctuations in the Company's financial results and
other factors could cause the price of the Shares to fluctuate, perhaps
substantially. In addition, the stock market has experienced extreme price and
volume fluctuations that have particularly affected the market price for many
technology companies and that have often been unrelated to the operating
performance of these companies. These broad market fluctuations may adversely
affect the market price of the Shares. The trading prices of many technology
companies' stocks, including the Shares, are at or near their historical highs,
and reflect price/earnings ratios substantially above historical norms. There
can be no assurance that the trading price of the Shares will remain at or near
its current level.
GOVERNMENT REGULATION. The Company's medical business segment and, to a
lesser degree, its electronics business segment are subject to regulation in the
United States and abroad. Failure to comply with applicable regulatory
requirements can result in fines, denial or suspension of approvals, seizures or
recall of products, operating restrictions and criminal prosecutions any or all
of which could have a material adverse effect on the Company. Furthermore,
changes in existing regulations or adoption of new regulations could prevent the
Company from obtaining, or could affect the timing of, future regulatory
approvals.
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Medical Segment. All medical devices, including those sold by the
Company, are subject to regulation by the FDA under the Medical Device
Amendments of the United States Food, Drug and Cosmetics Act (the "FDA Act").
The Company's business, financial condition and operations are critically
dependent upon timely receipt of FDA regulatory clearance.
FDA Clearance Status for Cosmetic Laser Products. Three of the
Company's lasers have received clearance from the FDA: the Q-pulse Ruby laser,
the Tru-Pulse laser and the Epilaser system.
The Company is also investigating other applications in dermatology for
its laser systems. It will be required to obtain FDA clearance before
commercially marketing any other application. The Company believes that it will
be able to seek such clearance under the 510(k) application process; however, no
assurance can be given that the FDA will not require the Company to follow the
more extensive and time-consuming Pre-Market Approval ("PMA") process. FDA
review of a 510(k) application currently averages about seven to twelve months
and requires limited clinical data based on "substantial equivalence" to a
product marketed prior to 1976, while a PMA review can last for several years
and require substantially more clinical data.
The FDA also imposes various requirements on manufacturers and sellers
of products under its jurisdiction, such as labeling, good manufacturing
practices, record keeping and reporting requirements. The FDA also may require
post-market testing and surveillance programs to monitor a product's effects.
There can be no assurance that the appropriate clearances from the FDA will be
granted, that the process to obtain such clearances will not be excessively
expensive or lengthy or that the Company will have sufficient funds to pursue
such clearances.
No assurance can be given that FDA approval will be obtained for the
Company's current or proposed medical products on a timely basis, if at all. The
medical products segment of the Company's business, is, and will continue to be,
critically dependent upon FDA approval of its current and proposed medical
products. Delays or failure to obtain such approval would have a material
adverse effect on the Company.
Other Government Approvals for Medical Products; Good
Manufacturing Practices. In order to be sold outside the United States, the
Company's products are subject to FDA permit requirements that are conditioned
upon clearance by the importing country's appropriate regulatory authorities.
Many countries also require that imported products comply with their own or
international electrical and safety standards. In November 1992, the Company
obtained approval certifying compliance with certain international electrical
and safety regulations applicable to its pulsed dye laser. Additional approvals
may be required in other countries. The Company has yet to apply for
international approval for its diode laser for use in cosmetic surgery and
dermatology.
The Company is subject to the laser radiation safety regulations of the
FDA Act administered by the National Center for Devices and Radiological Health
("CDRH") of the FDA. These regulations require a laser manufacturer to file new
product and annual reports, to maintain quality control, product testing and
sales records, to distribute appropriate operation manuals, to incorporate
certain design and operating features in lasers sold to end-users and to certify
and label each laser sold to end-users as one of four classes of lasers (based
on the level of radiation from the laser). In addition, various warning labels
must be affixed on the product and certain protective devices must be installed
depending upon the class of product. Under the Act, the Company is also required
to register with the FDA as a medical device manufacturer and is subject to
inspection on a routine basis by the FDA for compliance with Good Manufacturing
Practice ("GMP") regulations. The GMP regulations impose certain procedural and
documentation requirements upon the Company relevant to its manufacturing,
testing and quality
9
control activities. The CDRH is empowered to seek fines and other remedies for
violations of these regulatory requirements. The Company believes that it is
currently in compliance with these regulations.
Electronic Segment. A significant percentage of the total sales of the
flexible circuit board component business of the Company, which presently
accounts for significant amount of the sales of the Company, are the result of
either a subcontract or a direct contract for government programs funded by the
U.S. military. Generally, government contracts and subcontracts are terminable
at the convenience of the government. Cutbacks in military spending for certain
programs or lack of military spending in general could have a material adverse
effect on the Company.
