UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended July 1, 2000.
Commission file number 0-14742
CANDELA CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 04-2477008
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
530 Boston Post Road
Wayland, Massachusetts 01778
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (508) 358-7400
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
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(Title of Class)
Common Stock Purchase Warrants
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K [ ].
The aggregate market value of the Common Stock, $.01 par value, of the
registrant held by non-affiliates of the registrant as of October 24, 2000
(computed based on the closing price of $6.844 of such stock on The Nasdaq
National Market on October 24, 2000) was $55,231,648.
As of October 24, 2000, 11,494,988 shares of the registrant's Common Stock,
$.01 par value, were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
2
The undersigned registrant hereby amends the following items of its
Annual Report on Form 10-K as set forth on the pages attached hereto:
3
PART I
ITEM 3. LEGAL PROCEEDINGS
On August 11, 2000, Candela reached a settlement of legal disputes with the
Regents of the University of California ("Regents") and New Star Technology Inc.
("New Star"), relating to the Dynamic Cooling Device ("DCD") technology licensed
by Candela from the Regents. The parties continue their negotiation of a
definitive settlement agreement and amended license agreement. The amended
license agreement will specify, among other things, a modification in the
computation of Candela's royalty obligation to the Regents from the date of
settlement. While this modification retains the historical percentage royalty
rate previously payable to the Regents, it will prospectively apply to more
components sold for certain laser system configurations. As a result, Candela's
royalty payments will increase compared to the method of computing royalties
prior to the modification.
From time to time, we are a party to various legal proceedings incidental
to our business. We believe that none of the other presently pending legal
proceedings will have a material adverse effect upon our financial position,
results of operations, or liquidity.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITION
---- --- --------
Gerard E. Puorro........................ 53 President, Chief Executive Officer
and Director
Kenneth D. Roberts...................... 67 Chairman of the Board of Directors
Theodore G. Johnson..................... 68 Director
Douglas W. Scott........................ 54 Director
Richard J. Cleveland, M.D............... 68 Director
Nancy Nager, R.N., B.S.N., M.S.N........ 49 Director
MR. PUORRO was appointed a Director of the Company in September 1991.
Mr. Puorro has been President and Chief Executive Officer of the Company since
April 1993. From April 1989 until April 1993, Mr. Puorro was Senior Vice
President and Chief Financial Officer of the Company. Mr. Puorro was elected
Treasurer in April 1991 and Chief Operating Officer in December 1992. Prior to
joining the Company and since 1982, he was Vice President and Controller at
Massachusetts Computer Corporation, a manufacturer of micro-supercomputers. Mr.
Puorro became acting Chief Executive Officer of Candela Skin Care Centers, Inc.
in June 1997.
MR. ROBERTS has been a Director of the Company since August 1989 and
Chairman of the Board of Directors since November 1991. From November 1992 to
June 1995, Mr. Roberts was employed on a part-time basis as Vice President and
Chief Financial Officer of Foster Miller, Inc., an engineering services company.
Since December 1988, he has been an independent management consultant. From July
1986 to December 1988, Mr. Roberts was Vice President, Treasurer and Chief
Financial Officer of Massachusetts Computer Corporation, a manufacturer of
micro-supercomputers. Prior to that time and for many years, he was Senior Vice
President and Treasurer of Dynatech Corporation, a provider of diversified high
technology products and services.
MR. JOHNSON has been a Director of the Company since February 1988.
From 1983 until 1991, he managed his own venture capital and consulting
business, Prelude Management, Inc. Since that time, he has been an active
venture investor and director of a number of companies. Prior to that and for
twenty-five years, he was a Vice President at Digital Equipment Company. Mr.
Johnson is currently a Director of Kronos, Inc., Gensym, Inc., and a number of
private companies including Enrollment Collaborative, Inc., a computer-based
college application service.
MR. SCOTT has been a Director of the Company since September 1991.
Since 1985, Mr. Scott has been a partner with Phildius, Kenyon & Scott, a health
care consulting and investment firm. Mr. Scott is currently President, Chief
Operating Officer, and a Director of Avitar, Inc., a publicly held health care
company. Mr. Scott also served as Chief Executive Officer of Avitar from
December 1989 through April 1991.
DR. CLEVELAND was appointed a Director of the Company in April 1994. He
has been Professor of Surgery at Tufts University School of Medicine since 1972.
In 1986, he was appointed the Andrews Professor of Surgery at the same
institution. From 1975 to 1993, Dr. Cleveland was Chairman of the Department of
Surgery and Surgeon-in-Chief at the New England Medical Center and a member of
the staff of several hospitals in the Boston area. He is presently
Secretary-Treasurer of the American Board of Thoracic Surgery and has held
numerous positions in a variety of other professional associations.
