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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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 Section 240.14a-11(c) or 240.14a-12
INNOTECH, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check appropriate box):
[X]$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_]$500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(3) 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:
_____________________________________
[_]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:
_____________________________________
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INNOTECH, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 2, 1996
To the Stockholders:
The 1996 Annual Meeting of Stockholders of Innotech, Inc. (the "Company")
will be held on October 2, 1996, at 10:00 a.m., local time, at Roanoke Airport
Marriott, 2801 Hershberger Road, Roanoke, Virginia 24017 for the following
purposes:
I. To elect two members of the Company's Board of Directors, which
consists of seven members, to serve for a three-year term and until their
successors have been duly elected and qualified; and
II. To transact such other business as may properly come before the
meeting and any adjournment(s) thereof.
The Board of Directors has fixed the close of business on August 23, 1996 as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the 1996 Annual Meeting of Stockholders (the "Meeting"). Only
stockholders of record at the close of business on such date will be entitled
to notice of, and to vote at, the Meeting and any adjournment(s) thereof. A
complete list of stockholders entitled to notice of and to vote at the Meeting
will be open to examination by stockholders beginning ten days prior to the
Meeting for any purpose germane to the Meeting during normal business hours at
the office of the Secretary of the Company at 5568 Airport Road, Roanoke,
Virginia 24012.
By Order of the Board of Directors
Ronald D. Blum
Secretary
September 4, 1996
YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE POSTAGE PREPAID ENVELOPE WHICH HAS BEEN PROVIDED, WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. THE PROXY MAY BE REVOKED BY YOU
AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE PRESENT AT THE MEETING YOU MAY,
IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND EXERCISE YOUR RIGHT TO VOTE
YOUR SHARES PERSONALLY.
PROXY STATEMENT
INNOTECH, INC.
5568 AIRPORT ROAD
ROANOKE, VIRGINIA 24012
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 2, 1996
GENERAL INFORMATION
This Proxy Statement is furnished to stockholders of Innotech, Inc. (the
"Company" or "Innotech"), a Delaware corporation, in connection with the
solicitation by the Company's Board of Directors (the "Board") of proxies to
be voted at the 1996 Annual Meeting of Stockholders (the "Meeting"), and at
any adjournment(s) thereof, for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders. The Meeting is to be held on October
2, 1996, at the Roanoke Airport Marriott, 2801 Hershberger Road, Roanoke,
Virginia 24017 at 10:00 a.m. local time.
The principal executive offices of the Company are located at 5568 Airport
Road, Roanoke, Virginia 24012, and its telephone number is (540) 362-2020. The
enclosed proxy and this Proxy Statement are being transmitted to stockholders
of the Company on or about September 4, 1996.
VOTING OF PROXIES
The accompanying proxy in the form enclosed is being solicited by and on
behalf of the Board. The solicitation of proxies will be made principally by
mail and, in addition, may be made by directors, officers and employees of the
Company personally, or by telephone or telegraph, without extra compensation.
The Company has also retained The Financial Relations Board, Inc. to assist it
in the solicitation of proxies. Brokers, nominees and fiduciaries will be
reimbursed for their out-of-pocket and clerical expenses in transmitting
proxies and related material to beneficial owners. The costs of soliciting
proxies will be borne by the Company. The Company will pay a fee of
approximately $3,000, plus expenses.
The accompanying proxy card is intended to permit a stockholder of record on
August 23, 1996 to vote at the Meeting, and at any adjournment thereof, on the
proposal described in this Proxy Statement, whether or not the stockholder
attends the Meeting. Persons who acquire shares of record after the close of
business on August 23, 1996 will not be entitled to vote such shares at the
Meeting by proxy or by voting at the Meeting in person.
The presence at the Meeting, in person or by proxy, of the holders of a
majority of the issued and outstanding shares of common stock, $.001 par
value, of the Company (the "Common Stock") entitled to vote shall constitute a
quorum. Abstentions and broker non-votes are counted as present for purposes
of determining whether a quorum is present.
The persons named in the proxy have been designated as proxies by the Board.
Shares represented by properly executed proxies received by the Company will
be voted at the Meeting in the manner specified therein or, if no
specification is made, will be voted (i) "FOR" the election of the two
nominees for director named herein, and (ii) at the discretion of the proxy
holders in respect of such other business, if any, as may properly be brought
before the Meeting and which the Board did not know would be presented at the
Meeting. Abstentions and broker non-votes will not have the effect of votes in
opposition to the election of a director. On all other matters, abstentions
will have the same effect as a negative vote, but because shares held by
brokers will not be considered to be entitled to vote on matters as to which
the brokers withhold authority, a broker non-vote will have no effect on such
vote. Any proxy given to the Company by a stockholder pursuant to this
solicitation may be revoked by the stockholder at any time before it is
exercised by written notification delivered to the Secretary
of the Company, by voting in person at the Meeting, or by executing and
delivering another proxy bearing a later date. Attendance by a stockholder at
the Meeting does not alone serve to revoke the proxy.
The Board has fixed the close of business on August 23, 1996 as the record
date (the "Record Date") for the determination of stockholders of the Company
who are entitled to receive notice of, and to vote at, the Meeting. An
aggregate of 7,827,578 shares of Common Stock were outstanding at the close of
business on August 9, 1996. Each share of Common Stock outstanding on the
Record Date is entitled to one vote on each matter to be voted upon at the
Meeting. The Company's stockholders do not have cumulative voting rights. The
Company has no other class of voting securities entitled to vote at the
Meeting.
