SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CARDIOVASCULAR DIAGNOSTICS, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
CARDIOVASCULAR DIAGNOSTICS, INC.
5301 Departure Drive
Raleigh, North Carolina 27616
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 9, 1997
TO THE SHAREHOLDERS OF
CARDIOVASCULAR DIAGNOSTICS, INC.
The Annual Meeting of Shareholders of Cardiovascular Diagnostics, Inc. (the
"Company") will be held at the Carolina Country Club, 2500 Glenwood Avenue,
Raleigh, North Carolina, on Friday May 9, 1997, at 10:00 a.m. for the following
purposes:
1. To elect a board of seven directors;
2. To approve an amendment to the Company's 1995 Stock Plan increasing the
number of shares of Common Stock reserved for issuance thereunder by
250,000 shares;
3. To ratify the appointment of Coopers & Lybrand L.L.P. as the independent
auditors of the Company for the year ending December 31, 1997; and
4. To act upon such other matters as may properly come before the meeting
or any adjournment thereof.
The foregoing items are more fully described in the Proxy Statement accompanying
this Notice.
The Board of Directors has fixed the close of business on March 31, 1997 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting or any adjournment or adjournments thereof. All such
shareholders are cordially invited to attend the meeting in person. However, to
assure your representation at the meeting, you are urged to mark, sign, date and
return the enclosed proxy card as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any shareholder attending the meeting may
vote in person, even if such shareholder returned a proxy.
The Company's Proxy Statement and proxy is submitted herewith along with
the Company's Annual Report for the year ended December 31, 1996.
IMPORTANT -- YOUR PROXY IS ENCLOSED
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, SHAREHOLDERS ARE URGED TO
EXECUTE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
By Order of the Board of Directors
/s/ JOHN P. FUNKHOUSER
JOHN P. FUNKHOUSER,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Raleigh, North Carolina
April 15, 1997
<PAGE>
CARDIOVASCULAR DIAGNOSTICS, INC.
5301 Departure Drive
Raleigh, North Carolina 27616
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 9, 1997
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed proxy is solicited by the Board of Directors of Cardiovascular
Diagnostics, Inc., a North Carolina corporation (the "Company"), for use at the
Company's Annual Meeting of Shareholders to be held at the Carolina Country
Club, 2500 Glenwood Avenue, Raleigh, North Carolina, at 10:00 a.m. on Friday,
May 9, 1997, and any adjournments thereof (the "Meeting"). The cost of
soliciting proxies will be borne by the Company. In addition to solicitation of
proxies by mail, employees of the Company, without extra remuneration, may
solicit proxies personally or by telephone. The Company will reimburse brokerage
firms and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses for forwarding proxy materials to beneficial owners and
seeking instruction with respect thereto. The mailing address of the principal
executive offices of the Company is 5301 Departure Drive, Raleigh, North
Carolina 27616. Copies of this Proxy Statement and accompanying proxy card were
mailed to shareholders on or about April 15, 1997.
REVOCABILITY OF PROXIES
Any shareholder giving a proxy has the power to revoke it at any time
before it is voted by giving a later proxy or written notice to the Company
(Attention: B. Denise Hobbs, Secretary), or by attending the Meeting and voting
in person.
VOTING
When the enclosed proxy is properly executed and returned (and not
subsequently properly revoked), the shares it represents will be voted in
accordance with the directions indicated thereon, or, if no direction is
indicated thereon, it will be voted: (i) FOR the election of the nominees for
director identified below; (ii) FOR the approval of an amendment to the 1995
Stock Plan increasing the number of shares of Common Stock for issuance
thereunder by 250,000; (iii) FOR ratification of the appointment of Coopers &
Lybrand L.L.P., Raleigh, North Carolina, as independent auditors of the Company
for the year ending December 31, 1997; and (iv) in the discretion of the proxies
with respect to any other matters properly brought before the shareholders at
the Meeting.
Abstentions and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business
at the Meeting. Abstentions will be counted in tabulations of votes cast on
proposals presented at the Meeting, and, consequently, an abstention will have
the effect of a vote against the proposal to which it relates. Broker non-votes
will not be counted in tabulation of votes cast on proposals presented at the
Meeting. While there is no definitive statutory or case law authority in North
Carolina with regard to these matters, the Company believes that its intended
treatment of abstentions and broker non-votes at the Meeting is appropriate.
RECORD DATE
Only the holders of record of the Company's Common Stock at the close of
business on the record date, March 31, 1997 (the "Record Date"), are entitled to
notice of and to vote at the Meeting. On the Record Date, 6,728,843 shares of
Common Stock were outstanding. Shareholders will be entitled to one vote for
each share of Common Stock held on the Record Date.