MS. NAGER was appointed a Director of the Company in February 1999.
From 1990 until the present, Ms. Nager has been the Principal and CEO of
Specialized Health Management, Inc., a privately held behavioral health care
corporation. Ms. Nager also founded and directs Specialized HomeCare, Inc.,
Specialized Billing Services, Inc. and Seniorlink, an information, referral and
resource corporation. Prior to that, Ms. Nager was the Chief Operating Officer
of Charles River Hospital, a private psychiatric facility in Wellesley, where
she previously held a
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number of positions in nursing and administration from 1976 through 1990. Ms.
Nager also provided corporate consulting to the hospital's parent company
Community Care Systems, Inc. from 1990 through 1992.
Information regarding the Company's executive officers is contained in
Part I of the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission (the "SEC") on September 29, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file initial reports of ownership and reports of changes in 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.
Dr. James C. Hsia failed to timely file three Statements of Change
in Beneficial Ownership on Form 4 for twenty-one transactions. Of these
twenty-one transactions, ten were reported one day after they were due and
six were reported four days after they were due. Dr. Richard J. Cleveland, MD
failed to timely file a Statement of Change in Beneficial Ownership on Form 4
for ten transactions. None of the directors, executive officers, or 10% or
more stockholders of Candela filed an Annual Statement of Changes in
Beneficial Ownership on Form 5. The foregoing information is based solely on
the Company's review of the copies of such forms received by it and review of
a report of SEC filings for Candela Corporation provided by an independent
information service company.
ITEM 11. EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive an annual
retainer of $4,000 and a fee of $1,000 per regularly scheduled meeting of the
Board of Directors or committee meeting thereof if held separately. Directors
are also reimbursed for out-of-pocket expenses incurred in connection with the
performance of their duties as a director.
On May 10, 1990, the Board of Directors of the Company adopted the 1990
Non-Employee Director Plan, which was approved by the Company's shareholders on
November 13, 1990. The 1990 Non-Employee Director Plan provides for the issuance
of options for the purchase of up to 90,000 shares of the Company's Common
Stock. Under this plan, each member of the Company's Board of Directors who is
neither an employee nor officer of the Company receives a one-time grant of an
option to purchase 15,000 shares of Common Stock at an exercise price equal to
the fair market value on the date of grant. The options generally become
exercisable in equal amounts over a period of four years from the date of grant,
expire seven years after the date of grant and are nontransferable. Including
cancellations, options for the purchase of 99,750 shares have been granted at a
range of exercise prices from $2.17 to $9.67 per share. Upon shareholder
approval of the 1993 Non-Employee Director Stock Option Plan, the Board of
Directors terminated the granting of options under the 1990 Non-Employee
Director Stock Option Plan.
On June 2, 1993, the Board of Directors of the Company adopted the 1993
Non-Employee Director Stock Option Plan, which was approved by the Company's
shareholders on November 18, 1993. The 1993 Non-Employee Director Plan provides
for the issuance of options for the purchase of up to 120,000 shares of the
Company's Common Stock. Under this Plan, each member of the Company's Board of
Directors who is neither an employee nor an officer of the Company receives a
onetime grant of an option to purchase 10,000 shares of Common Stock at an
exercise price equal to the fair market value on the date of grant. The options
generally become exercisable in equal amounts over a period of two years from
the date of grant, expire ten years after the date of grant and are
nontransferable. To date, options for the purchase of 90,000 shares have been
granted at exercise prices ranging from $1.083 to $5.375 per share.
On December 24, 1996, Dr. Cleveland, a director of the Company, was
granted non-statutory options to purchase 20,000 shares of the common stock of
Candela Skin Care Centers, Inc., a subsidiary of the Company, at an
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exercise price of $1.00. These non-statutory options were granted pursuant to
the terms of the Candela Skin Care Centers, Inc. 1996 Incentive and
Non-Statutory Stock Option Plan, have a term of 10 years from the date of
grant and become exercisable over a four-year period. On August 21, 1997,
options granted under the CSCC Plan were converted to options in Candela
Corporation at the rate of 0.21053 Candela Corporation options for each CSCC
option. Mr. Cleveland realized options for 4,211 in Candela Corporation as a
result of this conversion.
