As filed, via EDGAR, with the Securities and Exchange Commission
on June 1, 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] e
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only
[ ] 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 Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
<PAGE>
(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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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 ("the Appointment of Auditors"); 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 ARE
COMMITTED TO ENHANCING 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:
o developing with an expert consultant a short and long-term plan
for strategic growth;
o an immediate review and reduction of the Company's overhead;
o capitalizing on the Company's superior technology; and
o improving investor relations in order to enhance market
appreciation of the Company and its prospects.
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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 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. 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 the Company stockholders
on or about June XX, 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 accountants 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.
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 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.
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
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also a General Partner of Taraval Associates Seed Capital Fund ("TASCF"),
located in Menlo Park, California. TASCF is a venture capital fund currently
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 are 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.
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<PAGE>
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 with existing of 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 after the election of its nominees, 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 an equivalent number of shares 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.
5
<PAGE>
There are no family relationships between any of the Monterey nominees and
any current director or executive officer of the Company. Mr. 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 listed above.
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
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 are committed to enhancing
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
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Monterey is not aware of any proposals other than the election of 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.
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 their discretion, unless you marked
the BLUE proxy card against authority to cast such discretionary votes.
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.
Only holders of record as of the close of business on the record date 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 before or 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 before
or 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 and the Appointment of Accountants, 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 long-term 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
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stock. Then members of Monterey have concluded that the Board has not earned the
confidence or attention of the marketplace. Monterey believes that the cosmetic
laser industry in which the Company is active has significant opportunities and
that the Company has superior technology and resources to capture those
opportunities for the benefit of stockholders. Monterey also believes that the
current Board is not properly focused on utilizing the Company's resources to
increase stockholder value in the near term. 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:
o Commence a review of operations, technology and business opportunities with
the assistance of an expert consultant with experience in the laser
industry. Monterey expects that the new Board will promptly 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. 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. Monterey anticipates that the new Board will retain existing
management pending the conduct of the strategic review.
o Undertake an immediate review of the Company's overhead expenses. Monterey
is of the view that the Company's costs remain excessive. Based upon
publicly available information about the Company, Monterey believes that
the Company's costs and administrative overhead can be meaningfully trimmed
without adversely affecting the Company's business or prospects.
o Commence an aggressive, well-conceived and disciplined share repurchase
program. Monterey believes that, at the currently depressed prices, the
Company's common stock is undervalued. Accordingly, Monterey expects that
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,
disciplined stock repurchase program. 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
a stock repurchase program, although they reserve the right to change their
intention.
o Capitalize on valuable technology. Monterey believes that the Company's
most valuable asset is its superior technology. 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 long term stockholder value. Monterey expects that the
strategic review referred to above will address the issue of how best to
develop the Company's key technologies.
o 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, the current Board has not been successful in conveying to
investors the significance of the Company's technology and the prospects
for growth and development in the Company's industry. Monterey expects that
the
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new Board will make investor relations and concerns a priority, with a view
to enhancing market realization of the Company's value.
All four Monterey nominees have substantial experience in operating in,
evaluating and investing in technology-based companies. Mark Smith oversaw the
growth of a private pharmaceutical manufacturing company from approximately $50
million in value to approximately $500 in value in the course of only six years.
George Murphy has been a technology consultant for over ten years, has served on
numerous boards 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 superior academic backgrounds in science. All of the Monterey
nominees have demonstrated their ability to grow businesses and create long
termvalue. Collectively, the Monterey nominees bring to the Company seasoned
expertise in a wide variety of business environments and market climates.
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. Monterey believes that its nominees have
the experience and the track record that justify your vote and confidence.
BACKGROUND OF THE SOLICITATION
Members of Monterey began purchasing stock to the Company in June 1997.
About that time, Mr. 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 on 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.
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, who 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
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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 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 are committed to enhancing 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 officers and employees of 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, and that aggregate amount is also set forth below. 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>
- ------------------------------------------------------------------------------------------------------------------------
Name and Address of Number of Shares Percent of Class and Number of Shares Percent of Class
Beneficial Owner (excluding Warrant Voting Power (including Warrant and Voting Power
Shares)* Shares)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Rockside Foundation 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 Research, 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 9,161,650 12.1% 12,161,650 15.4%*****
OF MONTEREY
- ------------------------------------------------------------------------------------------------------------------------
</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.
12
<PAGE>
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.
