EP MedSystems, Inc.
100 Stierli Court - Suite 107
Mount Arlington, NJ 07856
September 24, 1998
Dear Shareholder,
You are cordially invited to join us for our Annual Meeting
of Shareholders to be held this year on Wednesday, October
28, 1998, at 10:00 a.m., local time, at The Penn Club, 30
West 44th Street, New York, New York.
The Notice of Annual Meeting of Shareholders and the Proxy
Statement that follow describe the business to be conducted
at the meeting. We will also report on matters of current
interest to our shareholders.
Whether you own a few or many shares of stock, it is
important that your shares be represented. If you cannot
personally attend the meeting, we encourage you to make
certain that you are represented by signing the accompanying
proxy card and promptly returning it in the enclosed
envelope.
Sincerely,
/s/ DAVID A. JENKINS
- --------------------
David A. Jenkins
Chairman of the Board,President
and Chief Executive Officer
<PAGE>
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 Rule 240.14a-11(c)
or Rule 240.14a-12
EP MedSystems, Inc.
-----------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is
calculated and state how it was determined): _________
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(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:__________
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(4) Date Filed:___________
<PAGE>
EP MedSystems, Inc.
100 Stierli Court - Suite 107
Mount Arlington, NJ 07856
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, OCTOBER 28, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of EP MedSystems, Inc., a New Jersey
corporation (the "Company"), will be held at The Penn Club,
30 West 44th Street, New York, New York, at 10:00 a.m.,
local time, on Wednesday, October 28, 1998, for the
following purposes:
(1) To authorize an amendment of the Company's Amended and
Restated Certificate of Incorporation providing
for classification of the Board of Directors into three
classes of directors with staggered terms of office;
(2) To elect four (4) directors to the Board of Directors as follows:
(a) two directors to serve a three year term, one director to serve
a two year term and one director to serve a one year term, or
(b) if a classified Board of Directors is not approved, four (4)
directors to serve until the next Annual Meeting of Shareholders
and until their respective successors shall be duly elected and
qualified;
(3) To ratify the appointment of PricewaterhouseCoopers LLP,
independent public accountants, as auditors for the
Company for the fiscal year ending December 31, 1998; and
(4) To transact such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on
September 11, 1998 as the record date for the determination
of shareholders entitled to notice of and to vote at the
Annual Meeting or any adjournment thereof.
Your attention is directed to the attached Proxy Statement
for further information regarding each proposal to be made.
All shareholders are cordially invited to attend the Annual
Meeting in person. Whether or not you expect to attend the
Annual Meeting, your proxy vote is important. To ensure
representation at the Annual Meeting, shareholders are urged
to mark, sign, date and return the enclosed Proxy as
promptly as possible, even if they plan to attend the Annual
Meeting. A return envelope, which requires no postage if
mailed in the United States, is enclosed for this purpose.
Any shareholder attending the Annual Meeting may vote in
person even if such shareholder has returned a Proxy if the
Proxy is revoked in the manner set forth in the accompanying
Proxy Statement.
By order of the Board of Directors,
/s/ JAMES J. CARUSO
-------------------
James J. Caruso
Vice President, Finance, Chief
Financial Officer and Secretary
September 24, 1998
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD
BE COMPLETED AND RETURNED PROMPTLY
--------------------------------------------
<PAGE>
EP MEDSYSTEMS, INC.
100 Stierli Court - Suite 107
Mount Arlington, NJ 07856
PROXY STATEMENT FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON OCTOBER 28, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
General
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of EP MedSystems,
Inc. (the "Company" or "EP MedSystems") of proxies for use
at the Annual Meeting of Shareholders (the "Annual Meeting")
to be held at The Penn Club, 30 West 44th Street, New York,
New York, at 10:00 a.m., local time, on Wednesday, October
28, 1998, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders. The principal
executive offices of the Company are located at 100 Stierli
Court - Suite 107, Mount Arlington, New Jersey 07856. This
Proxy Statement and accompanying form of proxy and Annual
Report to Shareholders are being mailed to shareholders on
or about September 24, 1998.
Record Date and Outstanding Shares
Holders of record of the Company's common stock, no par
value, $.001 stated value per share (the "Common Stock"), at
the close of business on September 11, 1997 (the "Record
Date") are entitled to notice of and to vote at the Annual
Meeting. On the Record Date there were 9,872,417 shares of
Common Stock outstanding.
Revocability of Proxies
Shares represented at the Annual Meeting by properly
executed proxies in the accompanying form will be voted at
the Annual Meeting and, where the shareholder giving the
proxy specifies a choice, the proxy will be voted in
accordance with the specification so made. A proxy given
for use at the Annual Meeting may be revoked by the
shareholder giving the proxy at any time prior to the
exercise of the powers conferred thereby. A proxy may be
revoked either by (i) filing with the Secretary of the
Company prior to the Annual Meeting, at the Company's
principal executive offices, either a written revocation or
a duly executed proxy bearing a later date or (ii) attending
the Annual Meeting and voting in person, regardless of
whether a proxy has previously been given. Presence at the
Annual Meeting will not revoke the shareholder's proxy
unless such shareholder votes in person.
Quorum and Voting
Holders of Common Stock will be entitled to one vote per
share. Action may be taken on a matter submitted to
shareholders at the Annual Meeting only if a quorum exists.
A majority of the outstanding shares of Common Stock
entitled to vote, present in person or represented by proxy,
constitutes a quorum at a meeting of the shareholders.