On August 14, 1997, Non-Qualified Options to purchase 15,000 shares
of the Company's Common Stock were granted to each of Theodore G. Johnson,
Kenneth D. Roberts, Richard J. Cleveland and Douglas W. Scott, at an exercise
price of $3.125 per share, such price being the market price of the Common
Stock on the date of the grant. These Non-Qualified Options were granted
pursuant to the Company's 1989 Stock Plan (the "Plan") and vest in equal 50%
amounts on each of the first and second anniversaries of the date of the
grant, provided that each such optionee continues to serve as a director of
the Corporation on such anniversary date.
On August 21, 1997, Candela granted Richard J. Cleveland options to
purchase 6,000 shares at $4.66 per share. These options are fully vested and
have a term of ten years.
On September 30, 1998, Non-Qualified Options to purchase 7,500
shares of our common stock were granted to each of Theodore G. Johnson,
Kenneth D. Roberts, Richard J. Cleveland and Douglas W. Scott, at an exercise
price of $2.42 per share, such price being the market price of the common
stock on the date of the grant. These Non-Qualified Options were granted
outside of a plan and vest in equal 50% amounts on each of the first and
second anniversaries of the date of the grant, provided that each such
optionee continues to serve as a director of Candela on such anniversary date.
On January 12, 1999, Non-Qualified Options to purchase 7,500 shares
of our common stock were granted to each of Theodore G. Johnson, Kenneth D.
Roberts, Richard J. Cleveland and Douglas W. Scott, at an exercise price of
$4.66 per share, such price being the market price of the common stock on the
date of the grant. These Non-Qualified Options were granted pursuant to our
1998 Stock Plan and are fully vested.
7
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation paid or accrued by the Company for services rendered to the
Company, in all capacities, for the year ended July 1, 2000 by its Chief
Executive Officer (the "CEO") and the four other most highly paid executive
officers of the Company, in each case whose total salary and bonus exceeded
$100,000 during the year ended July 1, 2000 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
----------------------------- ---------------
NAME AND PRINCIPAL FISCAL OTHER ANNUAL AWARDS(2) ALL OTHER
POSITION YEAR SALARY($) COMPENSATION($) OPTIONS/SARS(#) COMPENSATION($)
- ------------------------------------- ------ --------- --------------- --------------- ---------------
Gerard E. Puorro..................... 2000 254,807 125,044 (9) 30,000 6,697(5)
Chief Executive Officer, 1999 243,284 375,912 (9) 30,000 5,471(5)
President and Director 1998 237,500 114,885 (3) 15,791(4) 4,972(5)
Toshio Mori.......................... 2000 220,436 37,221 (9) -- --
Vice President, 1999 166,896 32,408 (9) 15,000 --
President of Candela KK 1998 156,713 15,029 (9) 1,500 --
James C. Hsia, Ph.D.................. 2000 169,038 77,300 (9) 15,000 3,734(8)
Senior Vice President, 1999 208,201 261,160 (9) 45,000 4,229(8)
Research 1998 155,000 105,188 (6) 49,500(7) 2,942(8)
William B. Kelley.................... 2000 167,130 77,125 (9) 15,000 3,566(10)
Vice President, North 1999 187,186 261,160 (9) 15,000 3,025(10)
American Sales and Service 1998 163,942 65,188 (9) -- 2,443(10)
F. Paul Broyer....................... 2000 141,731 63,659 (9) 30,000 3,788(11)
Senior Vice President of Finance 1999 136,532 213,676 (9) 15,000 3,410(11)
Chief Financial Officer, Treasurer 1998 110,557 65,188 (9) 7,500 1,533(11)
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(1) Excludes perquisites and other personal benefits, the aggregate annual
amount of which for each officer was less than the lesser of $50,000 or 10%
of the total salary and bonus reported for the named executive officer.
(2) The Company did not grant any restricted stock awards or stock appreciation
rights ("SARs") or make any long-term incentive plan pay-outs during the
fiscal years ended July 1, 2000, July 3, 1999 or June 27, 1998.
(3) Fiscal year 1998 includes $15,000 for debt forgiveness. Fiscal 1998 also
includes incentive bonus of $99,885.
(4) Options granted in fiscal 1996 for the purchase of 50,000 shares in Candela
Skin Care Centers, Inc., a subsidiary of the Company, were converted to
15,791 during the fiscal year ended June 27, 1998.
(5) For fiscal 2000, includes $3,591 in matching contributions by the Company
pursuant to the Company's 401(k) Plan, $1,373 in life insurance premiums
paid by the Company for the benefit of Mr. Puorro, and $1,733 for a Company
provided automobile. For fiscal 1999, includes $2,750 in matching
contributions by the Company pursuant to the Company's 401(k) Plan, $1,275
in life insurance premiums paid by the Company for the benefit of Mr.
