<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
OCULAR SCIENCES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
[OCULAR SCIENCES' LETTERHEAD]
April 29, 1998
To Our Stockholders:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Ocular Sciences, Inc. to be held at the Embassy Suites Hotel,
250 Gateway Boulevard, South San Francisco, California 94080 on Friday, May 29,
1998 at 9:00 a.m. Pacific Time.
The matters expected to be acted upon at the meeting are described in
detail in the following Notice of Annual Meeting of Stockholders and Proxy
Statement.
It is important that you use this opportunity to take part in the
affairs of your Company by voting on the business to come before this meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING. Returning the Proxy does not
deprive you of your right to attend the meeting and to vote your shares in
person.
We look forward to seeing you at the meeting.
Sincerely,
John D. Fruth
Chief Executive Officer and
Chairman of the Board of
Directors
1
<PAGE> 3
OCULAR SCIENCES, INC.
475 ECCLES AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-----------
To Our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of Ocular
Sciences, Inc. (the "Company") will be held at the Embassy Suites Hotel, 250
Gateway Boulevard, South San Francisco, California 94080 on Friday, May 29, 1998
at 9:00 a.m. Pacific Time for the following purposes:
1. To elect seven directors of the Company, each to serve until the next
Annual Meeting of Stockholders and until his successor has been
elected and qualified or until his earlier resignation or removal. The
Company's Board of Directors has nominated the following persons for
election as directors:
John D. Fruth William R. Grant
Daniel J. Kunst Edgar J. Cummins
Norwick B.H. Goodspeed Francis R. Tunney, Jr.
Terence M. Fruth
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close of
business on April 7, 1998 are entitled to notice of and to vote at the meeting
or any adjournment thereof.
By Order of the Board of Directors
John D. Fruth
Chief Executive Officer and
Chairman of the Board of Directors
South San Francisco, California
April 29, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
1
<PAGE> 4
OCULAR SCIENCES, INC.
475 ECCLES AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
-----------
PROXY STATEMENT
-----------
APRIL 29, 1998
The accompanying proxy is solicited on behalf of the Board of Directors of
Ocular Sciences, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders of the Company to be held on May 29, 1998 at 9:00
a.m. Pacific Time (the "Annual Meeting"). The Annual Meeting will be held at the
Embassy Suites Hotel, 250 Gateway Boulevard, South San Francisco, California
94080. This Proxy Statement and the accompanying form of proxy were first mailed
to stockholders on or about April 29, 1998. A copy of the Company's Annual
Report for the year ended December 31, 1997 is enclosed with this Proxy
Statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Only holders of record of the Company's Common Stock at the close of
business on April 7, 1998 (the "Record Date") will be entitled to vote at the
Annual Meeting. At the close of business on the Record Date, the Company had
22,240,386 shares of Common Stock outstanding and entitled to vote. The
presence, in person or by proxy, of the holders of a majority of the shares of
Common Stock outstanding on the Record Date will constitute a quorum for the
transaction of business at the Annual Meeting.
Holders of the Company's Common Stock are entitled to one vote for each
share held as of the Record Date. Shares of Common Stock may not be voted
cumulatively. In the event that a broker, bank, custodian, nominee or other
record holder of the Company's Common Stock indicates on a proxy that it does
not have discretionary authority to vote certain shares on a particular matter
(a "broker non-vote"), those shares will not be considered present and entitled
to vote with respect to that matter, although they will be counted in
determining the presence of a quorum.
Directors will be elected by a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors. All votes will be tabulated by
the inspector of elections appointed for the Annual Meeting.
Unless otherwise instructed, each valid returned Proxy in the form
accompanying this Proxy Statement that is not revoked will be voted in the
election of directors "FOR" the nominees of the Board of Directors, and at the
Proxy holder's direction, on such other matters, if any, that may come before
the Annual Meeting (including any proposal to adjourn the Annual Meeting).
The expenses of soliciting proxies in the form accompanying this Proxy
Statement will be paid by the Company. Following the original mailing of the
proxies and other soliciting materials, certain of the Company's directors,
officers, employees and agents may also solicit proxies, without additional
compensation, by mail, telephone, telegraph or in PERSON. Following the original
mailing of the proxies and other soliciting materials, the Company will request
that brokers, custodians, nominees and other record holders of the Company's
Common Stock forward copies of the proxy and other soliciting materials to
persons for whom they hold shares of Common Stock and request authority for the
exercise
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of proxies. In such cases, the Company, upon the request of the record holders,
will reimburse such holders for their reasonable expenses.
REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this Proxy Statement
has the power to revoke it prior to the Annual Meeting or at the Annual Meeting
prior to the vote pursuant to the proxy. A proxy may be revoked by a written
instrument delivered to the Company stating that the proxy is revoked, by a
subsequent proxy that is signed by the person who signed the earlier proxy and
is presented at the Annual Meeting or by attendance at the Annual Meeting and
voting in person. Please note, however, that if a stockholder's shares are held
of record by a broker, bank or other nominee and that stockholder wishes to vote
at the Annual Meeting, the stockholder must bring to the Annual Meeting a letter
from the broker, bank or other nominee confirming that stockholder's beneficial
ownership of the shares.
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<PAGE> 6
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, stockholders will elect directors to hold office
until the next Annual Meeting of Stockholders and until their respective
successors have been elected and qualified or until such directors' earlier
resignation or removal. The size of the Company's Board of Directors (the
"Board") is currently set at seven members. Accordingly, seven persons will be
elected at the Annual Meeting to be the directors of the Company. In the
election of directors, each stockholder is entitled to one vote for each share
of Common Stock held. The Board has nominated for election as the directors of
the Company the seven persons identified under "Directors/Nominees" below. Each
share represented by the accompanying proxy will be voted for the election of
the seven persons nominated by the Board unless the proxy is marked in such a
manner as to withhold authority so to vote. If any nominee for any reason is
unable to serve, or declines to serve, as a director at the time of the Annual
Meeting, the proxies may be voted for such substitute nominee as the proxy
holder may determine. The Company is not aware of any nominee who will be unable
to, or intends to decline to, serve as a director.
DIRECTORS/NOMINEES
The names of the Board's nominees for election as directors, and certain
information about them as of April 1, 1998, are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- --------------- --- -------------------- -----
<S> <C> <C> <C>
John D. Fruth......... 54 Chief Executive Officer and Chairman of the 1985
Board of Directors of the Company
Norwick B.H.
Goodspeed........... 48 President and Chief Operating Officer of the 1997
Company
Daniel J. Kunst....... 45 Vice President, Sales and Marketing of the 1987
Company
Edgar J. Cummins(1)... 54 Healthcare consultant 1992
Terence M. Fruth...... 59 Partner of the law firm of Fruth & Anthony, 1992
P.A.
William R. Grant(1)... 73 Chairman of Galen Associates 1992
Francis R. Tunney, Corporate Vice President, General Counsel 1996
Jr.(1).............. 50 and Corporate Secretary of Allergan, Inc.
</TABLE>
- --------
(1) Member of the Audit Committee and the Compensation Committee
JOHN D. FRUTH founded the Company in 1985 and has been the Chief Executive
Officer and Chairman of the Board of Directors of the Company since its
inception. He was also President of the Company from 1985 to October 1997. Prior
to joining the Company, Mr. Fruth worked in the regulatory affairs department,
and served as President, contact lens division, of CooperVision, Inc., a contact
lens manufacturer, from 1976 to 1983. From 1972 to 1976, Mr. Fruth worked in
sales and marketing management positions at Bausch & Lomb, Inc., a company that
manufactures and markets health-care products, including contact lenses. John D.