Flexible circuit board component sales to the U.S. military are subject
to certain military certifications. These certifications are based upon
compliance with specification standards set by the U.S. military. The Company is
subject to periodic audit and review from U.S. government agencies to ensure
compliance under criteria set forth by these agencies. Failure to meet or exceed
criteria set forth could result in a suspension or disqualification of certain
certifications. Such suspension or disqualification could have a material
adverse effect on the Company.
UNCERTAINTY OF MARKET ACCEPTANCE. The Company continually develops new
products intended for use in the medical products segment and the electronic
products segment. As with any new products, there is substantial risk that the
marketplace may not accept or be receptive to the potential benefits of such
products. Market acceptance of the Company's current and proposed products will
depend, in large part, upon the ability of the Company or any marketing partners
to demonstrate to the marketplace the advantages of the Company's products over
other types of products. There can be no assurance that applications or uses for
the Company's current and proposed products will be accepted by the marketplace
or that any of the Company's current or proposed products will be able to
compete effectively.
UNCERTAINTY OF HEALTHCARE REIMBURSEMENT AND REFORM. The healthcare
industry is subject to changing political, economic and regulatory influences
that may affect the procurement practices and operations of healthcare industry
participants. During the past several years, state and federal government
regulation of reimbursement rates and capital expenditures in the United States
healthcare industry has increased. Lawmakers continue to propose programs to
reform the United States healthcare system, which may contain programs to
increase governmental involvement in healthcare, lower Medicare and Medicaid
reimbursement rates or otherwise change the operating environment for the
Company's customers. Healthcare industry participants may react to these
proposals by curtailing or deferring investments, including investments in the
Company's products.
DEPENDENCE ON THIRD PARTY RESEARCHERS. The Company is substantially
dependent upon third party researchers and others, over which the Company will
not have absolute control, to satisfactorily conduct and complete research on
behalf of the Company and to grant to the Company favorable licensing terms for
products which may be developed. The Company has entered into a number of
research agreements with recognized research hospitals and clinical
laboratories. These research institutions include the Oregon Medical Laser
Center at the Heart Institute of St. Vincent Hospital and Medical Center in
Portland, Oregon, the Wellman Labs at Massachusetts General Hospital and the
Otolaryngology Research Center for Advanced Endoscopic Applications at New
England Medical Center ("New England Medical Center"), Boston, Massachusetts.
The Company provides research funding, laser technology and optics know-how in
return for licensing agreements with respect to specific medical applications
and patents. Management believes that this method of conducting research and
development provides a higher level of technical and clinical expertise than it
could provide on its own and in a more cost efficient manner. The Company's
success will be highly dependent upon the results of the research, and there can
be no assurance that
10
these research agreements will provide the Company with marketable products in
the future or that any of the products developed under these agreements will be
profitable for the Company.
TECHNOLOGICAL OBSOLESCENCE. Both the medical products segment and the
electronics segment are characterized by extensive technological developments
and the rapid pace experienced over the past few decades is expected to
continue. The Company's failure to develop products in a timely manner in
response to changes in the industry, whether for financial, technological or
other reasons, will have a material adverse effect on the Company's business,
financial condition and results of operations.
The medical device industry is characterized by extensive research and
development and rapid technological change. The flexible circuit board component
industry is characterized by large capital investments in new automated
processes and state-of-the-art fabrication techniques. Development by others of
new or improved products, processes or technologies may make the Company's
products or proposed products obsolete or less competitive. The Company will be
required to devote continued efforts and financial resources to enhancement of
its existing products and development of new products for the medical
marketplace. There can be no assurance that the Company will have the financial
resources or the technological capability necessary to carry out such product
enhancement and development.
In order to participate effectively in either the electronics
interconnect or the personal computer industries, the Company must continue to
make large capital investments in new automated processes and state-of-the-art
fabrication techniques. Development by others of new or improved products,
processes or technologies may make the Company's products or proposed products
obsolete or less competitive. The Company will be required to devote continued
efforts and financial resources to enhance its existing products and develop new
products. There can be no assurance that the Company will have the financial
resources or the technological capability necessary to carry out such product
enhancement and development.
LACK OF PATENT PROTECTION. The Company currently holds several patents
and intends to pursue various additional avenues that it deems appropriate to
protect its technology. There can be no assurance, however, that the Company
will file any additional patent applications or that any patent applications
that have been, or may be, filed will result in issued patents, or that any
patent, patent application, know-how, license or cross-license will afford any
protection or benefit to the Company.
