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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant Filed by a Party other than the Registrant
- --------------------------------------------------------------------------------
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
PALOMAR MEDICAL TECHNOLOGIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Not Applicable
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the Appropriate Box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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:
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May ___, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
(the "Meeting") of Palomar Medical Technologies, Inc. (the "Company") to be held
on June 18, 1997 at 10:30 a.m. at the BankBoston Auditorium, 100 Federal Street,
Boston, Massachusetts 02110, and thereafter as it may be adjourned from time to
time.
At the Meeting, you will be asked to (i) amend in certain respects the
Company's Restated Certificate of Incorporation, (ii) elect five directors of
the Company, (iii) amend in certain respects the Company's 1991, 1993, 1995 and
1996 Stock Option Plans and the Company's 1996 Employee Stock Purchase Plan, and
(iv) ratify the selection of the Company's independent auditors for fiscal 1997.
Details of the matters to be considered at the Meeting are contained in the
Proxy Statement, which we urge you to consider carefully.
As a stockholder, your vote is important. Whether or not you plan to attend
the 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 Meeting, you may vote in person if you wish, even if you have
previously returned your proxy.
Thank you for your cooperation, continued support and interest in Palomar
Medical Technologies, Inc.
Sincerely,
Steven Georgiev
Chief Executive Officer
Chairman of the Board of Directors
<PAGE>
PALOMAR MEDICAL TECHNOLOGIES, INC.
66 Cherry Hill Drive
Beverly, MA 01915
Notice of the
1997 Annual Meeting of Stockholders
To the stockholders of PALOMAR MEDICAL TECHNOLOGIES, INC.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Meeting") of PALOMAR MEDICAL TECHNOLOGIES, INC. (the "Company"), a Delaware
corporation, will be held on JUNE 18, 1997 at 10:30 A.M.. at the BANKBOSTON
AUDITORIUM, 100 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110, and thereafter as
it may be adjourned from time to time.
At the Meeting, the stockholders will be asked:
1. To consider and act upon a proposal to amend the Company's Restated
Certificate of Incorporation to (a) classify the Board of Directors
into three classes, each class consisting as nearly as possible of
one-third of the whole number of the Board of Directors; (b) require
that action required or permitted to be taken by stockholders of the
Company be taken at an annual or special meeting of stockholders and
not by written consent of stockholders; and (c) provide that, unless
certain conditions are met, the proposed amendments may not be amended
without a vote of the holders of seventy-five percent (75%) of
outstanding voting shares of stock of the Corporation entitled to vote
at a meeting of stockholders held for the purpose of voting on such
amendment, as set forth in the accompanying Proxy Statement.
2. To elect one Class I Director, two Class II Directors and two Class
III Directors for initial terms of 1, 2 and 3 years, respectively or,
alternatively (if Proposal No. 1 should not be approved), to elect the
Directors of the Company to serve until the 1998 annual meeting of
stockholders and until their respective successors are elected and
have qualified.
3. To amend in certain respects the Company's 1991, 1993, 1995 and 1996
Stock Option Plans.
4. To amend in certain respects the Company's 1996 Employee Stock
Purchase Plan.
5. To ratify the selection of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997.
6. To transact such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on May 1, 1997 as
the record date for the determination of Stockholders entitled to notice of and
to vote at the Meeting and any adjournment or adjournments thereof. Only
stockholders of record on such date are entitled to notice of, and to vote at,
said Meeting or any adjournment thereof.
We hope that all Stockholders will be able to attend the Meeting in person.
In order to assure that a quorum is present at the Meeting, please date, sign
and promptly return the enclosed Proxy whether or not you expect to attend the
Meeting. A postage prepaid envelope, 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.
<PAGE>
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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
MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND EXERCISE THE
RIGHT TO VOTE YOUR SHARES PERSONALLY.
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By Order of the Board of Directors
Steven Georgiev
Chief Executive Officer
Chairman of the Board of Directors
May ___, 1997
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PALOMAR MEDICAL TECHNOLOGIES, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 18, 1997
The enclosed Proxy is solicited by the Board of Directors of PALOMAR
MEDICAL TECHNOLOGIES, INC. (the "Company") for use at the 1997 Annual Meeting of
Stockholders (the "Meeting") to be held at the BankBoston Auditorium, 100
Federal Street, Boston, Massachusetts 02110, at 10:30 a.m. on Wednesday, June
18, 1997, and at any adjournment or adjournments thereof.
Management intends to mail this proxy statement, the accompanying form of
proxy and its Annual Report for the fiscal year ended December 31, 1996 to all
stockholders entitled to vote, on or about May ___, 1997. The costs of
soliciting proxies will be borne by the Company.
Only stockholders of record at the close of business on May 1, 1997, will
be entitled to vote at the Meeting or any adjournment thereof. As of May 1,
1997, ________ 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 Meeting. There is
no other class of voting securities of the Company entitled to vote at the
meeting.
To establish a quorum to transact business at the 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 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.
To be elected, a director must receive a plurality of the votes of the
Common Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors. The affirmative vote of a
majority of the Common Stock, present in person or represented by proxy, at the
Annual Meeting and entitled to vote thereon, is necessary to ratify the
selection of the independent auditors, to approve the proposals to amend the
Company's 1991, 1993, 1995 and 1996 Stock Option Plans and 1996 Employee Stock
Purchase Plan, and to approve the proposals to amend the Company's Restated
Certificate of Incorporation.
Execution of a Proxy will not in any way affect a Stockholder's right to
attend the 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 Annual
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 Annual Meeting and voting in person. The shares represented by
all properly executed Proxies received in time for the Meeting will be voted as
specified therein. Proxies which are executed, but which do not contain any
specific instructions will be voted as recommended by management.
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 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 Meeting. Broker non-votes will be deemed not entitled to vote on the
subject matter as to which the non-vote is indicated and will therefore, have no
legal effect on the vote on that particular matter.
Votes will be tabulated by the Company's transfer agent, American Stock
Transfer & Trust Company.
The Board of Directors knows of no other matter to be presented at the
Meeting. If any other matter should be presented at the Meeting upon which a
vote may be taken, such shares represented by all Proxies received
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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.
PROPOSAL NO. 1
AMENDMENTS OF RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has unanimously approved two amendments to the
Restated Certificate of Incorporation and has directed that they be submitted to
a vote of the stockholders at the Annual Meeting. Inasmuch as the Board deems
such amendments to be interrelated in purpose and effect, they are being
submitted as a single proposal to be voted upon. To be adopted, the proposed
amendments require the affirmative vote of holders of a majority of all
outstanding shares of Common Stock of the Company entitled to vote thereon at
the Annual Meeting. Management believes it to be in the best interests of the
Company to amend the Restated Certificate of Incorporation to give effect to the
proposed amendments.
The proposed amendments would, among other things:
(1) classify the Company's Board of Directors into three classes;
(2) provide that stockholder action only be taken at a meeting of
stockholders and not be written consent; and
(3) provide that, unless certain conditions are met, the proposed
amendments may not be further amended or repealed without a vote of 75% of
stockholders.
The principal purposes of the proposed amendments are to promote continuity
and stability in the Company's leadership and policies and to encourage any
persons who might wish to acquire the Company to negotiate with its management
rather than to attempt to effect certain types of business combinations without
the approval of management or of a substantial portion of the Company's
stockholders. The proposed amendments may be considered "anti-takeover" in
nature and the effect of such amendments may be to render more difficult or to
discourage a merger or tender offer, even if such transaction is favorable to
the interests of the stockholders, or the assumption of control by a holder of a
large block of the Company's shares and the removal of incumbent management,
even if such removal would be beneficial to stockholders.
Stockholders should note that the proposed amendments may discourage tender
offers and other non-open market acquisitions made at prices above the
prevailing market price of the Company's stock and acquisitions of stock by
persons attempting to acquire control through market purchases that may cause
the market price of the stock to reach levels that are higher than would
otherwise be the case. Discouragement of such acquisitions may have the effect
of depriving stockholders of opportunities to sell their stock at a premium
under such circumstances.
