SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
|X| Definitive Proxy Statement (as permitted by
Rule 14a-6(e)(2))
| | Definitive Additional Materials
| | Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
HUMASCAN 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:*
(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:
- --------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
1
<PAGE>
HUMASCAN INC.
125 Moen Avenue
Cranford, New Jersey 07016
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held June 26, 1997
--------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
HUMASCAN INC. ("Company") will be held at the executive offices of the Company,
125 Moen Avenue, Cranford, New Jersey, on Thursday, June 26, 1997, at 10:00 a.m.
local time, for the following purposes, all as more fully described in the
attached proxy statement:
1. To elect five directors of the Company to hold office until the
Annual Meeting of Stockholders in 1998 and until their respective successors
have been duly elected and qualified; and
2. To transact such other business as may properly come before the
meeting, or any or all adjournments thereof.
Only stockholders of record at the close of business on May 2, 1997
will be entitled to notice of, and to vote at, the meeting and any adjournments
thereof.
You are urged to read the attached proxy statement, which contains
information relevant to the action to be taken at the meeting. In order to
assure the presence of a quorum, whether or not you expect to attend the meeting
in person, please sign and date the accompanying proxy card and mail it promptly
in the enclosed addressed, postage prepaid envelope. You may revoke your proxy
if you so desire at any time before it is voted.
By Order of the Board of Directors
Kenneth S. Hollander
Secretary
Cranford, New Jersey
May 7, 1997
<PAGE>
HUMASCAN INC.
----------
PROXY STATEMENT
----------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 26, 1997
----------
This Proxy Statement and the accompanying form of proxy is furnished to
stockholders of HUMASCAN INC. ("Company") in connection with the solicitation of
proxies, in the accompanying form, by the Board of Directors of the Company for
use in voting at the Annual Meeting of Stockholders to be held at the offices of
the Company, 125 Moen Avenue, Cranford, New Jersey, on Thursday, June 26, 1997,
at 10:00 a.m., and at any and all adjournments thereof. Any proxy given pursuant
to this solicitation may be revoked by the person giving it by giving notice to
the Secretary of the Company in person, or by written notification actually
received by the Secretary, at any time prior to its being exercised. Unless
otherwise specified in the proxy, shares represented by proxies will be voted
for the election of the nominee listed herein.
The Company's executive offices are located at 125 Moen Avenue,
Cranford, New Jersey 07016. On or about May 7, 1997, this Proxy Statement and
the accompanying form of proxy, together with a copy of the Annual Report of the
Company for the fiscal year ended December 31, 1996, is being mailed to each
stockholder of record at the close of business on May 2, 1997.
VOTING SECURITIES
The Board of Directors has fixed the close of business on May 2, 1997,
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting. Only stockholders of record at the close of
business on that date will be entitled to vote at the Annual Meeting or any and
all adjournments thereof. As of May 2, 1997, the Company had issued and
outstanding 7,720,313 shares of Common Stock, the Company's only class of voting
securities outstanding. Each stockholder of the Company will be entitled to one
vote for each share of Common Stock registered in his name on the record date.
The presence, in person or by proxy, of a majority of all of the outstanding
shares of Common Stock constitutes a quorum at the Annual Meeting. Proxies
relating to "street name" shares that are returned to the Company but marked by
brokers as "not voted" will be treated as shares present for purposes of
determining the presence of a quorum on all matters but will not be treated as
shares entitled to vote on the matter as to which authority to vote is withheld
by the broker ("broker non-votes"). The election of directors requires a
plurality vote of those shares voted at the Annual Meeting with respect to the
election of directors. "Plurality" means that the individuals who receive the
largest number of votes cast "FOR" are elected as directors. Consequently, any
shares not voted "FOR" a particular nominee (whether as a result of a direction
to withhold authority or a broker non-vote) will not be counted in such
nominee's favor. All other matters to be voted on will be decided by the
affirmative vote of a majority of the shares present or represented at the
Annual Meeting and entitled to vote. On any such matter, an abstention will have
the same effect as a negative vote, but because shares held by brokers will not
be considered entitled to vote on matters as to which the brokers withhold
authority, a broker non-vote will have no effect on the vote.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of May 2, 1997 by (i) each
stockholder known by the Company to be the beneficial owner of 5% or more of the
outstanding Common Stock, (ii) each of the Company's directors, (iii) each of
the named executive officers (as such term is defined in Rule 402(a)(2) of
Regulation S-B) and (iv) all directors and executive officers of the Company as
a group. Except as otherwise indicated, the Company believes that the beneficial
owners of the Common Stock listed below, based on information furnished by such
owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable. Shares of Common Stock
issuable upon exercise of options and warrants that are currently exercisable or
exercisable within 60 days of the date of this Proxy Statement have been
included in the table.