The medical device market has been characterized by substantial
litigation regarding patent and other intellectual property rights. In both the
medical products and the electronic products segments, litigation, which could
result in substantial cost to and diversion of effort by the Company, may be
necessary to protect trade secrets or know-how owned by or licensed to the
Company or to determine the enforceability, scope and validity of the
proprietary rights of others. Adverse determination in litigation or
interference proceedings could subject the Company to significant liabilities to
third parties, require the Company to seek licenses from third parties and could
prevent the Company from manufacturing and selling its products, all of which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
POSSIBLE PATENT INFRINGEMENTS. In the medical products segment, the
Company is aware of patents relating to laser technologies used in certain
applications that the Company intends to pursue, which, if valid and
enforceable, may be infringed by the Company. The Company has obtained opinions
of counsel that the Company is not infringing currently on patents held by
others; however, such opinions have not been challenged in any court of law. If
the Company's current or proposed products are, in the opinion of patent
counsel, infringing on any of these patents, the Company intends to seek
non-exclusive, royalty-bearing licenses to such patents but there can be
11
no assurance that any such license would be available on favorable terms, if at
all. In the electronic products segment, the Company has not been notified that
it is currently infringing on any patents nor has it been subject of any patent
infringement action. No assurance can be given that infringement claims will not
be made or that the Company would prevail in any legal action with respect
thereto. Defense of a claim of infringement would be costly and could have a
material adverse effect on the Company's business, even if the Company were to
prevail.
NEED FOR ADDITIONAL QUALIFIED PERSONNEL. The Company's ability to
develop, manufacture and market all of its products, and to attain a competitive
position within the medical products and electronics industries, will depend, in
large part, on its ability to attract and retain qualified personnel.
Competition for qualified personnel in these industries is intense and the
Company will be required to compete for such personnel with companies which may
have greater financial and other resources. The Company's inability to attract
and retain such personnel could have a material adverse effect upon its
business.
ISSUANCE OF PREFERRED STOCK AND DEBENTURES COULD AFFECT RIGHTS OF
COMMON SHAREHOLDERS. The Company is authorized to issue up to 5 million shares
of Preferred Stock, US$.01 par value. The Preferred Stock may be issued in one
or more series, the terms of which may be determined at the time of issuance by
the Board of Directors, without further action by shareholders, and may include
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion and redemption rights
and sinking fund provisions. In February 1996, the Company issued 6,000 shares
of Series D Convertible Preferred Stock at a price of US$1,000 per share, which
are convertible into Shares at 80% of the daily average closing price of the
Shares on the ten trading days preceding such conversion, but in no event less
than US$4.50 or more than US$6.00. In July 1996, 1,735 shares of Series D
Convertible Preferred Stock were converted into 300,113 common shares. In April
1996, the Company issued 10,000 shares of Series E Preferred Stock at a price of
US$1,000 per share. The Series E Convertible Preferred Stock, together with any
accrued but unpaid dividends, may be converted into Shares at 85% of the average
closing bid price for the three trading days immediately preceding the
conversion date, but in no event at less than US$7.50 or more than US$11.50. .
In July 1996 and August 1996, 5,700 shares of Series E Convertible Preferred
Stock were converted into 701,441 common shares. In July 1996, the Company
issued 6,000 shares of Series F Convertible Preferred Stock at a price of
US$1,000 per share, which are convertible into Shares at 80% of the daily
average closing price of the Shares on the ten trading days preceding such
conversion, but in no event less than US$10.00 or more than US$16.00. In July
1996, the Company issued 9,675 units in a convertible debenture financing. Each
unit consisted of a convertible debenture denominated in 1,000 Swiss Francs and
a warrant to purchase 24 shares of the Company's common stock at $16.50 per
share. The issuance of any such Preferred Stock or Debentures could affect the
rights of the holders of Shares, and could reduce the market price of the
Shares. In particular, specific rights granted to future holders of Preferred
Stock or Debentures could be used to restrict the Company's ability to merge
with or sell its assets to a third party, thereby preserving control of the
Company by the existing control group.
ISSUANCE OF RESERVED SHARES; REGISTRATION RIGHTS. As of August 13,
1996, the Company had 28,061,662 Shares of Common Stock outstanding. The Company
has reserved an additional 19,951,091 Shares for issuance as follows: (1)
3,924,400 Shares for issuance to key employees, officers, directors, consultants
and advisors pursuant to the Company's Stock Option Plans; (2) 254,115 Shares
for issuance to employees, officers and directors pursuant to the Company's
401(k) Plan; (3) 1,000,000 Shares for issuance to the Company's Employee Stock
Purchase Plan; (4) 7,370,656 Shares for issuance upon exercise of three-, four-
five- and seven- year Warrants issued to certain lenders, investors,
consultants, directors, officers and a principal shareholder (a portion of which
are subject to certain anti-dilutive adjustments); (5) 1,033,220 Shares for
issuance upon conversion of the 4,265 shares of Series D Preferred Stock; and
(6) 744,300 Shares for issuance upon conversion of the 4,300 shares of Series E
Preferred Stock; (7) 1,100,000 Shares for issuance upon conversion of the
debentures sold in the Swiss Franc-Denominated
12
Offering; and (8) 600,000 Shares for issuance upon conversion of the 6,000
shares of Series F Preferred Stock. All of the foregoing reserved Shares are, or
the Company intends for them shortly to be, registered with the Commission and
therefore freely saleable on Nasdaq or elsewhere.