Directors will be elected by a plurality of the votes cast
by the holders of the shares of Common Stock voting in
person or by proxy at the Annual Meeting. Holders of Common
Stock are not entitled to cumulative voting rights in the
election of directors. Approval of any other matters to
come before the Annual Meeting will require the affirmative
vote of the holders of a majority of the shares of Common
Stock entitled to vote and present in person or by proxy at
the Annual Meeting. Abstentions or broker non-votes are not
counted as votes cast on any matter to which they relate
and, therefore, will not be included in vote totals and will
have no effect on the outcome of any matters to be voted
upon at the Annual Meeting. Abstentions and broker non-
votes will be treated as shares that are present, in person
or by proxy, and entitled to vote for purposes of
determining the presence of a quorum.
Solicitation of Proxies
The expense of soliciting proxies for the Annual Meeting,
including the cost of preparing, assembling and mailing the
notice, proxy and Proxy Statement, will be paid by the
Company. The solicitation will be made by use of the mails,
through brokers and banking institutions, and by officers
and other employees of the Company. Proxies may be
solicited by personal interview, mail, telephone or
facsimile transmission.
PROPOSAL #1. AMENDMENT OF THE COMPANY'S CERTIFICATE OF
INCORPORATION TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS
The Board has unanimously determined that an amendment to
the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") is
advisable and has voted to recommend such amendment to the
Company's shareholders for approval. The proposed amendment
(the "Amendment") to the Certificate of Incorporation (i)
classifies the Board of Directors into three classes, as
nearly equal in number as possible, each of which, after an
interim arrangement, will serve for three years, with one
class being elected each year, and (ii) provides that the
shareholder vote required to amend, repeal or adopt a
provision inconsistent with the Amendment be increased from
a majority of the votes cast by all shareholders entitled to
vote thereon to sixty six and two thirds percent (66 2/3%)
of the outstanding common stock of the Company entitled to
vote thereon.
The Board believes that the Amendment would, if adopted,
enhance the likelihood of continuity and stability in the
composition of the Company's Board of Directors and in the
policies formulated by the Board, and, at the same time,
effectively reduce the possibility that a third party could
effect a sudden or surprise change in majority control of
the Company's Board of Directors without the support of the
incumbent Board of Directors. However, adoption of the
Amendment may have significant effects on the ability of
shareholders of the Company to benefit from certain
transactions which are opposed by the incumbent Board of
Directors. Accordingly, shareholders are urged to read
carefully the following section of this Proxy Statement,
which describes the Amendment and its purpose and effect,
and Appendix A hereto, which sets forth the full text of the
Amendment.
The Amendment is not being recommended in response to any
specific effort of which the Company is aware to accumulate
the Common Stock or to effect control of the Company and is
not a plan by the Board to adopt a series of amendments to
the Certificate of Incorporation. The Company's Certificate
of Incorporation and Bylaws do not currently contain any
other specific provisions to deter non-negotiated takeovers
of the Company (other than authorized but unissued preferred
stock). However, the Board of Directors may review and
consider other anti-takeover measures in the future. The
Board has observed the relatively common use of certain
coercive takeover tactics in recent years, including the
accumulation of substantial voting stock positions as a
prelude to a threatened takeover or corporate restructuring,
proxy fights and partial tender offers and the related use
of "two-tier" pricing. The Board of Directors believes that
the use of these tactics can place undue pressure on a
corporation's board of directors and shareholders to act
hastily and on incomplete information and, therefore, can be
highly disruptive to a corporation and result in unfair
differences in treatment of shareholders who act immediately
in response to an announcement of takeover activity and
those who choose to act later, if at all.
The Amendment is intended to encourage persons seeking to
acquire control of the Company to initiate such an
acquisition through arms-length negotiations with the
Company's management and Board of Directors. The Amendment,
if adopted, may also have the effect of discouraging a third
party from making a tender offer or otherwise attempting to
obtain control of the Company, even though such an attempt
might be beneficial to the Company and its shareholders. In
addition, since the Amendment may discourage accumulations
of large blocks of the Company's stock by purchasers whose
objective is to have such stock repurchased by the Company
at a premium, adoption of the Amendment could tend to reduce
temporary fluctuations in the market price of the Company's
stock which might be caused by such accumulations.
Accordingly, shareholders could be deprived of certain
opportunities to sell their stock at a temporarily higher
market price.
Takeovers or changes in control in management of the Company
which are proposed and effected without prior consultation
and negotiation with the Company's management may not always
be detrimental to the Company and its shareholders.
However, the Board of Directors feels that the benefits of
seeking to protect its ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to take
over or restructure the Company outweigh the disadvantages
of discouraging such proposals.
The adoption of the Amendment would make more difficult or
discourage a proxy contest or the assumption of control by a
holder of a substantial block of the Company's common stock
or the removal of the incumbent Board of Directors and thus
may tend to continue the Company's incumbent Board of
Directors in office. At the same time, the Amendment would
help ensure that the Board, if confronted by a surprise
proposal from a third party, will have sufficient time to
review the proposal and appropriate alternatives to the
proposal and to seek a premium price for the shareholders.
The Company's Amended and Restated By-Laws (the "By-Laws")
currently provide that all directors are to be elected to
the Board of Directors annually and shall hold office until
the annual meeting of shareholders next following their
election and until their successors have been elected and
qualified. The proposed new Article TENTH of the
Certificate of Incorporation (as set forth in Appendix A)
provides that the Board of Directors shall be divided into
three classes of directors, each class to be as nearly equal
in number as possible. If Proposal No. 1 is adopted, the
Company's directors will be divided into three classes, one
class to hold office initially until the annual meeting of
shareholders to be held in 1999, a second class to hold
office initially until the annual meeting of shareholders to
be held in 2000 and a third class to hold office initially
until the annual meeting of shareholders to be held in 2001
(in each case, until their respective successors are duly
elected and qualified). At each annual meeting of
shareholders commencing with the annual meeting to be held
in 1999, the successors to the class of directors whose term
then expires shall be elected to serve a three year term
(and until their respective successors are duly elected and
qualified). If the Amendment to the Certificate of
Incorporation is adopted, the By-Laws will be amended to be
consistent with the amendment to the Certificate of
Incorporation relating to the classification of the Board of
Directors.