1
<PAGE>
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
NOMINEES
The Company's Bylaws provide that the number of directors constituting the
Board of Directors shall be no less than one. The number of directors currently
authorized is seven. Therefore, that number of directors are to be elected to
serve for one year, until the election and qualification of their successors,
and it is intended that proxies, not limited to the contrary, will be voted FOR
all of the nominees named below. If any nominee is unable or declines to serve
as a director at the time of the Meeting, the individuals named in the enclosed
proxy may exercise their discretion to vote for any substitute proposed by the
Board of Directors. It is not anticipated that any nominee listed below will be
unable or will decline to serve as a director. None of the nominees is related
by blood, marriage or adoption to any other nominee or any executive officer of
the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE SINCE
<S> <C> <C>
John P. Funkhouser.............................................. 43 1993
Dennis J. Dougherty............................................. 49 1986
William A. Hawkins.............................................. 43 1995
John K. Pirotte................................................. 47 1996
Stephen R. Puckett.............................................. 44 1996
Philip R. Tracy................................................. 55 1996
Paul W. Wiles................................................... 49 1996
</TABLE>
JOHN P. FUNKHOUSER was elected President, Chief Executive Officer and a
director of the Company in October 1993 upon the Company's acquisition of Coeur
Laboratories, Inc., which manufactures and sells disposable power injection
syringes for cardiology and radiology procedures, as well as custom angiographic
procedure kit manifolds ("Coeur"). Since February 1992, Mr. Funkhouser has also
served as President and Chief Executive Officer of Coeur. Before his employment
with Coeur, Mr. Funkhouser was a General Partner with Hillcrest Group, a venture
capital firm, and worked for over nine years in managing venture capital
portfolio companies. In 1991, CSVa, Inc., a venture capital portfolio company of
which Mr. Funkhouser was a director, filed a petition for bankruptcy. Mr.
Funkhouser holds a B.A. from Princeton University and an M.B.A. from the
University of Virginia.
DENNIS J. DOUGHERTY was elected a director and Chairman of the Company in
1986. Mr. Dougherty has been a General Partner of Intersouth Partners, a North
Carolina-based venture capital firm, since 1985. Mr. Dougherty also serves as a
director of UOL Publishing, Inc. and of a number of private companies. In 1994,
Microwave Laboratories, Inc. ("MLI"), a venture capital portfolio company of
which Mr. Dougherty had been a director until December 1993, filed a petition
for bankruptcy. Mr. Dougherty holds a B.A. in Marketing from Oklahoma City
University.
WILLIAM A. HAWKINS was elected a director of the Company in January 1995.
Since October 1995, Mr. Hawkins has been President of Ethicon Endo-Surgery,
Inc., a medical device company that is a subsidiary of Johnson & Johnson. From
January 1995 to October 1995, Mr. Hawkins served as Vice President in charge of
U.S. operations of Guidant Corporation and President of Devices for Vascular
Intervention, a medical device company and a subsidiary of Guidant. Prior to
joining Guidant, Mr. Hawkins held several positions with IVAC Corporation, most
recently serving as President and Chief Executive Officer from 1991 until 1995.
Mr. Hawkins holds a B.S. in Engineering and Biomedical Engineering from Duke
University and an M.B.A. from the University of Virginia.
JOHN K. PIROTTE has been Chairman and Chief Executive Officer of CORPEX
Technologies Incorporated, a privately held company that develops and markets
surface active chemical technology, since 1990. In addition, Mr. Pirotte has
operated a private investment company, was Chief Financial Officer from 1979 to
1981 and Chairman and Chief Executive Officer from 1981 until 1988 of The
Aviation Group, Inc., and served as a manager of Acquisition Advisory Services
for an international public accounting firm. Mr. Pirotte was also a director of
MLI when it filed a petition for bankruptcy. He is a founding director of North
Carolina Enterprise Corp., a venture capital fund. Mr. Pirotte holds a B.A. from
Princeton University and an M.S. from New York University Graduate School of
Business Administration.
STEPHEN R. PUCKETT has served as Chairman of the Board of Directors and
President of MedCath Incorporated, a publicly held provider of cardiology and
cardiovascular services that he founded in 1988. He has also served as Executive
Vice President and Chief Operating Officer of the Charlotte Mecklenburg Hospital
Authority. Mr. Puckett holds a B.S. and an M.S. in Health Management from the
University of Alabama.
2
<PAGE>
PHILIP R. TRACY was President and CEO of Burroughs-Wellcome Company, the
United States subsidiary of Wellcome plc, a global pharmaceutical company, from
1989 until the acquisition of Wellcome by Glaxo plc in 1995. Prior to 1989, he
served in various legal capacities with Burroughs-Wellcome, including Vice
President and General Counsel. He has served on the boards of Wellcome Plc, the
Pharmaceutical Research and Manufacturers of America, and the Non-Prescription
Drug Manufacturers Association. He is currently Of Counsel to the law firm of
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P. and serves on the
Board of SunPharm Corporation, a development stage pharmaceutical company. Mr.
