<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
SpectRx, 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
SPECTRX, INC.
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 1999
---------------------
TO THE STOCKHOLDERS:
Notice is hereby given that the 1999 Annual Meeting of Stockholders of
SpectRx, Inc., a Delaware corporation (the "Company"), will be held on Tuesday,
May 25, 1999 at 10:00 a.m., local time, at the Drury Inn located at 5655 Jimmy
Carter Blvd., Room 111, Norcross, Georgia 30071 for the following purposes:
1. To elect directors of the Company.
2. To confirm the appointment of Arthur Andersen LLP as the Company's
independent accountants for the 1999 fiscal year.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
These matters are more fully described in the Proxy Statement accompanying
this Notice.
Only stockholders of record at the close of business on April 7, 1999 are
entitled to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to sign and
return the enclosed Proxy as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person even if the stockholder has returned a proxy.
By Order of The Board of Directors
MARK A. SAMUELS
Chairman, Chief Executive Officer
and Director
Norcross, Georgia
April 28, 1999
IMPORTANT
TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-
PREPAID ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON EVEN IF YOU
RETURNED A PROXY.
<PAGE> 3
SPECTRX, INC.
---------------------
PROXY STATEMENT
1999 ANNUAL MEETING OF STOCKHOLDERS
---------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Spectrx, Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held Tuesday, May 25, 1999 at 10:00 a.m., local time, or
at any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will
be held at the Drury Inn located at 5655 Jimmy Carter Blvd, Norcross, Georgia
30071. The Company's telephone number at its principal office is (770) 242-8723.
This Proxy Statement is being mailed on or about April 28, 1999 to all
stockholders entitled to vote at the Annual Meeting.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on April 7, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. The
Company has one series of common shares outstanding, designated Common Stock. At
the Record Date, 8,022,718 shares of the Company's Common Stock, $0.001 par
value (the "Common Stock"), were issued and outstanding and held of record by
114 stockholders.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share held as of the
Record Date. Stockholders will not be entitled to cumulate their votes in the
election of directors (Proposal One).
The cost of soliciting proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by certain of
the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone, facsimile or telegram.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections (the "Inspector") with the assistance of the
Company's Transfer Agent. The Inspector will also determine whether or not a
quorum is present. Except in certain specific circumstances, the affirmative
vote of a majority of shares present in person or represented by proxy at a duly
held meeting at which a quorum is present is required under Delaware law for
approval of proposals presented to stockholders. In general, Delaware law also
provides that a quorum consists of a majority of shares which are entitled to
vote and which are present or represented by proxy at the meeting.
<PAGE> 4
The Inspector will treat shares that are voted "WITHHELD" or "ABSTAIN" as
being present and entitled to vote for purposes of determining the presence of a
quorum but will not be treated as votes in favor of approving any matter
submitted to the stockholders for a vote. Proxies in the accompanying form that
are properly executed and returned will be voted at the Annual Meeting in
accordance with the instructions on the Proxy. Any properly executed Proxy on
which there are no instructions indicated about a specified proposal will be
voted as follows: (i) FOR the election of the five persons named in this Proxy
Statement as the Board of Directors' nominees for election to the Board of
Directors; and (ii) FOR the ratification of the appointment of Arthur Andersen
LLP as independent auditors of the Company. No business other than that set
forth in the accompanying Notice of Annual Meeting of Stockholders is expected
to come before the Annual Meeting. Should any other matter requiring a vote of
stockholders properly arise, the persons named in the Proxy will vote the shares
they represent as the Board of Directors may recommend. The persons named in the
Proxy may also, at their discretion, vote the Proxy to adjourn the Annual
Meeting from time to time.
If a broker indicates on the enclosed proxy or its substitute that it does
not have discretionary authority as to certain shares to vote on a particular
matter ("Broker Non-Votes"), those shares will not be considered as present with
respect to that matter. The Company believes that the tabulation procedures to
be followed by the Inspector are consistent with the general statutory
requirements in Delaware concerning voting of shares and determination of a
quorum.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS TO BE PRESENTED AT 2000 ANNUAL
MEETING
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 2000 Annual Meeting must be received by
the Company at its principal executive offices no later than December 30, 1999
in order to be considered for inclusion in the Company's proxy statement and
form of proxy relating to that meeting.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and
persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and reports of changes in the ownership
with the Securities and Exchange Commission (the "SEC"). Such persons are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, the
Company believes that, with respect to fiscal year 1998, officer Mark L. Faupel,
Ph.D. failed to timely file one Form 3 at the time he first became an officer of
the Company; its other officers, directors and 10% stockholders were in
compliance with all applicable filing requirements.