Fruth is the brother of Terence M. Fruth.
NORWICK B.H. GOODSPEED has been President and Chief Operating Officer of the
Company and a member of the Board of Directors since October 1997. From 1993 to
October 1997, Mr. Goodspeed was the President and Chief Executive Officer of
McGaw, Inc., a manufacturer of intravenous solutions and
4
<PAGE> 7
related equipment and a subsidiary of IVAX Corp. From 1991 to 1993, Mr.
Goodspeed was Senior Vice President, Sales and Marketing of McGaw, Inc. From
1988 to 1991, he was the President and Chief Executive Officer of Vical, Inc., a
gene therapy company.
DANIEL J. KUNST has been Vice President, Sales and Marketing, of the Company
since August 1995. Mr. Kunst has also been a member of the Board of Directors of
the Company since October 1987 and served as Executive Vice President and Chief
Operating Officer of the Company from 1987 to February 1992. From November 1994
to May 1995, Mr. Kunst served as Chief Executive Officer of NeoLens, Inc., an
optical products company. From January 1993 to October 1994, Mr. Kunst was
President, Chief Executive Officer and a director of Cymed, Inc., a manufacturer
and marketer of medical devices. From March 1992 to January 1993, he worked as
an independent consultant to ophthalmic companies. Additionally, from 1990 to
1995, Mr. Kunst was a member of the board of directors of VISX, Inc., a
manufacturer of ophthalmic lasers. From 1979 to 1987, Mr. Kunst held various
management positions with CooperVision, Inc., including President, Professional
Resources Division; Senior Vice President, Ophthalmic Products Division; and
Vice President, Sales and Marketing, Revo Sunglass Division.
EDGAR J. CUMMINS has been a member of the Board of Directors of the Company
since October 1992. Mr. Cummins is currently principally occupied as an
independent healthcare consultant. From May 1995 to January 1998, Mr. Cummins
served as Chief Financial Officer of Chiron Vision Corporation, an ophthalmic
surgical company. Chiron Vision Corporation was acquired by Bausch & Lomb, Inc.
in December 1997. From 1986 to May 1995, he was Chief Financial Officer of
Allergan, Inc. ("Allergan"). Prior to his service with Allergan, Mr. Cummins
held various senior financial positions with American Hospital Supply
Corporation, a health-care and medical products company, and Baxter Travenol
Laboratories, Inc., a medical products company, over a period of seven years.
Prior to that, he spent five years as a financial consultant for Arthur Young &
Company, a certified public accounting company.
TERENCE M. FRUTH has been Corporate Secretary and a member of the Board of
Directors of the Company since August 1992. Since 1985, Mr. Fruth has been a
partner, Vice President and Corporate Secretary of Fruth & Anthony, P.A., a
Minneapolis-based law firm specializing in commercial litigation. Mr. Fruth has
been practicing law for 30 years. Mr. Fruth is a member of both the Minnesota
State and American Bar Associations. Terence M. Fruth is the brother of John D.
Fruth.
WILLIAM R. GRANT has been a member of the Board of Directors of the Company
since October 1992. Since 1989, he has been the Chairman of Galen Associates, a
venture capital firm specializing in emerging health-care companies. From 1987
to 1989, Mr. Grant served as Chairman of New York Life International Investment,
and, from 1979 to 1987, he was the Chairman and President of MacKay-Shields
Financial Corporation. Prior to 1979, Mr. Grant had 25 years' experience with
Smith Barney, Harris Upham & Co., Inc., where he served as President and, from
1976 to 1978, Vice Chairman. Mr. Grant currently serves as Vice Chairman of
SmithKline Beecham plc and serves on the boards of directors of Allergan, Inc.;
MiniMed, Inc., a company that specializes in drug delivery devices and systems;
Seagull Energy Corporation, an oil and gas company; and Witco Corporation, a
specialty chemicals company.
FRANCIS R. TUNNEY, JR. has been a member of the Board of Directors of the
Company since October 1996. Mr. Tunney has been Corporate Vice President,
General Counsel and Corporate Secretary of Allergan since February 1991. From
1989 to 1991, Mr. Tunney was Senior Vice President, General Counsel and
Corporate Secretary of Allergan. Mr. Tunney joined Allergan in 1985 as Associate
General Counsel and from 1986 to 1989 served as Allergan's General Counsel. From
1979 to 1985, Mr. Tunney held several positions at SmithKline Beecham plc,
including counsel for its Medical Device and Diagnostics Division, acting
general manager for its Medical Ultrasound Division and senior international
attorney within its corporate law department.
Directors are elected at each annual meeting of stockholders to serve until
the next annual meeting of stockholders, or until their successors are duly
elected and qualified or until their earlier resignation, removal or death.
William R. Grant and Francis R. Tunney, Jr. were elected to the Board of
Directors
5
<PAGE> 8
(the "Board") pursuant to the terms of a shareholders' agreement which
terminated on the closing of the Company's initial public offering.
The Company incorporated under the name O.S.I. Corporation in California in
1985, and was reincorporated in Delaware in July 1997. Unless the context
otherwise requires, references herein to the Company include its California
predecessor.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board met ten times, and acted by unanimous written consent seven times,
during the year ended December 31, 1997. No director attended fewer than 75% of
the aggregate of the total number of meetings of the Board and of all committees
of the Board on which such director served.
Standing committees of the Board include an Audit Committee and a
Compensation Committee. The Board does not have a nominating committee or a
committee performing similar functions.
The Audit Committee is composed of Edgar J. Cummins, William R. Grant and
Francis R. Tunney, Jr. The Audit Committee: (1) nominates the independent
auditors of the Company to be approved by the Board of Directors; (2) meets with
the independent auditors to review the annual audit; (3) assists the full Board
in evaluating the auditors' performance; and (4) reviews internal audit and
control procedures, related party transactions and, where appropriate, potential
conflict of interest situations. The Audit Committee met three times in the year
ended December 31, 1997, in each case with the participation of the other
members of the Board.
The Company's Compensation Committee is composed of Edgar J. Cummins, William
R. Grant and Francis R. Tunney, Jr. The Compensation Committee reviews and
approves the compensation and benefits for the Company's executive officers,
administers the Company's 1997 Equity Incentive Plan and makes recommendations
to the Board regarding such matters. The Compensation Committee acted once by
unanimous written consent during fiscal 1997.
DIRECTOR COMPENSATION
Prior to the Company's initial public offering in August 1997, the
non-employee members of the Board were issued shares of the Company's Common
Stock as compensation for their service. In January 1997, William R. Grant,
Terence M. Fruth, Edgar J. Cummins and Francis R. Tunney, Jr. were issued 742,
680, 680 and 186 shares of Common Stock, respectively, as compensation for
services during 1996. In November 1997, the Company paid $4,333 to each of
Messrs. Grant, Fruth, Cummins and Tunney as compensation for services in 1997.