PRODUCT LIABILITY EXPOSURE. Medical product companies face an inherent
business risk of financial exposure to product liability claims in the event
that the use of their products results in personal injury. The Company's
products are and will continue to be designed with numerous safety features, but
it is possible that patients could be adversely affected by use of one of the
Company's products or that deaths could occur. Further, in the event that any of
the Company's products prove to be defective, the Company may be required to
recall and redesign such products. Although the Company has not experienced any
material losses due to product liability claims to date, there can be no
assurance that it will not experience such losses in the future. The Company
maintains liability insurance in the amount of US$4,000,000; however, there can
be no assurance that such coverage will continue to be available on terms
acceptable to the Company or that such coverage will be adequate for liabilities
actually incurred. In the event the Company is found liable for damages in
excess of the limits of its insurance coverage, or if any claim or product
recall results in significant adverse publicity against the Company, the
Company's business, financial condition and results of operations could be
materially and adversely affected. In addition, although the Company's products
have been and will continue to be designed to operate in a safe manner, and
although the Company attempts to educate medical personnel with respect to the
proper use of its products, misuse of the Company's products by medical
personnel over whom the Company cannot exert control may result in the filing of
product liability claims or significant adverse publicity against the Company.
DEPENDENCE ON SOLE SUPPLIERS. The Company relies on outside suppliers
for substantially all of its manufacturing supplies, parts and components.
Pyralux(R), an integral component of most of the Company's flexible circuit
products, is manufactured exclusively by E.I. du Pont de Nemours and Company
("DuPont"). Although the Company has a written agreement with DuPont under which
DuPont will supply the Company with all of its requirements for Pyralux, there
can be no assurance that the Company will be able to obtain a sufficient supply
of Pyralux to fulfill orders for its products in a timely manner, if at all.
In addition, CO2 laser tubes, an integral component of Tissue's
Tru-Pulse Laser system, are manufactured exclusively by Pulse Systems, Inc.
There can be no assurance that the Company will be able to obtain sufficient
supply of CO2 laser tubes to fulfill orders for its products in a timely manner,
if at all. Furthermore, several other component parts of the Company's medical
device products and electronic segment products are manufactured exclusively by
one supplier. There can be no assurance that the Company will be able to obtain
a sufficient supply of such components at commercially reasonable prices or at
all. A shortage of necessary parts and components or the inability of the
Company to obtain such parts and components would have a material adverse effect
on the Company's business, financial condition and results of operations.
HAZARDOUS SUBSTANCE AND ENVIRONMENTAL CONCERNS. The manufacture of
substrate interconnect products involves numerous chemical solvents and other
solid, chemical and hazardous wastes and materials. Dynaco is subject to a
variety of environmental laws relating to the generation, storage, handling,
use, emission, discharge and disposal of these substances and potentially
significant risks of statutory and common law liability for environmental damage
and personal injury. The Company, and in certain circumstances, its officers,
directors and employees, may be subject to claims arising from the Company's
manufacturing activities; including the improper release, spillage, misuse or
mishandling of hazardous or nonhazardous substances or material. The Company may
be strictly liable for damages, regardless of whether it exercised due care and
complied with all relevant laws and regulations. The Company does not currently
maintain environmental impairment insurance. There can be no assurance that the
Company will not face claims resulting in substantial liability for which the
Company is
13
uninsured or that hazardous substances are not or will not be present at the
Company's facilities. The Company believes that it operates its Dynaco
facilities in substantial compliance with existing environmental laws and
regulations. In June 1989 and April 1994, Dynaco conducted environmental studies
of its Tempe, Arizona substrate manufacturing facility and did not discover any
contamination requiring remediation.
Failure to comply with proper hazardous substance handling procedures
or violation of environmental laws and regulations would have a material adverse
effect on the Company.
SIGNIFICANT OUTSTANDING INDEBTEDNESS; SUBORDINATION OF DEBENTURES. The
Company has incurred substantial indebtedness in relation to its equity capital
and will be subject to all of the risks associated with substantial leverage,
including the risk that available cash may not be adequate to make required
payments to the holders of the Debentures. The Company's ability to satisfy its
obligations under the Debentures from cash flow will be dependent upon the
Company's future performance and will be subject to financial, business and
other factors affecting the operation of the company, many of which may be
beyond the Company's control. In the event the Company does not have sufficient
cash resources to satisfy quarterly interest or other repayment obligations to
the holders of the Debentures the Company will be in default under the
Debentures, which would have a material adverse effect on the Company. To the
extent that the Company is required to use cash resources to satisfy interest
payments to the holders of the Debentures, it will have less resources available
for other purposes. Inability of the Company to repay the Debentures upon
maturity would have a material adverse effect on the Company, which could result
in a reduction of the price of the Company's Shares.
