SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/ Filed by a Party other than the Registrant /X/
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Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c)
or sec. 240.14a-12
/ / Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
PALOMAR MEDICAL TECHNOLOGIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Not Applicable
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the Appropriate Box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE>
PROXY/VOTING INSTRUCTION CARD
PALOMAR MEDICAL TECHNOLOGIES, INC.
C/O THE AMERICAN STOCK TRANSFER & TRUST COMPANY
40 WALL STREET, 41ST FLOOR, NEW YORK, NEW YORK 10005
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
I (whether one or more of us) appoint Joseph P. Caruso and Paul S.
Weiner to be my Proxies. The Proxies may vote on my behalf, in accordance with
my instructions, all of my shares entitled to vote at the Annual Meeting of
Stockholders of Palomar Medical Technologies, Inc. ("Palomar"). The meeting is
scheduled for June 7, 2000, but this proxy includes any adjournment(s) of that
meeting. The Proxies may vote on my behalf as if I were personally at the
meeting.
PLEASE COMPLETE, DATE AND SIGN ON REVERSE SIDE
AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
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^ DETACH HERE BEFORE MAILING TOP PORTION ^
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY(X)
IN THEIR DISCRETION, THE PROXIES MAY VOTE ON ANY OTHER BUSINESS THAT
PROPERLY COMES BEFORE THE MEETING. THIS PROXY WHEN PROPERLY EXECUTED WILL BE
VOTED AS INSTRUCTED BELOW BY THE UNDERSIGNED STOCKHOLDER. IF NO MARKING IS MADE,
THIS PROXY WILL BE DEEMED TO BE DIRECTION TO VOTE FOR PROPOSALS 1 AND 2.
The Board of Directors recommends a vote FOR:
1. To select Arthur Andersen LLP as the company's auditors for fiscal 2000.
FOR ( ) AGAINST ( ) ABSTAIN ( )
2. The election of each of the following nominees as Directors of Palomar
to serve until the 2001 annual meeting of stockholders and until their
respective successors are elected and have qualified.
FOR AGAINST WITHHELD
Nicholas P. Economou ( ) ( ) ( )
James G. Martin ( ) ( ) ( )
A. Neil Pappalardo ( ) ( ) ( )
Louis P. Valente ( ) ( ) ( )
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN WITH RESPECT TO ONE OR MORE OF THE PROPOSALS SET FORTH ABOVE,
WILL BE VOTED FOR SUCH PROPOSAL OR PROPOSALS.
DATED: _________________, 2000 ---------------------------
Signature of Stockholder(s)
Please promptly date and sign this proxy and mail it in the enclosed envelope to
assure representation of your shares. No postage need be affixed if mailed in
the United States. PLEASE SIGN EXACTLY AS NAME(S) APPEAR ON STOCK CERTIFICATE.
If stockholder is a corporation, please sign full corporate name by president or
other authorized officer and, if a partnership, please sign full partnership
name by an authorized partner or other person.
Mark here if you plan to attend the meeting. / /
[NOTE THAT YOU MAY ATTEND THE MEETING
EVEN IF YOU DO NOT CHECK THE BOX]
<PAGE>
May 5, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of
Stockholders of Palomar Medical Technologies, Inc. (the "Company") to be held on
June 7, 2000 at 10:00 a.m. at the Renaissance Bedford Hotel, 44 Middlesex
Turnpike, Bedford, Massachusetts 01730, and thereafter as it may be adjourned
from time to time.
At the meeting, you will be asked to consider and act upon proposals to
(i) ratify the selection of the Company's independent auditors for fiscal 2000,
and (ii) elect four directors of the Company.
Details of the matters to be considered at the meeting are contained in
the proxy statement, which we urge you to consider carefully.
As a stockholder, your vote is important. Whether or not you plan to
attend the meeting, please complete, date, sign and return your proxy card
promptly in the enclosed envelope, which requires no postage if mailed in the
United States. If you attend the meeting, you may vote in person if you wish,
even if you have previously returned your proxy.
Thank you for your cooperation, continued support and interest in
Palomar Medical Technologies, Inc.
Sincerely,
/s/ Louis P. Valente
--------------------
Louis P. Valente
CHIEF EXECUTIVE OFFICER,
PRESIDENT AND CHAIRMAN OF THE BOARD
<PAGE>
PALOMAR MEDICAL TECHNOLOGIES, INC.
82 CAMBRIDGE STREET
BURLINGTON, MASSACHUSETTS 01803
NOTICE OF THE
2000 ANNUAL MEETING OF STOCKHOLDERS
To the stockholders of PALOMAR MEDICAL TECHNOLOGIES, INC.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of
PALOMAR MEDICAL TECHNOLOGIES, INC. (the "Company"), a Delaware corporation, will
be held on JUNE 7, 2000 AT 10:00 A.M. at the RENAISSANCE BEDFORD HOTEL, 44
MIDDLESEX TURNPIKE, BEDFORD, MASSACHUSETTS 01730, and thereafter as it may be
adjourned from time to time.
At the meeting, the stockholders will be asked:
(1) To ratify the selection of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000.
