<PAGE>
As filed, via EDGAR, with the Securities and Exchange Commission on June 9,
1999.
File No:
ICA No:
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 [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[_]Confidential, for Use of the
[_]Preliminary Proxy Statement Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X]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)
The Monterey Stockholders Group LLC, Mark T. Smith, The
Rockside Foundation, Logg Investment Research, Inc.,
Thomas O'Brien
and
The R. Templeton Smith Foundation
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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 ActRule 0-11:
(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:
<PAGE>
1999 ANNUAL MEETING OF STOCKHOLDERS
of
PALOMAR MEDICAL TECHNOLOGIES, INC.
45 Hartwell Avenue
Lexington, MA 02421
----------------
PROXY STATEMENT
of
THE MONTEREY STOCKHOLDERS GROUP LLC
----------------
This Proxy Statement and the accompanying Letter to Stockholders and BLUE
Annual Meeting proxy card are furnished in connection with the solicitation of
proxies by The Monterey Stockholders Group LLC ("Monterey") to be used at the
1999 Annual Meeting of Stockholders of Palomar Medical Technologies, Inc., a
Delaware corporation (the "Company"), to be held at the Sheraton Tara
Lexington Inn, located at 727 Marrett Road, Lexington, Massachusetts 02421, on
June 23, 1999, at 10:00 a.m., local time and at any adjournments or
postponements thereof (the "Annual Meeting").
Management's Proposals
At the Annual Meeting, management of the Company will seek approval:
1. To ratify the selection by the Board of Directors of Arthur Andersen LLP
as the Company's independent auditors for the fiscal year ending
December 31, 1999; and
2. To elect a slate of four Directors, consisting of the Company's current
four Directors, who would serve for the coming year.
Monterey's Proposals
Monterey, which is owned by a group of stockholders that collectively owns
approximately 12.1% of the Company's shares, is soliciting your proxy in
support of the election of its four nominees named below. ALL OF MONTEREY'S
NOMINEES INTEND TO WORK FOR THE ENHANCEMENT OF STOCKHOLDER VALUE FROM ITS
CURRENT HISTORIC LOW AS REFLECTED IN THE COMPANY'S STOCK PRICE. As we describe
more fully below, Monterey's platform includes:
. developing with an expert consultant a short and long-term plan for
strategic growth;
. an immediate review, with a view to reduction, of the Company's
overhead;
. pursuing a significant stock buyback program;
. capitalizing on the Company's superior technology; and
. improving investor relations in order to enhance market appreciation of
the Company and its prospects.
Monterey favors the appointment of auditors.
MONTEREY URGES YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY THE COMPANY. IF
YOU HAVE ALREADY DONE SO, YOU MAY REVOKE YOUR PROXY BY DELIVERING A WRITTEN
NOTICE OF REVOCATION OR A LATER DATED PROXY FOR THE
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ANNUAL MEETING TO MACKENZIE PARTNERS, INC., OR TO THE SECRETARY OF THE
COMPANY, OR BY VOTING IN PERSON AT THE ANNUAL MEETING. SEE "PROXY PROCEDURES"
BELOW.
Monterey, a Delaware limited liability company, is owned by its members,
Mark T. Smith, The Rockside Foundation, Logg Investment Research, Inc., Thomas
O'Brien and The R. Templeton Smith Foundation. These members acquired
interests in Monterey, which had previously been an inactive entity, in May
1999 for the purpose of conducting this proxy solicitation. You can find
information on the members of Monterey in Appendix A to this proxy statement.
The members of Monterey have also filed a statement on Schedule 13D with the
Securities and Exchange Commission concerning their ownership of Company
stock. The members also own currently exercisable warrants to purchase common
stock, exercisable at $21.00 per share. If these warrants are taken into
account, the members of Monterey would be deemed to own 15.4% of the Company
stock under SEC rules.
Rule 14a-5(c) of the SEC(/1/) allows us to refer you to the Company's
definitive proxy statement dated May 14, 1999 for certain information. This
includes the record date for the Annual Meeting; the number of shares of
Company stock outstanding and eligible to vote at the Annual Meeting; the
number of votes per share of Company stock; the quorum requirements and
securities ownership of the Company; information about the Company's officers
and directors, including compensation; information about the approval of the
appointment of Arthur Andersen LLP; and the date by which stockholders must
submit proposals for consideration at the next annual meeting.
This Proxy Statement, the accompanying Letter to Stockholders and the BLUE
Annual Meeting proxy card are first being furnished to Company stockholders on
or about June 9, 1999.
IMPORTANT
Monterey urges you to mark, sign, date and return the enclosed BLUE Annual
Meeting proxy card to vote FOR the Monterey Nominees and FOR the Appointment
of Auditors.
- --------
(1) Rule 14a-5(c) provides that "any information contained in any other proxy
soliciting material which has been furnished to each person solicited in
connection with the same meeting or subject matter may be omitted from the
proxy statement, if a clear reference is made to the particular document
containing such information."
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PROPOSAL 1
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has proposed the appointment of Arthur Andersen LLP to act as
the Company's independent auditors for the fiscal year ending December 31,
1999 and the financial statements relating thereto. Please see the Company
Proxy Statement for information about this proposal.
Monterey recommends a vote FOR the proposal to appoint auditors.
PROPOSAL 2
ELECTION OF DIRECTORS
According to the Company Proxy Statement, the Company currently has four
directors, all of whose terms will expire at the Annual Meeting. The Company's
by-laws currently provide for all of the directors to be elected annually at
the annual meeting of stockholders. There are no classes of directors or a
"staggered" board.