<TABLE>
<CAPTION>
Number of Shares of Common Percentage
Name and Address Stock Beneficially Owned Beneficially Owned
- ---------------- ------------------------ ------------------
<S> <C> <C>
Donald B. Brounstein(1)................................ 914,000(2) 11.7%
Steven S. Elbaum
1790 Broadway
New York, NY 10019.................................. 40,833(3) 1.0%
Jack L. Rivkin
388 Greenwich Street
New York, NY 10013.................................. 0 *
John F. Sasen, Sr.
7800 Belfort Parkway, Suite 250
Jacksonville, FL 32256.............................. 210,833(4) 2.7%
Udi Toledano
545 Madison Avenue, Suite 800
New York, NY 10022.................................. 230,229(5) 2.9%
Travelers Group Inc.
388 Greenwich Street
New York, NY 10013.................................. 2,180,778(6) 26.8%
Scantek Medical, Inc.
26 Merry Lane
East Hanover, NJ 07936.............................. 1,014,713(7) 13.1%
OppenheimerFunds, Inc.
Two World Trade Center
New York, NY 10048.................................. 750,000(8) 9.7%
All directors and executive officers as a group
(7 persons)(2)(3)(4)(5)(9).......................... 1,488,895 18.3%
</TABLE>
- ----------
* Less than 1%.
(1) c/o HumaScan Inc., 125 Moen Avenue, Cranford, New Jersey 07016.
(2) Includes an aggregate of 17,000 shares of Common Stock held by Mr.
Brounstein's wife and son and 72,000 shares issuable upon exercise of
immediately exercisable options and warrants held by Mr. Brounstein.
(3) Includes 22,083 shares of Common Stock issuable upon exercise of
immediately exercisable options and warrants. Does not include 6,667
shares issuable upon exercise of options which are not currently
exercisable.
(4) Includes 18,333 shares of Common Stock issuable upon exercise of
immediately exercisable options held by Mr. Sasen. Also includes 56,250
shares held by Physician Sales & Service, Inc. ("PSS") and 136,250
2
<PAGE>
shares issuable upon exercise of immediately exercisable warrants held
by PSS. Does not include 6,667 shares issuable upon exercise of options
held by Mr. Sasen which are not currently exercisable. Mr. Sasen
disclaims beneficial ownership of the securities held by PSS.
(5) Includes 42,017 shares issuable upon exercise of immediately
exercisable options and warrants held by Mr. Toledano. Also includes
75,000 shares of Common Stock held by Mr. Toledano's wife and 50,477
shares issuable upon exercise of immediately exercisable warrants held
by Mr. Toledano's wife and a certain trust for the benefit of their
minor children ("Toledano Trust") and an aggregate of 5,860 shares
issuable upon exercise of immediately exercisable warrants held by
certain other members of Mr. Toledano's family. Does not include 6,667
shares issuable upon exercise of options held by Mr. Toledano which are
not currently exercisable. Mr. Toledano disclaims beneficial ownership
of all of the securities held by members of his family other than his
wife and the Toledano Trust.
(6) Includes 1,440,000 shares of Common Stock held by Travelers Insurance
Company ("TIC"), 333,155 shares issuable upon exercise of immediately
exercisable options and warrants held by TIC, 234,875 shares held by
Smith Barney Worldwide Special Fund, N.V. ("Smith Barney Fund"), 44,135
shares issuable upon exercise of immediately exercisable warrants held
by Smith Barney Fund, 44,125 shares held by Smith Barney Worldwide
Securities, Ltd. ("Smith Barney Securities"), 8,063 shares issuable
upon exercise of immediately exercisable warrants held by Smith Barney
Securities, 37,500 shares issuable upon exercise of immediately
exercisable warrants held by Smith Barney Inc. and 38,925 shares held
in accounts managed by Smith Barney Inc. Does not include 6,667 shares
issuable upon exercise of options held by TIC which are not currently
exercisable. Smith Barney Inc. and TIC are both subsidiaries of
Travelers Group Inc., and Smith Barney Securities and Smith Barney Fund
are investment funds domiciled outside the United States for which
Smith Barney Inc. acts as sponsor and adviser. None of Travelers Group
Inc., TIC, Smith Barney Inc. or their respective affiliates has assumed
or has any responsibility for the management, business or operations of
the Company or for the statements contained in this Proxy Statement
(other than the limited information regarding the stock ownership of
such entities under the caption "Principal Stockholders").
(7) Includes 5,625 shares of Common Stock issuable upon exercise of
immediately exercisable warrants held by Scantek Medical, Inc.
("Scantek"), 213,750 shares of Common Stock owned by Zsigmond G. Sagi
("Dr. Sagi"), the Chairman of the Board and a principal stockholder of
Scantek, 375 shares issuable upon exercise of immediately exercisable
options owned by Dr. Sagi and 15,900 shares held by Patricia B.
Furness, Vice President and a stockholder of Scantek. Does not include
1,125 shares issuable upon exercise of options held by Dr. Sagi which
are not immediately exercisable.
(8) The information regarding OppenheimerFunds, Inc. is derived from a
Schedule 13G filed by OppenheimerFunds, Inc. dated February 5, 1997.