2
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the close of business on August 9,
1996, the beneficial ownership of the Common Stock by (i) each person known to
the Company to be the beneficial owner of more than 5% of the Common Stock,
(ii) each director and nominee for election as a director of the Company,
(iii) the Named Executives, as defined in the "Executive Compensation" section
of this Proxy Statement, and (iv) all directors and nominees and current
executive officers of the Company as a group (based upon information furnished
by such persons). Under the rules of the Securities and Exchange Commission, a
person is deemed to be a beneficial owner of a security if such person has or
shares the power to vote or direct the voting of such security or the power to
dispose of or to direct the disposition of such security. In general, a person
is also deemed to be a beneficial owner of any securities (including options
and warrants) which that person has the right to acquire through October 8,
1996, i.e. 60 days from August 9, 1996. Accordingly, more than one person may
be deemed to be a beneficial owner of the same securities.
SHARES PERCENTAGE BENEFICIALLY
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OWNED (1)
---------------- --------------------- -----------------------
Chase Venture Capital Associates, 2,211,043 25.4%
L.P. ...........................
c/o Chase Capital Partners
270 Park Avenue
New York, NY 10017
CIBC Wood Gundy Ventures, Inc. .. 779,007 10.0%
425 Lexington Avenue
New York, NY 10017
SBIC Partners, L.P. ............. 561,701 7.2%
201 Main Street, Suite 2302
Fort Worth, TX 76102
Johnson & Johnson Development 474,515 6.1%
Corporation......................
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Ronald D. Blum, O.D.(2).......... 1,084,626 12.7%
Steven A. Bennington(2).......... 87,775 1.1%
Amitava Gupta, Ph.D(2)........... 186,652 2.3%
Horace N. Hudson, Jr.(2)......... 24,502 *
Robert P. Padula(2).............. 44,447 *
Mitchell J. Blutt, M.D.(3)....... 2,211,043 25.4%
Gregory J. Forrest(4)............ -- *
Ian M. Kidson(5)................. -- *
Michael B. Packard(6)............ -- *
Damion E. Wicker, M.D.(3)........ 2,211,043 25.4%
All directors and executive
officers as a group
(12 persons)(3)(7).............. 3,670,256 37.4%
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*Less than one percent (1%) of the outstanding shares of Common Stock.
(1) Except as indicated by footnote, and subject to community property laws
where applicable, to the Company's knowledge, the persons or entities
named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
3
(2) Includes with respect to Drs. Blum and Gupta and Messrs. Bennington,
Hudson and Padula, 652,504, 173,401, 87,775, 24,502 and 43,780 shares,
respectively, issuable pursuant to options and warrants exercisable on or
before October 8, 1996. Does not include shares of Common Stock issuable
upon the exercise of stock options that may be granted pursuant to the
Option Grant Agreement between the Company and such executives. Pursuant
to the terms of the Option Grant Agreement, such options will not be
granted unless the value of all equity interests of Dr. Blum in the
Company on a Change in Control Date (as defined in the Option Grant
Agreement) exceeds $10 million (on an after tax basis). Also includes for
Dr. Blum 2,983 shares owned by Dr. Blum's children and 85,000 shares of
Common Stock subject to a Put/Call Agreement between Dr. Blum and the
Company. See "Certain Relationships and Related Transactions--Transactions
with Directors and Executive Officers."
(3) Reflects 2,211,043 shares deemed beneficially owned by Chase Venture
Capital Associates, L.P., formerly Chemical Venture Capital Associates,
L.P. ("CVCA"). Drs. Blutt and Wicker are Executive Partner and a
Principal, respectively, of Chase Capital Partners, the general partner of
CVCA. Drs. Blutt and Wicker disclaim beneficial ownership of all shares
owned by CVCA.
(4) Excludes shares owned by SBIC Partners, L.P. ("SBIC Partners"). SBIC
Partners is the beneficial owner of all shares of the Common Stock
registered in its name. Forrest Binkley & Brown L.P., a Texas limited
partnership ("FBB"), is the managing general partner of SBIC Partners, and
Forrest Binkley & Brown Venture Co., a Texas corporation ("Venture Co."),
is the sole general partner of FBB. Mr. Forrest is a limited partner of
FBB and is an executive officer, director and stockholder of Venture Co.
Mr. Forrest disclaims beneficial ownership of all shares of Common Stock
owned by SBIC Partners.
(5) Excludes shares owned by CIBC Wood Gundy Ventures, Inc. ("CIBC"). Mr.
Kidson, a Managing Director of CIBC Wood Gundy Securities, Inc. (an entity
related to CIBC), disclaims beneficial ownership of all shares owned by
CIBC.
(6) Excludes shares owned by the parent company of LensCrafters, Inc. Mr.
Packard, Executive Vice President of LensCrafters, Inc., disclaims
beneficial ownership of all shares owned by the parent company of
LensCrafters, Inc.
(7) Includes an aggregate of 1,101,156 shares issuable pursuant to options and
warrants exercisable on or before October 8, 1996 held by the executive
officers of the Company.
4
PROPOSAL I
ELECTION OF DIRECTORS
DIRECTORS
The Company's Certificate of Incorporation provides that the Board shall be
divided into three classes, with the term of office of one class expiring each
year. The Class II and Class III directors of the Company have terms which
expire in 1997 and 1998, respectively. The terms of office of Class I
directors expire this year. Gregory J. Forrest and Ian M. Kidson each have
been nominated to be elected at the Meeting as Class I directors to hold
office for a three-year term until the 1999 Annual Meeting of Stockholders and
until their successors have been duly elected and qualified. The number of
directors of the Company is currently set at seven.
