SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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:
|X| Preliminary Proxy Statement |_| Confidential, for Use of the
Commission only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PALOMAR MEDICAL TECHNOLOGIES, INC.
--------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
NOT APPLICABLE
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
|_| $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6
(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
* * * * *
June 11, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
(the "Special Meeting") of Palomar Medical Technologies, Inc. (the "Company") to
be held on July 19, 1996 at 10:30 a.m. at the Bank of Boston Auditorium, 100
Federal Street, Boston, Massachusetts 02110, and thereafter as it may be
adjourned from time to time.
At the Special Meeting, you will be asked to approve an amendment to
the Company's Certificate of Incorporation and to approve and adopt a stock
option plan and an employee stock purchase plan.
Details of the matters to be considered at the Special Meeting are
contained in the Proxy Statement, which we urge you to consider carefully.
Whether or not you plan to attend the Special Meeting, please complete,
date, sign and return your proxy card promptly in the enclosed envelope, which
requires no postage if mailed in the United States. If you attend the Special
Meeting, you may vote in person if you wish, even if you have previously
returned your proxy.
Sincerely,
Steven Georgiev
Chief Executive Officer
Chairman of the Board of Directors
PALOMAR MEDICAL TECHNOLOGIES, INC.
66 CHERRY HILL DRIVE
BEVERLY, MA 01915
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of PALOMAR MEDICAL TECHNOLOGIES, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
PALOMAR MEDICAL TECHNOLOGIES, INC. (the "Company"), a Delaware corporation, will
be held on July 19, 1996 at 10:30 A.M. at the BANK OF BOSTON AUDITORIUM, 100
FEDERAL STREET, BOSTON, MASSACHUSETTS 02110, and thereafter as it may be
adjourned from time to time.
At the Special Meeting, the Stockholders will be asked:
1. To approve an amendment to the Company's Certificate of
Incorporation to authorize an increase in the authorized Common Stock, $.01 par
value per share, of the Company ("Common Stock") from 40,000,000 to 80,000,000
shares;
2. To approve and adopt the Company's 1996 Incentive and Nonqualified
Stock Option Plan;
3. To approve and adopt the Company's 1996 Employee Stock Purchase
Plan; and
4. To transact such other business as may properly come before the
Special Meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on June 10,
1996, as the record date for the determination of Stockholders entitled to
notice of and to vote at the Special Meeting and any adjournment or adjournments
thereof.
We hope that all Stockholders will be able to attend the Special
Meeting in person. In order to assure that a quorum is present at the Special
Meeting, please date, sign and promptly return the enclosed Proxy whether or not
you expect to attend the Special Meeting. A postage prepaid enveloped, addressed
to American Stock Transfer & Trust Company, the Company's transfer agent and
registrar, has been enclosed for your convenience. If you attend the meeting,
you may revoke your Proxy and vote your shares in person.
-1-
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT PROXY CARDS BE RETURNED PROMPTLY.
PLEASE FILL IN, DATE AND SIGN THE PROXY CARD AND RETURN IT IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE PROXY
MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE PRESENT AT THE
SPECIAL MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
- --------------------------------------------------------------------------------
By Order of the Board of Directors
Dr. Michael H. Smotrich
President & Secretary
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PALOMAR MEDICAL TECHNOLOGIES, INC.
PROXY STATEMENT
The enclosed Proxy is solicited by the Board of Directors of PALOMAR
MEDICAL TECHNOLOGIES, INC. (the "Company") for use at the Special Meeting of
Stockholders (the "Special Meeting") to be held at the Bank of Boston
Auditorium, 100 Federal Street, Boston, Massachusetts 02110, at 10:30 a.m. on
July 19, 1996, and at any adjournment or adjournments thereof.
Management intends to mail this Proxy statement and the accompanying
form of Proxy to all Stockholders entitled to vote, on or about June 11, 1996.
The costs of soliciting Proxies will be borne by the Company.
Only Stockholders of record at the close of business on June 10, 1996,
will be entitled to vote at the Special Meeting or any adjournment thereof. As
of May 15, 1996, 26,191,161 shares of common stock, $.01 par value ("Common
Stock") of the Company were issued and outstanding. Each share entitles the
holder to one vote with respect to all matters submitted to Stockholders at the
Special Meeting. There is no other class of voting securities of the Company
entitled to vote at the Special Meeting.
To establish a quorum to transact business at the Special Meeting,
there must be present at the Meeting, in person or by proxy, a majority of the
shares of Common Stock issued, outstanding, and entitled to vote at the Special
Meeting. Shares represented by executed Proxies received by the Company will be
counted for purposes of establishing a quorum, regardless of how or whether such
shares are voted on any specific proposal.
The affirmative vote of a majority of the outstanding Common Stock
entitled to vote thereon is necessary to approve the amendment to the Company's
Certificate of Incorporation. The affirmative vote of a majority of the Common
Stock, present in person or represented by proxy at the Special Meeting and
entitled to vote thereon, is necessary to approve the Company's 1996 Stock
Option Plan and 1996 Employee Stock Purchase Plan.
Execution of a Proxy will not in any way affect a Stockholder's right
to attend the Special Meeting and vote in person. The Proxy may be revoked at
any time before it is exercised, by written notice to the Secretary prior to the
Special Meeting, or by giving to the Secretary a duly executed Proxy bearing a
later date than the Proxy being revoked at any time before such Proxy is voted,
or by appearing at the Special Meeting and voting in person. The shares
represented by all properly executed Proxies received in time for the Special
Meeting will be voted as specified therein. Proxies which are executed, but
which do not contain any specific instructions will be voted in favor of all
items set forth herein.
In accordance with Delaware law, abstentions and "broker non-votes"
(i.e. Proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owner or other persons entitled to
vote shares as to a matter with respect to which the brokers or nominees do not
have discretion to vote) will be treated as present for purposes of determining
the presence of a quorum. For purposes of determining approval of a matter
presented at the Special Meeting, abstentions will be deemed present and
entitled to vote and will, therefore, have the same legal effect as a vote
against a matter presented at the Special Meeting. Broker non-votes will be
deemed not entitled to vote on the
-1-
subject matter as to which the non-vote is indicated and will therefore, have no
legal effect on the vote on that particular matter.
The Board of Directors knows of no other matter to be presented at the
Special Meeting. If any other matter should be presented at the Special Meeting
upon which a vote may be taken, such shares represented by all Proxies received
by the Board of Directors will be voted with respect thereto in accordance with
the judgment of the persons named as attorneys in the Proxies.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of the date of May 15, 1996, the
number of shares of the Company's Common Stock owned by each director, by each
executive officer named in the Summary Compensation Table appearing on page 4,
by all directors and officers as a group, and by any persons (including any
"group" as used in Section 13(d)(3) of the Securities Exchange Act of 1934),
known by the Company to own beneficially 5% or more of the outstanding Common
Stock. Except as otherwise indicated, the Stockholders listed in the table below
have sole voting and investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
Number of Shares Percentage of
Name and Address of Beneficial Owner Beneficially Owned(1) Class(1)(2)(3)(4)
------------------------------------ --------------------- -----------------
<S> <C> <C>
Michael H. Smotrich(5) 1,223,590 4.67%
66 Cherry Hill Drive
Beverly, MA 01915
Steven Georgiev(6) 931,654 3.56%
Joseph P. Caruso(7) 666,826 2.55%
Joseph E. Levangie(8) 632,485 2.42%
Sanford R. Lane 170,158 .65%
Maurice E. Needham, Jr.(9) 150,000 .57%
All Directors and Executive Officers
(six persons)(10) 3,774,713 14.41%
</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 number and percentage
of shares owned by such individual or group, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person shown in the table.
(2) Does not include 149,500 shares reserved for issuance pursuant to the
Company's 1991 Stock Option Plan, 337,500 shares reserved for issuance
pursuant to the Company's 1993 Stock Option Plan, or 868,500 shares
reserved for issuance pursuant to the Company's 1995 Stock Option Plan,
except as indicated in notes 5 and 7.
(3) Does not give effect to an aggregate of up to 4,836,061 shares issuable
upon exercise of (i) a warrant issued to H.J. Meyers & Co., Inc. (the
"Representative") in connection with the
-2-
Company's initial public offering, including the warrants included in the
units issuable upon exercise of the Representative's warrant; (ii)
warrants issued or to be issued to certain lenders; and (iii) warrants
issued to certain investors, consultants, principal Stockholders, and
employees, except as indicated in notes 5, 6, 7, 8 and 9.
(4) Does not give effect to an aggregate of up to 1,189,753 shares issuable
upon (i) conversion of certain convertible debentures and (ii) exercise
of certain warrants issued to Baxter Healthcare Corporation.
(5) Includes 70,000 shares of Common Stock issuable upon exercise of
five-year options expiring April 6, 1999, at an exercise price of $2.375
per share; 100,000 shares of Common Stock issuable upon exercise of
five-year options expiring October 6, 1999, at an exercise price of
$2.375 per share; 150,000 shares of Common Stock issuable upon exercise
of five-year options expiring July 4, 2000, at an exercise price of
$2.375 per share; 100,000 shares issuable upon exercise of five-year
warrants granted in August 1995, at an exercise price of $2.125 per
share; 250,000 shares issuable upon exercise of five-year warrants
granted in February 1996, at an exercise price of $6.75 per share; and
24,000 shares held by family members. Each of the foregoing options and
warrants was issued in consideration of services rendered to the Company.