Puorro, and $1,446 for a Company provided automobile. For fiscal 1998,
includes $2,375 in matching contributions by the Company pursuant to the
Company's 401(k) Plan, $766 in life insurance premiums paid by the Company
for the benefit of Mr. Puorro, and $1,831 for a Company provided
automobile.
(6) Includes $65,188 incentive bonus approved by Board of Directors, based on
Company results for second half of Fiscal 1998. Additionally, includes an
Inventor's Bonus of $40,000, which was awarded to Dr. Hsia in fiscal 1998
for recognition of his involvement with the GentleLase-TM-.
(7) During fiscal 1998 options granted in fiscal 1991 to purchase 12,000 shares
of stock at $8.75 and options granted in fiscal 1992 to purchase 37,500
shares of stock were repriced at $2.16 per share. All rights
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and interests in options granted in fiscal 1996 to purchase 15,000 shares
at $9.875 per share and options granted in fiscal 1997 to purchase 20,000
shares at $7.50 were forfeited during fiscal 1998.
(8) For fiscal 2000, includes $2,977 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $757 in life insurance premiums
paid by the Company for the benefit of Dr. Hsia. For fiscal 1999, includes
$3,574 in matching contributions by the Company pursuant to the Company's
401(k) Plan and $655 in life insurance premiums paid by the Company for the
benefit of Dr. Hsia. For fiscal 1998, includes $2,144 in matching
contributions by the Company pursuant to the Company's 401(k) Plan and $798
in life insurance premiums paid by the Company for the benefit of Dr. Hsia
(9) Incentive bonus approved by Board of Directors, based on Company results
for the fiscal year.
(10) For fiscal 2000, includes $3,310 in matching contributions by the Company
pursuant to the Company's 401(k) Plan and $256 in life insurance premiums
paid by the Company for the benefit of Mr. Kelley. For fiscal 1999,
includes $2,788 in matching contributions by the Company pursuant to the
Company's 401(k) Plan and $237 in life insurance premiums paid by the
Company for the benefit of Mr. Kelley. For fiscal 1998, includes $2,325 in
matching contributions by the Company pursuant to the Company's 401(k) Plan
and $118 in life insurance premiums paid by the Company for the benefit of
Mr. Kelley.
(11) For fiscal 2000, includes $2,987 in matching contributions by the Company
pursuant to the Company's 401(k) Plan, $252 in life insurance premiums paid
by the Company for the benefit of Mr. Broyer, and $551 for a Company
provided automobile. For fiscal 1999, includes $3,103 in matching
contributions by the Company pursuant to the Company's 401(k) Plan and $307
in life insurance premiums paid by the Company for the benefit of Mr.
Broyer. For fiscal 1998, includes $1,286 in matching contributions by the
Company pursuant to the Company's 401(k) Plan.
9
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth grants of stock options pursuant to the
Company's 1998 Stock Plans during the fiscal year ended July 1, 2000 to the
Named Executive Officers listed in the Summary Compensation Table above:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTIONS(1)
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PERCENT OF
TOTAL
OPTIONS/
GRANTED TO EXERCISE
OPTION EMPLOYEES OF BASE EXPIR-
GRANTED IN FISCAL PRICE ATION
NAME (#) YEAR ($/SHARE) DATE 5% 10%
- ------------------------- ------- ---------- ---------- ------- ------- -------
Gerard E. Puorro......... 30,000 17.39% 12.042 1/14/10 227,194 575,755
Toshio Mori.............. -- -- -- -- -- --
James C. Hsia, Ph.D...... 15,000 8.70% 12.042 1/14/10 113,597 287,878
William B. Kelley........ 15,000 8.70% 12.042 1/14/10 113,597 287,878
F. Paul Broyer .......... 30,000 17.39% 12.042 1/14/10 227,194 575,755
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(1)Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation (5% and 10%)
on the Company's Common Stock, as the case may be, over the term of the
options. These numbers are calculated based on rules promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price growth. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent on the timing of
such exercise and the future performance of the Company's Common Stock.
There can be no assurance that the rates of appreciation assumed in this
table can be achieved or that the amounts reflected will be received by
the individuals.
