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 7, 1998
----------------------------------------
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 Thursday, May 7, 1998, at 10:30 a.m. for
the following purposes:
1. To elect a board of directors;
2. To ratify the appointment of Coopers & Lybrand L.L.P. as the independent
auditors of the Company for the year ending December 31, 1998; and
3. 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, 1998
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, 1997.
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 9, 1998
<PAGE>
CARDIOVASCULAR DIAGNOSTICS, INC.
5301 Departure Drive
Raleigh, North Carolina 27616
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
May 7, 1998
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 10:30
a.m. on Thursday, May 7, 1998, 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 9, 1998.
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: Paul Storey, 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 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, 1998; and (iii) 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, 1998 (the "Record Date"), are entitled
to notice of and to vote at the Meeting. On the Record Date, 6,793,079 shares
of Common Stock were outstanding. Shareholders will be entitled to one vote for
each share of Common Stock held on the Record Date.
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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 six, but the number authorized to be elected at the Meeting is
five. 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>
Name of Nominee Age Director Since
- -------------------------------------- ----- ---------------
<S> <C> <C>
John P. Funkhouser ........... 44 1993
William A. Hawkins ........... 44 1995
John K. Pirotte .............. 48 1996
Stephen R. Puckett ........... 45 1996
Philip R. Tracy .............. 56 1996
Other Current Director
- ---------------------------------------
Dennis J. Dougherty .......... 50 1986
</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. Mr. Funkhouser holds a B.A. from
Princeton University and an M.B.A. from the University of Virginia.
WILLIAM A. HAWKINS was elected a director of the Company in January 1995.
Since April 1997, Mr. Hawkins has been Vice President of American Home Products
Corporation, a pharmaceutical company. From October 1995 until he joined
American Home Products, Mr. Hawkins was 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. 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.
PHILIP R. TRACY was President and CEO of Burroughs Wellcome Co., 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
2
<PAGE>
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.
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 a number of private companies. Mr. Dougherty holds a B.A. in
Marketing from Oklahoma City 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, 1997, the Board of Directors held
four formal meetings, excluding actions that were taken by unanimous written
consent during the year. Each member of the Board attended at least 75% of the
1997 meetings of the Board of Directors and Board committees of which he was a
member, except for Mr. Hawkins who attended 50% of the meetings.
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 1997. 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 1997, the Compensation Committee held three meetings, excluding actions
that were taken by unanimous written consent during the year.
Vote Required
The 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 -- 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, 1998, 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, 1998.
3
<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, 1997 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. 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.
<TABLE>
<CAPTION>
Shares
Beneficially Percentage
Name Owned Owned (1)
- ------------------------------------------------ ---------------- -----------
<S> <C> <C>
Davenport & Co. ............................ 426,035(2) 6.3%
901 E. Cary Street, Suite 1100
Richmond, Virginia 23219
The Capital Group Companies, Inc. .......... 412,500(3) 6.1
333 South Hope Street
Los Angeles, California 90071
John P. Funkhouser ......................... 267,087(4) 3.8
Dennis J. Dougherty ........................ 139,071(5) 2.0
Jonathon M. Lawrie, Ph.D. .................. 84,476 1.2
Michael D. Riddle .......................... 41,241(4) *
Wayne J. Scroggins ......................... 16,300 *
Donald E. Mahan, Ph.D. ..................... 13,950(6) *
William A. Hawkins ......................... 3,899(4) *
Stephen R. Puckett ......................... 3,000(7) *
John K. Pirotte ............................ 2,000(4) *
Philip R. Tracy ............................ 2,000(4) *
All current executive officers and directors
as a group (11 persons) .................. 472,248(8) 6.6
</TABLE>
- ---------
* Less than one percent.
(1) As of the Record Date, the Company had 6,793,079 shares of Common Stock
outstanding.
(2) As reported in the Schedule 13G dated January 23, 1998 filed with the
Securities and Exchange Commission by Davenport & Company LLC, consists of
shares held by individuals who are customers, or representatives (or
members of a representatives' immediate family), of Davenport & Company
LLC, which disclaims beneficial ownership.