Members of the Board are also reimbursed for their reasonable expenses in
attending meetings of the Board. The Company has discontinued paying cash
compensation to its directors, other than reimbursement for these expenses, as
the non-employee members of the Board are now compensated under the Company's
1997 Directors Stock Option Plan (the "Directors Plan").
In June 1997, the Board adopted and the stockholders approved the
Directors Plan and reserved a total of 300,000 shares of the Company's Common
Stock for issuance thereunder. Only members of the Board who are not employees
of the Company, or any parent, subsidiary or affiliate of the Company, are
eligible to participate in the Directors Plan. On August 4, 1997, the effective
date of the Company's initial public offering, each eligible director (Terence
M. Fruth, William R. Grant, Francis R. Tunney and Edgar J. Cummins) was granted
an option to purchase 30,000 shares at an exercise price of $16.50 per share.
Each eligible director who hereafter becomes a member of the Board will
automatically be granted an option to purchase 30,000 shares upon joining the
Board. In addition, each eligible director will automatically be granted an
option to purchase 15,000 shares on each anniversary date of such director's
initial option grant under the Directors Plan if such director has served
continuously as a member of the Board since the date such director was first
granted an option under the Directors Plan. As of December 31, 1997, options to
purchase a total of 120,000 shares of Common Stock has been granted under the
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<PAGE> 9
Directors Plan. All options granted under the Directors Plan vest as to 1/36 of
the shares subject to the option per month commencing the month following the
month of the date of grant, for so long as the optionee continues as a member of
the Board or as a consultant to the Company. The exercise price of all options
granted under the Directors Plan is and will be the fair market value of the
Common Stock on the date of grant.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINATED DIRECTORS
7
<PAGE> 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of April 1, 1998,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each stockholder known by the Company to be the beneficial owner of more than 5%
of the Company's Common Stock, (ii) each director and nominee, (iii) the Chief
Executive Officer of the Company and each of the Company's four other most
highly compensated executive officers who were serving as executive officers at
the end of fiscal 1997 (together, the "Named Executive Officers") and (iv) all
current directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OUTSTANDING COMMON
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) STOCK (1)
------------------------ ---------------------- ---------
<S> <C> <C>
John D. Fruth(2)................... 5,000,000 22.5%
William R. Grant(3)................ 1,971,379 8.9
Galen Partners, L.P. and
affiliates(4).................... 1,963,873 8.8
The TCW Group, Inc. (5)............ 1,326,500 6.0
Terence M. Fruth(6)................ 112,476 *
Gregory E. Lichtwardt(7)........... 80,480 *
Daniel J. Kunst(8)................. 40,725 *
Edgar J. Cummins (9)............... 18,954 *
John Lilley (10)................... 16,000 *
Francis R. Tunney, Jr.(11)......... 7,692 *
Norwick B.H. Goodspeed............. -- *
All directors and executive
officers as a group (9
persons)(12).................... 7,247,706 32.6
</TABLE>
- --------------
* Less than 1% of the Company's outstanding Common Stock
(1) Percentage ownership is based on 22,232,876 shares outstanding as of April
1, 1998, and shares beneficially owned and percentage ownership reflect
sales of Common Stock by certain of the persons and institutions named in
the table in the Company's March 1998 public offering. See "Certain
Relationships and Related Transactions - 1997 Initial Public Offering and
1998 Secondary Public Offering." Unless otherwise indicated below, the
persons and entities named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable. Shares of Common Stock subject to
options that are currently exercisable or will become exercisable within 60
days of April 1, 1998, are deemed to be outstanding and to be beneficially
owned by the person holding such options for the purpose of computing the
percentage ownership of such person but are not treated as outstanding for
the purpose of computing the percentage ownership of any other person.
(2) As of February 15, 1998, prior to the Company's 1998 public offering, Mr.
Fruth beneficially owned a total of 7,314,576 shares or 33.4% of the shares
outstanding prior to the 1998 public offering. Mr. Fruth sold a total of
2,314,576 shares in the 1998 public offering. The address for Mr. Fruth is
c/o Ocular Sciences, Inc., 475 Eccles Ave., South San Francisco, California
94080.
(3) Shares owned represent 1,963,873 shares held of record by Galen Partners,
L.P. and its affiliates and 7,506 shares of Common Stock that may be
acquired upon exercise of stock options that are currently exercisable or
will become exercisable within 60 days of April 1, 1998. See Note (4)
below.
(4) Shares owned represent 1,770,564 shares held of record by Galen Partners,
L.P., 182,299 shares held of record by Galen Partners International, L.P.
and 11,010 shares held of record by Galen Associates, but do not include
7,506 shares of Common Stock that may be acquired by William R. Grant (a
director of the Company) upon exercise of stock options that are currently
exercisable or will become exercisable within 60 days of April 1, 1998. In
the 1998 public offering 907,784 shares were sold by Galen Partners, L.P.
and 93,412 shares were sold by Galen Partners International, L.P. Mr.
Grant, Bruce F. Wesson and Rebound Investments, Inc. are the general
partners of BGW Partners, L.P., the general partner of Galen Partners, L.P.
and Galen Partners International, L.P. and thus may be deemed to have
voting and investment power with respect to these shares.
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<PAGE> 11
The address for these individuals and entities is c/o Galen Associates, 610
Fifth Avenue, New York, New York 10020.
(5) Information regarding The TCW Group, Inc. ("TCW") is derived from a
Schedule 13G filed by TCW with the Securities and Exchange Commission on
February 12, 1998. The shares reported as beneficially owned by TCW are
beneficially owned by certain subsidiaries of TCW. Robert Day, an
individual who may be deemed to control TCW, may be deemed to beneficially
own the shares reported as beneficially owned by TCW. TCW's address is 856
South Figueroa Street, Los Angeles, California 90017. Mr. Day's address is
200 Park Avenue, New York, New York 10166.
(6) Includes 7,506 shares of Common Stock that may be acquired upon exercise of
stock options that are currently exercisable or will become exercisable
within 60 days of April 1, 1998.
(7) In the Company's 1998 secondary public offering Mr. Lichtwardt sold 10,000
shares of Common Stock.
(8) In the Company's 1998 secondary public offering Mr. Kunst sold 9,886 shares
of Common Stock.
(9) Includes 7,506 shares of Common Stock that may be acquired upon exercise of
stock options that are currently exercisable or will become exercisable
within 60 days of April 1, 1998.
(10) Represents shares of Common Stock that may be acquired upon exercise of
stock options that are currently exercisable or will become exercisable
within 60 days of April 1, 1998.
(11) Represents 186 shares held of record by Mr. Tunney, Jr. and 7,506 shares of
Common Stock that may be acquired by Mr. Tunney upon exercise of stock
options that are currently exercisable or will become exercisable within 60
days of April 1, 1998. As of February 15, 1998, prior to the Company's 1998
secondary public offering Mr. Tunney was considered the beneficial holder
of 1,977,723 shares held of record by Allergan, Inc., 417,000 of which were
transferred to The Allergan Foundation, and thereafter sold by The Allergan
Foundation in the 1998 secondary public offering. Mr. Tunney, a director of
the Company, is the General Counsel of Allergan. Allergan's and Mr.
Tunney's address is 2525 Dupont Drive, Irvine, California 92612.
(12) Includes the shares described by notes (2), (3), (6), (7), (8), (9), (10)
and (11).
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<PAGE> 12
EXECUTIVE OFFICERS
The executive officers of the Company, and their ages as of April 1,
1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
John D. Fruth 54 Chief Executive Officer and Chairman of the
Board of Directors
Norwick B.H. Goodspeed 48 President, Chief Operating Officer, and
Director
Daniel J. Kunst 45 Vice President, Sales and Marketing and
Director
Gregory E. Lichtwardt 43 Vice President, Finance, Chief Financial
Officer and Treasurer
John Lilley 51 Vice President, Manufacturing
</TABLE>
For information regarding the positions and offices with the Company
held by Messrs. Fruth, Goodspeed and Kunst, please refer to the discussion
regarding nominees for election as directors in "Directors/Nominees" under
Proposal No. 1 above.
