<PAGE>
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 (S) 240.14a-11(c) or (S) 240.14a-12
Photoelectron Corporation
(Name of Registrant as Specified In Its Certificate)
Photoelectron Corporation
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(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.:
(3)Filing Party:
(4) Date Filed:
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
PHOTOELECTRON CORPORATION
TO BE HELD
MAY 17, 2000
To the Stockholders of Photoelectron Corporation:
We are pleased to notify you that 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 Wednesday, May 17, 2000 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 approve an amendment to the Company's 1996 Equity Incentive Plan to
increase the number of shares of the Company's common stock reserved for
issuance under such plan from 541,775 to 1,041,775;
3) To approve an amendment to the the Company's Articles of Organization
to increase the number of authorized shares of common stock from 15,000,000
to 20,000,000 and to reduce the number of authorized shares of preferred
stock from 7,500,000 to 2,500,000;
4) To approve of the designation of Arthur Andersen LLP to audit the
books, records and accounts of the Company; and
5) 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 5,
2000, 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,
/s/ William O. Flannery
William O. Flannery, Esq.
Clerk
Lexington, Massachusetts
April 24, 2000
PHOTOELECTRON CORPORATION
5 Forbes Road
Lexington, MA 02421
(781) 861-2069
<PAGE>
PHOTOELECTRON CORPORATION
5 Forbes Road
Lexington, Massachusetts 02421
(781) 861-2069
----------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 17, 2000
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 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 Wednesday, May 17, 2000 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 24, 2000.
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, FOR
the approval of an amendment to the Company's 1996 Equity Incentive Plan to
increase the number of shares of the Company's common stock reserved for
issuance under such plan from 541,775 to 1,041,775, FOR the approval of an
amendment to the Company's Articles of Organization to increase the number of
authorized shares of common stock from 15,000,000 to 20,000,000 and to reduce
the number of authorized shares of preferred stock from 7,500,000 to
2,500,000, and FOR the approval of the designation of Arthur Andersen LLP to
audit the books, records and accounts of the Company. 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 1999 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 1,
2000 and January 2, 1999.
1
<PAGE>
VOTING SECURITIES
At April 7, 2000, there were 7,843,454 shares of common stock outstanding
and no shares of preferred stock outstanding.
Only stockholders of record at the close of business on April 5, 2000 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 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 qualified. 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>
First
Principal Occupation - Elected
Name Age Position Held Director
---- --- ---------------------- --------
<C> <C> <S> <C>
Peter M. Nomikos............... 68 Chairman of the Board and Chief 1989
Executive Officer of the
Company
George N. Hatsopoulos, Ph.D. .. Chairman emeritus of Thermo
73 Electron Corporation 1989
President and Chief Executive
Officer of Wellington
Consultants, Inc. and
Roger D. Wellington............ 73 Wellington Associates, Inc. 1989
</TABLE>
BACKGROUND OF NOMINEES FOR ELECTION AS DIRECTORS
Peter M. Nomikos has served as Chairman of the Board and Chief Executive
Officer of the Company since its founding in 1989 and had served as President
and Treasurer of the Company from its founding in 1989 until he voluntarily
resigned from those positions 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's
professional time is devoted to his other professional activities, including
those relating to PYC Corporation, the owner of more than 5% of the Company's
common stock. PYC is a Liberian corporation owned by members of Mr. Nomikos's
immediate family.
2
<PAGE>
George N. Hatsopoulos, Ph.D. has served as a Director of the Company since
its founding in 1989. Dr. Hatsopoulos is a founder of Thermo Electron
Corporation and served as its chairman and chief executive officer since its
founding in 1956 until his retirement as CEO in June 1999, and as chairman in
December of that year. He resigned as a director of Thermo Electron in March
2000. Dr. Hatsopoulos is a part-time employee of Thermo Electron and is
currently organizing an incubator for bioengineering businesses. Dr.
Hatsopoulos is also a member of the Company's Audit Committee.
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. Mr. Wellington serves as Chairman of the
Company's Audit Committee.
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 nine meetings in the fiscal year ended
January 1, 2000. 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 1, 2000. 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 1, 2000.
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 two meetings during the
fiscal year ended January 1, 2000.
