<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Photoelectron Corporation
- - --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
NOTICE OF SPECIAL MEETING IN LIEU OF THE
ANNUAL MEETING OF STOCKHOLDERS
OF
PHOTOELECTRON CORPORATION
TO BE HELD
MAY 25, 1999
To the Stockholders of Photoelectron Corporation:
We are pleased to notify you that a Special Meeting in lieu of the Annual
Meeting of Stockholders (the "Meeting") of Photoelectron Corporation (the
"Company") will be held at the offices of the Company located at 5 Forbes
Road, Lexington, Massachusetts 02421, on Tuesday, May 25, 1999 at 11:00 a.m.,
for the purpose of considering and acting upon the following matters, all as
described in the accompanying Proxy Statement:
1) To elect a Board of three Directors to hold office until the next
annual meeting and until the election and qualification of their respective
successors.
2) To act upon the approval of the designation of Arthur Andersen LLP to
audit the books, records and accounts of the Company.
3) To consider and act upon all other matters which may properly come
before the Meeting or any adjournment or adjournments thereof.
The Board of Directors has set the close of business on Wednesday, April 14,
1999, as the record date for the purpose of determining the stockholders
entitled to notice of, and to vote at, the Meeting or any adjournment thereof,
and only stockholders of record on that date shall be entitled to notice of
and to vote at said meeting.
Your Proxy is enclosed. You are cordially invited to attend the Meeting. If
you do not expect to be present and wish your shares to be voted, you are
requested to fill in, date, sign, and mail the enclosed Proxy promptly. A
return envelope with prepaid postage if mailed in the United States is
enclosed for your convenience. If you attend the Meeting, your Proxy will be
returned to you upon request to the Clerk.
By order of the Board of Directors,
William O. Flannery, Esq.
Clerk
Lexington, Massachusetts
April 23, 1999
PHOTOELECTRON CORPORATION
5 Forbes Road
Lexington, MA 02421
(781) 861-2069
<PAGE>
PHOTOELECTRON CORPORATION
5 Forbes Road
Lexington, Massachusetts 02421
(781) 861-2069
----------------
SPECIAL MEETING IN LIEU OF THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 25, 1999
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Photoelectron Corporation (the "Company") of proxies for
use at the Special Meeting in lieu of the Annual Meeting of Stockholders of
the Company (the "Meeting") to be held at the offices of the Company located
at 5 Forbes Road, Lexington, Massachusetts 02421, on Tuesday, May 25, 1999 at
11:00 a.m. and at any adjournments thereof. This Proxy Statement and the
accompanying Proxy Card are being mailed to stockholders on or about April 23,
1999.
Unless contrary instructions are indicated on the proxy, all valid proxies
received pursuant to this solicitation (and not revoked before they are voted)
will be voted FOR the election of the nominees for Director named herein. If a
stockholder specifies a different choice on the proxy, such stockholder's
shares of Common Stock will be voted in accordance with such specifications.
Any person giving a proxy in the form accompanying this Proxy Statement has
the power to revoke it at any time before its exercise. A proxy may be revoked
by filing with the Clerk of the Company an instrument revoking it, by
presenting an executed proxy bearing a later date at the Meeting, or by
attending the Meeting and voting in person.
The cost of soliciting proxies will be borne by the Company. Solicitations
may be made by mail, personal interview, telephone and/or telegram by
Directors, officers and employees of the Company, without additional
compensation for such solicitation activities. Arrangements will be made by
the Company with its transfer agent, American Stock Transfer & Trust Company,
6201 15th Avenue, Brooklyn, New York 11219, to forward solicitation material
to the beneficial owners of the shares held of record. The Company will
reimburse banks, brokerage firms, other custodians, nominees and fiduciaries
for reasonable expenses incurred in sending proxy material to beneficial
owners of the Company's Common Stock held in their respective names.
Copies of the 1998 Annual Report of the Company are being mailed to
stockholders together with this Proxy Statement. The Annual Report contains
the financial statements of the Company for the fiscal years ended January 2,
1999 and January 3, 1998.
1
<PAGE>
VOTING SECURITIES
At April 14, 1999, 7,740,454 shares of common stock, $.01 par value (the
"Common Stock"), were issued and outstanding. Of the shares of Preferred Stock
authorized for issuance, no shares were issued and outstanding at April 14,
1999.