GREGORY E. LICHTWARDT has been Vice President, Finance, and Chief
Financial Officer of the Company since April 1993 and Treasurer since May 1997.
Prior to joining the Company, from November 1990 to February 1993, Mr.
Lichtwardt was Vice President, Finance, of the Humphrey Instruments Division of
Allergan, a health-care company focused on specialty pharmaceutical products.
From February 1989 to November 1990, he served as Director of Operations,
Accounting and Planning, of Allergan's Optical Division. From December 1986 to
January 1989, he was Corporate Controller of AST Research, Inc., a personal
computer manufacturing company, and from June 1980 to December 1986, Mr.
Lichtwardt held financial positions within several different divisions of
American Hospital Supply Corporation, a health-care and medical products
company.
JOHN LILLEY has been Vice President, Manufacturing, of the Company since
June 1996. From 1990 to June 1996, Dr. Lilley served as Manufacturing Director
of Bespak plc, an English company that manufactures precision plastic
injection-molded components for the pharmaceutical industry. From 1989 to 1990,
he was Operations Director of Birkby Plastics, a division of the Plessey
Plastics Group, which manufactures plastic injection-molded components for the
automotive and computer industries.
10
<PAGE> 13
EXECUTIVE COMPENSATION
COMPENSATION OF NAMED OFFICERS
The following table sets forth compensation awarded to or earned for
services rendered in all capacities to the Company by the Company's Named
Executive Officers during fiscal 1997. This information includes the dollar
values of base salaries and bonus awards, the number of shares subject to stock
options granted and certain other compensation, whether paid or deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
------------------------------------------------ ---------------------
OTHER ANNUAL SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($)(1) BONUS($)(2) COMPENSATION($)(3) OPTIONS(#)
--------------------------- ------------ ----------- ------------------ ---------------------
<S> <C> <C> <C> <C>
John D. Fruth .................. $357,462 $192,500 $ 3,939(4) --
Chief Executive Officer
Norwick B.H. Goodspeed ......... 49,615 -- 111,250(6) 300,000
President and Chief Operating
Officer(5)
Gregory E. Lichtwardt .......... 190,513 97,428 235 --
Vice President, Finance,
Chief Financial Officer and
Treasurer
Daniel J. Kunst ................ 186,406 82,829 426 --
Vice President, Sales and
Marketing
John Lilley .................... 169,000 73,811 63,415(8) --
Vice President,
Manufacturing(7)
</TABLE>
- --------
(1) Excludes salary earned in 1996 and paid in 1997 as follows: Mr. Lichtwardt,
$30,154; and Mr. Kunst, $20,597. Includes salary earned in 1997 and paid in
1998 as follows: Mr. Fruth $57,462; Mr. Lichtwardt $15,513; and Mr. Kunst
$5,252.
(2) Represents bonuses earned in 1997 and paid in 1998. Excludes bonuses earned
in 1996 and paid in 1997, as follows: Mr. Fruth, $133,000; Mr. Lichtwardt,
$53,463; Mr. Kunst, $45,451; and Dr. Lilley $36,132.
(3) For all but Mr. Fruth, Mr. Goodspeed and Dr. Lilley, Other Annual
Compensation represents premiums paid by the Company with respect to life
insurance for the benefit of the respective individual.
(4) Represents premiums paid by the Company with respect to term life insurance
for Mr. Fruth's benefit in the amount of $864 and automobile expenses paid
by the Company for his benefit in the amount of $3,075.
(5) Mr. Goodspeed joined the Company as President and Chief Operating Officer
in October 1997, and serves in those capacities under the terms of an
employment agreement. His current annual salary is $300,000. See "--
Employment Agreements."
(6) Represents $80,000 of relocation costs and $31,250 representing the portion
of certain loans to Mr. Goodspeed that the Company amortized in 1997. See
"-- Employment Agreements."
(7) Dr. Lilley serves as the Company's Vice President, Manufacturing under the
terms of an employment agreement. See "-- Employment Agreements."
(8) Represents a $42,108 contribution by the Company to a pension plan for the
benefit of Dr. Lilley, a $10,437 reimbursement for automobile expenses and
$10,870 paid by the Company for insurance for the benefit of Dr. Lilley.
11
<PAGE> 14
OPTION GRANTS IN FISCAL 1997
The following table sets forth information regarding option grants
during 1997 to each of the Named Executive Officers. In accordance with the
rules of the Securities and Exchange Commission, the table sets forth the
hypothetical gains or "option spreads" that would exist for the options at the
end of their respective six-year terms. These gains are based on assumed rates
of annual compound stock price appreciation of 5% and 10% from the date the
option was granted to the end of the option term.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE PRICE FOR OPTION TERM($)(4)
OPTIONS IN FISCAL PER SHARE EXPIRATION ------------------------
NAME GRANTED(#)(1) YEAR(2) ($/SH)(3) DATE 5% 10%
---- ------------ ------------ -------------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
John D. Fruth............ -- -- -- -- -- --
Norwick B.H. Goodspeed... 300,000 68.2% $24.25 10/15/03 $2,474,196 $5,613,106
Gregory E. Lichtwardt.... -- -- -- -- -- --
Daniel J. Kunst.......... -- -- -- -- -- --
John Lilley.............. -- -- -- -- -- --
</TABLE>
- ----------
(1) The options granted vest over a five-year period, with 20% of the option
vesting upon the completion of each year of service. In January 1998, the
Company granted additional options to the Named Executive Officers as
follows: Mr. Fruth, 220,000 shares; Mr. Lichtwardt, 66,000 shares, Mr.
Kunst, 36,000 shares and Dr. Lilley, 30,000 shares.
(2) The Company granted options to purchase 440,150 shares of Common Stock to
employees during 1997.
(3) The exercise price may be paid in cash, in shares of the Company's common
stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares.
(4) The 5% and 10% assumed annual compound rates of stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices.
AGGREGATED OPTION EXERCISES IN 1997 AND FISCAL YEAR END OPTION VALUES
The following table sets forth information regarding the exercise of stock
options by the Named Executive Officers during 1997 and stock options held as of
December 31, 1997 by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END(#) AT FISCAL YEAR END(1)
ACQUIRED ON VALUE -------------------------- -----------------------------
NAME EXERCISES(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John D. Fruth ............ 1,280,000 $20,744,154 -- -- -- --
Norwick B.H. Goodspeed ... -- -- -- 300,000 -- $ 600,000
Gregory E. Lichtwardt .... -- -- 128,000 32,000 $ 3,172,000 793,000
Daniel J. Kunst .......... -- -- 40,000 60,000 928,600 1,392,900
John Lilley .............. -- -- 16,000 64,000 339,520 1,358,080
</TABLE>
- ----------
(1) Based on the fair market value of the Company's Common Stock at December 31,
1997 ($26.25 per share) less the exercise price payable for such shares.