2
<PAGE> 5
SHARE OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of March 31, 1999 by (i) each
person who is known to the Company to beneficially own more than 5% of the
outstanding shares of its Common Stock, (ii) each director and the nominee for
election, (iii) each officer named in the Summary Compensation Table below, and
(iv) all directors, nominees for election and executive officers as a group.
Unless otherwise indicated, officers and directors can be reached at the
Company's principal executive offices. A total of 8,022,718 shares of the
Company's Common Stock were issued and outstanding as of March 31, 1999.
<TABLE>
<CAPTION>
SHARES APPROXIMATE
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) TOTAL(2)
- ------------------------------------ ------------ -----------
<S> <C> <C>
Entities affiliated with Hillman Medical Ventures(3)........ 1,873,254 23.35%
(Charles G. Hadley)
824 Market Street Suite 900 Wilmington, DE 19801
Noro-Moseley Partners....................................... 1,040,631 12.97
4200 Northside Parkway Building 9 Atlanta, GA 30327
Abbott Laboratories......................................... 500,143 6.23
100 Abbott Park Road Abbott Park, IL 60064
Keith D. Ignotz(4).......................................... 534,601 6.66
Mark A. Samuels(5).......................................... 486,442 6.06
Thomas H. Muller, Jr.(6).................................... 65,186 *
Richard L. Fowler(7)........................................ 54,282 *
Robert G. Rothfritz(8)...................................... 28,011 *
Mark Faupel(9).............................................. 19,791 *
Earl Lewis(10).............................................. 1,875 *
William Zachary(11)......................................... 13,379 *
All directors and executive officers as a group (9
persons).................................................. 3,076,821 38.35
</TABLE>
- ---------------
* Less than 1%
(1) Except as otherwise indicated in the footnotes to this table and pursuant
to applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock.
(2) Applicable percentage ownership is based on 8,022,718 shares of Common
Stock outstanding as of March 31, 1999 together with applicable options for
such stockholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission, based on factors including
voting and investment power with respect to shares. Shares of Common Stock
subject to the options currently exercisable, or exercisable within 60 days
after March 31, 1998, are deemed outstanding for computing the percentage
ownership of the person holding such options, but are not deemed
outstanding for computing the percentage ownership of any other person.
(3) Consists of 416 shares held by Mr. Hadley subject to stock options that are
exercisable within 60 days of March 31, 1999, 82,637 shares held by
Wilmington Interstate Corporation, 75,000 shares held by Hillman Medical
Ventures 1997 L.P., 423,102 shares owned by Hillman Medical Ventures 1996
L.P.,101,860 shares owned by Hillman Medical Ventures 1995 L.P., 275,953
shares owned by Hillman Medical Ventures 1994 L.P., 714,286 shares owned by
Hillman Medical Ventures 1993 L.P., 200,000
3
<PAGE> 6
shares held by Henry L. Hillman, Elsie Hilliard Hilman and C.G.
Grefenstette, Trustees of the Henry L. Hilman Trust U/A Dated 11/18/85 L.P.
Charles Hadley, a director of the Company, is Vice President of Rock Hill
Ventures, Inc., a Successor to Hillman Medical Ventures, Inc. Mr. Hadley
disclaims beneficial ownership of the shares held by such entities except
to the extent of his proportionate partnership interest therein. The
general partners of the Hillman Medical Ventures partnerships are Cashon
Biomedical Associates L.P. and Hillman/Dover Limited Partnership. The
general partner of Hillman/Dover Limited Partnership is a wholly-owned
subsidiary of The Hillman Company, a firm engaged in diversified
investments and operations. The Hillman Company is controlled by Henry L.
Hillman, Elsie Hilliard Hillman and C.G. Grefenstette, Trustees of the
Henry L. Hillman Trust, which Trustees may be deemed the beneficial owners
of the shares owned by the Hillman Medical Ventures partnerships.
(4) Consists of 385,629 shares held by Mr. Ignotz, and 148,972 shares subject
to stock options that are exercisable within 60 days of March 31, 1999.
(5) Consists of 310,386 shares held by Mr. Samuels and 176,056 shares subject
to stock options that are exercisable within 60 days of March 31, 1999.