(9) Includes 434,770 shares of Common Stock issuable upon exercise of
immediately exercisable options and warrants held by directors and
executive officers of the Company. Does not include 79,501 shares
issuable upon exercise of options held by executive officers of the
Company which are not immediately exercisable.
PROPOSAL I: ELECTION OF DIRECTORS
At the Annual Meeting, five directors (constituting the entire Board of
Directors) are to be elected to serve until the next annual meeting of
stockholders and until their respective successors are elected and qualified.
The proxies given pursuant to the solicitation will be voted for the five
nominees--Donald B. Brounstein, Steven S. Elbaum, Jack L. Rivkin, John F. Sasen,
Sr. and Udi Toledano--unless authority is withheld. Should a nominee become
unavailable for any reason, the proxies will be voted for an alternative nominee
to be determined by the persons named in the proxy. The Board of Directors has
no reason to believe that any nominee will be unavailable.
3
<PAGE>
Information About the Nominees
Name Age Principal Occupation
- ---- --- --------------------
Donald B. Brounstein 45 President and Chief Executive Officer of the
Company
Steven S. Elbaum 48 Chairman and Chief Executive Officer of The
Alpine Group, Inc.
Jack L. Rivkin 56 Senior Vice President of Travelers Group Inc.
John F. Sasen, Sr. 55 Chief Executive Officer and President of
Physician Sales & Service, Inc.
Udi Toledano 46 President of Andromeda Enterprises, Inc.
Donald B. Brounstein has served as President and Chief Executive
Officer of the Company since its inception. In 1978, Mr. Brounstein founded Lee
Surgical Co., Inc. ("Lee Surgical"), a company which specialized in sales and
service of medical supplies and equipment to physicians throughout New Jersey
and New York. He was Chief Executive Officer of Lee Surgical until February 1994
when Lee Surgical was acquired by PSS. Mr. Brounstein served as General Manager
of PSS until January 1995. In 1989, Mr. Brounstein founded BBU Leasing Inc., a
medical equipment finance company, of which he remains a director. Mr.
Brounstein devotes all of his business time to the Company's affairs.
Steven S. Elbaum has been a director of the Company since June 1996.
Mr. Elbaum has been the Chairman and Chief Executive Officer of The Alpine
Group, Inc., a public, diversified holding company which owns several companies
engaged in various manufacturing businesses, since 1984. He was a partner in the
law firm of Gifford, Woody, Palmer & Series from 1979 to 1984 and was an
associate with such firm from 1974 to 1979. Mr. Elbaum also is a director of
Interim Services, Inc., one of the nation's largest providers of value added
staffing and health care services, Polyvision Corporation, a manufacturer of
information display systems, Superior Telecom, Inc., a provider of
telecommunications services, and Broadway & Seymour, Inc., a software solutions
company, each of which is a public company.
Jack L. Rivkin has been a director of the Company since May 1996. Mr.
Rivkin has been a Senior Vice President of Travelers Group Inc., the parent
company of TIC, and Smith Barney Inc., since January 1, 1996. He is currently
responsible for the management of venture capital and public equity partnerships
for several insurance subsidiaries of Travelers Group Inc. He also is a director
and member of the Investment Committee of Greenwich Street Capital Partners,
Inc., a merchant banking fund affiliated with Travelers Group Inc. From May 1993
to October 1995, he was Vice Chairman and Director of Global Research at Smith
Barney Inc. From August 1992 to May 1993, he was an independent consultant. From
1990 to August 1992, Mr. Rivkin was Director of the Equities Division and
Director of Research of Lehman Brothers. From 1987 to 1990, he was Director of
Research at Shearson Lehman Brothers. From 1984 to 1987, Mr. Rivkin was
President of PaineWebber Capital, Inc., the merchant banking arm of PaineWebber
Group, and Chairman of Mitchell Hutchins Asset Management. He is the co-author
of a book on the venture capital industry, "Risk and Reward, Venture Capital and
the Making of America's Great Industries," published by Random House. He also is
a guest lecturer on venture capital at Columbia University.
John F. Sasen, Sr. has been a director of the Company since May 1996.
Mr. Sasen has been Chief Executive Officer of PSS since March 1997 and President
of PSS since August 1995, Chief Operating Officer of PSS since December 1993 and
a director of PSS since July 1993. Mr. Sasen also was Executive Vice President
of PSS from August 1993 to August 1995. From August 1990 to December 1992, he
was Vice President--Sales and Marketing of PSS, and from January 1993 to July
1993 he was Regional Vice President of PSS. Prior to joining PSS, Mr. Sasen was
Vice President--Sales, Marketing and Distributor Relations of Becton, Dickinson
& Co., a manufacturer of health care products. Mr. Sasen was employed by Becton,
Dickinson & Co. for over 20 years.
Udi Toledano has been a director of the Company since May 1996. Mr.