12
<PAGE> 15
EMPLOYEE BENEFIT PLANS
1989 Stock Option Plan. Under the 1989 Plan, options to purchase 1,289,804
shares of Common Stock were outstanding as of April 1, 1998. The 1989 Plan was
terminated on August 4, 1997, the effective date of the Company's initial public
offering, at which time the Company's 1997 Equity Incentive Plan became
effective. As a result, no options have been granted under the 1989 Plan since
the Company's initial public offering. However, termination does not affect any
outstanding options, all of which will remain outstanding until exercised or
until they terminate or expire in accordance with their terms. The terms of
options granted under the 1989 Plan and the administration of the plan are
substantially the same as those that pertain to the 1997 Equity Incentive Plan,
except that the vesting of options granted prior to March 1, 1995 under the 1989
Plan accelerates upon certain acquisitions of the Company unless the options are
assumed or substituted by the acquiring corporation.
1997 Equity Incentive Plan. In June 1997, the Board adopted and the
stockholders approved the 1997 Plan, under which 2,292,634 shares of Common
Stock are reserved for issuance. As of April 1, 1998, options to purchase
1,619,000 shares of the Company's Common Stock were outstanding under the 1997
Plan. The 1997 Plan will terminate in May 2007, unless sooner terminated by the
Board. The 1997 Plan authorizes the award of options, opportunities to purchase
restricted stock and stock bonuses (each an "Award"). The 1997 Plan is
administered by a committee appointed by the Board, currently the Compensation
Committee, consisting of Messrs. Cummins, Grant and Tunney, all of whom are
"nonemployee directors" under applicable federal securities laws and "outside
directors" as defined under applicable federal tax laws. The committee has the
authority to construe and interpret the 1997 Plan and any agreement made
thereunder, grant Awards and establish their terms and make all other
determinations necessary or advisable for the administration of the 1997 Plan.
The 1997 Plan provides for the grant of both incentive stock options ("ISOs")
that qualify under Section 422 of the Internal Revenue Code of 1986, as amended,
and nonqualified stock options ("NQSOs"). ISOs may be granted only to employees
of the Company or of a parent or subsidiary of the Company. NQSOs may be granted
to employees, officers, directors, consultants, independent contractors and
advisors of the Company or of any parent or subsidiary of the Company, provided
such consultants, independent contractors and advisors render bona fide services
not in connection with the offer and sale of securities in a capital-raising
transaction ("Eligible Service Providers"). The exercise price of ISOs must be
at least equal to the fair market value of the Company's Common Stock on the
date of grant (110% of that value in the case of ISOs issued to ten percent
stockholders). The exercise price of NQSOs must be at least equal to 85% of that
value. The maximum term of options granted under the 1997 Plan is ten years.
Options granted under the 1997 Plan may not be transferred in any manner other
than by will or by the laws of descent and distribution and may be exercised
during the lifetime of the optionee only by the optionee. Options granted under
the 1997 Plan generally expire 90 days after the termination of the optionee's
service to the Company or to a parent or subsidiary of the Company, except in
the case of death or disability, in which case the options may be exercised up
to 12 months following the date of death or termination of service. Options
terminate immediately upon termination of employment for cause.
Opportunities to purchase shares of the Company's Common Stock and awards of
shares of the Company's Common Stock, either of which may be subject to a right
of repurchase in favor of the Company or other restrictions on ownership or
transfer, may be given to Eligible Service Providers.
In the event of certain acquisitions of the Company, any or all outstanding
Awards may be assumed or replaced by the successor corporation. In the
alternative, the successor corporation may substitute equivalent Awards or
provide consideration to Award recipients which is substantially similar to that
provided to stockholders. If the successor does not assume or substitute Awards,
outstanding Awards will expire upon consummation of the transaction, provided
that the Board in its sole discretion may provide that the vesting of any or all
Awards will accelerate prior to such consummation.
13
<PAGE> 16
1997 Employee Stock Purchase Plan. In June 1997, the Board adopted and the
stockholders approved the 1997 Employee Stock Purchase Plan (the "Purchase
Plan") and reserved a total of 400,000 shares of the Company's Common Stock for
issuance thereunder. The Purchase Plan has not been implemented, and as of April
1, 1998 no shares of Common Stock had been purchased under the Purchase Plan. If
and when the Purchase Plan is implemented and becomes effective, it will permit
eligible employees to acquire shares of the Company's Common Stock through
payroll deductions. Eligible employees may select a rate of payroll deduction
between 2% and 10% of their compensation and are subject to certain maximum
purchase limitations described in the Purchase Plan. Each offering under the
Purchase Plan will be for a period of 24 months (the "Offering Period") and will
consist of four six-month purchase periods (each a "Purchase Period"). The
purchase price for the Company's Common Stock purchased under the Purchase Plan
is 85% of the lesser of the fair market value of the Company's Common Stock on
the first day of the applicable Offering Period and the last day of the
applicable Purchase Period. The Board has the authority to determine the date on
which the first Offering Period will begin and the length of such Offering
Period. The Board has the power to change the duration of Offering Periods and
Purchase Periods. The Purchase Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Code.
EMPLOYMENT AGREEMENTS
In October 1997, Norwick B.H. Goodspeed joined the Company as its President
and Chief Operating Officer pursuant to the terms of an employment agreement
dated October 15, 1997. Under the employment agreement, the Company agreed to
employ Mr. Goodspeed as its President and Chief Operating Officer at an initial
annual base salary of $300,000. Mr. Goodspeed is eligible to receive a bonus of
up to 60% of his annual salary in 1998, and up to 50% of his annual salary for
each year thereafter. In addition, Mr. Goodspeed has received an option to
purchase 300,000 shares of the Company's Common Stock at an exercise price of
$24.25 per share, vesting 20% per year over five years so long as Mr. Goodspeed
is employed by the Company. The Company has also agreed to pay certain
relocation costs and other costs associated with the sale of Mr. Goodspeed's
prior residence in southern California, up to a maximum of $159,000. To date,
the Company has paid $80,000 of such relocation costs. The employment agreement
further provides that Mr. Goodspeed's employment will continue for a term of
three years unless and until terminated by either the Company or Mr. Goodspeed.
Under Mr. Goodspeed's employment agreement, the Company extended a $450,000
loan to Mr. Goodspeed in January 1998 in connection with his purchase of a new
residence in the San Francisco area (the "Loan"). The Loan is interest free and
is secured by a purchase money second deed of trust on the new residence and by
a security interest in certain stock options granted to Mr. Goodspeed to
purchase 300,000 shares of the Company's Common Stock and any securities
issuable upon exercise of such options. The Loan is due and payable in full on
the earlier of (i) October 15, 2002; (ii) six months after Mr. Goodspeed's
voluntary resignation or termination by the Company for Cause (as defined in Mr.
Goodspeed's employment agreement); or (iii) Mr. Goodspeed's agreement to sell,
convey, transfer, dispose of, or further encumber the new residence. Under the
terms of the employment agreement, the Company has agreed to forgive the Loan in
its entirety (and return any payments received in connection therewith), in the
event that Mr. Goodspeed remains continuously employed with the Company from
October 15, 1997 through October 15, 2000. The Company has also agreed to
forgive 50% of the Loan in the event that Mr. Goodspeed is terminated by the
Company without Cause.
Pursuant to the terms of an employment agreement dated March 1996, the
Company employed Dr. John Lilley as its Vice President, Manufacturing at an
initial annual salary of pound sterling95,000. This salary was increased to
pound sterling103,000 in 1997. Under the employment agreement, Dr. LiLley is
eligible to receive a bonus of up to 40% of his annual salary at the discretion
of the Company based on the achievement of manufacturing goals and objectives
established by the Company at the start of each fiscal year. In 1996, Dr. Lilley
also received an option to purchase 80,000 shares of the Company's Common Stock
at an exercise price of $5.03 per share. Under Dr. Lilley's employment
agreement, his employment will continue unless and until either the Company or
Dr. Lilley serves on the other 12 months' notice of
14
<PAGE> 17
termination, provided that the Company has the right to terminate his employment
upon his 65th birthday.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Cummins, Grant and Tunney.