The Board of Directors has no knowledge of any efforts by any person to
obtain control of the Company or to change its management. However, in view of
the number of hostile tender offers and proxy contests experienced by public
companies, the Board of Directors believes that it is prudent and in the
interest of the stockholders to adopt the proposed amendments. The Board of
Directors has further concluded that it is desirable to consider these proposed
amendments at a time when the Company is not subject to a takeover attempt.
Current Provisions of Restated Certificate of Incorporation and By-laws
The Company does not believe that its Restated Certificate of Incorporation
and By-laws as presently constituted contain any provisions which are intended
to have an anti-takeover effect. However, as of April 25, 1997, under the
Certificate of Incorporation 45,884,228 shares of Common Stock and 4,980,316
shares of preferred stock remain authorized and not reserved for any purpose and
are available for issuance. Although these shares were authorized to allow the
Board of Directors, without further stockholder approval, to issue additional
shares of the Company's capital stock to raise capital or to effect potential
acquisitions in the future, the authorization of such additional shares could
incidentally have an anti-takeover effect, in that such shares could potentially
be issued in such manner as to hamper the efforts of persons who might attempt
to gain control of the Company. Also, Article Fourth of the Restated Certificate
specifically provides that the Board has the authority to create the special
terms and conditions of the preferred stock
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which it issues. The Board is authorized to establish the number of shares of
preferred stock to be issued in any series it decides to issue, and to fix the
voting powers, designations, preferences and relative, participating, optional
or other special rights of the preferred stock, including voting rights and
conversion rights, and the qualifications, limitations and restrictions thereon.
Accordingly, it is possible for the Board to seek to authorize the issuance of a
series of preferred stock with rights and preferences that could affect an
attempt to acquire control of the Corporation. For example, such additional
authorized shares could potentially be issued to dilute the stock ownership of
persons seeking to obtain control of the Company, or shares of preferred stock
with favorable voting rights, such as the right to elect certain additional
directors or other special rights, could be created and issued to parties that
support the management of the Company.
The proposed amendments, combined with the power of the Board of Directors
to issue shares of authorized preferred stock, may have the effect of
maintaining the continuity of management and may make changes in management more
difficult, even if a majority of stockholders might consider such changes
advisable. The Company does not have a present intention to adopt any proposals
that have an anti-takeover effect, or to submit any such proposals for further
consideration by stockholders, except for the amendments proposed herein and
amendments to the Company's By-laws to conform them thereto.
Cumulative voting for the election of directors is not permitted under the
Company's Restated Certificate of Incorporation, as now in effect and as
proposed to be amended.
The following sections set forth an explanation of the proposed amendments,
which are set forth in their entirety in Exhibit A hereto.
Classification of Board of Directors
Summary
The Company's By-laws currently provide for a Board of Directors consisting
of such number as shall be determined from time to time by a majority of the
directors or by the stockholders. Directors are elected to serve until the next
annual meeting of stockholders and until their respective successors are duly
elected and have qualified. The number of directors constituting the whole Board
is currently fixed at five. The terms of all of the Company's Directors will
expire at the Annual Meeting.
Proposal No. 1 would amend Article Fifth of the Restated Certificate of
Incorporation to divide the Board of Directors into three classes, labeled Class
I, Class II and Class III, each containing, insofar as possible, an equal number
of directors, with the term of one of the three classes expiring each year at
the Company's annual meeting or special meeting in lieu thereof. The text of the
proposed amendment is set forth as Exhibit A hereto. The Company's Directors
unanimously approved the proposed amendment at a regular meeting of Directors on
April 23, 1997.
Under proposed Article Fifth, there would be limits prescribed for the size
of the entire Board of Directors with a minimum set at three directors and a
maximum set at twelve directors, exclusive of directors to be elected by any
class or series of the Company's stock other than Common Stock voting separately
as a class. The exact number of directors, and the number of members of each
class of directors, would be fixed or changed from time to time within such
limits by resolution of the Board of Directors. The provisions of proposed
Article Fifth would not apply to any director elected by holders of a class or
series of the Company's preferred stock at any time such holders might have a
right to vote separately as a class for the election of directors.
If the proposed amendment is approved, the Company will designate nominees
for each of the three classes of Directors as set forth in Proposal No. 2. The
Class I Director would serve initially for a one-year term, until the 1998
annual meeting of stockholders and until a successor is duly elected and
qualifies, and thereafter be elected for three-year terms. The Class II
Directors would serve initially for a two-year term, until the 1999 annual
meeting of stockholders and until their respective successors are duly elected
and have qualified, and thereafter be elected for three-year terms. The Class
III Directors would immediately commence service for a three-year term, and
serve until the 2000 annual meeting of stockholders and until their respective
successors are duly elected and have qualified. The proposed amendment provides
that any vacancy on the Board of Directors resulting from an increase in the
number of Directors may be filled by the affirmative vote of a majority of the
Directors then in office, and any other vacancy on the Board of Directors may be
filled by the affirmative vote of a majority of the Directors then in office,
although less
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than a quorum, or by a sole remaining Director. Any Director elected to fill a
vacancy not resulting from an increase in the number of Directors would serve
for a term equivalent to the remaining unserved portion of the term of such
newly elected Director's predecessor.
Under Delaware law, the holders of a majority of a corporation's
outstanding shares may remove directors with or without cause unless such power
of removal is limited by the corporation's certificate of incorporation. The
Restated Certificate of Incorporation presently contains no provision limiting
such power. Such law also provides that if a corporation's certificate of
incorporation provides for classification of directors, directors may be removed
only for cause unless otherwise set forth in the certificate of incorporation.
The Board intends, upon the adoption of the proposed amendment by the
stockholders, to amend the Company's By-laws to provide that incumbent Directors
may be removed by a majority of stockholders only for "Cause." "Cause," for the
purposes of the proposed By-law provision, is defined as (a) willful and
continued material failure, refusal or inability to perform one's duties to the
Corporation or the willful engaging in gross misconduct materially and
demonstrably damaging to the Corporation; or (b) conviction for any crime
involving moral turpitude or any other illegal act that materially and adversely
reflects upon the business, affairs or reputation of the Company or on one's
ability to perform one's duties to the Corporation.
The vote of holders of record of a majority of the outstanding Common Stock
entitled to vote thereon at the Annual Meeting is required for adoption of the
proposed amendment.
Reasons for and Effects of Proposed Article Fifth
Designation of a classified board of directors is permitted under Section
141(d) of the General Corporation Law of the State of Delaware. Section 141(d)
provides that a corporation may divide its board into one, two or three classes,
with (in the case of a board divided into three classes) the classes serving for
staggered three-year terms, so that the directors of one class stand for
re-election in any given year.
The proposal to adopt a classified Board of Directors is not the result of
management's knowledge of any specific effort to accumulate the Company's
securities or to obtain control of the Company through a merger, tender offer,
consent solicitation or otherwise. The Board of Directors believes that the
adoption of proposed Article Fifth will enhance the likelihood of continuity and
stability in the composition of the Company's Board of Directors and in the
policies formulated by the Board, in that only about one-third of the Board of
Directors would be subject to election each year. Staggered terms would also
guarantee that, except in the unusual circumstances of the death or resignation
of Directors, approximately two-thirds of the Directors, or more, at any one
time would have at least one year's experience as Directors of the Company.
The proposed Article Fifth will also restrict the ability of stockholders
of the Company to change the composition of the Board of Directors by extending
the time required to elect a majority of Directors from one to two years, under
most circumstances. Thus, the existence of a classified Board may have an
anti-takeover effect because a person who has gained voting control of the
Company will be unable to gain immediate control of the Board of Directors
unless he can obtain sufficient votes to amend proposed Article Fifth pursuant
to the requirements for such an amendment as set forth therein. See
"Supermajority Requirements for Amendment of the Proposed Amendments" below.