(2) To elect four directors of the Company to serve until the 2001
annual meeting of stockholders and until their respective
successors are elected and have qualified.
(3) To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on April 17,
2000 as the record date for the determination of stockholders entitled to notice
of and to vote at the meeting and any adjournment or adjournments thereof. Only
stockholders of record on such date are entitled to notice of, and to vote at,
the meeting or any adjournment thereof.
We hope that all stockholders will be able to attend the meeting in
person. In order to assure that a quorum is present at the meeting, please date,
sign and promptly return the enclosed proxy whether or not you expect to attend
the meeting. A postage prepaid envelope has been enclosed for your convenience.
If you attend the meeting, you may revoke your proxy and vote your shares in
person.
By Order of the Board of Directors
Louis P. Valente
CHIEF EXECUTIVE OFFICER,
PRESIDENT AND CHAIRMAN OF THE BOARD
May 5, 2000
IT IS IMPORTANT THAT PROXY CARDS BE RETURNED PROMPTLY.
PLEASE FILL IN, DATE AND SIGN THE PROXY CARD AND RETURN IT IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE PROXY
MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE PRESENT AT THE
MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND EXERCISE THE
RIGHT TO VOTE YOUR SHARES PERSONALLY.
<PAGE>
-i-
PALOMAR MEDICAL TECHNOLOGIES, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 7, 2000
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ITEM PAGE
PROPOSAL NO. 1: RATIFICATION OF SELECTION OF AUDITORS FOR FISCAL 2000....................................2
PROPOSAL NO. 2: ELECTION OF DIRECTORS....................................................................2
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON...................................................2
DIRECTORS AND EXECUTIVE OFFICERS..........................................................................2
Committees and Meetings of the Board.............................................................3
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS..........................................................4
Director Compensation............................................................................4
Executive Compensation...........................................................................4
Option and Warrant Grants in Last Fiscal Year....................................................5
Fiscal Year End Option and Warrant Values........................................................6
Other Employee Benefit Plans.....................................................................6
Employment Agreements............................................................................7
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS............................................7
Introduction.....................................................................................7
Compensation Programs............................................................................7
Compensation of Chief Executive Officer..........................................................8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION...............................................9
COMPANY STOCK PRICE PERFORMANCE...........................................................................9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...........................................10
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES AND EXCHANGE ACT OF 1934.................................11
FINANCIAL INFORMATION INCORPORATED BY REFERENCE..........................................................12
SOLICITATION.............................................................................................12
DEADLINE FOR SUBMISSION OF 2001 STOCKHOLDER PROPOSALS AND NOMINATIONS....................................12
MISCELLANEOUS............................................................................................12
AVAILABLE INFORMATION....................................................................................12
</TABLE>
<PAGE>
PALOMAR MEDICAL TECHNOLOGIES, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 7, 2000
The enclosed proxy is solicited by the Board of Directors of Palomar
Medical Technologies, Inc. (the "Company") for use at the 2000 Annual Meeting of
Stockholders to be held at the Renaissance Bedford Hotel, 44 Middlesex Turnpike,
Bedford, Massachusetts 01730, at 10:00 a.m. on Wednesday, June 7, 2000, and at
any adjournment or adjournments thereof.
Management intends to mail this proxy statement, the accompanying form
of proxy and its Annual Report and Annual Report on Form 10K (excluding
exhibits) for the fiscal year ended December 31, 1999 to all stockholders
entitled to vote, on or about May 8, 2000. The costs of soliciting proxies will
be borne by the Company.
Only stockholders of record at the close of business on April 17, 2000
will be entitled to vote at the meeting or any adjournment thereof. As of March
24, 2000, 10,089,450 shares of common stock, $.01 par value, of the Company were
issued and outstanding. Each share entitles the holder to one vote with respect
to all matters submitted to stockholders at the meeting. There is no other class
of voting securities of the Company entitled to vote at the meeting.
To establish a quorum to transact business at the meeting, there must
be present at the meeting, in person or by proxy, a majority of the shares of
common stock issued, outstanding, and entitled to vote at the meeting. Shares
represented by executed proxies received by the Company will be counted for
purposes of establishing a quorum, regardless of how or whether such shares are
voted on any specific proposal.
To be elected, a director must receive a plurality of the votes of the
common stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors. The affirmative vote of a
majority of the common stock, present in person or represented by proxy at the
Annual Meeting and entitled to vote thereon, is necessary to ratify the
selection of the independent auditors.
Execution of a proxy will not in any way affect a stockholder's right
to attend the meeting and vote in person. The proxy may be revoked at any time
before it is exercised, by written notice to the Assistant Secretary prior to
the meeting, or by giving to the Assistant Secretary a duly executed proxy
bearing a later date than the proxy being revoked, at any time before such proxy
is voted, or by appearing at the Annual Meeting and voting in person. The shares
represented by all properly executed proxies received in time for the meeting
will be voted as specified therein. Proxies which are executed but which do not
contain any specific instructions will be voted as recommended by management.