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 31, 2000 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) all
current executive officers of the Company 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 BeneficialOwnership(1) Percent of Class(1)
- ------------------------------------ ---------------------- -------------------
<S> <C> <C>
Peter M. Nomikos.................... 4,424,595(2) 47.0%
George N. Hatsopoulos, Ph.D......... 27,000(3) *
Roger D. Wellington................. 27,000(4) *
Euan S. Thomson..................... 6,385(5) *
Gerald J. Bojas..................... 13,600(6) *
Charles Vecoli...................... -- *
Thermo Electron Corporation......... 833,861 10.6%
81 Wyman Street
Waltham, MA 02254
PYC Corporation..................... 3,637,735(7) 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 (6 persons)............. 4,498,580(8) 47.5%
</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 80,000 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 1,260,000 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.
(3) Includes 14,500 shares subject to exercisable options granted by the
Company. Excludes any shares owned by Thermo Electron, as to which Dr.
Hatsopoulos disclaims beneficial ownership.
4
<PAGE>
(4) Includes 14,500 shares subject to exercisable options granted by the
Company.
(5) Includes 5,800 shares subject to exercisable options granted by the
Company.
(6) Includes 12,600 shares subject to exercisable options granted by the
Company.
(7) Includes 1,260,000 shares issuable upon exercise of outstanding warrants.
(8) Includes a total of 1,622,400 shares which may be acquired within 60 days
of March 31, 2000 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 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 1, 2000, 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) a Form 5 report for Euan S.
Thomson was filed approximately 31 days late; (ii) a Form 5 report for Gerald
J. Bojas was filed approximately 31 days late; and (iii) a Form 3 report for
Charles Vecoli was filed approximately 43 days late.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation earned by the
Chief Executive Officer and each of the other executive officers of the
Company for services rendered in all capacities to the Company during fiscal
1999, 1998 and 1997:
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)....
Chairman of the Board 1999 -- -- -- -- -- -- --
and Chief Executive 1998 -- -- -- -- 100,000 -- --
Officer 1997 -- -- -- -- -- -- --
Euan S. Thomson (2) .... 1999 154,181 -- -- -- 75,000 -- 43,536(3)
President and Chief 1998 -- -- -- -- 1,000 -- --
Operating Officer 1997 -- -- -- -- 1,000 -- --
Gerald J. Bojas......... 1999 107,188 -- -- -- 9,000 -- 4,053(4)
Chief Financial Officer 1998 101,866 -- -- -- 4,000 -- 3,855(4)
and Treasurer 1997 81,031 -- -- -- 15,000 -- 2,717(4)
Charles A. Vecoli (5)... 1999 42,192 -- -- -- 25,000 -- 288(6)
Vice President- 1998 -- -- -- -- -- -- --
Marketing 1997 -- -- -- -- -- -- --
</TABLE>
- --------
(1) Mr. Nomikos elected to waive his compensation during the fiscal years
ending January 1, 2000, January 2, 1999 and January 3, 1998 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.
(2) Dr. Thomson was elected President and Chief Operating Officer of the
Company in March 1999. From January 1999 to March 1999, Dr. Thomson served
as Managing Director of Photoelectron (Europe) Limited, the Company's
European subsidiary. Prior to 1999, Dr. Thomson served as a consultant to
the Company.
(3) Includes $41,288 paid by the Company to Dr. Thomson for his relocation
expenses and tax reimbursement, $1,600 for preparation of his 1999 tax
return and $648 for premiums on group term life insurance.
(4) Includes $3,189, $3,008 and $1,991 paid by the Company to Mr. Bojas's
401(K) plan in 1999, 1998 and 1997, respectively, and $864, $847 and $726
paid by the Company for premiums on group term life insurance in 1999,
1998 and 1997, respectively. Mr. Bojas was hired as Chief Financial
Officer of the Company in February 1997 and was elected Treasurer of the
Company in March 1999.
(5) Mr. Vecoli was elected Vice President-Marketing in December 1999. From
August 1999 to December 1999, Mr. Vecoli served as the Company's Product
Manager.
(6) Represents payments made by the Company on group term life insurance in
1999.