The Debentures will be unsecured and subordinate in right of payment to
all Senior Indebtedness of the Company. The Debentures do not restrict the
Company's ability to incur additional Senior Indebtedness and most other
indebtedness. The terms of Senior Indebtedness now existing or incurred in the
future could affect the Company's ability to make payments of principal and/or
interest to the holders of Debentures.
THE COMPANY
The Company was organized to design, manufacture and market lasers,
delivery systems and related disposable products for use in medical cosmetic
procedures. The Company currently operates in two business segments: medical
products and electronic products. In the medical products segment, the Company
manufactures and markets the FDA approved Q-pulse Ruby laser, the Tru-Pulse
laser and the EpiLaser system. The Company also is developing ruby, pulse dye
and diode medical lasers for use in clinical trials and is engaged in the
research and development of additional medical and surgical products. The
Company has expanded its efforts in the cosmetic laser area through a series of
product development activities, acquisitions and strategic alliances that target
patient self pay procedures performed in doctors' offices and clinics. The
Company has entered into a number of research agreements with recognized
research hospitals and clinical laboratories. The Company provides research
funding, laser technology and optics know-how in return for licensing agreements
to specific medical applications and patents. Management feels that this method
of conducting research and development provides a higher level of technical and
clinical expertise than it could provide on its own and in a more cost efficient
manner. To date, some of the Company's medical laser products are undergoing
clinical trials and have not received FDA approval.
In the electronic products segment, the Company manufactures high
density, flexible electronic circuitry for use in industrial, military and
medical devices. The Company is also introducing a number of proprietary
products targeted to service the personal computer industry. Some of the
Company's electronic products are
14
being incorporated into its laser systems. These new products include a series
of proprietary computer memory modules that double the memory capacity of
traditional memory modules using the same interface as well as a user-friendly
upgradable personal computer that management believes will decrease the level of
technical obsolescence found with most personal computers in the market.
The Company also makes early stage investments in core technologies and
companies that management feels are strategic to the Compay's business or will
yield a higher than average financial return to support the Company's core
business. Some of these investments are with companies that are related to some
of the directors and officers of the Company.
In September 1995, the Company established Palomar Electronics
Corporation, a wholly-owned subsidiary, as part of a plan to separate the
electronics and computer segments of the business from the medical laser
segments of the business.
USE OF PROCEEDS
The Company will receive no part of the proceeds from the sale of any
of the Shares by the Selling Stockholder.
15
SELLING STOCKHOLDER
The following table sets forth information concerning the beneficial
ownership of shares of Common Stock by the Selling Stockholder as of the date of
this Prospectus and the number of such shares included for sale in this
Prospectus assuming the sale of all Shares being offered by this Prospectus. A
description of the transactions under which the Selling Stockholder received the
Common Stock being registered herein is set forth under the heading "Plan Of
Distribution" which follows this table. To the best of the Company's knowledge,
except as stated in this Prospectus, the Selling Stockholder has not held any
office or maintained any material relationship with the Company or any of its
predecessors or affiliates over the past three years. The Selling Stockholder
reserves the right to reduce the number of shares offered for sale or to
otherwise decline to sell any or all of the Shares registered hereunder.
<TABLE>
<CAPTION>
Shares Shares Shares
owned to be owned
Selling prior to sold in after
Stockholder Offering (1)(2) Offering Offering (2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRAL & Co (3) 2,933,220 1,100,000 1,833,220 6.1%
One Tower Square
Hartford, CT 06183
</TABLE>
1. Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock which an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the ownership of such individual
or group.
2. The amount and (if one percent or more) the percentage of outstanding
Common Stock.
3. Represents 600,000 shares of Common Stock issued or issuable upon
conversion of 6,000 shares of Series F Convertible Preferred Stock (the
"Preferred Stock") and 500,000 shares of Common Stock issuable pursuant to
a Warrant at $16.00 per share through 7/12/01. The warrant is not
exercisable until 20 days after the effective date of the registration
statement to which this prospectus relates. The Preferred Stock was issued
at $1,000 per share. Under the terms of the Certificate of Designation for
the Preferred Stock, the Preferred Stock, together with any accrued but
unpaid dividends, can be converted into a number of shares of Common Stock
equal to 80% of the average closing bid price of the Common Stock on the
ten trading days immediately preceding the conversion date, but in no event
less than $10.00 or more than $16.00. The Preferred Stock is not
convertible until 20 days after the effective date of the registration
statement to which this Prospectus relates. Dividends accrue at the rate of
8% per annum for the first twelve months after issuance; 6% per annum for
the second twelve months after issuance and 4% per annum thereafter. The
Preferred Stock may only be converted and the warrant may only be
excercised to the extent that neither The Travelers Insurance Company nor
any affiliate thereof would be deemed to hold more than 10% of the
Company's outstanding Common Stock as a result of such conversion or
exercise. Also includes 1,033,220 shares of Common Stock issued or issuable
upon conversion of 4,265 shares of Series D Convertible Preferred Stock,
and 600,000 shares of Common Stock issuable pursuant to a Warrant at $7.50
per share through 2/14/01 and 200,000 shares of Common Stock issuable
pursuant to a Warrant at $8.00 per share through 2/14/01. Tral & Co owns
such securities as nominee for The Travelers Insurance Company, a
subsidiary of Travelers Group Inc.