Tracy holds a B.A. from the University of Nebraska and an L.L.B. from George
Washington University School of Law, and has attended the Senior Executive
Program at Stanford University.
PAUL M. WILES is President and Chief Executive Officer of Forsyth Memorial
Hospital, Inc. and Carolina Medicorp, Inc., a hospital and its holding company,
for which he has worked in various executive capacities since 1974. He is also
Chairman of the Board of Directors of VHA, Inc. and a director of VHA
Carolinas-Tennessee, Inc. and Old North State Bank. Mr. Wiles holds a B.A. from
St. Michael's College and a Master of Hospital Administration from Duke
University.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The business of the Company is under the general management of the Board of
Directors as provided by the laws of North Carolina and the Bylaws of the
Company. During the year ended December 31, 1996, the Board of Directors held
five formal meetings, excluding actions that were taken by unanimous written
consent during the year. Each member of the Board attended at least 80% of the
1996 meetings of the Board of Directors and Board committees of which he was a
member.
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Board has no Nominating Committee. The Audit
Committee currently consists of Messrs. Dougherty and Pirotte. The Audit
Committee held two meetings during 1996. The Audit Committee makes
recommendations to the Board of Directors concerning its review of the Company's
internal controls and accounting system and its review of the annual audit, and
regarding the selection of independent auditors. The Compensation Committee
currently consists of Messrs. Dougherty, Pirotte and Puckett. The Compensation
Committee recommends employee salaries and incentive compensation to the Board
of Directors and administers the Company's stock option plans. During 1996, the
Compensation Committee held three meetings, excluding actions that were taken by
unanimous written consent during the year.
VOTE REQUIRED
The seven nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted at the Meeting shall be
elected as directors of the Company.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE ELECTION OF THE NOMINEES LISTED ABOVE.
PROPOSAL NO. 2 -- APPROVAL OF AMENDMENT TO THE 1995 STOCK PLAN
GENERAL
The Company's 1995 Stock Plan (the "1995 Plan") was adopted by the Board of
Directors in September 1995 and approved by the shareholders in November 1995.
The 1995 Plan authorizes for issuance of 488,150 shares of Common Stock, 250,000
of which are subject to shareholder approval at the Meeting. As of March 31,
1997, without giving effect to the proposed amendment, no shares had been issued
under the 1995 Plan, options to purchase 237,473 shares were outstanding
thereunder and 677 shares remained available for future grant thereunder.
The 1995 Plan provides for grants of options to employees, consultants and
directors of the Company and its affiliates. It also allows for the grant of
stock bonuses and purchase rights, but none of either have been granted to date.
As of March 31, 1997, approximately 80 persons were eligible to receive grants
under the 1995 Plan. Each stock option granted under the 1995 Plan is evidenced
by a written stock option agreement between the Company and the optionee. The
acceptable methods of payment for shares issued upon exercise of an option
consist of cash, check, promissory note or any combination of the foregoing. The
Company has full recourse with respect to any promissory note given by an
optionee. The exercise price of options granted under the 1995 Plan is
determined on the date of grant, and in the case of incentive stock options
(within the meaning of Section 422 of the Code) must be at least 100% of the
fair market value at the time of grant. As of March 31, 1997, the fair market
value of the Company's Common Stock, as quoted on the Nasdaq Stock Market, was
$5.00 per share.
3
<PAGE>
At the time an option is granted, the Board (or its committee) determines the
period within which the option may be exercised. Options granted to employees
under the 1995 Plan generally become exercisable in increments, based on the
optionee's continued employment with the Company, over a period of four years.
The form of option agreement generally provides that options granted under the
1995 Plan expire 10 years from the date of grant. Options granted pursuant to
the 1995 Plan are not transferable by the optionee, other than by will or the
laws of descent and distribution, and are exercisable during the optionee's
lifetime only by the optionee.
Under the 1995 Plan, each non-employee director of the Company, regardless
of his or her stock ownership in the Company, is granted, upon election or
re-election to the Board, a fully vested option to purchase 1,000 shares of
Common Stock at an exercise price equal to the fair market value at the time of
grant.
The 1995 Plan may be administered by the Board of Directors of the Company
or a committee of directors designated by the Board. The Compensation Committee
currently administers the 1995 Plan. The Board or Committee may amend the 1995
Plan at any time or from time to time or may terminate the 1995 Plan without the
approval of the shareholders, provided that shareholder approval is required for
any amendment to the 1995 Plan requiring shareholder approval under applicable
law as in effect at the time. However, no action by the Board of Directors,
Committee or shareholders may alter or impair any option previously granted
under the 1995 Plan. The Board or Committee may accelerate the exercisability of
any option or waive any condition or restriction pertaining to such option at
any time. The 1995 Plan will terminate in September 2005, unless terminated
sooner by the Board or Committee.