Proxies in the accompanying form will be voted at the Meeting in favor of
the election of each of the nominees listed on the accompanying form of proxy,
unless authority to do so is withheld as to an individual nominee or nominees
or both nominees as a group. Proxies cannot be voted for a greater number of
persons than the number of nominees named. It is expected that each of the
nominees will be able to serve, but if before the election it develops that
any one or more of the nominees will be unable to serve or for good cause will
not serve, the proxies reserve discretion to vote or refrain from voting for a
substitute nominee or nominees. Each of the nominees has consented to serve as
a director of the Company and to be named herein. Messrs. Forrest and Kidson
are currently members of the Board. Directors will be elected by a plurality
of the votes cast by the holders of shares entitled to vote thereon who are
present at the Meeting in person or by proxy.
The following table sets forth certain information concerning the directors
of the Company (based solely upon information provided by them):
NAME OF DIRECTOR AGE DIRECTOR SINCE TERM EXPIRES
---------------- --- -------------- ------------
Ronald D. Blum, O.D.(1)......................... 49 1990 1998
Amitava Gupta, Ph.D.(1)(2)...................... 49 1993 1997
Mitchell J. Blutt, M.D.(2)...................... 39 1993 1997
Gregory J. Forrest(1)........................... 49 1996 1996
Ian M. Kidson(2)(3)............................. 37 1995 1996
Michael B. Packard(3)........................... 48 1992 1998
Damion E. Wicker, M.D.(1)(2)(3)................. 35 1993 1998
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(1) Member of Nominating Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
CLASS I
Gregory J. Forrest has served, since June 1993, as a principal of Forrest
Binkley & Brown L.P., which he co-founded and which is the managing general
partner of SBIC Partners, L.P., a Texas limited partnership and private equity
investment fund ("SBIC Partners"). From April 1992 until June 1993, he served
as the Chairman and President of BankAmerica Venture Capital. Prior to April
1992, Mr. Forrest was the President and Chief Executive Officer of Security
Pacific Venture Capital.
Ian M. Kidson is a Managing Director of CIBC Wood Gundy Securities, Inc., a
merchant bank, affiliated with CIBC Wood Gundy Ventures, Inc. ("CIBC"). He has
served CIBC Wood Gundy Securities, Inc. in various capacities since he joined
them in 1984.
CLASS II
Amitava Gupta served the Company as a research and development consultant
and technical advisor to the Company's Board of Directors from September 1991
until January 1992 when he became Director of
5
Engineering, Research and Development, and in January 1993 he became Executive
Vice President of Engineering, Research and Development. Dr. Gupta served as
Vice President of Research, Development and Engineering of Ioptex Research
Inc. ("Ioptex"), a subsidiary of Smith & Nephew, plc, from 1987 to 1992.
Ioptex is a manufacturer of intraocular lenses. From 1975 to 1987, Dr. Gupta
held a variety of positions, including senior research scientist, at the Jet
Propulsion Laboratory of the California Institute of Technology. Dr. Gupta is
an inventor named on numerous patents.
Mitchell J. Blutt has been an executive of Chase Capital Partners ("CCP"),
formerly Chemical Venture Partners, a private equity investment firm
affiliated with Chase Manhattan Bank, N.A. where he has directed all of CCP's
health care industry investments since August 1987. Since 1990, Dr. Blutt has
been Executive Partner of CCP. CCP is the general partner of Chase Venture
Capital Associates, L.P., a California Limited Partnership ("CVCA"). Since
August 1987, Dr. Blutt has been a physician and Adjunct Professor of Medicine
at New York Hospital/Cornell Medical Center. Dr. Blutt is a director of Hanger
Orthopedics Group, Inc., a public company engaged in medical rehabilitation
business, Landec Inc., a public company engaged in the polymer products
business, and General Medical Corporation, a public company engaged in the
medical product distribution business. Dr. Blutt has indicated that he intends
to resign from the Board following the 1996 Annual Meeting of Stockholders.
CLASS III
Ronald D. Blum is the founder of the Company and has served as Chairman of
the Board and Secretary since the Company's inception in October 1990. Dr.
Blum also served as President from the Company's inception until November 1994
and has served as Chief Executive Officer since 1994. Until December 1992,
Dr. Blum also served as Chief Executive Officer of Drs. Blum, Newman,
Blackstock and Associates, Optometrists, P.C., an optometric practice with
nine locations which he co-founded in 1977. Dr. Blum is an inventor named on
numerous patents dealing with optical care technologies and has been engaged
in the development of new products and technologies since 1982. He has written
numerous articles and has lectured at many professional meetings. Dr. Blum has
been a member of the editorial advisory board of Eye Care Business, an
optometric industry magazine, and he is currently a member of the American
Optometric Association. Dr. Blum was a contributing editor to 20/20 Magazine,
an optometric industry magazine.
Michael B. Packard has served, since February 1990, as Executive Vice
President of LensCrafters, Inc., simultaneously serving during 1993 as
President of Sight & Save, a division of LensCrafters, Inc. Mr. Packard had
earlier served in a variety of other positions at LensCrafters, Inc.,
including Vice President of Products, Vice President of Manufacturing and as
Senior Vice President.