6
<PAGE>
OPTIONS/SAR GRANTS
The following table sets forth certain information regarding stock
appreciation rights and individual gains of stock options made during the last
fiscal year to the named executive officers:
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------
Potential
Realizable Value
At Assumed
Number Percent Of Annual Rates Of Alternative To
Of Total Stock Price (f) and (g):
Securities Options/ Appreciation For Grant Date
Underlying SARs Option Term Value
Options/ Granted Exercise Of ----------------- ---------------
SARs' To Employees Base Price Expiration Grant Date
Name Granted (#) In Fiscal Year ($/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........ 0 0% -- -- -- -- --
Euan S.Thomson.......... 25,000 9.7% $3.19 3/26/06 112,216 155,410 --
50,000 19.5% $2.81 12/17/06 197,698 273,795 --
Gerald J. Bojas......... 4,000 1.6% $2.13 5/10/06 11,960 16,564 --
5,000 1.9% $2.81 12/17/06 19,770 27,379 --
Charles A. Vecoli....... 15,000 5.8% $2.56 8/2/06 54,033 74,830 --
10,000 3.9% $2.81 12/17/06 39,540 54,759 --
</TABLE>
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 1, 2000 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........ -- -- 57,500 90,000 -- --
Euan S. Thomson......... -- -- 600 76,400 -- --
Gerald J. Bojas......... -- -- 8,800 19,200 $750 $750
Charles A. Vecoli....... -- -- -- 25,000 -- --
</TABLE>
- --------
(1) Based on the fiscal year ended closing price of the common stock of $2.50
per share, less the option exercise price.
7
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company are Peter M. Nomikos, Euan S. Thomson,
Ph.D. and Gerald J. Bojas. For a description of the background of Mr. Nomikos,
see "Background of Nominees for Election as Directors."
Dr. Thomson, age 37, 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, age 63, has served as the Chief Financial Officer of the Company
since March 1997 and Treasurer of the Company since March 1999. 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. Vecoli, age 42, has served as Vice President-Marketing for the Company
since December 1999, having initially joined the Company as Product Manager in
August 1999. Prior to joining the Company, Mr. Vecoli held the position of
Product Manager of Radiation Therapy Products at Radionics. From 1989 to 1998,
Mr. Vecoli held various positions with the Scanalytics Division of CSPI,
developers of biological imaging and analysis software, where his most recent
role was General Manager.
8
<PAGE>
[GRAPH APPEARS HERE]
<TABLE>
<S> <C> <C> <C> <C>
1/29/97 12/97 12/98 12/99
PHOTOELECTRON CORPORATION 100 113 51 40
NASDAQ STOCK MARKET (U.S.) 100 123 173 312
NASDAQ HEALTH SERVICES 100 102 86 71
</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, 1999, 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 1999. Mr. Nomikos, the
Company's Chairman of the Board and Chief Executive Officer, waived his
compensation for fiscal year 1999.
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 1999, 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
1999. 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 1999, 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 $6,093 in 1999 for these services.
George N. Hatsopoulos, Ph.D. and Roger D. Wellington, both whom are directors
of the Company, are also both directors of Thermo Electron.
The Company is also provided with certain services by Thermo Power
Corporation, a wholly-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
$147,315 in 1999 for these services. As of January 1, 2000, $7,284 was payable
to Thermo Power Corporation and was included in accounts payable in the
accompanying consolidated balance sheets.
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 on demand at a conversion price of $3.00. 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 1, 2000, 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.
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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. At January 1, 2000,
warrants to purchase 810,000 shares of the Company's common stock were
outstanding under the 1992 Debt Agreement. These remaining warrants expire as
follows: 575,000 on September 29, 2000 and 235,000 on January 27, 2002. All
warrants purchased by PYC Corporation have been accounted for as capital in
excess of par value--common stock.
In November 1999, the Company entered into a loan agreement with PYC
Corporation. Under the agreement, PYC Corporation established a $2.25 million
line of credit to be used by the Company for working capital purposes. Any
amounts drawn under the line of credit accrue interest at a rate equal to 8%
per year. In addition, the Company agreed to issue to PYC Corporation warrants
to purchase one share of the Company's common stock for each $5.00 drawn by
the Company under the line of credit. As of April 7, 2000, the Company had
drawn down $2,250,000 under the line of credit and had issued to PYC
Corporation warrants for the purchase of 450,000 shares of the Company's
common stock. The warrants were issued to PYC Corporation in eleven
installments with an average exercise price of approximately $3.29.