In accordance with Delaware law, abstentions and "broker non-votes"
(i.e. proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owner or other persons entitled to
vote shares as to a matter with respect to which the brokers or nominees do not
have discretion to vote) will be treated as present for purposes of determining
the presence of a quorum. For purposes of determining approval of a matter
presented at the meeting, abstentions will be deemed present and entitled to
vote and will, therefore, have the same legal effect as a vote against a matter
presented at the meeting. Broker non-votes will be deemed not entitled to vote
on the subject matter as to which the non-vote is indicated and will therefore
have no legal effect on the vote on that particular matter.
Votes will be tabulated by the Company's transfer agent, American Stock
Transfer & Trust Company.
The Board of Directors knows of no other matter to be presented at the
meeting. If any other matter should be presented at the meeting upon which a
vote may be taken, such shares represented by all proxies received by the Board
of Directors will be voted with respect thereto in accordance with the judgment
of the persons named as attorneys in the proxies.
1
<PAGE>
PROPOSAL NO. 1: RATIFICATION OF SELECTION OF AUDITORS FOR FISCAL 2000
The persons named in the enclosed proxy will vote to ratify the
selection of Arthur Andersen LLP as independent auditors for the fiscal year
ending December 31, 2000 unless otherwise directed by the stockholders. That
firm has served as the Company's independent auditors since 1989. A
representative of Arthur Andersen LLP is expected to be present at the meeting,
and will have the opportunity to make a statement and is expected to be
available to answer appropriate questions from stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS
PROPOSAL TO SELECT ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
FISCAL 2000.
PROPOSAL NO. 2: ELECTION OF DIRECTORS
The directors of the Company are elected annually and hold office until
the next annual meeting of stockholders and until their successors shall have
been elected and qualified. In general, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority vote of the directors then in office. Shares
represented by all proxies received by the Board of Directors and not so marked
as to withhold authority to vote for an individual director, or for all
directors, will be voted (unless one or more nominees are unable or unwilling to
serve) for the election of the nominees named below. The Board of Directors
knows of no reason why any such nominee should be unable or unwilling to serve,
but if such should be the case, proxies will be voted for the election of some
other person or for fixing the number of directors at a lesser number.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF MESSRS. VALENTE, ECONOMOU, MARTIN AND PAPPALARDO AS DIRECTORS OF THE
COMPANY.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
None of the directors or executive officers of the Company has any
interest in the adoption of the above proposals.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
Company's executive officers and each nominee for election as a director. Each
of the nominees currently serves as a director. For information about ownership
of the Company's common stock by each nominee, see "Security Ownership of
Certain Beneficial Owners and Management."
NAME AGE POSITIONS AND OFFICES WITH
THE COMPANY
Louis P. Valente 69 Chairman,
Chief Executive Officer,
and President
Nicholas P. Economou 51 Director
James G. Martin 64 Director
A. Neil Pappalardo 58 Director
Joseph P. Caruso 41 Vice President,
Chief Financial Officer,
and Secretary
The Company currently has four directors. All directors will hold office
until the 2001 Annual Meeting of Stockholders of the Company or special meeting
in lieu thereof (and thereafter until their successors have been duly elected
and qualified). None of the nominees is related by blood, marriage or adoption
to any of the Company's directors or executive officers. Executive officers are
elected annually by the Board of Directors and serve at the discretion of the
Board.
2
<PAGE>
LOUIS P. VALENTE. Mr. Valente became a director of the Company on
February 1, 1997. On May 14, 1997, he became Chief Executive Officer and
President of the Company, and on September 15, 1997, he became Chairman of the
Board. From 1968 to 1995 Mr. Valente held numerous positions at Perkin Elmer,
Inc. (formerly EG&G, Inc.), a diversified technology company which provides
optoelectronic, mechanical and electromechanical components and instruments to
manufacturers and end-user customers in varied markets that include aerospace,
automotive, transportation, chemical, petrochemical, environmental, industrial,
medical, photography, security and other global arenas. In 1968 he began his
career at EG&G, Inc. as an Assistant Controller and held executive positions,
including Corporate Treasurer, before becoming Senior Vice President of EG&G,
Inc., presiding over and negotiating acquisitions, mergers and investments.
Currently, Mr. Valente serves as a director of MKS Instruments, Inc., a publicly
held company, and several private companies. Mr. Valente is a Certified Public
Accountant and a graduate of Bentley College.
NICHOLAS P. ECONOMOU. Dr. Economou became a director of the Company on
November 13, 1997. Dr. Economou is the Chief Operating Officer of FEI Company, a
manufacturer of production and analytical equipment for the semiconductor and
data storage industries. Prior to that, Dr. Economou served as President of
Micrion Corp., which merged with FEI Company in August of 1999. Before joining
Micrion, Dr. Economou managed a group developing advanced semiconductor
technology at M.I.T.'s Lincoln Laboratory. Before joining Lincoln Laboratory,
Dr. Economou was with Bell Telephone Laboratories and also served in the U.S.
Air Force. Dr. Economou received his B.A. in Physics from Dartmouth College and
his M.A. and Ph.D. in Physics from Harvard University.