Damion E. Wicker has been a Principal of CCP since April 1993. From July
1991 until April 1993, Dr. Wicker served as President and a director of Adams
Scientific, Inc., a biotechnology diagnostic company which he founded. From
May 1988 to July 1991, he was an associate with MBW Venture Partners, a
venture capital firm. Dr. Wicker was also a Commonwealth Fund Medical Fellow
for the National Institute of Health. Dr. Wicker is a director of InteCare/LLC
and Hepatix, Inc.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE TWO
NOMINEES NAMED ABOVE AS CLASS I DIRECTORS OF THE COMPANY.
BOARD AND COMMITTEE MEETINGS
The Board met nine times during fiscal year 1995 which ended on December 31,
1995. The Compensation and Stock Option Committee ("Compensation Committee")
held two meetings during fiscal year 1995. The primary function of the
Compensation Committee is to determine salaries, incentives and other forms of
compensation for executive officers and other employees of the Company and to
administer the incentive compensation and benefit plans of the Company. The
Audit Committee did not have any official meetings during fiscal year 1995.
The primary function of the Audit Committee is to oversee the actions taken by
the Company's
6
independent auditors and review the Company's internal financial and
accounting controls and policies. The Company did not have a Nominating
Committee during fiscal year 1995. The Company currently has a Nominating
Committee. The primary function of the Nominating Committee is to make
recommendations to the Board concerning the selection of nominees for election
as directors. The Nominating Committee will consider candidates suggested by
directors or stockholders. Nominations by stockholders, properly submitted in
writing to the Secretary of the Company, will be referred to the Nominating
Committee for consideration. During fiscal year 1995, Dr. Mitchell Blutt
attended fewer than 75% of the total number of meetings of the Board and of
the committees of the Board on which he served during the time he served on
the Board and on such committees.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As a public company, the Company's directors, executive officers and more
than 10% beneficial owners are subject to reporting requirements under Section
16(a) of the Securities Exchange Act of 1934, as amended. During fiscal year
1995, the Company was not subject to such reporting requirements.
COMPENSATION OF DIRECTORS
Members of the Company's Board do not receive compensation for their
services as directors, but directors may be reimbursed for certain expenses in
connection with attendance at Board and committee meetings. Non-employee
directors of the Company may participate in the Directors' Stock Option Plan
(the "Directors' Plan"). The Directors' Plan provides for the automatic grant
of options to purchase 5,000 shares of Common Stock on the date a non-employee
director is initially elected to the Board and on each successive date on
which the stockholders of the Company shall elect directors at an annual
meeting. The exercise price for such option is the fair market value of the
Common Stock on the date of grant, and such option is exercisable beginning on
the first anniversary of the date of grant, provided that the director
receiving same has not voluntarily resigned or been removed "for cause" as a
member of the Board prior to such date.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Private Placements of Securities
Between October 1993 and October 1995, the Company and CVCA, the beneficial
owner of 25.4% of the Common Stock and the Company's largest stockholder,
engaged in several transactions to provide the Company with necessary
financing. Drs. Blutt and Wicker, directors of the Company, are affiliated
with CVCA through their employment by its general partner, CCP. See "Voting
Securities and Principal Stockholders." In March 1994, CVCA purchased 82,718
shares of Series B Convertible Preferred Stock, $.001 par value, of the
Company ("Series B Preferred Stock") at a price of $10.00 per share out of a
total of 152,500 shares sold. In September 1994, CVCA loaned the Company
$1,000,000 through the issuance of a note with an interest rate of 13% per
annum (the "Subordinated Note"). The Subordinated Note was subordinated to the
Company's senior lenders. In connection with the Subordinated Note, CVCA was
granted Class G Warrants to purchase 22,864 shares of Common Stock at an
exercise price of $.0079 per share and was paid a $20,000 commitment fee. The
Class G Warrants expire in September 2004. CVCA and all other holders of the
Company's then outstanding Preferred Stock were issued additional Class G
Warrants in connection with their granting the Company requisite permission to
borrow $2,055,000 of funds, including the Subordinated Note. Such Class G
Warrants were granted in proportion to their ownership of the Company's then
outstanding Preferred Stock, and CVCA received 21,305 additional Class G
Warrants.
CVCA purchased from the Company a demand promissory note in the aggregate
principal amount of $400,000 in January 1995 (the "Demand Note"). The Demand
Note accrued interest at a rate of 14% per annum. CVCA was paid a processing
fee of $12,000 for the Demand Note.
During the period from March to June 1995, CVCA purchased in a series of
transactions 330,529 shares of Series C Preferred Stock, $.001 par value, of
the Company (the "Series C Preferred Stock") at a price of $10.00
7
per share out of a total of 397,955 shares sold and received a number of Class
I Warrants to purchase Common Stock in proportion to its purchase of shares of
the Series C Preferred Stock. CVCA paid the purchase price with a combination
of cash and conversion of the Demand Note (plus accrued interest on such
Note). The Series C Preferred Stock subsequently converted into shares of
Series D Preferred Stock, $.001 par value, of the Company (the "Series D
Preferred Stock") pursuant to the terms of the Series C Preferred Stock. CVCA
was issued Class I Warrants to purchase 837,494 shares of Common Stock at an
exercise price of $.0079 per share. The Class I Warrants expire in March 2005.
In July 1995, CVCA purchased from the Company a demand promissory note in the
aggregate principal amount of $400,000 (the "July Demand Note"), having the
same terms as the Demand Note.