The Certificate of Incorporation does not permit cumulative
voting in the election of directors. Accordingly, the
holders of a majority of the voting power of the outstanding
shares of the Company's voting stock could now elect all of
the directors being elected at any annual or special meeting
of the Company's shareholders. However, the classification
of the Board of Directors pursuant to the Amendment will
apply to every election of directors, whether or not a
change in control of the Company has occurred or the holders
of a majority of the voting power of the Company desire to
change the Board of Directors. The classification of the
Board of Directors will have the effect of making it more
difficult to change the composition of the Board of
Directors. At least two shareholder meetings, instead of
one, will be required to effect a change in control of the
Board of Directors. The Board believes that the longer time
required to elect a majority of a classified Board of
Directors will help to assure the continuity and stability
of the Company's management and policies in the future,
since a majority of the directors at any given time will
have prior experience as directors of the Company.
The proposed requirement of a super-majority vote of the
shareholders alter, amend, repeal or adopt any provision
inconsistent with the proposed new Article TENTH of the
Certificate of Incorporation is designed to prevent a
shareholder with a majority of the stock of the Company
present at a shareholder meeting from avoiding the
provisions relating to the classified Board of Directors
simply by repealing or amending them.
The affirmative vote of a majority of the votes cast by all
shareholders entitled to vote thereon is required to approve
this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
<PAGE>
PROPOSAL # 2. ELECTION OF DIRECTORS
The Company's By-Laws provide that the number of Directors,
as determined from time to time by the Board of Directors,
shall not be less than three nor more than eleven. Pursuant
to the By-Laws, the Board of Directors has set the number of
Directors at four (4). At the Annual Meeting, the
shareholders will elect all four members of the Board of
Directors of the Company. If a classified Board of
Directors is approved, the Directors will be elected to the
respective classes of the Board for the terms specified
below. If a classified Board of Directors is not approved,
each Director will hold office until the next annual meeting
of shareholders and thereafter until his successor is duly
elected and qualified. Cumulative voting is not permitted
in the election of directors. Consequently, each
shareholder is entitled to one vote for each share of Common
Stock held in his or her name. In the absence of
instructions to the contrary, a properly signed and dated
proxy will vote the shares represented by that proxy FOR the
election of the nominees listed below.
The Board of Directors has no reason to believe that any of
the nominees listed below will be unable or unwilling to
serve as a director. If, however, a nominee becomes
unavailable, the proxies will have discretionary authority
to vote for a substitute nominee.
On July 16, 1998, Lester Swenson, a member of the Board of
Directors since 1995, resigned due to business and personal
reasons, but not due to any disagreement with the Board of
Directors. The Board has commenced a search for a
replacement director to serve as a fifth member of the Board
of Directors, but, as of this date, has not identified a
replacement. The Board of Directors intends to continue its
search for a replacement following the Annual Meeting of
Shareholders. If such person is found prior to the next
annual meeting of shareholders and agrees to serve as a
director, the Board, as permitted by the By-Laws, may
increase the number of directors to five and elect such
person to fill such vacancy, provided, the interim term of
such new director shall extend only until the next annual
meeting of shareholders at which point, if such person is
nominated, the shareholders shall vote on the continued
service of such person as a director.
If the proposal to authorize a classified Board of Directors
described in this Proxy Statement is approved, the directors
will be divided among the Classes as follows:
Class I Director:
(To serve until the 1999 Annual Meeting of Shareholders)
John E. Underwood
Class II Director:
(To serve until the 2000 Annual Meeting of Shareholders)
Anthony J. Varrichio
Class III Directors:
(To serve until the 2001 Annual Meeting of Shareholders)
David A. Jenkins
David W. Mortara, Ph.D.
At the time that the terms of a class of directors expires,
an election of directors will occur for the same class for
each director to serve a new three year term. (See Proposal
#1. above). If the proposal to authorize a classified Board
of Directors described in this Proxy Statement is not
approved, each director will serve until the next Annual
Meeting of Shareholders and thereafter until his successor
is duly elected and qualified.
Information Regarding Nominees for Election as Directors
The following information with respect to the principal
occupation or employment, other affiliations and business
experience of each of the four nominees during the past five
years has been furnished to the Company by such nominee.
Nominees for Directors
David A. Jenkins (Age 40) is the co-founder and Chairman of
the Board of Directors, President and Chief Executive
Officer of the Company. Mr. Jenkins has served as the
President, Chief Executive Officer and a Director of the
Company since 1993 and as Chairman since 1995. From 1988 to
1993, Mr. Jenkins served as the Chief Executive Officer and
then Chairman of the Board of Directors of Arrhythmia
Research Technology, Inc., a publicly held company involved
in the sale and distribution of electrophysiology products.
David W. Mortara, Ph.D. (Age 57) has served as a Director of
the Company since November, 1995. Dr. Mortara founded and
has served as the Chairman and Chief Executive Officer of
Mortara Instrument, Inc. ("MII"), a privately-held
manufacturer and supplier of electrocardiography equipment,
since 1982. Prior to founding MII, Dr. Mortara was Vice
President, Engineering at Marquette Electronics, Inc. He
has authored numerous scientific publications on signal
processing for electrocardiography and currently serves as
co-chair of AAMI's ECG Standards Committee.
John E. Underwood (Age 56) has served as a Director of the
Company since June, 1998, when he was elected by the Board
of Directors to fill a vacancy. Since 1985, Mr. Underwood
has served as the founder and President of Proteus
International, a venture banking and venture consulting
concern with offices in Mahwah, New Jersey. Prior to
founding Proteus, Mr. Underwood held senior management
positions with Pfizer, General Electric and Becton
Dickinson.