A. NEIL PAPPALARDO. Mr. Pappalardo became a director of the Company on
June 2, 1997. Mr. Pappalardo is the founder and serves as the Chairman and CEO
of Medical Information Technology, Inc. ("Meditech"), a provider of software
systems to hospitals in the United States, Canada and the United Kingdom with
over 1,800 employees. Mr. Pappalardo received his B.S. in electrical engineering
from M.I.T. Mr. Pappalardo serves on the Executive as well as various other
operational and academic committees at M.I.T., and is a trustee of the New
England Aquarium and serves on its Board of Governors.
JAMES G. MARTIN. Dr. Martin became a director of the Company on June 2,
1997. From 1995 through the present, Dr. Martin has served as the Vice President
of Research at the Carolinas Medical Center. He has also been the Chairman of
the Research Development Board of the Carolinas Medical Center since 1993. Dr.
Martin was the Governor of North Carolina from 1985 to 1993. Prior to that, he
served as a United States Congressman from North Carolina for six terms, from
1973 to 1984. Dr. Martin currently serves as a director for the following
publicly held companies: Duke Energy Company, Family Dollar, Inc., and Applied
Analytical Industries, Inc. Dr. Martin has a B.S. in chemistry from Davidson
College and a Ph.D. in chemistry from Princeton University.
JOSEPH P. CARUSO. Mr. Caruso joined the Company in March 1992 as
Controller in a part-time capacity and became a full-time employee on June 15,
1992. Effective January 1, 1993, Mr. Caruso became Vice President and Chief
Financial Officer. From 1989 to 1992, Mr. Caruso was the Chief Financial Officer
of Massachusetts Electrical Manufacturing Co., Inc., a privately held
manufacturer of power distribution equipment. From 1987 to 1989, Mr. Caruso was
a manager with Robert Half, an international consulting firm. From 1982 to 1987,
Mr. Caruso was a manager with Pannell Kerr Forster, an international public
accounting firm. Mr. Caruso became a Certified Public Accountant in 1984 and has
a B.S. in accounting from Merrimack College.
COMMITTEES AND MEETINGS OF THE BOARD
All of the incumbent directors attended at least 75% of the meetings of
the Board of Directors and the committees on which they served during the year
ended December 31, 1999. The Board of Directors met eight times during the year
ended December 31, 1999 and acted seven times by unanimous written consent. The
Board currently has three committees.
The Executive Committee (currently consisting of Messrs. Pappalardo,
Martin and Valente) was formed on June 13, 1997. The Executive Committee did not
meet during the year ended December 31, 1999. The Executive Committee is
authorized to exercise all of the powers of the Board of Directors except those
not permitted by the Delaware Corporation Law. All business transacted by the
Executive Committee is subject to approval by the Board of Directors at its next
regular meeting if required by resolution of the Board of Directors, by Delaware
Corporation
3
<PAGE>
Law or by the Restated Certificate of Incorporation or By-laws of the Company.
To the extent it may lawfully do so, the Executive Committee may initiate any
action which the Board of Directors could initiate and may oversee and direct
the day-to-day operations of the Company.
The Audit Committee (currently consisting of outside directors Messrs.
Economou and Pappalardo) held two meetings during the year ended December 31,
1999. The Audit Committee's functions include making recommendations to the
Board of Directors relative to the appointment of independent public
accountants, conferring with the Company's independent public accountants
regarding the scope and the results of the audit of the Company's books and
accounts and reporting the same to the Board of Directors, reviewing the
internal accounting procedures of the Company, and reviewing existing and
contemplated investments of the Company.
The Compensation Committee (currently consisting of outside directors
Messrs. Martin and Pappalardo) held four meetings during the year ended December
31, 1999. The Compensation Committee's functions include the administration of
the Company's stock option plans and stock purchase plan and fixing the salaries
and determining the supplemental compensation awards, if any, of members of the
Board of Directors who are officers or employees of the Company, and of other
officers of the Company.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR COMPENSATION
Outside directors receive $20,000 per year for their services as
director and $5,000 per year, per committee, for their services as members of
any committee of the Board of Directors. In addition, for their services as
directors, Mr. Pappalardo and Drs. Economou and Martin each received a warrant
to purchase 7,142 shares of the Company's common stock for $10.50 per share and
a warrant to purchase 35,000 shares of the Company's common stock for $3.1875
per share. These warrants expire 90 days from the date on which their service as
a Board member terminates. In accordance with Company policy, directors who are
employees of the Company serve as directors without compensation. Directors are
also reimbursed for reasonable out-of-pocket expenses incurred in attending
Board of Directors meetings.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for services rendered in all capacities to the Company for the
fiscal years ended December 31, 1997, 1998 and 1999 of all individuals serving
as the Company's CEO during 1999 and the other executive officers of the Company
serving on December 31, 1999 whose salary and bonuses for 1999 exceeded $100,000
(the "Named Executive Officers"):
<TABLE>
<S> <C> <C> <C> <C> <C>
Long-Term
Compensation Awards
Securities Underlying All Other
Name and Fiscal Salary Bonus Options/Warrants(1) Compensation
Principal Position Year ($) ($) (#) ($)
Louis P. Valente 12/31/99 $290,859 $350,000 200,000
Chairman, Chief Executive 12/31/98 $275,000 $--- 57,142 (2)
Officer and President 12/31/97 $275,000 $--- 57,142
Joseph P. Caruso 12/31/99 $230,000 $48,000 125,000 $40,962(3)
Vice President, Chief 12/31/98 $230,000 $--- 109,997 (2)
Financial Officer and 12/31/97 $200,000 $--- ---
Secretary
</TABLE>
* In accordance with regulations promulgated by the SEC, perquisites
are not included since the aggregate amount is less than the lesser of $50,000
or 10% of salary and bonus. Therefore, the Other Annual Compensation column
has not been included in this table.