In August 1995, CVCA purchased 600,000 shares of Series D Preferred Stock
out of a total of 1,999,999 shares issued in August and October 1995 at a
purchase price of $10.00 per share. CVCA paid the purchase price with a
combination of cash, conversion of the Subordinated Note, the Demand Note and
the July Demand Note (plus accrued interest on such Notes) and unpaid fees,
and the automatic conversion of shares of the Series C Preferred Stock (plus
accrued dividends thereon). The Company reimbursed CVCA for the fees and
expenses of CVCA's counsel in connection with its transactions with the
Company.
Johnson & Johnson Option
At the same time that CVCA purchased shares of Series D Preferred Stock,
Johnson & Johnson Development Corporation ("JJDC") purchased 150,000 shares of
Series D Preferred Stock at a price of $10.00 per share. Pursuant to the
above-mentioned stockholders' agreement, JJDC, a subsidiary of Johnson &
Johnson ("J&J"), had a right to appoint one director to the Board. J&J
appointed one director who, after a short period of time, resigned.
In a separate transaction, but one which was directly related to the sale of
Series D Preferred Stock, the Company, CVCA, certain other stockholders,
optionholders and warrantholders of the Company and J&J entered into an option
agreement (the "Option Agreement") pursuant to which J&J acquired an option
(the "J&J Option") to purchase all of the outstanding capital stock of the
Company at a net aggregate exercise price of approximately $85 million. In
consideration of the grant of the J&J Option, J&J paid $1.5 million to the
Company (the "Option Payment"). Pursuant to the terms of the Option Agreement,
the J&J Option terminated, and J&J was issued 150,000 shares of Series D
Preferred Stock (the "Option Shares") for the Option Payment on March 14,
1996, the effective date of the initial public offering of the Common Stock
(the "IPO"). Such shares then converted into Common Stock upon consummation of
the IPO.
In October 1995, the Company issued to JJDC 33,122 shares of Series D
Preferred Stock at a value of $10.00 per share to prepay J&J for $331,000 in
professional services in connection with its due diligence investigation of
the Company. The Company was entitled to copies of certain reports resulting
from the investigation. Pursuant to an option agreement, CIBC, a principal
stockholder of the Company, purchased 30,000 shares of Series D Preferred
Stock from JJDC at an exercise price of $10.00 per share upon the consummation
of the IPO.
In connection with the sales of securities to CVCA, CIBC, JJDC and SBIC
Partners, the Company granted certain rights to such investors and certain
other investors who participated in such financing transactions, including
preemptive rights, rights to appoint directors to the Board and registration
rights. The agreements with respect to preemptive rights and the right to
appoint directors terminated upon the consummation of the IPO.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
Dr. Blum licenses to the Company two patents and one patent application
owned by him on a perpetual, royalty-free, exclusive basis. In connection with
such license, the Company paid $10,000 to a third party in a transaction which
involved the sale of such patents and patent application to Dr. Blum and the
sale of certain other intellectual property rights to the Company by such
third party.
8
Dr. Blum and Mr. Padula provided an aggregate of $75,000 in collateral to
secure a bank loan to the Company from November 1994 to August 1995. Such
officers were paid interest at an annual rate of 6.0% on the amount of the
collateral provided, plus reimbursement of bank charges incurred by such
officers for an aggregate of $3,844, and received Class H Warrants to purchase
an aggregate of 1,697 shares of Common Stock at an exercise price of $.079 per
share.
Dr. Blum, in January 1995, granted a ten-year option for the purchase of
7,597 shares of Common Stock owned by him to Sirrom Capital Corporation
("Sirrom"), one of the Company's secured lenders, in order to obtain the
consent of Sirrom to a leasing transaction involving the Company. This leasing
transaction was believed to be critical in providing necessary financing to
the Company. In consideration of Dr. Blum's grant of the option on shares
owned by him and the potential loss on the value of the Common Stock in
respect of which he granted an option to Sirrom, the Board agreed to pay Dr.
Blum certain amounts conditioned upon the Company obtaining specified minimum
levels of permanent equity financing. The Company paid to Dr. Blum $100,000,
on an after-tax basis, in connection with the closing of the Series D
Preferred Stock financing and the Option Agreement with J&J in which the
Company raised an aggregate of approximately $21,500,000 (including the Option
Payment of $1,500,000 and the conversion of certain outstanding securities
issued by the Company together with accrued interest and dividends thereon).
Effective July 19, 1996, the Company and Dr. Blum entered into a Put/Call
Agreement. This Agreement provides for the sale by Dr. Blum and his permitted
assigns to the Company and for the purchase by the Company from Dr. Blum and
his permitted assigns of an aggregate of 85,000 shares of Common Stock. The
exercise price for the put and call is $9.8125 per share. The put and call
options of Dr. Blum and the Company pursuant to such Agreement become
exercisable on September 11, 1996 and terminate on September 10, 1997.
The Company, from time to time, sells consumables and Excalibur Systems at
special negotiated rates to LensCrafters, Inc. and its divisions or
subsidiaries. The Company entered into a purchase order agreement with
LensCrafters, Inc. in 1992, pursuant to which the Company was paid deposits
for Excalibur Systems purchases. As a result of revisions to such agreement,
the Company repaid $437,300 of such deposits to LensCrafters, Inc. Michael B.
Packard, an Executive Vice President of LensCrafters, Inc., is a director of
the Company. The parent company of LensCrafters, Inc. beneficially owns shares
of Common Stock.