TAX CONSEQUENCES OF OPTIONS
An optionee who is granted an incentive stock option will generally not
recognize taxable income either at the time the option is granted or upon its
exercise, although the exercise may subject the optionee to the alternative
minimum tax. Upon the sale or exchange of the shares more than two years after
grant of the option and one year after exercising the option, any gain or loss
will be treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee will recognize ordinary income at the time of sale
or exchange equal to the difference between the exercise price and the lower of
the fair market value of the shares at the date of the option exercise or the
sale price of the shares. A different rule for measuring ordinary income upon
such a premature disposition may apply if the optionee is also an officer,
director or holder of more than 10% of the outstanding Common Stock of the
Company. The Company will be entitled to a deduction in the same amount as the
ordinary income recognized by the optionee. Any gain or loss recognized on such
a premature disposition of the shares in excess of the amount treated as
ordinary income will be characterized as long-term or short-term capital gain or
loss, depending on the holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. Generally, an optionee will not recognize
any taxable income at the time he or she is granted a non-statutory option.
However, upon its exercise, the optionee will recognize taxable income generally
measured as the excess of the then fair market value of the shares purchased
over the purchase price. Any taxable income recognized in connection with an
option exercise by an optionee who is also an employee of the Company will be
subject to tax withholding by the Company. The Company will be entitled to a tax
deduction in the same amount as the ordinary income recognized by the optionee
with respect to shares acquired upon exercise of a nonstatutory option. Upon
resale of such shares by the optionee, any difference between the sales price
and the optionee's purchase price, to the extent not recognized as taxable
income as described above, will be treated as long-term or short-term capital
gain or loss, depending on the holding period.
The foregoing is only a summary, based on the Code as currently in effect,
of the effect of federal income taxation upon the optionee and the Company with
respect to the grant and exercise of options under the 1995 Plan, does not
purport to be complete, and does not discuss the tax consequences of the
optionee's death or the income tax laws of any municipality, state or foreign
country in which an optionee may reside.
PROPOSED AMENDMENT
On February 18, 1997, the Board of Directors adopted an amendment to the
1995 Plan increasing the number of shares reserved for issuance thereunder by
250,000. Prior to this amendment, a total of only 677 shares remained available
for future grant under the 1995 Plan, which number of shares the Board of
Directors determined was insufficient to meet the Company's anticipated needs
with respect to the issuance of additional options to employees, consultants and
directors of the Company.
4
<PAGE>
At the Meeting, the shareholders are being asked to approve the
above-described amendment to the 1995 Plan increasing the number of shares
authorized for issuance thereunder by 250,000 shares.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present or represented and voting on this proposal at the
Meeting will be required to approve the amendment to the 1995 Plan.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS A VOTE "FOR"
THE PROPOSED AMENDMENT TO THE 1995 PLAN.
PROPOSAL NO. 3 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed the firm Coopers &
Lybrand L.L.P., Raleigh, North Carolina ("Coopers"), to serve as the independent
auditors of the Company for the year ending December 31, 1997, and recommends
that the shareholders ratify such action. If the appointment of Coopers is not
ratified by the shareholders, the Board of Directors will reconsider its
selection. Coopers has audited the accounts of the Company since 1994 and has
advised the Company that it does not have, and has not had, any direct or
indirect financial interest in the Company or its subsidiaries in any capacity
other than that of serving as independent auditors. Representatives of Coopers
are expected to attend the Meeting. They will have an opportunity to make a
statement, if they desire to do so, and will also be available to respond to
appropriate questions.
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present or represented and voting on this proposal at the
Meeting shall constitute ratification of the appointment of Coopers.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS A VOTE "FOR"
THE RATIFICATION OF THE APPOINTMENT OF COOPERS AS INDEPENDENT AUDITORS FOR THE
YEAR ENDING DECEMBER 31, 1997.