Monterey proposes that the Company's stockholders elect Monterey's nominees
as the directors of the Company. If all Monterey nominees are elected, the
Monterey nominees would constitute the entire Board of Directors of the
Company. The Monterey nominees are listed below and have furnished the
following information concerning their principal occupations or employment and
certain other matters. Each of the Monterey nominees has consented to being
named in the proxy statement and to serve if elected. Each Monterey nominee,
if elected, would hold office until the 2000 annual meeting of stockholders
and until a successor has been elected and qualified or until his earlier
death, resignation or removal. Monterey has no reason to believe that any of
the Monterey nominees will be unable to serve as a director. However, if any
one or more of the Monterey nominees is not available for election, the
persons named on the BLUE Annual Meeting proxy card will vote for the election
of such other nominees as may be proposed by Monterey.
There is no assurance that any of the Company's nominees will serve as
directors if any of the Monterey nominees are elected to the Board.
Monterey Nominees for Directors
Mark T. Smith, age 45, is currently the President and Chief Operating
Officer of Oakwood Laboratories, L.L.C., located in Oakwood, Ohio. Oakwood is
a pharmaceutical and drug development company founded in April 1997 as Ben
Venue Therapeutics, LLC to commercialize technologies licensed from
universities and other research institutions. From February 1997 to December
1997, Mr. Smith was Director of Business Development of Ben Venue
Laboratories, Inc., Bedford, Ohio, a privately owned generic and proprietary
drug manufacturer and marketer. From October 1991 to February 1997 his title
was Manager of Business Development. In such capacities, Mr. Smith initiated
and shared responsibility for the development of a five-year plan to develop
and market generic and proprietary products, and was responsible for the in-
licensing of patented products and technologies and the management of their
commercial development. Mr. Smith contributed significantly to changing the
focus of the company from contract manufacturing to product marketing, as a
result of which the company increased in value from approximately $50 million
to in excess of $500 million at the time of its sale in 1997. In April 1997 he
became President of Ben Venue Therapeutics, LLC, which subsequently was spun
off from Ben Venue Laboratories, Inc. and changed its name to Oakwood
Laboratories, L.L.C. Mr. Smith has an M.B.A. from the Stanford University
Graduate School of Business (1980) and a B.A. from Harvard College (1976). Mr.
Smith's business address is 7670 First Place, Oakwood, OH 44146.
George F. Murphy, Jr., age 50, is the Chairman and Chief Executive Officer
of AviGenics, Inc., the leading avian transgenesis animal company which he
founded in 1996. He is also a General Partner of Taraval Associates Seed
Capital Fund ("TASCF"), located in Menlo Park, California. TASCF is a venture
capital fund currently
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raising $25 million to invest in start-up and early-stage life sciences
companies. Mr. Murphy has extensive experience in the management of early-
stage ventures and in technology transfer, both as a founder and manager of
technology-driven companies and as a technology licensing professional. From
1989 through 1998, he was the owner of Taraval Associates, which provided new
venture development services to technology-based companies, primarily in the
life sciences area. In 1993 he assisted in the formation of Full Spectrum,
Inc., an Iowa-based manufacturer of peripherals for medical lasers. In 1991 he
managed a technology acquisition program for LaserScope, Inc., a public
company, focusing on licensing opportunities to complement that company's
product portfolio and internal development programs. Mr. Murphy has served as
the director and significant equity owner of several privately-held companies
involved in life sciences, including several companies involved in the
commercialization of transgenic animals. Mr. Murphy received an M.B.A. from
the Stanford University Graduate School of Business (1980) and a B.Sc. in
Chemical Engineering from Cornell University (1975). Mr. Murphy's business
address is 845 Oak Grove Avenue, Suite 220, Menlo Park, CA 94025.
Jay Delahanty, age 49, is the President of DelTech Management, Inc., located
in Dedham, Massachusetts. DelTech is a venture capital and money management
firm specializing in early stage high tech companies with approximately $7
million under management. DelTech manages some funds of The Rockside
Foundation and The R. Templeton Smith Foundation, which are members of
Monterey. Mr. Delahanty and his firm also provide management, strategic
partnering and fund raising consulting services to emerging high tech
companies. He is currently the director of five private, development stage
companies. From 1981 through 1992, Mr. Delahanty was a General Partner of One
Liberty Ventures (formerly Morgan, Holland Ventures), a $100 million venture
capital partnership located in Boston, Massachusetts. He started his career at
Arthur D. Little, Inc. in San Francisco, California and Cambridge,
Massachusetts, where he worked as a consultant in the mechanical engineering
section and the chemical management section. Mr. Delahanty received an M.B.A.
from the Stanford University Graduate School of Business (1976) and a B.S. and
M.S. in mechanical engineering from the Massachusetts Institute of Technology
(1972). Mr. Delahanty's business address is 280 Bridge Street, Suite 202,
Dedham, MA 02026.
Michel D. Marks, age 49, is the Chairman Emeritus of the New York Mercantile
Exchange (the "NYMEX"), New York, New York, and served as its Chairman from
1978 to 1987. During that time, he was the youngest person ever to head a
futures market in the United States and led a major reorganization and
turnaround. At the time of his retirement, the NYMEX was the third largest
futures exchange in the world. Mr. Marks is currently a private investor,
teacher and consultant. He is the Chairman of the Board of Parris Securities
Corporation, a New York investment firm, and President of Silibis Corporation,
a privately held firm which provides consulting services in corporate strategy
and therapy. Mr. Marx received a B.A. from Princeton University. His business
address is P.O. Box 51, Rumson, NJ 07760.
It is anticipated that each of the Monterey nominees, upon his election as a
director of the Company, will receive director's fees consistent with the
Company's practices as set forth in the Company Proxy Statement. However, the
new Board may consider reducing or eliminating the $20,000 per annum cash fee
currently received by Board members, together with the additional $5,000 per
annum they receive for serving on Board committees, which Monterey and the
Monterey nominees believe may be excessive. As part of its review of the
compensation arrangements for Board members, the new Board will consider
issuing options or other equity-based compensation to directors to align the
interests of the directors with those of the stockholders.
There are no current arrangements between the Company and any members of
Monterey with respect to any consulting, investment banking or other services
to be provided to the Company by members of Monterey or any of their
affiliates.