Anthony J. Varrichio (Age 51) has served as a Director of
the Company since 1993 and served as the Chairman of the
Board and Treasurer of the Company from 1993 to 1995. Since
1987, Mr. Varrichio has served as the President and a
director of HiTronics Designs, Inc. ("HDI"), an engineering
consulting and medical device corporation. Prior to co-
founding HDI, Mr. Varrichio served as Vice President of
Electro-Biology, Inc., a manufacturer of electronic bone
growth stimulator devices. Prior thereto, Mr. Varrichio
worked in the Advanced Technology Laboratory division of
Intermedics, Inc., where he served as Director of
Engineering. Mr. Varrichio is also the Chairman of the
Board of Neomedics, Inc.
The affirmative vote of a plurality of the Company's
outstanding Common Stock represented and voting at the
Annual Meeting is required to elect the Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ELECTION OF THE NOMINEES.
Compensation of Directors
During 1997, no directors of the Company received cash or
other compensation for services on the Board of Directors or
any committee thereof. No other director received other
compensation for services on the Board of Directors or any
committee thereof. The directors were reimbursed for their
reasonable travel expenses incurred in performance of their
duties as directors.
1995 Director Option Plan
The Company's 1995 Director Option Plan (the "Director
Plan") was adopted by the Board of Directors and the
shareholders in November, 1995. A total of 360,000 shares
of Common Stock of the Company are available for issuance
under the Director Plan. The Director Plan provides for
grants of "director options" to eligible directors of the
Company and for grants of "advisor options" to eligible
members of the Scientific Advisory Board of the Company. At
September 11, 1998, there were 179,000 director options and
108,000 advisor options outstanding at exercise prices
ranging from $2.00 to $3.00 per share. Director options and
advisor options become exercisable at the rate of 1,000
shares per month, commencing with the first month following
the date of grant for so long as the optionee remains a
director or advisor, as the case may be. At September 11,
1998, 96,000 director options and 102,000 advisor options
were vested. The Director Plan is administered by the Plan
Committee of the Company. The Director Plan will terminate
on November 30, 2005, unless earlier terminated by the Board
of Directors.
Information Regarding Committees of the Board of Directors
and Meetings
The Company's Board of Directors has established an Audit
Committee, a Compensation Committee and a Plan Committee.
The Company does not have a Nominating Committee.
Audit Committee
The Company has an Audit Committee of the Board of Directors
at least a majority of whom must be "independent directors"
(as defined in the rules of the National Association of
Securities Dealers, Inc.), to make recommendations
concerning the engagement of independent public accountants,
review with the independent public accountants the plans and
results of the audit engagement, approve professional
services provided by the independent public accountants,
review the independence of the independent public
accountants, consider the range of audit and non-audit fees
and review the adequacy of the Company's internal accounting
controls. Currently, Messrs. Mortara and Underwood are
members of the Audit Committee.
Compensation Committee
The Company has a Compensation Committee of the Board of
Directors consisting of two or more non-employee directors,
who may not receive options under the 1995 Long Term
Incentive Plan (the "1995 Plan"), to determine compensation
for the Company's executive officers and to administer the
1995 Plan. Currently, Messrs. Mortara and Underwood are
members of the Compensation Committee.
Plan Committee
The Company has a Plan Committee of the Board of Directors
consisting of two or more directors to administer the
Company's Director Plan, none of whom are eligible to
participate in such Plan. Currently, Messrs. Jenkins and
Varrichio are members of the Plan Committee.
Attendance at Board and Committee Meetings
In 1997, there were three meetings of the Board of Directors
at which all then current directors were present. There was
one meeting of the Audit Committee during 1997 at which all
members were present. The Compensation Committee and Plan
Committee did not meet during 1997.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Officers
The following table sets forth certain information regarding
the current executive officers and certain key employees of
the Company:
OFFICER
NAME AGE POSITION SINCE
- ------------------ --- -------------------------------- -------
David A. Jenkins 40 Chairman of the Board, President 1993
and Chief Executive Officer
J. Randall Rolston 51 Vice President, Sales 1998
James J. Caruso 38 Chief Financial Officer, 1996
Treasurer and Secretary
C. Bryan Byrd 37 Vice President, Engineering 1993
Joseph C. Griffin 39 President, ProCath Corporation 1993
David A. Jenkins is the co-founder and Chairman of the Board
of Directors, President and Chief Executive Officer of the
Company. Mr. Jenkins has served as the President, Chief
Executive Officer and a Director of the Company since 1993
and as Chairman since 1995. From 1988 to 1993, Mr. Jenkins
served as the Chief Executive Officer and then Chairman of
the Board of Directors of Arrhythmia Research Technology,
Inc., a publicly held company involved in the sale and
distribution of electrophysiology products.
J. Randall Rolston is the Vice President, Sales of the
Company. Mr. Rolston joined the Company in September, 1996
as National Sales Manager and was named Vice President,
Sales in April, 1998. Prior to joining the Company, Mr.
Rolston was employed in various sales management positions
at Cordis-Webster, an electrophysiology catheter company
owned by Johnson & Johnson. Prior to Cordis-Webster, Mr.
Rolston held various sales management positions, including
15 years at American Edwards prior to its merger with Baxter
Healthcare Corporation.
James J. Caruso is the Chief Financial Officer, Treasurer
and Secretary of the Company. Mr. Caruso served from 1989
to 1995 as Vice President and Chief Financial Officer of
Micron Medical Products, Inc., a wholly-owned subsidiary of
Arrhythmia Research Technology, Inc. Mr. Caruso is a
Certified Public Accountant.