EXECUTIVE OFFICERS
The executive officers of the Company presently consist of Dr. Blum as
Chairman of the Board, Chief Executive Officer and Secretary; Steven A.
Bennington as President and Chief Operating Officer; Dr. Gupta as Executive
Vice President, Engineering, Research and Development; Horace N. Hudson, Jr.
as Vice President Manufacturing; Sunder H. Malkani as Vice President of
Marketing; Robert P. Padula as Vice President of Sales and Customer Care; and
Jo Ann Swasey as Treasurer and Controller.
The following table sets forth certain information with respect to the
executive officers of the Company who are not directors or nominees for
election as a director:
Steven A. Bennington has served the Company since August 1996 as President
and was appointed Chief Operating Officer in September 1993. From June 1992
until August 1996, Mr. Bennington served as Vice President of Operations of
the Company. Mr. Bennington served as Vice President--International of Vismed,
Inc., a manufacturer of in-office laminating systems, from September 1991 to
June 1992. In March 1991, Mr. Bennington founded and served beyond September
1991 as a consultant for KSC International, a consulting firm for medical
instrumentation, eyewear and vision care companies. From September 1988 to
February 1991, Mr. Bennington served as Chief Executive Officer of
TechnaVision, Inc., a manufacturer of in-office whole lens thermal casting
fabrication systems. From August 1981 to September 1988, Mr. Bennington served
as Vice President--Operations and then as Vice President--International of
Allergan Humphrey, Inc., a manufacturer of diagnostic and surgical ophthalmic
instrumentation. Mr. Bennington is 47 years old.
9
Horace N. Hudson has served the Company as Director of Materials Research
since August 1993 and as Vice President of Manufacturing since December 1994.
From 1989 until August 1993, he worked as an independent consultant for
several companies in the ophthalmic products and equipment industry, including
Garrett Optical, Inc., Crossbows Optical Ltd. and Bausch & Lomb, Inc. He was
employed by Coburn Optical Industries, Inc., a manufacturer of surfacing
equipment and ophthalmic lens products, from 1972 until 1989, holding various
positions including Vice President--Operations. Mr. Hudson is 46 years old.
Sunder H. Malkani joined the Company as Vice President of Marketing in
October 1995, and from April 1994 until October 1995, he served as a
consultant to the Company. From May 1990 until September 1995, Mr. Malkani
served as President of Healthcare Consultants, Inc., a consulting firm to
medical device companies. Mr. Malkani also served as Vice President of United
States Professional Products Group at Ciba Vision Corporation, an entity which
manufactures and distributes contact lenses, from 1985 to 1990. Mr. Malkani is
48 years old.
Robert P. Padula joined the Company in February 1994 as Executive Vice
President of Sales and Marketing and became Vice President of Sales and
Customer Care in January 1995. Before joining Innotech, he was employed by
Allergan Humphrey, Inc., a manufacturer of diagnostic and surgical ophthalmic
instrumentation, from 1981 to 1994 as Vice President of Sales and Service and
in several other positions. Mr. Padula is 39 years old.
Jo Ann Swasey has served the Company since February 1993 as Controller. In
October 1995, she became Treasurer of the Company. From 1989 until February
1993, Ms. Swasey was an accountant with H. Schwarz & Co. P.C., Public
Accountants. Ms. Swasey is a certified public accountant. Ms. Swasey is 33
years old.
EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ended December 31, 1995 and
1994, compensation awarded or paid by the Company to its Chief Executive
Officer and each of the four other most highly compensated executive officers
of the Company (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
--------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION(S) YEAR SALARY ($) BONUS ($) COMPENSATION OPTIONS (#)
- ------------------------------ ------ ---------- --------- ------------ -----------
Ronald D. Blum, O.D........ 1995 $178,282 $35,831 $ -- 804,992
Chairman, Chief Executive 1994 150,449 -- -- --
Officer and Secretary
Steven A. Bennington....... 1995 136,825 31,303 -- 81,602
President and Chief 1994 114,672 25,000 11,964(1) --
Operating Officer
Amitava Gupta, Ph.D........ 1995 208,469 70,584 -- 202,613
Executive Vice President, 1994 191,410 25,000 -- --
Engineering, Research and
Development
Robert P. Padula........... 1995 125,000 24,680 -- 44,192
Vice President of Sales 1994 105,769 -- -- 19,722
and Customer Care
Horace N. Hudson, Jr....... 1995 99,198 24,255 -- 33,369
Vice President of 1994 92,278 9,000 -- 1,710
Manufacturing
- --------
(1) Represents forgiveness of a loan payable to the Company.
10
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information concerning each grant of options to
purchase shares of Common Stock made during the fiscal year ended December 31,
1995 to the Named Executive Officers:
INDIVIDUAL GRANTS
-------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL ESTIMATED AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE FAIR STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE PER VALUE OPTION TERM (2)
OPTIONS EMPLOYEES IN SHARE PER EXPIRATION -----------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) SHARE(1) DATE 5%($) 10%($)
---- ----------- ------------ --------- --------- ---------- -------------- --------------
Ronald D. Blum, O.D..... 221,524 17.6% $ .08 $6.56 8/23/05 $ 2,342,596 $ 3,732,693
583,468 46.5 15.50 6.56 8/23/00 0 0
Steven A. Bennington.... 27,518 2.2 $ .08 $6.56 8/23/05 291,164 464,188
54,084 4.3 15.50 6.56 8/23/00 0 0
Amitava Gupta, Ph.D..... 75,357 6.0 $ .08 $6.56 8/23/05 797,528 1,271,740
127,256 10.1 15.50 6.56 8/23/00 0 0
Robert P. Padula........ 11,105 0.9 $ .08 $6.56 8/23/05 117,397 187,009
33,087 2.6 15.50 6.56 8/23/00 0 0
Horace N. Hudson, Jr.... 15,553 1.2 $ .08 $6.56 8/23/05 164,677 262,708
17,816 1.4 15.50 6.56 8/23/00 0 0
- --------
(1) The estimated fair value of the Company's Common Stock, as determined by
the Board of Directors on the dates of grant, was $6.56 per share.