(6) Consists of 3,714 shares held by Mr. Muller and 61,472 shares subject to
stock options that are exercisable within 60 days of March 31, 1999.
(7) Consists of 24,476 shares held by Mr. Fowler and 29,806 shares subject to
stock options that are exercisable within 60 days of March 31, 1999.
(8) Consists of 438 shares held by Mr. Rothfritz and 27,573 shares subject to
stock options that are exercisable within 60 days of March 31, 1999.
(9) Consists of 19,791 shares held by Mr. Faupel subject to stock options that
are exercisable within 60 days of March 31, 1999.
(10) Consists of 1,875 shares held by Mr. Lewis subject to stock options that
are exercisable within 60 days of March 31, 1999.
(11) Consists of 12,963 shares held by Mr. Zachary and 416 shares subject to
stock options that are exercisable within 60 days of March 31, 1999.
4
<PAGE> 7
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
A Board of five directors will be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the five nominees named below, all of whom are presently directors of the
Company. If any nominee is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. It is not
expected that any nominee will be unable to or will decline to serve as a
director. If stockholders nominate additional persons for election as directors,
the proxy holder will vote all proxies received by him to assure the election of
as many of the Board of Directors' nominees as possible, with the proxy holder
making any required selection of specific nominees to be voted for. The term of
office of each person elected as a director will continue until the next Annual
Meeting of Stockholders or until that person's successor has been elected.
VOTE REQUIRED
The five nominees receiving the highest number of affirmative votes of the
Votes Cast shall be elected as directors.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE NOMINEES LISTED BELOW.
NOMINEES FOR DIRECTOR
Directors
The directors of the Company are as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE
- ---- --- ------------------------- --------
<S> <C> <C> <C>
Mark A. Samuels................... 41 Chairman, Chief Executive Officer and 1992
Director
Keith D. Ignotz................... 51 President, Chief Operating Officer and 1992
Director
Charles G. Hadley................. 42 Director 1993
Earl R. Lewis..................... 55 Director 1998
William E. Zachary, Jr............ 56 Director 1999
</TABLE>
Mark A. Samuels has served as a member of the Company's Board of Directors,
President and CEO since co-founding the Company in 1992. Prior to that time, Mr.
Samuels was a founder of Laser Atlanta Optics, Inc., an optical sensor company,
where he held the position of President and Chief Executive Officer until 1992,
and was a director until October 1996. While at Laser Atlanta Optics, Mr.
Samuels focused on the development of commercial and medical applications of
electro-optics. Mr. Samuels earned a B.S. in Physics and an M.S. in Electrical
Engineering from Georgia Institute of Technology.
Keith D. Ignotz has served as a member of the Company's Board of Directors
and Chief Operating Officer since co-founding the Company in 1992. Formerly, Mr.
Ignotz was President of Humphrey Instruments SmithKline Beckman (Japan),
President of Humphrey Instruments GMBH (Germany), and Senior Vice President of
Allergan Humphrey Inc., a $100 million per year medical company. Mr. Ignotz is a
member of the board of directors of Vismed, Inc., an ophthalmic diagnostic
products company, doing business as Dicon, and Pennsylvania College of
Optometry. Mr. Ignotz earned a B.A. in Sociology and Political Science from San
Jose State University and an M.B.A. from Pepperdine University.
Charles G. Hadley has served as a member of the Company's Board of
Directors since 1993. Since 1988, Mr. Hadley has been general partner of Cashon
Biomedical Associates, L.P., which is the managing general partner of the
Hillman Medical Ventures Partnerships. These venture firms focus on early stage
medical
5
<PAGE> 8
technology. Mr. Hadley earned a B.A. from George Washington University and a
J.D. and M.B.A. from Stanford University.
Earl R. Lewis has served as a member of the Company's Board of Directors
since July 1998. Mr. Lewis is president and CEO of Thermo Instrument Systems,
Inc. Mr. Lewis has served in various capacities with Thermo Instrument Systems
since 1986 and was subsequently named president in 1997 and CEO in 1998. Thermo
Instrument Systems develops, manufactures and markets analytical instruments
used to identify complex compounds as well as instruments used to image, inspect
and measure various industrial processes and life sciences phenomena. Mr. Lewis
is Chairman of Thermo BioAnalysis Corporation, Thermo Vision Corporation, Thermo
Optek Corporation, ThermoQuest Corporation and ONIX Systems, Inc. He is a
director of Thermo Instrument Systems, Metrika Systems Corporation and
ThermoSpectra Corporation.