16
PLAN OF DISTRIBUTION
The 1,100,000 shares being registered herein for sale by the Selling
Stockholder consist of (i) 600,000 shares of Common Stock issued or issuable
upon conversion of shares of the Preferred Stock, and (ii) 500,000 shares
issuable pursuant to a Warrant exerciseable for Common Stock at $16.00 per share
through 7/12/01.
The Selling Stockholder may sell the Common Stock registered in
connection with this Offering on the NASDAQ market system or otherwise. There
will be no charges or commissions paid to the Company by the Selling Stockholder
in connection with the issuance of the Shares. It is anticipated that usual and
customary brokerage fees will be paid by the Selling Stockholder upon sale of
the Common Stock offered hereby. The Company will pay the other expenses of this
Offering. The Shares may be sold from time to time by the Selling Stockholder,
or by pledges, donees, transferees or other successors in interest. Such sales
may be made on one or more exchanges or in the over-the-counter market, or
otherwise at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The Shares may be sold
by one or more of the following: (a) a block trade in which the broker so
engaged will attempt to sell the Shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (b) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) an exchange distribution in accordance
with the rules of NASDAQ; and (d) ordinary brokerage transactions. In effecting
sales, brokers or dealers engaged by the Selling Stockholder may arrange for
other brokers or dealers to participate. Brokers or dealers will receive
commissions or discounts from Selling Stockholder in amounts to be negotiated
prior to the sale. Such brokers or dealers and any other participating brokers
or dealers may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In addition, any securities
covered by this Prospectus which qualify for sale pursuant to Rule 144 may be
sold under Rule 144 rather than pursuant to this Prospectus.
The Company has agreed to indemnify the Selling Stockholder against
certain liabilities, including certain liabilities under the Securities Act, or
to contribute to payments which the Selling Stockholder will be required to make
in respect thereof.
EXPERTS
The audited financial statements incorporated by reference in this
Prospectus and elsewhere in the registration statement, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein upon the authority of said
Firm as experts in giving said reports.
LEGAL OPINIONS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Foley, Hoag & Eliot LLP, One Post Office Square,
Boston, Massachusetts 02109.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
17
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
18
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of the
Common Stock to be registered are estimated (except for the Securities and
Exchange Commission filing fee) below. All such expenses will be paid by the
Registrant.
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee $3,366
Accounting Fees and Expenses 2,500
Legal Fees and Expenses 4,000
Blue Sky Filing Fees and Expenses 500
Printing and Mailing Costs 100
Transfer Agent Fees 500
Miscellaneous 500
----------
Total Expenses $11,466
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware General Corporation Law, Section 102(b)(7), enables a
corporation in its original certificate of incorporation or an amendment thereto
validly approved by stockholders to eliminate or limit personal liability of
members of its Board of Directors for violations of a director's fiduciary duty
of care. However, the elimination or limitation shall not apply where there has
been a breach of the duty of loyalty, failure to act in good faith, engaging in
intentional misconduct or knowingly violating a law, paying a dividend or
approving a stock repurchase which was deemed illegal or obtaining an improper
personal benefit. The Company's Certificate of Incorporation includes the
following language:
"To the maximum extent permitted by Section 102(b)(7) of the General Corporation
Laws of Delaware, a director of this corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit."
Section 145 of the General Corporation Law of the State of Delaware
generally provides that a corporation may indemnify any director, officer,
employee or agent against expenses, judgments, fines and amounts paid in
settlement in connection with any action against him by reason of his being or
having been such a director, officer, employee or agent, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action, had no
reasonable cause to believe his conduct was unlawful. No indemnification shall
be made, however, if he is adjudged liable for negligence or misconduct in the
performance of his duty to the corporation, unless a court determines that he is
nevertheless entitled to indemnification. If he is successful on the merits or
otherwise in defending the action, the corporation must indemnify him against
expenses actually and reasonably incurred by him. Article IX of the Company's
Bylaws provides indemnification as follows:
19
INDEMNIFICATION
SECTION 1. Actions, Etc. Other Than by or in the Right of the Corporation. The
Corporation shall, to the full extent legally permissible, indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including a grand jury proceeding, and all
appeals (but excluding any such action, suit or proceeding by or in the right of
the Corporation), by reason of the fact that such person is or was a director,
executive officer (as hereinafter defined) or advisory council member of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct in question was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that such person did not act in good faith and in a
manner which such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that such person had reasonable cause to believe that the conduct in
question was unlawful. As used in this Article IX, an "executive officer" of the
Corporation is the president, treasurer, a vice president given the title of
executive vice president, or any officer designated as such pursuant to vote of
the Board of Directors.
