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
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
/_/ Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
HUMASCAN INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(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.
<PAGE>
HUMASCAN INC.
125 Moen Avenue
Cranford, New Jersey 07016
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held July 30, 1998
--------------------
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, July 30, 1998, at 10:00 a.m.
local time, for the following purposes, all as more fully described in the
attached proxy statement:
1. To elect four directors of the Company to hold office until the
Annual Meeting of Stockholders in 1999 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 June 10, 1998
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
June 24, 1998
<PAGE>
HUMASCAN INC.
--------------------
PROXY STATEMENT
--------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 30, 1998
--------------------
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, July 30, 1998,
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 nominees listed herein.
The Company's executive offices are located at 125 Moen Avenue,
Cranford, New Jersey 07016. On or about June 24, 1998, 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, 1997, is being mailed to each
stockholder of record at the close of business on June 10, 1998.
VOTING SECURITIES
The Board of Directors has fixed the close of business on June 10,
1998, 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 June 10, 1998, the Company
had issued and outstanding 7,789,070 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.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of June 24, 1998 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 hereinafter defined) 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
<PAGE>
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>
Elizabeth E. Tallett(1) ............................... 68,000(2) *
Kenneth S. Hollander(1) ............................... 41,000(3) *
Jack L. Rivkin
388 Greenwich Street
New York, NY 10022 ................................. 0 *
John F. Sasen, Sr
4345 Southpoint Boulevard
Jacksonville, FL 32216 ............................. 217,501(4) 2.7%
Udi Toledano
545 Madison Avenue, Suite 800
New York, NY 10022 ................................. 181,037(5) 2.3%
Travelers Group Inc.
388 Greenwich Street
New York, NY 10013 ................................. 2,130,521(6) 25.9%
Scantek Medical, Inc. .................................
26 Merry Lane
East Hanover, NJ 07936 ............................. 1,076,688(7) 13.5%
Donald B. Brounstein
129 Hillcrest Avenue
Summit, NJ 07901 ................................... 914,000(8) 11.6%
OppenheimerFunds, Inc. ................................
Two World Trade Center
New York, NY 10048 ................................. 700,500 9.0%
All directors and executive officers as a group
(7 persons)(2)(3)(4)(5)(9) ......................... 522,538 6.4%
</TABLE>
- ------------------
* Less than 1%.
(1) c/o HumaScan Inc., 125 Moen Avenue, Cranford, New Jersey 07016.
(2) Includes 65,000 shares of Common Stock issuable upon exercise of currently
exercisable options held by Ms. Tallett.
(3) Includes 39,500 shares of Common Stock issuable upon exercise of currently
exercisable options held by Mr. Hollander. Does not include 16,750 shares
issuable upon exercise of options held by Mr. Hollander that are not
currently exercisable.
(4) Includes 25,001 shares of Common Stock issuable upon exercise of currently
exercisable options held by Mr. Sasen. Also includes 56,250 shares held by
Physician Sales & Service, Inc. ("PSS") and 136,250 shares issuable upon
exercise of currently exercisable warrants held by PSS. Does not include
9,999 shares issuable upon exercise of options held by Mr. Sasen that are
not currently exercisable. Mr. Sasen disclaims beneficial ownership of the
securities held by PSS.
2
<PAGE>
(5) Includes 48,685 shares issuable upon exercise of currently exercisable
options and warrants held by Mr. Toledano. Also includes 50,000 shares of
Common Stock held by Mr. Toledano's wife and 50,477 shares issuable upon
exercise of currently exercisable warrants held by Mr. Toledano's wife and a
certain trust for the benefit of their minor children ("Toledano Trust").
Does not include 9,999 shares issuable upon exercise of options held by Mr.
Toledano that are not currently exercisable.
(6) Includes 1,440,000 shares of Common Stock held by Travelers Insurance
Company ("TIC"), 339,823 shares issuable upon exercise of currently
exercisable options and warrants held by TIC, 219,875 shares held by Smith
Barney Worldwide Special Fund, N.V. ("Smith Barney Fund"), 44,135 shares
issuable upon exercise of currently exercisable warrants held by Smith
Barney Fund, 41,125 shares held by Smith Barney Worldwide Securities, Ltd.
("Smith Barney Securities"), 8,063 shares issuable upon exercise of
currently exercisable warrants held by Smith Barney Securities and 37,500
shares issuable upon exercise of currently exercisable warrants held by
Smith Barney Inc. Does not include 9,999 shares issuable upon exercise of
options held by TIC that 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 180,625 shares of Common Stock issuable upon exercise of currently
exercisable warrants held by Scantek Medical, Inc. ("Scantek"), 213,750
shares of Common Stock owned by Zsigmond L. Sagi ("Dr. Sagi"), the Chairman
of the Board and a principal stockholder of Scantek, and 750 shares issuable
upon exercise of currently exercisable options owned by Dr. Sagi. Does not
include 225,000 shares issuable upon exercise of warrants held by Scantek
that are not currently exercisable and 750 shares issuable upon exercise of
options held by Dr. Sagi that are not currently exercisable.