4
<PAGE>
(1) During fiscal 1999, 1998, and 1997, the Company did not grant
any restricted stock awards or stock appreciation rights or
make any long-term incentive plan payouts to any of the Named
Executive Officers.
(2) Represents options/warrants granted in replacement of canceled
options/warrants.
(3) Paid in lieu of (untaken but contractually allotted) vacation
time for fiscal years 1992 through 1998.
OPTION AND WARRANT GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock
options and warrants granted during 1999 by the Company to the Named Executive
Officers:
- --------------------------------------------------------------------------------
OPTION AND WARRANT GRANTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Percent of
Total
Number of Shares Options/Warrants
Underlying Granted Grant Date
Name and Options/Warrants To Employees Exercise Price Expiration Present Value
Principal Position Granted in Fiscal Year(1) Per Share Date ($)(2)
- ------------------------------------------------------------------------------------------------------------------------------
Louis P. Valente 200,000(3) 19.2% $3.1875 5/31/09 $419,280(4)
Chairman,
Chief Executive Officer, and
President
Joseph P. Caruso 125,000(5) 12.0% $3.1875 5/31/09 $262,050(4)
Vice President, Chief
Financial Officer, and
Secretary
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company granted options/warrants to purchase an aggregate of
714,327 shares of common stock to all employees other than Named
Executive Officers and granted options/warrants to purchase an
aggregate of 325,000 shares to all Named Executive Officers as a group
(2 persons) during fiscal 1999.
(2) This column sets forth the present value of the grants at the date of
grant, using the Black-Scholes pricing model.
(3) This warrant expires on May 31, 2009. 80,000 options were vested on the
date of grant and 40,000 options vest on May 17, 2000, 2001 and 2002.
(4) The assumptions used in calculating the Black-Scholes value were
$3.1875 as fair market value, 3.50 year term, .94 volatility, 5.81%
risk free interest rate and no yield or premiums.
(5) This warrant expires on May 31, 2009 and vested fully on the date of
grant.
5
<PAGE>
<PAGE>
FISCAL YEAR END OPTION AND WARRANT VALUES
The following unexpired warrants and options to purchase common stock
were held by the Named Executive Officers at December 31, 1999. None of such
Named Executive Officers exercised any warrants or options during the year ended
December 31, 1999:
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Number of Securities Underlying
Unexercised Options/Warrants(1) at Value of Unexercised in-the-Money
FY-End(#) Options/Warrants at FY-End ($)(2)
- ---------------------------------------------------------------------------------------------------------------------------
Name and
Principal Position Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------
Louis P. Valente 137,142(3) 120,000(4) --- ---
Chairman,
Chief Executive Officer,
and President
Joseph P. Caruso 224,997(5) --- --- ---
Vice President, Chief --- --- ---
Financial Officer, and Secretary
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has not granted any stock appreciation rights and
its stock plans do not provide for the granting of such
rights.
(2) Value is based on the December 31, 1999, closing price on the
Nasdaq Small Cap Market of $1.1875 per share. Actual gains, if
any, on exercise will depend on the value of the common stock
on the date of the sale of the shares.
(3) Consists of 57,142 warrants to purchase common stock with an
exercise price of $10.50 per share which expire on June 1,
2002 and 80,000 options to purchase common stock with an
exercise price of $3.1875 per share which expire on May 31,
2009.
(4) Consists of options to purchase common stock with an exercise
price of $3.1875 per share which expire on May 31, 2009.
40,000 options vest on May 17, 2000, 2001 and 2002.
(5) Consists of 14,285 warrants to purchase common stock with an
exercise price of $14.88 per share which expire on August 18,
2000, 85,712 options and warrants to purchase common stock
with an exercise price of $10.50 per share which expire on or
before December 18, 2001 and 125,000 options to purchase
common stock with an exercise price of $3.1875 per share which
expire on May 31, 2009.
OTHER EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors and approved by the stockholders in 1996. The
number of shares of common stock reserved for issuance under the Purchase Plan
is 140,000 and as of the end of the fiscal year 114,292 shares of common stock
remained available for issuance thereunder. The Purchase Plan permits employees
who are employed for at least twenty hours per week and more than five months in
a calendar year to purchase common stock of the Company, through payroll
deductions, which may not exceed 15% of an employee's compensation, at the lower
of 85% of the fair market value of the common stock at the beginning or at the
end of each three month period. The Purchase Plan provides for four offerings
during each fiscal year, each having a duration of three months.