Except for Mr. Smith, who is one of the members of Monterey and has
significant holdings of the Company's securities, none of the other Monterey
nominees currently owns any shares of the Company's common stock or holds any
options or warrants to purchase such securities. The Monterey nominees may be
prevented from purchasing Company securities at the present time because their
holdings could be combined
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with the holdings of the members of Monterey under the Company's newly adopted
stockholder rights plan. Monterey expects that its nominees will acquire an
equity interest in the Company after their election to express their
confidence in the Company and its business prospects.
Except as set forth below, none of Monterey, the Monterey nominees, the
members of Monterey or any of their respective associates (i) has any
arrangements or understandings with any person or persons with respect to any
future employment by the Company or its affiliates, or with respect to any
future transactions to which the Company or any of its affiliates may be a
party; (ii) has carried on any occupation or employment with the Company or
any corporation or organization which is or was a parent, subsidiary or other
affiliate of the Company; (iii) has received any cash compensation, cash
bonuses, deferred compensation, compensation pursuant to plans, or other
compensation, from, or in respect of, services rendered to or on behalf of the
Company; (iv) has engaged in or has a direct or indirect material interest in
any transaction or series of similar transactions to which the Company or any
of its subsidiaries was or is to be a party in which the dollar amount
involved exceeded, or is expected to exceed, $60,000 in the aggregate; (v) has
been indebted to the Company or any of its subsidiaries in an amount in excess
of $60,000; or (vi) is a party adverse to the Company or any of its
subsidiaries in any material proceedings or has a material interest adverse to
the interest of the Company or any of its subsidiaries in any such
proceedings.
As described in the section "Monterey's Plan for Enhancing Stockholder
Value," Monterey expects that if its nominees are elected, the new Board will
retain an experienced management and operations consultant with an engineering
background to conduct a comprehensive review of the Company's business
operations, technologies and opportunities. Monterey presently has no
agreement or understanding with any such person to serve as the consultant.
On July 24, 1998, The Rockside Foundation and Mr. Smith together acquired
from the Company 3,000,000 units, each unit consisting of one share of common
stock of the Company and a warrant to purchase one share of common stock. The
price was $1.00 for each unit. The Rockside Foundation purchased 1,800,000
units and Mr. Smith purchased 1,200,000 units. After taking into account the
Company's recent one for seven reverse split, The Rockside Foundation now owns
257,143 shares and warrants as a result of the purchase, and Mr. Smith now
owns 171,429 shares and warrants as a result of the purchase. The exercise
price of the warrants, after the reverse split, is $21.00 per share.
The Stock Purchase Agreement with respect to the units provided that for so
long as each purchaser continues to hold shares of common stock purchased, the
Company would pay to such purchaser $0.0125 per share for the three month
period ending November 30, 1998 and for each subsequent three month period.
This amounts to an annual per share payment of $.35 after taking into account
the reverse split.
There are no family relationships between any of the Monterey nominees and
any current director or executive officer of the Company. Mark Smith, is a
member of Monterey and is a trustee and officer of The Rockside Foundation and
of The R. Templeton Smith Foundation. The other Monterey nominees do not have
any family relationship with Monterey or its members.
Information relating to the ownership, purchase and sale of securities of
the Company by the members of Monterey is set forth in "Security Ownership of
Monterey and its Affiliates" below and in Schedule I.
The election of directors requires a plurality vote of those votes
represented in person or by proxy at the Annual Meeting. Accordingly, the four
nominees receiving the highest number of votes of the Company stock
represented and voting at the Annual Meeting will be elected to serve on the
Board. Abstentions and broker non-votes will have no effect on the election of
the directors.
The accompanying BLUE Annual Meeting proxy card will be voted at the Annual
Meeting in accordance with your instructions on such card. You may vote FOR
the election of each of the Monterey nominees or withhold authority to vote
for the election of all the Monterey nominees by marking the proper box on the
BLUE
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Annual Meeting proxy card. You may also withhold your vote from any one or
more of the Monterey nominees by writing the name of such nominee(s) in the
space provided on the BLUE Annual Meeting proxy card. IF NO MARKING IS MADE,
YOU WILL BE DEEMED TO HAVE GIVEN A DIRECTION TO VOTE THE SHARES REPRESENTED BY
THE BLUE ANNUAL MEETING PROXY CARD FOR THE ELECTION OF ALL THE MONTEREY
NOMINEES PROVIDED THAT YOU HAVE SIGNED THE PROXY CARD. The members of Monterey
own in the aggregate 9,161,650 shares eligible to vote at the Annual Meeting,
which constitute approximately 1,308,820 shares after taking into account the
recent reverse split announced after the record date for the Annual Meeting.
Those amounts do not take into account shares that would be issuable if the
warrants held by The Rockside Foundation and Mr. Smith were exercised. The
members of Monterey will vote their shares FOR the election of the Monterey
nominees and as otherwise recommended in this Proxy Statement.
Monterey believes that it is in your best interest to elect the Monterey
nominees at the Annual Meeting. All Monterey nominees intend to work for the
enhancement of stockholder value from its historic low as reflected in the
Company's stock price. See "Monterey's Plan for Enhancing Stockholder Value"
below.
MONTEREY STRONGLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE MONTEREY
NOMINEES.
OTHER MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
Monterey is not aware of any proposals other than the appointment of
auditors and the election of directors to be brought before the Annual
Meeting. Should any other proposal be brought before the Annual Meeting, the
vote required for approval of such proposal would be as prescribed by the
Company's charter or bylaws or by applicable law. Generally, approval of a
proposal would require a majority of the votes represented at the Annual
Meeting and entitled to vote on the matter. Shares voted as abstentions would
have the same effect as a negative vote. Shares with respect to which a broker
submits a "broker non-vote" on a matter would not be counted in calculating
the number of shares entitled to vote on a matter.