(6) Includes 67,000 shares issuable upon exercise of five-year warrants
granted in March 1992, at an exercise price of $.60 per share; 350,000
shares issuable upon exercise of five-year warrants granted in July 1995,
at an exercise price of $2.00 per share; 100,000 shares issuable upon
exercise of five-year warrants granted in August 1995, at an exercise
price of $2.125 per share; and 300,000 shares issuable upon exercise of
five-year warrants granted in February 1996, at an exercise price of
$6.75 per share. Each of the foregoing warrants was issued in
consideration of services rendered to the Company.
(7) Includes 30,000 shares of Common Stock issuable upon the exercise for
five-year options expiring June 14, 1998, at an exercise price of $3.50
per share; 70,000 shares of Common Stock issuable upon exercise of
five-year options expiring April 6, 1999, at an exercise price of $2.375
per share; 100,000 shares of Common Stock issuable upon exercise of
five-year options expiring October 6, 1999, at an exercise price of
$2.375 per share; 150,000 shares of Common Stock issuable upon exercise
of five-year options expiring July 4, 2000, at an exercise price of $2.00
per share; 100,000 shares issuable upon exercise of five-year warrants
granted in August 1995, at an exercise price of $2.125 per share; and
150,000 shares issuable upon exercise of five-year warrants granted in
February 1996, at an exercise price of $6.75 per share. Each of the
foregoing options and warrants was issued in consideration of services
rendered to the Company.
(8) Includes 60,000 shares issuable upon exercise of five-year warrants
granted in March 1992, at an exercise price of $.60 per share; 150,000
shares issuable upon exercise of five-year warrants granted in July 1995,
at an exercise price of $2.00 per share; 100,000 shares issuable upon
exercise of five-year warrants granted in August 1995, at an exercise
price of $2.125 per share; and 150,000 shares issuable upon exercise of
five-year warrants granted in February 1996, at an exercise price of
$6.75 per share. Each of the foregoing warrants was issued in
consideration of services rendered to the Company.
(9) Includes 50,000 shares issuable upon exercise of five-year warrants
granted in February 1996, at an exercise price of $6.75 per share; and
100,000 shares of Common Stock issuable upon exercise of five-year
options expiring October 6, 1999, at an exercise price of $2.375 per
share. Each of the foregoing options and warrants was issued in
consideration of services rendered to the Company.
-3-
(10) For purposes of this calculation, total issued and outstanding shares
include an aggregate of 1,877,000 shares issuable upon exercise of the
warrants described in footnotes 5, 6, 7, 8 and 9 above and an aggregate
of 670,000 shares issuable upon exercise of options described in
footnotes 5 and 7 above.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the
Company to each executive officer of the Company who earned $100,000 or more for
the year ended December 31, 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards
----------------------
(a) (b) (c) (d) (e) (f) (g)
Other Restricted Securities
Annual Stock Underlying
Name and Compensa- Award(s)(2) Options/
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Position Year Salary($) Bonus($) tion(1)($) ($) SARs(#)
<S> <C> <C> <C> <C> <C> <C>
Steven Georgiev 12/31/95 $161,800 $ 50,000 $ -- $ -- 450,000
Chief Executive Officer 12/31/94 $ -- $ -- $ 80,000 $237,500 --
3/31/94 $ -- $ -- $ 70,500 $ -- --
Michael H. Smotrich 12/31/95 $149,400 $ 50,000 $ -- $ -- 250,000
President, Chief Operating 12/31/94 $ 92,000 $ 20,000 $ -- $415,625 170,000
Officer, Secretary 3/31/94 $110,000 $ -- $ -- $ -- --
Joseph P. Caruso 12/31/95 $109,600 $ 75,000 $ -- $ -- 250,000
Vice President and 12/31/94 $ 70,400 $ 20,000 $ -- $154,374 170,000
Chief Financial Officer 3/31/94 $ 96,300 $ -- $ -- $ -- 30,000
Maurice E. Needham, Jr. 12/31/95 $155,000 $ -- $ -- $ -- --
Chairman of the Board of 12/31/94 $119,200 $ -- $ -- $ -- 100,000
Palomar Electronics Corp. and 3/31/94 $ 17,900 $ -- $ 12,000 $ -- --
CEO of Dynaco Acquisition
Corporation
Sanford R. Lane 12/31/95 $101,250 $ 25,300 $ -- $ -- --
President and CEO of Spectrum 12/31/94 $ -- $ -- $ -- $ -- --
Acquisition Corporation 3/31/94 $ -- $ -- $ -- $ -- --
</TABLE>
(1) With respect to Mr. Georgiev, includes $____ and $____ paid by the
Company to Mr. Georgiev during the years ended December 31, 1994 and
March 31, 1994, respectively, pursuant to consulting arrangements
between the Company and Mr. Georgiev. With respect to Mr. Needham,
includes $____ paid by the Company to Mr. Needham pursuant to
_____________.
(2) In October 1994, the Company issued to certain officers, directors and
consultants shares of Common Stock at par value. Upon issuance of all
these shares, the Company recorded compensation expense, representing
the fair market value of the stock on the date of grant.
-4-
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the option grants by the Company to each
executive officer of the Company who earned $100,000 or more for the year ended
December 31, 1995:
OPTION GRANTS
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options
Underlying Granted
Name and Options to Employees Exercise Expiration
Principal Position Granted (#) in Fiscal Year ($/Sh) Date
(a) (b) (c) (d) (e)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Steven Georgiev 350,000(1) 28.1% $2.00 7/4/00
Chief Executive Officer 100,000(1) 8.0% $2.125 8/18/00
Michael H. Smotrich 150,000(2) 12.1% $2.00 7/4/00
President, Chief Operating 100,000(2) 8.0% $2.125 8/18/00
Officer, Secretary
Joseph P. Caruso 150,000(3) 12.1% $2.00 7/4/00
Vice President and Chief 100,000(3) 8.0% $2.125 8/18/00
Financial Officer
Maurice E. Needham, Jr. -- -- -- --
Chairman of the Board of
Palomar Electronics Corp.
and CEO of Corporation
Sanford R. Lane -- -- -- --
President and CEO
Spectrum Medical
Technologies, Inc.
Financial Officer
</TABLE>
(1) Mr. Georgiev was granted 350,000 shares issuable upon exercise of
five-year warrants granted in July 1995, at an exercise price of $2.00
per share; and 100,000 shares issuable upon exercise of five-year
warrants granted in August 1995, at an exercise price of $2.125 per
share.
(2) On July 5, 1995, the Company granted to Dr. Smotrich incentive stock
options expiring July 5, 2000, to purchase 150,000 shares of Common
Stock, at an exercise price of $2.00 per share, pursuant to its 1995
Stock Option Plan. Options to purchase 75,000 shares vested immediately
and options to purchase 75,000 shares vest on July 5, 1996, if Dr.
Smotrich is still employed by the Company on that date. In addition,
Dr. Smotrich was granted 100,000 shares issuable upon exercise of
five-year warrants granted in August 1995, at an exercise price of
$2.125 per share.
(3) On July 5, 1995, the Company granted to Mr. Caruso incentive stock
options expiring July 5, 2000, to purchase 150,000 shares of Common
Stock, at an exercise price of $2.00 per share, pursuant to its 1995
Stock Option Plan. Options to purchase 75,000 shares vested immediately
and options to purchase 75,000 shares vest on July 5, 1996, if Mr.
Caruso is still employed by the Company on that date. In addition, Mr.
Caruso was granted 100,000 shares issuable upon exercise of five-year
warrants granted in August 1995, at an exercise price of $2.125 per
share.
-5-
AGGREGATED OPTION/SAR EXERCISES IN LAST YEAR AND FISCAL YEAR-END; OPTION/SAR
VALUES
The following table sets forth information on an aggregated basis
regarding the exercise of stock options during the last completed fiscal year by
each of the executive officers named in the Summary Compensation Table and the
value of unexercised options at December 31, 1995:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options Options
Shares at FY-End (#) at FY-End ($)
Name and Acquired Value Exercisable/ Exercisable/
Principal Position on Exercise(#) Realized($) Unexercisable Unexercisable
(a) (b) (c) (d) (e)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Steven Georgiev -- -- 517,000/-0- $2,900,370/$-0-
Chief Executive Officer
Michael H. Smotrich -- -- 345,000/75,000 $1,935,450/$420,750
President, Chief Operating
Officer, Secretary
Joseph P. Caruso 75,000 $90,378 275,000/75,000 $1,542,750/$420,750
Vice President and Chief
Financial Officer
Maurice E. Needham, Jr. -- --
Chairman of the Board of
Palomar Electronics Corp.
and CEO of Corporation
Sanford R. Lane -- --
President and CEO
Spectrum Medical
Technologies, Inc.
Financial Officer
</TABLE>
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
The Company does not maintain any long-term compensation plans for its
officers, directors or employees.
COMPENSATION OF DIRECTORS
The Company does not provide any compensation to its directors for
their service as directors. For a discussion of the compensation arrangements
between the Company and Mr. Georgiev, Mr. Levangie and Dr. Smotrich, refer to
the discussions set forth under the headings below entitled "Employment
Agreements" and "Consulting Agreements."