(8) 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
currently exercisable options and warrants held by Mr. Brounstein.
(9) Includes 15,000 shares of Common Stock issuable upon exercise of currently
exercisable options held by Roger W. Martin, the Company's Vice President of
Sales. Does not include 15,000 shares issuable upon exercise of options held
by Mr. Martin that are not currently exercisable.
PROPOSAL I: ELECTION OF DIRECTORS
At the Annual Meeting, four 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 four
nominees -- Elizabeth E. Tallett, 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.
Information About the Nominees
Name Age Principal Occupation
- ---- --- --------------------
Elizabeth E. Tallett 49 Chairman of the Board of the Company and
Acting President and Chief Executive
Officer
Jack L. Rivkin 57 Director
John F. Sasen, Sr. 56 Director
Udi Toledano 47 Director
3
<PAGE>
Elizabeth E. Tallett has been a director of the Company since March
1998 and Chairman of the Board and Acting President and Chief Executive Officer
since May 19, 1998. Ms. Tallett is performing the duties of Acting President and
Chief Executive Officer on a part time basis. Ms. Tallett has served as
President and Chief Executive Officer of Dioscor Inc., a biotechnology
management company, since March 1996, and President and Chief Executive Officer
of Ellard Pharmaceuticals Inc., a pharmaceutical company involved in the
anti-ulcer field, since July 1997. From 1992 to March 1996 Ms. Tallett was
President and Chief Executive Officer of Transcell Technologies Inc., a company
focused on carbohydrate chemistry company. From 1987 to 1992 she was President
of Centocor Pharmaceuticals, a biotechnology company focused on monoclonal
antibody based pharmaceuticals. From 1984 to 1987 she was Director of Marketing
Operations of Parke-Davis, the pharmaceutical division of Warner-Lambert
Company, and a member of the Parke-Davis Executive Committee, and from 1973 to
1987 she was Director of Worldwide Strategic Planning for Warner-Lambert
Company. Ms. Tallett also serves on the Board of Directors of Principal Life
Insurance Company, Varian Associates Inc., Coventry Health Care Inc., Integramed
America Inc., Prosperity New Jersey Inc., a non-for-profit corporation, and is a
founding member of the Biotechnology Council of New Jersey.
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 Executive Vice President of PSS/World Medical Inc. since
April 1998. From March 1997 to April 1998 he was Chief Executive Officer of PSS.
He was President of PSS from August 1995 to March 1997 and Chief Operating
Officer of PSS from December 1993 to August 1995, and has been 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, and Universal Stainless & Alloy Products, Inc., a specialty steel
producer, each of which is a public company.
Information About the Other Executive Officers
Name Age Position
- ---- --- --------
Kenneth S. Hollander 32 Chief Financial Officer
Roger W. Martin 50 Vice President of Sales
Kenneth S. Hollander has been Chief Financial Officer of the Company
since June 1996. From 1989 to May 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.
4
<PAGE>
Mr. Hollander serves as Treasurer of the Board of Trustees of The
Richmond Fellowship, a private, non-profit, psychiatric transitional residence.
Roger W. Martin has been Vice-President of Sales of the Company since
April 1998. From 1994 to April 1998, Mr. Martin was Senior Business Development
Manager for Roche Diagnostic Systems, a division of Roche Holdings AG. From 1979
to 1994, Mr. Martin was employed by Becton Dickinson and Company as Senior
Regional Sales Manager.
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 1997.
Committees
The Company has a Compensation Committee and an Audit Committee, both
of which were established in June 1996. From June 1996 to June 11, 1998, the
Company also had an Executive Committee. Each Committee held one meeting during
1997. The Company does not have a standing nominating committee.
The Audit Committee currently consists of Mr. Rivkin, as Chairman, and
Messrs. Toledano and Sasen. 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 the 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. The Audit Committee also makes an annual recommendation to
the Board of Directors concerning the appointment of independent accountants for
the ensuing year. In addition, the Audit Committee reviews all transactions
between the Company and its officers, directors, principal stockholders and
affiliates.
The Compensation Committee currently consists of Mr. Toledano, as
Chairman, and Messrs. Tallett and Rivkin. The Compensation Committee determines
the compensation and benefits of all officers of the Company other than
compensation pursuant to incentive plans of the Company and reviews general
policy matters relating to compensation and benefits of employees of the
Company.