William E. Zachary, Jr. has served as a member of the Company's Board of
Directors since April 1, 1999. Since 1971, Mr. Zachary has been a partner with
the law firm of Zachary & Segraves, P.A. of Decatur, Georgia of which he is a
founding partner. He also serves on the Investigative Panel of the State Bar of
Georgia Disciplinary Board. Mr. Zachary is a founder and Chairman of the Board
of Bank Atlanta since 1986. Mr. Zachary is a qualified Arbitrator for the New
York and American Stock Exchanges and the National Association of Securities
Dealers.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held five meetings during the fiscal
year ended December 31, 1998. No director attended fewer than 80% of the
meetings of the Board of Directors during the fiscal year ended December 31,
1998. The Board of Directors has an Audit Committee and a Compensation
Committee. It does not have a nominating committee or a committee performing the
functions of a nominating committee. From time to time, the Board has created
various ad hoc committees for special purposes. No such committee is currently
functioning.
The Audit Committee consists of directors Hadley, Lewis and Zachary. The
Audit Committee is responsible for reviewing the results and scope of the audit
and other services provided by the Company's independent auditors. The Audit
Committee held two meetings during the last fiscal year.
The Compensation Committee consists of directors Hadley and Lewis. The
Compensation Committee reviews and makes recommendations to the Board concerning
salaries and incentive compensation for employees of the Company and administers
the Company's equity incentive plans. The Compensation Committee held four
meetings during the last fiscal year.
DIRECTOR COMPENSATION
Nonemployee directors ("Outside Directors") receive payments of $3,000 per
quarter, $1,000 per meeting attended in person ($500 if attended by telephone)
and $500 per committee meeting attended, up to a maximum of $20,000 per year.
All directors are reimbursed for expenses actually incurred in attending
meetings of the Board of Directors and its committees. Outside Directors may be
granted options to purchase Common Stock under the Company's 1995 Stock Option
Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee makes recommendations concerning salaries,
incentives and other forms of compensation for directors, officers and other
employees of the company, subject to ratification by the full Board of
Directors. The Compensation Committee also administers the Company's various
stock plans. Presently, Charles G. Hadley and Earl Lewis comprise the
Compensation Committee. No member of the Compensation Committee has a
relationship that would constitute an interlocking relationship with executive
officers or directors of another entity.
6
<PAGE> 9
PROPOSAL NO. 2:
CONFIRMATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP, independent
accountants, to audit the financial statements of the Company for the 1999
fiscal year ending December 31, 1999 and recommends that the stockholders
confirm such selection. This firm has audited the Company's financial statements
since the Company's inception. In the event of a negative vote, the Board of
Directors will reconsider its selection. Representatives of Arthur Andersen LLP
are expected to be present at the Annual Meeting with the opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
VOTE REQUIRED
The affirmative vote of the majority of the Votes Cast will be required to
ratify the appointment of Arthur Andersen LLP as the Company's independent
auditors for the 1999 fiscal year ending December 31, 1999.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE 1999 FISCAL YEAR ENDING DECEMBER 31,
1999.
7
<PAGE> 10
EXECUTIVE COMPENSATION
COMPENSATION TABLES
Summary Compensation Table. The following table sets forth certain
compensation paid by the Company during each of the fiscal years ended December
31, 1996, 1997 and 1998 to the Chief Executive Officer, the four other most
highly compensated executive officers of the Company and certain other officers
of the Company whose total annual salary and bonus for such years exceeded
$100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
--------------------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
FISCAL --------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS OPTIONS COMPENSATION
- --------------------------- ------ -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Samuels........... 1998 $200,641 $ 30,000 -- -- $ 3,073(4)
Chairman and Chief 1997 161,539 -- -- 120,000 465(4)
Executive Officer 1996 150,000 -- -- 114,287 --
Keith D. Ignotz........... 1998 $175,641 $ 26,200 -- -- $ 2,880(4)
President and Chief 1997 155,769 -- -- 95,000 2,640(4)
Operating Officer 1996 150,000 -- -- 89,287 --
Thomas H. Muller, Jr...... 1998 $140,827 $ 19,500 -- -- $ 1,471(4)
Executive Vice President, 1997 130,000 -- -- 70,000 --
Chief Financial Officer 1996 3,918(1) -- -- 60,715 --
and Secretary
Mark L. Faupel............ 1998 $102,308(3) $ 28,700 -- 55,000 --
Vice President, Research 1997 -- -- -- -- --
& Development 1996 -- -- -- -- --
Richard L. Fowler......... 1998 $108,000 $ 16,200 -- -- --
Vice President, 1997 98,000 -- -- 30,000 --
Engineering 1996 78,872 -- -- 21,429 --
Robert G. Rothfritz....... 1998 $108,000 $ 16,200 -- -- --
Vice President,
Operations........... 1997 98,000 -- -- 35,000 --
1996 43,846(2) -- -- 21,429 --
</TABLE>
- ---------------
(1) Includes salary from December 20, 1996 upon commencement of Mr. Muller's
employment.