Only stockholders of record at the close of business on Wednesday, April 14,
1999 have the right to receive notice of and to vote at the Meeting and any
adjournments thereof. Each share of Common Stock entitles the holder thereof
to one vote. Under the Massachusetts Business Corporation Law, the presence,
in person or by proxy, of stockholders holding a majority in interest of the
issued and outstanding shares of Common Stock entitled to vote at the Meeting
is necessary to constitute a quorum. Abstentions and broker non-votes are each
included for purposes of determining the presence or absence of a sufficient
number of shares to constitute a quorum for the transaction of business. With
respect to the approval of any particular proposal, abstentions and broker
non-votes are not counted in determining the number of votes cast.
Proposal I. Election of Directors
It is intended that, unless otherwise indicated thereon, the proxies
received will be voted in favor of the election of the three persons named
below to serve as Directors until the next annual meeting of Stockholders and
until their successors shall be elected and shall qualify. Although it is
expected that each of the nominees will be available for election, if a
nominee is not a candidate at the time the election occurs, it is intended
that such proxies will be voted for the election of a substitute nominee
selected by the Board of Directors, unless the Board chooses to reduce the
number of Directors to the number of nominees then available for election. In
this event, the proxies would be voted for the reduced number of nominees.
Unless otherwise indicated on the enclosed Proxy Card, the votes represented
by any proxy may be voted at the discretion of the person or persons voting
the proxy. The three nominees receiving a plurality of the votes cast by the
stockholders represented at the meeting, in person or by proxy, will be
elected as Directors of the Company.
The following table sets forth the name and age (as of the date of the
Meeting) of the Directors, their principal occupations at present, the
positions and offices, if any, held by each Director with the Company in
addition to the position as a Director, and the period during which each has
served as a Director of the Company.
<TABLE>
<CAPTION>
Principal Occupation - First Elected
Name Age Position Held Director
---- --- ---------------------- -------------
<C> <C> <S> <C>
Peter M. Nomikos............... 67 Chairman of the Board, 1989
Chief Executive Officer
and Treasurer
George N. Hatsopoulos, Ph.D. .. 72 Chairman of the Board and 1989
Chief Executive Officer of
Thermo Electron
Corporation
Roger D. Wellington............ 72 President and Chief 1989
Executive Officer of
Wellington Consultants,
Inc. and Wellington
Associates, Inc.
</TABLE>
BACKGROUND OF NOMINEES FOR ELECTION AS DIRECTORS
Peter M. Nomikos has served as Chairman of the Board, Chief Executive
Officer, and Treasurer of the Company since its founding in 1989 and served as
President of the Company from its founding in 1989 until he voluntarily
resigned as President in March, 1999. Mr. Nomikos was co-founder of Thermo
Electron Corporation ("Thermo Electron") where he was a director until 1976.
For the past 30 years, Mr. Nomikos has resided in London and has been involved
in maritime shipping as Managing Director of Nomikos (London) Ltd. He devotes
on average approximately 150 hours per month (or roughly two-thirds of his
professional time) to directing the overall business activities of the Company
in the U.S. and abroad. Approximately one-third of Mr. Nomikos' professional
time is devoted to his other professional activities, including those relating
to PYC Corporation.
2
<PAGE>
George N. Hatsopoulos, Ph.D. has served as a Director of the Company since
its founding in 1989. Dr. Hatsopoulos has been Chairman of the Board and Chief
Executive Officer of Thermo Electron and has served as a director of Thermo
Electron since 1956. Dr. Hatsopoulos is also a director of Thermedics, Inc.,
Thermo Ecotek Corporation, Thermo Fibertek, Inc., Thermo Instrument Systems
Inc., Thermo Optek Corporation, ThermoQuest Corporation and ThermoTrex
Corporation.
Roger D. Wellington has served as a Director of the Company since its
founding in 1989. Mr. Wellington serves as President and Chief Executive
Officer of Wellington Consultants, Inc. and Wellington Associates, Inc.,
international business consulting firms he founded in 1994 and 1989,
respectively. Prior to 1989, Mr. Wellington served for more than five years as
Chairman of the Board of Augat Inc., a manufacturer of electromechanical
components. Prior to 1988, he also held the positions of President and Chief
Executive Officer of Augat Inc. Mr. Wellington is also a director of Thermo
Electron and Thermo Fibergen Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF PETER M. NOMIKOS, GEORGE N. HATSOPOULOS, PH.D. AND ROGER D.
WELLINGTON AS DIRECTORS.
GENERAL INFORMATION RELATING TO
THE BOARD OF DIRECTORS
The Board of Directors
The business and affairs of the Company are managed by the Board of
Directors. The Board of Directors held five meetings in the fiscal year ended
January 2, 1999. Each member of the Board of Directors attended all meetings
of the Board and all meetings held by all Committees of the Board on which he
served during the fiscal year ended January 2, 1999. It is anticipated that
immediately following the Meeting, the Board of Directors will hold its Annual
Meeting of the Board of Directors.