C. Bryan Byrd is the Vice President, Engineering of the
Company. Mr. Byrd joined the Company in April 1993 to
oversee software development for new products. From 1989 to
1993, he co-founded and served as the Director of
Engineering for BioPhysical Interface Corp. where he was
responsible for developing automated computerized monitoring
equipment for pacemaker and open heart operating rooms and
follow-up clinics. Prior to that, he was a software
engineer for Medtronic, Inc. ("Medtronic"), and also worked
with Mt. Sinai Medical Center in Miami Beach, Florida. He
has developed databases for all aspects of cardiac surgery.
Joseph C. Griffin has been the President of ProCath
Corporation, the wholly-owned subsidiary of the Company,
since its inception in 1993. Mr. Griffin founded
Professional Catheter Corporation, the predecessor to
ProCath Corporation, in 1990 and served as its President
until the Company acquired its business in 1993. Mr.
Griffin has more than 18 years experience in the design,
development, regulation and manufacture of cardiac catheters
and has served as a member of the Health Industry
Manufacturers Association Pacemaker Task Force and Electrode
Catheter Task Force.
Executive Compensation
The following summary compensation table sets forth certain
information concerning compensation paid or accrued to the
Chief Executive Officer, the former Vice President of Sales
and Marketing and the current Vice President, Sales of the
Company (the "Named Executive Officers") for services
rendered in all capacities for the years ended December 31,
1997, 1996 and 1995. No other executive officer of the
Company was paid a salary and bonus aggregating greater than
$100,000 during such time periods.
Summary Compensation Table
Annual Compensation Long Term Compensation
------------------- -----------------------
Securities
Name and Principal Salary Bonus Underlying
Position Year ($) ($) Options
- ------------------ ----- ------- ----- -----------
David A. Jenkins 1997 $145,000 $0 0
Chairman, President 1996 $127,500 $250 0
and Chief Executive 1995 $110,000 $5,250 166,000 (1)
Officer
Robert W. Evans (2) 1997 $108,750 $0 0
Former Vice President 1996 $42,492 $0 125,000 (3)
of Sales and Marketing 1995 $0 $0 0
J. Randall Rolston (4) 1997 $140,500 $0 28,000 (5)
Vice President, Sales 1996 $31,250 $0 12,000 (6)
1995 $0 $0 0
_____________________
1) The Company granted Mr. Jenkins a non-qualified stock
option to purchase 96,000 shares of Common Stock at an
exercise price of $2.20 per share. Options to purchase
30,000 shares became exercisable on the grant date and
options to purchase 1,000 shares become exercisable each
month thereafter. The term of such option is five years.
On November 29, 1995, the Company granted Mr. Jenkins an
incentive stock option to purchase 70,000 shares of Common
Stock pursuant to the Company's 1995 Plan at an exercise
price of $2.20 per share. Options to purchase 45,000 shares
became exercisable upon completion of the Company's initial
public offering and options to purchase 25,000 shares became
exercisable on the first anniversary of such date. The term
of such option is ten years.
2) Mr. Evans' left the employ of the Company in September, 1997.
3) During September, 1996, the Company granted Mr. Evans
an incentive stock option to purchase 90,000 shares of
common stock pursuant to the 1995 Long Term Incentive Plan
and a non-qualified stock option to purchase 35,000 shares
of Common Stock at an exercise price of $5.50 per share.
Options to purchase 25,000 shares became exercisable on the
grant date and options to purchase 2,083 shares became
exercisable each month thereafter. Following the
termination of Mr. Evans employment, the options expired
unexercised.
4) Mr. Rolston served as National Sales Manager of the
Company from September, 1996 through April, 1998. During
April, 1998, Mr. Rolston was named Vice President, Sales.
5) On September 30, 1997, the Company granted Mr. Rolston
an incentive stock option to purchase 28,000 shares of
common stock pursuant to the 1995 Long Term Incentive Plan
at an exercise price of $3.00 per share. Options to
purchase 5,600 shares became exercisable on the grant date
and options to purchase 5,600 shares become exercisable each
year thereafter.
6) On October 3, 1996, the Company granted Mr. Rolston an
incentive stock option to purchase 12,000 shares of common
stock pursuant to the 1995 Long Term Incentive Plan at an
exercise price of $4.75 per share. Options to purchase
2,400 shares became exercisable on the grant date and
options to purchase 200 shares become exercisable each month
thereafter.
Stock Options
The following table sets forth certain information
concerning grants of stock options to the Named Executive
Officers during the fiscal year ended December 31, 1997.
Option Grants in Fiscal Year 1997
Individual Grants
-----------------
Number of
Shares Percent of Total
Underlying Options Granted Exercise
Options to Employees Price per Expiration
Granted in Fiscal Year Share Date
---------- ---------------- --------- ----------
David A. Jenkins - - - -
Chairman, President
and Chief Executive
Officer
J. Randall Rolston 28,000 12% $3.00 9/30/02
Vice President, Sales
Robert W. Evans (1) - - - -
Former Vice President
of Sales and Marketing
_____________________
1) Mr. Evans' employment with the Company terminated in September, 1997.
Option Exercises and Holdings
The following table provides certain information with
respect to the Named Executive Officers concerning the
exercise of stock options during the fiscal year ended
December 31, 1997 and the value of unexercised stock options
held as of December 31, 1997.
Aggregated Option Exercises in 1997 and Year End Option Values
--------------------------------------------------------------
Value of
Number of Unexercised
Shares Underlying In the Money
Acquired Unexercised Options at
on Value Options at December 31, 1997
Exercise Realized December 31, 1997 ($) (1)
Name (#) ($) Exercis. Unexercis. Exercis. Unexercis.