SECTION 2. Actions. Etc. by or in the Right of the Corporation. The Corporation
shall, to the full extent legally permissible, indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit, including appeals, by or in the right of the
Corporation to procure a judgment in its favor, by reason of the fact that such
person is or was a director or executive officer of the Corporation as defined
in Section 1 of this Article, or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 3. Determination of Right of Indemnification. Any indemnification of a
director or officer (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that such
indemnification is proper in the circumstances because the director or executive
officer has met the applicable standard of conduct as set forth in Sections 1
and 2 hereof. Such a determination shall be reasonably and promptly made (i) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) (if such a
quorum is not obtainable, or, even if obtainable if a quorum of disinterested
directors so directs) by independent legal counsel in a written opinion, or
(iii) by the stockholders.
20
SECTION 4. Indemnification Against Expenses of Successful Party. Notwithstanding
any other provision of this Article, to the extent that a director or officer of
the Corporation has been successful in whole or in part on the merits or
otherwise, including the dismissal of an action without prejudice, in defense of
any action, suit or proceeding or in defense of any claim, issue or matter
therein, such person shall be indemnified against all expenses incurred in
connection therewith.
SECTION 5. Advances of Expenses. Expenses incurred by a director or officer in
any action, suit or proceeding shall be paid by the Corporation in advance of
the final disposition of thereof, if such person shall undertake to repay such
amount in the event that it is ultimately determined, as provided herein, that
such person is not entitled to indemnification. Notwithstanding the foregoing,
no advance shall be made by the Corporation if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum of
disinterested directors, or (ii) (if such a quorum is not obtainable or, even if
obtainable, if a quorum of disinterested directors so directs) by independent
legal counsel in a written opinion, that, based upon the facts known to the
Board of Directors or such counsel at the time such determination is made, such
person has not met the relevant standards set forth for indemnification in
Section 1 or 2, as the case may be.
SECTION 6. Right to Indemnification Upon Application: Procedure Upon
Application. Any indemnification or advance under Sections 1, 2, 4 or 5 of this
Article shall be made promptly, and in any event within ninety days, upon the
written request of the person seeking to be indemnified, unless a determination
is reasonably and promptly made by the Board of Directors that such person acted
in a manner set forth in such Sections so as to justify the Corporation's not
indemnifying such person or making such an advance. In the event no quorum of
disinterested directors is obtainable, the Board of Directors shall promptly
appoint independent legal counsel to decide whether the person acted in the
manner set forth in such Sections so as to justify the Corporation's not
indemnifying such person or making such an advance. The right to indemnification
or advances as granted by this Article shall be enforceable by such person in
any court of competent jurisdiction, if the Board of Directors or independent
legal counsel denies the claim therefor, in whole or in part, or if no
disposition of such claim is made within ninety days.
SECTION 7. Other Right and Remedies: Continuation of Rights. The indemnification
and advancement of expenses provided by this Article shall not be deemed
exclusive of any other rights to which any person seeking indemnification or
advancement of expenses may be entitled under any Bylaw, agreement, Vote of
stockholders or disinterested directors, the General Corporation Law of the
State of Delaware or otherwise, both as to action in such person's official
capacity and as to action in another capacity while holding such office. All
rights to indemnification or advancement under this Article shall be deemed to
be in the nature of contractual rights bargained for and enforceable by each
director and executive officer as defined in Section 1 of this Article who
serves in such capacity at any time while this Article and other relevant
provisions of the General Corporation Law of the State of Delaware and other
applicable laws, if any, are in effect. All right to indemnification under this
Article or advancement of expenses shall continue as to a person who has ceased
to be a director or executive officer, and shall inure to the benefit of the
heirs, executors and administrators of such a person. No repeal or modification
of this Article shall adversely affect any such rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought based in whole or
in part upon any such state of facts. The Corporation shall also indemnify any
person for attorneys' fees, costs, and expenses in connection with the
successful enforcement of such person's rights under this Article.
21
SECTION 8. Other Indemnities. The Board of Directors may, by general vote or by
vote pertaining to a specific officer, employee or agent, advisory council
member or class thereof, authorize indemnification of the Corporation's
employees and agents, in addition to those executive officers and to whatever
extent it may determine, which may be in the same manner and to the same extent
provided above.
SECTION 9. Insurance. Upon resolution passed by the Board of Directors, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee, advisory council member or agent of the
Corporation, or is or was serving at the request of the Corporation, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions of this
Article.