No interlocking relationship exists between the Board or Compensation Committee
and the board of directors or compensation committee of any other company, nor
has any such interlocking relationship existed in the past. For a description of
transactions between the Company and members of the Compensation Committee and
entities affiliated with such members, see the discussion under "Certain
Relationships and Related Transactions" below.
15
<PAGE> 18
OCULAR SCIENCES, INC.
REPORT OF THE COMPENSATION COMMITTEE
This Report of the Compensation Committee is required by the Securities and
Exchange Commission and shall not be deemed to be incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or filed under such acts.
To the Board of Directors:
Final decisions regarding compensation and stock option grants to executive
officers are made by the Compensation Committee of the Board of Directors (the
"Committee"). The Committee is composed of three independent non-employee
Directors, none of whom have any interlocking relationships as defined by the
SEC.
GENERAL COMPENSATION POLICY
The Committee acts on behalf of the Board to establish the general
compensation policy of the Company. The Committee reviews base salary levels and
target bonuses for the Chief Executive Officer ("CEO") and other executive
officers of the Company at or about the beginning of each year. The Committee
also administers the Company's 1997 Equity Incentive Plan (the "1997 Plan") and
reviews the equity compensation of the CEO and other executive officers at or
about the beginning of each year.
The Committee's philosophy in compensating executive officers, including
the CEO, is to relate compensation to corporate and individual performance.
Consistent with this philosophy, annual salary adjustments and the incentive
component of executive officer compensation is determined after a review of the
Company's and individual's performance for the previous year. Long-term equity
incentives for executive officers are effected through the granting of stock
options under the 1997 Plan. Stock options generally have value for the
executive only if the price of the Company's stock increases above the fair
market value on the grant date and the executive remains in the Company's employ
for the period required for the shares to vest.
The base salaries, incentive compensation and stock option grants of
executive officers are also determined in part by the Committee reviewing data
on prevailing compensation practices of companies with whom the Company competes
for executive talent. During 1997, the Committee determined that increases in
base salaries, incentive compensation and equity compensation for executive
officers, including the CEO, might be necessary to align the Company's
compensation practices with other companies in the industry. To this end, the
Committee retained Coopers & Lybrand L.L.P. to perform a comprehensive study
(the "C&L Study") of the compensation practices of comparable companies to
determine base salary, target bonuses and stock option awards for such persons.
In preparing the performance graph for this Proxy Statement, the Company
used the Standard & Poor's Medical Products & Supplies Index as its published
line of business index. However, the compensation practices of most of the
companies in the Standard & Poor's Medical Products & Supplies Index were not
reviewed when the Committee reviewed the compensation information described
above because such companies were determined not to be competitive with the
Company for executive talent.
16
<PAGE> 19
FISCAL 1997 EXECUTIVE COMPENSATION
Base Compensation. In late 1996, the Company established the base salary
for each executive officer for 1997. In January 1998, the Committee reviewed the
information described above, especially the C&L Study, met with the
representative of Coopers & Lybrand L.L.P., and evaluated the performance of the
Company and its executive officers. The Committee also considered the
substantial competition for executive talent in the San Francisco Bay Area,
where the Company is headquartered. Based on such analysis the Committee
increased the base salary for each executive officer. In certain cases base
salary increases were made retroactive to specified dates in 1997.
Incentive Compensation. The Committee also used the information described
above as the basis for determining incentive compensation for the Company's
executive officers. The target amount of bonus for each individual was
established by the Company prior to the beginning of 1997. The actual amount of
bonus paid was based on the Committee's evaluation of the Company's and
individual's performance in 1997. For 1997, executive officers generally
received 110% of the target bonus. Certain executive officers who contributed
significant amounts of time and energy to the Company's initial public offering
received an additional bonus as well.
Stock Options. Stock options typically have been granted to executive
officers when the executive first joins the Company, in connection with a
significant change in responsibilities and, occasionally, to achieve equity
within a peer group or to meet competitive requirements. The Committee may,
however, grant stock options to executives for other reasons. The number of
shares subject to each stock option granted is within the discretion of the
Committee and is based on anticipated future contribution and ability to impact
corporate and/or business unit results, past performance, consistency within the
executive's peer group and competitive conditions. No options were granted to
executive officers in 1997 except to Mr. Goodspeed, who joined the Company in
1997, as described below. Stock options generally become exercisable over a
five-year period and are granted at a price that is equal to the fair market
value of the Company's Common Stock on the date of grant.
Mr. Goodspeed, the Company's President and Chief Operating Officer, joined
the Company in October 1997. As Mr. Goodspeed's compensation package was
negotiated and agreed to at that time, no change in his compensation was made in
January 1998 when the foregoing adjustments were made to the compensation of the
other executive officers. For a description of Mr. Goodspeed's compensation, see
"Executive Compensation - Compensation of Named Officers" and "Executive
Compensation - Employment Agreements."
Company Performance and CEO Compensation. Based upon the criteria set forth
above, Mr. Fruth received a bonus of $192,500 in fiscal 1997. Mr. Fruth's bonus
represents 110% of the target bonus established by the Committee prior to the
beginning of the year. Mr. Fruth's salary was also increased to $395,000
effective May 1997. The Committee based Mr. Fruth's bonus and salary increase
on, among other things, (i) the Company's achievement of financial performance
goals, (ii) his significant contributions to the Company's initial public
offering, and (iii) his role in the Company's successful recruitment of Mr.
Goodspeed as President and Chief Operating Officer, as well as the C&L Study.
Mr. Fruth did not receive a stock option in 1997.
Compliance with Section 162(m) of the Internal Revenue Code of 1986. The
Company intends to comply with the requirements of Section 162(m) of the
Internal Revenue Code of 1986. The 1997 Plan is already in compliance with
Section 162(m) by limiting stock awards to named executive officers. The Company
does not expect cash compensation for 1998 for any executive officer to exceed
$1,000,000.
COMPENSATION COMMITTEE
EDGAR J. CUMMINS
WILLIAM R. GRANT
FRANCIS R. TUNNEY, JR.
17
<PAGE> 20
COMPANY STOCK PRICE PERFORMANCE
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company with the cumulative total return on the Nasdaq Stock
Market and the Standard & Poor's Medical Products & Supplies Index from the
first date the Company's Common Stock was publicly traded (August 5, 1997) to
the last trading day in each subsequent month through December 31, 1997
(assuming the investment of $100 in the Company's Common Stock and in each of
the indexes on the date of the Company's initial public offering, and
reinvestment of all dividends).
The comparisons in the graph below are based on historical data and are
not intended to forecast the possible future performance of the Company's Common
Stock.
[OCULAR SCIENCES, INC. PERFORMANCE CHART
STANDARD & POOR'S MEDICAL PRODUCTS & SUPPLIES INDEX
NASDAQ STOCK MARKET INDEX - U.S. INDEX]
The graph set forth above is required by the Securities and Exchange
Commission and shall not be deemed to be incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or filed under such acts.