Toledano has been the President of Andromeda Enterprises, Inc., a private
investment company, since December 1993. Prior to that, he was the President of
CR Capital Inc., a private investment company, for more than five years. He has
also been an advisor to various public and private corporations, none of which
is affiliated with or competes with the Company. Mr. Toledano is a director and
Chairman of the Board of Alyn Corporation, a producer of advanced materials, and
is a director of Global Pharmaceutical Corporation, a generic pharmaceuticals
manufacturer; Universal Stainless &
4
<PAGE>
Alloy Products, Inc., a specialty steel producer; and Pudgie's Chicken, Inc.,
a national fast food chain; each of which is a public company.
Information About the Other Executive Officers
Name Age Position
- ---- --- --------
James J. Whidden 61 Senior Vice President of Clinical Development
Kenneth S. Hollander 32 Chief Financial Officer
James J. Whidden has served as Senior Vice President of Clinical
Development of the Company since May 1996. From the Company's inception until
May 1996, he was a consultant to the Company. From 1985 to 1994, Mr. Whidden was
a consultant for various private and public companies in the health care field,
as well as president of two development stage medical companies. From 1989 to
1990, he was President of Biomonitor, Inc., a development stage biotechnology
company, and from 1988 to 1989, he was President of Humagen, Inc., a development
stage biotechnology company. In 1983 and 1984, he was Senior Vice President,
Business Development at Technicon Corporation, a manufacturer of clinical
instruments and diagnostic chemicals and had responsibility for new clinical
systems. From 1981 to 1982, he was an independent consultant in the health care
industry and from 1975 to 1981, he was President of two divisions of Becton,
Dickinson & Co., a manufacturer of health care products.
Kenneth S. Hollander has been Chief Financial Officer of the Company
since June 1996. From 1989 to May 31, 1996, Mr. Hollander was Controller of
Sidmak Laboratories, Inc., a company engaged in the generic pharmaceutical
industry. From 1987 to 1989, Mr. Hollander was employed by the accounting firm
of Arthur Andersen & Co. Mr. Hollander serves as Treasurer of the Board of
Trustees of The Richmond Fellowship, a private, non-profit, psychiatric
transitional residence.
Directors are elected to serve until the next annual meeting of
stockholders or until their successors are elected and qualified. Officers are
elected annually by the Board of Directors and serve at the discretion of the
Board.
The Company's Board of Directors held four meetings during 1996. Except
for Steven S. Elbaum, who attended one of the two meetings held during the
period for which he served as a director, all of the directors attended all of
the meetings held during the periods for which they served as directors.
Committees
The Company has an Executive Committee, a Compensation Committee and an
Audit Committee, all of which were established in June 1996. None of the
Committees held any meetings during 1996. The Company does not have a standing
nominating committee.
The Executive Committee currently consists of Mr. Brounstein, as
Chairman, and Messrs. Rivkin and Toledano. The Executive Committee has all the
powers of the Company's Board of Directors except that it is not authorized to
amend the Company's Certificate of Incorporation, declare any dividends or issue
shares of the capital stock of the Company. The Audit Committee currently
consists of Mr. Elbaum as Chairman, and Messrs. Rivkin and Toledano. The Audit
Committee reviews with the Company's independent accountants the scope and
timing of their audit services, any other services they are asked to perform,
the report of independent accountants on the Company's financial statements
following completion of their audit and the Company's policies and procedures
with respect to internal accounting and financial controls. In addition, the
Audit Committee makes an annual recommendation to the Board of Directors
concerning the appointment of independent accountants for the ensuing year. The
Compensation Committee currently consists of Mr. Toledano, as Chairman, and
Messrs. Brounstein and Rivkin. The Compensation Committee reviews the
compensation and benefits of all officers of the Company, makes recommendations
to the Board of Directors and reviews general policy matters relating to
compensation and benefits of employees of the Company.
5
<PAGE>
Executive Compensation
Set forth in the following table is information as to the compensation
paid or accrued to Donald B. Brounstein, the Company's Chief Executive Officer,
for the year ended December 31, 1996. No other executive officer of the Company
received a total annual salary and bonus from the Company in excess of $100,000
for the year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------- ----------------------
Other Annual Securities
Name and Principal Position Year Salary ($) Compensation ($) Underlying Options (#)
- --------------------------- ---- ---------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Donald B. Brounstein 1996 145,000 $7,380(1) 37,500(2)
President, Chief Executive Officer
and Director
</TABLE>
(1) Represents an automobile allowance.
(2) Represents options to purchase 37,500 shares of Common Stock for $5.33 per
share through February 9, 2001, all of which are currently exercisable.
Mr. Brounstein did not receive non-cash benefits having a value
exceeding 10% of cash compensation during 1995.