Committees of the Board of Directors
The Company had no nominating or compensation committees of the Board of
Directors or committees performing similar functions during the year ended
January 2, 1999.
The Board of Directors has an Audit Committee, which has general
responsibility for supervision of financial controls as well as accounting and
audit activities of the Company. The Audit Committee has the responsibility to
review annually the qualifications of the Company's independent certified
public accountants, make recommendations to the Board of Directors concerning
the selection of the accountants and review the planning, fees and results of
the accountants' audit. The current members of the Audit Committee are Messrs.
Hatsopoulos and Wellington. The Audit Committee held three meetings during the
fiscal year ended January 2, 1999.
Compensation of Directors
Outside Directors of the Company currently receive an annual stipend of
$2,000, a fee of $1,000 per regular or special meeting of the Board of
Directors attended in person (together with reimbursement of reasonable travel
expenses), a fee of $500 per each such meeting participated in by means of
conference telephone arrangements and a fee of $500 per any regular or special
meeting of any committee of the Board of Directors, whether attended in person
or participated in by conference telephone arrangements (together, in the
event not coincident with a meeting of the Board of Directors, with
reimbursement of reasonable travel expenses). Directors who are employees of
the company receive no compensation as members of the Board of Directors.
3
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
Under the rules of the Securities and Exchange Commission (the "SEC"), a
person who directly or indirectly has or shares voting power and/or investment
power with respect to a security is considered to be a beneficial owner of the
security. Shares as to which voting power and/or investment power may be
acquired within 60 days are also considered to be beneficially owned under
these rules.
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 29, 1999 by (i) each
person (including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) known by the
Company to be the beneficial owner of more than 5% of the Company's Common
Stock (assuming conversion of all outstanding warrants and convertible debt),
(ii) each current Director and nominee for election as Director, (iii) each
executive officer who received salary and bonus in excess of $100,000 for all
services rendered during the fiscal year ended January 2, 1999 and (iv) all
current Directors and executive officers of the Company as a group. Except as
otherwise provided in the footnotes to this table, the Company believes that
the persons named in this table have voting and investment power with respect
to all the shares of Common Stock indicated.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership(1) Percent of Class(1)
- - ------------------------------------ ----------------------- -------------------
<S> <C> <C>
Peter M. Nomikos................... 4,327,095(2) 46.9%
Peter E. Oettinger, Ph.D........... 169,700(3) 2.2%
George N. Hatsopoulos, Ph.D........ 23,500(4) *
Roger D. Wellington................ 23,500(5) *
Gerald J. Bojas.................... 7,800(6) *
John C. Brink...................... 4,700(7) *
Thomas R. Varricchione............. 10,200(8) *
Thermo Electron Corporation........ 833,861 10.8%
81 Wyman Street
Waltham, MA 02254
PYC Corporation.................... 3,567,735(9) 40.0%
c/o Aegeus Shipping Co., Ltd.
TANPY Building
17-19 Akti Miaouli
Piraeus 185 35 Greece
All Directors and executive
officers as a group (7 persons)... 4,566,494(10) 48.6%
</TABLE>
- - --------
* Less than 1%.
(1) Includes the number of shares and percentage ownership represented by
such shares determined to be beneficially owned by a person in accordance
with the rules of the Securities and Exchange Commission. The number of
shares beneficially owned by a person includes shares of Common Stock
subject to options, convertible debt or warrants held by that person that
are currently exercisable or convertible or exercisable or convertible
within 60 days. Such shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of each other person.
Shares subject to exercisable options and shares issuable upon conversion
of convertible debt or exercise of outstanding warrants are shown in the
footnotes to this table, if applicable. The persons named in this table
have voting and investment power with respect to all shares of Common
Stock shown as owned by them, subject to community property laws where
applicable and except as otherwise indicated in the other footnotes to
this table.
(2) Includes 52,500 shares subject to exercisable options granted by the
Company, and 235,000 shares issuable upon conversion of convertible debt.
Includes 2,377,735 shares and 1,190,000 shares issuable upon exercise of
outstanding warrants owned by PYC Corporation, of which Mr. Nomikos is
the President. Mr. Nomikos has been granted investment power and the
authority to vote such shares by PYC Corporation. Includes 300 shares
owned by Petronome Corporation. Mr. Nomikos has been granted investment
power and the authority to vote such shares by Petronome Corporation.