-6-
EMPLOYMENT AGREEMENTS
On April 1, 1994, the Company entered into two-year key employee
agreements with Dr. Smotrich and Messrs. Aldag, Maciejewski and Caruso. Pursuant
to these agreements, Dr. Smotrich serves as Executive Vice President, Mr. Aldag
served as Vice President of Advanced Technology, Mr. Maciejewski served as Vice
President of Marketing and Business Development and Mr. Caruso served as Vice
President of Finance and Chief Financial Officer, at base salaries of $121,000,
$100,000, __________ and $92,000 per annum, respectively. Effective January 1,
1995, the Company entered into new two-year key employment agreements with Mr.
Georgiev, Dr. Smotrich and Messrs. Aldag and Caruso. Pursuant to these
agreements, Mr. Georgiev serves as Chief Executive Officer, Dr. Smotrich serves
as President and Chief Operating Officer, Mr. Aldag serves as Vice President of
Advanced Technology and Mr. Caruso serves as Vice President of Finance and Chief
Financial Officer, at base salaries of $165,000, $150,000, $125,000 and $110,000
per annum, respectively. Effective January 1, 1996, the Company amended its
employment agreements with Mr. Georgiev, Dr. Smotrich and Mr. Caruso to increase
their base salaries to $275,000, $215,000 and $180,000 per annum, respectively.
Effective February 9, 1994, the Company entered into a two-year key employment
agreement with Mr. Needham. Pursuant to this agreement, Mr. Needham serves as
Chief Executive Officer of Dynaco Corporation, at a base salary of $155,000 per
annum. Effective April 5, 1995, the Company entered into a five-year key
employment agreement with Mr. Lane. Pursuant to this agreement, Mr. Lane serves
as President and CEO of Spectrum Acquisition Corporation at a base salary of
$135,000 per annum. The agreements provide for bonuses as determined by the
Board of Directors or Executive Committee, and employee benefits, including
vacation, sick pay and insurance, in accordance with the Company's policies.
Upon termination of employment without cause, the agreements provide for lump
sum severance payments equal to six to twelve months of base salary, or, if the
termination is the result of a change of control of the Company, the lesser of
six to twelve months of base salary or the remaining payments due under the
Agreement.
CONSULTING AGREEMENTS
Effective January 1, 1994, the company entered into Consultant
Agreements with Messrs. Levangie and Georgiev, pursuant to which they provided
certain financial management and consulting services for monthly fees of $4,000
and $8,500 respectively, until December 31, 1994. Effective January 1995, Mr.
Georgiev became a full-time employee of the Company and entered into the
two-year key employee agreement discussed above. Effective June 1, 1995, the
Company entered into a new Consultant Agreement with Mr. Levangie, pursuant to
which Mr. Levangie provides certain financial management and consulting services
for a monthly fee of $7,000.
INCREASE IN COMPANY'S AUTHORIZED COMMON STOCK
SUMMARY OF AMENDMENTS TO ARTICLE 4
The Board of Directors unanimously proposes the adoption of an
amendment to Article 4 of the Company's Certificate of Incorporation which would
increase the authorized Common Stock to 80,000,000 shares from 40,000,000
shares.
REASONS FOR PROPOSED AMENDMENT TO ARTICLE 4
Article 4 of the Company's Certificate of Incorporation (as amended)
currently authorizes the Company to issue up to 40,000,000 shares of Common
Stock, and 5,000,000 shares of preferred stock, $.01 par value per share
("Preferred Stock").
-7-
The Board of Directors believes that adoption of the amendment is
advisable because it will provide the Company with greater flexibility in
connection with:
o STOCK DIVIDENDS OR STOCK SPLITS
The Company's stock price has experienced a dramatic rise over
the past year and the Board of Directors anticipates that it
may be in the best interest of the Company's Stockholders to
declare a stock dividend or stock split if the stock price
continues to increase.
o ACQUISITIONS
The Company has been successful in completing a number of
strategically important mergers and acquisitions in order to
expand the business rapidly. The Board of Directors feels that
a critical part of its plans for expansion could include
additional mergers and acquisitions.
o EMPLOYEE INCENTIVE PLANS
The Board of Directors has added a number of key employees
throughout the organization in operational roles critical to
the expansion of the business. The Board of Directors feels
that a proper incentive for these key employees and all
employees includes equity participation in the Company.
o FINANCING
The Company has expanded its business within the medical
device and electronics business segments. As the Company
introduces a number of new products in both areas, the Board
of Directors feels that a combination of both equity and debt
financing would be ideal in order to maximize product
introduction, expand research and development activities and
fund current operations.
Although the Company has no present plans, agreements or understandings
regarding the issuance of the proposed additional shares, having such additional
authorized shares available will give the Company the ability to issue shares
without the expense and delay of holding a special meeting of Stockholders at
the time that an issuance of Common Stock is contemplated. Such a delay might
deprive the Company of the flexibility the Board views as important in
facilitating the effective use of the Company's shares. Except as otherwise
required by applicable law or stock exchange rules, authorized but unused shares
of Common Stock may be issued at such time, for such purposes, and for such
consideration as the Board of Directors may determine to be appropriate, without
further authorization by Stockholders.
As of May 15, 1996 the company had 26,191,161 shares of Common Stock
outstanding. The Company has reserved 1,464,500 shares of Common Stock for
issuance to key employees, officers, directors, consultants and advisors
pursuant to the Company's Stock Option Plans. The Company has reserved 254,115
remaining shares of Common Stock for issuance to employees, officers and
directors pursuant to the Company's 401(k) Plan. The Company has also reserved
7,067,321 shares of its Common Stock for issuance upon exercise of three, four,
five and seven year warrants issued to certain lenders, investors, consultants,
directors and officers. The Company has reserved 2,779,074 shares of
-8-
its Common Stock for issuance upon conversion of 6,000 shares of Series D
Preferred Stock and 10,000 shares of Series E Preferred Stock. Therefore, the
total number of shares available is 2,243,829.
Because of the limited number of shares of Common Stock available to be
issued, the Board of Directors has declared it advisable that the Certificate of
Incorporation of the Company, as amended, be further amended, subject to
approval by the Stockholders, to increase the authorized Common Stock to
80,000,000 shares from 40,000,000 shares. The Board recommends that the
Stockholders approve the amendment of Article 4 of the Company's Certificate of
Incorporation.
The additional shares of Common Stock would become part of the existing
class of Common Stock, and the additional shares, when issued, would have the
same rights and privileges as the shares of Common Stock now issued. There are
no preemptive rights or cumulative voting rights relating to the Common Stock.
If the proposed amendment is approved by the Stockholders, it will become
effective upon filing and recording a Certificate of Amendment as required by
the General Corporation Law of Delaware. The complete text of Article 4 as
proposed to be amended is attached to this Proxy Statement as Exhibit A.
Since the issuance of additional shares of Common Stock, other than on
a pro rata basis to all current Stockholders, would dilute the ownership
interest of a person seeking to obtain control of the Company, such issuance
could be used to discourage a change in control of the Company by making it more
difficult or costly. The Company is not aware of anyone seeking to obtain
control of the Company and has no present intention to use the additional
authorized shares to deter a change in control.
The shares of Common Stock represented by Proxies will be voted FOR the
proposal to amend the Company's Certificate of Incorporation, as set forth
above, in the absence of contrary instructions.
STOCK OPTION PLAN
If the proposed amendment to the Company's Certificate of Incorporation
to increase the Company's authorized stock is not approved by the Stockholders,
then the Company's 1996 Incentive and Nonqualified Stock Option Plan (the "Stock
Option Plan") will be withdrawn from consideration, as the Company's authorized
stock will be insufficient for issuance under the Stock Option Plan.
Description of the Stock Option Plan
On May 15, 1996, the Company's Board of Directors adopted, subject to
approval by the Stockholders of the Company, the Stock Option Plan. A total of
1,000,000 shares of Common Stock are reserved for issuance under the Stock
Option Plan. The Stock Option Plan authorizes (i) the grant of options to
purchase Common Stock intended to qualify as incentive stock options ("Incentive
Options"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and (ii) the grant of options that do not so qualify
("Nonqualified Options"). The Board of Directors unanimously recommends that the
Stockholders approve the Stock Option Plan. A copy of the Stock Option Plan is
attached to this Proxy Statement as Exhibit B.
The Stock Option Plan shall terminate on the tenth anniversary of its
adoption unless earlier terminated by the Board of Directors.
The Stock Option Plan is administered by a committee of no less than
two members of the Board of Directors (the "Committee"). All members of the
Committee must be "disinterested persons" as that term is defined under rules
promulgated by the SEC. The Committee will select the individuals to whom
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awards will be granted and determine the option exercise price and other terms
of each award, subject to the provisions of the Stock Option Plan.
Incentive Options may be granted under the Stock Option Plan to
employees and officers of the Company, including members of the Board of
Directors who are also employees. Nonqualified Options may be granted under the
Stock Option Plan to employees, officers, individuals providing services to the
Company and members of the Board of Directors, whether or not they are employees
of the Company.
No options may extend for more than ten years from the date of grant
(five years in the case of employees or officers holding 10% or more of the
total combined voting power of all classes of stock of the Company or any
subsidiary or parent (a "greater-than-ten-percent-stockholder")). The exercise
price for Incentive Options may not be less than the fair market value of the
Common Stock on the date of grant or, in the case of a
greater-than-ten-percent-stockholder, no less than 110% of the fair market
value. The aggregate fair market value (determined at the time of grant) of
shares issuable pursuant to Incentive Options which first become exercisable by
an employee or officer in any calendar year may not exceed $100,000.
Options are non-transferable except by will or by the laws of descent
or distribution. Options generally may not be exercised (i) ninety days after
the optionee ceases to be employed by the Company, and (ii) one year following
an optionee's retirement from the Company in good standing by reason of
disability or death.