(2) Potential realizable value is based on the assumption that the Common
Stock appreciates at the annual rates shown (compounded annually) from
the date of grant until the expiration of the option term. These numbers
are calculated based on the requirements promulgated by the Securities
and Exchange Commission and do not reflect any estimate by the Company of
future Common Stock price increases.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding the stock
options held as of December 31, 1995 by the Named Executive Officers. No stock
options were exercised by the Named Executive Officers in fiscal year 1995.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1995 (#) DECEMBER 31, 1995 ($)(1)
---------------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ---------------- ----------- -------------
Ronald D. Blum, O.D..... 33,229 771,764 $329,661 $2,632,424
Steven A. Bennington.... 83,097 23,390 285,648 232,055
Amitava Gupta, Ph.D..... 155,527 81,780 447,055 741,376
Robert P. Padula........ 41,326 22,587 82,516 138,938
Horace N. Hudson, Jr.... 21,288 13,790 50,409 133,118
- --------
(1) Based upon the initial public offering price of $10.00 per share minus
the applicable exercise price.
EMPLOYMENT AGREEMENTS AND TERMINATION ARRANGEMENTS
The Company has entered into employment agreements with Drs. Blum and Gupta
and Messrs. Bennington, Hudson and Padula. Each of the employment agreements
provides for the officer's employment in his current positions through the
respective dates set forth below, subject to earlier termination by the
Company or the executive officer. The terms of employment for Drs. Blum and
Gupta expire on August 31, 1998, the term of employment for Mr. Bennington
expires on May 31, 1997, the term of employment for Mr. Hudson expires on
11
August 23, 1997, and the term of employment of Mr. Padula expires on November
30, 1996. The terms of such agreements (except Mr. Hudson's agreement) will be
extended automatically each year for an additional one-year period unless the
executive officer or the Company provides notice that he or it does not desire
to extend the term. Pursuant to the respective employment agreements, Dr. Blum
receives an annual base salary of $175,000, Dr. Gupta receives an annual base
salary of $195,000, Mr. Bennington receives an annual base salary of $150,000,
Mr. Hudson receives an annual base salary of $110,000, and Mr. Padula receives
an annual base salary of $125,000. In addition, the Company reimburses Dr.
Gupta for certain housing expenses up to $14,000 per year. Certain of such
employment agreements provide that the executive will receive specified
bonuses, stock option awards and other employee benefits, as the case may be.
Under the agreement with Dr. Blum, the Company has agreed to use its best
efforts to cause the election of Dr. Blum to the Board until such time as he
no longer owns 10% of the Common Stock on a fully-diluted basis and he no
longer is an officer of the Company. Also, the Company has agreed to make
available not less than $250,000 per year during the term of his employment
for research and development activities on behalf of the Company as determined
by Dr. Blum.
Each of the foregoing employment agreements provides for certain payments
upon termination of the officer's employment as a result of a material breach
by the Company of the officer's employment agreement or a termination by the
Company without Cause (as defined in the employment agreements). A material
breach by the Company of the employment agreements includes termination
without Cause and a material change in the officer's responsibilities. In the
case of Dr. Blum, he would be entitled to receive a lump-sum payment equal to
his annual base salary, payments of annual base salary for the longer of 12
months and the unexpired portion of the employment term and a lump-sum equal
to $20,833 multiplied by the number of full or partial months comprising the
unexpired portion of the employment term. Dr. Gupta would be entitled to
receive severance payments of annual base salary for the longer of 12 months
and the unexpired portion of the employment term, plus a pro rata portion of
bonus accrued through the date of termination. Mr. Bennington would be
entitled to receive severance payments of annual base salary for the longer of
12 months and the unexpired portion of the employment term, plus a pro rata
portion of bonus accrued through the date of termination. Mr. Hudson would be
entitled to receive severance payments amounting to 12 months of his annual
base salary, plus a pro rata portion of bonus accrued through the date of
termination. Mr. Padula would be entitled to severance payments amounting to
12 months of his annual base salary. In addition, certain stock options held
by each of the Named Executive Officers will become immediately exercisable
upon termination of such Named Executive Officer's employment.
The Company has obtained key man life insurance in the aggregate amounts of
$2,500,000, $2,250,000 and $250,000 on the lives of Drs. Blum and Gupta and
Mr. Bennington, respectively. The Company's lenders are the named
beneficiaries for such insurance in the aggregate amount of $4,250,000.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
In fiscal year 1995, the Company was not a public company, and, therefore,
the Compensation Committee was not required to prepare a report with respect
to executive compensation during such year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee conducted deliberations concerning executive
compensation during the last completed fiscal year. None of the Compensation
Committee members are executive officers of the Company. None of the executive
officers of the Company has served on the board of directors or on the
compensation committee of any other entity, any of whose officers served on
the Board of the Company.