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OPTION EXERCISES AND FISCAL YEAR END VALUES
The following table sets forth information with respect to options to
purchase (1) the Company's Common Stock granted under the 1987 Stock Option
Plan, 1989 Stock Plan, and 1998 Stock Option Plan, and (2) shares of the
Company's subsidiary, Candela Skin Care Centers, Inc. including (i) the number
of shares purchased upon exercise of options in the most recent fiscal year,
(ii) the net value realized upon such exercise, (iii) the number of
unexercised options outstanding at July 1, 2000, and (iv) the value of such
unexercised options at July 1, 2000:
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
JULY 1, 2000 OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT JULY 1, 2000 (#) AT JULY 1, 2000 ($)(2)
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SHARES VALUE
ACQUIRED REALIZED EXERCIS- UNEXERCIS- EXERCIS- UNEXERCIS-
ON EXERCISE ($)(1) ABLE ABLE ABLE ABLE
NAME (#)
- -------------------------------------------------------------------------------------------------------------------------------
Gerard E. Puorro......... 150,000 2,035,865 135,791 52,500 905,650 100,312
Toshio Mori.............. 3,750 32,547 4,125 12,000 19,297 55,375
James C. Hsia, Ph.D...... 79,500 -- 41,250 48,750 265,156 201,093
William B. Kelley........ 48,438 566,411 -- 29,187 -- 62,271
F. Paul Broyer........... 35,625 385,919 -- 54,375 -- 122,264
- --------------------
(1) Named Executive Officers will receive cash only if and when they sell the
securities issued upon exercise of the options and the amount of cash
received by such individuals is dependent on the value of such securities
at the time of such sale, if any.
(2) Value is based on the difference between option grant price and the fair
market value at 2000 fiscal year end ($9.125 per share as quoted on the
NASDAQ Stock Market at the close of trading on June 30, 2000) multiplied by
the number of shares underlying the option.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee, which consisted of Mr. Scott and Dr. Cleveland during
fiscal 2000. Both members of the Compensation Committee are non-employee
directors. Pursuant to the authority delegated by the Board of Director's the
Compensation Committee each year sets the compensation of the Chief Executive
Officer and reviews and approves the compensation of all other senior
officers, including approval of annual salaries and bonuses as well as the
grant of stock options to officers and employees.
COMPENSATION PHILOSOPHY
The goal of the Company is to attract and retain qualified executives
in a competitive industry. To achieve this goal, the Compensation Committee
applies the philosophy that compensation of executive officers, specifically
including that of the Chief Executive Officer and President, should be linked
to revenue growth, operating results and earnings per share performance.
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Under the supervision of the Compensation Committee, the Company has
developed and implemented compensation policies. The Compensation Committee's
executive compensation policies are designed to (i) enhance profitability of
the Company and shareholder value, (ii) integrate compensation with the
Company's annual and long-term performance goals, (iii) reward corporate
performance, (iv) recognize individual initiative, achievement and hard work,
and (v) assist the Company in attracting and retaining qualified executive
officers. Currently, compensation under the executive compensation program is
comprised of cash compensation in the form of annual base salary, bonus, and
long-term incentive compensation in the form of stock options.
BASE SALARY
In setting cash compensation for the Chief Executive Officer and
reviewing and approving the cash compensation for all other officers, the
Compensation Committee reviews salaries annually. The Compensation Committee's
policy is to fix base salaries at levels comparable to the amounts paid to
senior executives with comparable qualifications, experience and
responsibilities at other companies of similar size and engaged in a similar
business to that of the Company. In addition, the base salaries take into
account the Company's relative performance as compared to comparable companies.
The salary compensation for the executive officers is based upon
their qualifications, experience and responsibilities, as well as the
attainment of planned objectives. The Chief Executive Officer and President
makes recommendations to the Compensation Committee regarding the planned
objectives and executive compensation levels. The overall plans and operating
performance levels upon which management compensation is based are approved by
the Compensation Committee on an annual basis. During fiscal 2000, the Chief
Executive Officer and President made recommendations for merit and promotional
salary increases for the executive group, and the Compensation Committee
approved increases ranging from 3% to 32% to 5 of the executive officers.
These increases reflect the impact of promotions as well as incentive changes.
BONUS COMPENSATION
In addition to salary compensation, on September 8, 1999 the
Compensation Committee recommended the continuation of the Incentive Bonus
Plan, adopted by the Board of Directors in the previous year, whereby senior
executives recommended by the Chief Executive Officer and approved for
inclusion in the Plan by the Compensation Committee receive bonus compensation
based on a percentage of base salary. Bonuses paid under this Plan were a
percentage of base salary for fiscal 2000 and were based on pre-tax profits,
after bonus, for fiscal 2000 for the device business only.