Proposal II. Amendment of Equity Incentive Plan
The Board of Directors has adopted an amendment to the Company's 1996 Equity
Incentive Plan (the "Equity Incentive Plan"), subject to approval by the
stockholders, to increase the number of shares of common stock covered by the
Equity Incentive Plan to an aggregate of 1,041,775 shares. As of April 7,
2000, stock options exercisable for 554,417 shares of common stock were
outstanding pursuant to the Equity Incentive Plan. The following is a summary
of the material provisions of the Plan.
On July 17, 1996, the Board of Directors of the Company adopted the Equity
Incentive Plan for employees, officers, Directors and consultants of the
Company and its subsidiaries, and recommended approval of the plan by the
stockholders. The Equity Incentive Plan provides for grants of incentive stock
options to employees (including officers) of the Company, and for grants of
non-qualified stock options to such employees as well as to Directors and
consultants of the Company and its subsidiaries. In addition, persons eligible
to receive non-qualified stock options can be awarded shares of common stock
and given the opportunity to purchase shares of common stock. On May 27, 1998,
the stockholders of the copy approved an amendment to the Equity Incentive
Plan whereby the number of shares of common stock covered by the Plan was
increased from 266,775 to 541,775.
The Equity Incentive Plan is administered by the Board of Directors of the
Company, which may delegate any or all of its responsibilities to a Committee
of two or more Board members who, if the Company registers any class of any
equity security pursuant to Section 12 of the Securities Exchange Act of 1934
(the "Exchange Act"), must qualify as non-employee directors within the
meaning of Rule 16b-3 adopted pursuant to the Exchange Act. The plan
administrator determines the recipients and terms of all stock rights granted
under the plan, including in the case of all options, the option price. Except
in the case of some incentive stock options, as described below, the term of
all options granted under the plan may not exceed ten years.
Special rules apply to incentive stock options. The exercise price of all
incentive stock options granted under the Equity Incentive Plan must be at
least equal to the fair market value of the common stock of the Company on the
date of grant. If an incentive stock option is granted to an optionee who owns
stock representing more than 10% of the voting power of the Company's
outstanding capital stock, the exercise price of the option must equal at
least 110% of the fair market value of the common stock on the date of grant
and the maximum term of the option cannot exceed five years. No incentive
stock option may be transferred by the optionee other than by will or the laws
of descent and distribution, and should the holder of an incentive stock
option cease to be employed by the Company and any of its subsidiaries, he or
she (or his or her estate, personal representative or beneficiary in the event
of death) will no longer be able to exercise the option to the extent of the
shares not exercisable upon termination of employment, and will have a limited
period of time after termination of employment within which to exercise the
option (in general, three months in the case of termination other than by
reason of disability or death, one year in the event of disability, and 180
days in the event of death, unless the option expires earlier by its terms).
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At the request of an optionee, the plan administrator can take whatever
action is necessary to convert such optionee's incentive stock options into
non-qualified options. Also, an optionee's rights with respect to options and
other rights granted under the Equity Incentive Plan are to be appropriately
adjusted when certain events occur, such as a stock dividend or split, a
recapitalization, or a merger or sale of assets.
The Board of Directors of the Company has the authority to amend or
terminate the Equity Incentive Plan provided that, in general, no amendment
may alter or impair the rights of a grantee under any option previously
granted without the grantee's consent and stockholder approval must be
obtained within 12 months before or after the Board adopts a resolution
authorizing certain actions, including the extension of the expiration date of
the Equity Incentive Plan or the increase in the number of shares reserved for
issuance under the Equity Incentive Plan. Unless sooner terminated, the Equity
Incentive Plan will terminate on July 16, 2006.
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-8 covering the shares of common stock
underlying options granted under the Equity Incentive Plan.
The Board of Directors believes it is in the interest of the Company and its
stockholders to adopt the proposed amendment to the Equity Incentive Plan. The
increase in shares available for issuance under the Equity Incentive Plan will
assist the Company to continue to attract and retain key personnel and to
strengthen the identity of such personnel's interest with those of the
Company's stockholders. A majority of the votes cast by the stockholders
represented at the meeting, in person or by proxy, is required to approve this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT OF THE EQUITY
INCENTIVE PLAN.