On a proposal to adjourn the Annual Meeting, the persons named in the BLUE
Annual Meeting proxy card will vote against the adjournment if the proposal is
made by management in order to allow management time to solicit more votes to
elect its nominees and will vote for the proposal if it will allow time to
solicit more votes needed to elect the Monterey nominees. However, such
persons will not vote on a proposal to adjourn the Annual Meeting if you have
marked the BLUE proxy card against authority to cast such a vote. MONTEREY
RECOMMENDS A VOTE "FOR" ALLOWING THE MONTEREY PROXIES TO VOTE ON ADJOURNMENT
OF THE ANNUAL MEETING.
Should other proposals be brought before the Annual Meeting, the persons
named on the BLUE Annual Meeting proxy card will abstain from voting on such
proposals. However, if such proposals adversely affect the interests of
Monterey as determined by Monterey in its sole discretion and Monterey has not
received notice of such proposals a reasonable time in advance of the Annual
Meeting, such persons will vote on such proposals in a manner that protects
the interests of Monterey.
PROXY PROCEDURES
Stockholders are urged to mark, sign and date the enclosed BLUE Annual
Meeting proxy card and return it in the envelope provided in time to be voted
at the Annual Meeting. Execution of the BLUE Annual Meeting proxy card will
not affect your right to attend the Annual Meeting and to vote in person. Any
proxy may be revoked at any time prior to the Annual Meeting by delivering a
written notice of revocation or a later dated proxy to MacKenzie Partners,
Inc. or to the Secretary of the Company or by voting in person at the Annual
Meeting. Only your latest dated proxy for the Annual Meeting will count, which
will have the effect of revoking any previously executed proxies.
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Only holders of record as of the close of business on the record date of
April 29, 1999 will be entitled to vote at the Annual Meeting. If you were a
stockholder of record on the record date, you may vote your shares at the
Annual Meeting even if you have sold your shares after the record date.
Accordingly, please vote the shares held by you on the record date, or grant a
proxy to vote such shares, on the BLUE Annual Meeting proxy card, even if you
have sold your shares after the record date.
If any of your shares are held in the name of a brokerage firm, bank, bank
nominee or other institution on the record date, only it can vote such shares
and only upon receipt of your specific instructions. Accordingly, please
contact the person responsible for your account and instruct that person to
execute on your behalf the BLUE Annual Meeting proxy card.
Where you indicate a choice on your BLUE Annual Meeting proxy card, your
shares will be voted as specified. If you indicate no choice, your shares will
be voted FOR the Monterey nominees, the appointment of auditors and the
authorization of Monterey proxies to vote on adjournment, provided that you
have signed and dated the BLUE Annual Meeting proxy card.
MONTEREY'S PLAN FOR ENHANCING STOCKHOLDER VALUE
Affiliates of Monterey have offered suggestions to management about actions
that could improve profitability in a competitive industry with a view towards
increasing stockholder value. As the largest equity holders in the Company,
the members of Monterey have witnessed with dismay the steady decline in the
price of the Company's common stock. The members of Monterey believe that the
Board has not earned the confidence or attention of the marketplace. Monterey
notes the Company is selling in the market below its cash value. The aggregate
market price for the Company is approximately $38 million while the Company
has approximately $40 million in working capital, $48 million in cash and net
stockholders' equity of $39 million. To Monterey this means that the market is
ascribing no value to the ability of the current Board and management to
capitalize upon the Company's technology or its prospects.
Monterey believes that the cosmetic laser industry in which the Company is
active has significant opportunities. Monterey agrees with the statement of
management in its proxy statement dated March 12, 1999 that the market for
laser-based hair removal remains a promising one. In that same proxy statement
management stated its belief that the electrolysis market is about $1 billion
in annual spending.
Monterey also believes that the Company has superior technology and
resources to capture those opportunities for the benefit of stockholders.
Monterey believes that, based upon the public statements of management, the
current Board is not properly focused on utilizing the Company's resources to
increase stockholder value in the near term. In his letter to stockholders in
the Company's Annual Report, for example, the Chairman states that his "number
one priority is to enhance long-term shareholder value"; and that "it is a
long-term approach, which now is unequivocally the philosophy of Palomar."
Monterey also notes that the Company's May 4, 1999 press release states that
the Company "anticipate[s] operating losses in the next few quarters."
Although there are no assurances that Monterey's proxy solicitation will be
successful, if its nominees are elected, Monterey expects that the new Board
will take the following actions to redirect the Company's business towards
profitability and enhanced stockholder value:
. Commence a review of operations, technology and business opportunities
with the assistance of an expert consultant. Monterey expects that if
its nominees are elected, the new Board will promptly seek to retain a
management and operations consultant with an engineering background to
undertake a thorough review of the Company's technology and operations.
The consultant would assist the Board in formulating short term and long
term strategic goals for the Company and would make specific
recommendations for effective utilization of technology, an improved
sales and marketing program, appropriate levels of research and
development and allocation of key management responsibilities.
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Monterey anticipates that the consultant would draw on business models
and experience in the related field of laser surgery for vision
correction, which has grown significantly in recent years. For example,
VISX, Inc., which is a leading designer, manufacturer and marketer of
proprietary technologies and systems for laser vision correction, nearly
doubled its revenues in 1998. VISX used a business strategy that derives
significant income from per procedure charges for the use of its
equipment. Monterey anticipates that the consultant the new Board will
seek to retain will assist the Board in analyzing whether such a
strategy is appropriate for the Company and the cosmetic laser industry.
Monterey anticipates that the new Board will retain existing management
pending the conduct of the strategic review.
. Undertake an immediate review of the Company's overhead expenses.
Monterey is of the view that the Company's costs remain excessive. The
Company recently sold its Star Medical Technologies, Inc. subsidiary,
the asset from which the Company derived approximately 80% of its
revenues in 1998. Yet, Monterey understands from management that the
Company does not expect to realize any meaningful reduction in general
and administrative costs as a result of the disposition. Monterey notes
that, based upon publicly available information about the Company,
selling, general and administrative costs as a percentage of revenues
for the three months ended March 31, 1999 (including the Star business
revenues) were approximately 42%. Monterey believes that the Company's
costs and administrative overhead can be meaningfully trimmed following
the Star sale without adversely affecting the Company's business or
prospects.