- ---------------- ------- -------- -------- ---------- -------- ----------
David A. Jenkins - - 127,000 39,000 $0 $0
Chairman, President
and Chief Executive
Officer
J. Randall Rolston - - 10,800 29,200 $0 $0
Vice President, Sales
Robert W. Evans (2) - - - - $0 $0
Former Vice President
of Sales and Marketing
- -------------------------
(1) Amounts calculated by subtracting the exercise price of
the options from the market value of the underlying Common
Stock using the closing sale price on the Nasdaq National
Market of $1.75 per share on December 31, 1997.
(2) Mr. Evans' employment with the Company terminated in September, 1997.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the securities laws of the United States, the
Company's directors, executive officers and any persons
beneficially owning more than ten percent of the Company's
Common Stock are required to report their ownership of the
Company's Common Stock and any changes in that ownership to
the Securities and Exchange Commission and the Nasdaq
National Market Surveillance Department. Based solely on
its review of the forms received by it from such persons for
their 1997 transactions, the Company believes that all
beneficial ownership filing requirements applicable to such
officers, directors and greater than ten percent beneficial
owners were complied with in a timely manner.
Employment Agreements
On March 1, 1993, the Company entered into an Employment
Agreement with David A. Jenkins as President for an initial
term of three years. The agreement provides for base
compensation and bonuses and other additional compensation
as may be determined by the Board of Directors in its sole
discretion. On August 31, 1995, the Company entered into an
Employment Agreement Addendum with Mr. Jenkins which
extended the term of employment through March 1, 1999. The
addendum provides for base compensation of $145,000, plus
five percent of the Company's consolidated income before
taxes. Mr. Jenkins' Employment Agreement may be terminated
at any time for cause. It contains a non-competition
provision extending for two years after termination of
employment for cause and, in the Company's discretion, one
year after termination of employment for any other reason,
provided that if Mr. Jenkins is terminated without cause,
the Company is obligated to continue to pay him compensation
during such discretionary period.
Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth certain information regarding
beneficial ownership of Common Stock of the Company as of
September 11, 1998 by (i) each of the Company's directors,
(ii) the Named Executive Officers, (iii) all directors and
executive officers as a group and (iv) each person known to
the Company to beneficially own more than five percent of
the Company's Common Stock. Except as otherwise indicated,
the persons named in the table have sole voting and
investment power with respect to all shares beneficially
owned, subject to community property laws, where applicable.
Name and Address Number of Shares Percentage of Class
of Beneficial Owner Beneficially Owned Beneficially Owned
(1)
- ------------------- ------------------ ------------------
David A. Jenkins (2) 1,008,000 10.2%
100 Stierli Court
Mount Arlington, NJ 07856
Anthony J. Varrichio (3) 539,000 5.5%
1 Hemlock Lane
Flanders, NJ 07836
David W. Mortara, Ph.D. (4) 86,000 *
7865 North 86th Street
Milwaukee, WI 53224
J. Randall Rolston (5) 47,569 *
100 Stierli Court
Mount Arlington, NJ 07856
John E. Underwood (6) 5,000 *
c/o Proteus International
Crossroads Plaza
Mahwah, NJ 07430
H & Q Life Sciences Investors (7) 430,000 4.4%
50 Rowes Wharf
Boston, MA 02110-6679
H & Q Healthcare Investors (7) 645,000 6.5%
50 Rowes Wharf
Boston, MA 02110-6679
SC Fundamental Value Fund, LP (7) 376,800 3.8%
10 East 50th Street
New York, NY 10022
SC Fundamental Value BVI, Ltd. (7) 373,200 3.8%
c/o SC BVI Partners
10 East 50th Street
New York, NY 10022
Special Situations Fund III LP (7) 574,000 4.4%
153 East 53rd Street
New York, NY 10022
Special Situations Cayman Fund (7) 144,200 1.5%
153 East 53rd Street
New York, NY 10022
Medtronic, Inc. (4) 584,000 5.9%
7000 Central Avenue NE
Minneapolis, MN 55432
Oppenheimer Funds, Inc. 500,000 5.0%
Two World Trade Center
New York, NY 10048
Robert W. Evans (8) 0 *
9352 Loma Street
Villa Park, CA 92667
All executive officers and
directors as a group
(eight persons) (9) 1,935,871 18.9%
- -------------------------
* Represents beneficial ownership of less than one percent
of the Common Stock.
(1) Applicable percentage ownership as of September 11,
1998 is based upon 9,872,417 shares of Common Stock
outstanding together with the applicable options for
such shareholder. Beneficial ownership is determined
in accordance with Rule 13d-3(d) of the Securities
Exchange Act of 1934, as amended. Under Rule 13d-3(d),
shares issuable within 60 days upon exercise of
outstanding options, warrants, rights or conversion
privileges ("Purchase Rights") are deemed outstanding
for the purpose of calculating the number and
percentage owned by the holder of such Purchase Rights,
but not deemed outstanding for the purpose of
calculating the percentage owned by any other person.
"Beneficial ownership" under Rule 13d-3 includes all
shares over which a person has sole or shared
dispositive or voting power.
(2) Includes 138,000 shares issuable upon exercise of
options. Also includes 160,000 shares held by Mr. Jenkins
as trustee for the Dalin Class Trust. Excludes 45,000
shares held by Mr. Jenkins' wife, and 20,000 shares held by
Mr. Jenkins' wife as custodian for his children.
(3) Includes 68,000 shares issuable upon exercise of options.
(4) Includes 36,000 shares issuable upon exercise of options.
(5) Includes 22,569 shares issuable upon exercise of options.
(6) Includes 5,000 shares issuable upon exercise of options.