12
PERFORMANCE GRAPH
The following graph compares the cumulative stockholder return on the Common
Stock from March 15, 1996 through July 31, 1996, with the cumulative return,
including the reinvestment of dividends, of an investment in (a) the Nasdaq
Stock Market Index of U.S. Companies, as published, and (b) a peer group,
weighted by market capitalization. The peer group consists of the following
ophthalmic companies: BEC Group Inc., Bausch & Lomb Incorporated, Corning
Incorporated, De Rigo S.p.A., Gerber Scientific Inc. and Sola International,
Inc. The graph assumes that an investment of $100 on March 15, 1996, in the
Company, the index and the peer group. Although the Company believes it has
chosen a peer group containing companies whose businesses are most comparable
to the Company's primary business segment, ophthalmic products, certain
companies in such group are engaged in businesses other than the ophthalmic
products business which may provide a large portion of such companies'
revenues. In addition, such companies have been engaged in the ophthalmic
products business for a significantly longer period of time than the Company.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG INNOTECH, INC., NASDAQ STOCK MARKET (US COMPANIES)
AND SELF-DETERMINED PEER GROUP
Measurement period INNOTECH Nasdaq Peer Group
(Fiscal year Covered) Index Index
- --------------------- --------- --------- ---------
Measurement PT -
03/15/96 $100.0 $100.0 $100.0
FYE 03/29/96 $ 81.3 $100.2 $100.6
FYE 04/30/96 $ 90.0 $108.6 $102.4
FYE 05/31/96 $115.0 $113.6 $111.1
FYE 06/28/96 $111.9 $108.4 $109.9
FYE 07/31/96 $ 82.5 $ 98.9 $103.0
13
INDEPENDENT AUDITORS
The Board has selected the firm of KPMG Peat Marwick LLP, independent
certified public accountants, to act as independent public accountants for the
Company for the 1996 fiscal year. KPMG Peat Marwick LLP has acted in such
capacity for the Company's fiscal years from the fiscal year ended December
31, 1992. A representative of KPMG Peat Marwick LLP is expected to be present
at the Meeting, such representative will have the opportunity to make a
statement if he or she so desires and is expected to be available to respond
to appropriate questions.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposal which is intended to be presented by any stockholder for action
at the 1997 Annual Meeting of Stockholders must be received in writing by the
Secretary of the Company, at 5568 Airport Road, Roanoke, Virginia 24012, not
later than December 31, 1996 in order for such proposal to be considered for
inclusion in the proxy statement and form of proxy relating to the 1997 Annual
Meeting of Stockholders.
OTHER MATTERS
At the date of this proxy statement, the Board has no knowledge of any
business which will be presented for consideration at the Meeting, other than
as described above. If any other matter or matters are properly brought before
the Meeting or any adjournment(s) thereof, it is the intention of the persons
named in the accompanying form of proxy to vote proxies on such matters in
accordance with their best judgment.
THE COMPANY UNDERTAKES TO PROVIDE ITS STOCKHOLDERS, WITHOUT CHARGE, A COPY
OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES FILED THEREWITH. THE COMPANY'S FIRST ANNUAL REPORT ON
FORM 10-K WILL BE PREPARED FOR THE 1996 FISCAL YEAR. WRITTEN REQUESTS FOR SUCH
REPORT SHOULD BE ADDRESSED TO: INNOTECH, INC., 5568 AIRPORT ROAD, ROANOKE,
VIRGINIA 24012, ATTENTION: CORPORATE SECRETARY.
14
P
R
O
X
Y
INNOTECH, INC.
This Proxy is being Solicited on Behalf of the Board of Directors
Proxy for Annual Meeting To Be Held on October 2, 1996
Know All Men By These Presents: That the undersigned stockholder(s) of
Innotech, Inc., a Delaware corporation (the "Company"), hereby constitute(s) and
appoint(s) Ronald D. Blum and Steven A. Bennington with full power of
substitution in each, as the agents, attorneys and proxies of the undersigned,
for and in the name, place and stead of the undersigned, to vote, at the Annual
Meeting of Stockholders of the Company to be held at the Roanoke Airport
Marriott, 2801 Hershberger Road, Roanoke, Virginia, on October 2, 1996, at 10:00
a.m. (local time) and at any adjournments thereof, the shares of stock which the
undersigned would be entitled to vote if then personally present in the
transaction of such business as may properly come before the meeting. The
undersigned would direct my (our) proxies to vote for me (us) as specified by a
cross (X) in the appropriate spaces, upon the following proposals:
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN BELOW. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF TWO MEMBERS
OF THE BOARD OF DIRECTORS.
[X] Please mark your +
votes as in this +
example. +++++
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted
FOR the election of all listed nominees.
- --------------------------------------------------------------------------------
Election of Directors. Nominees: Gregory J. Forrest and Ian M. Kidson
Withhold Authority
1. Election of Directors For All to Vote for all
Nominees listed
[_] [_]
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
(INSTRUCTION To withhold authority to vote for any individual nominee write the
nominee's name in the space below.)
- ---------------------------------------
- --------------------------------------------------------------------------------
Please mark, sign, date, and return this proxy card promptly.
____________________________________________________, 1996
SIGNATURE DATE
____________________________________________________, 1996
SIGNATURE if held jointly DATE
Please sign exactly as name appears hereon. When shares are held by joint
accounts, both should sign. When signing as attorney, executor, administrator,
trustees or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the president or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
[_] I plan on attending the Annual Meeting