18
<PAGE> 21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1995, there has not been, nor is there currently proposed,
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 amount involved exceeds
$60,000 and in which any director, executive officer, holder of more than 5% of
the Common Stock of the Company or any member of the immediate family of any of
the foregoing persons had or will have a direct or indirect material interest
other than (i) compensation agreements and related loans described above under
the caption "Executive Compensation," (ii) director compensation arrangements
described above under the caption "Proposed No. 1 -- Election of Directors --
Director Compensation," and (iii) the transactions described below.
OSL ACQUISITION AND RELATED LITIGATION
In September 1992, the Company acquired Precision Lens Laboratories Ltd.
("PLL"), a United Kingdom-based manufacturer of contact lenses and, until the
acquisition, a supplier to the Company, for a total of 1,728,000 shares of the
Company's Common Stock (the "PLL Acquisition"). After the acquisition, PLL was
renamed Ocular Sciences Ltd. ("OSL"). The owners of PLL (the "PLL Owners")
included John D. Fruth, the Company's Chief Executive Officer and a director and
principal stockholder of the Company, who received 496,976 shares of the
Company's Common Stock in the acquisition, and Geoffrey H. Galley and his son
Anthony D. Galley (together, the "Galleys"), who received 1,015,024 shares of
the Company's Common Stock in the acquisition. Prior to this acquisition,
Geoffrey H. Galley had owned 190,400 shares of the Company's Common Stock.
In connection with the PLL Acquisition, PLL entered into a patent license
agreement (the "Patent License Agreement") with the PLL Owners other than Mr.
Fruth (the "Patent Owners"), pursuant to which PLL obtained a non-exclusive
license to certain contact lens manufacturing patents in exchange for royalty
payments that were to aggregate up to $4.4 million, of which up to $3.6 million
was to be paid to the Galleys. An additional royalty was to be payable by PLL on
certain sales by it to other contact lens manufacturers. As of December 31,
1994, the Company had made cumulative royalty payments of approximately $3.2
million. No royalty payments were made after 1994 as a result of the lawsuit
described below. Also in connection with the PLL Acquisition, PLL entered into a
purchase and supply agreement with Aspect Vision Care Ltd. ("AVCL"), a United
Kingdom-based contact lens distributor controlled by certain of the Patent
Owners, pursuant to which PLL agreed to manufacture and supply contact lenses to
AVCL at a purchase price equal to the Company's direct and indirect costs of
processing the lenses, plus 20% (the "Purchase and Supply Agreement"). In
connection with the Purchase and Supply Agreement, PLL agreed not to sell the
contact lenses covered by such agreement to third parties in the United Kingdom,
and AVCL agreed not to sell such lenses in North and South America, for a period
of ten years (subject to certain exceptions). AVCL accounted for approximately
$1.9 million of the Company's net sales for the year ended December 31, 1994 and
$407,000 of accounts receivable as of December 31, 1995 and 1996.
There were no sales to AVCL in 1995 and 1996.
In May 1992, Anthony Galley was appointed Managing Director of PLL and in
November 1992 entered into an employment agreement with PLL. Mr. Galley was also
appointed Vice President, Manufacturing, of the Company. In 1993 and 1994,
disputes arose between the Company, OSL, Anthony Galley and AVCL regarding the
type, price and quantity of contact lenses that OSL was obligated to supply to
AVCL under the Purchase and Supply Agreement. AVCL constructed its own
manufacturing facility in 1994 using information that the Company believed to be
proprietary to OSL.
In April 1994, OSL terminated Anthony Galley's employment, and, in the
following month, the Company and OSL sued AVCL, the Galleys, the other Patent
Owners and certain related persons in the United Kingdom and later in
California. The suit in the United Kingdom alleged misappropriation of
intellectual property, breach of fiduciary duty, breach of contract and other
claims, while the suit in California alleged securities fraud arising out of the
PLL Acquisition. The defendants brought a
19
<PAGE> 22
counterclaim against OSL and the Company for sums allegedly due under the Patent
License Agreement and breach of Anthony Galley's employment contract, and other
claims, and brought a separate action in the United Kingdom against OSL alleging
patent infringement.
In November 1996, judgment was rendered in the United Kingdom actions. The
judgment found against the Company and OSL on the most important claims brought
by them. In the judgment, the judge harshly criticized the Company's business
practices and stated that he did not believe the testimony of Messrs. Fruth and
Lichtwardt, the Company's Chief Executive Officer and Chief Financial Officer,
respectively. The judge found in favor of the defendants on a number of their
counterclaims, although not on the issue of patent infringement, which was
decided in favor of OSL.
In February 1997, prior to the determination of any costs or damages, the
Company and the other parties to the foregoing litigations entered into a
settlement agreement (the "Settlement Agreement") providing for, among other
things, (i) a mutual release among the parties, including a release from any
further amounts owed under the Patent License Agreement or Purchase and Supply
Agreement, and the termination of all pending litigation, (ii) the replacement
of the patent license agreement with a new, fully paid-up, non-exclusive patent
license that did not limit OSL's ability to sell contact lenses to other contact
lens manufacturers, (iii) the grant by OSL to AVCL and the Patent Owners of a
royalty-free, non-exclusive license to any OSL proprietary information that was
in their possession as of the commencement of the lawsuits in May 1994, and (iv)
the termination of the Purchase and Supply Agreement, including the elimination
of the restriction on the Company's ability to sell contact lenses in the United
Kingdom (with the payment of a royalty in certain limited circumstances) and the
elimination of the restriction on AVCL's ability to sell contact lenses in North
and South America. The Settlement Agreement also provided for the payment of $10
million by the Company, of which $3.3 million was paid on the date of the
Settlement Agreement and the remaining $6.7 million was paid upon the closing of
the Company's initial public offering.
The Patent Owners sold all of the shares of Common Stock owned by them in the
Company's initial public offering, and have agreed not to acquire additional
shares of the Company's Common Stock or other securities or assets of the
Company for a period of five years from the date of the Company's initial public
offering. In December 1997, AVCL was acquired by The Cooper Companies, Inc.
ALLERGAN/AMERICAN HYDRON ACQUISITION; GALEN FINANCING
In October 1992, the Company acquired the North and South American contact
lens business of Allergan, which had been operating under the name American
Hydron, for $24.5 million, including acquisition costs of $1.2 million. The
transaction and related working capital requirements were financed by the
issuance of (i) a senior secured note in the amount of $7.0 million to Allergan,
(ii) senior subordinated notes in the aggregate principal amount of $16.3
million, $13.8 million of which was issued to Allergan and $2.5 million of which
was issued to Galen Partners, L.P. and Galen Partners International L.P.
(together, the "Galen Group"), (iii) 118,168 shares of Series A Preferred Stock
(valued at $8.46 per share, for an aggregate value of approximately $1.0
million) to Allergan, (iv) 3,403,192 shares of Common Stock at $1.47 per share,
for an aggregate price of approximately $5.0 million, to the Galen Group and (v)
warrants to purchase an aggregate of 3,492,688 shares of Common Stock at an
exercise price of $0.00125 per share, 2,957,000 of which were issued to Allergan
and 535,688 of which were issued to the Galen Group. The senior secured note was
repaid with bank borrowings in 1993 and the senior subordinated notes were
repaid with bank borrowings in October 1996. In December 1994, Allergan and the
Galen Group exercised their warrants to purchase 2,467,456 and 356,936 shares of
Common Stock, respectively. On December 31, 1996, the remaining warrants were
canceled pursuant to their terms because the Company had met certain financial
milestones. The Series A Preferred Stock was converted into 236,336 shares of
Common Stock at the consummation of the Company's initial public offering.