Monterey anticipates realizing cost savings from the elimination of
positions in various administrative departments. Monterey expects that
the specific positions to be cut would be determined only after the
completion of the comprehensive business review referred to above.
. Commence an aggressive and well-conceived share repurchase program.
Monterey believes that, at the currently depressed prices, the Company's
common stock is undervalued. Accordingly, Monterey expects that if its
nominees are elected, the new Board would use a portion of the Company's
cash available as a result of the sale of its Star business to undertake
a significant stock repurchase program. Monterey expects that such a
buyback program, at current price trends, would be in the range of $10
million to $15 million. Such a program would provide market liquidity
for those stockholders who wish to sell their stock, and would enhance
value for stockholders who are longer term investors in the Company.
The members of Monterey do not currently expect to participate in the
stock repurchase program, because of their belief that the Company's
stock is undervalued at current levels and because at current levels the
stock price is below their cost. The members of Monterey could change
their intentions, however, if the prices at which the buyback program
were conducted were significantly higher than current market levels or
if the members needed liquidity for business contingencies that are not
presently known.
. Capitalize on valuable technology. Monterey believes that the Company's
most valuable asset is its superior technology, particularly its second
generation Palomar E2000(TM) laser, which the Company has indicated is
anticipated to be superior to hair removal lasers currently on the
market. Monterey believes that key technologies should be exploited at
the lowest cost, and licensing out such promising technologies to
competitors or to other third parties is not necessarily the best
approach to building stockholder value. One alternative that Monterey
believes should be explored is the licensing approach utilized by VISX
in the laser vision correction industry. In that model, rather than
licensing technology to other manufacturers, doctors pay the company a
charge per procedure for utilizing the company's equipment.
Monterey expects that if its nominees are elected, the strategic review
referred to above will address the issue of how best to exploit the
Company's key technologies.
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. Improve communications with the market. Monterey believes that the
Company has not maintained effective communication with the investment
community and that as a result the Company has been undervalued in the
market. In particular, Monterey believes that the market does not
adequately understand the significance of the Company's technology and
the prospects for growth and development in the Company's industry.
Monterey believes that the market's lack of appreciation for the Company
is reflected in the Company's depressed stock price and the fact that
its market value is less than its working capital, cash on hand and net
stockholders' equity. Monterey expects that if its nominees are elected,
the new Board will make investor relations and concerns a priority, with
a view to enhancing market realization of the Company's value.
Although Monterey anticipates that the Monterey nominees will take the actions
described above, there can be no assurance that any of such actions will be
executed if the Monterey nominees are elected. Stockholders should be aware
that there are certain risks attendant to the Monterey plan. Monterey has
formulated its plan without access to non-public Company information. It is
possible, for example, that the cost reductions contemplated by Monterey will
not be achievable. If the Company's stock price were to increase
significantly, the new Board could decide that the stock price was not
undervalued and that it was not in the interest of the Company to continue the
stock buy back program. Also, Monterey contemplates retaining current
management. It is possible, however, that members of management might choose
not to remain with the Company following election of the Monterey nominees. If
management were to resign, there can be no assurance that the new Board could
engage replacement management quickly or at all, and if competent replacements
were not hired the Company would suffer.
All four Monterey nominees have substantial business experience. Mark Smith
oversaw the growth of a private pharmaceutical manufacturing company from
approximately $50 million in value to approximately $500 million in value in
the course of only six years. George Murphy is currently the chief executive
officer of a biotechnology company, has been a technology consultant for over
ten years and has experience in the laser industry. Jay Delahanty has managed
multi-million dollar technology investments for a large venture capital fund,
has significant board experience with technology companies and has advised
growth companies in management and strategic partnering issues. Michel Marks
was the youngest Chairman of the New York Mercantile Exchange, and in his
tenure of almost ten years supervised its growth to the third largest
commodities exchange in the world. Three of the nominees have graduate degrees
in business administration. In addition to their advanced business degrees,
Messrs. Murphy and Delahanty have academic backgrounds in applied science.
Stockholders need to decide which slate of nominees is best suited to
implementing both short-term and long-term strategies focusing on the creation
and maintenance of stockholder value. Collectively, Monterey's nominees bring
to the Company:
. expertise in the management of high technology companies;
. proven track records in growing business enterprises;
. engineering backgrounds;
. venture capital management and expertise; and
. a strategy for enhancing stockholder value for the Company, as set forth
in the Monterey plan described above.
Monterey believes that its nominees have the experience, the track record
and a plan for the Company that justify your vote and confidence.
BACKGROUND OF THE SOLICITATION
Members of Monterey began purchasing stock in the Company in June 1997.
About that time, Thomas O'Brien met Louis Valente, the Company's chief
executive officer, and discussed the Company's plans for cost reductions and
disposition of unproductive assets. Members of Monterey continued to purchase
shares in 1997 and early 1998, and in January 1998, Mr. O'Brien visited the
facilities of the Company's Star Medical Technologies, Inc. subsidiary, which
the Company has just recently sold.
9
<PAGE>
In July 1998, Mr. Smith and The Rockside Foundation participated in the
private placement of units of common stock and warrants referred to above. Mr.
Smith and The Rockside Foundation together purchased 30% of the $10 million
offering. Encouraged by the fundamental value of the Company's business and
assets, members of Monterey continued to purchase shares of common stock in the
open market through January 1999. In August 1998, the members of Monterey filed
a Statement on Schedule 13D with the SEC, which they have amended from time to
time.
Messrs. O'Brien and Smith met with management of the Company in January 1999,
and heard an optimistic presentation by management. Shortly afterwards, Mr.