The following tables set forth certain information with respect to
options granted in 1996 to Mr. Brounstein:
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total Options Exercise
Number of Securities Granted to Employees Price Expiration
Name of Executive Underlying Options Granted in Fiscal Year ($/Share) Date
- ----------------- -------------------------- -------------- --------- ----------
<S> <C> <C> <C> <C>
Donald B. Brounstein 37,500(1) 15.5% 5.33 2/9/2001
President, Chief Executive Officer
and Director
</TABLE>
(1) Represents options granted outside the 1996 Plan to purchase 37,500
shares of Common Stock for $5.33 per share through February 9, 2001,
all of which are currently exercisable.
AGGREGATE YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Options Value of Unexercised In-the-Money
at Fiscal Year End (#) Options at Fiscal Year End ($)
------------------------------ ---------------------------------
Name of Executive Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Donald B. Brounstein 37,500 0 11,063(1) 0
President, Chief Executive Officer
and Director
</TABLE>
(1) Represents the difference between the aggregate market value at
December 31, 1996 of the Common Stock (based on a last sale price of
$5.625 on that date) and the options' aggregate exercise price.
6
<PAGE>
Employment Agreements
The Company has an employment agreement with Donald B. Brounstein
pursuant to which Mr. Brounstein serves as the Company's President and Chief
Executive Officer. Mr. Brounstein's employment agreement provides for a base
annual salary of $145,000 with annual cost of living increases and a customary
benefits package. The agreement has a term of three years, ending December 31,
1998, with automatic one-year extensions thereafter unless either party gives
notice of termination. Mr. Brounstein's employment agreement prohibits him from
competing with the Company for one year following his termination of employment
with the Company and disclosing confidential information or trade secrets in any
unauthorized manner. The Company has purchased a key person insurance policy on
the life of Mr. Brounstein in the amount of $8,000,000, with $600,000 of the
death benefit payable to a beneficiary selected by Mr. Brounstein and the
remaining $7,400,000 payable to the Company.
Under his employment agreement, Mr. Brounstein is eligible to receive
in 1997 an annual bonus of up to 100% of his base compensation, subject to the
Company achieving certain after-tax net income levels during the 1997 calendar
year. The following table sets forth for 1997 the target after-tax net income
that must be achieved by the Company in order for Mr. Brounstein to be entitled
to the corresponding bonus award:
Additional Percentage of
Targeted 1997 After Tax Net Income Salary Paid as Bonus
- ---------------------------------- --------------------
$3.0 million or greater but less than $3.7 million.... 10%
$3.7 million or greater but less than $4.4 million.... 20%
$4.4 million or greater but less than $4.7 million.... 30%
$4.7 million or greater but less than $5.0 million.... 40%
$5.0 million or greater............................... 100%
Mr. Brounstein will be eligible to receive performance-based annual
bonuses for each year after 1997 modeled on a similar formula as determined and
agreed to by the Compensation Committee.
Stock Options
1996 Plan. The Company's 1996 Stock Incentive Plan ("1996 Plan") was
adopted by the Company's Board of Directors in June 1996 for the purpose of
securing for the Company and its stockholders the benefits arising from the
ownership of restricted shares of Common Stock ("Restricted Stock"), stock
appreciation rights ("SARs") and options to purchase Common Stock ("Options") by
directors who are not employees ("Eligible Directors") (Messrs. Elbaum, Rivkin,
Sasen and Toledano are currently Eligible Directors), officers, other key
employees and consultants ("Key Employees") of the Company (and any subsidiary
companies) who are expected to contribute to the Company's future growth and
success. No shares of Restricted Stock or SARs have been granted under the 1996
Plan. Options for 188,000 shares have been issued under the 1996 Plan as of the
date of this Proxy Statement. No award may be granted under the 1996 Plan after
June 2006.
Under the 1996 Plan, the maximum number of shares with respect to which
Options or SARs may be granted or which may be awarded as restricted stock is
700,000 shares of Common Stock. The Company may in its sole discretion grant
shares of Restricted Stock, SARs and Options to Key Employees and shall grant
Options to the Company's Eligible Directors subject to specified terms and
conditions and in accordance with a specified formula ("Formula") as discussed
below. The 1996 Plan is administered by the Board of Directors, which, subject
to the terms of the 1996 Plan, determines the Key Employees who will receive
grants of Options, SARs or Restricted Stock, the number of shares of Common
Stock subject to each Option or SAR or awarded as Restricted Stock, the grant
date, the expiration date, and other terms and conditions.
Under the Formula, each Eligible Director was granted in June 1996
Options to purchase 15,000 shares of Common Stock at an exercise price equal to
the initial public offering price per share, all of which vested immediately
upon grant ("Initial Director Options"). On the first business day following the
Annual Meeting, and thereafter on the first business day following each
successive annual meeting of stockholders, so long as Options remain available
to grant to Eligible Directors, each person who is elected as a director after
that meeting and is
7
<PAGE>
an Eligible Director, and each person who continues to serve as a director after
that meeting and is an Eligible Director, shall be granted 10,000 Options
("Director Options") in recognition of service as a director, subject to
vesting, for the year ending on the day prior to the next annual meeting of
stockholders of the Company to elect directors. Director Options expire ten
years from the date of grant and vest as follows (except for the Initial
Director Options, which vest immediately upon grant): 33 1/3% upon the grant of
such Options, 66 2/3% one year after the date of grant and 100% two years after
the date of grant, in each case assuming the recipient continuously serves as a
director during that time.