4
<PAGE>
(3) Includes 142,500 shares subject to exercisable options granted by the
Company. Pursuant to the terms of that certain Consulting Agreement dated
as of March 29, 1999, by and between Dr. Oettinger and the Company (the
"Consulting Agreement"), Dr. Oettinger tendered his resignation as Vice
President, Chief Operating Officer, and Director of the Company. The
terms of the Consulting Agreement are summarized herein under "Certain
Relationships and Related Transactions".
(4) Includes 11,000 shares subject to exercisable options granted by the
Company. Excludes any shares owned by Thermo Electron, as to which Dr.
Hatsopoulos disclaims beneficial ownership.
(5) Includes 11,000 shares subject to exercisable options granted by the
Company.
(6) Includes 6,800 shares subject to exercisable options granted by the
Company.
(7) Includes 3,400 shares subject to exercisable options granted by the
Company.
(8) Includes 10,200 shares subject to exercisable options granted by the
Company.
(9) Includes 1,190,000 shares issuable upon exercise of outstanding warrants.
(10) Includes a total of 1,662,400 shares which may be acquired within 60 days
of March 29, 1999 pursuant to options, warrants, and convertible debt
held by all directors and officers as a group.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Directors and
executive officers and holders of more than 10% of the Company's Common Stock
to file with the SEC and NASDAQ initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Directors, executive officers and holders of more than 10% of the
Company's Common Stock are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on a review of
copies of reports furnished to the Company or written representations that no
other reports were required, the Company believes that during the fiscal year
ended January 2, 1999, its Directors, executive officers and holders of more
than 10% of the Company's Common Stock complied with all applicable Section
16(a) reporting requirements, except that (i) one report was filed thirteen
days late by PYC Corporation covering one transaction for PYC Corporation and
(ii) one report was filed approximately six months late by Peter M. Nomikos
covering the conversion of interest on convertible debt into 226,170 shares of
Common Stock.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid or accrued
during the fiscal year ended January 2, 1999 of the Chief Executive Officer
and each other executive officer of the Company whose total annual salary and
bonus exceeded $100,000 for services in all capacities:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------------- -----------------------------------
Awards Payouts
--------------------------- -------
Other Annual Securities All Other
Compen- Restricted Underlying LTIP Compen-
Name and Principal Salary Bonus sation Stock Award(s) Options/SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
------------------ ---- ------- ----- ------------ -------------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peter M. Nomikos (1) 1998 -- -- -- -- 100,000 -- --
Chairman of the Board,
President, Chief
Executive Officer and
Treasurer.............. 1997 -- -- -- -- -- -- --
Peter E. Oettinger,
Ph.D. 1998 135,000 -- -- -- 50,000 -- 5,064(3)
Vice President, Chief
Operating Officer and
Director (2)........... 1997 124,346 5,000 -- -- -- -- 4,078(3)
Gerald J. Bojas 1998 101,866 -- -- -- 4,000 -- 3,855(4)
Chief Financial
Officer............... 1997 81,031 -- -- -- 15,000 -- 2,717(4)
John C. Brink 1998 123,749 -- -- -- 2,000 -- 3,720(5)
Vice President, Sales
and Marketing.......... 1997 18,462 -- -- -- 15,000 -- 78(5)
Thomas R. Varricchione 1998 98,282 -- -- -- 4,000 -- 3,848(6)
Vice President,
Clinical Regulatory
Affairs................ 1997 89,674 -- -- -- 0 -- 3,165(6)
</TABLE>
- - --------
(1) Mr. Nomikos elected to waive his compensation during the fiscal years
ending January 3, 1998 and January 2, 1999 to conserve the Company's cash
position. Although Mr. Nomikos devotes substantial time to the business of
the Company, he is also engaged in other business activities through a
London-based company. Mr. Nomikos voluntarily resigned as President of the
Company in March 1999.
(2) Pursuant to the terms of the Consulting Agreement, Dr. Oettinger tendered
his resignation as Vice President, Chief Operating Officer, and Director
of the Company.
(3) Includes $3,109 and $4,200 paid by the Company to Dr. Oettinger's 401(k)
plan in 1997 and 1998, respectively, and $969 and $864 paid by the Company
for premiums on group term life insurance in 1997 and 1998, respectively.
(4) Includes $1,991 and $3,008 paid by the Company to Mr. Bojas's 401(K) plan
in 1997 and 1998, respectively, and $726 and $847 paid by the Company for
premiums on group term life insurance in 1997 and 1998, respectively. Mr.
Bojas was hired as Chief Financial Officer of the Company in February
1997.
(5) Includes $0 and $2,856 paid by the Company to Mr. Brink's 401(K) plan in
1997 and 1998, respectively, and $78 and $864 paid by the Company for
premiums on group term life insurance in 1997 and 1998, respectively. Mr.