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 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 XX, 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:
- --------------------------------------------------------------------------------
Name of Member Address and Telephone Number
- --------------------------------------------------------------------------------
Mark T. Smith 7670 First Place
Oakwood, OH 44146
(440) 359-0000
- --------------------------------------------------------------------------------
The Rockside Foundation 524 North Avenue
New Rochelle, NY 10801
(914) 632-3778
- --------------------------------------------------------------------------------
Logg Investment Research, Inc. P.O. Box 4985
Stateline, NV 89449
(831) 372-8204
- --------------------------------------------------------------------------------
Thomas O'Brien P.O. Box 4985
Stateline, NV 89449
(831) 372-8204
- --------------------------------------------------------------------------------
The R. Templeton Smith Foundation 7670 First Place
Oakwood, OH 44146
(440) 359-0000
- --------------------------------------------------------------------------------
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>
CONFIDENTIAL - DRAFT #2 , 5/27
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 recent one for
seven Reverse Split announced by the Company.
Mark Smith
- ------------ ---------------------
Date Number of Shares
Purchased
- ------------ ---------------------
12/97 187,400
- ------------ ---------------------
3/98 63,500
- ------------ ---------------------
4/98 39,600
- ------------ ---------------------
5/98 101,000
- ------------ ---------------------
6/98 170,000
- ------------ ---------------------
7/98 1,230,000*
- ------------ ---------------------
9/98 2,000
- ------------ ---------------------
10/98 1,000
- ------------ ---------------------
12/98 623,650
- ------------ ---------------------
1/99 95,000
- ------------ ---------------------
* 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
- ------------ ----------------------
Date Number of Shares
Purchased
- ------------ ----------------------
12/97 300,000
- ------------ ----------------------
1/98 300,000
- ------------ ----------------------
3/98 108,200
- ------------ ----------------------
4/98 151,300
- ------------ ----------------------
5/98 116,600
- ------------ ----------------------
6/98 72,500
- ------------ ----------------------
7/98 1,805,000 *
- ------------ ----------------------
8/98 35,000
- ------------ ----------------------
9/98 267,500
- ------------ ----------------------
10/98 190,100
- ------------ ----------------------
11/98 292,400
- ------------ ----------------------
* 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
1
<PAGE>
The R. Templeton Smith Foundation
- ------------ ----------------------
Date Number of Shares
Purchased
- ------------ ----------------------
12/98 1,200,000
- ------------ ----------------------
1/99 1,815,800
- ------------ ----------------------
Thomas O'Brien
- ------------ -----------------------
Date Number of Shares
Purchased*
- ------------ -----------------------
6/97 5,000
- ------------ -----------------------
7/97 5,000 (Sale)
- ------------ -----------------------
9/9/97 3,000 (and 3,000 Sale)
- ------------ -----------------------
11/97 3,000
- ------------ -----------------------
12/97 18,000
- ------------ -----------------------
2/98 15,000 (Sale)**
- ------------ -----------------------
9/98 2,100
- ------------ -----------------------
11/98 10,000
- ------------ -----------------------
* 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.
- ------------ ----------------------
Date Number of Shares
Purchased*
- ------------ ----------------------
9/98 700
- ------------ ----------------------
10/98 4,300
- ------------ ----------------------
* Purchased for the benefit of Thomas O'Brien
<PAGE>
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 a 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 AND 2, AND IN THE DISCRETION SPECIFIED IN
ITEM 3.
(Please mark each proposal with an "X" in the appropriate box)
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.
[_] FOR [_] AGAINST [_] ABSTAIN
MONTEREY RECOMMENDS A VOTE FOR PROPOSAL 1.
2. ELECTION OF DIRECTORS:
Election of Mark T. Smith, George F. Murphy, Jr., Jay Delahanty and Michel D.
Marks
[_] FOR all nominees except as marked below [_] WITHHOLD AUTHORITY 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.)
- --------------------------------------------------------------------------------
MONTEREY RECOMMENDS A VOTE FOR THE MONTEREY NOMINEES.
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
PROPOSALS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF IF SUCH PROPOSALS ADVERSELY AFFECT MONTEREY AND MONTEREY HAS NOT
RECEIVED NOTICE THEREOF A REASONABLE TIME BEFORE THE MEETING.
[_] YES [_] NO
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN
<PAGE>
THE ENCLOSED ENVELOPE.
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.
2
<PAGE>
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.
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