Other Options. The Company has issued options outside of the 1996 Plan
to certain officers, employees and consultants to purchase a total of 142,500
shares of Common Stock. Options for 131,250 shares were granted on February 9,
1996 and have a five-year term and an exercise price of $5.33 per share. All of
such options were fully vested on the date of grant. Options for 11,250 shares
were granted as of June 3, 1996, have an exercise price of $5.33 per share and
vested in full on April 30, 1997.
Five former directors of the Company each were granted 1,500 options
outside the 1996 Plan in September 1996 in replacement of options granted under
the Company's former Nonemployee Director Stock Incentive Plan which expired as
a consequence of such directors' resignation from the Board in connection with
the Company's initial public offering.
Director Compensation
Non-employee members of the Board of Directors are paid $500 (plus
reasonable expenses) for each attended meeting of the Board of Directors or
committee thereof. Non-employee members of the Board of Directors of the Company
also are eligible for the grant of Options under the 1996 Plan which currently
provides for each Eligible Director (currently Messrs. Elbaum, Rivkin, Sasen and
Toledano) to receive the Initial Director Options and the Director Options. Mr.
Rivkin is a nominee of TIC. Mr. Rivkin has waived the $500 fee for attendance at
meetings of the Board of Directors or committees thereof and the Initial
Director Options and the 1997 Director Options. In lieu thereof, the Board of
Directors in June 1996 granted TIC options outside the 1996 Plan to purchase
15,000 shares of Common Stock at an exercise price equal to the initial public
offering price and has determined to grant TIC, on the first business day
following the annual meeting of stockholders in 1997, options outside the 1996
Plan to purchase 10,000 shares.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers, directors and persons who beneficially own more
than ten percent of a registered class of the Company's equity securities
("ten-percent stockholders") to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and The Nasdaq Stock
Market, Inc. Officers, directors and ten-percent stockholders also are required
to furnish the Company with copies of all Section 16(a) forms they file. Based
on its review of the copies of such forms furnished to it, and written
representations that no other reports were required, the Company believes that
during the Company's fiscal year ended December 31, 1996, all of its officers,
directors and tenpercent stockholders complied with the Section 16(a) reporting
requirements, except that a Form 3 required to be filed by Dr. Sagi in August
1996 was not filed until April 1997.
Certain Relationships and Related Transactions
Physician Sales and Service, Inc. In February 1996, the Company entered
into an exclusive supply and distribution agreement (as amended, "Distribution
Agreement" ) with PSS, a publicly traded company and one of the leading
distributors of medical supplies, diagnostic equipment and pharmaceuticals to
office-based medical professionals in the United States. PSS, with a reported
distribution network of approximately 704 sales representatives and 61
company-operated service/distribution centers serving more than 92,000
physician-based offices throughout the United States, has agreed to distribute
the BreastAlert Differential Temperature Sensor (the "BreastAlert device").
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Under the Distribution Agreement, over a two-year period beginning in
1997, PSS is to receive volume discount price incentives from the Company to the
extent PSS exceeds sales targets of 1.0 million units in 1997 and 3.5 million
units in 1998. If sales by PSS are less than 50% of such targets, the Company
and PSS will each have the right to terminate the Distribution Agreement upon
three months' notice. The term of the Distribution Agreement continues until
terminated by either party for failure to meet such sales targets or for certain
material breaches which are not cured within prescribed time limits. Also,
pursuant to the distribution agreement, PSS purchased an aggregate of 56,250
shares of Common Stock and warrants to purchase an additional 11,250 shares of
Common Stock at $2.93 per share and was issued warrants to purchase 125,000
shares of Common Stock at $4.00 per share. John F. Sasen, Sr., President and
Chief Executive Officer of PSS, is a director of the Company.
Scantek Medical, Inc. In October 1995, the Company and Scantek entered
into a license agreement ("License Agreement") pursuant to which Scantek granted
the Company an exclusive license to manufacture and sell the BreastAlert device
in the United States and Canada. The License Agreement provides for a cash
payment ("Cash Portion of the Licensing Fee") to Scantek of $1,600,000, $550,000
of which has already been funded. Subject to the Company's acceptance of the
equipment to be used to manufacture the BreastAlert device ("Production Line"),
$175,000 of the balance is payable on December 31, 1997, $175,000 on March 31,
1998, $350,000 on October 31, 1998 and $350,000 on January 31, 1999, provided,
however, that any Surplus Cash Flow (one half of net income, as defined in the
License Agreement, subject to certain adjustments) after the Company begins
operations is to be applied as prepayments to unpaid installments of the Cash
Portion of the Licensing Fee (as defined in the License Agreement) in inverse
order of maturity. Contemporaneously with the execution of the License
Agreement, the Company issued to Scantek 675,000 shares of Common Stock. Scantek
received an additional 329,063 shares of Common Stock upon the closing of a
private placement in May 1996 ("May 1996 Private Placement") in exchange for the
termination of its right, pursuant to the License Agreement, to maintain a
specified ownership interest in the Company.