Brink was hired as Director of Sales and Marketing of the Company in
November 1997 and was promoted to Vice President of Sales and Marketing of
the Company in November 1998.
(6) Includes $2,300 and $3,005 paid by the Company to Mr. Varricchione's
401(K) plan in 1997 and 1998, respectively, and $865 and $843 for premiums
on group term life insurance in 1997 and 1998, respectively. Mr.
Varricchione served as Director of Clinical and Regulatory Affairs of the
Company from March 1995 to November 1998 and was promoted to Vice
President of Clinical and Regulatory Affairs of the Company in November
1998.
6
<PAGE>
OPTIONS/SAR GRANTS
The following table sets forth certain information regarding stock
appreciation rights and individual gains of stock options made during the last
fiscal year to the named executive officers:
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------
Potential
Realizable Value
At Assumed
Annual Rates Of Alternative To
Number Of Percent Of Stock Price (f) and (g):
Securities Total Appreciation For Grant Date
Underlying Options/ Option Term Value
Options/ SARs Granted Exercise Of ------------------- ---------------
SARs' To Employees Base Price Expiration Grant Date
Name Granted (#) In Fiscal Year ($/Sh) Date 5% ($) 10% ($) Present Value $
(a) (b) (c) (d) (e) (f) (g) (h)
---- ----------- -------------- ----------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Peter M. Nomikos........ 100,000 40.3% 7.25 5/27/05 1,020,148 1,412,820 --
Peter E. Oettinger,
Ph.D.(1)............... 50,000 20.1% 7.25 5/27/05 510,074 706,410 --
Gerald J. Bojas......... 4,000 1.6% 7.25 5/27/05 40,806 56,513 --
John C. Brink........... 2,000 0.8% 7.25 5/27/05 20,403 28,256 --
Thomas R. Varricchione.. 4,000 1.6% 7.25 5/27/05 40,806 56,513 --
</TABLE>
- - --------
(1) Pursuant to the terms of the Consulting Agreement, Dr. Oettinger tendered
his resignation as Vice President, Chief Operating Officer, and Director
of the Company.
AGGREGATED OPTIONS/SAR EXERCISES AND
FISCAL YEAR END OPTIONS/SAR VALUES
The following table sets forth certain information regarding stock option
exercises during the fiscal year ended January 2, 1999 and stock options held
at such year end by the named executive officers:
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Shares Options at Fiscal Options at Fiscal
Acquired Year End Year End(1)
on Value ------------------------- -------------------------
Name Exercise Received Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter M. Nomikos........ 0 0 30,500 117,500 $ 13,750 $ 0
Peter E. Oettinger,
Ph.D.(2)............... 0 0 130,000 67,500 $346,250 $ 0
Gerald J. Bojas......... 0 0 3,000 16,000 $ 0 $ 0
John C. Brink........... 0 0 3,000 14,000 $ 0 $ 0
Thomas R. Varricchione.. 0 0 8,600 11,900 $ 0 $ 0
</TABLE>
- - --------
(1) Based on the fiscal year ended closing price of the Common Stock of $4.375
per share, less the option exercise price.
(2) Pursuant to the terms of the Consulting Agreement, Dr. Oettinger tendered
his resignation as Vice President, Chief Operating Officer, and Director
of the Company.
7
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company are Peter M. Nomikos, Euan Thomson,
Ph.D., Gerald J. Bojas, John C. Brink, and Thomas R. Varricchione. For a
description of the background of Mr. Nomikos, see "Background of Nominees for
Election as Directors."
Dr. Thomson has served as the President and Chief Operating Officer of the
Company since March 1999. Dr. Thomson has worked with the Company for the last
five years, advising the Company on aspects of product development before
taking up his position as Managing Director of Photoelectron (Europe) Limited.
Prior to joining the Company on a full-time basis, Dr. Thomson was the head of
the Radiotherapy Department at the Norfolk and Norwich Hospital in the United
Kingdom. Dr. Thomson is recognized throughout the world as an expert in
radiotherapy treatment and has worked extensively as a consultant and adviser
to manufacturers of radiotherapy products in Europe and the United States. Dr.
Thomson has also worked as a scientific and management consultant to many
hospitals, specializing in precision radiotherapy techniques.
Mr. Bojas has served as the Chief Financial Officer of the Company since
March 1997. Prior to joining the Company, from 1992 to 1996, Mr. Bojas was
Treasurer and Corporate Controller of MediSense, Inc. He also was the Chief
Financial Officer of MediSense, Inc. from 1990 to 1991. From 1981 to 1990, Mr.