6
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EMPLOYMENT AGREEMENTS
Effective May 15, 1997, the Company entered into a two-year employment
agreement with Mr. Valente, which agreement automatically renews for successive
one year periods absent notice of non-renewal by either party. That agreement
has been renewed and amended. Pursuant to this amended agreement, Mr. Valente
serves as Chief Executive Officer and President of the Company at an annual base
salary of $270,000. Mr. Valente's agreement provides that in the event of
termination without cause anytime after the initial term, the Company shall pay
one-half his annual salary as then in effect, in addition to any earned
incentive compensation, and continue his benefits and insurance payments for six
months to the extent permitted by the Company's plans or policies. In the event
of termination due to a change in control, Mr. Valente is entitled to receive
three times his annual salary as then in effect in addition to any earned
incentive compensation.
Mr. Caruso serves as Chief Financial Officer at an annual base salary
of $250,000 pursuant to a two year employment agreement dated as of January 1,
2000. This agreement also automatically renews for successive one year periods
absent notice of non-renewal by either party. Mr. Caruso's agreement provides
that, in the event of termination by the Company without cause or termination by
Mr. Caruso for good reason without a change in control, both as defined, the
Company shall pay one year's salary as then in effect in addition to any earned
incentive compensation, and continue benefits and insurance payments for one
year. The agreement further provides that in the event of termination by reason
of death, Mr. Caruso's beneficiaries shall receive the base salary that Mr.
Caruso would have received for one year following his death (plus any pro rata
bonus to which he would have been entitled). In the event of termination due to
a change in control, Mr. Caruso is entitled to receive three times his annual
salary as then in effect (plus any bonus to which he would have been entitled)
and the continuation of benefits and insurance payments for two years.
Both agreements provide for bonuses as determined by the Board of
Directors, and employee benefits, including vacation, sick pay and insurance, in
accordance with the Company's policies. Each of the employment agreements also
prohibits the employee from directly or indirectly competing with the Company
for a period of one year following termination of his employment.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE
COMPANY'S PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND
THE COMPANY STOCK PRICE PERFORMANCE GRAPH CONTAINED HEREIN SHALL NOT BE
INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
INTRODUCTION
The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company, and establishes the compensation
plans and specific compensation levels for executive officers. The Company's
primary objective is to maximize stockholder value. As a result, the Committee
strives to ensure that the Company's executive compensation programs will enable
the Company to attract and retain key people and motivate them to achieve or
exceed certain key objectives of the Company by making individual compensation
directly dependent on the Company's achievement of certain financial goals, such
as profitability and asset management and by providing rewards for exceeding
those goals. The Committee believes that the total compensation of executive
officers should reflect the scope of their responsibilities, the success of the
Company and the contribution of each executive to that success.
COMPENSATION PROGRAMS
BASE SALARY. Base salaries are intended to approximate the average
salaries for comparable positions at similar organizations of comparable size
and complexity to the Company. Base pay increases vary according to individual
contributions to the Company's success and comparisons to similar positions
within the Company and at other comparable companies.
7
<PAGE>
BONUS PLANS. Executive officers are awarded bonuses at the discretion
of the Committee. The factors that the Committee evaluates in exercising its
discretion include return on assets, growth in income and return on sales, as
well as a subjective assessment of the contributions of each executive that are
not captured by operating measures but are considered important to the creation
of long-term value for stockholders. The relative weighting of the operating
measures and subjective evaluation varies depending on the executive's role and
responsibilities within the organization.
In light of the successful restructuring of the Company in 1999,
including the sale of the Company's Star subsidiary, executive bonuses were
awarded in 1999, as reflected in the Executive Compensation table set forth on
page 4. The bonus amounts were intended to compensate the executives for the
turn-around of the Company completed in the time frame to which they had
committed. The bonus amounts further take into account the fact that no bonuses
were awarded to the executives in the prior two fiscal years.
STOCK OPTIONS/WARRANTS. The primary goal of the Company is to excel in
the creation of long-term value for stockholders; the Committee believes that
stock options/warrants provide additional incentive to officers to work towards
maximizing stockholder value. The Committee views stock options/warrants as one
of the more important components of the Company's long-term, performance-based
compensation philosophy. The grant of options/warrants to key employees
encourages equity ownership in the Company, and closely aligns management's
interests to the interests of all the stockholders. In addition, because they
are subject to vesting periods of varying durations and to forfeiture if the
employee leaves the Company permanently, stock options/warrants are an incentive
for key employees to remain with the Company long-term. These options/warrants
are provided through initial grants at or near the date of hire and through
subsequent periodic grants. Options/warrants granted by the Company to its
executive officers and other employees have exercise prices equal to or in
excess of the fair market value at the time of grant. Options/warrants vest and
become exercisable at such time as determined by the Board. The initial grant is
designed to be competitive with those of comparable companies for the level of
the job that the executive holds and is designed to motivate the officer to make
the kind of decisions and implement strategies and programs that will contribute
to an increase in the Company's stock price over time. Periodic additional stock
options within the comparable range for the job are granted to reflect the
executives' ongoing contributions to the Company, to create an incentive to
remain at the Company and to provide a long-term incentive to achieve or exceed
the Company's financial goals.