5
<PAGE>
OTHER INFORMATION
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the ownership
of shares of the Company's Common Stock as of the Record Date by (i) each person
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock, (ii) each current director of the Company, (iii) each of the
Company's President and four most highly compensated executive officers other
than the President whose cash compensation for the year ended December 31, 1996
exceeded $100,000 (collectively, the "Named Executive Officers"), and (iv) all
current directors and executive officers of the Company as a group. Except as
indicated in footnotes to this table, the persons named in this table have sole
voting and investment power with respect to all shares of Common Stock
indicated.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
NAME OWNED OWNED (1)
<S> <C> <C>
Dennis J. Dougherty............................................................. 1,069,511(2) 15.9 %
P. O. Box 13546
Research Triangle Park, NC 27709
Intersouth Partners............................................................. 1,041,431 15.5
P.O. Box 13546
Research Triangle Park, NC 27709
The Capital Group Companies, Inc................................................ 412,500(3) 6.1
333 South Hope Street
Los Angeles, CA 90071
John P. Funkhouser.............................................................. 252,924(4) 3.6
Bruce J. Oberhardt, Ph.D........................................................ 246,156 3.7
Jonathon M. Lawrie, Ph.D........................................................ 84,476(5) 1.3
Michael D. Riddle............................................................... 31,862(4) *
Wayne J. Scroggins.............................................................. 16,300(6) *
Stephen R. Puckett.............................................................. 2,000 *
William A. Hawkins.............................................................. 2,266(4) *
John K. Pirotte................................................................. 1,000(4) *
Philip R. Tracy................................................................. 1,000(4) *
Paul M. Wiles................................................................... 1,000(4) *
All current executive officers and directors 1,490,254(7) 21.1
as a group (11 persons).......................................................
</TABLE>
* Less than one percent.
(1) As of the Record Date, the Company had 6,728,843 shares of Common Stock
outstanding. Share ownership in each case includes shares issuable upon
exercise of outstanding options that may be exercised within 60 days after
the Record Date for purposes of computing the percentage of Common Stock
owned by such person but not for purposes of computing the percentage owned
by any other person.
(2) Includes 1,041,431 shares held by Intersouth Partners venture capital funds
of which Mr. Dougherty serves as a general partner of the general partner.
Mr. Dougherty disclaims beneficial ownership of such shares.
(3) As reported in the Schedule 13G dated February 12, 1997 filed with
Securities and Exchange Commission by The Capital Group Companies, Inc.
(4) Consists solely of shares underlying options.
(5) Includes 6,909 shares underlying options.
(6) Includes 12,500 shares underlying options.
(7) Includes shares referenced in footnotes (2) and (4). Also includes 27,915
additional shares underlying options held by executive officers other than
the Named Executive Officers.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION. The following table reflects all cash and noncash
compensation paid by the Company to the Named Executive Officers for their
services in all capacities during the years ended December 31, 1996, 1995 and
1994:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SARS COMPENSATION
<S> <C> <C> <C> <C> <C>
John P. Funkhouser, 1996 $ 185,000 $ -- -- $ --
President, Chief Executive Officer 1995 150,000 40,000 56,648 --
1994 150,000 -- 238,761 2,450(1)
Wayne J. Scroggins, 1996 92,269 -- 50,000 --
Chief Operating Officer(2)
Jonathon M. Lawrie, Ph.D., 1996 130,000 -- -- 19,909(3)
Managing Director, Europe 1995 130,000 10,000 27,631 29,100(4)
and Chief Scientific Officer 1994 130,000 -- 10,126 13,293(5)
Michael D. Riddle, 1996 125,000 -- -- --
Vice President, 1995 125,000 5,000 51,499 --
Sales and Marketing
Bruce J. Oberhardt, 1996 105,000 -- -- --
Executive Vice President, 1995 105,000 5,000 -- --
Research(6) 1994 105,000 -- -- --
</TABLE>
(1) Consists of moving expenses.
(2) Mr. Scroggins joined the Company in May 1996.
(3) Consists of foreign living allowance of $17,935 and family travel allowance
of $1,974.
(4) Consists of foreign living allowance.
(5) Consists of a car allowance of $1,260 and a foreign living allowance of
$5,637 (each covering the period commencing in October 1994, when Dr. Lawrie
moved to Europe), and moving expenses of $6,394.
(6) Dr. Oberhardt's employment by the Company terminated on December 31, 1996,
when he became an outside consultant of the Company.
OPTION GRANTS, EXERCISES AND HOLDINGS AND FISCAL YEAR-END OPTION VALUES.
The following table summarizes all option grants during the year ended December
31, 1996 to the Named Executive Officers.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE
SHARES OPTIONS VALUE AT ASSUMED
UNDERLYING GRANTED TO EXERCISE ANNUAL RATES OF STOCK
OPTIONS EMPLOYEES IN OR BASE PRICE APPRECIATION FOR
GRANTED FISCAL YEAR PRICE PER EXPIRATION OPTION TERM (3)
NAME (1) 1996 SHARE (2) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Wayne J. Scroggins.............................. 50,000 6.08% $ 4.50 May 2006 $141,500 $358,600
</TABLE>
(1) The stock option grant shown in this column was made in May 1996 pursuant to
the Company's 1995 Stock Plan and become exercisable over four years from
the date of grant, based on continued employment with the Company. To the
extent not already exercisable, the options become fully vested by their
terms upon the consummation of a merger in which the Company is not the
surviving corporation, a transfer of all of the Company's stock, a sale of
substantially all of the Company's assets or a dissolution or liquidation of
the Company, unless the successor corporation assumes the outstanding
options or substitutes substantially equivalent options.