Bojas was the Corporate Controller of Compugraphic Corporation.
Mr. Brink has served as the Vice President of Sales and Marketing of the
Company since November 1998. He served as Director of Sales and Marketing of
the Company from November 1997 to November 1998. Prior to joining the Company,
Mr. Brink was President and Chief Executive Officer of LingraphiCare America
(previously Tolfa Corporation), developer of proprietary software used in
speech therapy in LingraphiCare clinics. Mr. Brink also has 20 years
experience with Johnson and Johnson Professional, Inc. (previously Johnson and
Johnson Codman), a world leader in neurosurgical instrumentation, equipment,
and devices.
Mr. Varricchione has served as Vice President of Clinical and Regulatory
Affairs of the Company since November 1998. He served as Director of Clinical
and Regulatory Affairs of the Company from March 1995 to November 1998. Prior
to joining the Company, Mr. Varricchione served as Director of Clinical
Research and Regulatory Affairs for Candela Corporation, a manufacturer of
medical laser, cryosurgical, and related products. Prior to joining the
medical device industry, Mr. Varricchione worked for more than 15 years in
Boston area hospitals, with a focus in the clinical research and the care of
critically ill patients.
8
<PAGE>
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1/29/97 12/97 12/98
<S> <C> <C> <C>
PHOTOELECTRON CORPORATIO 100 113 51
NASDAQ STOCK MARKET (U.S.) 100 123 173
NASDAQ HEALTH SERVICES 100 102 87
</TABLE>
- - --------
* The performance graph above compares the percentage change in the Company's
total shareholder return on its Common Stock from January 29, 1997, the
effective date of the Company's initial public offering, with the cumulative
total return of the Nasdaq Stock Market-US Index and the Nasdaq Health
Services Index from December 31, 1996 through December 31, 1998, based upon
an assumed $100 investment in the Company's Common Stock and in the stocks
comprising each such index as of December 31, 1996 and reinvestment of all
dividends. The stock prices on the performance graph above are not
necessarily indicative of future stock price performance.
9
<PAGE>
COMPENSATION AND INSIDER PARTICIPATION
The entire Board of Directors was responsible for determining the
compensation of executive officers during fiscal 1998. Mr. Nomikos, the
Company's Chairman of the Board, then President, Chief Executive Officer, and
Treasurer, and Dr. Oettinger, the Company's then Vice President, Chief
Operating Officer, and Director, did not participate in deliberations relating
to their own compensation, except that Mr. Nomikos waived his compensation for
fiscal year 1998. Mr. Nomikos participated in deliberations relating to the
compensation of Dr. Oettinger.
BOARD OF DIRECTORS REPORT ON
EXECUTIVE COMPENSATION
Decisions regarding cash compensation paid and stock options granted to the
Company's executive officers were made by the full Board of Directors.
Executive Compensation Policy
The Company's compensation program is designed to attract, motivate, reward
and retain executive personnel capable of making significant contributions to
the long-term success of the Company. During fiscal year 1998, the Company's
compensation program consisted of base salary and incentive bonuses. No
bonuses were awarded to any executive officers of the Company for fiscal year
1998. Base salary provides the foundation for the Company's executive pay; its
purpose is to compensate the executive for performing his or her basic duties.
Base Salary. Base salaries for the Company's executive officers are set
annually. During fiscal 1998, the Company did not employ a formula approach
that links cash compensation to corporate performance nor did it utilize any
formal survey or other compilation of empirical data on executive compensation
paid by other companies. Instead, executive compensation was determined based
on a number of subjective factors, including individual responsibilities,
performance, contribution and experience, the Company's financial performance
as compared with the prior year, and general economic factors.
Stock Options. The Company's compensation program also utilizes stock option
awards, which are intended to provide additional incentive to increase
shareholder value.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company utilizes certain administrative resources of Thermo Electron on
an as-need basis without a formal contract and is charged at actual cost for
such services. These resources include legal advice and services, certain
employee benefit administration, tax advice and preparation, and space
allocation and utilities. The Company paid $4,952 in 1998 for these services.
George N. Hatsopoulos, Ph.D., a Director of the Company, is Chairman of the
Board and Chief Executive Officer of Thermo Electron. Roger D. Wellington, a
Director of the Company, is also a director of Thermo Electron.
The Company is also provided with certain services by Thermo Power
Corporation, a 69%-owned subsidiary of Thermo Electron. These services include
data processing services, administrative services, and machine shop services,
and are charged to the Company at actual cost. The Company paid $229,953 in
1998 for these services. As of January 2, 1999, $534 was payable to Thermo
Power Corporation and was included in accounts payable in the accompanying
consolidated balance sheets.