Executive Compensation
The following table shows the cash compensation paid by the Company, as
well as certain other compensation paid or accrued, during the fiscal years
ended December 31, 1997 and 1996 to the former President and Chief Executive
Officer of the Company and the other executive officers of the Company whose
compensation was $100,000 or greater during the fiscal year ending December 31,
1997 ("Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation(1)
Name and ---------------------- Securities Underlying
Principal Position Year Salary Bonus Options (#)
- ------------------ ---- ------ ----- ---------------------
<S> <C> <C> <C> <C>
Donald B. Brounstein, former 1997 $152,574 $14,980 0
President and Chief 1996 $145,000 $ 0 37,500
Executive Officer(2)
Kenneth S. Hollander, 1997 $94,414 $17,325 0
Chief Financial Officer(3) 1996 $51,923 $ 0 56,250
</TABLE>
(1) The Named Executive Officers routinely receive other benefits from the
Company, including automobile allowances and retirement plan contributions,
the amounts of which are customary in the industry. The Company has
concluded, after reasonable inquiry, that the aggregate amounts of such
benefits during 1997 did not exceed the lesser of $50,000 or 10% of the
compensation set forth above as to either Named Executive Officer.
5
<PAGE>
(2) Mr. Brounstein resigned as President and Chief Executive Officer of the
Company on May 19, 1998. Mr. Brounstein also resigned as a director of the
Company on June 22, 1998.
(3) Mr. Hollander's employment with the Company commenced on June 3, 1996.
No executive officer received any compensation during the fiscal year ended
December 31, 1995.
Aggregate Year-End Option Values Table
The following table sets forth information concerning the number and
value of unexercised options held by each of the Named Executive Officers as of
December 31, 1997.
AGGREGATE YEAR-END OPTION VALUES
(December 31, 1997)
<TABLE>
<CAPTION>
Number of securities underlying Value of unexercised in-the-money
unexercised options at fiscal year-end (#) options at fiscal year-end ($)
------------------------------------------ -------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Donald B. Brounstein 37,500 0 118,875 0
Kenneth S. Hollander 27,250 29,000 75,663 72,500
</TABLE>
(1) Represents the difference between the aggregate market value at December 31,
1997 of the Common Stock (based on a last sale price of $8.50 on that date) and
the options' aggregate exercise price.
Employment Agreements with Named Executive Officers
The Company has an employment agreement with Donald B. Brounstein dated
January 1, 1996 pursuant to which, until May 19, 1998, Mr. Brounstein served 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. In connection with Mr.
Brounstein's resignation from the offices of President and Chief Executive
Officer, the Company and Mr. Brounstein have agreed that the employment
agreement will terminate on September 30, 1998, provided that in the event of a
change of control of the Company prior to such date, the agreement will
terminate on December 31, 1998, and that until the employment agreement
terminates, Mr. Brounstein will be paid a consulting fee payable at the same
rate as his base salary as in effect on May 19, 1998. The agreement prohibits
Mr. Brounstein from competing with the Company for one year following
termination and from disclosing confidential information or trade secrets in any
unauthorized manner.
The Corporation has an employment agreement with Kenneth S. Hollander,
dated June 3, 1996, pursuant to which Mr. Hollander serves as the Company's
Chief Financial Officer. Mr. Hollander's employment agreement provides for a
base annual salary of $90,000 with annual cost of living increases and a
customary benefits package. The agreement has no definite term and is terminable
at will by Mr. Hollander or the Company, but if the agreement is terminated by
the Company without "Cause," as defined in the agreement, Mr. Hollander is
entitled to severance pay equal to six months of base salary. The agreement
prohibits Mr. Hollander from competing with the Company for one year following
termination of his employment with the Company and from disclosing confidential
information or trade secrets in any unauthorized manner.
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. 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
6
<PAGE>
growth and success. No shares of Restricted Stock or SARs have been granted
under the 1996 Plan. Options for 364,450 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 serving as a director or is
elected as a director on the date of such 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, directors, employees and consultants to purchase a total of
190,000 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. Options for 15,000 shares were
granted as of June 20, 1996, have an exercise price of $6.00 per share and were
fully vested on the date of grant. Options for 10,000 shares were granted as of
June 26, 1997, have an exercise price of $7.69 per share and vest 33 1/3% per
year over two years. Options for 15,000 shares were granted as of March 13,
1998, have an exercise price of $8.44 per share and were fully vested on the
date of grant.
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. Rivkin, Sasen and
Toledano) to receive 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
and 1998 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 in
1997 granted TIC options outside the 1996 Plan to purchase 10,000 shares of
Common Stock, 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 of Common Stock.