STOCK OPTIONS
The Compensation Committee relies on incentive compensation in the
form of stock options to retain and motivate executive officers. Incentive
compensation in the form of stock options is designed to provide long-term
incentives to executive officers and other employees, to encourage the
executive officers and other employees to remain with the Company and to
enable them to develop and maintain a stock ownership position in the
Company's Common Stock. The Company's 1989 Stock Plan and the 1998 Stock
Option Plan, administered by the Compensation Committee, have been used for
the granting of stock options.
Both the 1989 Stock Plan and The 1998 Stock Option Plan permits the
Compensation Committee to administer the granting of stock options to eligible
employees, including executive officers. Options generally become exercisable
based upon a vesting schedule tied to years of future service to the Company.
The value realizable from exercisable options is dependent upon the extent to
which the Company's performance is reflected in the market price of the
Company's Common Stock at any particular point in time. Equity compensation in
the form of stock options is designed to provide long-term incentives to
executive officers and other employees. The Compensation Committee approves
the granting of options in order to motivate these employees to maximize
shareholder value. Vesting for options granted under the plan is determined by
the Compensation Committee at the time of grant and expires after a 10-year
period (5 years for 10% or more stockholders), at no less than the fair
12
market value at the date of grant. As a result of this policy, executives and
other employees are rewarded economically only to the extent that the
shareholders also benefit through appreciation in the market.
Options granted to employees are based on such factors as individual
initiative, achievement and performance. In administering grants to
executives, the Compensation Committee evaluates each officer's total equity
compensation package. The Compensation Committee generally reviews the option
holdings of each of the executive officers, including vesting and exercise
price and the then current value of such unvested options. The Compensation
Committee considers equity compensation to be an integral part of a
competitive executive compensation package and an important mechanism to align
the interests of management with those of the Company's shareholders. In
fiscal 2000, options to purchase shares of Common Stock were granted to
Messrs. Broyer, Hsia, Kelley, McGrail, Puorro and Wilber.
MR. PUORRO'S COMPENSATION
The cash compensation program for the Chief Executive Officer and the
President of the Company is designed to reward performance that enhances
shareholder value. The compensation package is comprised of base pay and stock
options, which is affected by the Company's revenue growth, market share
growth, profitability, and growth in earnings per share. In fiscal 2000, Mr.
Puorro's cash compensation was $254,807 per year. The Compensation Committee
believes that Mr. Puorro's compensation has been, and is now, comparable to
the salary of other Chief Executive Officers in other medical equipment
companies, considering the size and rate of profitability of those companies.
The Compensation Committee is satisfied that the executive officers
of the Company are dedicated to achieving significant improvements in the
long-term financial performance of the Company and that the compensation
policies and programs implemented and administered have contributed and will
continue to contribute toward achieving this goal.
This report has been submitted by the members of the Stock Option and
Compensation Committee:
DOUGLAS W. SCOTT
RICHARD J. CLEVELAND, M.D.
13
STOCK PERFORMANCE GRAPH
The following graph illustrates a five-year comparison of cumulative
total shareholder return among the Company, the NASDAQ National Market Index
and the Company's "Industry Index." The Company selected an index of companies
in the electro-medical equipment industry as its industry group. Accordingly,
the Industry Index reflects the performance of all companies that are included
in the electro-medical equipment industry with 3845 as their Primary Standard
Industrial Classification Code Number. The comparison assumes $100 was
invested on July 2, 1995 (the date of the beginning of the Company's sixth
preceding fiscal year) in the Company's Common Stock and on June 30, 1995 in
each of the foregoing indices and assumes reinvestment of dividends, if any.
[GRAPH]
6/30/1995 6/28/1996 6/27/1997 6/26/1998 7/2/1999 7/1/2000
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CANDELA CORPORATION 100.00 538.46 284.62 53.85 1353.85 1084.68
S & P 500 100.00 126.00 169.73 220.92 271.19 290.85
PEER GROUP 100.00 141.17 176.49 249.16 296.92 378.17
EMPLOYMENT AGREEMENTS
Candela has entered into severance agreements with each of Messrs.