On May 22, 1990, the Company issued and sold $125,000 and $175,000 principal
amounts of 8% subordinated convertible debentures to Thermo Electron and Mr.
Peter M. Nomikos, respectively, that became due in 1998. The debentures were
convertible into shares of the Company's Common Stock at a conversion price of
$0.80. Also in 1990, the Company issued and sold $52,000 principal amount of
8% subordinated convertible debentures to Mr. Peter M. Nomikos, that became
due in 1998. The note was convertible into shares of the Company's Common
Stock at a conversion price of $3.00. In 1991, the Company issued and sold
$448,000
10
<PAGE>
principal amount of 8% subordinated convertible debentures to Mr. Peter M.
Nomikos, that became due in 1998. The note was convertible into shares of the
Company's Common Stock at a conversion price of $3.00. All of these debentures
also provided for the conversion of accrued interest into Common Stock at
maturity. The accrued interest is convertible into common stock at a
conversion price equal to the average fair market value of the Company's
Common Stock on the first ten days of trading of the fiscal quarter in which
the interest to be converted accrued.
On May 13, 1992, the Company entered into a $4,500,000 8% Convertible
Subordinated Demand Note and Warrant Purchase Agreement (the "1992 Debt
Agreement") with Mr. Peter M. Nomikos. These notes are convertible into Common
Stock at a conversion price of $3.00 on demand. The Company borrowed
$4,252,000 in the form of a demand loan with detachable warrant purchase
rights under this agreement, of which $705,000 is still outstanding. At
January 2, 1999, the Company is not aware of any intention by Mr. Peter M.
Nomikos of converting these debentures into shares of the Company's common
stock. The accrued interest is convertible into common stock at a conversion
price equal to the average fair market value of the Company's Common Stock on
the first ten days of trading of the fiscal quarter in which the interest to
be converted accrued.
Accordingly, in 1998, 226,170 shares of Common Stock were issued upon
conversion of $500,000 principal amount and $287,647 accrued interest of
subordinated convertible debentures to Mr. Peter M. Nomikos.
All warrant purchase rights under the 1992 Debt Agreement have been assigned
to PYC Corporation. Each warrant is exercisable upon issuance and allows the
holder to purchase one share of Common Stock at $3.00. In 1998, 67,333 shares
of Common Stock were issued to PYC Corporation for warrants exercised for the
consideration of $202,000. At January 2, 1999, warrants to purchase 1,310,000
shares of the Company's Common Stock were outstanding. These remaining
warrants expire as follows 120,000, 140,000, 140,000, 100,000, 575,000, and
235,000 on March 28, 1999, June 27, 1999, September 26, 1999, December 28,
1999, September 29, 2000, and January 27, 2002, respectively. All warrants
purchased by PYC Corporation have been accounted for as capital in excess of
par value--common stock.
Pursuant to a promissory note dated February 21, 1997 (the "Note"), the
Company loaned $80,211.26 to Peter Oettinger, Ph.D., the then Vice President,
Chief Operating Officer, and Director of the Company at an interest rate of 5%
per annum. The Note was secured by a pledge of 25,000 shares of the Company's
Common Stock owned by Dr. Oettinger, pursuant to a Pledge Agreement with the
Company dated as of February 21, 1997. On February 21, 1998, the Note was
renewed for a period of one year at an interest rate of 6% per annum. Pursuant
to the Consulting Agreement, the Company agreed to forgive the entire amount
of this debt.
The Company and Peter E. Oettinger, Ph.D. executed the Consulting Agreement
dated as of March 26, 1999, pursuant to which Dr. Oettinger tendered his
resignation as Vice President, Chief Operating Officer, and Director of the
Company. Dr. Oettinger has agreed to continue to serve the Company as a
consultant pursuant to the terms of the Consulting Agreement. The Board of
Directors has not nominated Dr. Oettinger for election to a new term as a
Director.
Under the terms of the Consulting Agreement, Dr. Oettinger will make himself
available to the Company as a full-time consultant for a period of 3 months
and as a part-time consultant thereafter until October 14, 2000. Dr. Oettinger
will perform such transitional and other tasks as may be requested by the
Company's Chief Executive Officer or Chief Operating Officer. The Company will
pay Dr. Oettinger gross consulting fees at the rate of $11,250 per month for
the first 3 months of his Consulting Agreement, and $7,543.40 per month
thereafter (pro rated for a partial month at the end of the term). In
addition, Dr. Oettinger's currently existing stock options will continue to
vest during the term of the Consulting Agreement and, at the end of the term
of the Consulting Agreement, all of Dr. Oettinger's un-vested options will
immediately vest. Dr. Oettinger will not be eligible for any Company benefits,
such as life insurance or participation in the Company's 401(k) Plan, but the
Company will compensate Dr. Oettinger for certain additional health insurance
costs he will incur following his resignation. The Company has also agreed in
the Consulting Agreement to forgive the existing indebtedness of Dr. Oettinger
to the Company, including all accrued interest thereon. As of February 21,
1999, the amount of this indebtedness was $85,023.94. The Consulting Agreement
also restricts Dr. Oettinger from competing with the Company prior to October
14, 2000.