Pursuant to the License Agreement, Scantek is entitled to additional
payments as follows: (i) $100,000 (to be applied to unpaid installments of the
Cash Portion of the Licensing Fee in order of maturity) upon the later of (x)
the investment at any time by PSS of $500,000 in the Company by exercising the
PSS Warrant and (y) the shipment by the Company of the first order of the
BreastAlert device to PSS; and (ii) $300,000 (of which $100,000 is to be applied
to unpaid installments of the Cash Portion of the Licensing Fee in order of
maturity and $200,000 is to be applied to unpaid installments of the Cash
Portion of the Licensing Fee in inverse order of maturity) upon the earlier to
occur of (a) the extension of the relevant patents at least through January 1,
2003 or (b) Scantek's obtaining a new United States patent on the product. The
License Agreement also provides for minimum annual royalty payments of $150,000,
$300,000, $400,000, and $500,000, respectively, in the first four years in which
the product is sold and $600,000 in the fifth and subsequent years ("Minimum
Royalties") and maximum royalty payments ranging from 3% of annual net sales up
to $2,000,000 to 10% of the annual net product sales if annual net product sales
exceed $10,000,000 ("Percentage Royalties"). In addition, the License Agreement
will terminate automatically if the aggregate earned royalties for the first
three years the product is sold do not exceed $950,000 ("Threshold Earned
Royalties"). The Minimum Royalties and Threshold Earned Royalties terminate
automatically at any time after May 22, 1998 (the date the relevant patents
expire) if a competitor introduces a product which would have infringed upon
such patents. In addition, the Percentage Royalties are reduced or eliminated if
the Company reduces the price of its product below certain preset amounts. The
License Agreement also provides that, if Scantek places an order with the
Company prior to the date which is 60 days prior to the Company's acceptance of
the Production Line, Scantek may purchase from the Company $1,000,000 worth of
BreastAlert devices at a per unit price equal to the greater of 150% of the
Company's Costs of Production (as defined in the License Agreement) or $2.50.
Pursuant to the License Agreement, Scantek is obligated to render
consulting services ("Consulting Services") to the Company through July 1997 in
connection with bringing the BreastAlert device to market and Dr. Sagi must
devote up to one day per week or 90 hours per calendar quarter of his time to
the development and marketing of the BreastAlert device ("Minimum Services"). In
the event Consulting Services are requested in excess of the Minimum Services,
Scantek will be compensated at the rate of $100 per hour. Dr. Sagi also is
required to render advisory and supervisory services on behalf of the Company in
connection with construction of the Production Line. Scantek is responsible for
all expenses of training the Company's manufacturing personnel. The Company is
obligated to reimburse Scantek for all reasonable out-of-pocket expenses.
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Zigmed, Inc. The Production Line has been constructed and is being
installed by Zigmed, a medical engineering contractor. The agreement between
Zigmed and the Company ("Turnkey Construction Contract") provides for the
turnkey construction of the Production Line at a fixed price of $1,750,680, with
payments to Zigmed in stages over a 15-month period. $1,245,000 has been paid to
Zigmed pursuant to the Turnkey Construction Contract as of May 2, 1997.
Specifications for the Production Line were prepared by Scantek.
Zsigmond G. Sagi, the chief executive officer and a principal of
Zigmed, is the son of Dr. Sagi. The Company has agreed to pay Zsigmond G. Sagi a
completion bonus of up to $15,000 plus warrants to purchase 11,250 shares of
Common Stock at an exercise price of $5.33 per share if certain conditions are
met in connection with the manufacturing of the Production Line.
Zsigmond G. Sagi has agreed to pay the Company damages of $100,000 per
month for three months commencing July 31, 1997 if Zigmed is unable to deliver
the Production Line by March 31, 1997. In addition, as part of the License
Agreement, Scantek has agreed to pay the Company $75,000 per month if the
Production Line is not accepted by the Company pursuant to the terms of the
Turnkey Construction Contract by March 31, 1997. Furthermore, Scantek has
guaranteed that BreastAlert device manufactured costs will not exceed $2.25 for
each unit, excluding depreciation, assuming production at the rate of 1,000,000
units or more per year for two consecutive quarters. If the Company's
manufactured cost is greater than $2.25 per unit, royalties due to Scantek will
be offset by the product of (x) the number of units manufactured during the
relevant year multiplied by (y) the manufactured cost of the unit less $2.25.