Puorro, Hsia, Broyer, Kelley, Wilber and McGrail. Under our agreements with
Messrs. Hsia, Broyer, Kelley, Wilber and McGrail, Candela has agreed to
continue payment of their respective base annual salaries over twelve months
in the event that their services for Candela are terminated for any reason
except for cause or such individuals' resignation. Under our agreement with
Mr. Puorro, in the event that his employment is terminated for any reason, at
either his election or Candela's election other than for just cause, he will
be entitled to receive severance payments equal to his base annual salary for
twelve months and then 50% of his base annual salary for an additional twelve
months. Each of the above named individuals are subject to non-solicitation
and non-competition provisions for the period during which he receives
severance payments.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
the beneficial ownership of the Company's Common Stock as of October 24, 2000
by (i) each person known to the Company who beneficially owns 5% or more of
the outstanding shares of its Common Stock, (ii) each director or nominee to
become a director of the Company, (iii) each executive officer identified in
the Summary Compensation Table and (iv) all directors and executive officers
of the Company as a group:
NUMBER OF SHARES PERCENT OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNERS (1) BENEFICIALLY OWNED BENEFICIALLY OWNED
- ----------------------------------------- ------------------ ------------------
Gerard E. Puorro (2).............................. 150,538 1.29%
Theodore G. Johnson (3)........................... 90,523 *
Kenneth D. Roberts (4)............................ 118,500 1.02%
Douglas W. Scott (5).............................. 62,500 *
Richard J. Cleveland, M.D. (6).................... 40,067 *
Nancy Nager, R.N., B.S.N., M.S.N (7).............. 7,500 *
Toshio Mori (8)................................... 4,125 *
James C. Hsia, PhD (9)............................ 66,224 *
William B. Kelley (10)............................ 2,937 *
F. Paul Broyer (11)............................... 2,237 *
William D. Witter (12)............................ 2,877,755 24.81%
153 East 53rd Street
New York, NY 10022
William D. Witter, Inc. (13)...................... 2,877,755 24.81%
153 East 53rd Street
New York, NY 10022
All Directors and Executive Officers as
a Group (10 Persons) (14)...................... 547,150 4.76%
* Represents less than 1% of the Company's outstanding stock.
(1) Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
beneficially owned by them. Except as otherwise indicated, the address for
each beneficial owner is 530 Boston Post Road, Wayland, MA 01778. Pursuant
to the rules of the Securities and Exchange Commission the number of shares
of Common Stock deemed outstanding includes, for each person or group
referred to in the table, shares issuable pursuant to options held by the
respective person or group which may be exercised within 60 days after
October 24, 2000.
(1) Includes 135,791 shares issuable pursuant to stock options exercisable
within the 60 day period following October 24, 2000.
(3) Includes 7,500 shares issuable pursuant to stock options exercisable within
the 60 day period following October 24, 2000.
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(4) Includes 82,500 shares issuable pursuant to stock options exercisable
within the 60 day period following October 24, 2000. Excludes 4,500 shares
held by a trust for the benefit of one of Mr. Roberts' children as to which
Mr. Roberts disclaims beneficial ownership.
(5) Includes 60,000 shares issuable pursuant to stock options exercisable
within the 60 day period following October 24, 2000.
(6) Includes 36,317 shares issuable pursuant to stock options exercisable
within the 60 day period following October 24, 2000.
(7) Includes 7,500 shares issuable pursuant to stock options exercisable
within the 60 day period following October 24, 2000.
(8) Includes 4,125 shares issuable pursuant to stock options exercisable within
the 60 day period following October 24, 2000.
(9) Includes 48,750 shares issuable pursuant to stock options exercisable
within the 60 day period following October 24, 2000.
(10) Includes 2,937 shares issuable pursuant to stock options exercisable within
the 60 day period following October 24, 2000.
(11) Includes 1,875 shares issuable pursuant to stock options exercisable within
the 60 days period following October 24, 2000.
(12) Includes 2,772,755 shares of common stock beneficially owned by William D.
Witter, Inc. Includes warrants to purchase 105,000 shares of Common Stock.
Mr. Witter is the President and primary owner of William D. Witter, Inc.
and has the sole power to dispose or to direct the disposition of all of
the shares of common stock which are beneficially owned respectively by
William D. Witter, Inc. and William D. Witter.
(13) Information based in Amendment No. 8 to Schedule 13G dated January 13, 2000
filed with the Security and Exchange Commission. All such shares are also
beneficially owned by William D. Witter, individually, the President and
primary owner of William D. Witter, Inc.