(2) The exercise price may be paid in cash, in shares of Common Stock with a
market value as of the date of exercise equal to the option price or a
combination of cash and shares of Common Stock.
7
<PAGE>
(3) The compounding assumes a 10-year exercise period for all option grants.
These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock, and overall stock market conditions. The
amounts reflected in this table may not necessarily be achieved.
The following table sets forth information concerning all option exercises
during the year ended December 31, 1996 and holdings as of December 31, 1996, by
the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
OPTIONS AT
SHARES NUMBER OF UNEXERCISED OPTIONS AT DECEMBER 31,
ACQUIRED ON VALUE DECEMBER 31, 1996 1996(1)
NAME EXERCISE REALIZED (2) EXERCISABLE (3) UNEXERCISABLE (3) EXERCISABLE (3)
<S> <C> <C> <C> <C> <C>
John P. Funkhouser.............. -- -- 252,924 42,486 $ 736,581
Wayne J. Scroggins.............. -- -- -- 50,000 --
Jonathon M. Lawrie, Ph.D........ 77,567 $469,547 6,909 20,725 --
Michael D. Riddle............... -- -- 28,365 28,136 73,216
<CAPTION>
NAME UNEXERCISABLE (3)
<S> <C>
John P. Funkhouser.............. $ --
Wayne J. Scroggins.............. --
Jonathon M. Lawrie, Ph.D........ --
Michael D. Riddle............... 43,432
</TABLE>
(1) Calculated by subtracting the exercise price from $3.875, the closing price
of the Company's Common Stock as reported by the Nasdaq National Market on
December 31, 1996, the last business day of the fiscal year ended December
31, 1996, and multiplying the difference by the number of shares underlying
each option.
(2) Market value of the underlying Common Stock as of the date of exercise,
minus the exercise price.
(3) The first number represents the number or value (as called for by the
appropriate column) of exercisable options; the second number represents the
number or value (as appropriate) of unexercisable options.
REPORT ON REPRICING OF OPTIONS
On November 12, 1996, the Compensation Committee of the Board of Directors
amended all outstanding stock options priced above $4.50 per share held by
employees to reset their exercise prices at $4.50 per share, the fair market
value of the Company's Common Stock as of such date. This action was taken to
help restore the incentive value of these options to the holders. There was no
increase in the number of outstanding options. The following table contains
information concerning the repricing of options held by Named Officers during
the portion of the last 10 years during which the Company was a reporting
company under the Exchange Act:
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE OF NEW
UNDERLYING OPTIONS STOCK AT TIME OF EXERCISE PRICE AT EXERCISE
NAME DATE REPRICED REPRICING TIME OF REPRICING PRICE
<S> <C> <C> <C> <C> <C>
John P. Funkhouser............... 11/12/96 56,648 $ 4.50 $ 12.10 $ 4.50
Wayne J. Scroggins............... 11/12/96 50,000 4.50 12.10 4.50
Jonathon M. Lawrie, Ph.D......... 11/12/96 27,634 4.50 12.10 4.50
Michael D. Riddle................ 11/12/96 18,528 4.50 12.10 4.50
<CAPTION>
LENGTH OF
ORIGINAL
OPTION TERM
REMAINING
AT DATE OF
NAME REPRICING
<S> <C>
John P. Funkhouser............... 109 months
Wayne J. Scroggins............... 115 months
Jonathon M. Lawrie, Ph.D......... 109 months
Michael D. Riddle................ 109 months
</TABLE>
Submitted by: THE COMPENSATION COMMITTEE
Dennis J. Dougherty
John K. Pirotte
Stephen R. Puckett
COMPENSATION OF DIRECTORS
Each of the Company's non-employee directors receives $2,500 per year, and
$1,000 per Board meeting and $500 per Committee meeting that he or she attends.
In addition, each non-employee director receives a fully vested option to
purchase 1,000 shares of Common Stock upon election or re-election to the Board.
All directors are reimbursed by the Company for expenses incurred to attend
Board meetings.
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
consisting entirely of non-employee directors, approves all policies under which
compensation is paid or awarded to the Company's executive officers. The
Committee is currently composed of Messrs. Dougherty, Pirotte and Puckett. The
Committee also administers the Company's stock plans.
Neither the material in this report nor the performance graph included in
this proxy statement under the heading " -- Performance Graph" (the "Performance
Graph") is soliciting material, is or will be deemed filed with the Securities
and Exchange Commission or is or will be incorporated by reference in any filing
of the Company under the Securities Act of 1933, as amended, or the Exchange
Act, whether made before or after the date of this proxy statement and
irrespective of any general incorporation language in such filing.