Payment of the exercise price for shares subject to options may be made
with cash, shares of Common Stock of the Company owned by the optionee for at
least six months, or by such other means as is authorized by the Board of
Directors. Full payment for shares exercised must be made at the time of
exercise.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The grant of an Incentive Option or a Nonqualified Option would not
result in income for the grantee or in a deduction for the Company.
The exercise of a Nonqualified Option would result in ordinary income
for the grantee and a deduction for the Company measured by the difference
between the Option price and the fair market value of the shares received at the
time of exercise. Income tax withholding would be required.
The exercise of an Incentive Option would not result in income for the
grantee if the grantee (i) does not dispose of the shares within two years after
the date of grant or one year after the transfer of shares upon exercise and
(ii) is an employee of the Company or a subsidiary of the Company from the date
of grant until three months before the exercise date. If these requirements are
met, the basis of the shares upon later disposition would be the option price.
Any gain will be taxed to the employee as long-term capital gain and the Company
would not be entitled to a deduction. The excess of the market value on the
exercise date over the option price is an item of tax preference, potentially
subject to the alternative minimum tax.
If the grantee disposes of the shares prior to the expiration of either
of the holding periods, the grantee would recognize ordinary income and the
Company would be entitled to a deduction equal to the lesser of the fair market
value of the shares on the exercise date minus the option price or the amount
realized on disposition minus the option price. Any gain in excess of the
ordinary income portion would be taxable as long-term or short-term capital
gain.
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The shares of Common Stock represented by Proxies will be voted FOR
approval of the Stock Purchase Plan in the absence of contrary instructions.
NEW PLAN BENEFITS
The Company is unable to determine the dollar value and number of
options or other benefits or amounts which will be received by or allocated to
any Directors, executive officers or employees as a result of the adoption of
the Stock Option Plan or the Stock Purchase Plan described below. Adoption of
the Stock Option Plan, if it had been effective during fiscal 1995, would not
have affected the dollar value or number of options or other benefits or amounts
received by or allocated to such persons during fiscal 1995.
STOCK PURCHASE PLAN
If the proposed amendment to the Company's Certificate of Incorporation
to increase the Company's authorized stock is not approved by the Stockholders,
then the Company's 1996 Employee Stock Purchase Plan (the "Stock Purchase Plan")
will be withdrawn from consideration, as the Company's authorized stock will be
insufficient for issuance under the Stock Purchase Plan.
DESCRIPTION OF THE STOCK PURCHASE PLAN
The Board of Directors has adopted the Stock Purchase Plan and
unanimously recommended its approval by Stockholders. The Stock Purchase Plan
authorizes the issuance of up to an aggregate of 1,000,000 shares of Common
Stock to participating employees. A copy of the Stock Purchase Plan is attached
to this Proxy Statement as Exhibit C.
Under the terms of the Stock Purchase Plan, all employees of the
Company (other than seasonal employees) who, as of October 1, 1996, have
completed six full calendar months of employment with the Company and whose
customary employment is more than 20 hours per week are eligible to participate
in the Stock Purchase Plan. Employees who own five percent or more of the
outstanding Common Stock of the Company and Directors who are not employees are
not eligible to participate. The Stock Purchase Plan is administered by the
Compensation Committee.
The right to purchase Common Stock under the Stock Purchase Plan will
be made available through a series of three-month offerings (each a "Purchase
Period"). On the first day of a Purchase Period, the Company will grant to each
eligible employee who has elected in writing to participate in the Stock
Purchase Plan an option to purchase shares of Common Stock. The employee will be
required to authorize an amount (between one and fifteen percent of such
employee's base compensation) to be deducted by the Company from such employee's
pay during the Purchase Period. On the last day of the Purchase Period, the
employee will be deemed to have exercised the option, at the option exercise
price, to the extent of accumulated payroll deductions. An employee shall
automatically continue to participate during subsequent Purchase Periods until
the employee withdraws or ceases to be an eligible employee. Under the terms of
the Stock Purchase Plan, the option exercise price is an amount equal to 85% of
the fair market value per share of Common Stock on either the first or last day
of the Purchase Period, whichever fair market value is lower.
No employee may be granted an option that would permit the employee's
rights to purchase Common Stock to accrue at a rate in excess of $6,250 in fair
market value of the Common Stock, determined as of the date the option is
granted, in any Purchase Period.
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The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote at the meeting is needed to approve the Stock Purchase
Plan. The shares of Common Stock represented by Proxies will be voted FOR
approval of the Stock Purchase Plan in the absence of contrary instructions.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Company believes that the Stock Purchase Plan is an "employee stock
purchase plan" as defined in Section 423 of the Internal Revenue code of 1986,
as amended, (the "Code"). Under the applicable provisions of the Code, an
employee will incur no federal income tax upon either the grant of the right to
purchase shares or the actual purchase of shares under the Stock Purchase Plan
if he or she is an employee of the Company (or a parent or subsidiary of the
Company) at the time the right to purchase the shares is granted and continues
to be an employee to a date at least three months before the date on which the
shares are acquired by the employee.
If an employee acquires shares of Common Stock pursuant to the Stock
Purchase Plan and does not dispose of them within two years after the
commencement of the Purchase Period pursuant to which the shares were acquired,
nor within one year after the date on which the shares were acquired, any gain
realized upon subsequent disposition will be taxable as a long-term capital
gain, except that the portion of such gain equal to the lesser of (a) the excess
of the fair market value of the shares on the date of disposition over the
amount paid to the Company upon purchase of the shares, or (b) the excess of the
fair market value of the shares on the first day of the Purchase Period over the
amount paid upon purchase of the shares, is taxable as ordinary income. There is
no corresponding deduction for the Company, however. If the employee disposes of
the shares at a price less than the price at which the employee acquired the
shares, the employee realizes no ordinary income and has a long-term capital
loss measured by the difference between the purchase price and the selling
price.
If the employee disposes of shares acquired pursuant to the Stock
Purchase Plan within two years after the first day of the Purchase Period
pursuant to which the shares were acquired or within one year after the date on
which the shares were acquired, the difference between the purchase price and
the fair market value of the shares at the time of purchase will be taxable to
the employee as ordinary income in the year of disposition. In this event, the
Company may deduct from its gross income an amount equal to the amount treated
as ordinary income to each such employee. Any excess of the selling price over
the fair market value at the time the employee purchased the shares will be
taxable as long-term or short-term capital gain, depending upon the period for
which the shares were held. If any shares are disposed of within either the
two-year or one-year period at a price less than the fair market value at the
time of purchase, the same amount of ordinary income (i.e., the difference
between the purchase price and the fair market value of the shares at the time
of purchase) is recognized, and a capital loss is recognized equal to the
difference between the fair market value of the shares at the time of purchase
and the selling price.
If a participating employee should die while owning shares acquired
under the Stock Purchase Plan, ordinary income may be reportable on the
employee's final income tax return.
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DEADLINE FOR SUBMISSION OF
STOCKHOLDER PROPOSALS AND NOMINATIONS
The Company currently anticipates that its 1996 Annual Meeting of
Stockholders will be held in September 1996. Stockholders who wish to present
proposals appropriate for consideration at the Company's 1996 Annual Special
Meeting of Stockholders must submit the proposals in proper form to the Company
at its address set forth on the first page of this proxy statement not later
than July 1, 1996 in order for the proposals to be considered for inclusion in
the Company's Proxy statement and form of Proxy relating to such Annual Special
Meeting.
OTHER INFORMATION
Proxies for the Special Meeting will be solicited by mail, telephone
and through brokerage institutions and all expenses involved, including printing
and postage, will be paid by the Company.
The Board of Directors is aware of no other matters, except for those
incidental to the conduct of the Special Meeting, that are to be presented to
Stockholders for formal action at the Special Meeting. If, however, any other
matters properly come before the Special Meeting or any adjournments thereof, it
is the intention of the persons named in the Proxy to vote the Proxy in
accordance with their judgment.
By Order of the Board of Directors
DR. MICHAEL H. SMOTRICH
President & Secretary
June 11, 1996
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EXHIBIT A
PROPOSED AMENDMENT TO ARTICLE 4 OF THE CERTIFICATE OF
INCORPORATION OF PALOMAR MEDICAL TECHNOLOGIES, INC.
The total number of shares which the corporation shall have the
authority to issue is eighty five million (85,000,000) shares of which eighty
million (80,000,000) shares shall be Common Stock with a par value of One Cent
($.01) per share and five million (5,000,000) shares shall be Preferred Stock
with a par value of One Cent ($.01) per share.
Additional designations and powers, the rights and preferences and the
qualifications, limitations or restrictions with respect to each class of stock
of the corporation shall be as determined by the Board of Directors from time to
time.
EXHIBIT B
1996 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
PALOMAR MEDICAL TECHNOLOGIES, INC.
PALOMAR MEDICAL TECHNOLOGIES, INC.