(7) SC Fundamental Value Fund, LP and SC Fundamental Value
BVI, Ltd. share common management. H&Q Life Sciences
Investors and H&Q Healthcare Investors share common
management and are significant shareholders of the Company
by virtue of their holding, in the aggregate, greater than
10% of the issued and outstanding common stock. The
management companies of Special Situations Fund III LP and
Special Situations Cayman Fund share certain common
ownership.
(8) Mr. Evans' employment with the Company terminated in
September, 1997.
(9) Includes 348,169 shares issuable upon exercise of options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Hi-Tronics Designs, Inc.
HDI was one of the Company's two founding shareholders.
HDI's shareholders are Anthony J. Varrichio, William
Winstrom and Medtronic. Mr. Varrichio is the President, a
director and the largest shareholder of HDI, and Mr.
Winstrom is an officer and director of HDI.
Mr. Varrichio has been a director of the Company since the
Company's inception and was Chairman of the Board of
Directors and Treasurer of the Company until November, 1995.
Mr. Winstrom was a director of the Company until November,
1995. Lester Swenson, an officer of Medtronic, was a
director of the Company from November, 1995 until June,
1998. Mr. Varrichio, Mr. Winstrom and Medtronic acquired
shares of the Company's Common Stock from HDI. As of
September 11, 1998, Mr. Varrichio owned beneficially 4.8% of
the Company's Common Stock, Mr. Winstrom owned beneficially
3.5% and Medtronic owned 5.9%.
Beginning in 1993, the Company engaged HDI as the
manufacturer of the EP-2 and EP-3 Clinical Stimulators.
During April, 1996, the Company entered into a Master
Manufacturing Agreement with HDI (the "Master Manufacturing
Agreement") which provides that HDI will manufacture
components for certain of the Company's products on an
exclusive basis in accordance with GMP regulations and all
other applicable laws and regulations. The Master
Manufacturing Agreement has a term of five years commencing
on March 31, 1996 and, unless terminated by either party
upon at least 90 days written notice, will automatically
renew for successive terms of one year. The Company
purchased products from HDI aggregating $506,000, $392,000
and $424,000 during the twelve months ended December 31,
1997, 1996 and 1995, respectively.
During 1996, the Company determined that the sale and
service of arrhythmia monitors no longer represented a
strategic fit with the Company's existing products and
planned product line, including the ALERT System.
Therefore, the Company discontinued sale of its line of
arrhythmia monitors. In 1997, the Company sold its line of
arrhythmia monitors including an arrhythmia monitor under
development to HDI in return for 60,000 shares of common
stock in Neomedics, Inc., a company involved in the design
and manufacture of implantable medical devices which is an
affiliate of HDI. Sales of arrhythmia monitors by the
Company were approximately $12,000 and $198,000 in the years
ended December 31, 1996 and 1995, respectively. Since the
value assigned to the arrhythmia monitor technology had been
fully amortized, the Company did not record a gain or loss
on the sale. The Neomedics common stock is not a registered
security traded on a public exchange and therefore its fair
value is not readily determinable. At December 31, 1997,
the Company valued the shares of Neomedics stock at zero.
HDI completed development of the TeleTrace III-S Receiver in
1997 for an aggregate consideration of 19,000 shares of
common stock of the Company, issued in 1995, and $30,000 in
cash paid in 1997. HDI manufactures the TeleTrace III-S
Receiver for the Company. On December 29, 1997, the Company
granted HDI a nonexclusive license to sell the TeleTrace
receiver in connection with the sale of arrhythmia monitors.
The agreement calls for the payment to the Company of a
royalty of $300 per unit sold by HDI.
The Company believes that each of its transactions with HDI
were entered into on terms and at prices no less favorable
than the Company could have received from an unaffiliated
party.
Mortara Instrument, Inc.
The Company purchases certain components for its products
from Mortara Instrument, Inc. ("Mortara Instrument"). Dr.
David W. Mortara, a director and shareholder of the Company,
is also a director and shareholder of Mortara Instrument.
The approximate dollar amount of products purchased from
Mortara Instrument was $573,000, $15,000 and $12,000 in
1997, 1996 and 1995, respectively. The Company believes
that each of its transactions with Mortara Instrument were
entered into on terms and at prices no less favorable than
the Company could have received from an unaffiliated party.
PROPOSAL # 3. RATIFICATION OF APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the Board of
Directors has selected PricewaterhouseCoopers LLP,
independent public accountants, to act as independent
auditors of the Company for the fiscal year ending December
31, 1998, subject to ratification of such appointment by the
shareholders at the Annual Meeting.
Arthur Andersen LLP were the auditors of the Company from
inception through the fiscal year ended December 31, 1997.
During August, 1998, upon a recommendation issued by the
Audit Committee and approved by the Board of Directors, the
Company changed certifying accountants from Arthur Andersen
LLP to PricewaterhouseCoopers LLP. During the two most
recent fiscal years and any subsequent interim period
preceding the change in accountants, there were no
disagreements with the former accountant on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of the
former accountant, would have caused it to make a reference
to the subject matter of the disagreements in connection
with its report. In addition, the reports issued by Arthur
Andersen LLP on the Company's financial statements for the
two most recent fiscal years did not contain any adverse
opinion or disclaimer of opinion, and were not modified as
to uncertainty, audit scope or accounting principles.
During the Company's two most recent fiscal years and any
subsequent interim period prior to engaging them as
independent public accountants, PricewaterhouseCoopers, LLP
were not consulted by the Company regarding (i) application
of accounting principles to specific transactions, (ii) the
type of audit opinion to be rendered in regard to the
Company's financial statements or (iii) any disagreements or
reportable events.