COMPENSATION PHILOSOPHY. The Company's executive compensation program has
three objectives: (1) to align the interests of the executive officers with the
interests of the Company's shareholders by basing a significant portion of an
executive's compensation on the Company's performance; (2) to attract and retain
highly talented and productive executives; and (3) to provide incentives for
superior performance by the Company's executives. To achieve these objectives,
the Committee has crafted a program that consists of base salary, short-term
incentive compensation in the form of cash bonuses and long-term incentive
compensation in the form of stock and stock options. These compensation elements
are in addition to the general benefits programs which are offered to all of the
Company's employees.
Each year, the Committee reviews the Company's executive compensation
program. In its review, the Committee uses compensation survey data prepared by
Coopers to study the compensation packages for executives of companies at a
comparable stage of development and in the Company's geographic area. The
Committee assesses the competitiveness of the Company's executive compensation
program and reviews the Company's financial and operational performance for the
previous fiscal year. The Committee also gauges the success of the compensation
program in achieving its objectives in the previous year and considers the
Company's overall performance objectives. For compensation paid to the Chief
Executive Officer and other Named Executive Officers in 1996, no reference was
made to the data for comparable companies included in the Performance Graph.
Each element of the Company's executive compensation program is discussed
below.
BASE SALARIES. The Committee annually reviews the base salaries of the
Company's executive officers. The base salaries for the Company's executive
officers for fiscal 1996 were established by the Committee at the beginning of
that fiscal year. In addition to considering the factors listed in the foregoing
section that support the Company's executive compensation program generally, the
Committee reviews the responsibilities of the specific executive position and
the experience and knowledge of the individual in that position. The Committee
also measures individual performance based upon a number of factors, including a
measurement of the Company's historic and recent financial and operational
performance and the individual's contribution to that performance, the
individual's performance on non-financial goals and other contributions of the
individual to the Company's success, and gives each of these factors relatively
equal weight without confining its analysis to a rigorous formula. As is typical
of most corporations, the actual payment of base salary is not conditioned upon
the achievement of any predetermined performance targets.
INCENTIVE COMPENSATION. Cash bonuses established for executive officers are
intended to motivate the individual to work hard to achieve the Company's
financial and operational performance goals or to otherwise incent the
individual to aim for a high level of achievement on behalf of the Company in
the coming year. Because it had been in the early stages of development, the
Company did not pay cash bonuses prior to fiscal 1995. However, in 1995, bonuses
were paid in recognition of the achievements of the Company during the year,
primarily consisting of TAS product launch and the IPO. The Committee does not
have a formula for determining bonus payments, but each year establishes general
target bonus levels for executive officers based in relatively equal measures
upon the Committee's subjective assessment of the Company's projected revenues
and other operational and individual performance factors. In 1996, the Company
paid no cash bonuses to executive officers.
LONG-TERM INCENTIVE COMPENSATION. The Company's long-term incentive
compensation plan for its executive officers is based upon the Company's stock
plans. The Company believes that placing a portion of its executives' total
compensation in the form of stock or stock options achieves three objectives. It
aligns the interest of the Company's executives directly with those of the
Company's shareholders, gives executives a significant long-term interest in the
Company's success and helps the Company retain key executives. Options generally
vest over four years based on continued employment. In establishing this
long-term compensation scheme (in the form of stock option grants), the Board
directly linked the vesting of certain
9
<PAGE>
options granted to executive officers in 1994 to the achievement by the Company
of certain earnings milestones or consummation of the IPO. Since the IPO vested
many options in full, the Committee granted additional options at an exercise
price per share of 110% of the IPO price per share, in order to provide further
incentive to executive officers. In determining the number of options to grant
an executive, the Board primarily considered the executive's past performance
and the degree to which an incentive for long-term performance would benefit the
Company, as well as the number of shares and options already held by the
executive officer. It is the Committee's policy to grant options at fair market
value unless particular circumstances warrant otherwise.
BENEFITS. The Company believes that it must offer a competitive benefits
program to attract and retain key executives. During fiscal 1996, the Company
provided the same medical and other benefits to its executive officers that are
generally available to its other employees.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer's
compensation is based on the same elements and measures of performance as is the
compensation for the Company's other executive officers. The Committee approved
a base salary for Mr. Funkhouser for fiscal 1996 of $185,000 based on the same
factors as were considered in determining the base salaries of the other
executive officers.
SECTION 162(M) OF THE CODE. It is the responsibility of the Committee to
address the issues raised by Section 162(m) of the Code. Revisions to this
Section made certain non-performance based compensation in excess of $1,000,000
to executives of public companies non-deductible to the companies beginning in
1994. The Committee has reviewed these issues and has determined that it is not
necessary for the Company to take any action at this time with regard to these
issues.