(3) As reported in the Amendment No. 1 to Schedule 13G dated February 10, 1998
filed with Securities and Exchange Commission by The Capital Group
Companies, Inc. ("Capital Group"), these shares are held by SMALLCAP World
Fund, Inc., an investment company ("SMALLCAP"), and may be deemed to be
beneficially owned by SMALLCAP's investment adviser, Capital Research and
Management Company, and by the latter's parent, Capital Group, which
disclaims beneficial ownership.
(4) Consists solely of shares underlying options.
(5) Includes 2,000 shares underlying options and 23,591 shares held by Mr.
Dougherty's wife. Also includes 78,530 shares held by venture capital
partnerships which Mr. Dougherty controls within the meaning of the
Securities Act of 1933, as amended.
(6) Includes 13,750 shares underlying options.
(7) Includes 2,000 shares underlying options.
(8) Includes shares referenced in footnotes (4) through (7).
4
<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, 1997, 1996 and 1995:
<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 1997 $185,000 $ -- 30,000 $ 37,900(1)
President, Chief Executive Officer 1996 185,000 -- -- --
1995 150,000 40,000 56,648 --
Michael D. Riddle 1997 125,000 10,000 5,000 --
Vice President, 1996 125,000 -- -- --
Sales and Marketing 1995 125,000 5,000 51,499 --
Wayne Scroggins (2) 1997 117,000 -- 25,000 --
Chief Operating Officer 1996 92,000 -- 50,000 --
Jonathon M. Lawrie, Ph.D. (3) 1997 108,000 -- -- 14,100(4)
Managing Director, Europe 1996 130,000 -- -- 19,900(5)
and Chief Scientific Officer 1995 130,000 10,000 27,631 29,100(6)
Donald E. Mahan, Ph.D. 1997 114,000 -- 30,000 --
Vice-President,
Research & Development
</TABLE>
- ---------
(1) Consists of club initiation fees.
(2) Mr. Scroggins' employment by the Company terminated in June 1997.
(3) Dr. Lawrie's employment by the Company terminated in October 1997.
(4) Consists of foreign living allowance of $6,400 and moving expenses of
$7,700.
(5) Consists of foreign living allowance of $17,900 and family travel allowance
of $2,000.
(6) Consists of foreign living allowance.
Option Grants, Exercises and Holdings and Fiscal Year-End Option Values.
The following table summarizes all option grants during the year ended
December 31, 1997 to the Named Executive Officers.
<TABLE>
<CAPTION>
Option Grants During Year Ended December 31, 1997
Potential Realizable
Value at
Assumed Annual Rates of
Number of % of Total Stock Price
Shares Options Exercise Appreciation for
Underlying Granted to or Base Option Term (2)
Options Employees Price Per Expiration ----------------------
Name Granted in 1997 Share (1) Date 5% 10%
- ---------------------------- --------------- ------------ ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
John Funkhouser ............ 30,000(3) 9.3% $ 5.00 Dec.-07 $94,300 $239,100
Michael D. Riddle .......... 5,000(4) 1.5% $ 3.75 Jan.-07 11,800 29,900
Wayne J. Scroggins ......... 25,000(4) 7.7% $ 3.75 Jan.-07 59,000 149,400
Donald E. Mahan, Ph.D. ..... 25,000(4) 7.7% $ 3.75 Jan.-07 59,000 149,400
5,000(3) 1.5% $ 5.00 Dec.-07 15,700 39,800
</TABLE>
- ---------
(1) 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.
(2) 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.
5
<PAGE>
(3) This grant was made in December 1997 and becomes 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.
(4) This grant was made in January 1997 and becomes 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.