Donald B. Brounstein. During 1995, Donald B. Brounstein, the Company's
President, Chief Executive Officer and a director, loaned the Company an
aggregate of $125,000 on an interest-free basis ("1995 Loans"). Mr. Brounstein
received no consideration for the 1995 Loans. Mr. Brounstein also purchased
$40,000 principal amount of 10% promissory notes from the Company ("March 1996
Bridge Notes") in connection with a private placement of notes and warrants to
purchase Common Stock effected by the Company in March 1996. In connection with
the May 1996 Private Placement, Mr. Brounstein applied such $40,000 principal
amount of March 1996 Bridge Notes and $34,000 of the 1995 Loans to the initial
purchase price for two Units, each consisting of 37,500 shares of Series A
Preferred Stock (which converted automatically on a one-for-one basis into
Common Stock upon consummation of the Company's initial public offering in
August 1996) and warrants to purchase 7,500 shares of Common Stock for $2.93 per
share. The remaining $91,000 of the 1995 Loans, plus accrued interest of $711 on
Mr. Brounstein's March 1996 Bridge Notes, was repaid to Mr. Brounstein from the
proceeds of the May 1996 Private Placement.
Travelers Group Inc. In connection with the May 1996 Private Placement,
the Company issued warrants to purchase 37,500 shares of Common Stock for $2.93
per share to Smith Barney Inc., a subsidiary of Travelers Group Inc.
Udi Toledano. In connection with the May 1996 Private Placement, the
Company issued warrants to purchase an aggregate of 80,625 shares of Common
Stock to Udi Toledano, a director of the Company, and members of his family
("Toledano Warrants"). Pursuant to their terms, the Toledano Warrants currently
may be exercised for an aggregate of only 26,250 shares, at a price of $2.93 per
share.
The Company believes that the terms of each of the foregoing
transactions were at least as favorable to the Company as could have been
obtained from third parties in arms' length transactions. In connection with the
Company's initial public offering, the Company adopted a policy whereby all
future transactions between the Company and its officers, directors, principal
stockholders or affiliates will be approved by a majority of the Board of
Directors, including a majority of the independent and disinterested members of
the Board of Directors or, if required by law, a majority of disinterested
stockholders, and will be on terms no less favorable to the Company than could
be obtained in arm's length transactions from unaffiliated third parties.
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INDEPENDENT ACCOUNTANTS
The Company has selected KPMG Peat Marwick LLP, Short Hills, New
Jersey, as its independent accountants for the year ending December 31, 1997. A
representative of KPMG Peat Marwick LLP is expected to be present at the meeting
with an opportunity to make a statement if the representative desires to do so
and is expected to be available to respond to appropriate questions from
stockholders.
SOLICITATION OF PROXIES
The solicitation of proxies in the enclosed form is made on behalf of
the Company and the cost of this solicitation is being paid by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone or telegraph using the services of directors, officers and regular
employees of the Company at nominal cost. Banks, brokerage firms and other
custodians, nominees and fiduciaries will be reimbursed by the Company for
expenses incurred in sending proxy material to beneficial owners of the
Company's Common Stock.
1998 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 1998 Annual Meeting of
Stockholders to be eligible for inclusion in the Company's Proxy Statement, they
must be received by the Company at its principal office in Cranford, New Jersey,
by January 7, 1998.
OTHER MATTERS
The Board knows of no matter which will be presented for consideration
at the meeting other than the matters referred to in this Proxy Statement.
Should any other matter properly come before the meeting, it is the intention of
the persons named in the accompanying proxy to vote such proxy in accordance
with their best judgment.
By Order of the Board of Directors
Kenneth S. Hollander
Secretary
Cranford, New Jersey
May 7, 1997
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HUMASCAN INC. - PROXY
Solicited by the Board of Directors
for Annual Meeting to be held on June 26, 1997
P The undersigned Stockholder(s) of HUMASCAN INC., a Delaware
corporation ("Company"), hereby appoints Donald B. Brounstein and
Kenneth S. Hollander, or either of them, with full power of
substitution and to act without the other, as the agents, attorneys
and proxies of the undersigned, to vote the shares standing in the
R name of the undersigned at the Annual Meeting of Stockholders of the
Company to be held on June 26, 1997 and at all adjournments thereof.
This proxy will be voted in accordance with the instructions given
below. If no instructions are given, this proxy will be voted FOR all
O of the following proposals.
1. Election of the following Directors:
FOR all nominees listed below, except WITHHOLD AUTHORITY to vote
X as marked to the contrary below | | for all nominees listed below | |
Donald B. Brounstein, Steven S Elbaum, Jack L. Rivkin, John F. Sasen, Sr.,
Udi Toledano
Y
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the space below.
- --------------------------------------------------------------------------------
2. In their discretion, the proxies are authorized to vote upon such other
business as may come before the meeting or any adjournment thereof.
| | I plan to attend the Annual Meeting.
Date _____________________________________, 1997
________________________________________________
Signature
________________________________________________
Signature if held jointly
Please sign exactly as name appears above. When
shares are held by joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please
sign in full corporate name by president or
other authorized officer. If a partnership,
please sign in partnership name by authorized
person.