1996 STOCK OPTION PLAN
TABLE OF CONTENTS
Page
ARTICLE I. Purpose of the Plan 1
ARTICLE II. Definitions 1
ARTICLE III. Administration of the Plan 2
ARTICLE IV. Eligibility 4
ARTICLE V. Stock Option Awards 4
ARTICLE VI. Exercise of Option 6
ARTICLE VII. Reporting Person Limitations 8
ARTICLE VIII. Terms and Conditions of Options 8
ARTICLE IX. Benefit Plans 9
ARTICLE X. Amendment, Suspension or Termination
of the Plan 9
ARTICLE XI. Changes in Capital Structure 10
ARTICLE XII. Effective Date and Term of the Plan 10
ARTICLE XIII. Conversion of ISOs into Non-Qualified
Options; Termination of ISOs 11
ARTICLE XIV. Application of Funds 11
ARTICLE VX. Governmental Regulation 11
ARTICLE XVI. Withholding of Additional Income Taxes 12
ARTICLE XVII. Notice to Company of Disqualifying
Disposition 12
ARTICLE XVIII. Governing Law; Construction 12
PALOMAR MEDICAL TECHNOLOGIES, INC.
1996 STOCK OPTION PLAN
ARTICLE I
Purpose of the Plan
The purpose of this Plan is to encourage and enable employees,
consultants, directors and others who are in a position to make significant
contributions to the success of PALOMAR MEDICAL TECHNOLOGIES, INC. and of its
affiliated corporations upon whose judgment, initiative, and efforts the
Corporation depends for the successful conduct of its business, to acquire a
closer identification of their interests with those of the Corporation by
providing them with opportunities to purchase stock in the Corporation pursuant
to options granted hereunder, thereby stimulating their efforts on behalf of the
Corporation and strengthening their desire to remain involved with the
Corporation.
ARTICLE II
Definitions
2.1 "Affiliated Corporation" means any stock corporation of which a majority of
the voting common or capital stock is owned directly or indirectly by the
Corporation.
2.2 "Award" means an Option granted under Article V.
2.3 "Board" means the Board of Directors of the Corporation.
2.4 "Code" means the internal Revenue Code of 1986, as amended from time to
time.
2.5 "Committee" means a committee of not less than two members of the Board
appointed by the Board to administer the Plan, each of whom is a "disinterested
person" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934, as amended, or any successor provision. In the event that two
"disinterested persons" are not available to administer the Plan, the Board may
appoint to the Committee two members of the Board, either or both of whom are
not "disinterested persons," in which event this Plan shall not qualify under
Rule 16b-3, but this Plan shall be valid and operative in all other respects.
2.6 "Corporation" means PALOMAR MEDICAL TECHNOLOGIES, INC., a Delaware
corporation, or its successor.
1
2.7 "Employee" means any person who is a regular full-time or part-time employee
of the Corporation or an Affiliated Corporation on or after May 17, 1996.
2.8 "Option" means an Incentive Stock Option or Non- Qualified Option granted by
the Committee under Article V of this Plan in the form of a right to purchase
Stock evidenced by an instrument containing such provisions as the Committee may
establish.
2.9 "Participant" means a person selected by the Committee to receive an award
under the Plan.
2.10 "Plan" means this 1995 Stock Option Plan.
2.11 "Incentive Stock Option" ("ISO") means an option which qualifies as an
incentive stock option as defined in Section 422 of the Code, as amended.
2.12 "Non-Qualified Option" means any option not intended to qualify as an
Incentive Stock Option.
2.13 "Stock" means the Common Stock, $.01 par value, of the Corporation or any
successor, including any adjustments in the event of changes in capital
structure of the type described in Article XI.
2.14 "Reporting Person" means a person subject to Section 16 of the Securities
Exchange Act of 1934, as amended, or any successor provision.
2.15 "Restricted Period" means the period of time selected by the Committee
during which an Award may be forfeited by the person.
ARTICLE III
Administration of the Plan
3.1 Administration by the Committee. This Plan shall be administered by the
Committee as defined herein. From time to time the Board may increase the size
of the Committee and appoint additional members thereto, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan. No member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any options
granted under it.
2
3.2 Powers. The Committee shall have full and final authority to operate,
manage, and administer the Plan on behalf of the Corporation. This authority
includes, but is not limited to:
(a) The power to grant Awards conditionally or unconditionally,
(b) The power to prescribe the form or forms of the instruments evidencing
Awards granted under this Plan,
(c) The power to interpret the Plan,
(d) The power to provide regulations for the operation of the incentive features
of the Plan, and otherwise to prescribe and rescind regulations for
interpretation, management and administration of the Plan,
(e) The power to delegate responsibility for Plan operation, management and
administration on such terms, consistent with the Plan, as the Committee may
establish,
(f) The power to delegate to other persons the responsibility of performing
ministerial acts in furtherance of the Plan's purpose, and
(g) The power to engage the services of persons, companies, or organizations in
furtherance of the Plan's purpose, including but not limited to, banks,
insurance companies, brokerage firms, and consultants.
3.3 Additional Powers. In addition, as to each Option to buy Stock of the
Corporation, the Committee shall have full and final authority in its
discretion: (a) to determine the number of shares of Stock subject to each
Option; (b) to determine the time or times at which Options will be granted, (c)
to determine the option price of the shares of Stock subject to each Option,
which price shall be not less than the minimum price specified in Article V of
this Plan; (d) to determine the time or times when each Option shall become
exercisable and the duration of the exercise period (including the acceleration
of any exercise period), which shall not exceed the maximum period specified in
Article V; and (e) to determine whether each Option granted shall be an
Incentive Stock Option or a Non-Qualified Option.
In no event may the Corporation grant an Employee any
Incentive Stock Option that is first exercisable during any one calendar year to
the extent the aggregate fair market value of the Stock (determined at the time
the options are granted) exceeds $100,000 (under all stock options plans of the
Corporation and any Affiliated Corporation); provided, however, that this
paragraph shall have no force and effect if its
3
inclusion in the Plan is not necessary for Incentive Stock Options issued under
the Plan to qualify as such pursuant to Section 422(d)(1) of the Code.
ARTICLE IV
Eligibility
4.1 Eligible Employees. All Employees (including Directors and Officers who are
Employees and who have not irrevocably elected to be ineligible to participate
in the Plan) are eligible to be granted Incentive Stock Option and Non-Qualified
Option Awards under this Plan.
4.2 Consultants, Directors and other Non-Employees. Any Consultant, Director
(whether or not an Employee) and any other Non-Employee is eligible to be
granted Non-Qualified Option Awards under the Plan provided the person has not
irrevocably elected to be ineligible to participate in the Plan, and provided
further that upon appointment to the Committee at the first Board of Directors
meeting following the Annual Meeting of the Shareholders, each non-employee
director appointed to the Committee shall be deemed to be ineligible to
participate under the Plan during his or her period of service on the Committee.
4.3 Relevant Factors. In selecting individual Employees, Consultants, Directors,
and other Non-Employees to whom Awards shall be granted, the Committee shall
weigh such factors as are relevant to accomplish the purpose of the Plan as
stated in Article 1. An individual who has been granted an Award may be granted
one or more additional Awards, if the Committee so determines. The granting of
an Award to any individual shall neither entitle that individual to, nor
disqualify him from, participation in any other grant of Awards.
ARTICLE V
Stock Option Awards
5.1 Number of Shares. Subject to the provisions of Article XI of this Plan, the
aggregate number of shares of Stock for which Options may be granted under this
Plan shall not exceed 1,000,000 shares. The shares to be delivered upon exercise
of Options under this Plan shall be made available, at the discretion of the
Committee, either from authorized but unissued shares or from previously issued
and reacquired shares of Stock held by the Corporation as treasury shares,
including shares purchased in the open market.
4
Stock issuable upon exercise of an option granted under the
Plan may be subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Committee.
5.2 Effect of Expiration, Termination or Surrender. If an Option under this Plan
shall expire or terminate unexercised as to any shares covered thereby, or shall
cease for any reason to be exercisable in whole or in part, or if the Company
shall reacquire any unvested shares issued pursuant to Options under the Plan,
such shares shall thereafter be available for the granting of other Options
under this Plan,
5.3 Term of Options. The full term of each Option granted hereunder shall be for
such period as the Committee shall determine. In the case of incentive Stock
Options granted hereunder, the term shall not exceed ten (10) years from the
date of granting thereof. Each Option shall be subject to earlier termination as
provided in Sections 6.4 and 6.5. Notwithstanding the foregoing, the term of
options intended to qualify as "Incentive Stock Options" shall not exceed five
(5) years from the date of granting thereof if such option is granted to any
employee who at the time such option is granted owns more than ten percent (10%)
of the total combined voting power of all classes of stock of the Corporation.
5.4 Option Price. The option price shall be determined by the Committee at the
time any Option is granted. In the case of Incentive Stock Options, the exercise
price shall not be less than 100% of the fair market value of the shares covered
thereby at the time the Incentive Stock Option is granted (but in no event less
than par value), provided that in the case where an Incentive Stock Option is
granted hereunder to any Employee who at the time of grant owns Stock possessing
more than 10% of the combined voting power of all classes of stock of the
Corporation and its Corporations, the Incentive Stock Option price shall equal
not less than 110% of the fair market value of the shares covered thereby at the
time the Incentive Stock Option is granted. In the case of Non-Qualified Stock
Options, the exercise price shall not be less than par value.
5.5 Fair Market Value. If, at the time an Option is granted under the Plan, the
Corporation's Stock is publicly traded, "fair market shall be determined as of
the last business day for which the prices or quotes discussed in this sentence
are available prior to the date such Option is granted and shall mean (i) the
average (on that date) of the high and low prices of the Stock on the principal
national securities exchange on which the Stock is traded, if the Stock is then
traded on a national securities exchange; or (ii) the last reported sale price
(on that date) of the Stock on the NASDAQ National Market List, if the Stock is
not then traded on a national securities exchange;
5
or (iii) the closing bid price (or average of bid prices) last quoted (on that
date) by an established quotation service for over-the-counter securities, if
the Stock is not reported on the NASDAQ National Market List. However, if the
Stock is not publicly traded at the time in Option is granted under the Plan,
"fair market value" shall be deemed to be the fair value of the Stock as
determined by the Committee under Section 3.3.