O'Brien disseminated a positive research report on the Company, which reflected
on the meeting with management. Among other things, the research report
discussed the pending sale of the Star business which had been previously
proposed and anticipated that the Company would use the proceeds of sale to
pursue a meaningful stock repurchase program.
The Company released its fourth quarter earnings results for 1998 on March 1,
1999, and shortly afterwards conducted a conference call with analysts to
discuss those results. Members of Monterey were disappointed to learn of the
high level of administrative costs in the fourth quarter and management's view
that there would be no meaningful reductions in these costs following the Star
sale.
Mr. Smith voiced these concerns to Mr. Valente and on March 17, 1999,
attended the Company's Board meeting as an observer. At the meeting, Mr. Smith
voiced his dissatisfaction with a stock buyback program proposed by the Board,
which in Mr. Smith's view was not meaningful. Following this Board meeting, Mr.
Smith continued to have discussions with Mr. Valente relating to the Company's
expense levels, its long term strategies and its stock price. Mr. Smith
requested that, in light of his significant holdings, he be given
representation on the Board. Mr. Smith also urged management to engage a
consultant to evaluate the Company and make strategic recommendations. The
Company was not responsive either to Mr. Smith's request for Board
representation or to his recommendation for an outside consultant.
On May 4, 1999, the Company issued a press release regarding the results of
operations for the first quarter of 1999 and held an analysts call on the same
day. Members of Monterey were disappointed to learn that the Company
contemplated a stock buyback program of only $5 million, which in their opinion
was inadequate; that management failed to target break-even operations for the
year 2000; that the Company was contemplating annual research and development
expenditures of about $8 million; and that management appeared content to rely
on the proceeds of the Star sale to fund operations for the next several years
rather than to aggressively pursue revenue opportunities. They were also very
concerned that the Company's common stock price had drifted below the level of
the Company's cash on hand.
Following the May 4 analysts call and after evaluating its alternatives, the
members of Monterey concluded that to protect and enhance the value of their
investment and the investment of other stockholders of the Company, the Board
should be replaced with directors who intend to work for the enhancement of
stockholder value both in the near term as well as in the long term. On May 24,
1999, Monterey issued a press release, which it filed with the SEC, stating its
intention to nominate a slate of directors for election at the Annual Meeting.
In the days after the press release, representatives of Monterey had several
communications with the Company's management and certain members of its Board
concerning Monterey's intention to solicit proxies in favor of its nominees. No
arrangements or understandings have been reached with the Company. Monterey's
representatives may continue to have discussions with the Company.
SOLICITATION OF PROXIES
Proxies may be solicited by mail, advertisement, telephone or telecopier or
in person. Solicitations may be made by the members of Monterey, none of whom
will receive additional compensation for such solicitations. Monterey has
requested banks, brokerage houses and other custodians, nominees and
fiduciaries to forward all its solicitation materials to the beneficial owners
of the Company stock they hold of record. Monterey will cause these record
holders to be reimbursed for customary clerical and mailing expenses incurred
by them in forwarding these materials to their customers.
10
<PAGE>
Monterey has retained MacKenzie Partners, Inc. ("MacKenzie") for
solicitation and advisory services in connection with the solicitation, for
which MacKenzie is to receive a fee of up to $25,000, together with
reimbursement for its reasonable out-of-pocket expenses. Monterey and the
members of Monterey have also agreed to indemnify MacKenzie against certain
liabilities and expenses, including liabilities and expenses under the federal
securities laws. MacKenzie will solicit proxies for the Annual Meeting from
individuals, brokers, banks, bank nominees and other institutional holders. It
is anticipated that MacKenzie will employ approximately 30 persons to solicit
stockholders for the Annual Meeting.
The entire expense of soliciting proxies for the Annual Meeting is being
borne by the members of Monterey. Costs incidental to this solicitation of
proxies include expenditures for printing, postage, legal, accounting, public
relations, advertising and related expenses and are expected to be
approximately $150,000; costs incurred to the date of this Proxy Statement are
approximately $40,000.
If the Monterey nominees are elected, Monterey will seek to cause the
Monterey nominees to have the members of Monterey reimbursed by the Company
for all expenses incurred in connection with this proxy solicitation, as well
as any litigation costs that may result from this proxy solicitation, but does
not expect that the question of such reimbursement will be submitted to a vote
of stockholders.
If Monterey should withdraw, or materially change the terms of, this
solicitation of proxies prior to the Annual Meeting, Monterey will supplement
this Proxy Statement or otherwise publicly disseminate information regarding
such withdrawal or change and, in appropriate circumstances, will provide
stockholders with a reasonable opportunity to revoke their proxies prior to
the Annual Meeting.
11
<PAGE>
SECURITY OWNERSHIP OF MONTEREY AND ITS AFFILIATES
Monterey owns no securities of the Company. The shares of the Company's
common stock owned directly by the members of Monterey as of the record date
for the Annual Meeting are set forth in the following table. As set forth in a
filing by members of Monterey of a Schedule 13D and several amendments
thereto, each member has acknowledged beneficial ownership of all of the
holdings of the other members. Except for Mr. Smith, none of the Monterey
nominees own any securities of the Company.
The following stockholdings do not reflect the reverse split announced
after the record date for the Annual Meeting. The percentages listed below are
based on 75,753,459 shares of common stock reported as outstanding by the
Company as of the record date.
<TABLE>
<CAPTION>
Number of Shares Percent of Class Number of Shares Percent of
Name and Address (excluding Warrant and (including Class and
of Beneficial Owner Shares)* Voting Power Warrant Shares) Voting Power
------------------- ------------------ ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
The Rockside Founda-
tion................... 3,608,600 4.8% 5,408,600 7.0%***
524 North Avenue
New Rochelle, NY 10801
Mark T. Smith........... 2,513,150 3.3% 3,713,150 4.8%****
7670 First Place
Oakwood, OH 44146
Logg Investment Re-
search, Inc. .......... 6,000 ** 6,000 **
P.O. Box 4985
Stateline, NV 89449
Thomas O'Brien.......... 18,100 ** 18,100 **
P.O. Box 4985
Stateline, NV 89449
The R. Templeton Smith
Foundation............. 3,015,800 4.0% 3,015,800 4.0%
7670 First Place
Oakwood, OH 44146
Aggregate holdings of
the members of
Monterey............... 9,161,650 12.1% 12,161,650 15.4%*****
</TABLE>
- --------
* The Rockside Foundation holds warrants to purchase 1,800,000 shares of
common stock and Mr. Smith holds warrants to purchase 1,200,000 shares of
common stock, each at an exercise price, without taking into account the
recent reverse split, of $3.00 per share.