(2) Includes salary from July 8, 1996 upon commencement of Mr. Rothfritz's
employment.
(3) Dr. Faupel was paid $22,825 by the Company in 1998 as an independent
consultant prior to his employment.
(4) Consists of insurance premiums for a term life policy, the proceeds of which
are payable to the officer's named beneficiary.
8
<PAGE> 11
STOCK OPTION INFORMATION
Option/SAR Grants in Last Fiscal Year. The following table sets forth
certain information concerning stock options granted during the fiscal year
ended December 31, 1998 to the Named Executive Officers. In accordance with the
rules of the Securities and Exchange Commission, the following table also sets
forth the potential realizable value over the term of the options (the period
from the grant date to the expiration date) based on assumed rates of stock
appreciation of 5% and 10%, compounded annually. These amounts do not represent
the Company's estimate of future stock prices. Actual realizable values, if any,
of stock options will depend on the future performance of the Common Stock
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS EXERCISE OPTION TERM(3)
OPTIONS GRANTED IN PRICE PER EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR(1) SHARES($/SH)(2) DATE 5%($) 10%($)
- ---- ---------- -------------- --------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Samuels............. -- -- -- -- -- --
Keith D. Ignotz............. -- -- -- -- -- --
Thomas H. Muller, Jr........ -- -- -- -- -- --
Richard Fowler.............. -- -- -- -- -- --
Robert G. Rothfritz......... -- -- -- -- -- --
Mark L. Faupel.............. 30,000 24.8% 8.50 4/16/08 $160,368 $406,404
25,000 20.7 4.125 9/30/08 64,855 164,355
</TABLE>
- ---------------
(1) Based on an aggregate of 121,000 options granted by the Company in the
fiscal year ended December 31, 1998 to employees of and consultants to the
Company, including the Named Executive Officers.
(2) The exercise price per share of each option was equal to the last reported
sale price of the Common Stock on the date of grant.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated assuming that the fair
market value of the Company's Common Stock on the date of grant appreciates
at the indicated annual rate compounded annually for the entire term of the
option and that the option is exercised and sold on the last day of its term
for the appreciated stock price.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values. In the year ended December 31, 1998, no options were exercised by the
Named Executive Officers. The following table set forth, for each of the Named
Executive Officers, the fiscal year end number and value of exercisable and
unexercisable options:
AGGREGATED OPTION EXERCISES IN 1998
AND 1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 12/31/98 AT 12/31/98($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Samuels............. -- -- 176,056 111,803 736,596 184,510
Keith D. Ignotz............. -- -- 148,972 88,887 639,418 148,414
Thomas H. Muller, Jr........ -- -- 61,472 69,243 131,355 86,066
Mark L. Faupel.............. -- -- 19,791 45,209 15,883 31,767
Richard L. Fowler........... -- -- 29,806 26,623 92,818 21,420
Robert G. Rothfritz......... -- -- 27,573 28,856 80,914 33,324
</TABLE>
- ---------------
(1) Based on a value of $6.031 per share, which was the last reported sale price
of the common stock on December 31, 1998.
9
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE
The following report is provided to stockholders by the members of the
Compensation Committee of the Board of Directors.
The Compensation Committee is responsible for making recommendations to the
Board of Directors concerning sales and incentive compensation for employees of
and consultants to the Company. The Compensation Committee also has the
authority and power to grant stock options to the Company's employees and
consultants.
The goal of the Company's compensation policies is to align executive
compensation with business objectives, corporate performance, and to attract and
retain executives who contribute to the long-term success and value of the
Company. The Company operates under the following principles to achieve its
compensation goals:
- The Company pays competitively for experienced, highly-skilled
executives:
The Company operates in the competitive and rapidly changing medical
device industry. Executive base compensation is targeted to the salary
range paid to comparable executives in companies of similar size,
location, and with comparable responsibilities. The individual executive's
salary is reviewed annually based on individual performance, corporate
performance, and the relative compensation of the individual when compared
to the salary ranges of executives in other companies with similar
responsibilities.