The following table sets forth information concerning all option exercises
during the year ended December 31, 1997 and option holdings as of December 31,
1997, by the Named Executive Officers.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised Options at In-the-Money Options at
Shares December 31, 1997 December 31, 1997 (1)
Acquired on Value ----------------------------------- ----------------------------------
Name Exercise Realized(2) Exercisable(3) Unexercisable(3) Exercisable(3) Unexercisable(3)
- ------------------------------- ------------- ------------- ---------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
John F. Funkhouser ............ -- -- 267,086 58,324 $1,820,600 $ 89,100
Michael D. Riddle ............. -- -- 35,244 21,257 229,000 113,400
Wayne J. Scroggins ............ 12,500 54,688 -- -- -- --
Jonathon M. Lawrie, Ph.D. ..... 6,909 11,227 -- -- -- --
Donald E. Mahan, Ph.D. ........ -- -- 7,500 37,500 26,250 147,500
</TABLE>
- ---------
(1) Calculated by subtracting the exercise price from $8.00, the closing price
of the Company's Common Stock as reported by the Nasdaq National Market on
December 31, 1997, the last business day of the fiscal year ended December
31, 1997, 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.
Compensation of Directors
Each of the Company's non-employee directors receives $2,500 per year,
$1,000 per Board meeting and annual Company strategy 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.
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.
6
<PAGE>
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 1997, 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 1997 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. In 1997, the Company
paid a cash bonus of $10,000 to Mr. Riddle. This bonus was paid based on
achievement of certain of the strategic goals established early in the year,
primarily those related to the Company's marketing strategy.
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 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 1997, 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 1997 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
7
<PAGE>
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, 1997 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.
Comparison of Cumulative Total Return (1)
[LINE GRAPH APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
<TABLE>
<CAPTION>
12/95 3/96 6/96 9/96 12/96 3/97 6/97 9/97 12/97
(Dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ 100.00 104.66 113.21 117.23 122.99 116.32 137.65 160.94 150.83
Peer Group - Non-Fin 100.00 105.04 114.29 117.18 121.52 113.34 134.33 157.37 142.60
Peer Group - Pharma 100.00 104.04 101.05 103.38 100.29 95.24 102.82 115.38 103.64
CVDI 100.00 104.55 77.27 61.36 35.28 45.45 68.18 81.82 72.73
</TABLE>
- ---------
(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, the Nasdaq Non-Financial Stocks
Total Return Index (the "Non-Financial Index") and the Nasdaq Pharmaceutical
Stocks Total Return Index (the "Pharmaceutical Index"). The Company has
previously used the Non-Financial Index as its published industry or
line-of-business index for comparison purposes. The Company intends to use
the Pharmaceutical Index for such purposes in the future, because the
Non-Financial Index includes companies in industries that are unrelated to
the Company's business. 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, 1997, all Section
16(a) reports were filed on a timely basis, except for late filing of the Form
3 for Donald E. Mahan, Ph.D. and of the Form 5 for John P. Funkhouser.
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
10, 1998. 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.
8
<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
9
<PAGE>
********************************************************************************
APPENDIX
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
PROXY
CARDIOVASCULAR DIAGNOSTICS, INC.
5301 Departure Drive
Raleigh, North Carolina 27616
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
May 7, 1998
The undersigned hereby appoints John P. Funkhouser and Paul Storey, 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,
1998, at the Annual Meeting of Shareholders to be held at the Carolina Country
Club, 2500 Glenwood Avenue, Raleigh, North Carolina, on Thursday, May 7, 1998,
at 10:30 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:
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY TO VOTE FOR ALL
(except as marked to the contrary) NOMINEES LISTED BELOW
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 William A. Hawkins John K. Pirotte
Stephen R. Puckett Philip R. Tracy
[ ] VOTE FOR [ ] VOTE AGAINST [ ] ABSTAIN
(2) To ratify the selection of Coopers & Lybrand L.L.P. as auditors of the
Company for the fiscal year ending December 31, 1998.
[ ] VOTE FOR [ ] VOTE AGAINST [ ] ABSTAIN
(over)
<PAGE>
(3) 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 PROPOSAL 2,
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 a representative
capacity should indicate the
capacity in which they sign.
Date: , 1998
-----------------------------------
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.
-----------------------------------