Submitted by: THE COMPENSATION COMMITTEE
Dennis J. Dougherty
John K. Pirotte
Stephen R. Puckett
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are currently Messrs. Dougherty,
Pirotte and Puckett. Messrs. Dougherty, Pirotte and Puckett were not at any time
during the fiscal year ended December 31, 1996 or at any other time an officer
or employee of the Company. No executive officer of the Company serves as a
member of the board of directors or compensation committee of any entity which
has one or more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee.
10
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN (1)
[GRAPH APPEARS HERE]
(1) Assumes $100 invested on December 11, 1995 (the effective date of the
Company's initial public offering) in each of the Company's Common Stock,
the NASDAQ CRSP Total Market Return Index and the NASDAQ Non-Financial
Stocks Total Return Index. Total return assumes reinvestment of dividends.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of the Company's Common
Stock (collectively, "Insiders"), to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Insiders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely upon review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1996, all Section
16(a) reports were filed on a timely basis, except for late filings of Forms 3
for John K. Pirotte, Stephen R. Puckett, Philip R. Tracy and Paul M. Wiles
following their election to the Board of Directors in May 1996.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Shareholders having proposals that they desire to present at next year's
annual meeting of shareholders of the Company should, if they desire that such
proposals be included in the Company's Proxy Statement relating to such meeting,
submit such proposals in time to be received by the Company at its principal
executive office in Raleigh, North Carolina, not later than December 11, 1997.
To be so included, all such submissions must comply with the requirements of
Rule 14a-8 promulgated under the Exchange Act and the Board of Directors directs
the close attention of interested shareholders to that Rule. Proposals may be
mailed to Secretary, Cardiovascular Diagnostics, Inc., 5301 Departure Drive,
Raleigh, North Carolina 27616.
11
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other business to be brought before the
Meeting, but it is intended that, as to any such other business, the shares will
be voted pursuant to the proxy in accordance with the best judgment of the
person or persons acting thereunder.
By Order of the Board of Directors
/s/ JOHN P. FUNKHOUSER
JOHN P. FUNKHOUSER,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
12
<PAGE>
********************************************************
APPENDIX
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
CARDIOVASCULAR DIAGNOSTICS, INC.
P R O X Y
5301 Departure Drive
Raleigh, North Carolina 27616
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 9, 1997
The undersigned hereby appoints John P. Funkhouser and B. Denise Hobbs, and
each of them, as proxies, each with full power of substitution, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
Common Stock of Cardiovascular Diagnostics, Inc., a North Carolina corporation
(the "Company"), held of record by the undersigned on March 31, 1997, at the
Annual Meeting of Shareholders to be held at the Carolina Country Club, 2500
Glenwood Avenue, Raleigh, North Carolina, on Friday, May 9, 1997, at 10:00 a.m.,
or at any adjournment(s) thereof. The following proposals to be brought before
the meeting are more specifically described in the accompanying Proxy Statement.
(1) ELECTION OF DIRECTORS:
<TABLE>
<S> <C>
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
(except as marked to the contrary) LISTED BELOW.
</TABLE>
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
John P. Funkhouser Dennis J. Dougherty William A. Hawkins John K.
Pirotte Stephen R. Puckett Philip R. Tracy Paul M. Wiles
(2) TO APPROVE AN AMENDMENT TO THE COMPANY'S 1995 STOCK PLAN INCREASING THE
NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER BY
250,000 SHARES:
[ ] VOTE FOR [ ] VOTE AGAINST [ ] ABSTAIN
(over)
<PAGE>
(3) TO RATIFY THE SELECTION OF COOPERS &
LYBRAND L.L.P. AS AUDITORS OF THE
COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 1997.
[ ] VOTE FOR [ ] VOTE AGAINST [ ] ABSTAIN
(4) IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING.
[ ] GRANT AUTHORITY [ ] WITHHOLD AUTHORITY
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED
FOR MANAGEMENT'S NOMINEES FOR DIRECTOR LISTED
ABOVE, FOR PROPOSALS 2 AND 3, AND IN THE DISCRETION
OF THE PROXIES
WITH RESPECT TO ANY OTHER MATTERS
PROPERLY BROUGHT
BEFORE THE SHAREHOLDERS AT THE
MEETING.
Signature
Signature, if held Jointly
Please date and sign exactly as
name appears on your stock
certificate. Joint owners
should each sign personally.
Trustees, custodians, executors
and others signing in
representative capacity should
indicate the capacity in
which they sign.
Date: , 1997
<TABLE>
<S><C>
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE,
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE
MEETING. IF YOU ATTEND THE MEETING, YOU CAN
VOTE EITHER IN PERSON OR BY YOUR PROXY.
</TABLE>