Adoption of the proposed amendment would thus tend to make more difficult,
or discourage, any attempt to remove current management of the Company by means
of a merger, a tender offer for the Company's stock, a proxy contest or any
other transaction resulting in a change in control, even where such an action
would be favorable to the Company's stockholders or was supported by a majority
of the stockholders. The proposed amendment would also make it more difficult
for the Company's stockholders to change the composition of the Board and the
Company's management, even for reasons of performance of the present Board and
management. The provisions of proposed Article Fifth will be applicable to every
election of Directors and not just elections occurring in connection with a
specified event such as a hostile tender offer.
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Amendment of Restated Certificate of Incorporation to Eliminate Stockholder
Action by Written Consent
Summary
The Board has unanimously authorized the Company to amend its Restated
Certificate of Incorporation to add a new provision to require that action
required or permitted to be taken by stockholders of the Company must be taken
at an annual or special meeting of stockholders and may not be taken by written
consent of stockholders. The full text of proposed Article Tenth is set forth in
Exhibit A hereto.
Under Delaware law, any actions required or permitted to be taken by
stockholders may be taken (unless a company's certificate of incorporation
otherwise provides) without a stockholder meeting, without prior notice and
without a stockholder vote if written consents setting forth the action to be
taken are signed by the holders of stock having the requisite number of votes.
The Restated Certificate of Incorporation currently does not prohibit such
action by written consent, and the Company's present By-laws provide that action
may be taken by written consent. The Company's stockholders do not, however,
have the ability to call a meeting of stockholders. Conditional upon the
approval of the proposed amendment to the Restated Certificate of Incorporation,
the Board of Directors plans to adopt various amendments to the Company's
By-laws consistent with the elimination of all provisions therein allowing
stockholder action by written consent. The text of such conforming By-law
amendments is set forth in Exhibit A.
The vote of holders of record of a majority of the outstanding Common Stock
is required for adoption of the proposed amendment.
Reasons for and Effects of Proposed Article Tenth
The proposed amendment is not the result of management's knowledge of any
specific effort to accumulate the Company's securities or to obtain control of
the Company through a merger, tender offer, consent solicitation or otherwise.
The elimination of stockholder action by written consent would ensure that all
stockholders of the Company will have notice of, and the opportunity to
participate in determining, any proposed stockholder action and would prevent
the holders of a majority of the voting power of the Company from using the
written consent procedure to take stockholder action unilaterally and without
prior notice. The Board believes it is important that stockholders be able to
discuss matters which may affect their rights, that the Board and the
stockholders be able to give advance consideration to any such action, and that
it is therefore appropriate for stockholders of a publicly-held corporation to
take action affecting the corporation and its stockholders only at a meeting.
The elimination of stockholder action by written consent may have the
effect of delaying consideration of a stockholder proposal until the next annual
meeting unless a special meeting is called by the Board, the Chairman of the
Board or the President. In addition, elimination of the written consent
procedure may lengthen the amount of time required to take stockholder action,
since certain actions by written consent are not subject to the minimum notice
requirement of a stockholders meeting.
Because elimination of the procedures for stockholders to act by written
consent could make more difficult an attempt to obtain control of the Company,
such action could have the effect of deterring a third party from making a
tender offer or otherwise attempting to obtain control of the Company. By
eliminating stockholder action by written consent, the Board intends to
encourage persons seeking to acquire control of the Company to initiate such an
acquisition through negotiations with the Company's management and the Board.
However, any provision in the Restated Certificate of Incorporation which
effectively requires a potential acquiror to negotiate with the Company's
management and the Board could be characterized as increasing management's and
the Board's ability to retain their positions with the Company and to resist a
transaction which may be desired by, or be beneficial to, the Company's
stockholders.
Elimination of the written consent procedure also means that a meeting of
stockholders would be required in order for the Company's stockholders to
replace the Board. With the proposed classified Board, two such meetings would
ordinarily be required. Thus, elimination of stockholder action by written
consent will make the removal of Directors more difficult. Accordingly, the
effect of the proposed amendment may be, under certain circumstances, to deter,
impede or delay actions that are desired by, or beneficial to, some or all of
the Company's stockholders, including stockholder attempts to change the
membership of the Board and the initiation or consummation of business
transactions, such as an acquisition, reorganization or recapitalization of the
Company.
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Supermajority Required to Repeal Proposed Amendments
Under Delaware law, amendments to the Restated Certificate of Incorporation
may be made with the approval of holders of majority of the Company's
outstanding Common Stock, since the Restated Certificate of Incorporation does
not currently provide otherwise.
Each of the proposed amendments would also provide that any further
amendment to the Restated Certificate of Incorporation that would amend, alter
or repeal such proposed amendment would require the vote of the holders of
seventy-five percent (75%) of all shares of stock of the Corporation entitled to
vote at a meeting held for the purpose of voting on such amendment. The 75%
requirement would not apply in the case of such an amendment recommended to the
stockholders pursuant to a resolution of the Board of Directors approved by
two-thirds of the "Continuing Directors." "Continuing Directors," for the
purposes of the proposed amendment, are (a) Directors of the Company who are or
become Directors on the date on which the proposed amendment is adopted by the
stockholders, or (b) any Director elected by a majority of the Continuing
Directors then in office to succeed any Director to fill any vacancy on the
Board of Directors.
This "supermajority" requirement is designed to prevent the circumvention
of the proposed amendments described herein by any person or persons holding
more than 50% but less than 75% of the Voting Stock.
The Board deems each of the proposed amendments to the Restated Certificate
of Incorporation to be in the best interests of the Company and its
stockholders, and unanimously recommends that the Company's stockholders vote
FOR the adoption of the proposed amendments.
PROPOSAL NO. 2
ELECTION OF DIRECTORS
At the Annual Meeting five Directors will be elected. The Board has
nominated Mr. Georgiev for election as a Class I Director, to serve until the
Company's 1998 annual meeting of stockholders or special meeting in lieu
thereof, and until his successor is duly elected and qualifies. The Board has
also nominated Dr. Smotrich and Mr. Glosson for election as a Class II
Directors, to serve until the Company's 1999 annual meeting of stockholders or
special meeting in lieu thereof, and until their respective successors are duly
elected and have qualified, and Dr. Deutch and Mr. Valente for election as Class
III Directors, to serve until the Company's 2000 annual meeting of stockholders
or special meeting in lieu thereof, and until their successors are duly elected
and have qualified. Each of the nominees presently serves as a Director of the
Company. Information relating to each of the nominees for election as a Director
is set forth below under the captions "Directors and Executive Officers" and
"Certain Transactions."
In case Proposal No. 1 to amend the Restated Certificate of Incorporation
to provide for three classes of directors should not be approved by the
stockholders, the Board has, in the alternative, nominated Messrs. Georgiev,
Smotrich, Glosson, Deutch and Valente for election as Directors, to serve until
the next annual meeting of stockholders and until their respective successors
shall have been elected and qualified.
The nominees have agreed to serve as Directors if elected, and the Company
has no reason to believe that they will be unable to serve. In the event that
any of them is unable or declines to serve as a Director at the time of the
Annual Meeting, proxies may be voted for such other nominee as is then
designated by the Board.
The Board unanimously recommends that you vote FOR the election of Mr.
Georgiev as a Class I Director, Dr. Smotrich and Mr. Glosson as Class II
Directors and Dr. Deutch and Mr. Valente as Class III Directors of the Company.
In the event that Proposal No. 1 is not adopted by the stockholders, the Board
unanimously recommends that you vote FOR the election of Messrs. Georgiev,
Smotrich, Glosson, Deutch and Valente as Directors of the Company.
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PROPOSAL NO. 3
AMENDMENTS OF 1991, 1993, 1995 and 1996 STOCK OPTION PLANS
The Board of Directors has unanimously approved an amendment to the
Company's 1991, 1993, 1995 and 1996 Stock Option Plans (the "Plans") and has
directed that they be submitted to a vote of the stockholders at the Annual
Meeting. Inasmuch as the Board deems such amendments to be interrelated in
purpose and effect, they are being submitted as a single proposal to be voted
upon. To be adopted, the proposed amendments require the affirmative vote of
holders of a majority of all outstanding shares of Common Stock of the company
entitled to vote thereon at the Annual Meeting. Management believes it to be in
the best interests of the Company to amend the Plans to give effect to the
proposed amendments.