OTHER. In addition to the foregoing, officers participate in
compensation plans available to all employees such the Company's 401(k)
retirement plan and Employee Stock Purchase Plan. See "Executive Compensation -
Other Employee Benefit Plans."
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The factors considered by the Compensation Committee in determining the
compensation of the Chief Executive Officer, in addition to chief executive
officer salaries at comparable companies, include the Company's operating and
financial performance, as well as his leadership and establishment and
implementation of strategic direction for the Company. Mr. Valente's salary was
established using the same criteria as for the Company's other executive
officers, as discussed above, and was determined by direct negotiations between
Mr. Valente and the entire Board of Directors at the time he accepted the
position of Chief Executive Officer. Subsequent to that time, Mr. Valente has
requested that his salary be reduced from its initial base amount of $300,000 to
$270,000, his current base salary. The Board considered as part of its
subjective evaluation, among other factors, Mr. Valente's (i) over two decades
of experience in a high-level executive position with a large, well-established
high-technology company (EG&G), (ii) outstanding reputation and contacts in the
local business community, and (iii) extensive knowledge of finance and
accounting.
COMPENSATION COMMITTEE
James G. Martin
A. Neil Pappalardo
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Chief Executive Officer, Louis P. Valente, serves on the
Board of Directors of Medical Information Technology, Inc. Mr. Pappalardo is the
Chief Executive Officer of Medical Information Technology Inc. Mr. Valente does
not serve on the Compensation Committee of Medical Information Technology, Inc.
COMPANY STOCK PRICE PERFORMANCE
The Securities and Exchange Commission requires that the Company
include in this proxy statement a line-graph presentation comparing cumulative
five-year shareholder returns for the Company's common stock with a broad-based
market index and either a nationally recognized industry standard or an index of
peer companies selected by the Company. The Company's common stock has been
publicly traded since December 18, 1992.
The following graph shows a five-year comparison of cumulative total
stockholder return, calculated on a dividend reinvestment basis and based on a
$100 investment, from December 31, 1994 through December 31, 1999 comparing the
return on the Company's common stock with the Nasdaq Stock Market Total Return
Index and the Nasdaq Non-Financial Stocks Index. No dividends have been declared
or paid on the Company's common stock during such period. The stock price
performance shown on the graph following is not necessarily indicative of future
price performance.
<TABLE>
Comparison of Five-Year Cumulative Total Return
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
Palomar Medical Technologies, Inc. $100 $161 $186 $25 $24 $5
Nasdaq Stock Market Total Return $100 $141 $174 $213 $300 $542
Nasdaq Non-Financial Stocks $100 $139 $169 $198 $290 $559
- -------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists ownership of the Company's common stock for
the persons or groups specified. Ownership includes direct and indirect
(beneficial) ownership, as defined by SEC rules. To the Company's knowledge,
each person, along with his or her spouse, has sole voting and investment power
over the shares unless otherwise noted. Information for our directors and
officers is as of March 24, 2000. Information for the beneficial owners of at
least 5% of our shares is as of the latest reports by those entities received by
the Company.
<TABLE>
<S> <C> <C>
Number of Shares Percentage
Name and Address of Beneficial Owner Beneficially Owned of Class (1)
- ----------------------------------------------- ------------------------- -------------------
Louis P. Valente(2) 204,143 2.0%
82 Cambridge Street
Burlington, MA 01803
Joseph P. Caruso(3) 236,232 2.3%
82 Cambridge Street
Burlington, MA 01803
A. Neil Pappalardo(4)(5) 70,713 *
82 Cambridge Street
Burlington, MA 01803
James G. Martin(4) 42,142 *
82 Cambridge Street
Burlington, MA 01803
Nicholas P. Economou(4) 43,570 *
82 Cambridge Street
Burlington, MA 01803
The Travelers Insurance Company(6) 956,418 9.5%
One Tower Square
Hartford, CT 06183
The Travelers Insurance Group, Inc.(6) 956,418 9.5%
One Tower Square
Hartford, CT 06183
PFS Services, Inc.(6) 956,418 9.5%
3120 Breckinridge Blvd.
Duluth, GA 30199-0001
Associated Madison Companies, Inc.(6) 956,418 9.5%
153 East 53rd Street
New York, NY 10013
Citigroup Inc.(6) 967,096 9.6%
153 East 53rd Street
New York, NY 10043
The Rockside Foundation(7) 1,707,688 16.9%
524 North Avenue
New Rochelle, NY 10801
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<PAGE>
Mark T. Smith(7) 1,707,688 16.9%
7670 First Place
Oakwood, OH 44146
The R. Templeton Smith Foundation(7) 1,707,688 16.9%
3001 Fairmont Blvd.
Cleveland Heights, OH 44118
All Directors and Executive Officers as Group 596,800 5.9%
</TABLE>
* Less than one percent.