** Less than 0.1%
*** Taking into account only the warrants held by The Rockside Foundation in
determining the number of shares of common stock outstanding.
**** Taking into account only Mr. Smith's warrants in determining the number
of shares of common stock outstanding.
***** Taking into account the warrants held both by The Rockside Foundation
and by Mr. Smith in determining the number of shares of common stock
outstanding.
OTHER INFORMATION
Security Ownership of Certain Beneficial Owners
Certain information regarding shares held by the Company' directors,
nominees, management and other 5% stockholders is contained in the Company
Proxy Statement and is incorporated herein by reference.
12
<PAGE>
Proposals of Security Holders
Information concerning the date by which proposals of security holders
intended to be presented at the next annual meeting of stockholders of the
Company must be received by the Company for inclusion in the Company's proxy
statement and form of proxy for that meeting is contained in the Company Proxy
Statement and is incorporated here by reference.
Monterey assumes no responsibility for the accuracy or completeness of any
information contained herein which is based on, or incorporated by reference
to, the Company Proxy Statement or the Company's public filings.
----------------
PLEASE INDICATE YOUR SUPPORT OF THE ABOVE RECOMMENDATIONS OF MONTEREY BY
COMPLETING, SIGNING AND DATING THE ENCLOSED BLUE ANNUAL MEETING PROXY CARD AND
RETURN IT PROMPTLY TO MACKENZIE PARTNERS, INC. IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS NECESSARY IF THE ENVELOPE IS MAILED IN THE UNITED STATES.
THE MONTEREY STOCKHOLDERS GROUP LLC
June 9, 1999
13
<PAGE>
APPENDIX A
MEMBERS OF THE MONTEREY STOCKHOLDERS GROUP LLC
The address of Monterey is 11 East 44th Street, 17th Floor, New York, NY
10017 and its telephone number is (212) 986-9700. The addresses and telephone
numbers of its members are listed below:
<TABLE>
<CAPTION>
Address and Telephone
Name of Member Number
-------------- ----------------------
<S> <C>
Mark T. Smith 7670 First Place
<CAPTION>
Oakwood, OH 44146
(440) 359-0000
<S> <C>
The Rockside Foundation 524 North Avenue
<CAPTION>
New Rochelle, NY 10801
(914) 632-3778
<S> <C>
Logg Investment Research, Inc. P.O. Box 4985
<CAPTION>
Stateline, NV 89449
(831) 372-8204
<S> <C>
Thomas O'Brien P.O. Box 4985
<CAPTION>
Stateline, NV 89449
(831) 372-8204
<S> <C>
The R. Templeton Smith Foundation 7670 First Place
<CAPTION>
Oakwood, OH 44146
(440) 359-0000
</TABLE>
Mr. O'Brien is the sole stockholder and President of Logg Investment
Research, Inc. Mr. Smith is one of three trustees of The Rockside Foundation
and serves as its Vice President and Secretary and is one of seven trustees of
The R. Templeton Smith Foundation and serves as its Vice President and as a
member of its Investment Committee. Neither Mr. Smith nor his immediate family
are beneficiaries of The Rockside Foundation or of the J. Templeton Smith
Foundation, which were each established by Mr. Smith and members of his family
for charitable purposes. Logg Investment Research, Inc. and Mr. O'Brien are
involved in investment management. The Rockside Foundation and Mr. Smith have
received investment advice relating to the Company and its securities from
Logg Investment Research, Inc. and Mr. O'Brien, which have limited
discretionary authority from The Rockside Foundation and Mr. Smith and which
have accordingly executed securities transactions on their behalf. Subject to
the foregoing, each member of Monterey makes its own investment decisions and
exercises its own voting power with respect to the Company's securities, but
has been and continues to be aware of the others' decisions and actions.
14
<PAGE>
SCHEDULE I
INFORMATION CONCERNING SHARES OF COMMON STOCK HELD BY
MONTEREY AND ITS AFFILIATES, INCLUDING THE MONTEREY NOMINEES
Except as disclosed in this Schedule or in the accompanying Proxy Statement,
none of Monterey or the Monterey nominees, or any of their respective
affiliates and associates, owns any securities of the Company or any
subsidiary of the Company, beneficially or of record, has purchased or sold
any of such securities within the past two years or is or was within the past
year a party to any contract, arrangement or understanding with any person
with respect to any such securities.
Given the volume of transactions, the purchases (and sales) are summarized
on a monthly basis. All figures do not take into account the one for seven
reverse split recently announced by the Company.