5.6 Non-Transferability of Options. Except as provided below, no Option granted
under this Plan shall be transferable by the grantee otherwise than by will or
the laws of descent and distribution, and such Option may be exercised during
the grantee's lifetime only by the grantee. Notwithstanding the above, in the
event the federal securities laws and the relevant tax laws change so as to
permit the transferability of the options provided by this Plan then to such
extent permitted by law, such options may be transferred in accordance with this
Plan.
5.7 Foreign Nationals. Awards may be granted to Participants who are foreign
nationals or employed outside the United States on such terms and conditions
different from those specified in the plan as the Committee considers necessary
or advisable to achieve the purpose of the Plan or comply with applicable laws.
ARTICLE VI
Exercise of Option
6.1 Exercise. Each Option granted under the Plan shall be exercisable on such
date or dates and during such period and for such number of shares as shall be
determined pursuant to the provisions of the instrument evidencing such Option.
The Committee shall have the right to accelerate the date of exercise of any
option, provided that the Committee shall not accelerate the exercise date of
any Incentive Stock Option granted if such acceleration would violate the annual
vesting limitation contained in Section 422(d)(1) of the Code.
6.2 Notice of Exercise and Payment. A person electing to exercise an Option
shall give written notice to the Corporation of such election and of the number
of shares he or she has elected to purchase and shall at the time of exercise
tender the full purchase price, in cash, Corporation Stock, owned by him or her
for at least six months, or by such other means as is authorized by the Board of
Directors, for the shares he or she has elected to purchase.
6.3 Delivery of Stock. No shares shall be delivered pursuant to any exercise of
an Option until payment in full of
6
the option price therefor is received by the Corporation. Such payment may be
made in whole of in part in cash or, to the extent permitted by the Committee at
or after the grant of an Option, by delivery of a note or shares of the Stock
owned by the optionee, including Restricted Stock, valued at their fair market
value on the date of delivery, or such other lawful consideration as the
Committee may determine. Until such person has been issued a certificate or
certificates for the shares so purchased, he or she shall possess no rights of a
record holder with respect to any of such shares.
6.4 Option Unaffected by Change In Duties. No Incentive Stock Option, and,
unless otherwise determined by the Committee, no Non-Qualified Option granted to
a person who is, on the date of the grant, an Employee of the Corporation or an
Affiliated Corporation, shall be affected by any change of duties or position of
the optionee (including transfer to or from an Affiliated Corporation), so long
as he or she continues to be an Employee. Employment shall be considered as
continuing and uninterrupted during any bona fide leave of absence (such as
those attributable to illness, military obligations or governmental service)
provided that the period of such leave does not exceed 90 days or, if longer,
any period during which such optionee's right to reemployment is guaranteed by
statute. A bona fide leave of absence with the written approval of the Committee
shall not be considered an interruption of employment under the Plan, provided
that such written approval contractually obligates the Corporation or any
Affiliated Corporation to continue the employment of the optionee after the
approved period of absence.
If the optionee shall cease to be an Employee for any reason
other than death, such Option shall thereafter be exercisable only to the extent
of the purchase rights, if any, which have accrued as of the date of such
cessation; provided that (i) the Committee may in its absolute discretion, upon
any cessation of employment, determine (but be no under no obligation to
determine) that such accrued purchase rights shall be deemed to include
additional shares covered by such Option, and (ii) unless the Committee shall
otherwise provide in the instrument evidencing any Option, upon any such
cessation of employment, such remaining rights to purchase shall in any event
terminate upon the earlier of (A) the expiration of the original term of the
Option; or (B) where such cessation of employment is on account of disability,
the expiration of one year from the date of such cessation of employment and,
otherwise, the expiration of three months from such date. For purposes of the
Plan, the term "disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code.
6.5 Death of Optionee. Should an optionee die while in possession of the legal
right to exercise an Option or Options
7
under this Plan, such persons as shall have acquired, by will or by the laws of
descent and distribution, the right to exercise any Options theretofore granted,
may, unless otherwise provided by the Committee in any instrument evidencing any
Option, exercise such Options at any time prior to one year from the date of
death; provided, that such Option or Options shall expire in all events no later
than the last day of the original term of such Option; provided, further, that
any such exercise shall be limited to the purchase rights that have accrued as
of the date when the optionee ceased to be an Employee, whether by death or
otherwise, unless the Committee provides in the instrument evidencing such
Option that, in the discretion of the Committee, additional shares covered by
such Option may become subject to purchase immediately upon the death of the
optionee.
6.6 Reload Option Grants. The Committee, in its discretion, may also grant stock
options with "reload provisions" that permit the option holder to exercise his
or her stock options and receive new stock option grants for the equivalent
amount of stock underlying the option exercise at the fair market value on the
date of such exercise. The reload options shall have the same expiration date as
the options they replace.
ARTICLE VII
Reporting Person Limitations
Notwithstanding any other provision of the Plan, to the extent
required to qualify for the exemption provided by Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, and any successor provision, (i)
any Stock or other equity security offered under the Plan to a Reporting Person
may not be sold for at least six (6) months after grant of an option acquire
such Stock or other equity security, except in case of death or disability and
(ii) any Option, or other similar right related to an equity security, issued
under the Plan to a Reporting Person shall not be transferable other than by
will or the laws of descent and distribution or in accordance with section 5.6
hereof, shall not be exercisable for at least six (6) months except in the case
of death or disability, provided in the provisions of section 5.6 hereof, shall
be exercisable during the Participant's lifetime only by the Participant or the
Participant's guardian or legal representative.
ARTICLE VIII
Terms and Conditions of Options
Options shall be evidenced by instruments (which need not be
identical) in such forms as the Committee may from time to
8
time approve. Such instruments shall conform to the terms and conditions set
forth in Articles V and VI hereof and may contain such other provisions as the
Committee deems advisable that are not inconsistent with the Plan, including
restrictions applicable to shares of Stock issuable upon exercise of Options. In
granting any Non-Qualified Option, the Committee may specify that such
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to Incentive Stock Options, or to such other termination and
cancellation provisions as the Committee may determine. The Committee may from
time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Corporation to execute and deliver
such instruments. The proper officers of the Corporation are authorized and
directed to take any and all action necessary or advisable from time to time to
carry out the terms of such instruments.
ARTICLE IX
Benefit Plans
Awards under the Plan are discretionary and are not a part of
regular salary. Awards may not be used in determining the amount of compensation
for any purpose under the benefit plans of the Corporation, or an Affiliated
Corporation, except as the Committee may from time to time expressly provide.
Neither the Plan, an Option or any instrument evidencing an Option confers upon
any Employee the right to continued employment with the Corporation or an
Affiliated Corporation.
ARTICLE X
Amendment, Suspension or Termination of the Plan
The Board may suspend the Plan or any part thereof at any time
or may terminate the Plan in its entirety. Awards shall not be granted after
Plan termination.
The Board may also amend the Plan from time to time, except
that amendments which affect the following subjects must be approved by
stockholders of the Corporation, unless and to such extent, that applicable
federal or state law or regulation permit amendment thereto:
(a) Except as provided in Article XI relative to capital
changes, and except as permitted by law or regulation where such change is not
deemed material, the number of shares as to which Options may be granted
pursuant to Article V;
(b) The maximum term of Options granted;
9
(c) The minimum price at which Options may be granted;
(d) The term of the Plan; and
(e) The requirements as to eligibility for
participation in the Plan.
Awards granted prior to suspension or termination of the Plan
may not be cancelled solely because of such suspension or termination, except
with the consent of the grantee of the Award.
ARTICLE XI
Changes in Capital Structure
The instruments evidencing Options granted hereunder shall be
subject to adjustment in the event of changes in the outstanding Stock of the
Corporation by reason of stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges or other
relevant changes in capitalization occurring after the date of an Award to the
same extent as would affect an actual share of stock issued and outstanding on
the effective date of such change. Such adjustment to outstanding Options shall
be made without change in the total price applicable to the unexercised portion
of such options, and a corresponding adjustment in the applicable option price
per share shall be made. In the event of any such change, the aggregate number
and classes of shares for which Options may thereafter be granted under Section
5.1 of this Plan may be appropriately adjusted as determined by the Committee so
as to reflect such change. Notwithstanding the foregoing, any adjustments made
pursuant to this Article XI with respect to Incentive Stock Options shall be
made only after the Committee, after consulting with counsel for the
Corporation, determines whether such adjustments would constitute a
"modification" of such Incentive Stock Options (as that term is defined in
Section 425 of the Code) or would cause any adverse tax consequences for the
holders of such Incentive Stock Options. If the Committee determines that such
adjustments made with respect to Incentive Stock Options would constitute a
modification of such Incentive Stock Options, it may refrain from making such
adjustments.
In the event of the proposed dissolution or liquidation of the
Corporation, each Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such other conditions
as shall be determined by the Committee.
Except as expressly provided herein, no issuance by the
Corporation of shares of stock of any class, or securities
10
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Corporation.