SECTION 10. Constituent Corporations. For the purposes of this Article,
reference to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporations (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors and officers so that any person who is or was a director or officer of
such a constituent corporation or is or was serving at the request of such
constituent corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
SECTION 11. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, executive officer,
advisory council member, and those employees and agents of the Corporation
granted indemnification pursuant to Section 3 hereof as to expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative, including a grand jury proceeding, and all appeals, and any
action by the Corporation, to the full extent permitted by any applicable
portion of this Article that shall not have been invalidated or by any other
applicable law.
SECTION 12. Other Enterprises. Fines. and Serving at Corporation's Request. For
purposes of this Article, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to "serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to any employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner such person reasonably believed to be in
the interest of the participants and beneficiaries of any employee benefit plan
shall be deemed to have acted in a manner not opposed to the best interests of
the Corporation" as referred to in this Article.
22
ITEM 16. EXHIBITS
The following documents have been previously filed as Exhibits
and are incorporated herein by reference except those exhibits indicated with an
asterisk which are filed herewith:
Exhibit No. Description
----------- -----------
4(a) Restated Certificate of Incorporation, incorporated
by reference to Exhibit No. 10(rr) of the Company's
Quarterly Report on Form 10-QSB for its quarter
ending June 30, 1996, filed August 14, 1996.
4(b) Bylaws of the Registrant incorporated by reference to
Exhibit No. 3(b) of the Company's Amendment No. 8 to
Registration Statement on Form S-1 [Reg. No.
33-47479] filed December 17, 1992
4(c) Form of Common Stock Certificate incorporated by
reference to Exhibit No. 4(b) of the Company's
Amendment No. 8 to Registration Statement on Form S-1
[Reg. No. 33-47479] filed December 17, 1992
5* Opinion of Foley, Hoag & Eliot regarding legality
of shares registered hereunder
23(a)* Consent of Arthur Andersen LLP, independent public
accountants
23(b)* Consent of Foley, Hoag & Eliot (included in Exhibit
5)
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement;
(i) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
23
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Beverly, Commonwealth of Massachusetts, on August 21,
1996.
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: /s/ Steven Georgiev
------------------------------
Steven Georgiev, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons, in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Steven Georgiev Chairman of the Board, Chief August 21, 1996
-------------------------------------- Executive Officer and Director
(Principal Executive Officer)
/s/ Dr. Michael H. Smotrich President, Chief Operating Officer, August 21, 1996
-------------------------------------- Director
Dr. Michael H. Smotrich
/s/ Joseph P. Caruso Vice President, Chief Financial August 21, 1996
-------------------------------------- Officer, Treasurer (Principal Financial
Joseph P. Caruso and Accounting Officer)
/s/ Joseph E. Levangie Director August 21, 1996
--------------------------------------
Joseph E. Levangie
</TABLE>
25
[LETTERHEAD OF FOLEY, HOAG & ELIOT LLP]
August 21, 1996
Palomar Medical Technologies, Inc.
66 Cherry Hill Drive
Beverly, Massachusetts 01915
Gentlemen:
We are familiar with the Registration Statement on Form S-3 (the "S-3
Registration Statement") to which this opinion is an exhibit, to be filed by
Palomar Medical Technologies, Inc., a Delaware corporation (the "Company"), with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended. The S-3 Registration Statement relates to the proposed public offering
by a securityholder of the Company of a total of 1,100,000 shares (the "Shares")
of the Company's Common Stock, $.01 par value per share ("Common Stock"),
consisting of (i) 600,000 shares issuable upon conversion of the Company's
Series F Convertible Preferred Stock, $.01 par value per share and (ii) 500,000
shares issuable upon exercise of a common stock purchase warrant issued by the
Company.
In arriving at the opinion expressed below, we have examined and relied on
the following documents:
(1) the Certificate of Incorporation and By-Laws of the
Company, each as amended as of the date hereof; and
(2) the records of meetings and consents of the Board of
Directors and stockholders of the Company provided to us by the
Company.
In addition, we have examined and relied on the originals or copies
certified or otherwise identified to our satisfaction of all such corporate
records of the Company and such other instruments and other certificates of
public officials, officers and representatives of the Company and such other
persons, and we have made such investigations of law, as we have deemed
appropriate as a basis for the opinion expressed below.
Based upon the foregoing, it is our opinion that the Company has corporate
power adequate for the issuance of the Shares issued and to be issued in the
manner set forth in the S-3
Palomar Medical Technologies, Inc.
August 21, 1996
Page 2
Registration Statement and offered pursuant to the S-3 Registration Statement.
The Company has taken all necessary corporate action required to authorize the
issuance and sale of the Shares, and when certificates for the Shares have been
duly executed and countersigned and delivered, such shares will be legally
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the S-3
Registration Statement.
Very truly yours,
FOLEY, HOAG & ELIOT llp
By /s/ David A. Brodwin
--------------------------
A Partner
EXHIBIT 23 (A)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made part of the registration
statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
August 15, 1996