Section 6.1 ("Exercise") of each of the Plans currently provides, in its
entirety, that:
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.
The proposed amendment would revise Section 6.1 by deleting the proviso at the
end of that Section, so that the new Section 6.1, as amended, would read in its
entirety:
Each Option granted under the Plan shall be exercisable in 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.
The principal purpose of the proposed amendments is to give the Committee
(consisting 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 166-3 under the Securities Exchange Act of 1934, as amended) the
discretion to accelerate the date of vesting of any option, even if such
acceleration would violate the annual vesting limitation contained in Section
422(d)(1) of the Code and therefore cause the option to become non-qualified.
The Board deems the proposed amendments to the Plans to be in the best
interests of the Company and its stockholders, and unanimously recommends that
the stockholders vote FOR the adoption of the proposed amendments.
PROPOSAL NO. 4
AMENDMENTS OF 1996 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has unanimously approved two amendments to the
Company's 1996 Employee Stock Purchase Plan (the "ESPP") and has directed that
they be submitted to a vote of the stockholders at the Annual Meeting. Inasmuch
as the Board deems such amendments to be interrelated in purpose and effect,
they are being submitted as a single proposal to be voted upon. To be adopted,
the proposed amendments require the affirmative vote of holders of a majority of
all outstanding shares of Common Stock of the Company entitled to vote thereon
at the Annual Meeting. Management believes it to be in the best interests of the
Company to amend the ESPP to give effect to the proposed amendments.
8
<PAGE>
Section 5 of the ESPP currently provides that:
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: (a) an employee who has
been employed by the Company for less than six months. . . .
The Company wishes to eliminate the six month waiting period for
eligibility, and therefore proposes to amend Section 5 by deleting subsection
(a) thereof.
Section 7 of the ESPP currently provides, in pertinent part, that:
With respect to shares of Common Stock purchased [pursuant to the
ESPP], the purchase price per shares shall be the lesser of (i)
ninety-five percent (95%) of the Fair Market Value of a share of
Common Stock on the Entry Date of the Purchase Period, or (ii)
ninety-five percent (95%) of the Fair Market Value of a share of
Common Stock on the Purchase Date of the Purchase Period.
The Company wishes to amend Section 7, retroactive to the date of adoption
of the ESPP, to provide that employees may purchase Common Stock pursuant to the
ESPP for:
. . . 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 purpose of the amendments is to further encourage ownership of the
Common Stock of the Company by eligible employees, thereby enhancing such
employees' personal interest in the continued success and progress of the
Company. The ESPP is intended to facilitate regular investment in the Company's
Common Stock by offering eligible employees a convenient means to make purchases
at a discounted price through payroll deductions.
The Board deems the proposed amendments to the ESPP to be in the best
interests of the Company and its stockholders, and unanimously recommends that
the stockholders vote FOR the adoption of the proposed amendments.
PROPOSAL NO. 5
RATIFICATION OF SELECTION OF AUDITORS FOR FISCAL 1997
The persons named in the enclosed Proxy will vote to ratify the selection
of Arthur Andersen LLP as independent auditors for the fiscal year ending
December 31, 1997 unless otherwise directed by the Stockholders. That firm has
served as the Company's independent auditors since 1989. A representative of
Arthur Andersen LLP is expected to be present at the Meeting of Stockholders,
and will have the opportunity to make a statement and answer questions from
Stockholders if he so desires.
The Board of Directors unanimously recommends that you vote for this
proposal to select Arthur Andersen LLP as the Company's independent auditors for
fiscal 1997.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
None of the directors or executive officers of the Company has any interest
in the adoption of the above Proposals except that, (i) with respect to the
Stock Option Plans which are the subject of Proposal No. 3, and (ii) with
respect to the Employee Stock Purchase Plan which is the subject of Proposal No.
5, the Company's Directors (other than non-employee Directors) and executive
officers participate in the Stock Option Plan and the Company's Directors (other
than non-employee Directors) and officers may participate in the Employee Stock
Purchase Plan.
9
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each director
and nominee for election as a director and each executive officer of the
Company.
<TABLE>
<C> <C> <C>
Name Age Position
Steven Georgiev* 62 Chief Executive Officer and Chairman of the Board
Michael H. Smotrich* 64 President, Secretary and Chief Operating Officer
Buster Glosson 54 Director
Dr. John M. Deutch 58 Director
Louis P. Valente 66 Director
Joseph P. Caruso 37 Treasurer, Vice President, and Chief Financial Officer .
</TABLE>
* Each of those persons may be deemed a parent and/or promoter of
the Company as these terms are defined in the Rules and Regulations
promulgated under the Securities Act of 1933, as amended.
The Company currently has five Directors. All Directors are elected to hold
office until the next annual meeting of stockholders of the Company and until
their successors have been duly elected and qualified. Proposal No. 1 would
divide the Board into three classes, each serving for staggered three-year
terms. See "Proposal No. 1 - Amendments of Restated Certificate of
Incorporation." Officers are elected to serve subject to the discretion of the
Board of Directors and until their successors are appointed. There are no family
relationships among executive officers and directors of the Company.
STEVEN GEORGIEV. Mr. Georgiev has served as Chief Executive Officer of the
Company since November 12, 1993, and became a full time employee of the Company
on January 1, 1995. Mr. Georgiev was a consultant to Dymed from June 1991 until
its September 1991 merger with the Company, at which time he became the Chairman
of the Company's Board of Directors. Mr. Georgiev is a financial and business
consultant to a variety of emerging, high growth companies. Mr. Georgiev has
been a director of Excel Technology, Inc. since 1992, and of Dynagen, Inc. since
1996. Mr. Georgiev was Chairman of the Board of Directors of Dynatrend, Inc., a
publicly-traded consulting firm that he co-founded in 1972, until February 1989.
Mr. Georgiev has a B.S. in Engineering Physics from Cornell University and an
M.S. in Management from the Massachusetts Institute of Technology (Sloan
Fellow).
MICHAEL H. SMOTRICH. Dr. Smotrich was a consultant to Dymed from May 1992
until its merger with the Company in September 1992, at which time he became the
Company's Executive Vice President, Chief Operating Officer, Secretary and a
director. In August 1994, Dr. Smotrich became the Company's President. From July
1988 until May 1991, Dr. Smotrich was an independent consultant specializing in
the development and manufacture of laser based medical products. Dr. Smotrich
was Vice President of Operations at Candela Laser Corp. from June 1987 to June
1988, where he was responsible for medical laser production and product
development. From July 1984 to June 1987, as Corporate Vice President of
Research and Development, Dr. Smotrich was responsible for the design and
development of surgical laser products at Merrimack Laboratories, Inc., which
was acquired by the LaserSonics division of Cooper Laboratories, Inc. From 1972
to 1984, Dr. Smotrich was Vice President in charge of the Electro-Optics Group
at Avco Everett Research Laboratory, Inc., working in the laser technology
field. Dr. Smotrich received a certificate from the Advanced Management Program
at Harvard Graduate School of Business Administration and has a B.S. in Physics
from the Massachusetts Institute of Technology and an M.S. and Ph.D. in Physics
from Columbia University.
BUSTER GLOSSON. Mr. Glosson has been a director of the Company since
September 1, 1996. From 1965 until June 1994, he was an officer in the United
States Air Force (USAF). Most recently, he served as a Lieutenant General and
Deputy Chief of Staff for plans and operations, Headquarters USAF, Washington,
D.C. Mr. Glosson is a veteran of combat missions in Vietnam and, during the Gulf
War, he commanded the 14th Air Force Division and was the director of campaign
plans for the United States Central Command Air Forces, Riyadh, Saudi Arabia. In
1994 he founded and has since served as President of Eagle Ltd., a consulting
firm concentrating on international business opportunities in the
high-technology arena. He is also Chairman and CEO of Alliance
10
<PAGE>
Partners Inc., an investment holding company with a focus on international
business. He also serves as a director of GreenMan Technologies, Inc., The
American Materials and Technologies Corporation, and Skysat Communication
Network Corporation, all publicly held companies.