- The Company rewards executives for superior performance:
The Committee believes that a substantial portion of each executive's
compensation should be in the form of bonuses. Executive bonuses are based
on a combination of individual performance and the attainment of corporate
goals. Individual performance goals are based on specific objectives which
must be met in order for the Company to achieve its corporate goals. In
order to attract and retain executives who are qualified to excel in the
medical device industry, performance in excess of the corporate goals
results in higher bonuses.
- The Company strives to align long-term stockholder and executive
interests:
In order to align the long-term interests of executives with those of
stockholders, the Company grants certain key employees, and particularly
executives, options to purchase stock. Options are granted at the closing
price of one share of the Company's Common Stock on the day of the date of
grant and will provide value only when the price of the Common Stock
increases above the exercise price. Options are subject to vesting
provisions designed to encourage executives to remain employed by the
Company. Additional options are granted from time to time based on
individual performance and the prior level of grants.
COMPENSATION OF MARK SAMUELS, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
During 1998, the compensation of Mr. Samuels was determined by applying the
same criteria discussed at the beginning of this report used to determine
compensation and bonuses for all executive officers. Mr. Samuel's compensation
for 1998 is set forth in the Summary Compensation Table appearing on page 8.
10
<PAGE> 13
SUMMARY
The Committee believes that the Company's compensation policy as practiced
to date by the Committee and the Board has been successful in attracting and
retaining qualified employees and in tying compensation directly to corporate
performance relative to corporate goals. The Company's compensation policy will
evolve over time as the Company attempts to achieve the many short-term goals it
faces while maintaining its focus on building long-term stockholder value
through technological leadership and development and expansion of the market for
the Company's products.
Respectfully submitted,
CHARLES G. HADLEY
EARL R. LEWIS
The foregoing Compensation Committee Report shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, except to the
extent the Company specifically incorporates it by reference into such filing.
11
<PAGE> 14
PERFORMANCE GRAPH
The following graph shows a comparison of total stockholder return for
holders of the Company's Common Stock from July 1, 1997, the date of the
Company's initial public offering, through December 31, 1998 compared with the
Nasdaq Stock Market, and the Hambrecht & Quist Healthcare Index. This graph is
presented pursuant to SEC rules. The Company believes that while total
stockholder return can be an important indicator of corporate performance, the
stock prices of medical device stocks like SpectRx, Inc. are subject to a number
of market-related factors other than company performance, such as competitive
announcements, mergers and acquisitions in the industry, the general state of
the economy, and the performance of other medical device stocks.
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
7/1/98 Sep-97 Dec-97 Mar-98 Jun-98 Sep-98 Dec-98
<S> <C> <C> <C> <C> <C> <C> <C>
SpectRx, Inc.......................... 100.00 107.14 96.43 123.21 98.21 64.29 86.16
Nasdaq Stock Market-U.S............... 100.00 116.73 109.46 128.07 131.78 119.30 153.87
H&Q Healthcare........................ 100.00 105.47 103.82 118.31 118.78 108.27 131.89
</TABLE>
The information contained in the Stock Performance Graph shall not be
deemed to be "soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
except to the extent the Company specifically incorporates it by reference into
such filing.
12
<PAGE> 15
CERTAIN TRANSACTIONS
On October 31, 1996, the Company loaned Mark A. Samuels, Chairman, Chief
Executive Officer and a director of the Company, $200,000. The loan, which was
made pursuant to a promissory note secured by Common Stock of the Company and
other securities, bears interest at the rate of 6.72% per year and becomes due
and payable on the earlier of October 31, 2001 or 120 days after the date when
he ceases to be an employee of the Company. The outstanding balance, including
interest, as of March 31, 1999 was $232,480. Mark A. Samuels' largest aggregate
amount of indebtedness outstanding to the Company in 1998 was approximately
$229,120.
On October 31, 1996, the Company loaned Keith D. Ignotz, President, Chief
Operating Officer and a director of the Company, $200,000. The loan, which was
made pursuant to a promissory note secured by Common Stock of the Company and
other securities, bears interest at the rate of 6.72% per year and becomes due
and payable on the earlier of October 31, 2001 or 120 days after the date when
he ceases to be an employee of the Company. The outstanding balance, including
interest, as of March 31, 1999 was $232,480. Keith D. Ignotz's largest aggregate
amount of indebtedness outstanding to the Company in 1998 was approximately
$229,120.