No fractional shares shall be issued under the Plan and the
optionee shall receive from the Corporation cash in lieu of such fractional
shares,
ARTICLE XII
Effective Date and Term of the Plan
The Plan shall become effective upon its adoption the Board,
provided that the stockholders of the Corporation shall have approved this Plan
within twelve months following the adoption of this Plan by the Board. The Plan
shall continue until such time as it may be terminated by action of the Board;
provided, however, that no Options may be granted under this Plan on or after
the tenth anniversary of the effective date hereof.
ARTICLE XIII
Conversion of ISO's into Non-Qualified Options;
Termination of ISO's
The Committee, at the written request of any optionee, may in
its discretion take such actions as may be necessary to convert such optionee's
Incentive Stock Options, that have not been exercised on the date of conversion,
into Non-Qualified Options at any time prior to the expiration of such Incentive
Stock Options, regardless of whether the optionee is an employee of the
Corporation or an Affiliated Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of such Options. At the time of such conversion, the
Committee (with the consent of the optionee) may impose such conditions on the
exercise of the resulting Non-Qualified Options as the Committee in its
discretion may determine, provided that such conditions shall not be
inconsistent with the Plan. Nothing in the Plan shall be deemed to give any
optionee the right to have such optionee's Incentive Stock Options converted
into Non- Qualified Options, and no such conversion shall occur until and unless
the Committee takes appropriate action. The Committee, with the consent of the
optionee, may also terminate any portion of any Incentive Stock Option that has
not been exercised at the time of such termination.
11
ARTICLE XIV
Application of Funds
The proceeds received by the Corporation from the sale of
shares pursuant to Options granted under the Plan shall be used for general
corporate purposes.
ARTICLE XV
Governmental Regulation
The Corporation's obligation to sell and deliver shares of
Stock under this Plan is subject to the approval of any governmental authority
required in connection with the authorization, issuance or sale of such shares.
ARTICLE XVI
Withholding of Additional Income Taxes
Upon the exercise of a Non-Qualified Option or the making of a
Disqualifying Disposition as defined in Article XVII the Corporation, in
accordance with Section 3402(a) of the Code, may require the optionee to pay
additional withholding taxes in respect of the amount that is considered
compensation includable in such person's gross income. The Committee in its
discretion may condition the exercise of an Option on the payment of such
additional withholding taxes.
ARTICLE XVII
Notice to Company of Disqualifying Disposition
Each employee who receives an Incentive Stock Option must
agree to notify the Corporation in writing immediately after the employee makes
a Disqualifying Disposition of any Stock acquired pursuant to the exercise of an
Incentive Stock Option. A Disqualifying Disposition is any disposition
(including any sale) of such Stock before the later of (a) two years after the
date the employee was granted the Incentive Stock Option or (b) one year after
the date the employee acquired Stock by exercising the Incentive Stock Option.
If the employee has died before such stock is sold, these holding period
requirements do not apply and no Disqualifying Disposition can occur thereafter.
12
ARTICLE XVIII
Governing Law; Construction
The validity and construction of the Plan and the instruments
evidencing Options shall be governed by the laws of the State of Delaware. In
construing this Plan, the singular shall include the plural and the masculine
gender shall include the feminine and neuter, unless the context otherwise
requires.
13
EXHIBIT C
PALOMAR MEDICAL TECHNOLOGIES, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose of the Plan
The purpose of the Palomar Medical Technologies, Inc. Employee Stock
Purchase Plan is to encourage ownership of the common stock of Palomar Medical
Technologies, Inc. ("Palomar") by its eligible employees and any and each of its
participating subsidiaries, thereby enhancing such employees' personal interest
in the continued success and progress of Palomar. The plan is intended to
facilitate regular investment in the common stock of Palomar by offering
employees a convenient means to make purchases at a discounted price through
payroll deductions. The Plan is intended to comply with the provisions of
Section 423 of the Internal Revenue Code of 1986, as amended.
2. Definitions
For purposes of the Plan, the following terms shall have the meanings
indicated below:
(a) "Business Day" shall mean a day on which there is trading on the
New York Stock Exchange.
(b) "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
(c) "Committee" shall mean the Compensation Committee of the Board of
Directors of Palomar.
(d) "Common Stock" shall mean Palomar's common stock, par value $.01
per share.
(e) "Company" shall mean Palomar and any of its subsidiaries (within
the meaning of Section 424(f) of the Code) whose Board of Directors has adopted
the Plan, with approval of the Board of Directors of Palomar, and which has not
terminated participation in or withdrawn from the Plan by action of such
subsidiary's Board of Directors or the Board of Directors of Palomar.
(f) "Compensation" shall mean the amount of a Participant's base wages,
overtime, commissions, cash bonuses, premium pay and shift differential, before
giving effect to any compensation reductions made in connection with any plans
described in Section 401(k) or Section 125 of the Code.
(g) "Custodian" shall mean the custodian appointed by the Committee
pursuant to Section 7 hereof to hold the shares of Common Stock purchased under
the Plan and subsequent Dividends reinvested or paid to Participant in cash.
(h) "Dividends" shall mean all cash dividends paid on shares of Common
Stock held in any Employee's Account.
(i) "Account" shall mean a separate account maintained by the Custodian
for each
Participant which reflects, at any time, the number of shares of Common Stock
purchased under the Plan by such Participant as well as reinvested Dividends
held by the Custodian.
(j) "Entry Date" shall mean the first Business Day of each Purchase
Period.
(k) "Eligible Employee" shall mean, with respect to any Purchase
Period, an employee of the Company who is eligible to participate in the Plan in
such Purchase Period under the rules set forth in Sections 5 and 8 hereof.
(l) The "Fair Market Value" of a share of Common Stock on any Business
Day shall be the average of the high and low prices of the Common Stock as
published in the New York Stock Exchange Composite Transactions listing for such
day; provided that in the event that such prices of the Common Stock shall not
be so published, the Fair Market Value of a share of Common Stock shall be
determined by the Committee.
(m) "Participant" shall mean, with respect to any Purchase Period, each
Eligible Employee who has elected to have amounts deducted from his or her
Compensation pursuant to Section 6 hereof for such Purchase Period.
(n) "Plan" shall mean this 1996 Employee Stock Purchase Plan, as the
same may be amended from time to time.
(o) "Purchase Date" shall mean the last Business Day of each Purchase
Period.
(p) "Purchase Period" shall mean each of the three month periods ending
on the last days of March, June, September and December during the period when
the Plan is in effect. The first Purchase Period shall begin on October 1, 1996
and end on December 31, 1996.
3. Common Stock Available Under the Plan
The maximum number of shares of Common Stock which may be purchased
under the Plan shall be 1,000,000 shares, except as such maximum number may be
adjusted as provided in Section 12 hereof. Shares of Common Stock purchased
under the Plan may be authorized and previously unissued shares, treasury shares
(including shares purchased from time to time by Palomar), or any combination
thereof.
4. Administration of Plan
The Plan shall be administered by the Committee. The Committee shall
have the authority, consistent with the Plan, to interpret the Plan, to adopt,
amend and rescind rules and regulations for the administration of the Plan and
to make all determinations in connection therewith which may be necessary or
advisable, and all such actions shall be binding for all purposes under the
Plan. The Plan shall be administered at the expense of the Company.
5. Eligibility
Each employee of the Company shall be eligible to participate in the
Plan during each Purchase Period, provided that he or she is not, as of the
Entry Date for such Purchase Period:
2
(a) an employee who has been employed by the Company for less than six
months; or
(b) an employee who is customarily employed by the Company for fewer
than 20 hours per week, or for five or fewer months in any calendar year; or
(c) an employee who owns (within the meaning of Section 424(d) of the
Code) stock possessing 5% or more of the total combined voting power or value of
all classes of stock of Palomar, treating as owned on Entry Date, for purposes
of this clause, Common Stock which such employee would be entitled to purchase
on Purchase Date for such Purchase Period but for this Section 5(c).
6. Participation
(a) On the Entry date for each Purchase Period, Palomar shall grant to
each Participant in the Plan for such Purchase Period an option to purchase on
the Purchase Date for such Purchase Period, at the applicable price specified in
Section 7 hereof, the number of shares of Common Stock, including any fractional
share, which may be purchased, at such price, with such participant's payroll
deductions received during such Purchase Period, subject to the terms and
conditions of the Plan.
(b) Eligible Employees may elect to participate in the Plan as follows:
(i) Each Eligible Employee may elect to participate in the
Plan, effective on the Entry Date for any Purchase Period, by making an election
to participate at least 15 days prior to such entry Date. Such election shall
authorize the Company to deduct an amount chosen by the employee equal to any
whole percentage between 1 and 15 percent, inclusive from such Employee's
Compensation paid during such Purchase Period.
(ii) After making the election pursuant to Section 6(b)(i)
hereof, a Participant shall automatically continue to participate in the Plan
during subsequent Purchase Periods until the Participant either withdraws from
the Plan or ceases to be an Eligible Employee. The percentage of the
Participant's Compensation deducted in subsequent Purchase Periods shall be the
percentage specified in the election made pursuant to Section 6(b)(i), as it may
be changed from time to time pursuant to Section 6(b)(iii) or 6(b)(iv) hereof.
(iii) Except as provided in Section 6(b)(iv) hereof, after the
last date for making an election described in Section 6(b)(i) hereof for the
Purchase Period, a Participant shall not be permitted to increase or reduce the
percentage of Compensation deducted from his or her Compensation paid during
each purchase period. A Participant may elect to reduce or increase the
percentage of his or her Compensation deducted pursuant to the Plan to any whole
percentage between 1 and 15, inclusive, effective for a subsequent Purchase
Period by filing an election not later than 15 days prior to the Entry Date for
such Purchase Period.