JOHN M. DEUTCH. Dr. Deutch became a director of the Company on February 1,
1997. In May 1995 he was sworn in as Director of Central Intelligence (DCI)
following a unanimous vote in the Senate, and served as DCI until December 1996.
In this position he was head of the Intelligence Community (all foreign
intelligence agencies of the United States) and directed the Central
Intelligence Agency. From March 1994 to May 1995 he served as the Deputy
Secretary of Defense. From March 1993 to March 1994, Dr. Deutch served as Under
Secretary of Defense for Acquisitions and Technology. Dr. Deutch has been a
member of the faculty of the Massachusetts Institute of Technology (M.I.T.) from
1970 to the present, where he was an associate professor and professor of
chemistry, Chairman of the Department of Chemistry, Dean of Science and Provost.
Currently, Dr. Deutch is an MIT Institute Professor and serves as director for
the following publicly held companies: Ariad Pharmaceutical, Citicorp, CMS
Energy and Schlinberger Ltd. Dr. Deutch has a B.A. in history and economics from
Amherst College and both a B.S. in chemical engineering and a Ph.D. in physical
chemistry from M.I.T. He holds honorary degrees from Amherst College, the
University of Lowell and Northeastern University.
LOUIS P. VALENTE. Mr. Valente became a director of the Company on February
1, 1997. From 1968 to 1995 Mr. Valente held numerous positions at EG&G, Inc., a
diversified technology company which provides optoelectronic, mechanical and
electromechanical components and instruments to manufacturers and end-user
customers in varied markets that include aerospace, automotive, transportation,
chemical, petrochemical, environmental, industrial, medical, photography,
security and other global arenas. In 1968 he began his career at EG&G, Inc. as
an Assistant Controller and held executive positions including Assistant
Treasurer and Corporate Treasurer before becoming a Senior Vice President of
EG&G, Inc. In this position he presided over and negotiated acquisitions,
mergers and investments. Since his retirement in 1995, Mr. Valente has served in
a similar role on a consulting basis. Currently, Mr. Valente serves as a
director in Micrion Corporation, a publicly held company. Mr. Valente is a
Certified Public Accountant and a graduate of Bentley College.
JOSEPH P. CARUSO. Mr. Caruso joined the Company in March 1992 as Controller
in a part-time capacity and became a full-time employee on June 15, 1992.
Effective January 1, 1993, Mr. Caruso became Vice President and Chief Financial
Officer. From October 1989 to June 1992, Mr. Caruso was the Chief Financial
Officer of Massachusetts Electrical Manufacturing Co., Inc., a privately held
manufacturer of power distribution equipment. From September 1987 to October
1989, Mr. Caruso was a manager with Robert Half, an international consulting
firm. From December 1982 to September 1987, Mr. Caruso was a manager with
Pannell Kerr Forster, an international public accounting firm. Mr. Caruso became
a Certified Public Accountant in 1984 and has a B.S. in accounting from
Merrimack College.
Committees and Meetings of the Board
All of the Directors then in office attended at least 75% of the Meetings
of Board of Directors and the committees on which they served during the year
ended December 31, 1996. The Board of Directors met two times during the year
ended December 31, 1996 and acted 25 times by unanimous written consent.
The Board currently has three committees.
The Audit Committee (currently consisting of Messrs. Glosson and Valente)
held one meeting during the year ended December 31, 1996. The Audit Committee's
functions include making recommendations to the Board of Directors relative to
the appointment of independent public accountants, conferring with the Company's
independent public accountants regarding the scope and the results of the audit
of the Company's books and accounts and reporting the same to the Board of
Directors, and reviewing the internal accounting procedures of the Company.
The Compensation Committee (currently composed of Messrs. Georgiev, Glosson
and Deutch) held six meetings during the year ended December 31, 1996. The
Compensation Committee's functions include the administration of the Company's
stock option plans and stock purchase plan and making recommendations to the
Board of Directors relative to the compensation of officers and employees.
11
<PAGE>
The Investment Committee (currently composed of Messrs. Valente and Deutch)
was formed on March 12, 1997. The Investment Committee's functions include
reviewing and approving certain new investments as well as acquisition and
disposition opportunities.
The Company does not have a standing nomination committee of the Board of
Directors or a committee performing similar functions.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Mr. Glosson, Mr. Valente and Dr. Deutch are paid $60,000 per year for their
services as Director. For his services as a Director, Mr. Glosson received a
warrant to purchase 100,000 shares of Common Stock at an exercise price of $8.00
per share. This warrant vests over a period of three years and expires on August
26, 2001. For his services as a Director, Mr. Valente received a warrant to
purchase 50,000 shares of Common Stock at an exercise price of $7.00 per share.
This warrant vests immediately and expires on December 26, 2001. For his
services as a Director, Dr. Deutch received a warrant to purchase 50,000 shares
of Common Stock at an exercise price of $6.75 per share. This warrant vests
immediately and expires on December 27, 2001. In accordance with Company policy,
Directors who are employees of the Company serve as Directors without
compensation. Directors are also reimbursed for reasonable out-of-pocket
expenses incurred in attending Board of Directors meetings.
Executive Compensation
The following table sets forth certain information concerning the
compensation for services rendered in all capacities to the Company for the
fiscal years ended December 31, 1995 and 1996 of (i) the Chief Executive Officer
of the Company during 1996 and (ii) the other executive officers of the Company
serving on December 31, 1996 whose salary and bonuses for 1996 exceeded $100,000
(the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<C> <C> <C> <C> <C> <C>
Long-Term
Compensation
Awards
----------------
Securities All
Underlying Other
Name and Fiscal Salary Bonus Options(1) Compensation
Principal Position Year ($) ($) (#) ($)
-------------- ------------ ---------------- ---------------- -----------------------
Steven Georgiev 12/31/96 $275,000 $ 305,000 800,000 $ --
Chief Executive Officer 12/31/95 $161,800 $ 50,000 450,000 $ --
12/31/94 $ -- $ -- -- $ 80,000(2)
Michael H. Smotrich 12/31/96 $214,000 $ 50,000 300,000 $ --
President, Chief 12/31/95 $149,400 $ 50,000 250,000 $ --
Operating Officer, 12/31/94 $ 92,000 $ 20,000 170,000 $ --
Secretary
Joseph P. Caruso 12/31/96 $180,000 $ 64,000 450,000 $ --
Vice President and Chief 12/31/95 $109,600 $ 75,000 250,000 $ --
Financial Officer 12/31/94 $ 70,400 $ 20,000 170,000 $ --
</TABLE>
(1) During fiscal 1996 and fiscal 1995, the Company did not grant any
restricted stock awards or stock appreciation rights or make any long-term
incentive plan payouts to any of the Named Executive Officers.
12
<PAGE>
(2) Represents monies paid by the Company to Mr. Georgiev during the year
ended December 31, 1994 pursuant to a consulting arrangement between the Company
and Mr. Georgiev.
Option Grants in Last Fiscal Year
The following table sets forth certain information regarding stock options
and warrants granted during 1996 by the Company to the Named Executive Officers:
OPTION GRANTS
<TABLE>
<C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Percent of
Number of Shares Total Options
Underlying Granted
Name and Options to Employee Exercise Price Expiration
Principal Position Granted in Fiscal Year Per Share Date
- -----------------------------------------------------------------------------------------------------------
Steven Georgiev
Chief Executive Officer 300,000(1) 5.87% 6.75 2/5/01
Chairman of the Board 200,000(1) 3.91% 6.00 12/18/01
300,000(1) 5.87% 8.00 8/26/01
Michael H. Smotrich
President, Chief 250,000(2) 4.89% 6.75 2/5/01
Operating Officer, 50,000(2) .98% 6.00 12/18/01
Secretary
Joseph P. Caruso
Vice President and Chief 200,000(3) 3.91% 8.00 8/26/01
Financial Officer 150,000(3) 2.94% 6.75 2/5/01
100,000(3) 1.96% 6.00 12/18/01
</TABLE>
(1) On February 5, 1996, the Company granted Mr. Georgiev 300,000 shares of
Common Stock, issuable upon exercise of a five year warrant at an exercise
price of $6.75 per share, all of which vests immediately. On December 19,
1996, the Company granted Mr. Georgiev 200,000 shares of Common Stock,
issuable upon exercise of a five year warrant at an exercise price of $6.00
per share, of which 66,666 shares vest immediately, 66,667 shares vest a
year from issuance and the final 66,667 shares vest two years from
issuance. On August 27, 1996, the Company granted Mr. Georgiev 300,000
shares of Common Stock issuable upon exercise of a five year stock option
at an exercise price of $8.00 per share, of which 100,000 shares vest
immediately, 100,000 shares vest one year from issuance and the final
100,000 shares vest two years from issuance.