(1) Pursuant to the rules of the Securities and Exchange Commission, shares
of common stock which an individual or group has a right to acquire
within 60 days pursuant to the exercise of options and warrants are
deemed to be outstanding for the purpose of computing the percentage
ownership of such individual or group, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of
any other person shown in the table. Percentage ownership is based on
10,089,450 shares of common stock issued and outstanding as of March
24, 2000.
(2) Includes 177,142 shares of common stock which Mr. Valente has the right
to acquire within 60 days pursuant to the exercise of options and
warrants.
(3) Includes 224,997 shares of common stock which Mr. Caruso has the right
to acquire within 60 days pursuant to the exercise of options and
warrants, and 1,689 shares held in our 401(k) Plan.
(4) Includes 42,142 shares of common stock which each of these directors
has the right to acquire within 60 days pursuant to the exercise of
warrants.
(5) Includes 28,571 shares of common stock which Mr. Pappalardo has the
right to acquire within 60 days pursuant to the exercise of warrants.
(6) Based on information provided in Amendment No. 5 to a Schedule 13G/A,
filed on February 14, 2000. Includes shares beneficially owned with
respect to which this entity shares voting and dispositive power with
the affiliated entities listed, and further assumes exercise/conversion
of certain securities which by their terms may not be currently
exercisable within 60 days. The entities may disclaim that they
constitute a "group" for purposes of owning these shares.
(7) Based on information provided in Amendment No. 6 to a Schedule 13D/A,
filed on January 10, 2000, and supplemental information provided by the
entities' attorney. Includes shares beneficially owned with respect to
which this entity/individual shares voting and dispositive power with
the affiliated entities/individuals listed. Includes 428,572 shares of
common stock which the entity/individual has the right to acquire
within 60 days pursuant to the exercise of warrants. The
entities/individuals may disclaim that they constitute a "group" for
purposes of owning these shares.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's common stock ("10% Stockholders"), to file with the Securities and
Exchange Commission initial reports of ownership of the Company's common stock
and other equity securities on Form 3 and reports of changes in such ownership
on Form 4 and Form 5. Officers, directors and 10% Stockholders are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file. To the Company's knowledge, based
solely on review of the copies of such reports furnished to the Company during,
and with respect to, its most recent fiscal year, or written representations
that Form 5 was not required, the Company believes that the Section 16(a) filing
requirements applicable to its officers, directors and 10% Stockholders were
complied with.
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<PAGE>
FINANCIAL INFORMATION INCORPORATED BY REFERENCE
The following financial information, which has been filed with the
Securities and Exchange Commission, is incorporated herein by reference:
(a)The Company's audited consolidated financial statements,
including the notes thereto and together with auditor's reports
thereon, appearing on pages 20 to 53 of the Company's Annual Report on
Form 10-K (the "Form 10-K") for the year ended December 31, 1999, as
included in the Company's 1999 Annual Report to Stockholders being
furnished to stockholders together with this proxy statement; and
(b)Management's Discussion and Analysis of Financial Condition
and Results of Operations appearing on pages 15-26 of the Form 10-K as
included in the Annual Report to Stockholders furnished herewith.
SOLICITATION
No compensation will be paid by any person in connection with the
solicitation of proxies. Brokers, banks and other nominees will be reimbursed
for their out-of-pocket expenses and other reasonable clerical expenses incurred
in obtaining instructions from beneficial owners of the common stock. In
addition to the solicitation by mail, special solicitation of proxies may, in
certain instances, be made personally or by telephone by directors, officers and
certain employees of the Company. It is expected that the expense of such
special solicitation will be nominal. All expenses incurred in connection with
this solicitation will be borne by the Company.
DEADLINE FOR SUBMISSION OF 2001 STOCKHOLDER PROPOSALS AND NOMINATIONS
Stockholders who wish to present proposals appropriate for
consideration at the Company's Annual Meeting of Stockholders to be held in 2001
must submit the proposals in proper form to the Company at its address set forth
on the first page of this proxy statement not later than December 31, 2000 in
order for the proposals to be considered for inclusion in the Company's proxy
statement and form of proxy relating to such Annual Meeting.
MISCELLANEOUS
The Board does not intend to present to the Annual Meeting any business
other than the proposals listed herein, and the Board was not aware, a
reasonable time before mailing this proxy statement to stockholders, of any
other business which may be properly presented for action at the Annual Meeting.
If any other business should come before the Annual Meeting, the persons present
will have discretionary authority to vote the shares they own or represent by
proxy in accordance with their judgment.
AVAILABLE INFORMATION
Stockholders of record on April 17, 2000 will receive a proxy statement
and the Company's 1999 Annual Report and Annual Report on Form 10-K (excluding
exhibits), which contains detailed financial information concerning the Company.
Written requests for additional copies of these forms may be submitted to Paul
S. Weiner, Treasurer, Palomar Medical Technologies, Inc., 82 Cambridge Street,
Burlington, Massachusetts 01803. In addition, you may visit our home page at
HTTP://WWW.PALMED.COM or the SEC's Web at HTTP://WWW.SEC.GOV that contains
reports, proxy and information statements and other information regarding
registrants that file electronically, including the Company.
12