(iv) A Participant may elect at any time to reduce the
percentage of his or her Compensation deducted pursuant to the Plan to zero,
effective commencing with the next payroll period beginning after the making of
such election. All cash amounts already deducted during a Purchase Period prior
to the effectiveness of any such election shall be refunded to the Participant.
(c) No interest will be paid to Participants on any payroll
deductions.
3
(d) A Participant may at any time elect to withdraw from further
participation in the Plan, effective as of the next Business day following such
election. Any Participant whose employment with the Company terminates for any
reason (including without limitation termination by reason of death or
disability) shall be deemed to have made a withdrawal, effective the next
Business Day following such termination of employment. Upon any withdrawal, (i)
no further amounts shall be deducted from such Participant's Compensation
effective for any payroll period beginning after the effective date of
withdrawal, (ii) any outstanding option granted to such Participant under the
Plan shall terminate as of the effective date of the withdrawal, and no further
purchases of Common Stock under the Plan shall be made for such Participant or
after such date, and (iii) as soon as possible the Company will refund all cash
deducted during the Purchase Period. Following any such withdrawal from the
Plan, an employee's eligibility to participate again in the Plan will be subject
to all provisions of Section 5 and 8 hereof.
(e) Notwithstanding any other provision of the Plan, an employee who
has withdrawn from the Plan pursuant to Section 6(d) hereof shall be deemed to
have made an irrevocable election not to participate in the Plan during the two
consecutive Purchase Periods immediately following the one in which such
withdrawal was made.
(f) Any election permitted by this Section 6 (other than an election
deemed made pursuant to Section 6(e)) shall be made in writing on the form
prescribed for such purpose by the Committee from time to time and shall be
delivered to the person or persons designated by the Committee. Any such
election shall be deemed made when such form is completed, signed by the
Participant and received by such designee.
7. Purchases of Common Stock
On the Purchase Date for each Purchase Period, all options granted
under the Plan on the first Business Day of such Purchase Period shall be deemed
to be exercised, and all amounts deducted pursuant to Section 6 hereof from the
Participant's Compensation during such Purchase Period shall be applied on such
date to purchase whole and fractional shares of Common Stock from the Company,
unless such Participant has withdrawn from the Plan during such Purchase Period
effective on or prior to such Purchase Date. With respect to shares of Common
stock purchased, the purchase price per share shall be the lesser of (i)
eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on
the Entry Date of the Purchase Period, or (ii) eighty-five percent (85%) of the
Fair Market Value of a share of Common Stock on the Purchase Date of the
Purchase Period. The Committee shall appoint the Custodian for the Plan and to
hold all whole and fractional shares purchased under the Plan and to maintain a
separate Account for each Participant, in which Common Stock purchased by such
Participant under the Plan shall be held and Dividends received will be
reinvested. Each Participant shall receive a statement as soon as practicable
after the end of each Purchase Period reflecting purchases for his or her
account under the Plan through the end of such Purchase Period.
8. Limitation on Number of Shares purchased
Notwithstanding any other provision of the Plan, the maximum number of
whole and fractional shares of Common Stock which a Participant may purchase in
a Purchase Period under the Plan and under all other "employee stock purchase
plans" (within the meaning of Section 423 of the Code) maintained by Palomar and
its subsidiaries (within the meaning of Section 424(f) of the Code)
4
shall be the number determined by dividing $6,250 by the Fair Market Value of a
share of Common Stock on the Entry Date for such Purchase Period. In the event
that the amount of payroll deductions is greater than $6,250 in any given
Purchase Period, the Company will refund the excess to the Participant as soon
as practicable after such Purchase Date.
9. Rights as a Stockholder
From and after the Purchase Date on which shares of Common Stock are
purchased by the Participant under the Plan, such Participant shall have all of
the rights and privileges of a stockholder of Palomar with respect to such
shares. Prior to the Purchase Date on which shares of Common Stock may be
purchased by a Participant, such Participant shall not have any rights as a
stockholder of Palomar.
10. Notice of Disposition of Stock
Each Participant agrees, by his or her participation in the Plan, to
promptly notify Palomar in writing of any disposition of any Common Stock
purchased under the Plan occurring within 2 years after the Entry Date of the
Purchase Period in which such stock was purchased.
11. Rights Not Transferrable
Rights under the Plan are not transferrable, except that the right to
receive shares pursuant to the Plan may be transferred by will or the laws of
descent and distribution. Options granted to a Participant hereunder may be
exercised only by such Participant.
12. Adjustment for Capital Changes
In the event of any capital change by reason of any stock dividend or
split, recapitalization, merger in which Palomar is the surviving entity,
combination or exchange of shares or similar corporate change, the number and
type of shares or other securities of Palomar which Participants may purchase
under the Plan, and the maximum aggregate number of such shares or securities
which may be purchased under the Plan, shall be appropriately adjusted by the
Board of Directors of Palomar.
13. Amendments
The Board of Directors of Palomar may at any time, or from time to
time, amend the Plan in any respect, except that, without stockholder approval,
no amendment shall be made (a) increasing the number of shares which may be
purchased under the Plan (other than as provided in Section 12 herein), (b)
materially increasing the benefits accruing to Participants or (c) materially
modifying the requirements as to eligibility for participation in the Plan.
14. Laws and Regulations
(a) Notwithstanding any other provision of the Plan, the rights of
Participants to purchase Common Stock hereunder shall be subject to compliance
with all applicable Federal, state and foreign laws, rules and regulations and
the rules of each stock exchange upon which the Common Stock is from time to
time listed.
5
(b) The Plan and the purchase of Common Stock hereunder shall be
subject to additional rules and regulations, not inconsistent with the Plan,
that may be promulgated from time to time by the Committee regarding purchases
and sales of Common Stock.
15. Employment
The Plan shall not confer any right to continued employment upon any
employee of the Company.
16. Effective Date of the Plan; Termination
(a) The Plan shall become effective on October 1, 1996, subject to
approval by the shareholders of Palomar in accordance with applicable law and
the requirements of Section 423 of the Code.
(b) The Plan and all rights hereunder shall terminate on the earliest
to occur of:
(i) the date on which the maximum number of shares of Common
Stock available for purchase under the Plan as specified in Section 3 hereof has
been purchased;
(ii) the termination of the Plan by the Board of Directors of
Palomar; or
(iii) the effective date of any consolidation or merger in
which Palomar is not the surviving entity, any exchange or conversion of
outstanding shares of Palomar for or into securities of another entity or other
consideration, or any complete liquidation of Palomar.
In the event that on any Purchase Date the remaining shares of Common
Stock available for purchase under the Plan are insufficient to fully satisfy
Participants' outstanding options, such remaining available shares shall be
apportioned among and sold to such Participant in proportion to the amounts of
payroll deductions and the excess payroll deduction shall be returned to the
Participant as soon as practicable thereafter.
Upon any termination of the Plan, any shares in the employee's Account
shall be delivered by the Custodian to the employee or his or her legal
representative as soon as practicable following such termination.
6
PALOMAR MEDICAL TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS -- JULY 19, 1996
The undersigned stockholder of Palomar Medical Technologies, Inc. (the
"Company") hereby appoints Steven Georgiev, Michael H. Smotrich and Joseph P.
Caruso, and each or any of them, proxies, with full power of substitution to
each and to each substitute appointed pursuant to such power, of the undersigned
to vote all shares of stock of the Company which the undersigned may be entitled
to vote at the Special Meeting of Stockholders of the Company to be held on
Friday, July 19, 1996, and at any and all adjournments thereof, with all powers
the undersigned would possess if personally present. The proxies are authorized
to vote as indicated below and on the reverse side upon the matters set forth
herein and in their discretion upon all other matters which may properly come
before said Meeting. The undersigned hereby acknowledges receipt of a copy of
the accompanying Notice of Special Meeting of Stockholders and Proxy Statement
for the Special Meeting of Stockholders and hereby revokes all proxies, if any,
heretofore given by him to others for said Meeting.
If this Proxy is properly executed and returned, the shares represented
hereby will be voted. If a choice is specified below or on the reverse side by
the stockholder with respect to any matter to be acted upon, the shares will be
voted upon that matter in accordance with the specification so made. The
undersigned understands that, if Proposal 1 regarding the amendment to the
Company's Certificate of Incorporation to increase the Company's authorized
stock is not approved, then Proposals 2 and 3 regarding the Company's 1996
Incentive and Nonqualified Stock Option Plan and 1996 Employee Stock Purchase
Plan, respectively, will be withdrawn from consideration, as the Company's
authorized stock will be insufficient for issuance under those Plans. IN THE
ABSENCE OF ANY SPECIFICATION, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2, and 3.
1. Proposal to amend the Certificate of Incorporation to increase authorized
Common Stock.
|_| FOR |_| AGAINST |_| ABSTAIN
2. Proposal to approve and adopt the Company's 1996 Incentive and Nonqualified
Stock Option Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
3. Proposal to approve and adopt the Company's 1996 Employee Stock Purchase
Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
Please date, sign exactly as name appears hereon and
return promptly. If the shares are registered in the
names of two or more persons, each should sign.
Executors, administrators, trustees, guardians,
custodians, attorneys and corporate officers should add
their titles.
......................................................
Signature
Date: ................................................
......................................................
Signature
Date: ................................................
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