(2) On February 5, 1996, the Company granted Dr. Smotrich 250,000 shares of
Common Stock, issuable upon exercise of a five year warrant at an exercise
price of $6.75 per share, all of which vests immediately. On December 19,
1996, the Company granted Dr. Smotrich 50,000 shares of Common Stock,
issuable upon exercise of a five year warrant at an exercise price of $6.00
per share, of which 16,666 shares vest immediately, 16,667 shares vest a
year from issuance and the final 16,667 shares vest two years from
issuance.
(3) On February 5, 1996, the Company granted Mr. Caruso 150,000 shares of
Common Stock, issuable upon exercise of a five year warrant at an exercise
price of $6.75 per share, all of which vests immediately. On December 19,
1996, the Company granted Mr. Caruso 100,000 shares of Common Stock,
issuable upon exercise of a five year warrant at an exercise price of $6.00
per share, of which 33,333 shares vest immediately, 33,333 shares vest a
year from issuance and the final 33,334 shares vest two years from
issuance. On August 27, 1996, the Company granted Mr. Caruso 200,000 shares
of Common Stock issuable upon exercise of a five year stock option at an
exercise price of $8.00 per share, of which 66,666
13
<PAGE>
shares vest immediately, 66,667 shares vest one year from issuance and the
final 66,667 shares vest two years from issuance.
Aggregated Option Exercises in Last Year and Fiscal Year-End; Option/SAR Values
The following table sets forth information on an aggregated basis regarding
the exercise of stock options during the last completed fiscal year by each of
the Named Executive Officers and the value of unexercised options at December
31, 1996:
<TABLE>
<C> <C> <C> <C> <C>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Shares Options/SARs Options/SARs
Acquired Value at FY-End (#) at FY-End ($)(1)
Name and on Exercise Realized Exercisable/ Exercisable/
Principal Position (#) ($) Unexercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------
Steven Georgiev
Chief Executive Officer 260,000 426,200 703,666/333,334(2) 1,115,750/100,000
Michael H. Smotrich
President, Chief -- -- 686,666/33,334(3) 1,881,249/25,000
Operating Officer,
Secretary
Joseph P. Caruso
Vice President and Chief -- -- 699,999/200,001(4) 2,041,250/50,000
Financial Officer
</TABLE>
(1) Value is based on the December 31, 1996 closing price on the Nasdaq Small
Cap Market of $6.75 per share. Actual gains, if any, on exercise will depend on
the value of the Common Stock on the date of the sale of the shares.
(2) Includes warrants to purchase Common Stock and stock options with exercise
prices ranging from $2.00-$8.00, all of which expire on or before December 18,
2001.
(3) Includes warrants to purchase Common Stock and stock options with exercise
prices ranging from $2.125-$6.75, all of which expire on or before December 18,
2001.
(4) Includes warrants to purchase Common Stock and stock options with exercise
prices ranging from $2.00-$8.00, all of which expire on or before December 18,
2001.
(5) Consists of a warrant to purchase Common Stock at an exercise price of $6.00
per share expiring on December 19, 2001.
Employment Agreements
Effective January 1, 1997, the Company entered into three-year key
employment agreements with Mr. Georgiev, Dr. Smotrich and Mr. Caruso. Pursuant
to these agreements, Mr. Georgiev serves as Chief Executive Officer, Dr.
Smotrich serves as President and Chief Operating Officer and Mr. Caruso serves
as Chief Financial Officer, at annual base salaries of $350,000, $250,000 and
$200,000, respectively. 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.
14
<PAGE>
The agreements provide that, in the event of termination (i) by the Company
without cause, as defined, or by the executive for good reason, as defined,
other than within one year of a change in control, the Company shall pay the
executive four times the executive's annual base salary then in effect, and
continue the executive's employee benefits for the remaining term of the
agreement; (ii) within one year following a change in control, the Company shall
pay the executive eight times the executive's annual compensation, as defined,
and continue the executive's employee benefits for the remaining term of the
agreement; and (iii) by the executive for good reason within one year following
an approved change in control, as defined, the Company shall pay the executive
eight times the executive's annual base salary then in effect and any bonus
compensation to which the executive would have been entitled if he had remained
as an employee under the agreement to the end of the fiscal year, and continue
the executive's employee benefits for the remaining term of the agreement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of April 4, 1997, the number of shares
of the Company's Common Stock owned by each director, by the Company's Principal
Executive Officer and each of the other Named Executive Officers, by all
directors and executive 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 power with respect to the shares indicated.
<TABLE>
<C> <C> <C>
Percentage
Number of Shares of Class
Name and Address of Beneficial Owner Beneficially Owned (1)
- ------------------------------------ ------------------ -----------
Steven Georgiev(5) 1,072,871 3.25%
66 Cherry Hill Drive
Beverly, MA 01915
Joseph P. Caruso(6) 768,257 2.33%
66 Cherry Hill Drive
Beverly, MA 01915
Michael H. Smotrich(7) 1,224,256 3.71%
66 Cherry Hill Drive
Beverly, MA 01915
Buster C. Glosson(8) 53,333 *
66 Cherry Hill Drive
Beverly, MA 01915
Louis P. Valente(9) 54,000 *
66 Cherry Hill Drive
Beverly, MA 01915
John M. Deutch(9) 50,000 *
66 Cherry Hill Drive
Beverly, MA 01915
All Directors and Executive Officers as a Group 3,222,717 9.34%
(6 persons)(10)
</TABLE>
* Less than one percent.
15
<PAGE>
(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 and warrants are deemed to be
outstanding for the purpose of computing the percentage ownership of 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. Percentage ownership is based on 32,267,890 shares of Common Stock
outstanding.
(5) Includes 703,666 shares of Common Stock which Mr. Georgiev has the right to
acquire within 60 days pursuant to the exercise of options and warrants,
40,000 shares of Common Stock held by family members and 2,051 shares held
in the Company 401(k) Plan.
(6) Includes 699,999 shares of Common Stock which Mr. Caruso has the right to
acquire within 60 days pursuant to the exercise of options and warrants,
and 1,432 shares held in the Company 401(k) Plan.
(7) Includes 686,666 shares of Common Stock which Dr. Smotrich has the right to
acquire within 60 days pursuant to the exercise of options and warrants,
and 8,000 shares of Common Stock owned by family members.
(8) Includes 53,333 shares of Common Stock which Mr. Glosson has the right to
acquire within 60 days pursuant to the exercise of options and warrants.
(9) Includes 50,000 shares of Common Stock which Mr. Valente and Mr. Deutch
have the right to acquire within 60 days pursuant to the exercise of
warrants.
(10) For purposes of this calculation, total issued and outstanding shares
includes an aggregate of 2,243,664 shares issuable pursuant to options and
warrants exercisable within 60 days.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From January 1996 to March 1997 the Company has advanced varying amounts to
Steven Georgiev, the Company's Chief Executive Officer and Chairman of the
Board; the total outstanding indebtedness at April 18, 1997 was $585,993. These
advances are evidenced by demand promissory notes which bear interest at 7% and
are collateralized by stock in the Company at a 75% loan to value ratio.
From January 1996 to February 1997 the Company has advanced varying amounts
to Michael H. Smotrich, the Company's President and Chief Operating Officer; the
total outstanding indebtedness at March 31, 1997 was $193,156. These advances
are evidenced by demand promissory notes which bear interest at 7% and are
collateralized by stock in the Company at a 75% loan to value ratio.