11
<PAGE>
Proposal II. Ratification of Selection of Auditors
The Board of Directors has selected the firm of Arthur Andersen LLP,
independent certified public accountants, to serve as auditors for the fiscal
year ending January 1, 2000. Arthur Andersen LLP served as the Company's
auditors for fiscal year 1998. A majority of the votes cast by the
stockholders represented at the meeting, in person or by proxy, is required to
approve this proposal. Representatives of Arthur Andersen LLP will be present
at the meeting to respond to appropriate questions, and they will have an
opportunity, if they desire, to make a statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF ARTHUR ANDERSEN LLP AS AUDITORS.
OTHER MATTERS
The Board of Directors of the Company is not aware of any matter, other than
those described above, that may come before the meeting. However, if any
matters are properly presented to the meeting for action, it is intended that
the persons named in the enclosed proxy will vote on such matters in
accordance with their best judgment.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
In order for a stockholder proposal to be considered for inclusion in the
Company's proxy materials for the 2000 Annual Meeting, it must be received by
the Company at 5 Forbes Road, Lexington, Massachusetts 02421, Attention: John
J. Crowley, no later than December 1, 1999.
ANNUAL REPORT
A copy of the Company's 1998 Annual Report to Stockholders is being mailed
with this Proxy Statement to each stockholder entitled to vote at the Annual
Meeting. Stockholders not receiving a copy of such Annual Report may obtain
one, without charge, by writing or calling John J. Crowley at 5 Forbes Road,
Lexington, Massachusetts 02421, telephone (781) 861-2069, or by e-mail at
[email protected].
OTHER BUSINESS
The Board of Directors is not aware of any matters to come before the
Meeting. However, it is intended that the proxy solicited herein will be voted
on any other matters that may properly come before the meeting in the
discretion of the person or persons named in the enclosed form of proxy.
By order of the Board of Directors
Lexington, Massachusetts
April 23, 1999
12
<PAGE>
PHOTOELECTRON CORPORATION
5 Forbes Road, Lexington, Massachusetts 02421
Proxy for Special Meeting in Lieu of the Annual Meeting of Stockholders -
May 25, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Euan Thomson and Gerald J. Bojas and each
of them, as proxy or proxies for the undersigned, with full power of
substitution, who may act by unanimous vote of said proxies or their substitutes
as shall be present at the meeting, or, if only one be present, then the one
shall have all the powers hereunder, to represent and to vote, as designated on
the other side (if no direction is made, this Proxy will be voted FOR Proposals
1 and 2), all of the shares of Common Stock, par value $.01 per share, of
Photoelectron Corporation standing in the name of the undersigned on April 14,
1999, at the Special Meeting in Lieu of the Annual Meeting of Stockholders of
Photoelectron Corporation to be held on Tuesday May 25, 1999 at 11:00 a.m., and
any adjournment thereof. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the meeting.
(Continued, and to be marked, dated and signed, on the other side)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Special Meeting in Lieu of the Annual Meeting of Stockholders
PHOTOELECTRON CORPORATION
May 25, 1999
Please Detach and Mail in the Envelope Provided
A [ X ] Please mark your
votes as in this
example using
dark ink only.
Vote FOR all nominees
at right
(except as withheld in Vote WITHHELD
the space below) from all nominees
[ ] [ ]
ITEM 1. Election of NOMINEES: Peter M. Nomikos
Directors
George N. Hatsopoulos, Ph.D.
Roger D. Wellington
WITHHELD FOR: (Write that nominee's name in the
space provided below)
- - --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
ITEM 2. APPOINTMENT OF INDEPENDENT PUBLIC [ ] [ ] [ ]
ACCOUNTANTS.
ITEM 3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Signature(s) Date: , 1999
------------------------------------- ------------------
-------------------------------------
(Additional Signature if held jointly)
Note: Please sign as your name(s) is (are) shown on the certificates to which
the Proxy applies. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation,
please sign in full corporate name by president or other authorized
officer. If a partnership or limited liability company, please sign in
partnership or limited liability company name by authorized person.