A representative of PricewaterhouseCoopers, LLP is expected
to be present at the Annual Meeting, with the opportunity to
make a statement, if the representative so desires, and is
expected to be available to respond to appropriate questions
from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION
OF INDEPENDENT PUBLIC ACCOUNTANTS
OTHER BUSINESS
The Board of Directors does not intend to present any
business at the Annual Meeting other than as set forth in
the accompanying Notice of Annual Meeting of Shareholders,
and has no present knowledge that any others intend to
present business at the Annual Meeting. If, however, other
matters requiring the vote of the shareholders properly come
before the Annual Meeting or any adjournment or postponement
thereof, the persons named in the accompanying proxy will
have discretionary authority to vote the proxies held by
them in accordance with their judgment as to such matters.
SHAREHOLDER PROPOSALS
Shareholder proposals intended for inclusion in the proxy
materials for the Company's 1999 Annual Meeting of
Shareholders (which may be held in June, 1999) must be
received by the Company no later than February 1, 1999. Any
other shareholder proposals for the Company's Annual Meeting
of Shareholders must be received not less than 50 days nor
more than 90 days prior to the meeting or, if less than 60
days notice of the meeting date is given, not later than the
close of business on the 10th day following the day on which
notice of the meeting date is mailed or public disclosure of
such date is made. Such proposals should be directed to EP
MedSystems, Inc., 100 Stierli Court, Mount Arlington, New
Jersey 07856, Attention: Corporate Secretary.
ANNUAL REPORT
A copy of the Company's Annual Report to Shareholders for
1997, including financial statements, accompanies this Proxy
Statement.
FORM 10-KSB
A copy of the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1997, as filed with the Securities
and Exchange Commission, will be furnished without charge to
beneficial shareholders or shareholders of record upon
written request to Investor Relations at the Company's
principal executive offices.
By order of the Board of Directors,
/s/ JAMES J. CARUSO
James J. Caruso
Vice President, Chief Financial
Officer and Secretary
September 24, 1998
APPENDIX A
AMENDMENT TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
TENTH: Effective with the election of directors at the
annual meeting of shareholders to be held in 1998, the
directors shall be classified, with respect to the time for
which they severally hold office, into three classes, as
nearly equal in number as possible, as shall be provided in
the manner specified in the by-laws; one class to hold
office initially for a term expiring at the annual meeting
of shareholders to be held in 1999, another class to hold
office initially for a term expiring at the annual meeting
of shareholders to be held in 2000, and another class to
hold office initially for a term expiring at the annual
meeting of shareholders to be held in 2001, with the
respective members of each class to hold office until their
respective successors are elected and qualified. At each
annual meeting of shareholders commencing with the annual
meeting in 1999, the successors to the class of directors
whose term then expires shall be elected to serve a three
year term and until their successors are duly elected and
qualified. No decrease in the number of directors shall
have the effect of shortening the term of any incumbent
director. Any increase or decrease in the number of
directors shall be apportioned among the classes so as to
make all classes as nearly equal in number as possible.
Notwithstanding anything contained herein to the contrary,
the affirmative vote of the holders of sixty six and two
thirds percent (66 2/3%) of all issued and outstanding
shares of the corporation entitled to vote thereon, voting
together as a single class, shall be required to alter,
amend or adopt any provisions inconsistent with, or repeal
this Article TENTH or any provision hereof at any annual or
special meeting of shareholders.
PROXY
EP MEDSYSTEMS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 28,
1998
The undersigned hereby appoint(s) David A. Jenkins and C.
Bryan Byrd, and each of them, as proxies, each with full
power of substitution, to represent and vote as designated
all shares of Common Stock of EP MedSystems, Inc. held of
record by the undersigned on September 11, 1998 at the
Annual Meeting of Shareholders of the Company to be held at
The Penn Club, 30 West 44th Street, New York, New York, at
10:00 a.m., local time, on Wednesday, October 28, 1998, with
authority to vote upon the matters listed on the other side
of this proxy card and with discretionary authority as to
any other matters that may properly come before the meeting
or any adjournment or postponement thereof.
IMPORTANT -- PLEASE DATE AND SIGN ON THE OTHER SIDE.
PLEASE MARK YOUR VOTES AS INDICATED IN THIS EXAMPLE. [X]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR THE NOMINEES"
IN ITEM 2 AND "FOR" ITEMS 1 and 3.
VOTE VOTE
FOR AGAINST ABSTAIN
---- ------- -------
1. AMENDMENT TO CERTIFICATE OF
INCORPORATION PROVIDING FOR
CLASSIFIED BOARD OF DIRECTORS [ ] [ ] [ ]
FOR the WITHHOLD AUTHORITY
Nominee to vote for the Nominee
------- -----------------------
2. ELECTION OF DIRECTORS
David A. Jenkins [ ] [ ]
David W. Mortara, Ph.D. [ ] [ ]
John E. Underwood [ ] [ ]
Anthony J. Varrichio [ ] [ ]
VOTE WITHHELD from all nominees listed above [ ]
VOTE VOTE
FOR AGAINST ABSTAIN
---- ------- -------
3. RATIFICATION OF PRICEWATERHOUSE
COOPERS, LLP AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1998 [ ] [ ] [ ]
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED
BY THE SHAREHOLDER IN THE SPACE PROVIDED. IF NO DIRECTION
IS GIVEN, THIS PROXY WILL BE VOTED "FOR THE NOMINEES" IN
ITEM 2 AND "FOR" ITEMS 1 AND 3.
Signature(s):______________ Date _________
Please sign exactly as your name appears hereon. Attorneys,
trustees, executors and other fiduciaries acting in a
representative capacity should sign their names and give
their titles. An authorized person should sign on behalf of
corporations, partnerships, associations, etc. and give his
or her title. If your shares are held by two or more
persons, each person must sign. Receipt of the notice of
meeting and proxy statement is hereby acknowledged.
YES NO
I plan to attend the Annual Meeting [ ] [ ]