At December 31, 1995, the Company had notes receivable for $3,150,000 from
the American Material & Technologies Corporation ("AM&T") evidenced by a
$3,000,000 promissory note and a $150,000 promissory note, both with interest at
the rate of 10% per annum. Steve Georgiev is chairman of AM&T and owns 13% of
AM&T's outstanding common stock. On March 29, 1996, the Company assigned a
portion of its notes receivable at a face value of $1,500,000 to a
non-affiliated individual for $1,500,000. The remaining outstanding portions of
the notes was paid off in 1996. The Company owns a total of 463,664 shares of
AM&T's common stock at March 31, 1997. These shares were purchased at a cost of
$375,000 and have a market value at March 31, 1997 of $2,781,984.
16
<PAGE>
In 1996 the Company had loans outstanding at various points in time
totaling $5,800,000 to Alliance Partners, Inc. Buster Glosson, a director of the
Company, is Chairman and Chief Executive Officer of Alliance Partners, Inc.
These loans accrued interest at a rate of 10% per annum and were all paid off by
December 31, 1996.
In 1996 the Company made consulting payments totaling $109,000 to Eagle
Limited. Buster Glosson is President of Eagle Limited.
On December 18, 1996, Steven Georgiev pledged 77,000 shares of his AM&T
common stock in favor of the Company to secure a loan of $500,000 made by the
Company to Trani, Inc.; on April 16, 1997, Mr. Georgiev increased the number of
pledged AM&T shares to 100,000.
On March 31, 1997, Steven Georgiev pledged 112,000 shares of his AM&T
common stock in favor of the Company to secure a loan of $500,000 made by the
Company to JCV Capital Corp.; on April 16, 1997, Mr. Goergiev decreased the
number of AM&T shares pledged to 100,000.
(See also "Employment Agreements.")
The Company believes the foregoing transactions were on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
The Company's policy, as adopted by its Board of Directors on December 16, 1996,
is that, in order to reduce the risks of self-dealing or a breach of the duty of
loyalty to the Company, all transactions between the Company and any of its
officers, directors or principal stockholders must be for bona fide purposes,
will be subject to approval by a majority of the disinterested members of the
Board of Directors of the Company, and must be on terms no less favorable to the
Company than could be obtained from unaffiliated parties.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES AND EXCHANGE ACT
OF 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's Common Stock ("10% Stockholders"), to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership of the Company's
Common Stock and other equity securities on Form 3 and reports of changes in
such ownership on Form 4 and Form 5. Officers, directors and 10% Stockholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company during, and with respect to, its most recent
fiscal year, or written representations that Form 5 was not required, the
Company believes that all Section 16(a) filing requirements applicable to its
officers, directors and 10% Stockholders were fulfilled in a timely manner.
SOLICITATION
No compensation will be paid by any person in connection with the
solicitation of proxies. Brokers, banks and other nominees will be reimbursed
for their out-of-pocket expenses and other reasonable clerical expenses incurred
in obtaining instructions from beneficial owners of the Common Stock. In
addition to the solicitation by mail, special solicitation of proxies may, in
certain instances, be made personally or by telephone by directors, officers and
certain employees of the Company. It is expected that the expense of such
special solicitation will be nominal. All expenses incurred in connection with
this solicitation will be borne by the Company.
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DEADLINE FOR SUBMISSION OF
1997 STOCKHOLDER PROPOSALS AND NOMINATIONS
Stockholders who wish to present proposals appropriate for consideration at
the Company's Annual Meeting of Stockholders to be held in 1998 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 December 31, 1997 in order for the
proposals to be considered for inclusion in the Company's proxy statement and
form of proxy relating to such Annual Meeting.
MISCELLANEOUS
The Board does not intend to present to the Annual Meeting any business
other than the proposals listed herein, and the Board was not aware, a
reasonable time before mailing this Proxy Statement to stockholders, of any
other business which may be properly presented for action at the Annual Meeting.
If any other business should come before the Annual Meeting, the persons present
will have discretionary authority to vote the shares they own or represent by
proxy in accordance with their judgment.
AVAILABLE INFORMATION
Stockholders of record on May 1, 1997 will receive a Proxy Statement and
the Company's 1996 Annual Report, which contains detailed financial information
concerning the Company. The Company will mail, without charge, a copy of the
Company's Annual Report on Form 10-KSB/A (excluding exhibits) to any stockholder
solicited hereby who requests it in writing. Please submit any such written
request to John Ingoldsby, Investor Relations, Palomar Medical Technologies,
Inc., 66 Cherry Hill Drive, Beverly, Massachusetts 01915. In addition, the SEC
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically, including the
Company. The SEC's Web site address is http://www.sec.gov.
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EXHIBIT A
STAGGERED BOARD OF DIRECTORS
PROPOSED AMENDMENT: The Restated Certificate of Incorporation of the
Corporation is hereby amended by deleting Article FIFTH thereof in its entirety
and substituting therefor the following new Article FIFTH:
FIFTH. (a) (1) The business and affairs of the Corporation shall be
managed under the direction of a Board of Directors, consisting of not
less than three nor more than twelve Directors, the number of which
shall be determined from time to time by resolution adopted by
affirmative of a majority of Directors then in office. The Directors
shall be classified with respect to the time for which they shall
severally hold office by dividing them into three classes, Class I,
Class II and Class III, each consisting as nearly as possible of
one-third of the whole number of the Board of Directors. All Directors
shall hold office until their successors are chosen and qualified, or
until their earlier death, resignation, disqualification or removal. At
the first meeting held for election of the Board of Directors following
adoption of this provision by the stockholders of the Corporation,
Class I Directors shall be elected for a term of one year; Class II
Directors shall be elected for a term of two years; and Class III
Directors shall be elected for a term of three years; and at each
annual election thereafter, successors to the class of Directors whose
terms shall expire that year shall be elected to hold office for a term
of three years, so that the term of office of one class of Directors
shall expire in each year. Any vacancy on the Board of Directors that
results from an increase in the number of Directors may be filled by
the affirmative vote of a majority of the Directors then in office, and
any other vacancy on the Board of Directors may be filled by the
affirmative vote of a majority of the Directors then in office,
although less than a quorum, or by a sole remaining Director. Any
Director elected to fill a vacancy not resulting from an increase in
the number of Directors shall serve for a term equivalent to the
remaining unserved portion of the term of such newly elected Director's
predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock issued by the Corporation shall
have the right, voting separately by class or series, to elect
Directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of
such directorships shall be governed by the terms of the Certificate of
Incorporation applicable thereto, and such Directors shall not be
divided into classes pursuant to this Article FIFTH (a)(1) unless
expressly provided by such terms.
(2) No amendment to the Certificate of Incorporation
of the Corporation shall amend, alter, or repeal any of the provisions
of this Article FIFTH (a) unless the amendment effecting such
amendment, alteration or repeal shall receive the affirmative vote of
or consent of the holders of seventy-five percent (75%) of all shares
of stock of the Corporation entitled to vote at a meeting of
stockholders held for the purpose of voting on such amendment,
considered for the purposes of this Article FIFTH as one class;
provided that this paragraph FIFTH (a)(2) shall not apply to, and such
seventy-five percent (75%) vote shall not be required for, any such
amendment recommended to the stockholders pursuant to a resolution of
the Board of Directors approved by two-thirds of the Continuing
Directors. For purposes of this paragraph FIFTH (a)(2), a "Continuing
Director" shall mean any Director of the Corporation who is or becomes
a Director on the date that this Article FIFTH is first adopted by the
Corporation's stockholders or any Director elected by a majority of the
Continuing Directors then in office to succeed any Director or to fill
any vacancy on the Board of Directors whether resulting from an
increase in the number of Directors or otherwise.
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(b) In furtherance and not in limitation of powers
conferred by statute, it is further provided that:
(1) election of Directors need not be by written
ballot unless so provided in the By-Laws of the
Corporation; and
(2) the Board of Directors is expressly
authorized to adopt, amend or repeal the By-Laws of the
Corporation.