(14) Includes 389,257 shares subject to stock options exercisable within the 60
day period following October 24, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following items are filed as part of this report:
(1) EXHIBITS: Except as otherwise noted, the following documents are
incorporated by reference from the Company's Registration Statement on Form
S-1 (File Number 333-78339):
3.1 Certificate of Incorporation, as amended
3.2 [FN9] By-laws of the Company, as amended and restated
3.3 [FN1] Agreement of Merger between Candela Corporation, Inc., a Massachusetts corporation,
and Candela Laser Corporation, a Delaware corporation
4.1 [FN6] Form of Rights Agreement dated as of September 4, 1992 between the Company and The First
National Bank of Boston, as Rights Agent, which includes as Exhibit A the Form of Rights
Certificate, and as Exhibit B the Summary of Rights to Purchase Common Stock
4.2 [FN11] Certificate of Amendment, dated as of March 25, 1996, by the Company
4.3 [FN11] First Amendment to Rights Agreement, dated as of March 25, 1996, between the Company
and The First National Bank of Boston
10.1 [FN1] 1985 Incentive Stock Option Plan
10.2 [FN2] 1987 Stock Option Plan
10.2.1 [FN2] 1989 Stock Plan
10.2.2 [FN3] 1990 Employee Stock Purchase Plan
10.2.3 [FN3] 1990 Non-Employee Director Stock Option Plan
10.2.4 [FN7] 1993 Non-Employee Director Stock Option Plan
10.2.5 [FN13] 1998 Stock Plan
10.3 [FN7] Lease for premises at 526 Boston Post Road, Wayland, Massachusetts
10.4 [FN7] Lease for premises at 530 Boston Post Road, Wayland, Massachusetts
10.5 [FN7] Patent License Agreement between the Company and Patlex Corporation effective as of
July 1, 1988
10.6 [FN4] License Agreement among the Company, Technomed International, Inc. and Technomed
International S.A. dated as of December 20, 1990
10.7 [FN5] License Agreement between the Company and Pillco Limited Partnership effective as of
October 1, 1991
10.8 [FN8] Distribution Agreement between the Company and Cryogenic Technology Limited, dated
October 15, 1993
10.9 [FN10] Asset Purchase Agreement between the Company and Derma-Laser, Limited and
Derma-Lase, Inc. dated June 23, 1994
10.10 [FN12] Note and Warrant Purchase Agreement, dated as of October 15, 1998 between the
Company, Massachusetts Capital Resource Company, William D. Witter and Michael D.
Witter
10.10.1 [FN12] Form of Note delivered by the Company in the aggregate principal amount of
$3,700,000 to Massachusetts Capital Resource Company, William D. Witter and Michael
D. Witter
10.10.2 [FN12] Form of Common Stock Purchase Warrant to purchase an aggregate of 370,000 shares of
the Company's Common Stock delivered to Massachusetts Capital Resource Company,
William D. Witter and Michael D. Witter
21. * Subsidiaries of the Company
23.1 * Consent of PricewaterhouseCoopers LLP (Independent Accountants)
23.2 * Consent of Ernst & Young LLP (Independent Auditors)
27. * Financial Data Schedule
- -----------------------------------
[FN1] Previously filed as an exhibit to Registration
Statement No. 33-54448B and
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incorporated herein by reference.
[FN2] Previously filed as an exhibit to the Company's
Amended and Restated Annual Report on Form 10-K for
the fiscal year ended June 30, 1988, and
incorporated herein by reference.
[FN3] Previously filed as an exhibit to the Company's
Annual Report on Form 10-K for the fiscal year
ended June 30, 1990, and incorporated herein by
reference.
[FN4] Previously filed as an exhibit to Form 10-Q for the
quarter ended December 29, 1990, and incorporated
herein by reference.
[FN5] Previously filed as an exhibit to Form 10-Q for the
quarter ended September 28, 1991, and incorporated
herein by reference.
[FN6] Previously filed as an exhibit to Form 8-K, dated
September 8, 1992, and incorporated herein by
reference.
[FN7] Previously filed as an exhibit to the Company's
Annual Report on Form 10-K for the fiscal year
ended July 3, 1993, and incorporated herein by
reference.
[FN8] Previously filed as an exhibit to Form 10-Q for the
quarter ended January 1, 1994, and incorporated
herein by reference.
[FN9] Previously filed as an exhibit to Form 10-Q for the
quarter ended April 2, 1994, and incorporated
herein by reference.
[FN10] Previously filed as an exhibit to the Company's
Annual Report on Form 10-K for the fiscal year
ended July 2, 1994, and incorporated herein by
reference.
[FN11] Previously filed as an exhibit to Form 8-K filed
March 25, 1996, and incorporated by reference
herein.
[FN12] Previously filed as an exhibit to Form 10-K/A filed
October 23, 1998, and incorporated by reference
herein.
* Filed with Form 10-K on September 29, 2000
(b) There were no reports on Form 8-K filed during the last quarter of fiscal
2000.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, this 27th day of
October, 2000.
CANDELA CORPORATION
By: /s/ Gerard E. Puorro
-----------------------------
Gerard E. Puorro
President and Chief Executive Officer
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