Mark Smith
<TABLE>
<CAPTION>
Number of
Shares
Date Purchased
---- ---------
<S> <C>
December 1997..................... 187,400
March 1998........................ 63,500
April 1998........................ 39,600
May 1998.......................... 101,000
June 1998......................... 170,000
July 1998......................... 1,230,000*
September 1998.................... 2,000
October 1998...................... 1,000
December 1998..................... 623,650
January 1999...................... 95,000
</TABLE>
- --------
* Includes 1,200,000 shares purchased from the Company; does not include an
additional 1,200,000 shares issuable upon the exercise of warrants purchased
from the Company
The Rockside Foundation
<TABLE>
<CAPTION>
Number of
Shares
Date Purchased
---- ---------
<S> <C>
December 1997..................... 300,000
January 1998...................... 300,000
March 1998........................ 108,200
April 1998........................ 151,300
May 1998.......................... 116,600
June 1998......................... 72,500
July 1998......................... 1,805,000*
August 1998....................... 35,000
September 1998.................... 267,500
October 1998...................... 190,100
November 1998..................... 292,400
</TABLE>
- --------
* Includes 1,800,000 shares purchased from the Company; does not include an
additional 1,800,000 shares issuable upon the exercise of warrants purchased
from the Company
S-1
<PAGE>
The R. Templeton Smith Foundation
<TABLE>
<CAPTION>
Number of
Shares
Date Purchased
---- ---------
<S> <C>
December 1998...................... 1,200,000
January 1999....................... 1,815,800
</TABLE>
Thomas O'Brien
<TABLE>
<CAPTION>
Number of Shares
Date Purchased or Sold*
---- ----------------------
<S> <C>
June 1997............. 5,000
July 1997............. 5,000 (sale)
September 1997........ 3,000 (and 3,000 sale)
November 1997......... 3,000
December 1997......... 18,000
February 1998......... 15,000 (sale)**
September 1998........ 2,100
November 1998......... 10,000
</TABLE>
- --------
* Unless otherwise indicated, all transactions are purchases.
** Balance of 6,000 shares held for Logg Investment Advisors, Inc., as reported
on Schedule 13D
Logg Investment Advisors, Inc.
<TABLE>
<CAPTION>
Number of
Shares
Date Purchased*
---- ----------
<S> <C>
September 1998.................... 700
October 1998...................... 4,300
</TABLE>
- --------
* Purchased for the benefit of Thomas O'Brien
S-2
<PAGE>
BLUE PROXY
PALOMAR MEDICAL TECHNOLOGIES, INC.
1999 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE MONTEREY STOCKHOLDERS GROUP LLC
The undersigned stockholder of Palomar Medical Technologies, Inc. (the
"Company") hereby appoints each of Mark T. Smith and Jay Delahanty, and each of
them with full power of substitution, for and in the name of the undersigned, to
represent and to vote, as designated below, all shares of Common Stock of the
Company that the undersigned is entitled to vote if personally present at the
1999 Annual Meeting of Stockholders of the Company, and at any adjournment or
postponement thereof. The undersigned hereby revokes any previous proxies with
respect to the matters covered by this Proxy.
WHERE A CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
AS SPECIFIED. IF NO CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2 AND 3. IN ADDITION, THE PROXIES WILL VOTE IN
THE DISCRETION SPECIFIED IN ITEM 4.
- -------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
<PAGE>
1. Proposal to ratify the selection by the Board of Directors' of Arthur
Andersen LLP as the Company's independent auditors for the fiscal year ending
December 31, 1999.
MONTEREY RECOMMENDS A VOTE FOR PROPOSAL 1.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. ELECTION OF DIRECTORS:
Election of Mark T. Smith, George F. Murphy, Jr., Jay Delahanty and Michel D.
Marks
MONTEREY RECOMMENDS A VOTE FOR PROPOSAL 1.
FOR all nominees WITHHOLD AUTHORITY
except as marked below for all nominees
[ ] [ ]
(INSTRUCTION: To withhold authority to vote for one or more nominees, mark FOR
above and print the name(s) of the person(s) with respect to whom you wish to
withhold authority in the space provided below.)
- ------------------------------------
3. Authorization of the proxies to vote on an adjournment of the Annual Meeting.
MONTEREY RECOMMENDS A VOTE FOR PROPOSAL 3.
FOR AGAINST
[ ] [ ]
4. THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER PROPOSALS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF IN A MANNER THAT PROTECTS
MONTEREY'S INTERESTS IF SUCH PROPOSALS ADVERSELY AFFECT MONTEREY AND
MONTEREY HAS NOT RECEIVED NOTICE THEREOF A REASONABLE TIME BEFORE THE
MEETING.
Please date and sign this proxy exactly as your name appears hereon.
- ----------------------------------------------------
(Signature)
- ----------------------------------------------------
(Signature, if held jointly)
- ----------------------------------------------------
(Title)
Dated: _____________________________________________
When shares are held by joint tenants, both should sign. When signing as
attorney-in-fact, executor, administrator, trustee, guardian, corporate officer
or partner, please give full title as such. If a corporation, please sign in
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
To vote in accordance with the Monterey recommendations, just sign and date this
proxy; no boxes need to be checked.
- --------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
IMPORTANT
Your proxy is important. No matter how many shares you own, please give Monterey
your proxy FOR the election of the Monterey Nominees and the Appointment of
Accountants by:
MARKING the enclosed BLUE Annual Meeting proxy card,
SIGNING the enclosed BLUE Annual Meeting proxy card,
DATING the enclosed BLUE Annual Meeting proxy card and
MAILING the enclosed BLUE Annual Meeting proxy card TODAY in the
envelope provided (no postage is required if mailed in the United
States).
If you have already submitted a proxy to the Company for the Annual
Meeting, you may change your vote to a vote FOR the election of the Monterey
Nominees by marking, signing, dating and returning the enclosed BLUE proxy card
for the Annual Meeting, which must be dated after any proxy you may have
submitted to the Company. Only your latest dated proxy for the Annual Meeting
will count at such meeting, which will have the effect of revoking any
previously executed proxies.
If you have any questions or require any additional information concerning
this Proxy Statement or the proposals by Monterey contained herein, please
contact MacKenzie Partners, Inc. at the address set forth below. IF ANY OF YOUR
SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK NOMINEE OR OTHER SUCH
INSTITUTION, ONLY IT CAN VOTE SUCH SHARES AND ONLY UPON RECEIPT OF YOUR SPECIFIC
INSTRUCTIONS. ACCORDINGLY, PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR
ACCOUNT AND INSTRUCT THAT PERSON TO EXECUTE THE BLUE ANNUAL MEETING PROXY CARD.
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, NY 10010
(212) 929-5500
or
Call Toll Free (800) 322-2885