ELIMINATION OF ACTION BY STOCKHOLDER CONSENT
PROPOSED AMENDMENT: The Restated Certificate of Incorporation of the
Corporation is hereby amended by (a) amending Article Tenth thereof by deleting
the word "TENTH" and inserting in its place the word "ELEVENTH," (b) amending
Article Eleventh thereof by deleting the word "ELEVENTH" and inserting in its
place the word "TWELFTH," and (c) by inserting, after Article Ninth, the
following new Article:
TENTH: (a) No action shall be taken by the stockholders of the
Corporation except at an annual or special meeting of the stockholders
of the Corporation."
(b) No amendment to the Certificate of Incorporation of the
Corporation shall amend, alter, or repeal any of the provisions of this
Article TENTH unless the amendment effecting such amendment, alteration
or repeal shall receive the affirmative vote of or consent of the
holders of seventy-five percent (75%) of all shares of stock of the
Corporation entitled to vote at a meeting of stockholders held for the
purpose of voting on such amendment, considered for the purposes of this
Article TENTH as one class; provided that this paragraph TENTH (b) shall
not apply to, and such seventy-five percent (75%) vote shall not be
required for, any such amendment recommended to the stockholders
pursuant to a resolution of the Board of Directors approved by
two-thirds of the Continuing Directors. For purposes of this paragraph
TENTH (b), a "Continuing Director" shall mean any Director of the
Corporation who is or becomes a Director on the date that this Article
TENTH is first adopted by the Corporation's stockholders or any Director
elected by a majority of the Continuing Directors then in office to
succeed any Director or to fill any vacancy on the Board of Directors
whether resulting from an increase in the number of Directors or
otherwise.
TEXT OF PROPOSED CONFORMING BY-LAW AMENDMENTS
The By-laws are hereby amended by:
* deleting Article II, Section 8 thereof in its entirety;
* deleting Article III, Section 2 thereof in its entirety
and substituting therefor the following new Section 2:
2. NUMBER AND TENURE. The board shall consist of not less than three
nor more than twelve Directors, the number of which shall be determined
from time to time by resolution adopted by affirmative of a majority of
Directors then in office. Subject to the foregoing and to the
provisions of the certificate of incorporation, the number of directors
may be increased or decreased at any time or from time to time by vote
of a majority of directors then in office, except that such decrease by
vote of directors shall only be made to eliminate vacancies existing by
reason of the death, resignation or removal of one or more directors.
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The directors shall be elected at the annual meeting of stockholders
except as provided in Section 4.5 of these By-laws. Directors need not
be stockholders.
The directors shall be classified with respect to the time for which
they shall severally hold office by dividing them into three classes,
each consisting of one-third of the whole number of the board of
directors, and all directors shall hold office until their successors
are chosen and qualified, or until their earlier death, resignation, or
removal. At the first meeting held for election of the board of
directors following adoption of these By-laws, directors of the first
class shall be elected for a term of one year; directors of the second
class shall be elected for a term of two years, directors of the third
class shall be elected for a term of three years; and at each annual
election thereafter, successors to the class of directors whose terms
shall expire that year shall be elected to hold office for a term of
three years, so that the term of offices of one class of directors
shall expire in each year.
* deleting Section 6 thereof in its entirety and substituting
therefor the following new Section 6:
6. RESIGNATION OR REMOVAL OF DIRECTORS. Any director or the entire
board of directors may be removed for "Cause," as hereinafter defined,
by the holders of a majority of the stock issued and outstanding and
entitled to vote at an election of directors; PROVIDED, HOWEVER, that
the directors elected by a particular class of stockholders may be
removed only by the vote of the holders of a majority of the shares of
such class. Any director may resign at any time by delivering a
resignation in writing to the principal executive officer of the
secretary or to a meeting of the board of directors, such resignation
shall be effective upon receipt unless specified to be effective at
some other time; and without in either case the necessity of its being
accepted unless the resignation shall so state. No director resigning
and (except where a right to receive compensation shall be expressly
provided in a duly authorized written agreement with the Corporation)
no director removed shall have any right to receive compensation as
such director for any period following the director's resignation or
removal, or any right to damages on account of such removal, whether
the director's compensation be by the month or by the year or
otherwise; unless in the case of a resignation, the directors, or in
the case of removal, the body acting on the removal, shall in heir or
its discretion provide for compensation. For purposes of this Section
6, "Cause" means:
(A) willful and continued material failure, refusal or
inability to perform one's duties to the Corporation or the
willful engaging in gross misconduct materially and demonstrably
damaging to the Corporation;
(B) conviction for any crime involving moral turpitude
or any other illegal act that materially and adversely reflects
upon the business, affairs or reputation of the Company or on
one's ability to perform one's duties to the Corporation.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PALOMAR MEDICAL TECHNOLOGIES, INC. A STOCKHOLDER WISHING TO
VOTE IN ACCORDANCE WITHT HE RECOMMENDATIONS OF THE
BOARD OF DIRECTORS NEED ONLY SIGN AND DATE THIS REPORT AND
RETURN IT IN THE ENCLOSED ENVELOPE.
PALOMAR MEDICAL TECHNOLOGIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 18, 1997
The undersigned stockholder of Palomar Medical Technologies, Inc. (the
"Company") revoking all prior proxies, hereby appoints Joseph P. Caruso and
Sarah B. Reed, Esq., or any of them acting singly, proxies, with full power of
substitution, to vote all shares of capital stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held on Wednesday, June 18, 1997 beginning at 10:30 a.m., and at
any and all adjournments thereof, upon matters set forth in the Notice of Annual
Meeting dated May ___, 1997 and the related Proxy Statement, copies of which
have been received by the undersigned, and in their discretion upon any business
that may properly come before the meeting or any adjournments thereof.
Attendance of the undersigned at the meeting or any adjourned session thereof
will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate the intention of the undersigned to vote the shares
represented hereby in person prior to the exercise of this proxy.
1. To amend the Company's Restated Certificate of Incorporation to (a)
classify the Board of Directors into three classes, each class consisting
as nearly as possible of one-third of the whole number of the Board of
Directors; (b) require that action required or permitted to be taken by
stockholders of the Company be taken at an annual or special meeting of
stockholders and not by written consent of stockholders; and (c) provide
that, unless certain conditions are met, the proposed amendments may not be
amended without a vote of the holders of seventy-five (75%) of outstanding
voting shares of stock of the Company entitled to vote at a meeting of
stockholders held for the purpose of voting on such amendment.
/ / FOR / / AGAINST / / ABSTAIN
2. To elect Steven Georgiev as a Class I Director for an initial term of one
year, Michael Smotrich and Buster Glosson as Class II Directors for an
initial term of two years, and John Deutch and Louis Valente as Class III
Directors of the Company, each for a term of three years or, in the
alternative, should Proposal No. 1 not be approved, to elect each of the
foregoing nominees as Directors of the Company to serve until the 1998
annual meeting of stockholders and until their respective successors are
elected and have qualified.
/ / FOR / / AGAINST the nominees / / FOR except
vote withheld
from the
following
nominee(s):
-------------
-------------
3. To amend the 1991, 1993, 1995 and 1996 Stock Option Plans.
/ / FOR / / AGAINST / / ABSTAIN
4. To amend the 1996 Employee Stock Purchase Plan.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
5. To select Arthur Andersen LLP as the Company's auditors for fiscal 1997.
/ / FOR / / AGAINST / / ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF
NO DIRECTION IS GIVEN WITH RESPECT TO ONE OR MORE OF THE PROPOSALS SET FORTH
ABOVE, WILL BE VOTED FOR SUCH PROPOSAL OR PROPOSALS.
DATED: _________________, 1997
Signature of Stockholder(s)
Please promptly date and sign this proxy and mail it in the enclosed envelope to
assure representation of your shares. No postage need be affixed if mailed in
the United States. PLEASE SIGN EXACTLY AS NAME(S) APPEAR ON STOCK CERTIFICATE.
If stockholder is a corporation, please sign full corporate name by president or
other authorized officer and, if a partnership, please sign full partnership
name by an authorized partner or other person.
Mark here if you plan to attend the meeting. / /