7
<PAGE>
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, 1997, all of its officers,
directors and ten-percent stockholders complied with the Section 16(a) reporting
requirements.
Certain Relationships and Related Transactions
Physician Sales & 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").
Under the Distribution Agreement, over a two-year period beginning in
1998, PSS is to receive volume discount price incentives from the Company to the
extent PSS exceeds sales targets of 1.0 million units in 1998 and 3.5 million
units in 1999. 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., Executive
Vice-President of PSS/World Medical Inc., of which PSS is a wholly owned
subsidiary, 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 originally provided for a
cash payment ("Cash Portion of the Licensing Fee") to Scantek of $1,600,000,
$775,000 of which has been funded. Contemporaneously with the execution of the
License Agreement, the Company issued to Scantek 675,000 shares of Common Stock.
Scantek received 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.
On May 15, 1998, the Company and Scantek entered into a settlement
agreement pursuant to which the License Agreement was amended to eliminate the
original requirement for minimum royalty payments of $150,000 and $300,000,
respectively, for the first two years of BreastAlert device production and to
provide that while the Company remains obligated to pay Scantek royalties
ranging from 3% to 10% on product sold, Scantek will credit the Company for 50%
of such royalties up to an aggregate of $550,000.
The license agreement was also amended to reduce the Cash Portion of
the License Fee by $375,000 in exchange for the issue to Scantek of warrants to
purchase 400,000 shares of Common Stock at $4.725 per share. The Company has
agreed to register the shares underlying the warrants for resale pursuant to the
Securities Act of 1933, as amended ("Securities Act"), and applicable state
securities laws.
Zigmed, Inc. In 1995, the Company entered into an agreement with
Zigmed, Inc. ("Zigmed") a medical engineering contractor, for the construction
and installation of the equipment for the manufacture, assembly and packaging of
the BreastAlert device (the "Production Line"). Zsigmond G. Sagi, the chief
executive officer and a principal of Zigmed, is the son of Dr. Sagi. The
agreement between Zigmed and the Company provided for the turnkey construction
of the Production Line at a fixed price of $1,750,680, of which $1,245,000 was
paid prior to May 15, 1998.
8
<PAGE>
On May 15, 1998, the Company and Zigmed entered into a settlement agreement
pursuant to which the purchase price to be paid by the Company for the
Production Line was reduced by approximately $200,000 in exchange for the issue
to Zigmed of warrants to purchase 30,000 shares of Common Stock at $4.725 per
share. The Company has agreed to register the shares underlying the warrants for
resale pursuant to the Securities Act and applicable state securities laws.
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. Jack L.
Rivkin, a director of the Company, is a Senior Vice President of Travelers Group
Inc. 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
and 1998 Director Options. In lieu thereof, the Board of Directors in June 1996
granted TIC, a subsidiary of Travelers Group Inc., 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 in 1997 granted TIC options outside the 1996
Plan to purchase 10,000 shares of Common Stock, and has determined to grant TIC,
on the first business day following the annual meeting of stockholders in 1998,
options outside the 1996 Plan to purchase 10,000 shares of Common Stock.
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
transactions between the Company and its officers, directors, principal
stockholders or affiliates must 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 must be on terms no less favorable to the Company than could
be obtained in arm's length transactions from unaffiliated third parties. In
addition, all such related party transactions are reviewed by the Audit
Committee of the Board of Directors.
INDEPENDENT ACCOUNTANTS
The Company has selected KPMG Peat Marwick LLP, Short Hills, New
Jersey, as its independent accountants for the year ending December 31, 1998. 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.
1999 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 1999 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 February 10, 1999.
9
<PAGE>
OTHER MATTERS
The Board knows of no matter that 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
June 24, 1998
10
<PAGE>
HUMASCAN INC. - PROXY
Solicited by the Board of Directors
for Annual Meeting to be held on July 30, 1998
P The undersigned Stockholder(s) of HUMASCAN INC., a Delaware
R corporation ("Company"), hereby appoints Elizabeth E. Tallett and Kenneth
O S. Hollander, or either of them, with full power of substitution and to act
X without the other, as the agents, attorneys and proxies of the undersigned,
Y to vote the shares standing in the name of the undersigned at the Annual
Meeting of Stockholders of the Company to be held on July 30, 1998 and at
all adjournments thereof. This proxy will be voted in O accordance with the
instructions given below. If no instructions are given, this proxy will be
voted FOR all of the following proposals.
1. Election of the following Directors:
FOR all nominees listed below, WITHHOLD AUTHORITY to vote
except as marked to the contrary for all nominees listed
below |_| below |_|
Elizabeth E. Tallett, Jack L. Rivkin, John F. Sasen, Sr., Udi Toledano
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 , 1998
------------------------
-----------------------------------
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.