Proposal III. Amendment to Articles of Organization to Increase the Authorized
Common Stock and Reduce the Authorized Preferred Stock
The Board of Directors has recommended an amendment to the Company's
Articles of Organization to increase the number of authorized shares of common
stock from 15,000,000 to 20,000,000 and to reduce the number of authorized
shares of preferred stock from 7,500,000 to 2,500,000. The approval of the
holders of a majority of the shares of common stock outstanding, voting in
person or by proxy, is required to approve this proposal.
The Company is currently exploring alternatives for raising financing to
fund the Company's operations, including through the sale of equity securities
or debt securities convertible into equity securities. The primary reason for
the proposed increase in the number of authorized shares of common stock would
be to facilitate any such sale of securities.
As of April 7, 2000, there were 7,843,454 shares of common stock
outstanding, stock options exercisable for 554,417 shares of common stock
outstanding pursuant to the Equity Incentive Plan, stock options exercisable
for 282,100 shares of common stock outstanding pursuant to the Company's 1989
Stock Option Plan, warrants exercisable for 1,260,000 shares of common stock
outstanding and convertible debt convertible into 235,000 shares of common
stock (not including accrued interest) outstanding pursuant to the 1992 Debt
Agreement. In addition, the $2,250,000 note issued to PYC Corporation in
connection with the November 1999 loan agreement is convertible into the
Company's common stock, at PYC Corporation's option, when the loan matures in
May 2000.
The additional common stock to be authorized by adoption of the amendment
would have rights identical to the currently outstanding common stock.
Adoption of the proposed amendment and issuance of the common stock would not
affect the rights of the holders of currently outstanding common stock, except
for effects incidental to increasing the number of shares of the Company's
stock outstanding.
The primary reason for reducing the number of authorized shares of preferred
stock while increasing the number of authorized shares of common stock is to
prevent the Company's having to pay to the Commonwealth of Massachusetts
additional franchise taxes as a result of the proposed increase in the number
of authorized shares of common stock. The Board of Directors believes that the
number of authorized shares of preferred stock, as so reduced, will be
adequate should the Company in the future determine that it is necessary or
desirable to issue preferred stock. The Board of Directors does not have any
present intention to issue any shares of preferred stock.
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<PAGE>
If the stockholders approve the amendment, it will become effective upon
filing of an amendment to the Company's Articles of Organization with the
Secretary of State of the Commonwealth of Massachusetts.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
COMPANY'S ARTICLES OF ORGANIZATION TO INCREASE THE AMOUNT OF AUTHORIZED SHARES
OF COMMON STOCK AND TO REDUCE THE AMOUNT OF AUTHORIZED SHARES OF PREFERRED
STOCK.
Proposal IV. 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 December 30, 2001. Arthur Andersen LLP served as the Company's
auditors for fiscal year 1999. 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 2001 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, 2000.
ANNUAL REPORT
A copy of the Company's 1999 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 24, 2000
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<PAGE>
PHOTOELECTRON CORPORATION
5 Forbes Road, Lexington, Massachusetts 02421
Proxy for the Annual Meeting of Stockholders - May 17, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Euan S. 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, 2, 3, and 4), all of the shares of Common Stock, par value $.01 per share, of
Photoelectron Corporation standing in the name of the undersigned on April 5,
2000, at the Annual Meeting of Stockholders of Photoelectron Corporation to be
held on Wednesday May 17, 2000 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!
Annual Meeting of Stockholders
PHOTOELECTRON CORPORATION
May 17, 2000
- --------------------------------------------------------------------------------
A[X] Please mark you
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
Directors
WITHHELD FOR: (Write that nominee's name in the
space provided below)
- --------------------------------
NOMINEES:
Peter M. Nomikos
George N. Hatsopoulos, Ph.D.
Roger D. Wellington
FOR AGAINST ABSTAIN
ITEM 2. APPROVAL OF AMENDMENT TO THE [ ] [ ] [ ]
1996 EQUITY INCENTIVE PLAN.
ITEM 3. APPROVAL OF AMENDMENT TO THE [ ] [ ] [ ]
ARTICLES OF ORGANIZATION.
ITEM 4. APPOINTMENT OF INDEPENDENT PUBLIC [ ] [ ] [ ]
ACCOUNTANTS.
ITEM 5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING.
Signature(s) Date: , 2000
--------------------------------- -----------------
- -----------------------------------------------
(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.