On June 30, 1994, the Company loaned Mark A. Samuels, Chairman, Chief
Executive Officer and a director of the Company, approximately $28,000 in
connection with his purchase of Common Stock of the Company. The loan was made
pursuant to a promissory note secured by the underlying stock, bears interest at
the rate of 6% per year and becomes due and payable on June 30, 1999. The
outstanding balance, including interest, as of March 31, 1999 was approximately
$17,522.
On June 30, 1994, the Company loaned Keith D. Ignotz, President, Chief
Operating Officer and a director of the Company, approximately $21,000 in
connection with his purchase of Common Stock of the Company. The loan was made
pursuant to a promissory note secured by the underlying stock, bears interest at
the rate of 6% per year and becomes due and payable on June 30, 1999. The
outstanding balance, including interest, as of March 31, 1999 was approximately
$26,813.
On December 5, 1996, the Company purchased 129,000 shares of FluorRx, Inc.
Series A Preferred Stock, and currently owns a 47% interest in FluorRx, Inc.
Mark A. Samuels is a director of FluorRx, Inc., and Keith D. Ignotz is Vice
President, Secretary and a director of FluorRx, Inc. In connection with the
purchase of this stock, the Company loaned FluorRx, Inc. $100,000. This loan was
made pursuant to a convertible promissory note, bore interest at the rate of 8%
per year and was repaid in December 1997.
On March 1, 1996, the Company entered into a License and Joint Development
Agreement (the "Altea/Nimco Agreement") with Altea Technologies, Inc. ("Altea")
and Non-Invasive Monitoring Company, Inc. ("Nimco") a company equally owned by
Jonathan Eppstein, a principal stockholder and former Vice President of the
Company, and his sister. Pursuant to the Altea/Nimco Agreement, the Company paid
royalties totalling $100,000 and $137,500 during 1997 and 1998 respectively.
13
<PAGE> 16
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, the persons named in the
accompanying form of proxy will vote the shares represented by proxy as the
Board may recommend or as the proxy holders, acting in their sole discretion,
may determine.
THE COMPANY WILL MAIL WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN
REQUEST A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1998, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND A LIST OF
EXHIBITS. REQUESTS SHOULD BE SENT TO STOCKHOLDER RELATIONS, SPECTRX, INC. 6025A
UNITY DRIVE, NORCROSS, GEORGIA 30071.
THE BOARD OF DIRECTORS
Dated: April 28, 1999
14
<PAGE> 17
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECTRX, INC.
1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 25, 1999
The undersigned shareholder of SPECTRX, INC., a Delaware corporation, hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement, each dated April 28, 1999 and hereby appoints Mark A. Samuels and
Thomas H. Muller, Jr. and each of them, proxies and attorneys-in-fact, with full
power to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 1999 Annual Meeting of Stockholders of SPECTRX,
INC. to be held on May 25, 1999 at 10:00 a.m. local time, at the Drury Inn
located at 5655 Jimmy Carter Blvd., Norcross, Georgia 30071 and at any
adjournment or adjournments thereof, and to vote all shares of Common Stock
which the undersigned would be entitled to vote if then and there personally
present, on the matters set forth below:
1. ELECTION OF DIRECTORS:
<TABLE>
<S> <C> <C> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD
(except as indicated)
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THAT
NOMINEE'S NAME IN THE LIST BELOW:
Mark A. Samuels, Keith D. Ignotz, Charles G. Hadley, Earl R. Lewis, William E. Zachary, Jr.
</TABLE>
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL PERIOD ENDING DECEMBER 31, 1999:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and, in their discretion, upon such other matter or matters which may
properly come before the meeting or any adjournment or adjournments
thereof. (Continued on other side)
(Continued from other side)
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE RATIFICATION OF
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS, AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
Dated:
-----------------------------------------------------------------------------,
1999
------------------------------
Signature
------------------------------
Signature
(This Proxy should be marked,
dated and signed by the
shareholder(s) exactly as his
or her name appears hereon,
and returned promptly in the
enclosed envelope. Persons
signing in a fiduciary
capacity should so indicate.
If shares are held by joint
tenants or as community
property, both should sign.)