20
<PAGE> 23
In connection with the American Hydron acquisition, the Company entered into
a registration rights agreement providing the Company's then current
shareholders, including John D. Fruth, Allergan, the Galen Group and the
Galleys, with certain registration rights.
1997 INITIAL PUBLIC OFFERING AND 1998 SECONDARY PUBLIC OFFERING
In August 1997, the Company completed its initial public offering in
which 8,280,000 shares of its Common Stock were sold to the public at a price of
$16.50 per share (including shares sold pursuant to the underwriters'
over-allotment option). The shares sold consisted of 3,600,000 shares sold by
the Company and 4,680,000 shares sold by selling stockholders. The Company
incurred aggregate expenses of $1,545,000 in connection with the initial public
offering (excluding underwriting discounts and commissions paid by the Company
and the selling stockholders).
In March 1998, the Company completed a secondary offering in which
5,343,381 shares of its Common Stock were sold to the public at a price of
$27.50 per share (including shares sold pursuant to the underwriters'
over-allotment option). The shares sold consisted of 30,000 shares sold by the
Company and 5,313,381 shares sold by selling stockholders. The Company incurred
aggregate expenses of approximately $540,000 in connection with the secondary
offering (excluding underwriting discounts and commissions paid by the Company
and the selling stockholders).
PAYMENTS TO DIRECTOR
Fruth & Anthony, a law firm in which Terence M. Fruth, a director of the
Company and the brother of John D. Fruth, the Chief Executive Officer of the
Company, is a partner, has provided legal services to the Company since its
formation. The Company made payments of $309,000 in 1995, $284,000 in 1996 and
$77,000 in 1997 to Fruth & Anthony for such legal services.
LOANS FROM MR. FRUTH
From July 1986 to March 1990, John D. Fruth loaned the Company a total of
$2.9 million to meet certain short-term operating cash requirements. In October
1992, in connection with the American Hydron acquisition, Mr. Fruth was issued a
$2.9 million junior subordinated promissory note, bearing interest at the prime
rate plus 3%. The Company repaid the note with a portion of the net proceeds
from the Company's initial public offering.
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INDEPENDENT AUDITORS
KPMG Peat Marwick, LLP, independent auditors, audited the consolidated
financial statements of the Company for the fiscal year ended December 31, 1997.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions. The Board of
Directors selects the Company's independent auditors.
STOCKHOLDER PROPOSALS AND REPORT ON FORM 10-K
Proposals of Stockholders intended to be presented at the Company's 1999
Annual Meeting of Stockholders must be received by the Company at its principal
executive offices no later than the close of business on December 29, 1998, in
addition to other applicable requirements, in order to be included in the
Company's Proxy Statement and form of proxy relating to the meeting.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1997 WILL BE
PROVIDED WITHOUT CHARGE ON WRITTEN REQUEST. REQUESTS SHOULD BE DIRECTED TO THE
COMPANY'S INVESTOR RELATIONS DEPARTMENT AT 475 ECCLES AVENUE, SOUTH SAN
FRANCISCO, CALIFORNIA 94080
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's Common Stock ("10% Stockholders"), to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership on a Form 3 and
reports of changes in ownership on a Form 4 or Form 5. Such persons are required
by SEC regulation to furnish the Company with copies of all Section 16(a) forms
that they file.
Based solely on its review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers, directors and 10% Stockholders were met during fiscal
1997, except that Edgar J. Cummins, a director of the Company, failed to report
the purchase of 500 shares of the Company's Common Stock in August 1997.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board does not presently intend
to bring any other business before the Annual Meeting, and, so far as is known
to the Board, no matters are to be brought before the Annual Meeting except as
specified in the Notice of the Meeting. As to any business that may properly
come before the Annual Meeting, or any adjournment thereof, however, it is
intended that proxies, in the form enclosed, will be voted in respect thereof in
accordance with the judgment of the persons voting such proxies.
Pursuant to the Company's Bylaws, only such business shall be conducted at
an annual meeting of stockholders as is properly brought before the meeting. For
business to be properly brought before an annual meeting by a stockholder, in
addition to any other applicable requirements, timely notice of the matter must
be first given to the Secretary of the Company. To be timely, written notice
must be delivered to the Secretary at the executive offices of the Company not
later than the close of business on the sixtieth day nor earlier than the close
of business on the ninetieth day prior to the first anniversary of the preceding
year's annual meeting, provided, however, that in the event that the date of the
annual meeting is more than thirty days before or more than sixty days after
such anniversary date, notice by the stockholder, to be timely, must be so
delivered not earlier than the close of business on the ninetieth day prior
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to such annual meeting and not later than the close of business on the later of
the sixtieth day prior to such annual meeting or the close of business on the
tenth day following the day on which public announcement of the date of such
meeting is first made by the Company. Such stockholder notice must set forth
certain information specified by the Company's Bylaws. A copy of the Company's
Bylaws is available upon request from the Company's Investor Relations
Department at 475 Eccles Avenue, South San Francisco, California 94080.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE SO THAT
YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
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<PAGE> 26
OCULAR SCIENCES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
May 29, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY.
The undersigned hereby appoints John D. Fruth and Gregory E. Lichtwardt, or
either of them, as proxies, each with full power of substitution, and hereby
authorizes them to represent and to vote, as designated below, all shares of
Common Stock, $0.001 par value, of Ocular Sciences, Inc. (the "Company"), held
of record by the undersigned on April 7, 1998, at the Annual Meeting of
Stockholders of the Company to be held at Embassy Suites Hotel, 250 Gateway
Boulevard, South San Francisco, California 94080, on Friday, May 29, 1998, at
9:00 a.m. Pacific Daylight Time, and at any adjournments or postponements
thereof.
1. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed [ ] WITHHOLDING AUTHORITY
below (except as indicated to vote for all nominees
to the contrary below) listed below
Nominees: John D. Fruth, Norwick B.H. Goodspeed, Daniel J. Kunst, Edgar J.
Cummins, Terence M. Fruth, William R. Grant and Francis R.
Tunney, Jr.
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
------------------------------------------------------------
The Board of Directors recommends that you vote FOR the election of all
nominees listed in this Proposal 1.
2. THE TRANSACTION OF SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS OF THE ANNUAL
MEETING.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 27
(CONTINUED FROM OTHER SIDE)
THIS PROXY WILL BE VOTED AS DIRECTED ABOVE. WHEN NO CHOICE IS INDICATED,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES LISTED IN PROPOSAL 1.
In their discretion, the proxy holders are authorized to vote upon such other
business as may properly come before the meeting or any adjournments or
postponements thereof to the extent authorized by Rule 14a-4(c) promulgated
under the Securities Exchange Act of 1934, as amended.
-------------------------------------------
(Print Stockholder(s) name)
-------------------------------------------
(Signature(s) of Stockholder or Authorized
Signatory)
-------------------------------------------
(Title of Authorized Signatory)
Dated: __________, 1998
Please sign exactly as your name(s) appear(s) on your stock certificate. If
shares of stock stand of record in the names of two or more persons or in the
name of husband and wife, whether as joint tenants or otherwise, both or all of
such persons should sign the proxy. If shares of stock are held of record by a
corporation, the proxy should be executed by the president or vice president and
the secretary or assistant secretary. Executors, administrators or other
fiduciaries who execute the above proxy for a deceased stockholder should give
their full title. Please date the proxy.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
25
